Annual Report • Apr 9, 2009
Annual Report
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Registered Office: Lugar do Espido, Via Norte, Maia, Portugal Registered at the Commercial Registry of Maia Registry and tax identification No. 506 035 034 Share Capital: € 700 000 000 Publicly Traded Company
19th February 2009
| MANAGEMENT REPORT 5 | ||
|---|---|---|
| 1. | MESSAGE FROM THE CHAIRMAN 5 | |
| 2. | MESSAGE FROM THE CEO 5 | |
| 3. | BOARD OF DIRECTORS REPORT 6 | |
| 3.1. | Sector Review in 2008 6 | |
| 3.2. | Sonae Indústria Business Review in 2008 8 | |
| 3.2.1. | Iberia 8 | |
| 3.2.2. | Central Europe (Germany, France and the UK) 8 | |
| 3.2.3. | Rest of the World (Canada, Brazil and South Africa) 10 | |
| 3.3. | Financial Review of FY 2008 11 | |
| 3.4. | Review of the Individual Accounts of the Holding Company 13 | |
| 3.5. | Activity carried out by the Non-Executive Board Members 13 | |
| 3.6. | Risk Management 13 | |
| 3.6.1. | Credit Risk Management Policy 13 | |
| 3.6.2. | Market Risks 14 | |
| 3.6.3. | Liquidity Risk 15 | |
| 3.7. | Treasury Shares 15 | |
| 3.8. | Proposal for Appropriation of Results 15 | |
| 3.9. | Subsequent Events 15 | |
| 3.10. | Outlook 16 | |
| 3.11. | Dividend Policy 16 | |
| 3.12. | Acknowledgements 16 | |
| CORPORATE GOVERNANCE REPORT 18 | ||
| 0. | COMPLIANCE WITH CMVM RECOMMENDATIONS 18 | |
| 1. | SHAREHOLDERS' GENERAL MEETING 23 | |
| 1.1. | Shareholders' General Meeting: composition and duration of the mandate 23 | |
| 1.2. | Remuneration of the Board of the Shareholders' General Meeting 23 | |
| 1.3. | Voting Rights and Shareholder Representations 23 | |
| 2. | CORPORATE GOVERNING AND AUDITING BODIES 25 | |
| 2.1. | ||
| 2.1.1 | Corporate Governing Bodies 25 | |
| Board of Directors 25 | ||
| 2.1.2 | Executive Committee 26 | |
| 2.1.3 | Statutory Audit Board 27 | |
| 2.1.4 | Statutory External Auditor 27 | |
| 2.1.5 | Company Secretary 27 | |
| 2.2. | Board Committees 28 | |
| 2.2.1 | Board Audit and Finance Committee ("BAFC") 28 | |
| 2.2.2 | Social Responsibility and Environment Committee ("SREC") 29 | |
| 2.2.3 | Board Nomination and Remuneration Committee ("BNRC") 29 | |
| 2.2.4 | Board and Corporate Governance Officer | 29 |
| 2.2.5 | Ethics Committee 30 | |
| 2.3. | Governing Bodies, Constitution, Organisation and Board Committees 30 | |
| 2.4. 2.5. |
Internal Control and Risk Management 31 Responsibilities of the Board of Directors and Executive Committee 35 |
| 2.6. | Regulations of the Governing Bodies 37 | |
|---|---|---|
| 2.7. | Appointment and replacement of members of the corporate governing and | |
| auditing bodies 37 | ||
| 2.8. | Board, Board Committees and Statutory Audit Board Meetings and attendance | |
| in 2008 38 | ||
| 2.9. | Independence of the members of the Board of Directors 38 | |
| 2.10. | Professional qualification of the members of the Board of Directors in the last 5 years and shares held 38 |
|
| 2.11. | Other positions held by Sonae Indústria Directors as of 31 December 2008 41 | |
| 2.12. | Independence of the Statutory Audit Board members 44 | |
| 2.13. | Professional qualification of the members of the Statutory Audit Board in the | |
| last 5 years and shares held 44 | ||
| 2.14. | Other positions held by Sonae Indústria Directors as of 31 December 2008 45 | |
| 2.15. | Directors' Remuneration and Other Compensation 45 | |
| 2.16. | Shareholders' Remuneration Committee | 47 |
| 2.17. | Policy of Communication Irregularities 47 | |
| INFORMATION 48 | ||
| 3. | ||
| 3.1. | Capital Structure 48 | |
| 3.2. | Qualified Shareholding under Article 20 of the Portuguese Securities Code 49 | |
| 3.3. | Identification of the shareholders that detain special rights and a description of | |
| those rights 49 | ||
| 3.4. | Possible restrictions on share-transfer, i.e. consent clauses for their disposal or | |
| 3.5. | restrictions on share-ownership 49 Shareholder agreements which the company may be aware of and which may |
|
| restrict the transfer of securities or voting rights 49 | ||
| 3.6. | Rules applicable to the amendment of the articles of association 49 | |
| 3.7. | Control mechanisms for a possible employee-shareholder system inasmuch as | |
| the voting rights are not directly exercised by them 49 | ||
| 3.8. | Share Price performance in 2008 49 | |
| 3.9. | Dividend policy. 51 | |
| 3.10. | Share and Share Options Schemes 51 | |
| 3.11. | Transactions with Related Parties 51 | |
| 3.12. 3.13. |
Investor Relations 51 Remuneration of the Statutory External Auditors 52 |
Appendix required by Article 447 of Portuguese Company Law Appendix required by Article 448 of Portuguese Company Law Qualified Shareholdings
Appendix required by Article 14, no. 7 of the CMVM Regulation no. 05/2008
Statement issued according and for the purposes of paragraph c) of Article 245. CMVM code
Balance Sheet Income Statement Statement of Changes in Equity Statement of Cash Flow Notes to the Financial Statements
Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Movements in Shareholders' Funds Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements
Statutory External Auditor's Report
Statutory Audit Board's Reports
"2008 will be remembered as the year of the financial and economic crises. What began as the sub-prime crisis in 3Q 2007 has since spread to infect the international capital markets and contaminate the international banking system in proportions we could never have imagined. The extent of the globalisation of markets we see today has through its various mechanisms spread the effects throughout the real economy at a surprising speed and with huge impacts during the last part of 2008.
As a result, it is clear to me that those companies most exposed to international markets as well as those that operate in the construction sector are finding themselves in an unenviable situation. These companies are first in the firing line and the first to suffer the full consequences of the storm. Sonae Indústria, with an industrial presence in 9 countries across 4 continents, not only falls into this group of companies but also operates in those markets which were most severely hit by the bursting of the real estate bubble. These include the North American, Spanish and British markets.
Consequently, we have been forced to adopt difficult but necessary measures to ensure that we survive as a long living company and as a sustainable leader in our industry. As a result, we are in the process of restructuring our industrial activities in Europe and South Africa.
In 2008, we published our 2nd Sustainability Report containing updated information on the measures we have taken in terms of environmental and social responsibility. We have concluded the process of establishing the values and principles of Sonae Indústria which, with their origins set in the Sonae culture, are based on the "Sonae Indústria way" of doing things. These are grouped under four headings: ambition, innovation, authenticity and responsibility. In an effort to further ensure that we meet best practices throughout the organisation, we appointed an Ethics Committee during 2008. This committee will oversee the implementation of our renewed Code of Conduct. Through these actions, we are aiming to build our vision of sustainable management based on ethical principles, which we believe to be the most appropriate and correct course for Sonae Indústria, given the volatile world we live in.
I would like to take this opportunity to thank all Sonae Indústria employees for their dedication and professionalism and challenge them to continue to strive for excellence in everything that they do. It is only through achieving excellence that we will be able to help our company deliver maximum value creation to our shareholders, customers, suppliers and local communities. I am very pleased and also grateful that we are able to rely on the ongoing loyalty and trust shown by all our stakeholders. I am convinced that this support provides the bedrock upon which to build a strong Group to face these very challenging times."
"After the very good results achieved in 2007, 2008 shows a significant decline in our performance. Two main factors are behind this decline - volumes and costs - which were partially offset by measures taken to reduce fixed costs and obtain efficiency gains. Our focus has been centred on cash-flow management and we have been successful in reducing working capital by € 65 million euros.
The worldwide fall in growth in 2008, which was particularly evident in the last part of the year, has significantly impacted the demand for wood based panels in almost all countries where we operate, due to the slowdown in the construction and furniture sectors.
As a result, our sales volumes declined and our turnover fell by 14% to 1,769 million euros. In response to this retraction and in an effort to control our stock levels, we implemented several commercial downtimes at our plants during 2008. These included extended seasonal production stoppages over both the summer and Christmas periods.
However, these stoppages proved to be insufficient to prevent a structural excess capacity developing in the market. Consequently and as already announced in January, we have entered into negotiations with all parties involved to downsize our operations in Northern Ireland, France and South Africa. In line with the strategy we have been pursuing, these actions are intended to adapt supply to market demand. We regret that the current business environment has forced us to implement such measures and we remain fully committed to these markets.
On the cost side, we have faced a sharp increase in urea and methanol prices, the main chemicals used to produce the resins used in our production. This has had a negative impact of close to 55 million euros on our recurrent EBITDA during 2008.
Our fixed costs have reduced by 21 million euros, due to our ongoing restructuring processes, despite the new particleboard production lines in Canada and South Africa and the new impregnation lines in Germany.
During 2008, our net debt increased by 92 million euros, largely explained by our dividend payment in May (€39 million) and by the acquisition of the Masisa stake in Tafisa Brasil, in July (€48 million).
I would like to thank our employees for their dedication, hard work and significant contributions amidst such difficult times and our shareholders and customers for their support and continuing confidence in our Group
2008 was tough, 2009 will not be easier, but we are confident and committed to implement all the necessary restructuring to get back to the profitability levels we achieved in previous years."
The European wood panels sector suffered a strong demand decline throughout 2008, particularly felt in the 2nd half of the year. In addition to this demand situation, the OSB market was also affected by additional imports from North America, especially in the first half of 2008. This effect was mainly driven by the worldwide negative macroeconomic situation which began with a capital markets crisis before rapidly spreading to contaminate the real estate markets and finally affect all economic sectors.
According to the latest forecasts issued by Euroconstruct, building investment (in the 19 European Countries represented by the association) should have dropped by 2.5% in 2008, a downward estimate from the 0.3% decline forecasted in June 2008. This drop could be even more pronounced in countries like Spain and the UK which previously posted consecutive years of buoyant activity.
European laminate flooring producers were affected by a decline in worldwide demand. According to preliminary data issued by the EPLF (European Producers of Laminate Flooring) at the beginning of 2009, worldwide sales of laminate flooring produced in Europe (by its members) should have dropped by 7.5% in 2008. Sales to Western Europe posted a drop of 7.8% while sales to Eastern Europe should have increased by 1.5%.
The resulting capacity utilisation problems led wood-based panel producers to implement measures to reduce output in the form of production stoppages of variable duration and/or cuts in working shifts. In some cases we have even witnessed indefinite capacity closures. Norbord Inc., the Canadian wood based panel producer announced the permanent closure of its PB line at the Genk plant in Belgium in February. In December, Kosche-Gruppe shut down its PB production at Valentin Holzwerkstoffe & Co. KG in Germany.
On the other hand, the slowdown in the pace of sector consolidation previously observed in 2007, continued throughout 2008.
In North America, the construction sector followed the negative trajectory previously recorded in 2007 mainly as a consequence of the financial crisis. According to the RISI, total US housing starts in 2008 dropped by 34% to approximately 892 million units, due to a 42% decrease in single-family starts. US particleboard demand dropped by 16% to 6.2 million m³ while US MDF demand declined by 13% to almost 5 million m 3 .
In Brazil the macroeconomic environment remained strong and GDP growth rate was higher than expected, with the International Monetary Fund reviewing 2008 GDP growth upwards to 5.8%. Nonetheless, the international credit crisis did hit the financial market mainly in the 4Q 2008 and first indications were observed particularly in the form of reduced availability of international credit which resulted in a sharp devaluation of the BRL and a gradual decline in consumption.
The growth in PB sales volumes in Brazil slowed down from 15.6% in 2007 to 2.2%1 in 2008 while MDF sales increased by almost 9% (which compares with the 13% increase in 2007).
Capacity expansion of the Brazilian wood-based panels industry continued during 2008 with producers such as Berneck, Satipel and Sudati reporting the start-up of their first MDF production lines.
South Africa contended with power supply problems, particularly at the beginning of 2008. This prevented some plants from running at 100% and thereby decreased country production. As a consequence, energy prices have increased. GDP growth has declined to 3.8%2 . The devaluation of the ZAR continued throughout the year but was particularly noticeable in 4Q 2008. According to the South African Statistics Office, the total value of buildings reported as completed, grew by 9% (YoY Jan. - Nov. 2008).
Production costs, particularly chemicals, increased sharply in 2008 thereby affecting the profitability of the wood panels industry. According to the ICIS, urea began increasing in March 2008 from 200 USD/mton to post a record price in August 2008 of 850 USD/mton before decreasing sharply in October 2008 back to the 200 USD/mton
1 Source: Brazilian Panels Industry Association (ABIPA), December 2008
2 Source: IMF October 2008
level. Methanol prices were very high in the 1st Half 2008 (500 euro / mton) but decreased in the 3Q 2008 before declining further in 4Q 2008.
Spain has been enduring a sharp economic slowdown following the bursting of the real estate bubble. New housing permits declined by 60%3 in 2008 when compared to 2007 and GDP growth should have dropped 3.7% in 2007 to 1.2%4 in 2008. This situation has led to a 15% reduction in our sales volumes in Iberia in 2008 compared to 2007. As previously reported and in line with our strategy of adapting production to customer demand, we have temporarily stopped our PB line in Valladolid. Including this measure, our capacity utilization in 4Q 2008 was only 63% which prevented us from diluting fixed costs adequately. Another factor which further reduced our margin was the increase in chemical costs (27% per m3 YoY).
When comparing 3Q 2008 with 4Q 2008, the contribution margin per m3 has increased but profitability declined sharply as we have implemented longer production stoppages in order to reduce stocks.
Iberian turnover in 2008 decreased by 16% compared to 2007 and recurrent EBITDA margin declined to 9%, 9 p.p. below the corresponding value for 2007.
Central Europe has also suffered a slowdown in the construction and furniture industry which has negatively affected wood-based panels demand.
3 Ministerio de Fomento, January 2009
4 IMF, January 2009
Central Europe Turnover & Recurrent EBITDA Margin
Our sales volumes in Germany decreased by 15% throughout 2008 when compared to 2007. This decline in demand combined with excess market capacity led to a downward price pressure throughout the year and forced us to implement longer production stoppages in the summer and Christmas periods.
Our MDF Line 1 (in Meppen, Germany) has been stopped indefinitely to concentrate production in order to better manage MDF capacity. In addition, the short working time (Kurzarbeit)5 has been initiated in Duisburg. Implementation of these processes further concentrates production in the most efficient lines and increases our capacity utilisation.
The ongoing restructuring process in Germany throughout 2008 has resulted in the layoff of a further 222 employees resulting in a fixed costs decrease in FY 2008 (when compared with FY 2007) of 7% (10 million euros).
In addition to this, the plant restructuring process (those we latest acquired) in Germany continues unabated and will further reduce fixed costs in 2009.
In France, housing starts have declined by 16%6 (compared to 2007). Consequently, volumes sold declined by 25% (compared to 2007) and turnover decreased by 25%. With a view to managing our working capital, we have been reducing production which has affected capacity utilisation. This fell to 46% in 4Q 2008.
The structural excess capacity problem in the French market, as previously announced, forced us to consider the reorganisation of our operations in France and the closure of two plants.
In the UK, house prices are falling and construction statistics show a pronounced downturn with orders for new housing dropping by 37% 7 % (YoY January – November). Our sales volumes decreased by 17% in 2008 (when compared to 2007) and 21% from 3Q 2008 to 4Q 2008. This was caused by weak demand resulting from the financial crisis which negatively affected credit availability in the country. This fall in demand combined with the need to control stocks led us to extend production stoppages. Consequently, our capacity utilisation declined to 49% in 4Q 2008.
5In this process, employees can receive up to 18 months between 60% and 67% of their net salary and the company receives this amount from the government and pays during that time only the social costs.
6 Source: Service économie statistiques et prospective (Ministère de l'Écologie, de l'Energie, du Développement durable et de l'Aménagement du territoire), January 2009
7 Source : Office for National Statistics UK, January 2009
In response to these difficulties, we decided to enter into consultations regarding the future of our operations at our plant in Coleraine, Northern Ireland.
These significant production stoppages in all Central European countries where we operate, prevented us from diluting fixed costs, particularly in 4Q 2008.
Additionally, this region was significantly affected by the urea price increase which led our chemical costs in this region to shoot up by 21% €/m3 from 2007 to 2008. Current demand levels have not permitted us to pass on these higher costs resulting in a strong deterioration in our contribution margin.
In Central Europe, when comparing 2007 to 2008, turnover decreased by 18% to 959 million euros and recurrent EBITDA fell (by 91%) to 9 million euros.
Our performance in Canada, Brazil, and South Africa reflects a combination of mixed market trends and specific impacts which make direct comparisons difficult.
RoW Turnover & Recurrent EBITDA Margin
Brazil experienced a resilient market situation in 2008 on the back of the positive macroeconomic environment and higher than expected GDP growth rate (IMF forecasted 2008 GDP growth of 5.8%). However, the international financial situation had a negative impact in the last quarter of this year and the first signs can be noted as the availability of international credit has been reduced, resulting in a sharp devaluation of the BRL and a gradual decline in consumption.
Our value-added products strategy (Melamine Faced MDF and Melamine Faced Chipboard) is paying off and enabled us to offset part of the dramatic chemicals cost increase.
In 4Q 2008 our capacity utilisation was 90%. However, two competitors started producing MDF in the 3Q 2008. These new investments have incresed MDF capacity in the market, although, at a slower than expected rate.
At the beginning of this year we ramped-up our reconstructed PB Line 2 in Canada and regained all the customers that we had before the fire in April 2006. Volumes sold increased by 70% when compared to 2007 despite the adverse market conditions brought on by the capital market crisis (according to the RISI, total US housing starts in 2008 dropped by 34%). Nevertheless, in 4Q 2008 we witnessed a decrease in demand which forced us to extend our seasonal stoppages. As a result, our EBITDA was negatively affected.
On the cost side, we faced continuing increases in wood and chemical costs in the first three quarters, which declined slightly in 4Q 2008.
In South Africa, the macroeconomic environment continues to be positive although GDP growth was lower than expected. This resuted mainly from a combination of power cuts in the 1st half of 2008 and decreasing credit availability. The depreciation of the ZAR against the USD worsened the cost increase of imported raw-materials such as chemicals. These cost increases have been absorbed since the excess capacity did not permit us to pass them on. Despite the market slowdown in 2008 our sales volumes increased by 5% compared to 2007, due to the start of the new PB line in 3Q 2007 and the ramp-up of the new melamine line in 3Q 2008. Our turnover improved by 5% in local currency compared to 2007 but when converted to euros, decreased by 15%. Our recurrent EBITDA margin declined due to the negative effect arising from the wood and chemical cost increases.
Turnover in the Rest of the World totalled 362 million euros in 2008, 5% above that for 2007. Excluding the effect of the compensation for the fire at our Canadian plant which we received in 2007, recurrent EBITDA in 2008 would have decreased by 32% to 51 million euros. This was mainly driven by higher production costs, namely chemicals and the negative profitability in Canada in 1Q 2008 as a consequence of ramping-up line 2.
Consolidated Turnover in 2008 totalled 1,769 million euros, a decrease of 14% when compared to 2007. Consolidated Recurrent EBITDA was 100 million euros, representing a margin on Turnover of 6% and an absolute decrease of 67% compared to 2007.
| (euro millions) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 4Q'07 | 3Q'08 | 4Q'08 | 4Q'08 / 4Q'07 |
4Q'08 / 3Q'08 |
2007 | 2008 | %chg 08/07 |
|
| Turnover | 478 | 431 | 373 | (22%) | (13%) | 2,066 | 1,769 | (14%) |
| Other Operational Income | 79 | 13 | 25 | (69%) | 92% | 129 | 114 | (11%) |
| EBITDA | 96 | 17 | (4) | (105%) | (126%) | 335 | 139 | (59%) |
| Recurrent EBITDA | 62 | 19 | 2 | (97%) | (90%) | 302 | 100 | (67%) |
| Recurrent EBITDA Margin % | 13.0% | 4.5% | 0.5% | 14.6% | 5.7% | |||
| Depreciation and amortisation | (31) | (31) | (32) | 4% | 2% | (117) | (123) | 5% |
| Provisions and Impairment Losses | (25) | (2) | (39) | 56% | 2,252% | (33) | (56) | 69% |
| Operational Profit | 52 | (12) | (69) | 205 | (23) | (111%) | ||
| Net Financial Charges | (20) | (19) | (21) | 2% | 9% | (81) | (78) | (3%) |
| o.w. Net Interest Charges | (7) | (12) | (12) | 67% | 4% | (44) | (48) | 9% |
| o.w. Net Financial Discounts | (5) | (4) | (4) | (22%) | 15% | (22) | (17) | (21%) |
| Profit before taxes (EBT) | 32 | (31) | (89) | 125 | (101) | (181%) | ||
| Taxes | (12) | (2) | 7 | (35) | (3) | |||
| o.w. Current Tax | (5) | (2) | 2 | (19) | (3) | |||
| Net Profit/(Loss) attributable to Shareholders of Sonae Indústria | 15 | (33) | (82) | 79 | (108) |
Total EBITDA decreased in FY 2008 by 59% to 139 million euros (compared to FY 2007).
In 4Q 2008, non-recurrent items totalled a negative 6 million euros as we incurred extraordinary lay-off costs.
In our Profit & Loss Account we have included provisions & impairments of about 43 million euros for business units with ongoing restructuring processes in Europe and South Africa and have not yet valued the alternative use of their land and buildings.
FY 2008 consolidated Net Results Attributable to Sonae Indústria Shareholders amounted to a negative 108 million euros, down from a positive 79 million euros in 2007.
| 2007 | 2008 | |
|---|---|---|
| Non Current Assets | 1,517 | 1,386 |
| Tangible Assets | 1,343 | 1,203 |
| Goodwill | 100 | 104 |
| Deferred Tax | 49 | 54 |
| Other Non Current Assets | 26 | 26 |
| Current Assets | 651 | 532 |
| Inventories | 258 | 193 |
| Trade Debtors | 260 | 200 |
| Cash & Investments | 66 | 66 |
| Other Current Assets | 67 | 74 |
| Total Assets | 2,168 | 1,918 |
| Shareholders' Funds | 595 | 397 |
| Minority Interests Shareholders' Funds + Minority Interests |
34 629 |
3 400 |
| Interest Bearing Debt | 864 | 956 |
| Short term | 160 | 189 |
| L-M term | 704 | 767 |
| Trade Creditors | 226 | 166 |
| Other Liabilities | 449 | 396 |
| Total Liabilities | 1,539 | 1,518 |
| Total Liabilities, Shareholders' Funds and | ||
| Minority Interests | 2,168 | 1,918 |
In FY 2008, additions to Fixed Assets totalled 110 million Euros of which: (i) 15 million euros relates to the line 2 project in Canada; (ii) 15 million euros to biomass energy projects in Darbo (France) and Oliveira do Hospital (Portugal); (iii) 14 million relates to the impregnation centre in Kaisersesch (Germany); (iv) 6 million euros to the new melamine line in South Africa; and (v) 60 million euros to essential maintenance investments and other industrial improvements.
In 2008, Net Debt increased by 92 million euros. This includes the dividends paid in May (€39 million) and the acquisition of the Masisa stake in Tafisa Brasil in July (€48 million). Close monitoring of our working capital resulted in an improvement of 65 million euros, mainly driven by a 65 million euros inventory decrease. Our receivables decreased by 60 million euros and our payables decreased by 60 million euros.
Our financial costs are lower than in 2007, benefiting from the 250 million euros debt refinanced at the beginning of 2008 and from lower pre-payment discounts granted.
As previously informed, our debt has no consolidated financial ratio covenants. At the end of the year the company had cash and immediately available facilities in excess of 100 million euros.
Sonae Indústria, SGPS, SA, as the holding company of the Sonae Indústria Group, defines the strategic guidelines for the Group and actively manages shareholdings and monitors the business activity of its subsidiaries. Amongst its main activities it is responsible for the functioning of global finance, allocating investment funds and managing the treasury requirements of its subsidiaries.
During 2008 the holding company only carried out internal transactions with its subsidiaries. Investments made amounted to 5,472,647 euros and disposals 495,237 euros.
Besides participating actively in the activities of the Board Committees to which they where appointed (for a full description of composition and main tasks of each committee please see the Corporate Governance Report), the Non-Executive Board Members have participated in company activities according to their professional past experience and time availability. Those activities included the analysis of industrial optimisation projects, restructuring projects and the development of relevant international networking with eventual partners and authorities in present and potential geographical areas of activity.
Non-Executive Board members have also attended the International Managers Meeting of Sonae Indústria. This event brought together over 150 Group managers for two days in June 2008 and was organised to facilitate the exchange of best practices between the representatives of the different companies.
Sonae Indústria Credit Risk derives mainly from its account receivables items related to its operating activity.
The main objective of Sonae Indústria Credit Risk Management is to guarantee the effective collection of its operating receivables according to the negotiated payment terms.
In order to mitigate Credit Risk related with potential Customers defaulting on payment of outstanding receivables, Group companies exposed to this type of risk have credit management procedures and credit approval processes in place together with insurance policies wherever necessary.
In addition to its operating activities, Group companies have financial assets, related mainly to its activities involving Financial Institutions such as cash deposits, financial investments and derivatives with positive market value. As a result, Credit Risk arises from the potential counterparty default from these Financial Institutions.
As a rule, Group companies only engage in financial operations with Investment Grade Financial Institutions. On the other hand, exposure related with this type of financial assets is generally speaking, spread widely and short lived in nature.
Due to the significant proportion of floating rate debt on Sonae Indústria's consolidated Balance Sheet and the consequent cash flows related to interest payments, the company is exposed to interest rate risk.
As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates. This approach is based on the principle of the existence of a negative correlation between the interest rate levels and the "operating cash flow before net interest charges", which creates a natural hedge on the "operating cash flow after net interest charges" for Sonae Indústria.
As an exception to its general rule, Sonae Indústria may engage in interest rates derivatives.
As a geographically diversified Group with subsidiaries spread throughout four different continents, Sonae Indústria is exposed to foreign exchange risk.
Consolidated Balance Sheet and Profit and Loss are exposed to foreign exchange translation risk and Sonae Indústria subsidiaries are exposed to foreign exchange risk of both translation and transaction type.
As a Group rule, whenever possible and economically viable, subsidiaries aim to offset assets and liabilities denominated in the same foreign currency.
Also as a rule, in situations where relevant exchange risk arises from trade in a currency other than that of the subsidiary, exchange risk should be mitigated through the use of short term forward exchange agreements performed by the subsidiary exposed to that risk. Sonae Indústria subsidiaries do not engage in forward exchange rate agreements for trading, speculative or profit making purposes.
As a policy, translation risk in connection with the conversion of the Equity investments in foreign non-Euro subsidiaries is not hedged as these are considered long-term investments. Also, it is assumed that hedging will not add value in the long term. Gains and losses related to the translation at different exchange rates of Equity investments in foreign non-Euro subsidiaries are accounted under the Conversion Reserve.
Liquidity risk management in Sonae Indústria aims to ensure that the company can timely obtain the financing required to properly carry on its business activities, implement its strategy and meet its payment obligations when due, while avoiding the need for having to obtain funding under unfavourable terms.
For this purpose, Liquidity management at the Group comprises: a) consistent financial planning and cash flow forecasting at country and consolidated levels with different time horizons (weekly, monthly, annual and business plan);
b) diversification of financing sources;
c) diversification of debt maturities issued in order to avoid excessive concentration of debt repayments at short periods of time;
d) an arrangement for committed (and uncommitted) credit facilities, commercial paper programs and other facilities (such as a Securitization of Receivables program) with relating banks. This helps to ensure the right balance between satisfactory liquidity and adequate commitment fees.
The Company did not acquire or sell any own shares during the year. As at 31st December, the Company did not hold any own shares.
Sonae Indústria SGPS SA, as the holding company of the Group, on an individual accounts basis, generated Net Profits of 6,750,824 euros for 2008 and on a consolidated basis generated a negative Net Result of 108,447,796 euros. The Board of Directors proposes that no dividend is distributed and that the profit for the year be allocated as follows:
| Euros | 2008 |
|---|---|
| Legal Reserves | 337,541.20 |
| Free Reserves | 6,413,282.80 |
| Proposed Dividend | 0 |
Over the course of 2009, Sonae Indústria has announced that a restructuring process is being considered at its affiliated companies Spanboard Products Limited, Isoroy SAS and Sonae Novobord, Ltd. In the specific cases of Isoroy and Sonae Novobord, this may lead to the closure of one and two plants, respectively.
We do not envisage a rebound in the construction and furniture sectors in the near and mid-term future. We are therefore adapting our structure to the market situation.
We expect to see a significant positive effect on our production costs following the worldwide fall in urea and methanol prices.
We will continue to pursue our restructuring program and efficiency improvement plan in all markets where we operate.
Working capital and investments will continue to be closely controlled to manage the level of our debt.
As stated in the 2007 Board of Directors Report, the Company policy is to distribute up to 50% of Consolidated Net Results Attributable to Sonae Indústria shareholders.
In the Shareholder's Annual General Meeting, shareholders approved the payment of 0.28 euros per share.
However, given the negative consolidated net results this year, the Board of Directors will propose to the Shareholders' General Meeting not to pay dividends in 2009 relating to the FY 2008.
We would like to thank all our employees for their demonstrated dedication and motivation amidst the backdrop of a very challenging market environment. The recognition of quality and commitment in relation to our customers, suppliers and local communities is what sets Sonae Indústria apart, being a leading company in the wood based panels sector. Sonae Indústria's management team takes this opportunity to strengthen its commitment to sound and sustainable management and thanks all stakeholders for their unwavering trust.
19th February 2009
Board of Directors
Belmiro de Azevedo
_________________________
_________________________ Álvaro Cuervo García
_________________________ Paulo Azevedo
_________________________ Per Knuts
_________________________ Thomas Nystén
_________________________ Carlos Bianchi de Aguiar
_________________________ Rui Correia
_________________________ Christophe Chambonnet
_________________________ Louis Brassard
Sonae Indústria is committed to developing and implementing good corporate governance practices going beyond mere compliance with regulatory obligations. Sonae Indústria firmly believes that good governance reduces risk and creates shareholder value. Good governance should include responsible management practices and a broad-based concern about environmental, social and ethical issues.
Sonae Indústria is subject to the Corporate Governance Code published by CMVM (the Portuguese Securities Market Commission) in September 2007, which is posted at www.cmvm.pt.
Sonae Indústria has analysed all the recommendations of the Corporate Governance Code of September 2007 and concluded that in some cases Sonae Indústria has not adopted some recommendations for the reasons which are described below.
| Recommendation | Degree of Compliance |
Corporate Governance Report | |
|---|---|---|---|
| I. | SHAREHOLDER'S GENERAL MEETING | ||
| I.1. | BOARD OF THE SHAREHOLDER'S GENERAL MEETING | ||
| I.1.1 | The Chairman of the Board of the Shareholders' General Meeting shall be given adequate human and logistical resources, taking the financial position of the company into consideration. |
comply | 1.1 |
| I.1.2 | The remuneration of the Chairman of the Board of the Shareholders' General Meeting shall be disclosed in the annual corporate governance report. |
comply | 1.2. |
| I.2. | PARTICIPATION AT THE MEETING | ||
| I.2.1 | The requirement to deposit or block shares before the General Meeting, contained in the Articles of Association, shall not exceed 5 working days. |
comply | 1.3. |
| I.2.2 | Should the General Meeting be suspended, the Company shall not require share blocking during the full period until the meeting is resumed, but shall apply the same period as for the first session. |
comply | 1.3. |
| I.3. | VOTING AND EXERCISING VOTING RIGHTS | ||
| I.3.1 | Companies should not impose any statutory restriction on postal voting. |
comply | 1.3. |
| I.3.2 | The statutory advance deadline for receiving voting ballots by post shall not exceed 3 working days. |
comply | 1.3. |
| I.3.3 | The Company's Articles of Association shall respect the one share-one vote principle. |
comply | 1.3. |
| Recommendation | Degree of Compliance |
Corporate Governance Report | |
|---|---|---|---|
| I.4. | QUORUM AND RESOLUTIONS | ||
| I.4.1 | Companies shall not set a constitutive or deliberative quorum that exceeds the minimum required by Portuguese Company Law. |
non-comply | Under Portuguese Company Law, at the first convening, there is no minimum quorum for a Shareholders' General Meeting, unless the agenda includes a deliberation that requires a qualified majority vote of two thirds. In this case, a quorum of one third of the voting power is required. For example, a qualified majority vote is required to alter company by-laws or approve mergers, de-mergers, transformations, or dissolutions. At a second convening there is no minimum quorum in either case. Sonae Indústria's Articles of Association require a quorum of over 50% of the voting power at the first convening, but there is no minimum quorum at a second convening. This requirement is aimed to increase shareholder participation. As a second convening has no minimum quorum, there is little risk of deliberations being blocked or delayed due to low participation levels. |
| I.5. | ATTENDANCE LISTS, MINUTES AND INFORMATION ON RESOLUTIONS ADOPTED |
||
| I.5.1 | The minutes of the Shareholders' General Meetings shall be made available to shareholders on the Company's website within a 5 day period, irrespective of the fact that such information may not be legally classified as material information. The lists of attendees, agendas items and resolutions adopted shall be kept in a historic file on the Company's website covering meeting held for at least the last 3 years. |
non-comply | Sonae Indústria informs the market in relation to the content of the proposals presented and deliberations taken at Shareholders' General Meetings. Sonae Indústria does not disclose the content of the minutes of this meeting, as we do not see any material benefit from doing so. |
| I.6. | MEASURES RELATING TO CHANGES IN CONTROL | ||
| I.6.3 | Defensive measures should not be adopted that automatically lead to a serious erosion in the value of the Company's assets, when there has been a change in control or a change in the Company's management, as this prevents the free transmission of shares and the ability of shareholders to evaluate those responsible for managing the Company . |
comply | 1.3. |
| II. | MANAGEMENT AND AUDIT BOARDS | ||
| II.1. | GENERAL POINTS | ||
| II.1.1. | STRUCTURE AND DUTIES | ||
| II.1.1.1 | The Board of Directors shall assess the model it has adopted in its corporate governance report, by identifying any restrictions that are holding back performance and proposing actions to be taken that are judged to be appropriate to resolve them. |
comply | 2.1. |
| II.1.1.2 | Companies shall set up internal control systems in order to efficiently detect risks relating to the Company's activity, in order to protect its assets and keep its corporate governance transparent. |
comply | 2.4. |
| II.1.1.3 | The Board of Directors and Statutory Audit Board shall establish internal regulations, which shall be disclosed on the Company's website. |
comply | 2.6. |
| Recommendation | Degree of Compliance |
Corporate Governance Report | |
|---|---|---|---|
| II.1.2. | INCOMPATIBILITY AND INDEPENDENCE | ||
| II.1.2.1 | The Board of Directors shall include a sufficient number of non-executive members to ensure that there is the capacity to effectively supervise, audit and assess the activity of the executive members. |
comply | 2.1.1. 2.2.3. and 2.9. |
| II.1.2.2 | Non-executive members shall include an adequate number of independent members, taking into account the size of the Company and its shareholder structure, but this shall never be less than one quarter of the total number of Board members. |
comply | 2.9. |
| II.1.3. | ELIGIBILITY CRITERIA FOR APPOINTMENT | ||
| II.1.3.1 | Depending on the governance model adopted, the Chairman of the Statutory Audit Board, or of the Board Audit Committee or of the Financial Matters Committee shall be independent and possess the necessary skills to perform their duties. |
comply | 2.12. |
| II.1.4. | POLICY ON THE REPORTING OF IRREGULARITIES | ||
| II.1.4.1 | The Company shall adopt a policy of reporting irregularities that allegedly occurred, which includes the following information: i) the means through which such irregularities may be reported internally, including the persons that are entitled to receive the reports; ii) how the report is to be handled, including confidential treatment, should this be requested by the reporter. |
comply | 2.17. |
| II.1.4.2 General guidelines from this policy should be disclosed in the Corporate Governance Report |
comply | 2.17. | |
| II.1.5. | REMUNERATION | ||
| II.1.5.1 | The remuneration of the members of the Board of Directors shall be structured to be aligned with the interests of the shareholders. In this sense: i) The remuneration of Directors carrying out executive duties should include a variable component based on performance linked to a performance assessment that shall be carried out periodically by the governance body or committee appointed for this purpose; ii) the variable component shall be consistent with the maximization of the long term performance of the Company, and shall be dependent on sustainability of the variables adopted to measure performance; iii) non-executive members of the Board of Directors shall only receive fixed remuneration, unless the legal requirements dictate otherwise. |
comply | 2.15. |
| II.1.5.2 | The Shareholders' Remuneration Committee and the Board of Directors shall present to the Shareholders' Annual General Meeting a statement of the remuneration policy applied to Statutory Governing Bodies (including the Board of Directors and Statutory Audit Board), as well as to other senior management who have regular access to privileged information and are involved in taking strategic decisions at the Company (Strategic Decision Makers - "Dirigentes") as defined in Article 248º-B, Clause 3 of the Portuguese Securities Code. The information to shareholders shall include the criteria and main indicators proposed to be used in assessing of performance and determining the variable component, independently of whether this in the form of bonuses paid in shares, share options, annual bonuses or other awards. |
comply | 2.15. |
| II.1.5.3 | At least one representative of the Shareholders' Remuneration Committee shall be present at the Shareholders' Annual General Meeting. |
non-comply | The 2008 Shareholders' Annual General Meeting was held on 21st April. Neither of the two Shareholders' Remuneration Committee members was able to be present. |
| Recommendation | Degree of Compliance |
Corporate Governance Report | |
|---|---|---|---|
| II.1.5.5 | The remuneration of the members of the Statutory Governing Bodies (including the Board of Director and Statutory Audit Board) shall be individually and disclosed on an annual basis. Fixed and variable components must be disclosed separately, when applicable, as well as any other remuneration received from other companies within the same Group or from companies controlled by shareholders with qualifying share holdings. |
comply | 2.15. - Sonae Indústria does not disclose the individual remuneration of all Board and Supervisory Board members. However, the recommendation is considered as complied since Sonae Indústria discloses the individual remuneration of the Board of Directors Chairman, the CEO and Supervisory Board Chairman as well as the aggregate remuneration of the Executive and Non Executive Directors and the other Supervisory Board members. Since the difference between these is lower, the amounts disclosed by the company are considered to be sufficient to permit the separate evaluation of all remuneration levels. |
| II.2. | BOARD OF DIRECTORS | ||
| II.2.1 | Within the limits established by Portuguese Company Law for each management and audit governance structure, and unless the Company is restricted by its size, the Board of Directors shall delegate the day-to-day running of the Company and the powers and terms of the delegation should be set out in the Corporate Governance Report. |
comply | 2.5. |
| II.2.2 | The Board of Directors shall ensure that the Company acts in accordance with its objectives, and should not delegate its own responsibilities, including: i) definition of the Company's strategy and general policies; ii) definition of the corporate structure of the Group; iii) decisions that are considered to be strategic due to the amounts, risks and special circumstances involved. |
comply | 2.5. |
| II.2.4 | The Annual Management Report shall include a description of the activity carried out by the non-executive Board Members and shall, in particular, report any restrictions that they encountered. |
comply | 2.1.1. |
| II.2.5. | The governing body responsible for management (Board of Directors) should promote the rotation of the Board member responsible for financial matters (CFO) at least at the end of every two mandates. |
non-comply | The current CFO has not yet served two Board mandates in this position. However, Sonae Indústria does not agree with this recommendation, which to our knowledge does not exist in any other Corporate Governance Code or Best Practice Guidelines issued by institutional investors. We believe that there is no benefit to shareholders and the Company in rotating a competent and successful CFO. |
| II.3. | CHIEF EXECUTIVE OFFICER (CEO), ESECUTIVE COMMITTEE AND EXECUTIVE BOARD OF DIRECTORS |
||
| II.3.1 | When Directors, who carry out executive duties are requested by other Board Members to supply information, they shall provide answers in a timely manner with information that adequately responds to the request made. |
comply | 2.5. |
| II.3.2 | The Chairman of the Executive Committee shall send the notices convening meetings and minutes of the respective meetings to the Chairman of the Board of the Directors and, when applicable, to the Chairman of the Statutory Audit Board or the Audit Committee. |
non-comply | Non-Executive Directors receive minutes of all Executive Committee meetings. Although the President of the Executive Committee does not send these minutes to the Statutory Audit Board, he ensures that the Statutory Audit Board receives all information requested, including the consultation of the minutes book from the Executive Committee meetings. |
| II.4. | GENERAL AND SUPERVISORY BOARD, FINANCIAL MATTERS COMMITTEE, AUDIT COMMITTEE AND AUDIT BOARD |
||
| II.4.2 | The annual reports on the activity of the General and Supervisory Board, the Financial Matters Committee, the Audit Committee and the Statutory Audit Board shall be disclosed on the Company's website together with the financial statements. |
comply | 2.12. |
| Recommendation | Degree of Compliance |
Corporate Governance Report | |
|---|---|---|---|
| II.4.3 | The annual reports on the activity of the General and Supervisory Board, the Financial Matters Committee, the Audit Committee and the Stautory Audit Board shall include a description of the supervisory and verification work completed and shall, in particular, report any restrictions that they encountered. |
comply | 2.12. |
| II.4.4 | The Financial Matters Committee, the Audit Committee or the Statutory Audit Board (depending on the governance model adopted) shall represent the Company, for all purposes, in the relationship with the external auditor. This shall include proposing who will provide this service, their respective remuneration, and ensuring that the Company provides adequate conditions to allow them to deliver their service, as well as acting as the point of contact with the Company and being the first recipient of their reports. |
comply | 2.12. |
| II.4.5 | The Financial Matters Committee, the Audit Committee or the Statutory Audit Board (depending on the governance model adopted), shall assess the external auditor on an annual basis and propose to the Shareholders' General Meeting that the external auditor should be discharged, should justifiable grounds exist. |
comply | 2.12. |
| II.5. | SPECIAL COMMITTEES | ||
| II.5.1 | Unless the Company is restricted by its size, the Board of Directors and the General and Supervisory Committee, depending on the governance model adopted, shall set up the necessary Committees in order to: i) ensure that a robust and independent assessment of the performance of the Executive Directors is carried out, as well as of its own overall performance and including the performance of all existing Committees; ii) consider the governance system adopted and assess its efficiency and propose to the respective bodies, measures to be implemented to achieve improvements. |
comply | 2.1.1. e 2.2.3. |
| II.5.2 | Members of the Shareholders' Remuneration Committee or alike, shall be independent from the Members of the Board of Directors. |
comply | 1.3 e 2.1.6. |
| II.5.3 | All Committees shall draw up minutes of the meetings they hold. |
comply | 2.2.1.; 2.2.2.; 2.2.3. |
| III. III.1. |
INFORMATION AND AUDITING GENERAL DISCLOSURE REQUIREMENTS |
||
| III.1.2 | Companies shall ensure that permanent contact is maintained with the market, upholding the principle of equal treatment for all shareholders and avoiding any asymmetry in the access to information by investors. To achieve this, the Company shall set up an Investor Relations Office. |
comply | 3.12. |
| III.1.3 | The following information disclosed on the Company's Internet website, shall be available in English: a) The Company, its listed company status, the registered office and the remaining information set out in Article 171 of Portuguese Company Law; b) Articles of Association; c) Identification of the members of the Statutory Governing Bodies and of the Representative for Relations with the Market; d) Investor Relations Office – its functions and contact details; e) Financial Statements; f) Half-Yearly Calendar of Company Events; g) Proposals presented to Shareholders' General Meetings; h) Notices convening Shareholders' General Meetings. |
comply | 3.12. |
CMVM recommendations I.6.1., I.6.2., II.1.5.4., II.2.3., II.3.3. and II.4.1. have not been included here as they do not apply to Sonae Indústria.
To at all times ensure the independence of members of the Statutory Audit Board and Board of the Shareholders' General Meeting, both, prior to their appointment, issued statements attesting not to engage in any of the disqualifications provided in Article 414º-A of the Company Law. Additionally, they stated that they are not in any situation that affects their independence in accordance with paragraph 5 of Article 414º of the same law and committed themselves to immediately notify the company of anything that may lead to their loss of independence or to any incompatibility during their mandate. Furthermore, they were also requested to complete questionnaires designed in the same terms as those used by CMVM.
With regard to non-executive and independent members of the Board of Directors, the company is aware that they have not been re-elected for more than two mandates and they have also been asked to complete a questionnaire to determine any situation of loss of independence.
The Board of the Shareholders' General Meeting was elected at the Shareholder's Annual General Meeting of Sonae Indústria held on 31 st May 2007, for the current mandate (2006-2008) and is composed of:
João Augusto Esmeriz Vieira de Castro (Chairman)
António Agostinho Cardoso da Conceição Guedes (Secretary)
The company makes human resources and logistical support available to members of Board of the Shareholders' General Meeting which is appropriate for their requirements.
The remuneration of members of the company's Board of the Shareholders' General Meeting consists of a fixed fee, determined considering the company situation and market practices.
The remuneration of the Chairman of the Board of the Shareholders' General Meeting in 2008 amounted to 5000 euros.
Under the terms of Sonae Indústria's Articles of Association, the Shareholders' General Meeting is composed only of shareholders with voting rights and holding shares or subscription bonds who, until five business days before the meeting taking place, provide evidence of their ownership, according to the terms established by company law. Considering that the Chairman of the Board of the Shareholders' General Meeting agrees to participate in the Shareholders General Meeting of shareholders whose evidence came to the company by fax or e-mail on the last day of that period, Sonae Indústria meets recommendation I.2.2. CMVM.
Individual shareholders may be represented at Shareholders' General Meetings as long as they have notified the Chairman of the Shareholders' General Meeting in writing, identifying the representative and his or her residence and date of the meeting. Corporate shareholders may be represented by a person duly appointed for that purpose by letter, the authenticity of which is scrutinised by the Chairman of the Shareholders' General Meeting.
Given that the Sonae Indústria Articles of Association do not have rules on share blocking in the event of suspension of the general meeting, the Chairman of the Shareholders' General Meeting has been consulted. He considers that, if the suspension period for the Shareholders' General Meeting does not exceed 5 working days, the share blocking required for the first session will be maintained because it is impossible to meet again before the time required for the first session. In the case of the suspension period exceeding 5 working days, the Chairman of the Shareholders' General Meeting will only require the shares blocking prior to that ordinarily required for the first session.
Each share corresponds to one vote
Shareholders' General Meetings can convene at the first session, as long as shareholders representing over fifty percent of the Company's share capital are present or represented.
All decisions at Shareholder's General Meetings are taken by simple majority except in those situations in which a higher percentage is required by law.
While Sonae Indústria is regarded as a listed and "publicly traded company", shareholders are allowed to vote by post in relation to all items on the agenda of the Shareholders' General Meeting, following the rules for the exercise of voting by mail. Sonae Indústria's Articles of Association establish that votes can only be considered when sent to the headquarters of the Company by registered post with notification of receipt addressed to the Chairman of the Shareholders' General Meeting. These votes should be received at least three days before the date of the Meeting and are subject to the normal rules regarding evidence of share ownership. Postal votes are considered negative votes in relation to any proposals presented after the date on which they were issued.
A standard form for postal voting is available from Sonae Indústria's corporate website www.sonaeindustria.com and its head offices.
Sonae Indústria does not have any process for electronic voting.
Proposals to be submitted by the Board of Directors to the Shareholders' General Meeting are made available to shareholders, as required by law, (one month or fifteen days notice ahead of the meeting, depending on whether there is a proposal to alter the Company's Articles of Association) at the Company's registered office, together with all relevant reports, documents and other legally mandatory information.
As stated in the Sonae Indústria Articles of Association, the Shareholders' General Meeting is responsible for fixing the remuneration of members of the governing bodies or electing a committee for this purpose. The Sonae Indústria Shareholders' General Meeting elected the Shareholders' Remuneration Committee (described in 2.16. of this report).
At the Annual General Meeting held in 2007, the Shareholders' Remuneration Committee submitted to the shareholders a proposal on the remuneration policy for members of the governing bodies and the 2008 Annual General Meeting submitted a proposal to amend this policy. Both proposals were approved by majority vote of those shareholders present.
Regarding the performance of members of the Board of Directors, all Annual General meetings include by law, a point on the agenda regarding the general assessment of the administration and supervision of the company where, if they so wish, shareholders discuss the performance of members of the administration.
The Company has not adopted any measures that would hinder the success of a public tender offer for the purchase of the Company's shares nor the company's articles of association which limits the number of votes that may be held or exercised by a sole shareholder. Additionally, it has not entered into any relevant kind of agreement that would be subject to change or termination in the event of transfer of control resulting from a public tender offer. Furthermore, it does not envisage defensive measures that instigate an immediate, serious asset erosion in the company and further disturb the free transmission of shares and voluntary assessment of the performance of the Board of Directors by the shareholders.
No agreements exist relating to compensation or payments made to directors or other employees because of contract termination due to a change in company control.
The Sonae Indústria Articles of Association define a corporate governance model of the company known as the "Reinforced Latin Model", which implies that the company has a Board of Directors, Statutory Audit Board and Statutory External Auditor.
The Corporate Governance Officer examines the advantages and possible disadvantages of adopting this model at this company annually and reports his conclusions to the Board of Directors.
The Board of Directors believes that the model favours the interests of the company and its shareholders, is effective and has not faced any constraints to its operation.
Based on the Articles of Association, the Board of Directors may be composed of an even or odd number of members, ranging from a minimum of three and maximum of thirteen, elected at a Shareholders' General Meeting.
Sonae Indústria's Board of Directors was composed of 10 members before the resignation of José António Comesaña Portela in December 2008.
The Chairman of the Board of Directors, who is elected by the Board, has a casting vote. As the Board of Directors was composed of an even number of members, in order to comply with Article 395º Point 4 of Portuguese Company Law, the Board of Directors conferred a casting vote to Duarte Paulo Teixeira de Azevedo, in the event of the absence or incapacity of the Chairman.
The Board of Directors at the date of this report (and considering the resignation of José António Comesaña Portela in December 2008) is composed of:
Carlos Francisco de Miranda Guedes Bianchi de Aguiar (Executive)
Rui Manuel Gonçalves Correia (Executive)
Christophe Chambonnet (Executive)
Louis Maurice Brassard (Executive)
The Board mandate is three years with the possibility of re-election. The current mandate covers the period 2006 to 2008 and under the terms of law, will maintain its functions until the next Shareholders' Annual General Meeting. All members of the Board of Directors were appointed with effect from 15th December 2005. This marked the registration date for the merger of the "old" Sonae Indústria – SGPS, SA, into Sonae 3P – Panels, Pulp and Paper, SA and the renaming of the latter to Sonae Indústria SGPS, SA, with the exception of Rui Manuel Gonçalves Correia, who was initially appointed to the Board of Sonae 3P on 22nd July 2002 and Christophe Chambonnet, who was co-opted by the Board of Directors in the meeting dated 20th December 2007. The Shareholders' Annual General Meeting held in 2008 ratified this cooption.
As stipulated by the Company's Articles of Association, Sonae Indústria's Board of Directors meets once a quarter and additionally whenever the Chairman or two of its members call a meeting. All decisions taken are recorded in the respective minutes. According to the Articles of Association, when a Board member misses two meetings without a justification, which is accepted by the Board of Directors, this will be considered a definitive absence.
Six Board meetings were held in 2008. The Board of Directors can only deliberate if the majority of its members are present or represented by proxy, and decisions are taken by a majority of the votes of the Board members present or represented and of those who vote by post.
According to Corporate Governance best practices, the Board undertook a formal selfassessment in 2005 with the help of an external consultant, having repeated such assessment in 2008. This assessment was designed to review how the Board and the Board Committees function, to evaluate Corporate Governance at Board level and to propose measures for further improvements. The main measures identified in the 2005 self-assessment have already been implemented whereas the ones identified in 2008 are being implemented. Through this process each director has the opportunity to assess his / her colleagues, express his / her views on a number of items related to their performance, having the opportunity to comment the analysis performed. This entire process is conducted with the assistance of an external consultant.
The Board of Directors has included a description of the activities undertaken by nonexecutive Board Members in its Management Report.
The Executive Committee is appointed by the Board of Directors and was composed of the CEO, CFO and COOs from Iberia, France and Canada. The Company's Articles of Association permit the Board to delegate ordinary company business, duties and responsibilities to an Executive Committee.
On 29th December 2008, José António Comesaña Portela, the COO responsible for Iberia, resigned as member of the Executive Committee of the company.
Responsibilities are currently divided among the Executive Committee members as follows:
In accordance with the company's Articles of Association, the Statutory Audit Board may be composed of an even or odd number of members, with a minimum of three and a maximum of five with one or two substitutes appointed, depending on the number of members being either three or more, respectively.
The Statutory Audit Board as of has currently the following composition:
João Manuel Gonçalves Bastos was elected at the 2008 Shareholder's General Meeting as Chairman of the Statutory Audit Board until the end of the current mandate (2006 - 2008). He resigned on 16th September 2008 and was replaced by the substitute member of this Board, Óscar José Alçada da Quinta, who took over the position and was nominated Chairman by deliberation at the Statutory Audit Board Meeting, held on 7 th November 2008.
PriceWaterHouseCoopers & Associados, SROC, Lda. represented by António Joaquim Brochado Correia or José Pereira Alves was elected as the Company's Statutory External Auditor.
The Company secretary and his/her substitute are elected by the Board of Directors and have a 3-year mandate, in accordance with that practiced at other corporate governing bodies. The Company secretary shall perform those duties established by law.
The Company secretary and her substitute are:
Permanent: Júlia Maria Moreira da Silva Santos Substitute: Patrícia Isabel Chemega dos Santos
To improve the operational efficiency of the Board of Directors and meet best practice in Corporate Governance, the Board of Directors has created 3 Board Committees and the role of the Board and Corporate Governance Officer and one Ethics Committee:
The BAFC is composed of the following Non-Executive Directors:
The BAFC normally meets at least 5 times yearly and is responsible for:
Over the course of 2008, the BAFC held 5 meetings, having been draft the respective minutes.
Responsibilities attributed to BAFC as a specialised committee of the Board of Directors, are developed in terms of company management and do not override the functions of the Statutory Audit Board, as a supervisory Board.
The BAFC is a Committee, within the Board of Directors and according to its empowerment is responsible for an in-depth analysis of the financial statements, risk management processes, the performance of the key financial ratios and among other areas, issues recommendations for final deliberation in the Board of Directors council, thereby improving its operational functioning.
The SREC is composed of the following Directors:
The SREC met twice in 2008, which have been registered in minutes, with its main function being to analyse corporate governance and the impact of the economic, environmental and social dimensions of sustainability, on the management of the Company's businesses.
The BNRC is composed of the following Non-Executive Members:
At the beginning of 2008 Carlos Bianchi de Aguiar (CEO) left the Board Nomination and Remuneration Committee.
This Committee meetings are held normally at least twice a year, the BNRC's main functions main tasks are to review and submit proposals and recommendations on behalf of the Board to the Shareholders' Remuneration Committee in relation to the remuneration and other compensation of members of the Board and to analyse and approve proposals and recommendations on behalf of the Board in relation to the remuneration and other compensation for other senior executives of the Sonae Indústria Group, depending on the activity performed by them.
The BNRC liaises with the Sonae Indústria Shareholders' Remuneration Committee ("Comissão de Vencimentos"),since this is the only means through which to guarantee that the Shareholders' Remuneration Committee has the necessary knowledge on the performance of every director throughout the year. This is particularly important in the case of the Executive Directors, given that the Shareholders' Remuneration Committee does not closely shadow the performance of every Director and therefore does not have the necessary knowledge that enables them to perform their functions in the best way.
The BNRC may also be assisted by external entities provided absolute confidentiality is ensured in relation to the information obtained arising from that cooperation.
Over the course of 2008, the BNRC met on two occasions, having been draft the respective minutes.
The Board and Corporate Governance Officer ("BCGO") is David Graham Shenton Bain, who reports to the Board of Sonae Indústria as a whole, through the Chairman.
Principal duties of the BCGO encompass:
taking a leading role in organising Board evaluations and assessments;
maintaining under close review all legislative, regulatory and corporate governance developments;
The BCGO also acts as the secretary of the BAFC and BNRC.
An Ethics Committee was created in 2008 to guarantee that the highest standards of business practices are upheld in the Sonae Indústria Group and to monitor the implementation of the new code of conduct. This Committee is also responsible for updating the Code whenever necessary.
A detailed description of this Code of Conduct is included in our 2008 Sustainability Report.
The Ethics Committee is chaired by an Independent Non-Executive Board Member elected by the Board of Directors while the Corporate Governance Officer and Internal Auditor are the other Committee members. The Ethics Committee reports at least once a year to the Board of Directors and when appropriate, also to the Statutory Audit Board of the related country, on issues related to corporate governance and business ethics.
The current members of the Ethics Committee are:
Sonae Indústria is based on integrity and ethical values that emanate from the top down with the example then being set by management. The commitment to competence is well illustrated through the fact that compensation is tied to appropriate performance.
The different governing bodies have been born from a management philosophy and operating style based on a strong organizational structure with adequate assignment of authority and responsibilities. Sound Human Resource policies and procedures together with a very recent Code of Conduct are enshrined in the framework.
Sonae Indústria faces a variety of risks from external and internal sources which must be assessed and we have instilled in our company a culture of prevention and early detection. As you will see subsequently, an Enterprise-Wide Risk Management Framework was developed and is continually updated.
Policies and procedures have been developed that help ensure management directives are carried out. Sonae Indústria has a dedicated team in Business Process & Organization which, through working with local operations and central departments, acts as a Centre of Excellence in accomplishing key objectives such as: prioritising, developing and implementing processes (including control activities); maintaining a Process Library (knowledge and documentation); establishing process best practices; and, evaluating process performance. Sonae Indústria has a huge range of activities in place as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties.
Pertinent information is identified, captured and communicated within a form and timeframe which enables people to fulfil their responsibilities. Sonae Indústria has a strong Planning and Management Control department which supported by robust information systems, produces reports containing operational, financial and compliance-related information. The centralised accounting back-office helps to guarantee alignment and effectiveness in procedures and controls.
Sonae Indústria also believes that it has established an effective communication with external parties such as customers, suppliers, regulators and shareholders through a series of publications including the Reports and Accounts, Sustainability Reports, etc.
Internal control systems are monitored. Ongoing monitoring activities exist, namely regular management and supervisory activities. Separate evaluations are followed whose scope and frequency depends primarily on an assessment of the risks and effectiveness of ongoing monitoring procedures. For instance, the Internal Audit department has elaborated an annual plan to monitor compliance with procedures and policies and a specific department (Planning and Management Controlling) is responsible for producing management information and raising questions at the unit levels.
Internal control deficiencies are reported upstream, with serious matters reported to top management and the Board. Monthly reports are sent to the executive committee and quarterly meetings are scheduled with the audit committee, BAFC.
Sonae Indústria has a reasonable level of confidence in the internal control framework which is in place. The formal validation and communication of the Vision, Values and Principles throughout the organization (to take place in early 2009) will reinforce the tone in terms of ethical behaviour. Further developments through the implementation of the Code of Conduct and the Whistleblower tool (already approved), will enhance the control culture of the organisation
Sonae Indústria has a Risk Management Department which is responsible for promoting and monitoring the development of structured and systematic processes and activities to manage business risks.
Risk Management is a key concern within the Sonae Indústria culture and is present in all management processes, forming part of the delegated responsibility of managers and employees at all levels within the Sonae Indústria Group.
Risk Management comprises the process of identifying potential risks, analysing their possible impact on the organisation's strategic goals and seeking ways to minimise the probability of their materialisation, in order to determine the best procedures to manage exposure to them.
A global approach is in place to assure a suitable and balanced coverage of the operational risk through its transfer to our reinsurance panel. Property damage and business interruption risks are covered by a global policy, developed and implemented locally. Sonae Indústria adopts this global policy as a support to its processes of risk management and is committed to improving plant protection and prevention levels to reinforce this partnership.
In addition to the active involvement of all Sonae Indústria Group managers and employees, risk management activity is performed and supported by the Risk Management Department, together with the Corporate Planning and Management Control Department.
The Risk Management Department consists of a central team with 2 full time members. There is a formally coordinated network of Country Risk Officers in each of the countries where Sonae Indústria has industrial operations and at each of the sites there is a Plant Risk Officer.
The Corporate Planning and Management Control Department is composed of 8 people, organised into three teams to better address the challenges and changes the businesses face: the Corporate Reporting Team, which is also responsible for business analysis, the Investment Analysis and big projects Team and the Strategic Planning and special projects Team.
At Sonae Indústria, Risk Management is based on a standard and integrated methodology, denominated Enterprise-Wide Risk Management ("EWRM").
In 2006, the systematisation process initiated in 2004, was consolidated, fully integrated and aligned with strategic business goals, aimed at prioritizing relevant business risks and identifying procedures to mitigate their impact. The process covers the whole organisation, encompassing all countries and corporate functions.
The Risk Model, which was built in 2004 and reviewed in 2006, aggregates business risks into three categories (Business Environment Risks, Business Process Risks and Information for Decision-Making Risks) and contains the quantification of the Significance (impact on the EBITDA and operational efficiency) as well as Probability (the frequency of occurrence of the event or scenario) of the critical risks for Sonae Indústria.
The Risk Model has been undergoing continuous updates and in 2008 a new risk was introduced, entitled Community Concern. This risk evaluates the influence – negative or positive - that Sonae Indústria could exert in the local community where its activities are developed.
In 2009, the level of development and implementation of actions identified to manage the key triggers of the drivers associated with the critical risks will be checked. Additionally, verifying those actions which were completed will help to evaluate the impact of those actions on the risk exposure and risk management.
During the updating process for 2009, we expect to see an increasing relevance of other risks in light of the current economic environment such as Economic influences, Financial markets, Capital availability and Liquidity.
In addition, financial risk management is included in Business Process Risk and is complemented and monitored within the scope of the financial function.
The manufacture of wood-based panels is an industrial activity with very significant operational fire and explosion risks. As a world leader, it would be unacceptable for Sonae Indústria to fail to recover from a catastrophic event on a "world class" scale. Thus, loss prevention and protection of core assets is a constant concern for our Group.
As a structured response to this "risk exposure", an ambitious Loss Prevention Programme was set up in 2003. In the last quarter of 2007, a project to develop an analytical version of these standards was launched with the support of recognized external consultants and with one of the key insurance market representatives, who is currently involved with Sonae Indústria. With this project Sonae Indústria aims to facilitate the understanding and implementation of these standards in all its units. This project was concluded in 2008 and is being communicated and incorporated in all processes and activities where it exerts an effect
This programme is the corner stone of the property damage and loss prevention strategy in all plants.
This project was developed as Sonae Indústria wishes to ensure that the Corporate Operational Risk Standards are an even more effective tool in terms of improving operational risk management, with little or no room for uncertainty.
An analytical version was developed that includes technical protection themes, management programs and standardised samples of checklists, reports, impairments, etc. Each and every part of CRS8 was developed with reference to international standards as NFPA9 and/or FM10 data sheets, considering the best practices of the wood industry and the good fire protection engineering practices at Sonae Indústria.
Since Sonae Indústria does not have the internal expertise to develop an analytical version of the Standards, the Corporate Risk Management team engaged a joint team with MDS, our insurance broker, XL GAPS, the external consulting entity recognised by
8 Corporate Risk Standards
9 National Fire Protection Association
10 Factory Mutual
the entire insurance panel and AIG, the insurance panel leader. This guaranteed the validation of the output.
The involvement of internal departments of Industrial Best Practices and Health & Safety as active partners in the entire process guaranteed a wide scope of the project and the consideration of transversal implications.
The Corporate Risk Standards are divided into three areas:
Best Industry Practices in Loss Prevention involving the Human Element: Preparation for emergencies;
Management of Programs (maintenance, equipment inspections, training, contractors, housekeeping).
Reference to international recognised standards, mainly NFPA; General requirements in detection and protection of industrial premises, fire water supply specifications and building materials characteristics; Integration of component for Surveillance practices (hardware).
World class developed knowledge in fire detection and protection inherent to the wood based panels industry: wet and dry particle handling and transport, dryers, hot presses…;
Specific issues such as thermal and hydraulic oil installations, electrical cabinets and rooms, transformers.
A process was developed to guarantee an adequate internal communication process. A live broadcast with all Country Industrial Directors and Country Risk Co-ordinators was performed in November and a CD with the Corporate Operational Risk Standards was sent to all Plant Managers and Local Risk Officers
In 2009, Sonae Indústria will consolidate this information and training program through regional Workshops with local teams and consequently roll out and implement the Standards. The Self Inspection Form is being reformulated and will incorporate a compliance verification during risk surveys and business planning: Risk Plan, Industrial Master Plan, Annual Planning and investments validation.
Supported by the Corporate Operational Risk Standards, the XL GAPS conducts external risk inspections at all sites every two years; a report is issued with a set of recommendations for each of the plants visited and a rating of the risk quality (QIN – Quality Index Number) is allocated for each plant. Since 2000, the overall QIN of Sonae Indústria has improved from 5.8 in 2000 to 7.2 in 2008 (on a scale from 0 to10).
In addition, AIG Europe actively participates in the Risk Engineering program in collaboration with XL GAPS and the risk management services of the insurance broker - MDS. In 2008, 10 external risk surveys were conducted by XL GAPS and AIG Europe in close cooperation with each plant and with the support of the Risk Management Department.
An internal visit is made to each plant every 18 months to review the status of the previous internal and external recommendations as well as compliance with Corporate Risk Standards. In 2008, 6 internal surveys were carried out.
A Quarterly Control self-assessment procedure using a Self Inspection Form has been carried out by each plant since 2000.
In 2008, the Self Inspection Form was reformulated to accommodate the new version of the Standards and will be implemented within this new framework for the first time in the first quarter of 2009.
This evaluates 70 items grouped into 5 categories (Assets, Management/Leadership, People, Process and Third Parties).
All non-conformities detected automatically generate a corrective action, and there is an automatic quarterly follow-up of outstanding corrective actions.
Each individual plant plan (which is updated annually) defines a set of measures to be taken towards achieving full compliance with the Corporate Operational Risk Standards by 2013. The main objectives encompass:
The 2008-2013 Risk Plan forms an integral part of the Industrial Master Plan of Sonae Indústria, which consists of the investment planning of each plant for the next 5 years.
Sonae Indústria's global insurance premium is charged to each plant with 50% being allocated according to local insurance market prices and 50% being based on the plant's measured risk quality. The former is calculated in line with "stand alone" local market insurance premium levels and the latter according to the QIN of each plant, so that the "worst" performers pay their fair share of insurance costs.
The Board of Directors is empowered to ensure the management of the Company in accordance with the objects established in the Company's Articles of Association. Currently, the Board of Directors may deliberate on increases in the Company's share capital of up to two billion euros, on one more occasions, in accordance with the law.
The Board of Directors has delegated powers to the Executive Committee to manage day-to-day operations of the Company except:
f) deciding to change the Company's headquarters or to approve any share capital increases;
g) deciding on mergers, de-mergers and modifications to the corporate structure of the Company;
h) approving the Company's Business Plan and Annual Budget;
i) deciding key features of personnel policies including stock incentive plans and variable remuneration plans applicable to Executives and Senior Managers (Management Levels G4 and above), in areas that do not require resolutions from the Shareholders' Remuneration Committee or deliberations at Shareholders' General Meetings, together with decisions on individual compensation for Executives of Management Levels G3 and above, which competence is delegated to the Board Nomination and Remuneration Committee and, when these Executives are Officers of the Company, also require decisions from the Shareholders' Remuneration Committee or deliberations at Shareholders' General Meetings;
j) defining or changing major accounting policies of any company included in the consolidation perimeter of Sonae Indústria Group;
k) approving quarterly and half-yearly reports and accounts;
l) selling, acquiring directly or by long-term lease or transacting in any other way, investments classified as tangible fixed assets where the individual transaction value is in excess of 5,000,000 euros, unless covered by the Annual Budget or the Business Plan, duly approved by the Board;
m) purchasing or subscribing new shares in the share capital of any subsidiary company where the accumulated amount exceeds 20,000,000 euros in any financial year, unless covered by the Annual Budget or the Business Plan, duly approved by the Board;
n) investing in any other company or in other financial assets when the accumulated value is in excess of 10,000,000 euros in any financial year, unless covered by the Annual Budget or the Business Plan, duly approved by the Board;
o) making any other financial investment which exceeds the accumulated amount of 10,000,000 euros in any financial year, unless covered by the Annual Budget or the Business Plan, duly approved by the Board;
p) disposing of assets or other divestments, if such a transaction has a significant effect on the operating results of the Company (defined as equal or greater than 5%) or affects the jobs of more than 100 employees, unless covered by the Annual Budget or the Business Plan, duly approved by the Board;
It is also the exclusive responsibility of the Board of Directors to define the Sonae Indústria and Sonae Indústria Group strategy and general policies as well as define the corporate structure of the Sonae Indústria Group.
The Executive Committee normally meets at least once every month and additionally whenever the President of the Executive Committee (CEO) or a majority of its members call a meeting in writing, at least 3 days before the appointed date. Meetings can only take place if at least four of the members are present (either physically or by videoconference). The CEO presides over the meeting as Chairman. Over the course of 2008, 15 meetings of the Executive Committee were held.
Decisions made by the Executive Committee are taken by a qualified majority of four votes in favour. In the absence of this qualified majority, the Executive Committee must submit the matter under consideration to the Board of Directors for deliberation. With the objective of maintaining the Board of Directors permanently informed on decisions taken by the Executive Committee, all Board members are sent the minutes arising from the Executive Committee meetings.
Members of the Executive Committee provide all information required by other members of the governing bodies both on time and in sufficient detail.
In 2008, the Board of Directors approved the regulations of the Board of Directors and Executive Committee. The Statutory Audit Board has approved its own regulation.
These regulations can be found at the site www.sonaeindustria.com. No rules have been set for any inconsistencies or cumulative number of positions, being applicable the provisions of law.
Members of the Board of Directors are elected by the Shareholders' General Meeting. Groups of shareholders representing between 10% and 20% of the Company's share capital, may submit a stand-alone proposal to nominate a Director in advance of the Shareholders' General Meeting. Each shareholder cannot support more than one list of Directors and each list must identify at least two eligible people to fill each position on the Board. If lists are submitted by more than one group of shareholders, the voting will be based on these lists.
In the event of death, resignation or temporary or permanent inability of any of the Directors, the Board of Directors is responsible for his or her replacement. If the Director in question was nominated by minority shareholders, a new separate election must be held.
Members of the Supervisory Audit Board are also elected by the Shareholders' General Meeting. Supervisory Board members who are temporary unable to exercise functions or whose functions have ceased are replaced by substitute members, who will subsequently continue functions until the first Shareholders Annual General Meeting. This meeting will then proceed to fill the respective vacancies.
In the absence of the alternate positions, vacancies are filled by a new election.
The Statutory External Auditor is elected by the Shareholders' General Meeting following a proposal from the Statutory Audit Board.
In the absence of the elected Statutory External Auditor, it is the responsibility of the Board of Shareholders General Meeting to appoint his substitute, subject to ratification by the following Shareholders General Meeting. In the absence of designation within 30 days, the company governing bodies shall notify the Association of External Auditors who is entitled to appoint the external auditor.
During 2008, the number of meetings and attendance record for the Board of Directors, Board Committees and Statutory Audit Board were as follows:
| Number of Meetings |
Attendance | |
|---|---|---|
| Board of Directors | 6 | 97% |
| Executive Committee | 15 | 97% |
| Board Audit and finance Committee | 5 | 87% |
| Social Responsibility and Environment Committee | 2 | 100% |
| Board Nomination and Remuneration Committee | 2 | 88% |
| Statutory Audit Board | 6 | 100% |
The Board of Directors of Sonae Indústria is currently composed of 9 members (as referred above José António Comesaña resigned in December 2008), 4 Executive and 6 Non-executive.
Of the Non-Executive Directors, 3 (three) are Independent, in that they are not associated with any interests group within the company, do not hold qualified shareholding nor do they act on behalf of shareholders with qualified shareholdings of 2% or more of the company's share capital. Additionally, they have not been re-elected for more than two mandates.
All Independent Board Members, with the exception of Per Knuts and Thomas Nystén, comply with the applicable rules of conflicts and determined in art. 414-A of the Company Law. Regarding these two members, both perform the same functions in the Supervisory Board of Glunz, AG, a company subsidiary of Sonae Indústria, but this does not imply a loss of independence.
These independent Directors exercise an important influence over the decision-making process and the development of company strategy and policy.
Belmiro de Azevedo (Chairman Sonae Indústria): obtained a degree in Industrial Chemical Engineering at the University of Oporto, a PMD from Harvard Business School, participated in the Financial Management Programme from Stanford University and has occupied a diverse number of positions in the Efanor/Sonae Group from an early stage. Mr Belmiro de Azevedo is today Chairman of the Board of Sonae Group and Chairman of the Board and CEO of Sonae Capital, SGPS S.A., a member of the European Union Hong Kong Business Cooperation Committee, of the International Advisory Board of Allianz AG and of the Harvard Business School International Advisory Board. He has been decorated on a number of occasions, some of the most prominent being the "Encomienda de Numero de la Ordem del Mérito Civil" from His Majesty D.Juan Carlos, King of Spain, the "Order of the Cruzeiro do Sul" from the President of the Brazilian Federal Republic, the "Grã Cruz da Ordem do Infante D. Henrique" from the President of the Portuguese Republic, nomination as "Honorary Fellow" of the London Business School and member of the "Order of Outstanding Contributors to Sustainable Development" from the World Business Council for Sustainable Development.
Álvaro Cuervo Garcia (Independent): holds a post graduate degree in Statistics and Psychology and a PhD in Economics from the University of Madrid (Spain). Mr Cuervo is a professor of Business Economics and was Head of the Business department at the Complutense University in Madrid, Head of Business Economics at Valladolid and Oviedo University (Spain) and CIDE (Mexico) and visiting professor at New York University and California Berkeley University (USA). As a member of the Spanish government's consultative committee for privatizations and Chairman of the Economic and Business Scientific Association (Spain), he holds a number of other directorship roles.
Paulo Azevedo: holds a degree in Chemical Industrial Engineering from the Lausanne Polytechnic School (Switzerland) and a post-graduate degree in Business studies from the Oporto Institute of Business Studies. Having been CEO of Optimus – Telecomunicações S.A. between 1998 and 2000. Today Mr. Paulo de Azevedo is CEO of Sonae SGPS and holds a number of managerial and directorship roles in the Efanor/Sonae Group. Paulo Azevedo is Belmiro de Azevedo's son.
Per Knuts (Independent): holds a degree in Chemical Engineering from the Royal Institute of Technology (Sweden) and was Chairman for the Global Council of Stora Feldmuhle AG Companies and FPB Holding AG (Dusseldorf – Germany) between 1998 and 2004.
Thomas Nystén (Independent): obtained a Master of Arts degree (Political Economy) at the University of St Andrews (Scotland) in 1963 and completed an AMP at the Harvard Business School in 1984. Previously held the positions of Executive Director of the Myllykoski Corporation in Helsinki and CEO of MD Lang Papier in Germany (1994- 2004).
Carlos Bianchi de Aguiar (President of the Executive Committee and CEO Sonae Indústria): graduated with a degree in economics from the University of Oporto. Having worked for Sonae Indústria since 1986, he has occupied a number of managerial and directorship roles in various geographies, namely the UK ('90-'95), Spain ('96-'97) and Germany ('00-'01). He returned to Portugal in 2002 to become Group CFO and was appointed CEO in 2005.
Rui Correia (CFO): holds a degree in Economics from the University of Oporto and a post graduate degree in Business Management from the Oporto Institute of Business Studies. Having exercised functions in the Efanor/Sonae Group since 1994, he was head of the Finance Department of Sonae SGPS from 2000 and was appointed as Sonae Indústria CFO in 2005. Since 2001, he has also held a number of directorship roles in the Efanor/Sonae Group.
Christophe Chambonnet (COO France): obtained a degree in engineering from ISAB (France), a MS in Applied Economics and an MBA from the University of Purdue, USA. Between 1998 and 2000 he has occupied a number of managerial and directorship roles in the Marketing area, namely in companies based in USA, Canada, France and Belgium. Between 2000 and 2005 he was a Board member of Tafisa Canada, a subsidiary of Sonae Indústria. Between April 2005 and June 2006, he was vice president of Tembec Avebene SAS, a French company. As from July 2006, he was appointed COO of Isoroy SAS.
Louis Brassard (COO Canada): obtained a degree in Industrial Engineering from the Montreal Polytechnic School (Quebec Canada) and an MBA in Finance and Marketing from Montreal University. He has been with Sonae Indústria since 1994 and has held a number of managerial and directorship roles.
| Number of Shares | Number of Shares | ||
|---|---|---|---|
| Belmiro Mendes de Azevedo | (1) Efanor Investimentos, SGPS, SA | ||
| Efanor Investimentos, SGPS, SA (1) | 49.999.997 | Sonae Indústria, SGPS, SA | 44.680.000 |
| Sonae Indústria, SGPS, SA | 1.010 | Pareuro, BV (2) | 2.000.000 |
| Sonae Capital, SGPS, SA (3) | 88.859.200 | ||
| Carlos Bianchi de Aguiar | |||
| Sonae Indústria, SGPS, SA | 720 | (2) Pareuro, BV | |
| Sonae Capital, SGPS, SA (3) | 50.000.000 | ||
| Rui Manuel Gonçalves Correia | Sonae Indústria, SGPS, SA | 27.118.645 | |
| Sonae Indústria, SGPS, SA | 12.500 | ||
| (3) Sonae Capital, SGPS, SA | |||
| Duarte Paulo Teixeira de Azevedo | SC, SGPS, SA (4) | 391.046.000 | |
| Efanor Investimentos, SGPS, SA (1) | 1 | Sonae Financial Participations, B.V (5) | 500 |
| Migracom, SGPS, SA (6) | 1.969.996 | ||
| Sonae Indústria, SGPS, SA | 223 | (4) SC, SGPS, SA | |
| Sonae Indústria, SGPS, SA | 9.521.815 | ||
| (5) Sonae Financial Participations, B.V | |||
| Sonae Indústria, SGPS, SA | 1.462.349 | ||
| (6) Migracom, SGPS, SA | |||
| Sonae Indústria, SGPS, SA | 90.000 | ||
| Sonae Capital, SGPS, SA (3) | 161.250 | ||
| Imparfin, SPS, SA (7) | 150.000 | ||
| (7) Imparfin, SPS, SA | |||
| Sonae Indústria, SGPS, SA | 278.324 | ||
| Sonae Capital, SGPS, SA (3) | 513.160 |
Sonae Indústria Directors have the following Sonae Indústria Shares attributed to them:
Members of the Board of Directors are currently also members of the Boards of other companies, which are listed in Point 2.11 of this report.
During the past five years, Belmiro de Azevedo, Carlos Bianchi de Aguiar, Rui Correia, Christophe Chambonnet and Paulo Azevedo have also been Directors at various other Efanor Group companies.
Within the same period, the following Directors also held directorships at the following companies outside to the Efanor Group:
• BA Vidrio, S.A.
• Stora Feldmühle AG
• FPB Holding AG
• Sonae – SGPS, S.A.
Maiequipa Gestão Florestal, S.A.
Movelpartes Componentes para a Indústria do Mobiliário, S.A.
Sonae Indústria de Revestimentos, S.A.
Sonae Indústria Produção e Comercialização de Derivados de Madeira, S.A.
• Glunz AG (Supervisory Board – "Aufsichtsrat")
• Glunz AG (Supervisory Board Chairman – "Aufsichtsrat")
All members of the Statutory Audit Board comply with the rules of conflicts referred to paragraph 1 of art. Article 414-A and the criteria of independence set out in paragraph 5 of art. 414, both relating to Company Law.
The current members of the Statutory Audit Board were elected at the Shareholders' Annual General Meeting held on 31st May 2007 until the end of the current mandate (2006-2008). The current chairman, Óscar José Alçada da Quinta was elected as a substitute at the same meeting, as explained above, assuming the functions of effective member following the resignation of João Manuel Gonçalves Bastos, elected by the Shareholders' Annual General on 21st April 2008, who resigned in September 2008.
The Annual Report of the Statutory Audit Board includes a description of the supervisory performed and is published on the company's website together with other accountability documents.
The Statutory Audit Board proposed the election of the Statutory External Auditor at the Shareholders' Annual General Meeting held in 2007, who is also the external auditor of the company. The proposed remuneration policy approved at the 2008 Shareholders' Annual General Meeting states that the Statutory External Auditor of the company should be paid according to the normal levels of fees for similar services by reference to market information, as negotiated annually under the supervision of the Statutory Audit Board and monitoring of the Board Audit and Finance Committee.
The Statutory Audit Board meets the Statutory External Auditor whenever it deems fit and monitors their activities and conclusions of their work through the final audit reports.
The remuneration of the Supervisory Board members of the company consists of a fixed fee, determined taking into account the situation of society and the practices of the market and includes one annual allowance insurance. The remuneration of the Chairman amounts to 16,682 euros and of the other two members amounts to 25,766.5 euros.
Degree in Economics (University of Porto). Mr. Quinta has held various functions in both the administrative and financial departments of different companies (1982-1986) and since 1986 has provided services within the external audit of the Official Statutory Auditors Association. Through this activity in 1990 he was included in the List of Official External Auditors, a function which he works on exclusivity, initially on a stand-alone basis but subsequently as partner of Óscar Quinta, Canedo da Mota & Pires Fernandes, SROC.
ARMANDO LUÍS VIEIRA DE MAGALHÃES (Statutory Audit Board Member): Bachelor of Accounting (former-ICP and current ESCAP), Degree in Economics (University of Porto), Executive-MBA European Management (IESF / IFG. Mr. Magalhães performed various functions in a credit institution (1964-1989) and since 1989 has practiced as an external auditor, first on a stand-alone basis but subsequently as partner of Santos Carvalho & Associados, SROC.
Management Degree (ISEG, Technical University of Lisbon), MBA in Finance-IEDE Madrid, MBA in Management and Information Systems (Catholic University), Official External Auditor. Mr. Morgado held various roles as auditor in Coopers & Lybrand (1980-1989), responsible for Management Control and Internal Audit of the Coelima Group (1989-1991) before becoming a partner of Deloitte (1991-2004). From 2004 he has been an Official Statutory Auditor and Partner of Econotopia-Consultoria e Gestão, SA.
None of the members of the Statutory Audit Board hold Sonae Indústria shares.
Sonaecom - SGPS, S.A. (Supervisory Audit Board) Sonae Distribuição, SGPS, SA (Supervisory Audit Board)
Sonaecom - SGPS, S.A. (Supervisory Audit Board) Sonae Capital, SGPS, SA (Supervisory Audit Board)
Sonae, SGPS, SA (Supervisory Audit Board) Sonae Capital, SGPS, SA (Supervisory Audit Board) Sonae Sierra, SGPS, SA (Supervisory Audit Board)
BA GLASS I – Serviços de Gestão e Investimentos, SA. (Supervisory Audit Board) Lisgráfica-Impressão e Artes Gráficas, SA (Supervisory Audit Board) Óscar Quinta, Canedo da Mota & Pires Fernandes, SROC (Board of Directors)
Futebol Clube do Porto - Futebol S.A.D (Supervisory Audit Board)
The Shareholders' Annual General Meeting held in 2007 approved a proposal made by Sonae Indústria Shareholders' Remuneration Committee ("Comissão de Vencimentos") setting out the remuneration policy to be followed during the current mandate (2006 – 2008).
In the 2008 Shareholders' Annual General Meeting, the Salaries Shareholders' Remuneration Committee deliberated on making certain amendments to the remuneration policy adopted by the 2007 Shareholders' Annual General Meeting, and presented a new remuneration policy.
This remuneration and compensation policy is based on the presumption that initiative, effort and commitment are the essential foundation stones for good performance. For these reasons, individual activity, performance and contributions to the company's success should be evaluated annually, which will thereby influence the attribution of variable remuneration and other compensations to each person.
In relation to Directors' remuneration and other compensation, the approved policy establishes the following:
Remuneration and compensation of the Executive Directors (ED) includes: (i) a fixed component, which includes an Annual Salary paid in reference to one year period (salaries are paid 12 months), an Annual Responsibility Allowance and a package of benefits linked to market practices, (ii) a variable "Annual Performance Bonus", which is paid during the first quarter of the following year, and (iii) a discretionary variable third component, attributable on the first quarter of the following year, as a deferred performance bonus under the Medium Term Incentive Plan, which vests on the second anniversary of the attribution date.
Individual compensation packages will be defined as a function of the level of responsibility of each ED and will be reviewed annually. Each ED is attributed a Sonae Indústria Management Level named "Grupo Funcional"("GF" or "G"). Sonae Indústria's EDs are normally "Senior Executive" (G2), being attributed to the CEO the level "Group Senior Executive" (G1). Sonae Indústria Management Levels are applied in a similar way across all Efanor Group and are related to Hay's international model for the classification of corporate functions, thereby facilitating market comparisons, as well as helping to promote internal equity. The compensation packages to be awarded to EDs will be benchmarked using market surveys of the compensation of Portuguese and European top executives, with the aim of setting fixed remuneration close to the median and total compensation close to the third quartile in comparable circumstances;
The purpose of the Annual Performance Bonus is to reward the achievement of several objectives annually defined, related to "Key Performance Indicators of Business Activity" (Business KPIs) and "Personal Key Performance Indicators" (Personal KPIs).
The Bonus target to be attributed will be based on a percentage of the fixed component, which will vary between 40% and 60%. Business KPIs, which include economic and financial indicators, will be based on approved budgets; individual performance of the business unit and group performance will account for 70% of the Annual Performance Bonus and constitute objective indicators. The remaining 30% will derive from Personal KPIs, based on subjective indicators and amounts paid will be based on real performance achieved and may vary between 0% and 120% of the target bonus attributed;
The Medium-term Incentive Plan will be aimed at enhancing ED's loyalty, aligning them with shareholders and increasing their awareness of their importance on the overall success of our organisation. Currently, the objective values are defined as a percentage of the Annual Performance Bonus. For the Executive Directors, such amounts represent between 50% and 100% of the target Annual Performance Bonus. Amounts attributed derive from one or more KPIs, aligned with value creation to shareholders and are similar for all EDs.
Remuneration of Non-Executive Directors (NEDs) is based on market comparables and is structured as follows: (i) a fixed remuneration (of which approx. 15% depends on attendance at meetings); (ii) an Annual Responsibility Allowance. No other variable remuneration of any kind is payable to NEDs. The Fixed Remuneration is increased by up to 6% for NEDs serving as Chairmanship of any Board Committee.
| 2008 | Total Fixed Annual Remuneration |
Total Short Term Performance Bonus |
Total Deferred Medium Term Performance Bonus |
Total 2007 | ||||
|---|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2007 (a) | 2008 (b) | 2007 (c) | 2008 (d) | 2007 | 2008 | |
| Chairman of the Board of Directors | 142,333 | 184,000 | 142,333 | 184,000 | ||||
| CEO | 257,465 | 256,600 | 103,035 | 43,200 | 114,000 | 474,500 | 299,800 | |
| Executive Directors (remaining) | 852,161 | 874,944 | 293,079 | 161,423 | 143,087 | 1,288,328 | 1,036,367 | |
| Non-executive Directors (remaining) | 149,020 | 143,600 | 149,020 | 143,600 | ||||
| Total of Board of Directors | 1,400,980 | 1,459,144 | 396,114 | 204,623 | 257,087 | 2,054,181 | 1,663,767 |
(a) relative to 2007, achievement approved in 2008
(b) relative to 2008, achievement approved in 2009
(c) relative to 2007 and to be paid in 2010
(d) relative to 2008 and to be paid in 2011
Given that Sonae Indústria does not have "dirigentes" within the meaning of paragraph 3 of Article 248-B of the Securities Code, its Board of Directors has not submitted any remuneration policy to the Shareholders' Annual General Meeting.
No special agreements exist regarding compensation or payments to be made to either Company Directors or employees in the event of termination of service resulting from a tender offer.
In 2009 a compensation for a Executive Board Member amounted to 1,012,100 euros
The company does not have plans for the allotment of shares and/or options for share purchases
Sonae Indústria's Shareholders' Remuneration Committee is appointed by the Shareholders' General Meeting for a three-year term and is currently composed of Efanor Investimentos - SGPS, SA, represented by José Manuel Neves Adelino and Imparfin -SGPS, SA, represented by Bruno Walter Lehmann, and is therefore independent in relation to the Board of Directors.
During 2008 and with the formalization of the Code of Conduct of Sonae Indústria, the procedure of reporting irregularities was defined. This is available on our website www.sonaeindustria.com.
Employees and service providers may report, on a confidential basis, concerns about any behaviour or decision that in its opinion, does not respect the ethics and the Code of Conduct.
The possible case of irregularity should be sent via e-mail or post to one of the following addresses:
E-mail: [email protected] Post: Sonae Industria SGPS, S.A. Corporate Governance Officer Lugar do Espido, Via Norte Apartado 1096 4470-177 Maia Codex Portugal
A meeting to clarify the alleged irregularity can then be arranged with the Corporate Governance Officer, when required
Each irregularity report will be received by the Corporate Governance Officer, who is responsible for initiating and supervising the investigation into all reports.
Once the research is concluded and if the irregularity reported corresponds to wrongful conduct, the Ethics Committee shall notify the situation to the superior of the employee or the Service Provider's Company in order to apply corrective actions and / or initiate disciplinary proceedings to be initiated.
As the Company wishes to encourage good faith reporting of any alleged irregularity while avoiding damage to the reputation of innocent persons initially indicated as allegedly suspected of wrongful misconduct, anonymous reports are not accepted.
The investigation will be conducted in a confidential manner and the Company ensures that there will be no discriminatory or retaliatory action against any employee or service provider who reports an alleged irregularity in good faith based on his/her personal knowledge. If any employee or service provider believes that he or she has been retaliated against for reporting or participating in an investigation, he/she should immediately report such perceived retaliation to the Corporate Governance Officer.
The company provides a means by which to report irregularities on its internet.
The company maintains a record of all complaints and cases investigated as well as their findings which will be available for consultation by the governing bodies and external auditor.
Sonae Indústria's share capital amounts to 700 million euros and is represented by 140 million ordinary shares with a nominal value of 5 euros per share. All shares are listed on Euronext Lisbon. No limitations or restrictions are in place regarding the transfer of control or sale of shares.
In the 2008 Shareholders' Annual General Meeting, the conversion of the book-entry bearer shares of the Company to book-entry registered shares was approved. Consequently the wording of paragraph 1 in article 6 of the Company's Articles of Association was amended to the following wording " ARTICLE SIX One - The shares shall be nominal and may be titled or registered."
On 30th May 2008 the shares were converted into book-entry registered shares.
| Shareholder | Number of shares | % Share Capital | % Voting Rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, S.A | |||
| Directly | 44.780.000 | 31,9857% | 31,9857% |
| By Pareuro, BV (controlled by Efanor) | 27.118.645 | 19,3705% | 19,3705% |
| By SC, SGPS, SA (indirectly controlled by Efanor) | 9.521.815 | 6,8013% | 6,8013% |
| By Sonae Financial Participations B.V (indirectly controlled by Efanor) | 1.462.349 | 1,0445% | 1,0445% |
| By Maria Margarida CarvalhaisTeixeira de Azevedo (Director of Efanor) | 1.010 | 0,0007% | 0,0007% |
| By Nuno Miguel Teixeira de Azevedo (Director of Efanor and held by descendent) | 711 | 0,0005% | 0,0005% |
| By Duarte Paulo Teixeira de Azevedo (Director of Efanor and held by descendent) | 223 | 0,0002% | 0,0002% |
| By Migracom, SGPS, SA (company controlled by Efanor's Director, Paulo Azevedo) | 90.000 | 0,0643% | 0,0643% |
| By Linhacom, SGPS, SA (company controlled by Efanor's Director, Cláudia Azevedo) | 23.186 | 0,0166% | 0,0166% |
| 82.997.939 | 59,2842% | 59,2842% |
There are no Shareholders with special rights.
There are no restrictions to the transfer of company shares.
The company is unaware of the existence of a shareholders agreement and which may restrict the transfer of securities or voting rights.
The rules applicable to amendments of the articles of association are established by law. It is the task of the Shareholders' General Meeting to decide on the amendment of the articles of association. However, the Board of Directors can decide to change the registered office within the national territory, as well as deliberate on increases in the Company's share capital by new cash entries up to two billion euros, on one or more occasions.
Control mechanisms for a possible employee-shareholder system, inasmuch as the voting rights are not directly exercised by them, are nor planned.
2008 was marked by a global drop in equity markets, resulting from the deepening crisis of confidence prevailing within capital markets, due to problems related to subprime mortgages. The Sonae Indústria share price was particularly affected as the company acts in a highly cyclical sector, depends on the construction industry and is exposed to those economies most affected by the real estate crisis: Spain and North America.
31st July 2008: 1H 2008 consolidated results announced
10th Sept. 2008: Start-up of the new melamine production line in White River, South Africa and the start-up of the new Hot Gas Generator in Oliveira do Hospital, Portugal
Every year, the actual pay-out ratio is proposed by the Board of Directors, considering the target pay-out ratio of 50% and the existing investment opportunities. In relation to 2007, the Board of Directors proposed to the Shareholders' General Meeting a dividend payment of 50% of the 2007 Consolidated Net Profits Attributable to its Equity Holders. This proposal which amounted to 39.2 million euros was subsequently approved.
In the two previous years, Sonae Indústria did not distribute dividends as it opted to instead strengthen its balance sheet following the significant deterioration in shareholders' funds as a result of past accumulated losses.
Sonae Indústria does not currently award any remuneration or other compensation involving or linked to shares or share options.
Sonae Indústria did not carry out any transactions with members of the Board of Directors nor with the Statutory Audit Board members.
All transactions with holding or other related companies represent normal operational activity and were made under "open market" conditions and at prices that comply with transfer pricing regulations.
Sonae Indústria has its own Investor Relations' Department, responsible for managing the relationship between the Company and shareholders, investors, analysts and market authorities including the CMVM (the Portuguese Securities Exchange Regulator).
Each quarter, the Investor Relations' Department is responsible for coordinating the preparation of an earnings announcement to be issued to the market and also provides statements whenever necessary to disclose or clarify any relevant fact or event that could affect the share price. The Investor Relations' Department is available at all times to respond to any general questions posed by the market. The Company is available to meet with investors, either in roadshows or in one-to-one meetings upon request, or by participating at conferences.
Sonae Indústria's Investor Relations Department may be contacted by email at [email protected] or by telephone: 00 351 22 010 0638. The investor relations director is Patrícia Vieira Pinto.
In addition, Sonae Indústria has an institutional website (www.sonaeindustria.com) that posts all earnings announcements, statements, reports and accounts together with any other public documents, press releases or general news items on a wide range of themes relating to the Company and Group.
Sonae Indústria's legal representative relations with equity market ("Representante para as Relações com o Mercado de capitais") is Rui Correia, who can be contacted via the Investor Relations' Department or alternatively, directly by email: [email protected].
The Company's website contains several information in English, including the company's name, the quality of publicly traded company, the headquarters and other elements mentioned in Article 171 of the Companies Code, the Articles of Association, the identity of the governing bodies and the representative relations with equity market, the Investor Relations Department, their duties and ways of access, documents of accountability, corporate events calendar, proposals for discussion and vote at Shareholders' Annual General Meeting and notice to convene the same meeting.
In 2008, the statutory external auditor PriceWaterhouseCoopers invoiced Sonae Indústria and its affiliated companies a total amount of 782,334 euros. Of this total, 92% related to the audit and legal certification of the accounts and 6% to other reliability services while 2% related to services other than legal certification of the accounts.
To safeguard external auditor independence, we required that tax consultancy and other services are provided by different teams from those involved in the audit process.
| Acquisitions | Sales | Balance at 31.12.2008 |
||||
|---|---|---|---|---|---|---|
| date | amount € average value |
amount | € average value | amount | ||
| Belmiro Mendes de Azevedo | ||||||
| Efanor Investimentos, SGPS, SA (1) | 49.999.997 | |||||
| ( 1 share is held by the spouse) Sonae Indústria, SGPS, SA |
1.010 | |||||
| Sonae Capital,SGPS, S.A. (2) | 838.862 | |||||
| Shares (*) | 28.01.2008 | 1.862 | ||||
| Acquisition | 06.02.2008 | 160.000 | 1,84 | |||
| Acquisition | 07.02.2008 | 150.000 | 1,84 | |||
| Acquisition | 08.02.2008 | 350.000 | 1,78 | |||
| Acquisition | 11.02.2008 | 177.000 | 1,76 | |||
| ( 1.862 shares are held by the spouse ) | ||||||
| Carlos Bianchi de Aguiar Sonae Indústria, SGPS, SA |
720 | |||||
| Rui Manuel Gonçalves Correia Sonae Indústria, SGPS, SA Acquisition |
27.05.2008 | 7.500 | 4,05 | 12.500 | ||
| Duarte Paulo Teixeira de Azevedo Efanor Investimentos, SGPS, SA (1) Sonae Capital,SGPS, S.A. (2) |
1 411 |
|||||
| Shares (*) (held by the menor descendent ) | 28.01.2008 | 411 | ||||
| Migracom,SGPS,SA (3) Increase in share capital |
27.11.2008 | 1.900.000 | 1 | 1.969.996 | ||
| Sonae Indústria, SGPS,SA (held by the menor descendent ) |
223 | |||||
| Agostinho Conceição Guedes | ||||||
| Sonae Indústria, SGPS,SA | 2.520 |
| Acquisitions | Sales | Balance at 31.12.2008 |
||||
|---|---|---|---|---|---|---|
| date | amount | € average value | amount | € average value | amount | |
| (1) Efanor Investimentos, SGPS, SA | ||||||
| Sonae Indústria, SGPS, SA | 44.780.000 | |||||
| Acquisition | 04.09.2008 | 105.294 | 2,70 | |||
| Pareuro, BV (4) | 2.000.000 | |||||
| Increase in share capital | 21.01.2008 | 1.980.000 | 152 | |||
| Sonae Capital, SGPS, SA (2) | 88.859.200 | |||||
| Acquisition of Rights of Demerger | 11.01.2008 | 13.029.263 | 0,17 | |||
| Acquisition of Rights of Demerger | 14.01.2008 | 11.000.000 | 0,20 | |||
| Acquisition of Rights of Demerger | 15.01.2008 | 26.613.385 | 0,21 | |||
| Shares (*) | 28.01.2008 | 82.350.553 | 0,00 | |||
| Shares (**) | 28.01.2008 | 6.330.331 | 0,00 | |||
| Acquisition of Shares | 07.03.2008 | 178.316 | 1,48 | |||
| (2) Sonae Capital,SGPS, SA | ||||||
| SC,SGPS, SA (5) | 391.046.000 | |||||
| Sonae Financial Participation,B.V. (6) | 500 | |||||
| (3) Migracom,SGPS,SA | ||||||
| Sonae Indústria, SGPS, SA | 90.000 | |||||
| Acquisition | 17.01.2008 | 50.000 | 4,95 |
| Acquisition | 18.01.2008 | 51 | 4,82 | |
|---|---|---|---|---|
| Sonae Capital,SGPS, SA Shares (*) |
28.01.2008 | 161.250 | 0,00 | 161.250 |
| Imparfin, SGPS, SA (7) | 150.000 | |||
| (4) Pareuro, BV Sonae Capital, SGPS, SA (2) Shares (*) Sonae Indústria, SGPS, SA |
28.01.2008 | 50.000.000 | 0,00 | 50.000.000 27.118.645 |
| (5) SC,SGPS,S.A. Sonae Indústria, SGPS, SA |
9.521.815 | |||
| (6) Sonae Financial Participations B.V. | ||||
| Sonae Indústria, SGPS, SA | 1.462.349 | |||
| Acquisition | 25.08.2008 | 5.000 | 2,63 | |
| 26.08.2008 | 60.000 | 2,66 | ||
| 27.08.2008 | 16.501 | 2,64 | ||
| 28.08.2008 | 30.000 | 2,65 | ||
| 29.08.2008 | 35.000 | 2,67 | ||
| 01.09.2008 | 15.000 | 2,65 | ||
| 02.09.2008 | 25.000 | 2,68 | ||
| 03.09.2008 | 8.000 | 2,68 | ||
| 04.09.2008 | 100.000 | 2,66 | ||
| 05.09.2008 | 60.000 | 2,60 | ||
| 08.09.2008 | 40.000 | 2,67 | ||
| 09.09.2008 | 45.000 | 2,65 | ||
| 10.09.2008 | 30.000 | 2,59 | ||
| 11.09.2008 | 35.000 | 2,57 | ||
| 12.09.2008 | 47.500 | 2,57 | ||
| 15.09.2008 | 38.121 | 2,49 | ||
| 16.09.2008 | 50.000 | 2,45 | ||
| 17.09.2008 | 70.000 | 2,47 | ||
| 18.09.2008 | 70.000 | 2,37 | ||
| 19.09.2008 | 90.000 | 2,37 | ||
| 22.09.2008 | 35.000 | 2,35 | ||
| 23.09.2008 | 35.000 | 2,34 | ||
| 24.09.2008 | 100.000 | 2,29 | ||
| 25.09.2008 | 15.000 | 2,27 | ||
| 26.09.2008 | 25.000 | 2,26 | ||
| 29.09.2008 | 20.000 | 2,25 | ||
| 30.09.2008 | 34.156 | 2,21 | ||
| 01.10.2008 | 12.500 | 2,23 | ||
| 02.10.2008 | 25.428 | 2,19 | ||
| 03.10.2008 | 32.500 | 2,12 | ||
| 06.10.2008 | 59.643 | 2,00 | ||
| 07.10.2008 08.10.2008 |
68.000 130.000 |
1,88 1,67 |
||
| (7) Imparfin, SGPS, SA | ||||
| Sonae Indústria, SGPS, SA | 278.324 | |||
| Sonae Capital, SGPS, SA (2) | 513.159 | |||
| Shares (*) | 28.01.2008 | 513.160 | 0,00 |
(*) - number of shares from the rights resulting from the demerger in the demerger process of Sonae, SGPS, SA
(**) - number of shares resulting from de acquisition of rights of demerger
| Number of shares at 31/12/08 | |
|---|---|
| Efanor Investimentos, SGPS, SA | |
| Sonae Indústria, SGPS, SA | 44.780.000 |
| Pareuro, BV | 2.000.000 |
| Sonae Capital, SGPS, SA | 88.859.200 |
| Pareuro, BV | |
| Sonae Indústria, SGPS, SA | 27.118.645 |
| Sonae Capital, SGPS, SA | 50.000.000 |
| Sonae Capital, SGPS, SA | |
| SC, SGPS, SA | 391.046.000 |
| Sonae Financial Participations B.V. | 500 |
| SC, SGPS, SA | |
| Sonae Indústria, SGPS, SA | 9.521.815 |
| Sonae Financial Participations B.V. | |
| Sonae Indústria, SGPS, SA | 1.462.349 |
| Shareholder | No. of shares | % Share Capital | % Voting rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, S.A. | |||
| Directly | 44.780.000 | 31,9857% | 31,9857% |
| By Pareuro, BV ( controlled by Efanor) | 27.118.645 | 19,3705% | 19,3705% |
| By SC, SGPS, SA ( indirectly controlled by Efanor) | 9.521.815 | 6,8013% | 6,8013% |
| By Sonae Financial Participations B.V. ( indirectly controlled by Efanor) | 1.462.349 | 1,0445% | 1,0445% |
| By Maria Margarida CarvalhaisTeixeira de Azevedo (Director of Efanor) | 1.010 | 0,0007% | 0,0007% |
| By Nuno Miguel Teixeira de Azevedo (Director of Efanor and held by descendent) | 711 | 0,0005% | 0,0005% |
| By Duarte Paulo Teixeira de Azevedo (Director of Efanor and held by descendent) | 223 | 0,0001% | 0,0001% |
| By Migracom, SGPS,SA (Company controlled by Efanor´s Director, Paulo Azevedo) | 90.000 | 0,0642% | 0,0642% |
| By Linhacom, SGPS,SA (Company controlled by Efanor´s Director, Cláudia Azevedo) | 23.186 | 0,0166% | 0,0166% |
| Total allocation | 82.997.939 | 59,2841% | 59,2841% |
| Acquisitons | Sales | Balance 31.12.2008 |
||||
|---|---|---|---|---|---|---|
| Date | Amount | average value | Amount | average value | Amount | |
| Efanor Investimentos, SGPS, SA (1) Sonae Indústria, SGPS, SA |
44.780.000 | |||||
| Acquisition | 04.09.2008 | 105.294 | 2,70 | |||
| Sonae Financial Participations B.V (2) | ||||||
| Sonae Indústria, SGPS, SA Acquisition |
25.08.2008 | 5.000 | 2,63 | 1.462.349 | ||
| 26.08.2008 | 60.000 | 2,66 | ||||
| 27.08.2008 | 16.501 | 2,64 | ||||
| 28.08.2008 | 30.000 | 2,65 | ||||
| 29.08.2008 | 35.000 | 2,67 | ||||
| 10.09.2008 | 30.000 | 2,59 | ||||
| 11.09.2008 | 35.000 | 2,57 | ||||
| 12.09.2008 | 47.500 | 2,57 | ||||
| 15.09.2008 | 38.121 | 2,49 | ||||
| 16.09.2008 | 50.000 | 2,45 | ||||
| 17.09.2008 | 70.000 | 2,47 | ||||
| 18.09.2008 | 70.000 | 2,37 | ||||
| 19.09.2008 | 90.000 | 2,37 | ||||
| 22.09.2008 | 35.000 | 2,35 | ||||
| 23.09.2008 | 35.000 | 2,34 | ||||
| 24.09.2008 | 100.000 | 2,29 | ||||
| 25.09.2008 | 15.000 | 2,27 | ||||
| 26.09.2008 | 25.000 | 2,26 | ||||
| 29.09.2008 | 20.000 | 2,25 | ||||
| 30.09.2008 | 34.156 | 2,21 | ||||
| 01.10.2008 | 12.500 | 2,23 | ||||
| 02.10.2008 | 25.428 | 2,19 | ||||
| 03.10.2008 | 32.500 | 2,12 | ||||
| 06.10.2008 | 59.643 | 2 | ||||
| 07.10.2008 | 68.000 | 1,88 | ||||
| 08.10.2008 | 130.000 | 1,67 | ||||
| Nuno Miguel Teixeira de Azevedo (3) (held by descendent) Sonae Indústria, SGPS, SA |
711 | |||||
| Sale | 25.10.2008 | 258 1,634 |
||||
Complying with Article 14, no. 7 of the CMVM Regulation no. 05/2008
(1) Entity closely connected with directors Belmiro de Azevedo and Paulo Azevedo, since they are also directors of Efanor, and in the case of Belmiro de Azevedo, because he helds Efanor
(2) Entity closely connected with the director Belmiro de Azevedo, as he indirectly helds it
(3) Director of the parent company of Sonae Indústria
(Free translation from the original in Portuguese)
In terms of the order in sub-paragraph c), no. 1, Article 245 of the Portuguese Securities Code, the Board members of Sonae Indústria, SGPS, SA hereby declare, to the best of our knowledge, that the:
Belmiro Mendes de Azevedo
Álvaro Cuervo Garcia
Duarte Paulo Teixeira de Azevedo
Per Otto Knuts
Knut Thomas Alarik Nysten
Carlos Francisco de Miranda Guedes Bianchi de Aguiar
Rui Manuel Gonçalves Correia
Louis Maurice Brassard
Christophe Chambonnet
(Amounts in Euros)
| ASSETS | Notes | 31.12.08 | 31.12.07 |
|---|---|---|---|
| NON CURRENT ASSETS | |||
| Tangible assets | 3 | 14.248 | 24.675 |
| Intangible assets | 4 | 4.143 | 19.731 |
| Investment property | - | - | |
| Investment property in progress | - | - | |
| Goodwill arising on consolidation Investments in jointly controlled companies |
- - |
- - |
|
| Investments in associated companies | 6 | 927.309.795 | 921.842.133 |
| Investments held for sale | 6 | 117.922 | 117.922 |
| Deferred tax assets | 7 | 9.396.042 | 9.247.624 |
| Other non current assets | 8 | 690.090.455 | 680.160.458 |
| Total Non Current Assets | 1.626.932.604 | 1.611.412.543 | |
| CURRENT ASSETS | |||
| Inventories | - | - | |
| Trade debtors | 9 | 456.839 | 442.702 |
| Other debtors | 9 | 366.220 | 1.319.589 |
| Taxes and other contributions receivable | 9 | 1.679.182 | 1.331.193 |
| Other current assets | 10 | 221.544 | 332.365 |
| Derivatives instruments | 20 | 216.108 | 136.807 |
| Cash and cash equivalents | 11 | 23.406.351 | 89.410.824 |
| Total Current Assets | 26.346.245 | 92.973.480 | |
| Non current assets held for sale | - | - | |
| TOTAL ASSETS | 1.653.278.849 | 1.704.386.023 | |
| SHAREHOLDER´S FUNDS AND LIABILITIES | |||
| SHAREHOLDER´S FUNDS: Share Capital |
700.000.000 | 700.000.000 | |
| Own shares | - | - | |
| Supplementary capital | - | - | |
| Legal reserve | 2.399.639 | 1.340.138 | |
| Revaluation reserve | - | - | |
| Translation reserve | (1.065.070) | 95.244 | |
| Merge reserve | 245.920.750 | 245.920.750 | |
| Other reserves | 6.235.399 | 25.304.876 | |
| Retained earnings | |||
| Net profit (loss) for the period | 6.750.824 | 21.190.023 | |
| Total Shareholder´s Funds | 12 | 960.241.543 | 993.851.033 |
| LIABILITIES: NON CURRENT LIABILITIES |
|||
| Bank loans - long term-net of short-term portion | 13 | 194.375.000 | 75.625.000 |
| Debenture loans - long term-net of short-term portion | 13 | 302.147.961 | 431.336.457 |
| Finance lease creditors - long term - net of short-term portion | - | - | |
| Derivatives | - | - | |
| Other loans | - | - | |
| Obligations arising from pensions : defined benefit plans | 14 | 269.678 | 238.079 |
| Obligations arising from share based payments | - | - | |
| Other non current creditors | - | - | |
| Deferred tax liabilities | - | - | |
| Provisions Total Non Current Liabilities |
- 496.792.639 |
- 507.199.536 |
|
| CURRENT LIABILITIES: | |||
| Current portion of long term bank loans | 13 | 6.250.000 | 6.250.000 |
| Bank loans - short term | 13 | 20.000.000 | - |
| Current portion of long term debenture loans | 13 | 80.000.000 | 100.000.000 |
| Current portion of long term finance lease creditors | - | - | |
| Finance lease creditors | - | - | |
| Derivatives Other loans |
20 | 1.168.770 - |
- - |
| Trade creditors | 15 | 421.406 | 612.675 |
| Other creditors | 16 | 78.726.245 | 87.183.030 |
| Taxes and other contributions payable | 16 | 371.644 | 352.261 |
| Other current liabilities | 17 | 9.306.602 | 8.937.489 |
| Obligations arising from share based payments | - | - | |
| Obligations arising from pensions:defined benefit plans | - | - | |
| Provisions | - | - | |
| Total Current Liabilities | 196.244.667 | 203.335.454 | |
| Liabilities related to non current assets held for sale | - | - | |
| TOTAL SHAREHOLDER´S FUNDS AND LIABILITIES | 1.653.278.849 | 1.704.386.023 |
| Notes | 31.12.08 | 31.12.07 | |
|---|---|---|---|
| Operating Income: | |||
| Sales | - | - | |
| Services rendered | 23 | 3.814.233 | 2.796.587 |
| Changes in fair value of investment property | - | - | |
| Other operating income | 539.168 | 739.368 | |
| Total operantig income | 4.353.400 | 3.535.955 | |
| Operating Costs | |||
| Cost of sales | - | - | |
| Changes in stock and work in progress | - | - | |
| External supllies and services | (2.586.676) | (3.038.841) | |
| Staff costs | (2.776.524) | (3.302.655) | |
| Amortisation and depreciation | (25.989) | (28.716) | |
| Provisions and impairment losses | (337.428) | ||
| Other operanting costs | 24 | (384.257) | (293.639) |
| Total operating costs | (5.773.445) | (7.001.279) | |
| Operating profit/loss | (1.420.045) | (3.465.324) | |
| Finantial profit / loss | 25 | 5.197.854 | 11.995.281 |
| Profit / loss from associated companies | - | - | |
| Profit / loss from other investments | 26 | 2.498.080 | 5.804.673 |
| Profit / loss before tax | 6.275.889 | 14.334.629 | |
| Income taxation | 27 | 326.518 | 655.394 |
| Deferred tax assets | 27 | 148.417 | 6.200.000 |
| Net Profit / loss from continuing operations | 6.750.824 | 21.190.023 | |
| Profit / loss from discontinued operations | |||
| Net profit / loss for the períod | 6.750.824 | 21.190.023 |
(Amounts in Euros)
| Res erve s |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Merg e |
Fair | |||||||||||
| Sha re |
Ow n |
Sha re |
Sup leme ntary |
Leg al |
Res erve |
Val ue |
Hed ging |
Oth er |
Ret aine d |
|||
| Cap ital |
Sha re |
Pro mium s |
Cap ital |
Res erve |
Res erve |
Res erve |
Res erve s |
Ear ning s |
Net Pro fit / l oss |
Tota l |
||
| Bala at 1 Janu ary 2 007 nce |
700. 000 .000 |
- | - | - | 59.9 94 |
245 .920 .750 |
- | - | 982 .137 |
- | 25.6 02.8 84 |
972 .565 .765 |
| f pro fits f Apro priat ion o 2006 rom : |
||||||||||||
| Tran sfer to le gal r eser ve |
- | - | - | - | - | - | - | - | 25.6 02.8 84 |
(25 .602 .884 ) |
- | - |
| Distr ibuti on d ivide nds |
- | - | - | - | - | - | - | - | - | |||
| Tran sfer taine d ea rning to re s |
- | - | 25.6 02.8 84 |
(25 .602 .884 ) |
- | |||||||
| Acq uisit ion / (dis l) of sha posa own res |
- | - | - | - | - | - | - | - | - | - | - | - - |
| Incre ase/ (de se) i n fai r val f hed ging fina ntial crea ue o |
||||||||||||
| instr et of nts n taxe ume s |
- | - | - | - | - | - | - | - | - | - | - | |
| Defe rred tax ecte d to incre / (de se) i n fai r val conn ase crea ue |
- | |||||||||||
| of he dgin g fin anci al in strum ents |
- | - | - | - | - | - | - | - | - | - | - | |
| Incre / (de se) i n fai r val f ava ilabl e for sale ase crea ue o |
- | |||||||||||
| inve stme nts |
- | - | - | - | - | - | - | - | - | - | - | |
| Defe rred tax ecte d to incre / (de se) i n fai r val conn ase crea ue |
- | |||||||||||
| of av ailab le fo r sal e inv estm ent |
- | - | - | - | - | - | - | - | - | - | - | - |
| Prof it (Lo ss) f or th riod ende d at 31 D mbe r 200 7 e pe ecce |
- | - | - | - | - | - | - | - | - | - | 21. 190. 023 |
21. 190. 023 |
| Othe r |
- | 1.28 0.14 4 |
95.2 44 |
(1.2 44) 80.1 |
95.2 44 |
|||||||
| - | - | - | - | - | - | - | ||||||
| Bala at 3 1 De ber 2 007 nce cem |
700. 000 .000 |
- | - | - | 1.34 0.13 8 |
245 .920 .750 |
- | 95.2 44 |
25.3 04.8 78 |
- | 21. 190. 023 |
993 .851 .033 |
| Bala at 1 Janu ary 2 008 nce |
700. 000 .000 |
- | - | - | 1.34 0.13 8 |
245 .920 .750 |
- | 95.2 44 |
25.3 04.8 78 |
- | 21. 190. 023 |
993 .851 .033 |
| Apro priat ion o f pro fits f 2007 rom : |
||||||||||||
| Tran sfer to le gal r eser ve |
- | - | - | - | 1.05 9.50 1 |
- | - | - | (1.0 59.5 01) |
- | - | |
| Distr ibuti on d ivide nds |
- | - | - | - | - | - | - | - | (19 .069 .478 ) |
(20 .130 .522 ) |
- | (39 .200 .000 ) |
| Tran sfer taine d ea rning to re s |
- | 21. 190. 023 |
(21 .190 .023 ) |
- | ||||||||
| Acq uisit ion / (dis l) of sha posa own res |
- | - | - | - | - | - | - | - | - | - | - | - |
| Incre ase/ (de se) i n fai r val f hed ging fina ntial crea ue o |
||||||||||||
| instr nts n et of taxe ume s |
- | - | - | - | - | - | - | - | - | - | - | - |
| Defe rred tax ecte d to incre / (de se) i n fai r val conn ase crea ue |
||||||||||||
| of he g fin dgin anci al in strum ents |
- | - | - | - | - | - | - | - | - | - | - | - |
| Incre / (de se) i n fai r val f ava ilabl e for sale ase crea ue o |
||||||||||||
| inve stme nts |
- | - | - | - | - | - | - | - | - | - | - | - |
| Defe rred d to incre / (de se) i n fai r val tax ecte conn ase crea ue |
||||||||||||
| of av ailab le fo r sal e inv estm ent |
- | - | - | - | - | - | - | - | - | - | - | - |
| Prof it (Lo ss) f or th riod ende d at 31 D ber 2008 e pe ecem |
- | - | - | - | - | - | - | - | - | - | 6.75 0.82 4 |
6.75 0.82 4 |
| Othe r |
- | - | - | - | - | - | (1.1 60.3 14) |
- | - | - | (1.1 60.3 14) |
|
| Bala at 3 1 De ber 2 008 nce cem |
700. 000 .000 |
- | - | - | 2.39 9.63 9 |
245 .920 .750 |
- | (1.0 65.0 70) |
6.23 5.40 0 |
- | 6.75 0.82 4 |
960 .241 .543 |
| OPERATING ACTIVITIES | 31.12.2008 | 31.12.2007 | |||
|---|---|---|---|---|---|
| Cash receipts from trade debtors | 3.800.095 | 3.130.284 | |||
| Cash paid to trade creditors | 3.186.144 | 2.790.801 | |||
| Cash paid to employees | 2.783.725 | 2.964.461 | |||
| Operational Cash Flow | -2.169.774 | -2.624.978 | |||
| Corporate income tax paid / received | -896.136 | -513.209 | |||
| Other cash receipts and payments relating to operating activities | 739.890 | -159.118 | |||
| Net cash flow from operating activities [1] | -533.748 | -2.270.887 | |||
| INVESTMENTS ACTIVITIES: | |||||
| Cash receipts arising from: | |||||
| Financial investments | 354.985 | 42.578.805 | |||
| Tangible assets | 2.275 | ||||
| Intangible assets | |||||
| Interest assets and similar income | 51.469.168 | 5.174.487 | |||
| Dividends | 2.498.080 | 54.322.233 | 5.403.768 | 53.159.335 | |
| Cash payments owing to: | |||||
| Financial investments | 5.472.647 | 340.776.612 | |||
| Tangible assets | 1.413 | 4.935 | |||
| Intangible assets | 5.474.060 | 3.150 | 340.784.697 | ||
| Increase / decrease in granted loans | 14.993.588 | -350.081.750 | |||
| Net cash flow from investing activities [2] | 33.854.585 | 62.456.387 | |||
| FINANCIAL ACTIVITIES | |||||
| Cash receipts arising from: | |||||
| Loans | 2.873.200.000 | ||||
| 2.873.200.000 | 0 | ||||
| Cash payments owing from: | |||||
| Interest and similar costs | 40.170.134 | 32.760.170 | |||
| Dividends Loans |
39179599 2.884.450.000 |
2.963.799.733 | 32.760.170 | ||
| Increase / decrease in loans | -8.725.579 | -35.785.794 | |||
| Net cash flow from financing activities [3] | -99.325.311 | -68.545.964 | |||
| Net increase / decrease in cash and cash equivalents | -66.004.473 | -8.360.463 | |||
| Cash and cash equivalents - opening balance | 89.410.824 | 97.771.288 | |||
| Cash and cash equivalents - close balance | 23.406.351 | 89.410.825 | |||
| Net increase / decrease in cash and cash equivalents | -66.004.473 | -8.360.463 |
(Amounts expressed in euros)
SONAE INDÚSTRIA, SGPS, S.A. is based at Lugar do Espido, Via Norte, Apartado 1096, 4470-177 Maia, Portugal.
The main accounting policies adopted in preparing the accompanying financial statements are as follows:
The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or by the former Standing Interpretations Committee (SIC), effective 1 January 2007.
International Financial Reporting Standard (IFRS7), effective for annual periods beginning on or after 1 January 2007, was applied for the first time on these financial statements.
The accompanying financial statements have been prepared from the books and accounting records of the company on a going concern basis, except for financial instruments that they are recorded at their fair value (Note 2.9).
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition adjusted for acquisition related expenses. Financial investments in Group and Associated Companies are tested for imparity when appropriate. If an impairment loss exists, it is recorded as a cost.
Revenues from financial investments (dividends received) are recorded on the Profit and Loss statement of the period in which distribution is decided and announced.
Tangible assets acquired up to 1 January 2004 (transition date to IFRS) are recorded at their deemed cost, which corresponds to their acquisition cost or revaluated acquisition cost, in accordance with generally accepted accounting principles in Portugal at that date, net of depreciation and accumulated impairment losses.
Tangible assets acquired after that date, are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life for each class of assets.
Depreciation rates used correspond to the following expected useful lives of the underlying assets:
| Years | |
|---|---|
| Plant and Machinery | 15 |
| Fixtures and Fittings | 4 |
Maintenance and repair costs related to tangible assets are recorded directly as expenses in the year they are incurred.
Tangible assets in progress represent fixed assets still under construction/development and are stated at acquisition cost net of impairment losses. These assets are depreciated from the date they are completed or start being used.
Gains or losses arising from the sale or write-off of tangible assets are determined as the difference between the sale price and the accounting net value at the sale/write-off date and are registered as Other Operational Income/ Other Operational Losses.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognized if it is likely that they will generate future economic benefits, if they are controlled by the company and if their cost can be reliably measured.
Development expenses are recognized as an intangible asset if the company demonstrates technical feasibility and intention to complete the asset, ability to sell or use it and the probability that the asset will generate future economic benefits. Development expenses which do not fulfil these conditions are recorded as an expense in the period in which they are incurred.
Internal costs associated with maintenance and software development are recorded as an expense in the period in which they are incurred. Only costs directly attributable to projects for which the generation of future economic benefits is probable are capitalized as intangible assets.
Amortization is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life which is normally 5 years.
When accounting for leases in which the company is the lessee, the lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee.
A lease is classified as a financial or an operating lease dependent on the substance of the transaction rather than the form of the contract.
Lease payments within operating lease contracts are recognized as expenses on a straight line basis over the lease term.
Assets are assessed for impairment at the end of each year, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recorded on the income statement under Provisions and impairment losses.
The recoverable amount is the higher of an asset's fair value net of costs incurred on sale and its value in use. Fair value less sale related costs is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognized in prior years is only recorded when it is concluded that the impairment losses recognized for the asset no longer exist or have decreased. This analysis is performed whenever there is an indication that the impairment loss previously recognized has been reversed. The reversal is recorded on the income statement as Other Operational income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognized to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized for that asset in prior years.
Borrowing costs are recognized as an expense in the period in which they are incurred.
Provisions are recognized when, and only when, the company has an obligation (legal or constructive) resulting from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of that obligation. Provisions are reviewed and adjusted at the balance sheet date to reflect the best estimate as of that date.
Investments are classified into the following categories:
Investments measured at fair value through profit or loss include the investments held for trading by de company to be sold within a short period of time. They are classified as current assets in the balance sheet.
Available-for-sale investments are stated as non current assets except if they are intended to be sold within the next 12 months as from the balance sheet date.
All purchases and sales of investments are recognized on the trade date, independently of the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration paid for them, including transaction costs.
Available-for-sale investments and investments measured at fair value through profit or loss are subsequently carried at fair value, without any deduction for transaction costs which may be incurred on sale, by reference to their quoted market price at the balance sheet date. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured are stated at cost, less impairment losses.
Changes in the fair value of investments measured at fair value through profit or loss are included in the income statement for the period.
Gains or losses arising from a change in fair value of available-for-sale investments are recognized directly in equity, under Fair value reserve, included in Reserves and retained earnings until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is transferred to net profit or loss for the period.
Receivables are stated at net realizable value corresponding to their nominal value less impairment losses (recorded under the caption Impairment losses in accounts receivable).The impairment losses are recognized in "Impairment loss in costumers" The impairment losses are recorded when the company know that never go to receive the trade receivables.
The amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows. Discounted at the financial assets original effective interest rate,
The receivables are recorded as currents assets, except when its maturity is greater than twelve months from the balance sheet date, situation when they are classified as non-current assets.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded in the income statement on an accruals basis, in accordance with the accounting policy defined in Note 2.13. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Accounts payable are stated at their nominal value.
The company uses derivatives in the management of its financial risks, only to hedge such risks. Derivatives are not used by the company for trading purposes.
Derivatives classified as cash flow hedge instruments (Swaps) are used by the company mainly to hedge interest risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges. Inefficiencies that may arise are recorded on the Profit and Loss statement.
The company's criteria for classifying a derivative instrument as a cash flow hedge instrument include:
Cash flow hedge instruments used by the company are initially accounted for at cost and subsequently adjusted to their corresponding fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, included in Reserves and retained earnings on the balance sheet, and then recognized in the income statement over the same period in which the hedged instrument affects income statement.
The fair value of these financial instruments is calculated with resource to derivative valuation software and was based on the present value, at balance sheet date, of future cash flows of both the fixed and variable legs of the derivative instrument.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve are transferred to profit or loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement.
These derivative instruments over which no hedge accounting was applied are initially stated at cost, if any, and then adjusted to their fair value. Changes in fair value, calculated with resource to specific software, are accounted for as financial items on the profit and loss statement.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host contract, and this is not stated at fair value. Gains and losses are taken through the profit and loss statement.
Additionally, the company also negotiates, in specific situations, interest derivatives in order to hedge fair values. In these cases, derivatives are stated at fair value through profit or loss. When the hedged instrument is not measured at fair value (i.e. loans which are recorded at amortized cost) the book value is adjusted by the amount which is effectively hedged through profit or loss.
Derivative instruments are stated on the balance sheet under Other non current assets, Other current assets, Other non current liabilities and Other current liabilities.
Cash and cash equivalents include cash on hand, cash at banks, term deposits and other treasury applications which mature in less than three months and for which the risk of change in value is insignificant.
In the statement of cash flows, cash and equivalents also include bank overdrafts, which are included in the balance sheet item Borrowings.
As referred in Note 14, the company has an insurance policy for employees hired prior to 31/12/94, according to which they shall be entitled to receive a pension in the amount of 20% of their salary at that date.
It is a Defined Benefits Plan in the form of an insurance policy.
Contingent liabilities are not recorded in the financial statements. Instead they are disclosed in the notes to the financial statements, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the financial statements but disclosed when future economic benefits are probable.
Income tax for the year is determined based on the taxable income of the Company, considering the interim period profit and using the estimated effective average annual income tax rate.
In 2008, Ecociclo II - Energias, S.A was included in the Special Group Tax Regime that also includes the following companies: Euroresinas – Indústrias Quimicas,S.A., Sonae Indústria de Revestimentos,S.A., Ecociclo – Energia e Ambiente,S.A., Maiequipa – Gestão Florestal,S.A., Movelpartes – Componentes para a Industria de Mobiliário, S.A.,Sonae Serviços de Gestão ,S.A and Agloma – Sociedade Industrial de Madeira Aglomerada, S.A. Deferred taxes are calculated using the balance sheet liability method, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are calculated and annually reviewed using the tax rates in place or announced and thereby expected to apply at the time the temporary differences are expected to reverse.
Deferred tax assets are recognised only when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be used, or when taxable temporary differences are recognised and expected to reverse in the same period. At each balance sheet date a review is made of the deferred tax assets recognised, which are reduced whenever their future use is no longer likely.
Deferred tax assets and liabilities are recorded in the income statement, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in equity.
Revenue from services rendered is recognised in the income statement taking into consideration the stage of completion of the transaction at the balance sheet date.
Dividends are recognised as income in the year they are attributed to shareholders.
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other Current Liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but will only correspond to income or expenses of future years, when they are to be recognised in the income statement.
Capital gains and losses that result from the sale or write-off of tangible and intangible assets and of investments are presented on the profit and loss statement as the difference between the sale price and the net book value at date of sale or write-off, under the caption Other Operating Profits and Losses.
Exchange gains and losses arising from differences between historical exchange rates and those prevailing at the date of collection, payment or the date of the balance sheet, are recorded as income or expenses of the period, except for those related to non-monetary assets or liabilities, for which adjustments to fair value are directly recorded under equity.
Events after the balance sheet date that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the financial statements. Events after the balance sheet date that are non-adjusting events are disclosed in the notes when material.
a) Market Risk Management Policy
As a result of the relevant portion of floating rate debt on Sonae Industria Balance Sheet and the consequent cash flows related to interest payments, the company is exposed to interest rate risk, and it is particularly exposed to the risk of variation of Euro interest rates, as most of its floating rate debt is denominated in Euro.
As a general rule, Sonae Industria, SGPS does not hedge its exposure to floating interest rates.
As an exception to its general rule, Sonae Industria may engage into interest rates derivatives. If this is the case, the following is observed:
Derivatives are not used for trading, profit making, or speculative purposes;
The Company only engage in derivative transactions with Investment Grade Financial Institutions;
Derivatives match exact periods, settlement dates and base interest rate of the underlying exposures;
Maximum financial charges on the aggregate of the derivative and the underlying exposures are always known and limited on the inception of the hedging period;
Quotes from at least two Financial Institutions are considered before closing any interest rate hedging deal.
As at 31st December 2008, Sonae Industria did not hold material investments classified as "available-for-sale".
Liquidity risk management in Sonae Industria aims to ensure that the company is able to timely obtain the financing required to properly carry on its business activities, implement its strategy, and meet its payment obligations when due, while avoiding the need of having to obtain funding under unfavorable terms.
For this purpose, Liquidity management at the Group comprises:
consistent financial planning and cash flow forecasting at country and consolidated levels with different time horizons (weekly, monthly, annual and business plan);
diversification of financing sources;
diversification of the maturities of the debt issued in order to avoid excessive concentration of debt repayments in short periods of time;
arrangement of committed (and uncommitted) credit facilities, commercial paper programs, and other facilities (such as a Securitization of Receivables program) with relationship banks, ensuring the right balance between satisfactory liquidity and adequate commitment fees;
During the periods ended 31 December 2008 and 31 December 2007, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| Dez-08 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land & Building | Plant & Machinery | Vehicles | Tools | Fixtures & Fittings | Other Tangible Assets |
Tangible Assets in Progress |
Total | |
| Gross Value | ||||||||
| Opening Balance | 40.647 | 129.001 | 169.648 | |||||
| Acquisitions Transfers |
298 | 2.826 | 3.124 -3.124 |
3.124 | ||||
| Closing Balance | 40.945 | 131.827 | 172.772 | |||||
| Accumulated Depreciations & Imparment Losses |
||||||||
| Opening Balance | 24.107 | 120.866 | 144.973 | |||||
| Depreciations | 9.475 | 4.076 | 13.551 | |||||
| Closing Balance | 33.581 | 124.942 | 158.524 | |||||
| Net Value | 7.364 | 6.885 | 14.248 | |||||
| Dez-07 | Other Tangible | Tangible | ||||||
| Land & Building | Plant & Machinery | Vehicles | Tools | Fixtures & Fittings | Assets | Assets in Progress |
Total | |
| Gross Value | ||||||||
| Opening Balance | 38.299 | 126.461 | 164.760 | |||||
| Acquisitions | 4.889 | 4.889 | ||||||
| Transfers | 2.349 | 2.540 | -4.889 | 0 | ||||
| Closing Balance | 40.647 | 129.001 | 0 | 169.648 | ||||
| Accumulated Depreciations & Imparment Losses |
||||||||
| Opening Balance | 14.326 | 114.370 | 128.695 | |||||
| Depreciations | 9.782 | 6.496 | 16.278 | |||||
| Closing Balance | ||||||||
| 24.107 | 120.866 | 144.973 | ||||||
| Net Value | 16.540 | 8.135 | 24.675 |
During the periods ended 31 December 2008 and 31 December 2007, movements in intangible assets, accumulated depreciation and impairment losses were as follows:
| Dez-08 | ||||||
|---|---|---|---|---|---|---|
| R&D Expenses | Patents, Royalties & Other Rights |
Software | Other Intangible Assets |
Intangible Assets in Progress |
Total | |
| Gross Value | ||||||
| Opening Balance | 62 187 | 62 187 | ||||
| Acquisitions | 3 150 | 3 150 | ||||
| Transfers | - 3 150 | - 3 150 | ||||
| Closing Balance | 62 187 | 62 187 | ||||
| Accumulated Depreciations & Imparment Losses |
||||||
| Opening Balance | 45 606 | 45 606 | ||||
| Depreciations | 12 438 | 12 438 | ||||
| Closing Balance | 58 044 | 58 044 | ||||
| Net Value | 4.143 | - | - | - | - | 4.143 |
| Dez-06 | ||||||
| R&D Expenses | Patents, Royalties & Other Rights |
Software | Other Intangible Assets |
Intangible Assets in Progress |
Total | |
| Gross Value | ||||||
| Opening Balance | 62 187 | 62 187 | ||||
| Acquisitions | 3 510 | 3 510 | ||||
| Transfers | ||||||
| Closing Balance | 62 187 | 3 510 | 65 697 | |||
| Accumulated Depreciations & Imparment Losses |
||||||
| Opening Balance | 33 168 | 33 168 | ||||
| Depreciations | 12 438 | 12 438 | ||||
| Closing Balance | 45 606 | 45 606 |
| Loans | Assets at fair value |
Assets out of scope of |
||||||
|---|---|---|---|---|---|---|---|---|
| Note | and receivables |
through profit or loss |
Hedge derivatives |
Available-for-sale assets |
Sub-total | IFRS 7 | Total | |
| 31 December 2008 | ||||||||
| Non current assets Available for sale investments |
6 | 117 922 | 117 922 | 117 922 | ||||
| Other non current assets | 8 | 690 090 455 | 690 090 455 | 690 090 455 | ||||
| Current assets Customers |
9 | 456 839 | 456 839 | 456 839 | ||||
| Other current debtors | 9 | 366 220 | 366 220 | |||||
| Other current assets Derivative instruments |
10 20 |
216 108 | 216 108 | 221 544 | 221 544 216 108 |
|||
| Cash and cash equivalents | 11 | 23 406 351 | 23 406 351 | 23 406 351 | ||||
| Total | 713 953 645 | 216 108 | 117 922 | 714 287 675 | 587 764 | 714 875 440 | ||
| 31 December 2007 | ||||||||
| Non current assets Available for sale investments |
6 | 117 922 | 117 922 | 117 922 | ||||
| Other non current assets | 8 | 680 160 458 | 680 160 458 | 680 160 458 | ||||
| Current assets | ||||||||
| Customers Other current debtors |
9 9 |
442 702 700 032 |
442 702 700 032 |
619 557 | 442 702 1 319 589 |
|||
| Other current assets | 10 | 332 365 | 332 365 | |||||
| Derivative instruments Cash and cash equivalents |
20 11 |
89 410 824 | 136 807 | 136 807 89 410 824 |
136 807 89 410 824 |
|||
| Total | 770 714 016 | 136 807 | 117 922 | 770 968 745 | 951 922 | 771 920 666 | ||
| Liabilities at | Liabilities | |||||||
| fair value through |
Hedge | Other financial |
out of scope of |
|||||
| Note | profit or loss | derivatives | Liabilities | Sub-total | IFRS 7 | Total | ||
| 31 December 2008 | ||||||||
| Non current liabilities | ||||||||
| Bank loans - net of short term portion Debentures - net of short term portion |
13 13 |
194 375 000 302 147 961 |
194 375 000 302 147 961 |
194 375 000 302 147 961 |
||||
| Current assets | ||||||||
| Bank loans | 13 | 26 250 000 | 26 250 000 | 26 250 000 | ||||
| Debentures Trade creditors |
13 15 |
80 000 000 421 406 |
80 000 000 421 406 |
80 000 000 421 406 |
||||
| Derivatives | 20 | 1 168 770 | 1 168 770 | 1 168 770 | ||||
| Other creditors Other current liabilities |
16 17 |
77 583 000 | 77 583 000 | 1 143 245 9 306 602 |
78 726 245 9 306 602 |
|||
| Total | 1 168 770 | 680 777 367 | 681 946 137 | 10 449 847 | 692 395 984 | |||
| 31 December 2007 | ||||||||
| Non current liabilities | ||||||||
| Bank loans - net of short term portion Debentures - net of short term portion |
13 13 |
75 625 000 431 336 457 |
75 625 000 431 336 457 |
75 625 000 431 336 457 |
||||
| Current assets | ||||||||
| Bank loans | 13 | 6 250 000 | 6 250 000 | 6 250 000 | ||||
| Trade creditors Other creditors |
15 16 |
612 675 86 308 938 |
612 675 86 308 938 |
874 092 | 612 675 87 183 030 |
|||
| Other current liabilities | 17 | 8 937 489 | 8 937 489 | |||||
| Total | 700 133 070 | 700 133 070 | 9 811 581 | 709 944 650 |
At 31 December 2008 and 31 December 2007, details of investments were as follows:
| 31.12.2008 | 31.12.2007 | |||
|---|---|---|---|---|
| Non Current | Current | Non Current | Current | |
| Investment Group Companies | ||||
| Opening Balance | 933.342.602 | 634.824.394 | ||
| Acquisition | 5.472.647 | 340.676.612 | ||
| Disposal | (495.237) | (42.588.781) | ||
| Others | 430.377 | |||
| Closing Balance | 938.320.012 | 933.342.602 | ||
| Accumulated Imparement Losses | (11.010.217) | (11.500.469) | ||
| 927.309.795 | 921.842.133 | |||
| Other financial aplications | ||||
| Opening Balance | 117.922 | 17.922 | ||
| Acquisition | 100.000 | |||
| Disposal | - | - | ||
| Closing Balance | 117.922 | 117.922 | ||
| Derivate financial instruments | ||||
| Opening Balance | 136.807 | |||
| Acquisition | 136.807 | |||
| Disposal | 119.479 | |||
| Fair Value | 198.781 | |||
| Others | ||||
| Closing Balance | 216.108 | 136.807 | ||
| 927.427.716 | 216.108 | 921.960.055 | 136.807 |
The amount recognised as disposal of Investments in Group Companies relates to the disposal of Sonae Industria Brasil amounting to 490.252 euros and to the reduction in share capital of Somit Imobiliária, S.A. amounting to 4.985 euros.
The amount recognized during the period as acquisition under Investments in Group Companies is related to the increase in capital share of Agloma Investimentos, SGPS, S.A. amounting 5.000.000 euros, the acquisition of 100 shares of Sonae RE, S.A. amounting 500 euros and by the coverage of losses in Sonae Industria – Produção e Comercialização de Derivados de Madeira, S.A. amounting 472.147 euros.
Interest rate hedge derivatives (note 2) were recorded at fair value.
The accumulated impairment losses relate to the investment in Agloma – Sociedade de Madeiras Aglomeradas, S.A. and Maiequipa – Gestão Florestal, S.A.
At 31 December 2008, Sonae Industria, SGPS had the following holdings in Group and Associated Companies:
| % | Acquisition | Shareholder´s | Net | |
|---|---|---|---|---|
| Company | Share | Value | Funds | Profit |
| Dez-08 | Dez-08 | |||
| Euroresinas - Industrias Quimicas, S.A. | 100,00% | 5.838.525 | 5.287.891 | -1.015.426 |
| Maiequipa - Gestão Florestal,S.A. | 100,00% | 3.438.885 | 646.319 | -29.622 |
| Movelpartes - Componentes para Industria do Mobiliário,S.A. | 100,00% | 8.180.114 | 6.444.256 | -248.733 |
| Sonae Industria de Revestimentos,S.A. | 99,98% | 21.726.867 | 12.557.991 | 170.418 |
| Imoplamac - Gestão de Imóveis,S.A. | 100,00% | 6.000.000 | 1.062.142 | 223.949 |
| Sonae Serviços de Gestão,S.A. | 100,00% | 2.000.000 | 3.331.439 | 265.084 |
| Sonaegest | 20,00% | 159.615 | 1.799.135 | 125.023 |
| Taiber | 0,02% | 25.142 | 60.517.993 | 51.328.847 |
| Tafisa - Tableros de Fibras,S.A. | 96,63% | 849.919.750 | 324.672.996 | 17.307.129 |
| Ecociclo - Gestão Ambiental,S.A. | 100,00% | 631.267 | 1.205.362 | 118.243 |
| Somit Imobiliária,S.A. | 0,02% | 15 | 15.118.952 | 1.934.681 |
| Sonae Industria - Produção e Comercialização de Derivados de Madeira,S.A. | 2,81% | 3.497.772 | 83.341.567 | 3.930.580 |
| Siaf Energia, S.A. | 0,20% | 5.000 | 4.742.793 | 2.082.492 |
| Siaf Imobiliária,S.A. | 0,02% | 10 | 5.609.510 | 1.011.241 |
| Agloma - Soc.Ind.Madeira Aglomerada,S.A. | 100,00% | 31.896.550 | 23.023.812 | 844.622 |
| Agloma Investimentos,SGPS,S.A. | 6,54% | 5.000.000 | 82.289.835 | -3.144.062 |
| Sonae RÉ,S.A. | 4,00% | 500 | 1.250.000 | 166 |
a) The values recorded for the holdings in Agloma, Maiequipa were estimated to be higher than their recoverable value, therefore the company recognized impairment charges on prior year's balance sheet under the heading Investments in associated companies (note 18).
b) The amounts stated as shareholders' funds and net profit of Sonae Industria, PCDM, SA were prepared in accordance with IFRS/IAS;
c) In 2008, Somit Imobiliária, S.A. reduced its share capital by 22.432.500 euros, from 22.500.000 euros to 67.500 euros by means of cancellation of 4.486.500 shares with a nominal value of 5 euros each. The number of shares owned by Sonae Industria, S.A. decreased by 997.
d) Agloma Investimentos, S.A. increased its capital share in 65.000.000 euros with the issuance of 13.000.000 new shares at a nominal value of 5 euros. The number of shares owned by Sonae Industria, S.A. increased by 1.000.000.
e) During 2008, Sonae Industria – Produção e Comercialização de Derivados de Madeira, S.A. shareholders covered losses from previous years amounting to 16.802.376 euros. The investment made by Sonae Industria amounted to 472.147 euros.
Details of deferred tax asset at December 31, 2008 and December 31, 2007 were as follows:
| Deferred tax assets | |||
|---|---|---|---|
| 31.12.08 | 31.12.08 | ||
| Assets impairment | 2.326.102 | 3.047.624 | |
| Financial Instruments | - | - | |
| Prior years fiscal losses (Nota 27) | 7.069.940 | 6.200.000 | |
| 9.396.042 | 9.247.624 | ||
| Deferred tax assets | |||
| 31.12.08 | 31.12.07 | ||
| Opening balance | 9.247.624 | 3.047.624 | |
| Profit/loss efects | |||
| Assets impairment | (721.523) | - | |
| Prior years fiscal losses (Nota 27) | 869.940 | 6.200.000 | |
| 148.417 | 6.200.000 | ||
| Closing balance | 9.396.042 | 9.247.624 |
Details of Other Non Current Assets at December 31, 2008 and December 31, 2007, were as follows:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Loans Granted To Group Companies (Nota 2.2 e 22) | 690 090 455 | 680 160 458 |
| Other Loans Granted | 0 | 0 |
| Tax Recoverable | 0 | 0 |
| Other Non- Current Assets | 0 | 0 |
| 690 090 455 | 680 160 458 | |
| Accumulated Imparment Losses (Nota 18) | ||
| 690 090 455 | 680 160 458 |
Loans granted to Group companies have a medium and long term maturity and they yield interest at an average rate of 6,345%.
At 31 December 2008 and 31 December 2007, details of Current Trade Debtors were as follows:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Current Accounts | 456 839 | 442 702 |
| Bills Receivable | 0 | 0 |
| Doubtful Debtors | 0 | 0 |
| 456 839 | 442 702 | |
| Accumulated Imparment Losses | 0 | 0 |
| 456 839 | 442 702 |
At 31 December 2008 and 31 December 2007, detail of trade debtors maturities was as follows:
| AGEING OF TRADE DEBTORS | |||
|---|---|---|---|
| 31.12.08 | 31.12.07 | ||
| Not Due | 417.194 | 408.873 | |
| Due and not impaired | |||
| 0 - 30 dias | 39.645 | 33.829 | |
| 30 - 90 dias | - | - | |
| + 90 dias | - | - | |
| 39.645 | 33.829 | ||
| Due and impaired | |||
| 0 - 90 dias | - | - | |
| 90 - 180 dias | - | - | |
| 180 - 360 dias | - | - | |
| + 360 dias | - | - | |
| - | - | ||
| Total | 456.839 | 442.702 |
At 31 December 2008 and 31 December 2007, details of Other Current Trade Debtors and State and other public entities were as follows:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| State & Other Public Entities | ||
| Income Tax | 1 226 545 | 1 025 846 |
| Value Added Tax | 452 637 | 305 348 |
| Social Security Contribuitions | ||
| Others Debtors | 366 220 | 619 557 |
| Assets out of scope of IFRS7 | 2 045 402 | 1 950 751 |
| Other Debtors | 700.032 | |
| Financial instruments | - | 700.032 |
| AGEING OF OTHER DEBTORS | |||
|---|---|---|---|
| 31.12.08 | 31.12.07 | ||
| Not Due | - | - | |
| Due and not impaired | |||
| 0 - 30 dias | - | 700.032 | |
| 30 - 90 dias | - | - | |
| + 90 dias | - | - | |
| - | 700.032 | ||
| Due and impaired | |||
| 0 - 90 dias | - | - | |
| 90 - 180 dias | - | - | |
| 180 - 360 dias | - | - | |
| + 360 dias | - | - | |
| - | - | ||
| Total | - | 700.032 |
Details of Other Current Assets at 31 December 2008 and 31 December 2007 were the following:
| 31.12.08 | 31.12.07 |
|---|---|
| 213 619 | 327 375 |
| 7 926 | 4 990 |
| 221 545 | 332 365 |
| 0 | 0 |
| 221 545 | 332 365 |
Accrued Revenue includes mainly interest due but not paid related to loans to group companies.
At 31 December 2008 and 31 December 2007 detail of Cash and cash equivalents was the following:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Cash at Hand | 1 211 | 1 192 |
| Deposits | 170 699 | 247 565 |
| Treasury Apllications | 23 234 441 | 89 162 066 |
| Cash & Cash Equivalents - Balance Sheet | 23 406 351 | 89 410 824 |
| Bank Overdrafts | 0 | 0 |
| Cash & Cash Equivalents - Cash Flows Statement | 23 406 351 | 89 410 824 |
Cash & equivalents comprise cash at hand, deposits, treasury applications and term deposits with less than three months maturity, and for which the risk of value change is insignificant.
The item Treasury applications is composed by a Cash Reserve of 15.993.441 euros related to the Group Securitization program, and by various financial operations with Group companies amounting to 7.241.000 euros.
On December 31, 2008, the share capital, fully underwritten and paid, is represented by 140.000.000 ordinary shares, not entitled to fixed income, with a face value of 5 euros.
The following entity had more than 20% of the subscribed capital on 31 December 2008:
| Entity | % |
|---|---|
| Efanor Investimentos, SGPS, S. A. | 31,9 |
At 31 December 2008 and 31 December 2007 Sonae Industria, SGPS, S.A had the following outstanding loans:
| 31.12.08 | 31.12.07 | |||||||
|---|---|---|---|---|---|---|---|---|
| Reductions/Repayments | Nominal Value | Reductions/Repayments | Nominal Value | |||||
| Current | Non Current | Current | Non Current | Current | Non Current | Current | Non Current | |
| Bank Loans | 6 250 000 | 9 375 000 | 6 250 000 | 9 375 000 | 6 250 000 | 15 625 000 | 6 250 000 | 15 625 000 |
| Debentures | 80 000 000 | 302 147 961 | 80 000 000 | 305 000 000 | 100 000 000 | 431 336 457 | 100 000 000 | 435 000 000 |
| Obligations Under Finance Leases | ||||||||
| Other Loans | 20 000 000 | 185 000 000 | 20 000 000 | 185 000 000 | 60 000 000 | 60 000 000 | ||
| Bank Overdrafts | ||||||||
| Hedge Derivatives | ||||||||
| Gross Debt | 106 250 000 | 496 522 961 | 106 250 000 | 499 375 000 | 106 250 000 | 506 961 457 | 106 250 000 | 510 625 000 |
| Investments | ||||||||
| Cash & Cash Equivalents - Balance Sheet | 23 406 351 | 23 406 351 | 89 410 824 | 89 410 824 | ||||
| Net Debt | 82 843 649 | 496 522 961 | 82 843 649 | 499 375 000 | 16 839 176 | 506 961 457 | 16 839 176 | 510 625 000 |
| Total Net Debt | 579 366 610 | 582 218 649 | 523 800 633 | 527 464 176 | ||||
The loans have the following repayment schedule:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| 2008 | 106 250 000 | |
| 2009 | 106 250 000 | 86 250 000 |
| 2010 | 91 250 000 | 191 250 000 |
| 2011 | 78 125 000 | 3 125 000 |
| 2012 | 75 000 000 | 25 000 000 |
| Após 2012 | 255 000 000 | 205 000 000 |
| 605 625 000 | 616 875 000 |
At December 31, 2008, the contracted loans are summarized as follows:
a) Sonae Industria 2004 bonds, issued on 15 October 2004, with a principal amount of 80.000.000 euros, and a single bullet payment 5 years after issue date. Interest is calculated using Euribor 6 months plus 87.5 basis points and paid semi annually in arrears on 15 April and 15 October;
b) Sonae Industria 2005/2013 bonds, issued on 31 March 2005, with a principal amount of 55.000.000 euros, and a single bullet repayment 8 years after issue date. Interest is calculated using Euribor 6 months plus 87.5 basis points, paid semi annually in arrears on 31 March and 30 September;
c) During first semester 2005, a loan contracted by Sonae SGPS SA with the European Investment Bank, in the total amount of 50.000.000 euros, was transferred to Sonae Industria SGPS, SA. The loan pays interest quarterly, at market rates, and will be redeemed in 16 consecutive and equal semi annual instalments, the first of which occurred on 30 June 2003. On 31 December 2008, the principal outstanding was 15.625.000 euros;
d) Sonae Industria 2006/2014 50.000.000 euros Bond issued on 28 March 2006, to be repaid in one payment at maturity in 8 years. Interest is calculated at EURIBOR 6 months plus 87.5 basis points and will be paid twice a year on 28 March and 28 September;
e) On 25 January 2006, Sonae Industria signed and subsequently added a Commercial Paper agreement of up to 240.000.000 euros, with a number of financial institutions. The programme matures on 27 January 2016. At 31 December 2008, the balance was keep at 205.000.000 euros. Interest is calculated at the EURIBOR rate that matches the maturity of the issue.
f) Sonae Industria 2006/2013 50.000.000 euros Bond issued on 3 July 2006, to be repaid in one payment at maturity in 7 years. The company has the option of total or partial repayment (by reduction of nominal value of bonds) from July 2011. Interest is calculated at EURIBOR 6 months plus 86 basis points and will be paid twice a year on 3 January and 3 July;
g) Sonae Industria 2006/2014 (second issue) 50.000.000 euros Bond issued on 2 August 2006, to be repaid in one payment at maturity in 8 years. Interest is calculated at EURIBOR 6 months plus 88 basis points and will be paid twice a year on 2 February and 2 August;
h) Sonae Industria 2008/2013 50.000.000 euros Bond issued on 7 January 2008, to be repaid in one payment at maturity in 5 years. Interest is calculated at EURIBOR 6 months plus 60 basis points and will be paid twice a year on 7 January and 7 July;
i) Sonae Industria 2008/2012 50.000.000 euros Bond issued on 28 April 2008, to be repaid in one payment at maturity in 4 years. Interest is calculated at EURIBOR 6 months plus 80 basis points and will be paid twice a year on 28 April and 28 October.
Sonae Industria – Produção e Comercialização de Derivados de Madeira, S.A, has an insurance policy for employees hired prior to 31/12/94, according to which they shall be entitled to receive a pension in the amount of 20% of their salary at that date. Sonae Industria, SGPS, S.A. employees are also covered by this plan.
This is a Defined Benefits Plan in the form of an insurance contract.
According to actuarial studies carried out by the fund manager, total liabilities for services provided, taking into account salary growth, amounted to 403.611 euros and the market value of the fund is 133.933 euros. The company had a provision of 269.678 euros.
The actuarial assumptions were as follows:
Pension Growth Rate: 0% Forecasted Income Rate: 5% Expected Salary Growth Rate: 3% Technical Actuarial Rate: 5% Mortality Rate: TV 88/90
At 31 December 2008 and 31 December 2007 all amounts recorded under this item resulted from normal operations.
Trade creditors mature as follow:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| To be Paid | ||
| < 90 dias | 421.406 | 612.675 |
| 90 - 180 dias | - | - |
| > 180 dias | - | - |
| 421.406 | 612.675 |
MATURITY OF TRADE CREDITORS
At 31 December 2008 and 31 December 2007 details of this item were as follows:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| State & Other Public Entities | ||
| Income Tax | 334 753 | 321 076 |
| Social Security Contributions | 36 806 | 31 106 |
| Others | 85 | 80 |
| Liabilities out of scope of IFRS7 | 371 644 | 352 261 |
| Other Creditors | ||
| Loans From Group Companies (Nota 19) | 77 583 000 | 86 308 938 |
| Fixed Assets Suplliers | ||
| Fornecedores Imobil. c/c CP | ||
| Others | ||
| Financial Instrumets | 77.583.000 | 86.308.938 |
| Others Creditors | 1.143.245 | 874.092 |
| Liabilities out of scope of IFRS7 | 1.143.245 | 874.092 |
The Company and its subsidiaries each year grant their employees that belong to the functional group Executive a compensation which is related to the value added in the period
for the shareholders. This compensation will be paid after a three-year period if the employee is still in the Group.
This liability is stated on the balance sheet under Other creditors and is stated on the profit and loss statement under Personnel costs. If the employee ceases functions during the period over which payment of previously recognised liabilities is deferred, liabilities will be derecognised from the balance sheet against Personnel costs on the profit and loss statement.
At 31 December 2008 and 31 December 2007 this item had the following detail:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Accrued Costs | ||
| Insurance | 5 945 | 955 |
| Holidays | 265 516 | 198 427 |
| Bonus | 489 122 | 604 762 |
| Interests | 8 476 373 | 7 723 898 |
| External Supllies & Services | 69 646 | 409 447 |
| Liabilities out of scope of IFRS7 | 9 306 602 | 8 937 489 |
Changes in provisions and accumulated impairment losses during the period ended December, 2008 were the following:
| Description | Opening Balance | Increases | Utilisation | Reductions | Closing Balance |
|---|---|---|---|---|---|
| Accumulated Imparment Losses on Investments (Nota 5) | 11 500 469 | 0 | 0 | 490 252 | 11 010 217 |
| Accumulated Imparment Losses on Other Non Current Assets (Nota 6) | 0 | 0 | 0 | ||
| 11 500 469 | 0 | 0 | 490 252 | 11 010 217 |
Impairment losses are offset against the corresponding asset. Reduction of impairment losses on Other Non Current Assets is related with the subsidiary Sonae Industria Brasil which was written off when this company was sold.
In 2008, charges for operational lease payments in the amount of 137.281 euros were recorded on the profit and loss statement. In 2007, operational lease payments amounted to 126.293 euros.
In addition, at the balance sheet date, the company had irrevocable operational lease contracts with the following payment maturities:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| 2008 | 119.364 | |
| 2009 | 128.819 | 95.659 |
| 2010 | 106.496 | 73.908 |
| 2011 | 55.271 | 23.595 |
| 2012 | 7.167 | |
| 297.753 | 312.526 |
The fair value of derivative instruments is stated as follows:
| Derivatives at fair value through reserves | ||
|---|---|---|
| - Assets | 216.108 | 136.807 |
| - Liabilitie | 1.168.770 |
| Maturity od Derivatives Instruments | ||||
|---|---|---|---|---|
| 2009 | 2010 | |||
| Derivatives at fair value through reserves | ||||
| - Assets | 216.108 | |||
| - Liabilitie | -484.158 | -684.612 | ||
| -268.050 | -684.612 |
They are made up by interest rate derivatives, mainly swaps, which consist on cash flow hedges. Changes in the fair value of these financial instruments were recorded under Hedging reserves, included in the caption Reserves and retained earned on the balance sheet, for the amount of 1.065.070 euros. No amounts related to instruments which matured in 2008 were transferred from reserves to profit or loss
The liquidity risk described on note 2.17., b), related to gross debt referred to on note 13, can be analysed as follows:
| Maturity of gross debt (Note 13) |
Interest | Total | |
|---|---|---|---|
| 2009 | 106.250.000 | 23.624.842 | 129.874.842 |
| 2010 | 91.250.000 | 17.901.805 | 109.151.805 |
| 2011 | 78.125.000 | 24.565.411 | 102.690.411 |
| 2012 | 75.000.000 | 15.913.396 | 90.913.396 |
| 2013 | 155.000.000 | 10.709.522 | 165.709.522 |
| 2014 | 100.000.000 | 4.570.085 | 104.570.085 |
| 605.625.000 | 97.285.061 | 702.910.061 |
The calculation of interest in the previous table was based on interest rates at 31 December 2008 applicable to each item of debt. Gross debt maturing in 2009 includes scheduled repayment of debt along with the repayment of debt as at end 2008 maturing within less than one year (although some credit limits might be rolled over).
| Sensitivity Analysis | ||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | |||||
| "Notional" | Efeitos em resultados (Valores em Eur) | Efeitos em resultados (Valores em Eur) | ||||
| 0,75% | -0,75% | "Notional" | 0,75% | -0,75% | ||
| Gross Debt | ||||||
| Group | -77.583.000 | -629.175 | 629.175 | -86.308.938 | -755.406 | 755.406 |
| External | -605.625.000 | -3.841.031 | 3.841.031 | -616.875.000 | -3.395.064 | 3.395.064 |
| -683.208.000 | -4.470.206 | 4.470.206 | -703.183.938 | -4.150.470 | 4.150.470 | |
| Financial Instruments | ||||||
| Derivatives | 250.000.000 | 668 | -668 | 50.000.000 | ||
| 250.000.000 | 668 | -668 | 50.000.000 | |||
| Loans to Group Companies |
697.331.455 | 5.570.487 | -5.570.487 | 750.841.458 | 6.477.405 | -6.477.405 |
| Treasury Apllications | 15.993.441 | 133.181 | -133.181 | 18.481.066 | 219.151 | -219.151 |
| 713.324.896 | 5.703.668 | -5.703.668 | 769.322.524 | 6.696.556 | -6.696.556 | |
| 1.901.102 | -1.901.102 | 2.546.086 | -2.546.086 |
Balances and transactions with related parties may be summarized as follows:
| Transactions | Sales & Services Rendered |
Purchases & Acquired Services |
Interest Income | Interest Expenses | ||||
|---|---|---|---|---|---|---|---|---|
| 31.12.08 | 31.12.07 | 31.12.08 | 31.12.07 | 31.12.08 | 31.12.07 | 31.12.08 | 31.12.07 | |
| Parent Company & Group Companies | 3 827 941 | 2 793 177 | 966 949 | 1 249 426 | 45 421 969 | 45 354 962 | 4 182 630 | 4 082 404 |
| - Agloma | 1.874 | 1.636 | 1.074.993 | 1.391.897 | ||||
| - Agloma Investimentos | 2.426 | 1.955.133 | 255.966 | |||||
| - Ecociclo | 13.607 | 8.213 | 66.434 | 75.488 | ||||
| - Ecociclo II | 220.941 | 16.198 | ||||||
| - Euroresinas | 30.573 | 13.164 | 2.105.909 | 1.551.802 | 217 | |||
| - Glunz | 1.000.384 | 597.079 | ||||||
| - Implamac | 3.273 | 214.296 | 151.687 | |||||
| - SInd-pcdm | 428.792 | 347.088 | 164.669 | 473.886 | 5.594.171 | 2.515.101 | ||
| - Isoroy | 595.451 | 434.878 | ||||||
| - Maiequipa | 3.704 | 3.273 | 71.599 | 60.555 | ||||
| - Movelpartes | 30.573 | 4.049 | 131.612 | 75.033 | ||||
| - Resoflex | 1.500 | 24.294 | ||||||
| - Sc - Consultadoria | 28.654 | 17.332 | ||||||
| - Siaf Imobiliária | 4.061 | 3.273 | 269.744 | 134.411 | 35.374 | 331.435 | ||
| - Siaf Energia | 2.409 | 1.985 | 129.594 | 239.450 | 35.596 | 13.494 | ||
| - Sonae Industria Revestimentos | 31.499 | 22.086 | 12.372 | 8.379 | 339.342 | 138.707 | 325.627 | |
| - Sonaecenter | 384.144 | |||||||
| - Somit | 1.636 | 1.396 | ||||||
| - Somit Imobiliária | 1.636 | 283.443 | 840.249 | 1.606.839 | ||||
| - Solinca | 10.311 | 28.262 | ||||||
| - Sonae ,sgps | 13.150 | 363.896 | ||||||
| - Sonae Uk | 223.995 | 205.523 | 8.051 | |||||
| - Spanboard | ||||||||
| - Sind - Share Services Center | 7.082 | 7.855 | 54.021 | 55.001 | 86.875 | 57.602 | ||
| - Tafisa Benelux | 5.584 | |||||||
| - Tafisa Canadá | 465.990 | 398.545 | ||||||
| - Tafisa Espanha | 468.810 | 377.991 | 826 | |||||
| - Tafisa South Africa | 480.661 | 358.496 | ||||||
| - Tavapan | 32.892 | |||||||
| - Taiber | 36.126.496 | 40.467.740 | ||||||
| - Tradema | 192 | |||||||
| - Imosede | 21.627 | 21.028 | ||||||
| - Novis | 16.302 | 4.015 | ||||||
| - Efanor | 66.000 | |||||||
| - Praedium III | 9.841 | 9.018 | ||||||
| - Optimus | 16.759 | |||||||
| - Mds | 6.960 | |||||||
| - Digitmarket | 70 | 376 | ||||||
| - Smp | 180 | |||||||
| - Cronosaude | 1.370 | |||||||
| - Efanor | 66.000 | |||||||
| - Sonae Imobiliária III | 918 | |||||||
| - Sonaecom | 14.576 | |||||||
| - Equador | 171.020 | 167.168 | ||||||
| - Efanor ,Sgps | 22.798 | |||||||
| Empresas associadas | 0 | 3.409 | 0 | 41.927 | ||||
| - Ipaper | 3.409 | 41.927 |
Remuneration of the Board of Directors of the Company is detailed as follows:
| Total Fixed salaries | 834.161 |
|---|---|
| Total Bonus | 449.865 |
| 1.284.025 |
| Obtained Granted 31.12.08 31.12.07 31.12.08 31.12.07 31.12.08 31.12.07 31.12.08 31.12.07 456 839 442 702 182 281 490 872 77 583 000 86 308 938 697 331 455 750 841 458 Parent Company & Group Companies 187 165 23.170.000 - Agloma 11.167.938 - Agloma Investimentos 77.583.000 - Ecociclo 1.928 901 881.002 741.966 - Ecociclo II 6.765.000 1.597.000 - Euroresinas 3.722 1.650 30.699.640 31.568.916 - Sonae Espanha 103.181 81.569 - Glunz 330 4.217.163 3.353.000 - Implamac - SInd-pcdm 57.260 66.952 33.895 28.238 97.515.148 68.414.822 - Isoroy 63.356 60.918 - Maiequipa 370 330 1.184.194 1.189.193 3.722 558 2.965.000 - Movelpartes - Resoflex - Sc - Consultadoria 3.085 5.244 - Siaf Imobiliária 406 330 3.691.852 4.732.489 - Siaf Energia 241 199 1.065.000 4.214.405 - Sonae Industria Revestimentos 3.834 2.294 2.437 865 6.601.074 5.185.000 165 - Somit 165 46.161.000 16.164.654 - Somit Imobiliária 4.153 2.850 - Solinca - Sonae ,sgps 50.447 - Sonae Uk 29.970 48.939 - Spanboard - Sind - Share Services Center 1.241 842 10.804 5.546 1.780.000 465 - Tafisa Benelux - Tafisa Canadá 88.916 84.551 - Tafisa Espanha 52.833 56.177 345.822 - Tafisa South Africa 42.301 29.875 - Taiber 529.611.728 629.844.667 5.794 - Tradema 2.906 - Tavapan - Efanor 19.965 - Novis 3.090 837 - Optimus 2.102 - Sonaecenter 51.091 - Praedium III 993 1.005 19.800 - Efanor 20.321 - Sonaecom |
Balance | Accounts Receivable | Accounts Payable | Loans | |||||
|---|---|---|---|---|---|---|---|---|---|
| - Equador | 32.612 | 27.952 |
Details of Services Rendered are presented below:
| Services Rendered | 31.12.08 | 31.12.07 |
|---|---|---|
| Internal Cmmunication | 279.408 | 299.356 |
| Legal | 223.342 | 142.723 |
| Health & security | 146.329 | 100.267 |
| Administration | 1.935.964 | 1.369.875 |
| Engineering | 681.204 | 491.349 |
| Others | 547.985 | 393.018 |
| TOTAL | 3.814.231 | 2.796.587 |
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Taxes | 145.582 | 226.039 |
| Losses in disposal financial investments | 140.252 | 9.976 |
| Others | 98.422 | 57.624 |
| 384.257 | 293.639 |
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Financial Expenses: | ||
| Interest Expenses | 40 956 643 | 34 656 778 |
| Exchange Losses | 6 052 | 1 165 |
| Others | 909 503 | 464 328 |
| Financial Results | 5 197 854 | 11 995 281 |
| 47 070 052 | 47 117 552 | |
| Financial Revenues | ||
| Interest Income | 46 246 775 | 47 075 615 |
| Exchange Gains | 3 757 | 374 |
| Others | 819.520 | 41.563 |
| 47.070.052 | 47.117.552 |
The company received dividends of 2.498.080 euros from the following companies:
| Agloma - Soc.Ind.Madeira Aglomerada,S.A. | 982.180 |
|---|---|
| Euroresinas - Industrias Quimicas,S.A. | 573.331 |
| Sonae Industria - Produção e Comercialização Derivados de Madeira,S.A. | 506.766 |
| Imoplamac - Gestão de Imóveis,S.A. | 225.222 |
| Sonae Industria de Revestimentos,S.A. | 202.197 |
| Somit Imobiliária,S.A. | 6.615 |
| Siaf Energia,S.A. | 1.769 |
The income and deferred taxation recorded at 31 December 2008 and 2007 were:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Income taxation | (326.518) | (655.394) |
| Deferred taxation | (148.417) | (6.200.000) |
| (474.935) | (6.855.394) |
The income taxation includes tax savings from the tax perimeter of 413.580 euros along with income tax on specific items and local taxes in the amount of 81.593 euros.
A deferred tax asset related to tax losses amounting to 869.940 euros was recognised as a result of expected taxable net profits to take place over the next periods.
Reconciliation of Earnings before taxes with taxes for the year may be detailed as follows:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Net Income/(Loss) Before Yax | 6.275.889 | 14.334.629 |
| Adjustments in Net Income Before Tax | ||
| Non-deductible provisions (e.g. restructuring and other risks & charges) | 31.599 | 45.413 |
| Non deductible assets adjustments (e.g.debt and inventory) | -490.252 | 400.906 |
| Capital gains/losses on the sale of fixed assets | 140.252 | |
| Dividends | -2.499.555 | -1.350.942 |
| Others | -113.980 | -13.358 |
| -2.931.936 | -917.982 | |
| Net Income/(Loss) Before Yax after adjustments | 3.343.953 | 13.416.647 |
| Income taxation | 835.988 | 3.354.162 |
| Utilisation of prior year losses without deferred tax assets | 835.988 | 3.354.162 |
| Deferred tax assets recognized | -869.940 | -6.200.000 |
| Deferred tax assets reversal - impairment losses | 721.523 | |
| Current tax - prior year adjustment | 5.469 | 148.620 |
| Fiscal saving from fiscal perimeter | 81.571 | -774.932 |
| Excess/insufficiency of valuation | -413.558 | -29.082 |
| -474.935 | -6.855.394 |
Earnings per share, excluding the effect of discontinued operations, were calculated as follows:
| 31.12.08 | 31.12.07 | |
|---|---|---|
| Net Profit | ||
| Net Profit Considered for Basic EPS Calculation (Periodic Net Profit) |
6 750 824 | 21 190 023 |
| Net Profit Considered for Diluted EPS Calculation | 6 750 824 | 21 190 023 |
| Number of Shares | ||
| Weighted Average Number of Shares for Basic EPS Calculation | 140 000 000 | 140 000 000 |
| Weighted Average Number of Shares for Diluted EPS Calculation | 140 000 000 | 140 000 000 |
| Net Profit Per Share | 0,05 | 0,15 |
During 2008, no effect from discontinued operations was recorded.
These financial statements were approved by the Board of Directors and authorised for issuance in 19 February 2009.
(Amounts expressed in Euros)
| IFRS | |||
|---|---|---|---|
| ASSETS | Notes | 31.12.2008 | 31.12.2007 |
| NON CURRENT ASSETS: | |||
| Tangible assets | 11 | 1 202 504 678 | 1 342 821 348 |
| Goodwill | 14 | 103 811 638 | 100 086 856 |
| Intangible assets | 12 | 12 490 658 | 10 836 148 |
| Investment properties | 13 | 8 114 976 | 8 270 032 |
| Associated undertakings and non consolidated undertakings | 10 | 3 075 688 | 3 414 225 |
| Investment available for sale | 10 | 389 763 | 1 602 518 |
| Deferred tax asset | 15 | 53 985 797 | 48 605 752 |
| Other non current assets | 16 | 1 751 010 | 1 632 731 |
| Total non current assets | 1 386 124 208 | 1 517 269 610 | |
| CURRENT ASSETS: | |||
| Inventories | 17 | 192 882 429 | 257 715 327 |
| Trade debtors | 18 | 199 825 603 | 260 140 025 |
| Other current debtors | 19 | 15 418 674 | 21 839 466 |
| State and other public entities | 21 | 30 835 909 | 30 154 245 |
| Other current assets | 20 | 27 529 412 | 14 778 315 |
| Cash and cash equivalents | 22 | 65 750 257 | 65 883 548 |
| Total current assets | 532 242 284 | 650 510 926 | |
| TOTAL ASSETS | 1 918 366 492 | 2 167 780 536 | |
| SHAREHOLDERS' FUNDS, MINORITY INTERESTS AND LIABILITIES | |||
| SHAREHOLDERS' FUNDS: | |||
| Share capital | 23 | 700 000 000 | 700 000 000 |
| Own shares | |||
| Legal Reserve | 23 | 2 399 639 | 1 340 138 |
| Reserves and retained earnings | 23 | - 196 851 529 | - 184 863 692 |
| Net profit (loss) for the period - Group | - 108 447 796 | 78 612 713 | |
| Total shareholders' funds | 397 100 314 | 595 089 159 | |
| Minority interests TOTAL SHAREHOLDERS' FUNDS |
24 | 3 072 691 400 173 005 |
33 742 417 628 831 576 |
| LIABILITIES: | |||
| NON CURRENT LIABILITIES: | |||
| Long term bank loans - net of short-term portion | 25 | 268 056 483 | 187 543 520 |
| Non convertible debentures | 25 | 302 147 961 | 431 336 457 |
| Long term Finance Lease Creditors - net of short-term portion | 25 | 47 949 761 | 51 100 454 |
| Other loans | 25 | 148 419 100 | 34 506 252 |
| Pensions liabilities | 29 | 25 244 259 | 22 935 627 |
| Other non current liabilities | 28 | 118 741 078 | 124 751 509 |
| Deferred tax liabilities | 15 | 69 902 362 | 69 968 231 |
| Provisions Total non current liabilities |
33 | 37 498 938 1 017 959 942 |
40 061 308 962 203 358 |
| CURRENT LIABILITIES: | |||
| Short term portion of long term bank loans | 25 | 31 507 509 | 38 874 701 |
| Short term bank loans | 25 | 74 070 252 | 16 730 627 |
| Short term portion of long term non convertible debentures | 25 | 80 000 000 | 100 000 000 |
| Short term portion of Finance Lease Creditors | 25 | 3 535 578 | 3 465 063 |
| Other loans | 25 | 301 760 | 504 957 |
| Trade creditors | 30 | 165 920 462 | 226 228 686 |
| Taxes and Other Contributions Payable | 31 | 16 307 234 | 29 638 918 |
| Other current liabilities Provisions |
32 33 |
116 981 282 11 609 467 |
155 539 419 5 763 231 |
| Total current liabilities | 500 233 545 | 576 745 602 | |
| TOTAL SHAREHOLDERS' FUNDS AND LIABILITIES | 1 918 366 492 | 2 167 780 536 |
The notes are an integral part of the consolidated financial statements
The Board of Directors
| Notes | 31.12.2008 | 2nd. half 2008 | 1st. half 2008 | 31.12.2007 | |
|---|---|---|---|---|---|
| Operating revenues | |||||
| Sales | 41 | 1 761 563 732 | 800 908 311 | 960 655 421 | 2 056 119 499 |
| Services rendered | 41 | 7 489 459 | 3 310 821 | 4 178 638 | 10 165 769 |
| Negative goodwill | 685 753 | ||||
| Other operating revenues | 3,36 | 114 340 432 | 37 316 579 | 77 023 853 | 128 937 845 |
| Total operating revenues | 1 883 393 623 | 841 535 711 | 1 041 857 912 | 2 195 908 866 | |
| Operating costs | |||||
| Cost of sales | 929 577 834 | 428 023 407 | 501 554 427 | 1 016 305 254 | |
| (Increase) / decrease in production | 25 793 943 | 28 834 822 | - 3 040 879 | - 17 237 755 | |
| External supplies and services | 471 260 030 | 216 633 373 | 254 626 657 | 524 439 121 | |
| Staff expenses | 278 376 483 | 134 154 184 | 144 222 299 | 290 460 537 | |
| Depreciation and amortisation | 11,12 | 123 035 231 | 62 587 660 | 60 447 571 | 116 805 491 |
| Provisions and impairment losses | 11,12,33 | 55 580 961 | 40 567 356 | 15 013 605 | 32 970 366 |
| Other operating costs | 37 | 22 923 254 | 11 631 674 | 11 291 580 | 27 131 640 |
| Total operating costs | 1 906 547 736 | 922 432 476 | 984 115 260 | 1 990 874 654 | |
| Operational profit / (loss) | - 23 154 113 | - 80 896 765 | 57 742 652 | 205 034 212 | |
| Financial profits | 38 | 86 618 544 | 40 554 230 | 46 064 314 | 60 585 335 |
| Financial costs | 38 | 164 591 858 | 80 372 279 | 84 219 579 | 141 126 430 |
| Gains and losses in associated companies | 127 642 | 127 642 | 127 321 | ||
| Gains and losses in investments | 57 794 | 36 819 | 20 975 | 82 274 | |
| Current profit / (loss) | - 100 941 991 | - 120 550 353 | 19 608 362 | 124 702 712 | |
| Taxation | 39 | 2 934 767 | - 4 321 271 | 7 256 038 | 35 272 535 |
| Consolidated net profit / (loss) afer taxation | - 103 876 758 | - 116 229 082 | 12 352 324 | 89 430 177 | |
| Profit / (loss) after taxation from descontinued operations | - | - | - | - | |
| Consolidated net profit / (loss) for the period | - 103 876 758 | - 116 229 082 | 12 352 324 | 89 430 177 | |
| Attributable to: | |||||
| Equity Holders of Sonae Industria Minority Interests |
- 108 447 796 4 571 038 |
- 114 887 354 - 1 341 728 |
6 439 558 5 912 766 |
78 612 713 10 817 464 |
|
| Profit/(Loss) per share | |||||
| Excluding discontinued operations: | |||||
| Basic | 40 | - 0.7746 | - 0.8206 | 0.0460 | 0.5615 |
| Diluted | 40 | - 0.7746 | - 0.8206 | 0.0460 | 0.5615 |
| From discontinued operations: | |||||
| Basic | 40 | - | - | - | |
| Diluted | 40 | - | - | - |
The notes are an integral part of the consolidated financial statements
The board of directors
| Attr ibut able Equ ity H olde f So Ind ústr ia to rs o nae |
Min ority |
Tot al |
||||||
|---|---|---|---|---|---|---|---|---|
| Res nd erv es a |
Inte rest s |
Equ ity |
||||||
| Sha re |
Leg al |
reta ined |
Net | |||||
| Not es |
Cap ital |
Res erv e |
ning ear s |
Pro fit/( Los s) |
Tot al |
|||
| Bal 1 J 200 7 s at anc e a anu ary App riat ion of c olid d re sult of 200 6: ate ons |
70 0 0 00 000 |
59 99 4 |
- 21 2 3 28 870 |
32 31 1 96 9 |
52 0 0 43 093 |
28 10 0 7 92 |
54 8 1 43 885 |
|
| rop Tra nsfe r to lega l res nd reta ined rnin erv es a ea gs Dis trib uted div iden ds Sha apit al in re c cre ase |
1 2 80 144 |
31 03 1 82 5 |
- 32 31 1 96 9 |
|||||
| Cha Goo s in gat ive dwi ll nge ne Cha s in rsio nge co nve n re serv es Acq uisi tion d d ispo sals of affil iate d u nde rtak ings an Cha s in fai lue of h edg e fin ial i nstr nts, nge r va anc ume |
- 51 0 9 35 |
- 5 10 9 35 |
2 0 33 338 |
1 5 22 403 |
||||
| f ta ion et o xat n Inve stm ent in a ciat ed ies sso com pan Con soli dat ed Pro fit/( Los s) f or t he iod per |
95 24 4 |
95 24 4 |
-7 3 14 9 87 |
95 24 4 - 7 314 98 7 |
||||
| end ed at 3 1 D mbe r 20 07 ece |
78 61 2 7 13 |
78 61 2 7 13 |
10 81 7 4 64 |
89 43 0 1 77 |
||||
| Oth ers |
-3 1 50 956 |
- 3 150 95 6 |
10 5 8 10 |
- 3 045 14 6 |
||||
| Bal s 3 1 D mbe r 20 07 anc e a ece |
70 0 0 00 000 |
1 3 40 138 |
- 18 4 8 63 692 |
78 61 2 7 13 |
59 5 0 89 159 |
33 74 2 4 17 |
62 8 8 31 576 |
|
| Bal 1 J 200 8 s at anc e a anu ary App riat ion of c olid d re sult of ate 200 7: rop ons |
700 00 0 0 00 |
1 3 40 138 |
-18 4 8 63 692 |
78 612 71 3 |
595 08 9 1 59 |
33 742 41 7 |
628 83 1 57 6 |
|
| Tra nsfe r to lega l res nd reta ined rnin erv es a ea gs # Dis trib uted div iden ds Cha s in rsio nge co nve n re serv es Cha s in fai lue of h edg e fin ial i nstr nts, nge r va anc ume of t tion net axa |
1 0 59 501 |
77 553 21 2 -39 20 0 0 00 -42 55 7 6 11 -1 1 60 314 |
-78 61 2 7 13 |
-39 20 0 0 00 -42 55 7 6 11 -1 1 60 314 |
1 6 51 803 |
-39 20 0 0 00 -40 90 5 8 08 -1 1 60 314 |
||
| Inve stm ent in a ciat ed ies sso com pan Con soli dat ed Pro fit/( Los s) f he iod or t per |
-36 49 2 5 29 |
-36 49 2 5 29 |
||||||
| end ed at 3 1 D mbe r 20 08 ece Oth ers |
-6 6 23 124 |
-10 8 4 47 796 |
-10 8 4 47 796 -6 6 23 124 |
4 5 71 038 - 40 0 0 38 |
-10 3 8 76 758 -7 0 23 162 |
|||
| Bal 1 D mbe s 3 r 20 08 anc e a ece |
700 00 0 0 00 |
2 3 99 639 |
- 19 6 8 51 529 |
- 10 8 4 47 796 |
397 10 0 3 14 |
3 0 72 691 |
400 17 3 0 05 |
The notes are an integral part of the consolidated financial statements
The board of directors
(Amounts expressed in Euros)
| Notes | 31.12.08 | 31.12.07 | ||
|---|---|---|---|---|
| OPERATING ACTIVITIES | Published | Restated | ||
| Receipts from trade debtors | 1 759 622 434 | 2 038 157 176 | 2 038 157 176 | |
| Payments to trade creditors | 1 410 054 702 | 1 585 970 495 | 1 585 970 495 | |
| Payments to staff | 288 370 178 | 287 617 251 | 287 617 251 | |
| Net cash flow from operations | 61 197 554 | 164 569 430 | 164 569 430 | |
| Payment / (receipt) of corporate income tax | 16 287 635 | 20 759 615 | 20 759 615 | |
| Other receipts / payments relating to operating activities | 36 583 943 | 67 877 118 | 67 877 118 | |
| Net cash flow from operating activities (1) | 81 493 862 | 211 686 933 | 211 686 933 | |
| INVESTMENT ACTIVITIES | ||||
| Cash receipts arising from: | ||||
| Investments | 6 385 649 | 27 299 494 | 27 299 494 | |
| Tangible and intangible assets | 10 390 101 | 62 294 623 | 62 294 623 | |
| Loans granted | 20 122 | 123 537 | 123 537 | |
| Investment subventions | 2 915 850 | 812 476 | 812 476 | |
| Interest and similar charges | 6 521 977 | 4 525 330 | 4 525 330 | |
| Dividends | 57 795 | 82 275 | 82 275 | |
| 26 291 494 | 95 137 735 | 95 137 735 | ||
| Cash Payments arising from: | ||||
| Investments | 36 842 493 | 86 755 123 | 86 755 123 | |
| Tangible and intangible assets | 132 763 972 | 186 585 168 | 186 585 168 | |
| Loans granted | 2 003 930 171 610 395 |
1 265 810 274 606 101 |
1 265 810 274 606 101 |
|
| Net cash used in investment activities (2) | - 145 318 901 | - 179 468 366 | - 179 468 366 | |
| FINANCING ACTIVITIES | ||||
| Cash receipts arising from: Loans obtained |
3 117 292 136 | 13 987 945 | 1 091 012 706 | |
| Set up of jointly controlled companies | 670 639 | 670 639 | ||
| Others | 70 671 726 | |||
| 3 187 963 862 | 14 658 584 | 1 091 683 345 | ||
| Cash Payments arising from: | ||||
| Loans obtained | 3 049 647 888 | 130 306 896 | 1 207 331 657 | |
| Interest and similar charges | 59 391 808 | 50 026 830 | 50 026 830 | |
| Dividends | 39 179 599 | |||
| Finance leases - repayment of principal | 3 080 178 | 3 162 143 | 3 162 143 | |
| Others | 3 026 246 | 3 026 246 | ||
| 3 151 299 473 36 664 389 |
186 522 115 - 171 863 531 |
1 263 546 876 - 171 863 531 |
||
| Net cash used in financing activities (3) | ||||
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) | - 27 160 650 | - 139 644 964 | - 139 644 964 | |
| Effect of foreign exchange rate | 4 605 330 | - 83 378 | - 83 378 | |
| Cash and cash equivalents at the beginning of the period | 22 | 49 154 756 | 188 716 342 | 188 716 342 |
| Cash and cash equivalents at the end of the period | 22 | 17 388 776 | 49 154 756 | 49 154 756 |
The notes are an integral part of the consolidated financial statements
The board of directorsboard of directors
FOR THE YEAR ENDED 31 DECEMBER 2008
(Amounts expressed in euros)
SONAE INDÚSTRIA, SGPS, SA, whose head-office is at Lugar do Espido, Via Norte, Apartado 1096, 4470-909 Maia, Portugal, is the parent company of a group of companies as detailed in notes 5 to 7 ("Group"). The Group's operations and business segments are described in Note 41.
The shares of the company are listed on Euronext Lisbon.
The main accounting policies adopted in preparing the accompanying consolidated financial statements are as follows:
These consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB) and with Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or by the former Standing Interpretations Committee (SIC), effective 1 January 2008 and enacted by the European Union.
In the year ended 31 December 2008 the following Interpretations became applicable: IFRIC 11 IFRS 2 – Group and Treasury Shares Transactions. These Interpretations had no relevant impact on the Group's accounting policies.
At 31 December 2008 the following standards and interpretations had been issued: IFRS 2 – Share Based Payments (Amended 2008), IFRS 3 – Business Combinations (Revised 2008), IFRS 8 – Operating Segments, IAS 1 – Presentation of Financial Statements (Revised 2007), IAS 23 – Borrowing Costs (Revised 2007), IAS 27 – Consolidated and Separate Financial Statements (Amended 2008), IAS 32 – Financial Instruments: Presentation (Amended 2008), IFRIC 13 – Customer Loyalty Programmes, IFRIC 14 – The Limit of a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 16 – Hedges of a Net Investment in a Foreign Operation. As these standards and interpretations were not compulsorily applicable for the year beginning 1 January 2008, the Group decided not to apply them. No relevant effects are estimated for future consolidated financial statements from the application of these standards and interpretations.
The accompanying consolidated financial statements have been prepared from the books and accounting records of the companies included in the consolidation (Note 5) on a going concern basis and under the historical cost convention, except for financial instruments which are stated at fair value (Note 2.12).
The consolidation methods adopted by the Group are as follows:
Investments in companies in which the Group owns, directly or indirectly, more than 50% of the voting rights at Shareholders' General Meetings and is able to establish financial and operational policies so as to benefit from its activities (definition of control normally used by the Group), are included in the consolidated financial statements using the full consolidation method. Equity and net profit attributable to minority shareholders are shown separately, under the caption Minority interests, in the consolidated balance sheet and in the consolidated income statement, respectively. Companies included in the consolidated financial statements are listed in Note 5.
When losses attributable to minority interests exceed the minority interest in the equity of the Group company, the excess, and any further losses attributable to minority interests, are charged against the equity holders of Sonae except to the extent that minority shareholders have a binding obligation and are able to cover such losses. If the Group company subsequently reports profits, such profits are allocated to the equity holders of Sonae until the minority's share of losses previously absorbed by the equity holders of Sonae has been recovered.
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition. Any excess of the cost of acquisition over the Group's interest in the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2.2.d) and 14). Any excess of the Group's share in the fair value of the identifiable net assets acquired over cost, is recognised as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value. Minority interests include their proportion of the fair value of net identifiable assets and liabilities recognised on acquisition of Group companies.
The results of Group companies acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Adjustments to the financial statements of Group companies are performed, whenever necessary, in order to adapt accounting policies to those used by the Group. All intragroup transactions, balances, income and expenses and distributed dividends are eliminated on consolidation.
Financial investments in joint ventures (companies that the Group holds together with third parties and in which joint control is established in a shareholders' agreement) are accounted for through the proportionate consolidation method, as from the date the joint control is acquired or established. Under this method, the assets, liabilities, profits and losses of these companies are incorporated proportionately to the control attributable and line by line, in the Group's financial statements in appendix.
The excess value resulting from the difference between the acquisition cost and the fair value of the assets and liabilities of the joint-venture at the time of acquisition is recorded as goodwill (Note 2.2.d). If the difference between the acquisition cost and the fair value of the assets at the time of acquisition is negative, it is recognized as income in the period.
Transactions, balances and dividends between the companies are eliminated proportionately to the control attributable to the Group.
Joint-venture companies are detailed in note 6.
Investments in associated companies (companies where the Group exercises significant influence but does not establish financial and operational policies – usually corresponding to holdings between 20% and 50% in a company's share capital) are accounted for in accordance with the equity method.
Under the equity method, investments are recorded at cost, adjusted by the amount corresponding to the Group's share of changes in equity (including net profit) of associated companies and are offset against losses or profits in the period and against dividends received.
Any excess of the cost of acquisition over the Group's share in the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2.2.d). Any excess of the Group's share in the fair value of the identifiable net assets acquired over cost is recognised as income in the profit or loss for the period of acquisition, in results related to associated companies.
An assessment of investments in associated companies is performed when there is an indication that the asset might be impaired. Any impairment loss is disclosed in the income statement. Impairment losses recorded in prior years that are no longer justifiable, are reversed.
When the Group's share of losses exceeds the carrying amount of the investment, the investment is reported at nil value and recognition of losses is discontinued, unless the Group is committed beyond the value of its investment.
The Group's share in unrealized gains arising from transactions with associated companies is eliminated. Unrealized losses are eliminated, but only to the extent that there is no evidence of impairment of the asset transferred.
Investments in associated companies are disclosed in Note 7.
The excess of the cost of acquisition of investments in Group, jointly controlled and associated companies over the Group's share in the fair value of the assets and liabilities of those companies at the date of acquisition is shown as Goodwill (Note 14). The excess of the cost of acquisition of investments in foreign companies over the fair value of their identifiable assets and liabilities at the date of acquisition is calculated using the functional currency of each of those companies. Translation to the Group's currency (Euro) is made using the closing exchange rate. Exchange rate differences arising from this translation are disclosed in Reserves and retained earnings.
Goodwill is not amortised, but it is subject to impairment tests on an annual basis. Impairment losses identified in the period are disclosed in the income statement under Provisions and impairment losses, and cannot be reversed.
Any excess of the Group's share in the fair value of identifiable assets and liabilities in group, jointly controlled and associated companies over cost, is recognised as income in the profit or loss for the period, at the date of acquisition, after reassessment of the fair value of the identifiable assets and liabilities acquired.
Assets and liabilities denominated in foreign currencies in the individual financial statements of foreign companies are translated to Euro using exchange rates at the balance sheet date. Profit and loss and cash flows are converted to Euro using the average exchange rate for the period. Exchange rate differences originated after 1 January 2004 are recorded as equity under Translation reserves in Reserves and retained earnings. Exchange rate differences that originated prior to 1 January 2004 (date of transition to IFRS) were written-off through Retained earnings
Goodwill and fair value adjustments arising from the acquisition of foreign companies are recorded as assets and liabilities of those companies and translated to Euro using exchange rates at the balance sheet date.
Whenever a foreign company is sold, accumulated exchange rate differences are recorded in the income statement as a gain or loss on the disposal.
Exchange rates used on translation of foreign group, jointly controlled and associated companies are listed below:
| 31.12.08 | 31.12.07 | |||
|---|---|---|---|---|
| Closing | Average | Closing | Average | |
| rate | rate | rate | rate | |
| Great Britain Pound | 0.9525 | 0.7943 | 0.7333 | 0.6840 |
| Brazilian Real | 3.2436 | 2.6555 | 2.5963 | 2.6612 |
| South African Rand | 13.0668 | 11.9933 | 10.0301 | 9.6544 |
| Canadian Dollar | 1.6998 | 1.5574 | 1.4449 | 1.4657 |
| American Dollar | 1.3917 | 1.4631 | 1.4721 | 1.3684 |
| Swiss Franc | 1.4850 | 1.5862 | 1.6547 | 1.6425 |
| Polish Zloty | 4.1535 | 3.5002 | 3.5935 | 3.7814 |
Source: Bloomberg
Tangible assets acquired up to 1 January 2004 (transition date to IFRS) are recorded at acquisition cost, or revaluated acquisition cost, in accordance with generally accepted accounting principles in Portugal until that date, net of depreciation and accumulated impairment losses.
Tangible assets acquired after that date are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life for each class of assets.
Depreciation rates used correspond to the following estimated useful lives of underlying assets:
| Years | |
|---|---|
| Buildings | 50 |
| Plant & Machinery | 15 |
| Vehicles | 5 |
| Tools | 4 |
| Fixtures and Fittings | 10 |
| Other Tangible Assets | 5 |
Maintenance and repair costs related to tangible assets are recorded directly as expenses in the year they are incurred.
Tangible assets in progress represent fixed assets still under construction/development and are stated at acquisition cost net of impairment losses. These assets are depreciated from the date they are completed or start being used.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognised if it is probable that future economic benefits will flow from them, if they are controlled by the Group and if their cost can be reliably measured.
Expenditure on research associated with new technical know-how is recognised as an expense recorded in the income statement when it is incurred.
Expenditure on development is recognised as an intangible asset if the Group demonstrates the technical feasibility and its intention to complete the asset, its ability to sell or use it and the probability that the asset will generate future economic benefits. Expenditure on development, which does not fulfil these conditions, is recorded as an expense in the period in which it is incurred.
Internal costs associated with maintenance and development of software are recorded as an expense in the period in which they are incurred. Only costs directly attributable to projects for which the generation of future economic benefits is probable are capitalized as intangible assets.
Amortisation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life which normally is 5 years.
Brands and patents with indefinite useful lives are not amortised, but are subject to impairment tests on an annual basis.
Lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee.
Whether a lease is classified as a finance or an operating lease depends on the substance of the transaction rather than the form of the contract.
Tangible assets acquired through finance lease contracts are recorded as assets and corresponding obligations as liabilities in the balance sheet. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. Both the finance charge and the depreciation expense for depreciable assets are taken to the income statement in the period in which they are incurred.
Lease payments under operating lease contracts are recognised as an expense on a straight line basis over the lease term.
Investment properties are recorded at acquisition cost net of depreciation and of accumulated impairment losses. These are registered as a result of land and buildings used in discontinued operations and that the Group had established lease contracts with third parties.
Government grants are recorded at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them.
Grants received as compensation for expenses, namely grants for personnel training, are recognised as income in the same period as the relevant expense.
Grants related to depreciable assets are disclosed as Other non-current liabilities and are recognised as income on a straight line basis over the expected useful lives of those assets.
Assets are assessed for impairment at each balance sheet date whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the income statement under Provisions and impairment losses.
The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of
estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognised in prior years is only recorded when it is concluded that the impairment losses recognised for the asset no longer exist or have decreased. This analysis is performed whenever there is an indication that the impairment loss previously recognised has been reversed. The reversal is recorded in the income statement as Other Operational income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for that asset in prior years.
Borrowing costs are normally recognised as an expense in the period in which they are incurred.
Borrowing costs directly attributable to the acquisition, construction or production of tangible and intangible assets are capitalised as part of the cost of the qualifying asset. Borrowing costs are capitalised from the time of preparation of the activities to construct or develop the asset up to the time the production or construction is complete or when asset development is interrupted. Any income earned on funds temporarily invested pending their expenditure on the qualifying asset, is deducted from the borrowing costs that qualify for capitalisation.
Consumer goods and raw materials are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis.
Finished goods and work in progress are stated at the lower of the weighted average production cost or net realisable value. Production cost includes cost of raw materials, labour costs and overheads (including depreciation of production equipment based on normal levels of activity).
Net realisable value is the estimated selling price less estimated costs of completion and estimated costs necessary to make the sale.
Differences between cost and net realisable value, if negative, are shown as operating expenses under Cost of sales or Changes in stocks of finished goods and work in progress,
depending on whether they refer to consumer goods and raw materials or finished goods and work in progress.
Provisions are recognised when, and only when, the Group has an obligation (legal or constructive) resulting from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of that obligation. Provisions are reviewed and adjusted at the balance sheet date to reflect the best estimate as of that date.
Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and that plan has been communicated to the parties involved.
Increase and utilization of provisions are recognized on specific accounts of profit or loss, respectively included under Provisions and Impairment losses and Other Operating Revenues of the Consolidated Profit and Loss Statement.
Investments are classified into the following categories:
Investments measured at fair value through profit or loss include the investments held for trading acquired by the Group to be sold within a short period of time. They are classified as current assets on the consolidated balance sheet.
The Group classifies as available-for-sale the investments which cannot be regarded as investments measured at fair value through profit or loss or as held-to-maturity investments.
Available-for-sale investments are stated as non current assets except if they are intended to be sold within the next 12 months as from the balance sheet date.
Held-to-maturity investments are classified as non-current assets unless they mature within 12 months of the balance sheet date. Investments classified as held to maturity
have defined maturities and the Group has the intention and ability to hold them until the maturity date.
All purchases and sales of investments are recognised on the trade date, independently of the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration paid for them, including transaction costs.
Available-for-sale investments and investments measured at fair value through profit or loss are subsequently carried at fair value, without any deduction for transaction costs which may be incurred on sale, by reference to their quoted market price at the balance sheet date. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured, are stated at cost, less impairment losses.
Changes in the fair value of investments measured at fair value through profit or loss are included in the consolidated income statement for the period.
Gains or losses arising from a change in fair value of available-for-sale investments are recognised directly in equity, under Fair value reserve, included in Reserves and retained earnings until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is transferred to net profit or loss for the period.
Receivables are stated at net realisable value, corresponding to their nominal value less impairment losses, recorded under the caption Impairment losses in accounts receivable, and thereby reflect their net realisable value.
Impairment losses are recognised following objective evidence that part or the whole amount receivable will not be paid as long as the loss can be reliably estimated. For that, each group company takes into consideration market information showing that the customer is insolvent along with historical data of overdue and not paid amounts receivable.
Recognised impairment losses correspond to the difference between the carrying amount and the present value of the estimated cash flows, discounted at the original effective interest rate, which is nil whenever payment is expected to occur within less than twelve months.
Accounts receivable are stated in the consolidated balance sheet as current assets unless they mature after twelve months as from the balance sheet date, in which case they will be stated as non current assets.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
d) Loans
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded in the income statement on an accruals basis, in accordance with the accounting policy defined in Note 2.9. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Accounts payable are stated at their nominal value.
The Group uses derivatives in the management of its financial risks, only to hedge such risks. Derivatives are not used by the Group for trading purposes.
Derivatives classified as cash flow hedge instruments (Swaps) are used by the Group mainly to hedge interest risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges. Inefficiencies that may arise are recorded on the Profit and Loss statement.
The Group's criteria for classifying a derivative instrument as a cash flow hedge instrument include:
the effectiveness of the hedge can be reliably measured;
there is adequate documentation of the hedging relationships at the inception of the hedge;
Cash flow hedge instruments used by the Group are initially accounted for at cost and subsequently adjusted to their corresponding fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, included in Reserves and retained earnings on the consolidated balance sheet, and then recognised in the income statement over the same period in which the hedged instrument affects income statement.
The fair value of these financial instruments is calculated with resource to derivative valuation software and was based on the present value, at balance sheet date, of future cash flows of both the fixed and variable legs of the derivative instrument.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve are transferred to profit or loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement.
In some cases derivative instruments were negotiated to hedge cash flows mainly related to exchange rate hedges (forwards) of loans and trade transactions which do not consist in perfect hedging relations therefore not qualifying for hedge accounting. Notwithstanding, they significantly mitigate the effect on loans and accounts receivable denominated in foreign currencies of changes in exchange rates which the Group intends to hedge.
These derivative instruments over which no hedge accounting was applied are initially stated at cost, if any, and then adjusted to their fair value. Changes in fair value, calculated with resource to specific software, are accounted for as financial items on the consolidated profit and loss statement.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host contract, and this is not stated at fair value. Gains and losses are taken through the profit and loss statement.
Additionally, the Group also negotiates, in specific situations, interest derivatives in order to hedge fair values. In these cases, derivatives are stated at fair value through profit or loss. When the hedged instrument is not measured at fair value (i.e. loans which are recorded at amortised cost) the book value is adjusted by the amount which is effectively hedged through profit or loss.
Derivative instruments are stated on the consolidated balance sheet under Other non current assets, Other current assets, Other non current liabilities and Other current liabilities.
Equity instruments are those that represent a residual interest on the Group's net assets and are recorded at the amount received, net of costs incurred with their issuance.
Own shares are recorded at acquisition cost as a reduction to equity. Gains or losses arising from sales of own shares are recorded in Reserves and retained earnings under Other reserves.
Cash and cash equivalents include cash on hand, cash at banks, term deposits and other treasury applications which mature in less than three months and are subject to insignificant risk of change in value.
In the consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts, which are included in the balance sheet caption Borrowings.
As referred to in Note 30, some of the Group companies are committed to provide benefits to their employees when they get retired. These commitments are considered as defined benefit plans, and autonomous pension funds have been established to this effect:
In order to estimate its obligations, the Group obtains, annually, actuarial valuations according to the "Projected Unit Credit Method". When unrecognised cumulative actuarial gains and losses exceed the greater of 10% of the present value of the defined benefit
obligation and 10% of the fair value of plan assets, these are recorded as income or expense on a straight line basis over the average remaining service period of the participants.
Past service costs are recorded immediately when benefits are being paid. Otherwise, these are recorded on a straight line basis over the average remaining service period until they vest (generally, the date of retirement if they still work for the Group).
Obligations recorded at the closing balance sheet date reflect the present value of obligations for defined benefits adjusted for actuarial gains or losses and/or past service costs not recorded, net of the fair value of net assets of the pension fund.
Contingent liabilities are not recorded in the consolidated financial statements. Instead they are disclosed in the notes to the financial statements, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the consolidated financial statements but disclosed when future economic benefits are probable.
Income tax for the period is calculated based on the taxable income of companies included on consolidation and considers deferred taxation.
Current income tax is determined based on the taxable income of companies included on consolidation and includes deferred taxation, in accordance with the tax rules in force in the respective country of incorporation, considering the period profit and using the estimated effective average annual income tax rate.
Deferred taxes are calculated using the balance sheet liability method, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are calculated and annually remeasured using the tax rates that have been enacted or substantively enacted and therefore are expected to apply in the periods when the temporary differences are expected to reverse.
Deferred tax assets are recognised only when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be used, or when taxable temporary
differences are recognised and expected to reverse in the same period. At each balance sheet date a review is made of the deferred tax assets recognised, which are reduced whenever their future use is no longer probable
Deferred tax assets and liabilities are recorded in the income statement, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in equity.
Revenue from the sale of goods is recognised in the income statement when the risks and benefits have been transferred to the buyer and the amount of the revenue can be measured reasonably. Sales are recognised net of sales taxes and discounts and other expenses arising from the sale, and are measured as the fair value of the amount received or receivable.
Revenue from services rendered is recognised in the income statement taking into consideration the stage of completion of the transaction at the balance sheet date.
Dividends are recognised as income in the year they are attributed to the shareholders.
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other current liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but will only correspond to income or expenses of future years, when they will be recognised in the income statement.
Capital gains and losses that result from the sale or write-off of tangible and intangible assets and of investments are presented on the profit and loss statement as the difference between the sale price and the net book value at date of sale or write-off, under the caption Other Operating Profits and Losses.
Transactions in currencies other than the Euro, are translated to Euro using the exchange rate as at the transaction date.
At each balance sheet date, all monetary assets and liabilities expressed in foreign currencies are translated to the functional currency of each foreign company at the exchange rates as at that date. All non-monetary assets and liabilities recorded at fair value and stated in foreign currencies are converted to the functional currency of each company, using the exchange rate at the date the fair value was determined.
Exchange gains and losses arising from differences between historical exchange rates and those prevailing at the date of collection, payment or the date of the balance sheet, are recorded as income or expenses of the period, except for those related to non-monetary assets or liabilities, for which adjustments to fair value are directly recorded under equity. When the Group wants to reduce currency exposure, it negotiates hedging currency derivatives (Note 2.12.f)).
The Company and its subsidiaries each year grant their employees that belong to the functional group Executive a compensation which is related to the value added in the period for the shareholders. This compensation will be paid after a three-year period if the employee is still in the Group.
This liability is stated on the consolidated balance sheet under Other non current liabilities and Other current liabilities and is stated on the consolidated profit and loss statement under Personnel costs. If the employee ceases functions during the period over which payment of previously recognised liabilities is deferred, liabilities will be derecognised from the balance sheet against Personnel costs on the profit and loss statement.
Events after the balance sheet date that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Events after the balance sheet date that are non-adjusting events are disclosed in the notes when material.
All business and geographic segments of the Group are identified annually.
Information regarding business and geographic segments identified is included in Note 41.
The most significant estimations included in these consolidated financial statements refer to:
These estimations were based on the best available information at the date these consolidated financial statements were prepared and were based on the knowledge and experience of present and past events. Notwithstanding, some situations may occur in future periods which were not included in present estimations as they were not foreseeable. Changes to estimations after these financial statements date will be prospectively corrected through profit or loss in accordance with IAS 8.
Main estimations and assumptions relating to future events included in these consolidated financial statements are described in the correspondent notes.
a) Credit Risk Management Policy
Sonae Indústria Credit Risk derives mainly from its account receivables items related with its operating activity.
The main objective of Sonae Indústria Credit Risk Management is to guarantee the effective collection of its operating receivables according to the negotiated payment terms.
In order to mitigate Credit Risk related with potential Customers default on payment of outstanding receivables, Group companies exposed to this type of risk:
have dedicated teams for credit management and collections;
establish and review credit limits for their Customers, monitoring effective exposure to their Customers;
have insurance policies in place where viable;
ii) Other financial assets, other than receivables.
In addition to its operating activities, Group companies have financial assets, related mainly with its activities involving Financial Institutions, such as cash deposits, financial investments and derivatives with positive market value. As a result, Credit Risk arises from the potential counterparty default from these Financial Institutions.
As a rule, Group companies only engage in financial operations with Investment Grade Financial Institutions. On the other hand, generally speaking, exposure related with this type of financial assets is widely spread and short lived.
b) Market Risk Management Policy
As a result of the relevant portion of floating rate debt on Sonae Indústria consolidated Balance Sheet and the consequent cash flows related to interest payments, the company is exposed to interest rate risk, and it is particularly exposed to the risk of variation of Euro interest rates, as most of its floating rate debt is denominated in Euro.
As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates.
This approach is based on the principle of the existence of a negative correlation between the interest rate levels and the "operating cash flow before net interest charges", which creates a natural hedge on the "operating cash flow after net interest charges" for Sonae Indústria. The rationale behind this principle is as follows:
Sonae Indústria is mainly exposed to the Euro area on its operating activity and, as referred before, it is also mainly exposed to the Euro currency in what concerns to its floating rate debt.
Sonae Indústria operating activity is cyclical in the sense it is tied to business cycles of the overall economy and particularly of the construction sector (and also of the furniture sector on its own). This is mostly due to the nature of our products, and to the fact that they are commodity-like and durable goods, performing better when there are good economic conditions.
Under regular economic circumstances, when there is a strong level of economic activity and demand, inflation tends to increase. Since nominal interest rates are a function of inflation and also because the European Central Bank (ECB) has as its main mission keeping price stability, it normally acts in order to relieve inflationary tensions by increasing interest rates. Opposite effects occur when there is a weak level of activity and demand, with low pressure on prices.
When activity and demand are strong in the Euro Area, Sonae Indústria tends to have superior economic performance and operating cash flow generation. On the other hand, when economic conditions are strong, ECB tends to increase interest rates in order to refrain demand and avoid price increases, which is reflected on higher net interest charges for Sonae Indústria, creating a natural hedge on "operating cash flow after net interest charges". The same principle (with opposite signs) applies on economic downturn situations.
It is our understanding that, apart from the Euro interest rate, the same rationale applies to other interest rates to which Sonae Indústria is exposed such as the Pound Sterling and the Canadian Dollar, or to the South African Rand and Brazilian Real (while acknowledging that in emerging markets, interest rate behaviour is influenced by other effects not directly related with domestic economic conditions).
As an exception to its general rule, Sonae Indústria may engage into interest rates derivatives. If this is the case, the following is observed:
Derivatives are not used for trading, profit making, or speculative purposes;
Group companies only engage in derivative transactions with Investment Grade Financial Institutions;
Derivatives match exact periods, settlement dates and base interest rate of the underlying exposures;
Maximum financial charges on the aggregate of the derivative and the underlying exposures are always known and limited on the inception of the hedging period;
Quotes from at least two Financial Institutions are considered before closing any interest rate hedging deal.
As a geographically diversified Group with subsidiaries located in four different continents, Sonae Indústria is exposed to foreign exchange risk. Consolidated Balance Sheet and Profit and Loss are is exposed to foreign exchange translation risk and Sonae Indústria subsidiaries' are exposed to foreign exchange risk of both translation and transaction type.
Foreign exchange risk relates to the possibility of registering gains or losses resulting from the change in exchange rates.
Transaction risk arises when there is exchange risk related to a cash flow in other than a subsidiary local currency. Sonae Indústria subsidiaries cash flows are largely denominated in the subsidiary local currency. This is valid independently of the nature of the cash flows, i.e.: operating or financial, and provides a degree of natural currency hedging, reducing the Group's transaction risk. In line this rationale, as a principle, Sonae Indústria's subsidiaries financial debt is denominated in their local currency.
As a Group rule, whenever possible and economically viable, subsidiaries aim to offset assets and liabilities denominated in the same foreign currency.
Also as a rule, in situations where relevant exchange risk arises from trade in other than the subsidiary local currency, exchange risk should be mitigated through the use of short term forward exchange agreements performed by the subsidiary exposed to that risk. Sonae Indústria subsidiaries do not engage in forward exchange rate agreements with trading, speculative or profit making purposes.
Translation risk arises from the fact that for each accounting period, the Financial Statements of the subsidiaries denominated in other than Euro local currencies, must be translated or converted into Euro in order to prepare the Consolidated Financial
Statements of the Group. As exchange rates vary between periodical financial statements and the referred subsidiaries assets' do not match their liabilities, volatility in the consolidated accounts arise as a result of conversion at different exchange rates.
As a policy, translation risk in connection with the conversion of the Equity investments on foreign non Euro subsidiaries is not hedged as these are considered long-term investments and it is assumed that hedging will not add value in the long term. Gains and losses related to the translation at different exchange rates of Equity investments in foreign non Euro subsidiaries are accounted under the Conversion Reserve.
Some Sonae Indústria subsidiaries concede or receive intercompany funding on currencies other than their local currency. Whenever this happens, intercompany funding is always denominated in the currency of the other Group counterparty. It is Sonae Indústria policy to hedge systematically the outstanding amount of this intercompany funding in order to reduce volatility on subsidiaries (and consolidated) financial statements. This volatility arises from the fact that, there is no offset of the Exchange Rate gain or loss registered in the Profit and Loss of the Group counterparty with the intercompany asset or liability denominated in other than its local currency (gain or loss registered as a result of the change in value of its foreign currency intercompany asset or liability), on the side of the other Group counterparty (and as a result, on the Consolidated accounts).
These intercompany loans hedges are done through forward exchange rate agreements, performed by the subsidiary exposed to the exchange rate risk and rolled over consistently on a semi-annual basis. Quotes from at least two Financial Institutions are considered before closing any of these foreign exchange hedging deals. These foreign exchange rate derivatives are also not used for trading, profit making, or speculative purposes.
As at 31st December 2008, Sonae Indústria did not hold material investments classified as "available-for-sale".
c) Liquidity Risk Management Policy
Group Liquidity risk management aims to ensure that the Group is able to timely obtain the financing required to properly carry on its business activities, implement its strategy, and meet its payment obligations when due, while avoiding the need of having to obtain funding under unfavourable terms.
For this purpose, Liquidity management at the Group comprises:
consistent financial planning and cash flow forecasting at country and consolidated levels with different time horizons (weekly, monthly, annual and business plan);
diversification of financing sources;
diversification of the maturities of the debt issued in order to avoid excessive concentration of debt repayments in short periods of time;
arrangement of committed (and uncommitted) credit facilities, commercial paper programs, and other facilities (such as a Securitization of Receivables program) with relationship banks, ensuring the right balance between satisfactory liquidity and adequate commitment fees;
On 17 April 2006 a fire broke out on production line 2 at the factory in Lac Megantic, Canada, destroying a significant part of this line's assets. In addition, Line 1 was also forced to stop for almost 2 months. The Group's insurance policy covers asset and operating losses and the compensation received will be sufficient to replace production capacity prior to the fire with new assets and to cover operating losses resulting from the stoppage of both production lines, for a period of up to 18 months.
During first half 2008 line 2 was fully rebuilt and operational.
As a result, consolidated financial statements include, as from the occurrence date, the following effects that correspond to the final position resulting from the discussions held with the insurers:
| CAD | Year 2006 |
Year 2007 |
1 Half 2008 |
Total |
|---|---|---|---|---|
| Compensation for property damages | 69 630 661 | 22 387 718 | 75 173 945 | 167 192 324 |
| Compensation for business interruption | 43 432 314 | 34 423 039 | 4 608 851 | 82 464 204 |
| Total | 113 062 975 | 56 810 757 | 79 782 796 | 249 656 528 |
| EUR | Year 2006 |
Year 2007 |
1 Half 2008 |
Total |
| Compensation for property damages | 48 941 303 | 15 274 916 | 48 271 445 | 112 487 664 |
| Compensation for business interruption | 30 527 271 | 23 486 495 | 2 959 481 | 56 973 247 |
| Total | 79 468 574 | 38 761 411 | 51 230 926 | 169 460 911 |
On the previous table, translation of CAD to EUR was carried out using the average exchange rate for the corresponding period, in accordance with the procedure used to translate to EUR the income statements of companies included in the consolidation whose reporting currency is other than EUR.
The compensation for property damages and business interruption losses paid by the insurers in first half 2008 was included under Other operating revenues (43 766 166 euros) on the consolidated profit and loss account, and under Tangible assets (7 464 760 euros) on the consolidated balance sheet.
The amount of 7 464 760 euros, which reduced Tangible assets, corresponds to the compensation item for property damages that refers to the portion of the investment carried out for the sole purpose of complying with existing safety regulations in the Province of Quebec (Canada). These assets substantially will not generate any additional future economic benefit when compared to the existing assets prior to the accident.
No changes to the accounting policies mentioned in note 2 and no corrections to prior period errors were made.
Group companies included in the consolidated financial statements, their head offices and percentage of capital held by the Group as at 31 December 2008 and 31 December 2007 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | TERMS FOR INCLUSION |
||||
|---|---|---|---|---|---|---|---|
| 31.12.08 | 31.12.07 | ||||||
| Direct | Total | Direct | Total | ||||
| Agepan Eiweiler Management, GmbH | Eiweiler (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Agepan Flooring Products, SARL | Luxemburg | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Agloma Investimentos, SGPS, S. A. | Maia (Portugal) | 100.00% | 98.90% | 100.00% | 98.82% | a) | |
| Agloma - Sociedade Industrial de Madeira Aglomerada, S.A. | Oliveira do Hospital (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Aserraderos de Cuellar, S.A. | Madrid (Spain) | 100.00% | 98.90% | 100.00% | 98.82% | a) | |
| Cia. De Industrias y Negocios, S.A. | Madrid (Spain) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Darbo, SAS | Linxe (France) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Ecociclo, Energia e Ambiente, S. A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Ecociclo II – Energias, S. A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Euro Decorative Boards Ltd. | Knowsley (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Euromegantic Lteé | Lac Mégantic (Canada) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Euroresinas - Indústrias Quimicas, S.A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| GHP, GmbH | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Glunz AG | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Glunz Service GmbH | Hamm (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Glunz UK Holdings, Ltd. | Londres (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Glunz UkA GmbH | Hamm (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Hornitex Polska | Poznan (Poland) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| 1) | IM Impregnation Management GmbH | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Impaper Europe GmbH & Co. KG | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Imoplamac – Gestão de Imóveis, S. A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| 2) | Isoroy Casteljaloux, SA | Casteljaloux (France) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Isoroy, SAS | Boulogne (France) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Maiequipa - Gestão Florestal, S.A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Megantic B.V. | Amsterdão (The Netherlands) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Movelpartes – Comp. para a Indústria do Mobiliário, S.A. | Paredes (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| OSB Deustchland | Germany | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| 3) | Poliface Brasil, Ltda. | São Paulo (Brazil) | 99.99% | 99.99% | 99.99% | 99.99% | a) |
| Poliface North America | Baltimore (USA) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Racionalización y Manufacturas Florestales, S.A. | Madrid (Spain) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| SCS Beheer, BV | The Netherlands | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Siaf – Soc. de Iniciativa e Aproveitamentos Florestais, S.A. | Mangualde (Portugal) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Sociedade de Iniciativa e Aproveit. Florestais - Energias, S.A. | Mangualde (Portugal) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Société Industrielle et Financière Isoroy | Rungis (France) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Somit – Imobiliária, S.A. | Oliveira do Hospital (Portugal) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| 4) | Somit – Soc. de Madeiras Industrializadas e Transform., S. A. | Oliveira do Hospital (Portugal) | 100.00% | 98.89% | 100.00% | 98.82% | a) |
| Sonae – Serviços de Gestão, S. A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Sonae Indústria – Prod. e Comerc. Derivados Madeira, S. A. | Mangualde (Portugal) | 100.00% | 98.82% | 100.00% | 98.82% | a) | |
| Sonae Indústria – Soc. Gestora de Participações Sociais, S.A. | Maia (Portugal) | MÃE | MÃE | MÃE | MÃE | MÃE | |
| 5) | Sonae Indústria Brasil, Ltda. | São Paulo (Brazil) | 100.00% | 100.00% | 100.00% | 100.00% | a) |
| Sonae Indústria de Revestimentos, S.A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Sonae Novobord (Pty) Ltd | Woodnead (South Africa) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Sonae Tafibra (UK) Ltd | Knowsley (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| 6) | Sonae Tafibra International, B. V. | Woerden (The Netherlands) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Sonae UK, Limited | Knowsley (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Spanboard Products Ltd | Belfast (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tableros de Fibras, S.A. | Madrid (Spain) | 98.42% | 98.78% | 98.42% | 98.78% | a) | |
| Tableros Tradema, S.L. | Madrid (Spain) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafiber, Tableros de Fibras Ibéricas, S.L. | Madrid (Spain) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafibra South Africa, Limited | South Africa | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| 7) | Tafibras, S.A. | Curitiba (Brazil) | 100.00% | 99.34% | 54.32% | 53.66% | a) |
| Tafisa Brasil, S.A. | Curitiba (Brazil) | 100.00% | 98.78% | 100.00% | 62.24% | a) |
| Tafisa Canadá Societé en Commandite | Lac Mégantic (Canada) | 99.99% | 98.78% | 99.99% | 98.78% | a) |
|---|---|---|---|---|---|---|
| Tafisa France S.A.S. | Rungis (France) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Tafisa U.K.Ltd. | Knowsley (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Taiber, Tableros Aglomerados Ibéricos, S.L. | Madrid (Spain) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Tavapan, SA | Tavannes (Switzerland) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Tecnologias del Medio Ambiente, S.A. | Barcelona (Spain) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Tool, GmbH | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) |
These group companies are consolidated using the full consolidation method as described in Note 2.2.a).
The joint ventures, their head offices, percentage of share capital held and balance sheet on 31 December 2008 and 31 December 2007 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | ||||
|---|---|---|---|---|---|---|
| 31.12.08 | ||||||
| 31.12.07 | ||||||
| Direct | Total | Direct | Total | |||
| Agepan Tarkett Laminate Park GmbH & Co. KG | Eiweiler (Germany) | 50.00% | 49.39% | 50.00% | 49.39% | |
| Tarkett Agepan Laminate Flooring SCS | Luxembourg | 50.00% | 49.39% | 50.00% | 49.39% | |
| Tecmasa, Reciclados de Andalucia, S. L. | Alcalá de Guadaira (Spain) | 50.00% | 49.39% | 50.00% | 49.39% |
Joint venture companies have been consolidated using the proportionate consolidation method, as explained in note 2.2.b).
Associated companies, their head offices and the percentage of share capital held as at 31 December 2008 and 31 December 2007 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 31.12.2008 | 31.12.2007 | ||||||||
| Direct | Total | Direct | Total | ||||||
| 1) | Promodeco – Proj. Imobiliário Decoração e Constr., Lda. | Maia (Portugal) | 27.60% | 27.18% | 27.60% | 27.18% | |||
| Serradora Boix | Barcelona (Spain) | 31.25% | 30.87% | 31.25% | 30.87% | ||||
| Sonaegest | Maia (Portugal) | 20.00% | 20.00% | 20.00% | 20.00% |
1) Company sold 17.01.2008.
Associated companies are recognised in the consolidated financial statements using the equity method, as referred in Note 2.2.c).
Comparability of consolidated financial statements as at 31 December 2008 and 31 December 2007 is affected by the companies that were included and excluded in the consolidation perimeter during 2007 and 2008.
| COMPANY | HEAD OFFICE | % OF CAPITAL HELD AT | ||||
|---|---|---|---|---|---|---|
| LIQUIDATION DATE | ||||||
| Direct | Total | |||||
| 1) | Isoroy Casteljaloux, SA | Casteljaloux (France) | 100.00% | 98.78% | ||
| 2) | Somit – Soc. de Madeiras Industrializadas e Transform., S. A. | Oliveira do Hospital (Portugal) | 100.00% | 98.82% |
1) Company sold 14.03.2008;
2) Company liquidated 31.05.2008.
| COMPANY | HEAD OFFICE | % OF CAPITAL HELD AT ACQUISITION / INCORPORATION DATE |
|||
|---|---|---|---|---|---|
| Direct | Total | ||||
| 1) | Agloma Investimentos, SGPS, S. A. | Maia (Portugal) | 100.00% | 98.90% | |
| 2) | Aserraderos de Cuellar, S.A. | Madrid (Spain) | 100.00% | 98.90% | |
| 3) | IM Impregnation Management GmbH | Meppen (Germany) | 100.00% | 98.78% | |
| 4) | Impaper Europe GmbH & Co. KG | Meppen (Germany) | 100.00% | 98.78% | |
| 5) | Imoplamac – Gestão de Imóveis, S. A. | Maia (Portugal) | 100.00% | 100.00% | |
| 6) | Isoroy Casteljaloux, SA | Casteljaloux (France) | 100.00% | 98.78% | |
| 7) | Somit – Soc. de Madeiras Industrializadas e Transform., S. A. | Oliveira do Hospital (Portugal) | 100.00% | 98.89% | |
| 1) | Company acquired 24 April 2007; |
2) Company acquired 24 April 2007;
3) Company incorporated 10 September 2007;
4) Company incorporated 17 September 2007;
5) Company acquired 1 January 2007;
6) Company acquired 31 August 2007;
7) Company acquired 24 April 2007;
The inclusion of these companies in the consolidation perimeter did not materially affect the comparability of the consolidated financial statements for 2008 and 2007.
| COMPANY | HEAD OFFICE | % OF CAPITAL HELD AT | ||||
|---|---|---|---|---|---|---|
| LIQUIDATION DATE | ||||||
| Direct | Total | |||||
| 1) | Sonae España, S. A. | Madrid (Spain) | 99.94% | 99.94% |
1) Company liquidated 28 May 2007.
The exclusion of this company from the consolidation perimeter in 2007 did not materially affect the comparability of the consolidated financial statements for 2008 and 2007.
In the Consolidated Balance Sheets at 31 December 2008 and 31 December 2007, the following financial instruments are included:
| Note | Loans and receivables |
Assets at fair value through profit or loss |
Hedge derivatives |
Available-for-sale assets |
Sub-total | Assets out of scope of IFRS 7 |
Total | |
|---|---|---|---|---|---|---|---|---|
| 31.12.2008 | ||||||||
| Non current assets | ||||||||
| Available for sale investments | 10 | 389 763 | 389 763 | 389 763 | ||||
| Other non current assets | 16 | 1 744 276 | 1 744 276 | 6 739 | 1 751 015 | |||
| Current assets | ||||||||
| Customers | 18 | 199 825 603 | 199 825 603 | 199 825 603 | ||||
| Other current debtors | 19 | 15 045 151 | 15 045 151 | 373 523 | 15 418 674 | |||
| Other current assets | 20 | 16 305 349 | 216 108 | 16 521 457 | 11 007 955 | 27 529 412 | ||
| Cash and cash equivalents | 22 | 65 750 257 | 65 750 257 | 65 750 257 | ||||
| Total | 282 365 286 | 16 305 349 | 216 108 | 389 763 | 299 276 506 | 11 388 217 | 310 664 723 | |
| 31.12.2007 | ||||||||
| Non current assets | ||||||||
| Available for sale investments | 10 | 1 602 518 | 1 602 518 | 1 602 518 | ||||
| Other non current assets | 16 | 1 578 390 | 1 578 390 | 54 341 | 1 632 731 | |||
| Current assets | ||||||||
| Customers | 18 | 260 140 025 | 260 140 025 | 260 140 025 | ||||
| Other current debtors | 19 | 21 057 227 | 21 057 227 | 782 239 | 21 839 466 | |||
| Other current assets | 20 | 5 047 080 | 136 807 | 5 183 887 | 9 594 428 | 14 778 315 | ||
| Cash and cash equivalents | 22 | 65 883 548 | 65 883 548 | 65 883 548 | ||||
| Total | 348 659 189 | 5 047 080 | 136 807 | 1 602 518 | 355 445 596 | 10 431 007 | 365 876 603 |
| Liabilities at fair value |
Other | Liabilities out of scope |
|||||
|---|---|---|---|---|---|---|---|
| Note | through profit or loss |
Hedge derivatives |
financial Liabilities |
Sub-total | of IFRS 7 |
Total | |
| 31.12.2008 | |||||||
| Non current liabilities | |||||||
| Bank loans - net of short term portion | 25 | 268 056 483 | 268 056 483 | 268 056 483 | |||
| Debentures - net of short term portion | 25 | 302 147 961 | 302 147 961 | 302 147 961 | |||
| Finance lease creditors - net of short term por | 25 | 47 949 761 | 47 949 761 | 47 949 761 | |||
| Other loans | 25 | 148 419 100 | 148 419 100 | 148 419 100 | |||
| Other non current liabilities | 28 | 9 230 | 507 006 | 516 236 | 118 224 843 | 118 741 079 | |
| Current assets | |||||||
| Bank loans | 25 | 105 577 761 | 105 577 761 | 105 577 761 | |||
| Debentures | 25 | 80 000 000 | 80 000 000 | 80 000 000 | |||
| Finance lease creditors | 25 | 3 535 578 | 3 535 578 | 3 535 578 | |||
| Other loans | 25 | 301 760 | 301 760 | 301 760 | |||
| Trade creditors | 30 | 165 920 462 | 165 920 462 | 165 920 462 | |||
| Other current liabilities | 32 | 6 244 352 | 1 168 770 | 12 148 686 | 19 561 808 | 97 419 485 | 116 981 293 |
| Total | 6 253 582 | 1 168 770 | 1 134 564 558 | 1 141 986 910 | 215 644 328 | 1 357 631 238 | |
| 31.12.2007 | |||||||
| Non current liabilities | |||||||
| Bank loans - net of short term portion | 25 | 187 543 520 | 187 543 520 | 187 543 520 | |||
| Debentures - net of short term portion | 25 | 431 336 457 | 431 336 457 | 431 336 457 | |||
| Finance lease creditors - net of short term por | 25 | 51 100 454 | 51 100 454 | 51 100 454 | |||
| Other loans | 25 | 34 506 252 | 34 506 252 | 34 506 252 | |||
| Other non current liabilities | 28 | 216 079 | 1 119 165 | 1 335 244 | 123 416 265 | 124 751 509 | |
| Current assets | |||||||
| Bank loans | 25 | 55 605 328 | 55 605 328 | 55 605 328 | |||
| Debentures | 25 | 100 000 000 | 100 000 000 | 100 000 000 | |||
| Finance lease creditors | 25 | 3 465 063 | 3 465 063 | 3 465 063 | |||
| Other loans | 25 | 504 957 | 504 957 | 504 957 | |||
| Trade creditors | 30 | 226 228 686 | 226 228 686 | 226 228 686 | |||
| Other current liabilities | 32 | 942 442 | 29 910 576 | 30 853 018 | 124 686 401 | 155 539 419 | |
| Total | 1 158 521 | 1 121 320 458 | 1 122 478 979 | 248 102 666 | 1 370 581 645 |
| 31.12.2008 | 31.12.2007 | |||
|---|---|---|---|---|
| Current | Non current | Current | Non current | |
| Investment in group companies excluded from consolidation | ||||
| Opening balance | 42 726 009 | 42 726 009 | ||
| Acquisition | ||||
| Disposal | ||||
| Liquidation | 5 671 139 | |||
| Currency translation effect | ||||
| Closing balance | 37 054 870 | 42 726 009 | ||
| Accumulated impairment losses (Note 33) | 36 990 037 | 42 661 176 | ||
| Net investment in group companies excluded from consolidation | 64 833 | 64 833 | ||
| Investment in associated companies | ||||
| Opening balance | 3 349 392 | 2 920 894 | ||
| Increase in share capital | ||||
| Disposal | 466 179 | |||
| Effect of equity method application | 127 642 | 428 498 | ||
| Currency translation effect | ||||
| Closing balance | 3 010 855 | 3 349 392 | ||
| Accumulated impairment losses (Note 33) | ||||
| Net investment in associated companies | 3 010 855 | 3 349 392 | ||
| Associated undertakings and non consolidated undertakings | 3 075 688 | 3 414 225 |
| 31.12.2008 | 31.12.2007 | |||
|---|---|---|---|---|
| Current | Non current | Current | Non current | |
| Available-for-sale investment | ||||
| Opening balance | 1 618 479 | 1 433 432 | ||
| Acquisition | 500 | 100 000 | ||
| Disposal | 1 201 021 | |||
| Currency translation effect | - 12 234 | 85 047 | ||
| Closing balance | 405 724 | 1 618 479 | ||
| Accumulated impairment losses (Note 33) | 15 961 | 15 961 | ||
| Net available-for-sale investment | 389 763 | 1 602 518 | ||
| Investments | ||||
| Opening balance | 4 769 781 | |||
| Acquisition | 14 134 527 | |||
| Disposal | 18 904 308 | |||
| Closing balance | ||||
| Accumulated impairment losses (Note 33) | ||||
| Net investments measured at fair value through profit and loss |
Available-for-sale investment is made up of financial undertakings which do not fulfil the criteria to be stated as subsidiaries excluded from consolidation or as associates. They are recognised at cost as no relevant difference to their fair value is estimated.
During 2008, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| 2008 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery |
Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Fixed Assets under construction |
Total tangible assets |
||||
| Gross cost: | |||||||||||
| Opening balance | 508 325 762 | 1 921 191 719 | 17 022 449 | 17 600 545 | 51 438 613 | 16 136 514 | 151 571 086 | 2 683 286 688 | |||
| Changes in consolidation perimeter | - 1 912 172 | - 4 936 288 | - 3 081 | - 74 860 | - 854 609 | - 22 603 | - 7 803 613 | ||||
| Capital expenditure | 25 141 | 2 281 262 | 1 379 291 | 1 795 | 395 901 | 1 405 353 | 103 625 265 | 109 114 008 | |||
| Disposals | 4 115 684 | 8 754 934 | 1 281 717 | 712 175 | 3 178 677 | 109 235 | - 92 713 | 18 059 709 | |||
| Transfers and reclassifications | 39 704 664 | 156 112 981 | 921 219 | 1 774 496 | 1 464 360 | 1 033 355 | - 200 812 431 | 198 644 | |||
| Exchange rate effect | - 31 936 657 | - 98 245 218 | - 553 020 | - 466 755 | - 2 225 874 | - 218 735 | - 8 225 073 | - 141 871 332 | |||
| Closing balance | 510 091 054 | 1 967 649 522 | 17 485 141 | 18 197 906 | 47 819 463 | 17 392 643 | 46 228 957 | 2 624 864 686 | |||
| Accumulated depreciation and impairment losses |
|||||||||||
| Opening balance | 136 425 360 | 1 127 046 966 | 13 695 673 | 11 676 984 | 37 986 721 | 13 290 189 | 343 447 | 1 340 465 340 | |||
| Changes in consolidation perimeter | - 861 383 | - 3 422 758 | - 3 081 | - 45 513 | - 838 087 | - 5 170 822 | |||||
| Charge for the period | 14 873 678 | 125 967 181 | 1 514 284 | 2 025 552 | 4 307 470 | 652 757 | 745 024 | 150 085 946 | |||
| Disposals | 1 080 275 | 5 486 211 | 1 231 061 | 389 577 | 3 097 634 | 60 559 | 11 345 317 | ||||
| Transfers and reclassifications | - 96 837 | - 96 837 | |||||||||
| Exchange rate effect | - 4 913 872 | - 44 333 790 | - 352 494 | - 391 093 | - 1 573 294 | - 7 278 | - 6 481 | - 51 578 302 | |||
| Closing balance | 144 443 508 | 1 199 771 388 | 13 623 321 | 12 921 866 | 37 480 913 | 13 037 022 | 1 081 990 | 1 422 360 008 | |||
| Carrying amount | 365 647 546 | 767 878 134 | 3 861 820 | 5 276 040 | 10 338 550 | 4 355 621 | 45 146 967 | 1 202 504 678 |
| 2007 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery | Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Fixed Assets under construction |
Total tangible assets | |
| Gross cost: | ||||||||
| Opening balance | 464 461 863 | 1 881 653 116 | 10 101 675 | 9 411 014 | 57 066 427 12 910 283 | 58 146 152 | 2 493 750 530 | |
| Changes in consolidation perimeter | 33 793 070 | 21 918 528 | 259 508 | 119 679 | 178 319 | 1 404 552 | 3 527 654 | 61 201 310 |
| Capital expenditure | 279 684 | 1 172 899 | 614 829 | 2 964 | 314 774 | 220 038 | 199 204 890 | 201 810 078 |
| Disposals | 12 329 999 | 63 391 441 | 338 165 | 373 130 | 1 859 683 | 76 914 | 173 015 | 78 542 347 |
| Transfers and reclassifications | 21 795 479 | 76 073 529 | 6 274 257 | 8 572 555 | - 4 404 380 | 1 696 128 | - 110 317 610 | - 310 042 |
| Exchange rate effect | 325 665 | 3 765 088 | 110 345 | - 132 537 | 143 156 | - 17 573 | 1 183 015 | 5 377 159 |
| Closing balance | 508 325 762 | 1 921 191 719 | 17 022 449 | 17 600 545 | 51 438 613 16 136 514 | 151 571 086 | 2 683 286 688 | |
| Accumulated depreciation and impairment losses |
||||||||
| Opening balance | 130 141 937 | 1 062 716 318 | 8 400 501 | 6 565 770 | 39 628 914 11 394 270 | 343 447 | 1 259 191 157 | |
| Changes in consolidation perimeter | 3 342 596 | 14 267 080 | 211 472 | 117 932 | 118 758 | 1 361 491 | 19 419 329 | |
| Charge for the period | 12 576 431 | 110 040 619 | 1 557 996 | 1 936 737 | 4 690 823 | 614 300 | 131 416 906 | |
| Disposals | 9 914 220 | 60 849 909 | 246 254 | 335 337 | 1 753 020 | 78 517 | 73 177 257 | |
| Transfers | - 2 545 190 | 3 712 989 | 3 495 773 | - 4 708 796 | - 45 224 | |||
| Exchange rate effect | 278 616 | 3 418 048 | 58 969 | - 103 891 | 10 042 | - 1 355 | 3 660 429 | |
| Closing balance | 136 425 360 | 1 127 046 966 | 13 695 673 | 11 676 984 | 37 986 721 13 290 189 | 343 447 | 1 340 465 340 | |
| Carrying amount | 371 900 402 | 794 144 753 | 3 326 776 | 5 923 561 | 13 451 892 | 2 846 325 | 151 227 639 | 1 342 821 348 |
Charges for the period include impairment losses in the amount of 30 339 095 euros (15 465 324 euros for the period ended 31 December 2007).
Charges to impairment losses are detailed in note 33.
During 2008 and 2007 no interest paid or any other financial charges were capitalised, in accordance with conditions defined in note 2.9.
At 31 December 2008, mortgaged Land and buildings amounted to 19 132 500 euros (24 925 000 euros at 31 December 2007) as a guarantee for bank loans.
At 31 December 2008 and 2007, details of assets bought through financial leases were as follows:
| 31.12.2008 | 31.12.2007 | |||||
|---|---|---|---|---|---|---|
| Opening balance | Changes to consolidation perimeter |
Increase | Other changes | Closing balance |
Closing balance | |
| Gross cost: | ||||||
| Land and Buildings | 33 761 516 | - 584 834 | 33 176 682 | 33 761 516 | ||
| Plant and Machinery | 61 004 516 | - 16 205 936 | 44 798 580 | 61 004 516 | ||
| Vehicles | 4 793 515 | 726 931 | - 910 303 | 4 610 143 | 4 793 515 | |
| Tools | ||||||
| Fixtures and Fittings | 712 964 | - 706 841 | 6 123 | 712 964 | ||
| Other tangible assets | ||||||
| 100 272 511 | 726 931 | - 18 407 914 | 82 591 528 | 100 272 511 | ||
| Accumulated depreciation and impairment losses: | ||||||
| Land and Buildings | 7 312 711 | 851 774 | - 58 086 | 8 106 399 | 7 312 711 | |
| Plant and Machinery | 13 647 950 | 2 988 146 | - 7 117 544 | 9 518 552 | 13 647 950 | |
| Vehicles | 3 478 705 | 548 425 | - 826 488 | 3 200 642 | 3 478 705 | |
| Tools | ||||||
| Fixtures and Fittings | 677 072 | - 687 341 | - 10 269 | 677 072 | ||
| Other tangible assets | ||||||
| 25 116 438 | 4 388 345 | - 8 689 459 | 20 815 324 | 25 116 438 | ||
| Carrying amount | 75 156 073 | - 3 661 414 | - 9 718 455 | 61 776 204 | 75 156 073 |
The amounts included in column Other changes refer to items of tangible assets that having reached the term of the respective lease contract, were acquired thereafter and, consequently transferred to own tangible assets.
During 2008, movements in intangible assets, accumulated depreciation and impairment losses were as follows:
| 2008 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Costs | Patents, Royalties And Other Rights |
Software | Other Intangible Assets | Assets Under Development |
Total intangible assets | ||||||||
| Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Total | |
| G ross cost: O pening balance C hanges in consolidation per im eter |
452 792 | 4 038 343 | 4 996 766 | 770 634 | 2 653 037 | 3 608 142 1 979 464 | 8 604 908 | 9 894 270 | 18 499 178 | ||||
| C apital expenditure | 4 788 016 | 809 974 | 4 788 016 | 809 974 | 5 597 990 | ||||||||
| Disposals | 1 068 180 | 1 068 180 | 1 068 180 | ||||||||||
| T ransfers and rec lass ifications | 5 964 | 13 256 | 6 094 182 | 508 748 | 7 689 | - 6 342 448 | - 496 185 | - 248 266 | 39 472 | - 208 794 | |||
| E xchange rate effec t | - 1 335 | - 23 890 | - 304 974 | - 232 250 | - 537 224 | - 25 225 | - 562 449 | ||||||
| Closing balance | 457 421 | 2 959 529 | 10 785 974 | 1 279 382 | 2 660 726 | 1 821 460 2 293 253 | 12 607 434 | 9 650 311 | 22 257 745 | ||||
| Ac cumulated am or tisation and impairment losses |
|||||||||||||
| O pening balance | 430 909 | 3 969 070 | 457 827 | 349 028 | 2 456 196 | 457 827 | 7 205 203 | 7 663 030 | |||||
| C hanges in consolidation per im eter | |||||||||||||
| Charge for the period | 24 083 | 6 344 | 2 559 970 | 465 276 | 92 051 | 2 559 970 | 587 754 | 3 147 724 | |||||
| Disposals | 1 068 186 | 1 068 186 | 1 068 186 | ||||||||||
| T ransfers | - 623 | - 525 | 97 062 | 1 148 | 97 062 | 97 062 | |||||||
| E xchange rate effec t | - 1 163 | - 22 736 | - 48 523 | - 121 | - 48 523 | - 24 020 | - 72 543 | ||||||
| Closing balance | 453 206 | 2 883 967 | 3 066 336 | 815 331 | 2 548 247 | 3 066 336 | 6 700 751 | 9 767 087 | |||||
| Carrying amount | 4 215 | 75 562 | 7 719 638 | 464 051 | 112 479 | 1 821 460 2 293 253 | 9 541 098 | 2 949 560 | 12 490 658 |
| 2007 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Costs | Patents, Royalties And Other Rights |
Software | Other Intangible Assets | Assets Under Development |
Total intangible assets | ||||||||
| Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Total | |
| G ross cost: | |||||||||||||
| O pening balance | 803 599 | 4 051 626 | 64 295 | 223 951 | 1 655 526 | 7 689 | 13 258 | 71 984 6 747 960 | 6 819 944 | ||||
| C hanges in consolidation per im eter | 25 | 642 755 | 642 780 | 642 780 | |||||||||
| C apital expenditure | 8 368 849 2 514 727 | 8 368 849 2 514 727 | 10 883 576 | ||||||||||
| Disposals | 3 726 | 3 726 | 3 726 | ||||||||||
| T ransfers and rec lass ifications | - 350 297 | - 25 | 4 932 415 | 546 683 | 354 756 | - 4 713 180 | - 548 521 | 219 235 | 2 596 | 221 831 | |||
| E xchange rate effec t | - 510 | - 9 557 | 56 | - 55 216 | - 55 160 | - 10 067 | - 65 227 | ||||||
| Closing balance | 452 792 | 4 038 343 | 4 996 766 | 770 634 | 2 653 037 | 3 608 142 1 979 464 | 8 604 908 9 894 270 | 18 499 178 | |||||
| Ac cumulated am or tisation and impairment losses |
|||||||||||||
| O pening balance | 417 423 | 3 950 907 | 61 971 | 223 951 | 1 655 526 | 61 971 6 247 807 | 6 309 778 | ||||||
| C hanges in consolidation per im eter | 25 | 633 555 | 633 580 | 633 580 | |||||||||
| Charge for the period | 13 846 | 32 018 | 395 856 | 125 021 | 165 758 | 395 856 | 336 643 | 732 499 | |||||
| Disposals | 3 726 | 3 726 | 3 726 | ||||||||||
| T ransfers | - 25 | - 25 | - 25 | ||||||||||
| E xchange rate effec t | - 360 | - 10 129 | 56 | 1 357 | - 9 076 | - 9 076 | |||||||
| Closing balance | 430 909 | 3 969 070 | 457 827 | 349 028 | 2 456 196 | 457 827 7 205 203 | 7 663 030 | ||||||
| Carrying amount | 21 883 | 69 273 | 4 538 939 | 421 606 | 196 841 | 3 608 142 1 979 464 | 8 147 081 2 689 067 | 10 836 148 |
During 2008, movements in investment properties, accumulated depreciation and impairment losses were as follows:
| 2008 | 2007 | |||||||
|---|---|---|---|---|---|---|---|---|
| Cost | Under constrution | Total | Cost | Under constrution | Total | |||
| Gross cost: | ||||||||
| Opening balance Changes to consolidation perimeter |
8 788 398 | 8 788 398 | 8 788 398 | 8 788 398 | ||||
| Increase Disposals Transfers |
14 400 | 14 400 | ||||||
| Exchange rate effect | ||||||||
| Closing balance | 8 773 998 | 8 773 998 | 8 788 398 | 8 788 398 | ||||
| Accumulated depreciations and impairment losses: |
||||||||
| Opening balance Changes to consolidation perimeter |
518 366 | 518 366 | 377 711 | 377 711 | ||||
| Charge for the period Disposals Transfers |
140 656 | 140 656 | 140 655 | 140 655 | ||||
| Exchange rate effect | ||||||||
| Closing balance | 659 022 | 659 022 | 518 366 | 518 366 | ||||
| Carrying amount | 8 114 976 | 8 114 976 | 8 270 032 | 8 270 032 |
During 2008 and 2007, movements in goodwill arising on consolidation, accumulated depreciation and impairment losses were as follows:
| Goodwill | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| Gross value: | ||||
| Opening balance | 100 086 856 | 51 105 175 | ||
| New companies | ||||
| Increases | 11 571 386 | 49 828 568 | ||
| Decreases | 3 076 276 | |||
| Transfers and write-offs | ||||
| Currency translation | -4 770 328 | - 846 888 | ||
| Closing balance | 103 811 638 | 100 086 856 | ||
| Accumulated impairment losses: | ||||
| Closing balance |
Increase in Goodwill in the period refers to the acquisition as from 1 July 2008 of all shares of Tafibras, SA that were held by third parties until then (note 5). Taking into consideration that this subsidiary already was controlled by the Group, the aforementioned acquisition is not a business combination under the terms of IFRS 3.
Goodwill is not amortised. Impairment tests on goodwill are performed on a yearly basis.
At 31 December 2008 and 31 December 2007 deferred tax assets and liabilities were detailed according to underlying temporary differences as follows:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | |
| Harmonisation adjusments | 59 897 966 | 58 763 486 | ||
| Provisions not allowed for tax purposes | 3 377 394 | 4 397 809 | ||
| Impairment of Assets | 2 588 090 | 2 143 125 | ||
| Derecognized intangible assets | 600 | 4 548 | ||
| Derecognized tangible assets | 186 174 | 209 358 | ||
| Derecognized deferred costs | 177 647 | 193 609 | ||
| Valuation of hedging derivatives | 108 820 | 141 766 | ||
| Revaluation of tangible assets | 3 044 798 | 3 295 958 | ||
| Tax losses carried forward | 47 547 072 | 41 497 076 | ||
| Others | 18 461 | 6 959 598 | 7 908 787 | |
| 53 985 797 | 48 605 752 | 69 902 362 | 69 968 231 |
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Opening balance | 48 605 752 | 60 007 308 | 69 968 231 | 57 635 679 |
| Impact on results: | ||||
| Harmonisation adjusments | 9 817 199 | 8 581 750 | ||
| Changes in provisions not allowed for tax purposes | - 177 842 | - 6 567 788 | ||
| Impairment of Assets | 504 928 | 385 567 | ||
| Derecognized intangible assets | - 3 947 | - 9 362 | ||
| Derecognized tangible assets | - 23 184 | - 31 172 | ||
| Derecognized deferred costs | - 15 962 | - 38 985 | ||
| Valuation of hedging derivatives | 65 101 | - 481 985 | ||
| Revaluation of tangible assets | - 251 160 | - 322 798 | ||
| Tax losses carried forward | 9 658 708 | - 6 619 938 | ||
| Others | - 18 952 | 250 137 | 761 723 | 1 614 326 |
| 9 923 748 | - 12 566 440 | 10 327 762 | 9 391 293 | |
| Impact on reserves: | ||||
| Currency translation effect | - 4 543 703 | 1 164 884 | - 10 393 631 | 1 508 947 |
| - 4 543 703 | 1 164 884 | - 10 393 631 | 1 508 947 | |
| Impact of changes in the consolidation perimeter: Acquisitions |
1 432 312 | |||
| Closing balance | 53 985 797 | 48 605 752 | 69 902 362 | 69 968 231 |
In accordance with International Financial Reporting Standards / International Accounting Standards, on a yearly basis the Group performs an evaluation of the deferred tax asset relating to tax losses carried forward that was accounted for in previous years.
According to the estimation of taxable profit for the fiscal year 2008 and according to the tax return for the fiscal year 2007, tax losses carried forward and the corresponding deferred tax asset are detailed as follows:
| 31.12.2008 | 31.12.2007 | |||
|---|---|---|---|---|
| Limit date to be used | Tax loss carried forward | Deferred tax asset | Tax loss carried forward |
Deferred tax asset |
| 2008 | ||||
| 2009 | 378 636 | 94 659 | ||
| 2010 | 5 987 562 | 1 496 486 | 7 212 814 | 1 803 141 |
| 2011 | 161 732 | 40 433 | 161 732 | 40 433 |
| 2012 | 28 279 760 | 7 069 940 | 23 396 226 | 6 200 000 |
| 2013 | ||||
| 2014 | 9 053 703 | 2 263 426 | ||
| 2015 | ||||
| 2016 | ||||
| 2017 | 12 406 750 | 3 722 025 | 12 406 750 | 3 722 025 |
| 2018 | 3 740 985 | 1 122 296 | 3 740 985 | 1 122 296 |
| 2019 | 53 271 | 15 981 | 53 271 | 15 981 |
| 2020 | ||||
| 2021 | 13 906 977 | 4 172 093 | ||
| 2022 | ||||
| 2023 | ||||
| 2028 | 6 224 992 | 709 649 | ||
| 79 815 732 | 20 612 329 | 47 350 414 | 12 998 535 | |
| Without time limit | 98 602 904 | 26 934 743 | 105 772 167 | 28 498 541 |
| Total | 178 418 636 | 47 547 072 | 153 122 581 | 41 497 076 |
Furthermore, at 31 December 2008 and 31 December 2007, tax losses for which no deferred tax assets were recognised, are detailed as follows:
| 31.12.2008 | 31.12.2007 | |||
|---|---|---|---|---|
| Limit date to be used | Tax loss carried forward | Tax credit | Tax loss carried forward |
Tax credit |
| 2007 | 253 737 | 63 434 | ||
| 2008 | 3 240 690 | 810 306 | ||
| 2009 | 2 885 767 | 721 447 | ||
| 2010 | 56 788 | 14 197 | 4 378 441 | 1 096 699 |
| 2011 | 574 240 | 143 579 | ||
| 2012 | 15 239 574 | 3 809 894 | 26 516 598 | 7 019 513 |
| 2013 | 36 422 | 9 106 | 383 085 | 96 318 |
| 2014 | 18 491 424 | 5 547 428 | 32 967 957 | 9 890 469 |
| 2015 | 36 775 | 11 033 | 49 | 17 |
| 2016 | 90 183 965 | 27 055 189 | 66 749 192 | 20 043 443 |
| 2017 | 66 975 963 | 20 092 789 | 51 545 728 | 15 690 466 |
| 2018 | 101 762 748 | 30 528 825 | 88 047 862 | 26 560 927 |
| 2019 | 9 095 614 | 2 728 684 | 5 354 629 | 1 677 123 |
| 2020 | 1 082 928 | 324 878 | 1 082 928 | 379 025 |
| 2021 | 19 416 189 | 5 824 857 | 19 416 189 | 5 855 105 |
| 2022 | 746 825 | 224 047 | ||
| 2023 | 20 424 468 | 6 127 340 | ||
| 343 549 683 | 102 298 267 | 303 397 092 | 90 047 871 | |
| Without time limit | 841 744 931 | 256 787 469 | 780 665 412 | 237 392 833 |
| Total | 1 185 294 614 | 359 085 736 | 1 084 062 504 | 327 440 705 |
Deferred tax assets are offset against deferred tax liabilities in situations where the company generating the related temporary differences is legally entitled to offset the recognised amounts and intends to settle on a net basis or else to realise the assets and settle the liability simultaneously.
At 31 December 2008 and 31 December 2007 details of Other non current assets on the Consolidated Balance sheet were as follows:
| 31.12.2008 | 31.12.2007 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Loans granted to associated companies Other loans granted |
10 931 182 | 10 931 182 | 14 132 899 149 962 |
14 132 899 130 114 |
19 848 | |
| Trade accounts receivable and other debtors | 1 744 271 | 1 744 271 | 1 558 542 | 1 558 542 | ||
| Financial Instruments | 12 675 453 | 10 931 182 | 1 744 271 | 15 841 403 | 14 263 013 | 1 578 390 |
| Others | 6 739 | 6 739 | 54 341 | 54 341 | ||
| Assets out of scope of IFRS 7 | 6 739 | 6 739 | 54 341 | 54 341 | ||
| Total | 12 682 192 | 10 931 182 | 1 751 010 | 15 895 744 | 14 263 013 | 1 632 731 |
| AGEING OF NON CURRENT TRADE DEBTORS AND OTHER DEBTORS |
|||
|---|---|---|---|
| 31.12.2008 | 31.12.2007 | ||
| Not due | 1 115 647 | 654 120 | |
| Due and not impaired | |||
| < 6 months | 167 337 | 6 592 | |
| 6 - 12 months | 136 | 150 | |
| > 1 year | 461 151 | 897 679 | |
| 628 624 | 904 422 | ||
| Due and impaired | |||
| < 6 months | |||
| 6 - 12 months | |||
| > 1 year | |||
| Total | 1 744 271 | 1 558 542 |
At 31 December 2008 and 31 December 2007, details of Inventories on the Consolidated Balance Sheet were as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Merchandise | 11 241 939 | 12 792 958 |
| Finished and intermediate products | 76 792 137 | 106 051 119 |
| Products and working in progress | 1 610 524 | 1 725 817 |
| Raw Materials and Consumables | 120 336 784 | 149 733 708 |
| 209 981 384 | 270 303 602 | |
| Accumulated impairment losses on inventories (Note 33) | 17 098 955 | 12 588 275 |
| 192 882 429 | 257 715 327 |
At 31 December 2008 and 31 December 2007, details of Trade Debtors on the Consolidated Balance Sheet were as follows:
| 31.12.2008 | 31.12.2007 | ||||||
|---|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | ||
| Trade Debtors | 216 567 800 | 16 742 197 | 199 825 603 | 276 859 705 | 16 719 681 | 260 140 024 | |
| 31.12.2008 | 31.12.2007 | ||||||
| Not due | 155,725,848 | 203,431,697 | |||||
| Due and not impaired | |||||||
| 0 - 30 days | 17,747,807 | 34,481,114 | |||||
| 30 - 90 days | 9,483,134 | 10,596,124 | |||||
| ' + 90 days | 5,773,798 | 9,347,670 | |||||
| 33,004,739 | 54,424,908 | ||||||
| Due and impaired | |||||||
| 0 - 90 days | 11,860,656 | 4,590,668 | |||||
| 90 - 180 days | 2,060,788 | 613,443 | |||||
| 180 - 360 days | 1,439,043 | 2,844,742 | |||||
| + 360 days | 12,476,726 | 10,954,247 | |||||
| 27,837,213 | 19,003,100 | ||||||
| Total | 216,567,800 | 276,859,705 |
At 31 December 2008 and 31 December 2007, details of Other current debtors on the Consolidated Balance Sheet were as follows:
| 31.12.2008 | 31.12.2007 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Other debtors Advances to trade creditors |
14 658 608 388 730 |
19 628 | 14 638 980 388 730 |
20 402 117 391 711 |
19 628 | 20 382 489 391 711 |
| Goup companies | 17 441 | 17 441 | 705 903 | 422 876 | 283 027 | |
| Financial Instruments | 15 064 779 | 19 628 | 15 045 151 | 21 499 731 | 442 504 | 21 057 227 |
| Outros Devedores | 373 523 | 373 523 | 782 239 | 782 239 | ||
| Assets out of scope of IFRS 7 | 373 523 | 373 523 | 782 239 | 782 239 | ||
| Total | 15 438 302 | 19 628 | 15 418 674 | 22 281 970 | 442 504 | 21 839 466 |
| AGEING OF OTHER DEBTORS | AGEING OF ADVANCES TO TRADE CREDITORS |
AGEING OF GROUP COMPANIES | |||||
|---|---|---|---|---|---|---|---|
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | ||
| Not due | |||||||
| 125 791 | 810 337 | 309 298 | 54 520 | 564 | 283 027 | ||
| Due and not impaired | |||||||
| 0 - 30 days | 14 098 375 | 14 467 597 | 53 141 | 48 217 | 16 877 | ||
| 30 - 90 days | 99 726 | 136 347 | 8 039 | 81 234 | |||
| + 90 days | 334 716 | 4 934 015 | 18 252 | 207 740 | |||
| 14 532 817 | 19 537 959 | 79 432 | 337 191 | 16 877 | |||
| Due and impaired | |||||||
| 0 - 90 days | 53 821 | ||||||
| 90 - 180 days | |||||||
| 180 - 360 days | |||||||
| + 360 days | 422 876 | ||||||
| 53 821 | 422 876 | ||||||
| Total | 14 658 608 | 20 402 117 | 388 730 | 391 711 | 17 441 | 705 903 |
At 31 December 2008 and 31 December 2007, details of Other current assets on the Consolidated Balance Sheet were as follows:
| 31.12.2008 | 31.12.2007 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Derivatives instruments Financial Instruments |
16 521 457 16 521 457 |
16 521 457 16 521 457 |
5 183 887 5 183 887 |
5 183 887 5 183 887 |
||
| Accrued revenue Deferred Costs Others Assets out of scope of IFRS 7 |
5 441 863 5 535 277 30 815 11 007 955 |
5 441 863 5 535 277 30 815 11 007 955 |
2 583 923 6 996 291 14 214 9 594 428 |
2 583 923 6 996 291 14 214 9 594 428 |
||
| Total | 27 529 412 | 27 529 412 | 14 778 315 | 14 778 315 |
At 31 December 2008 and 31 December 2007, details of State and Other Public Entities on the Consolidated Balance Sheet were as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| State and other public entities: | ||
| Income Tax | 11 385 261 | 7 556 685 |
| Value Added Tax | 10 503 748 | 15 994 345 |
| Social Security Contribution | 90 016 | 12 872 |
| Others | 8 856 884 | 6 590 344 |
| 30 835 909 | 30 154 246 | |
At 31 December 2008 and 31 December 2007, the detail of Cash and Cash Equivalents was as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Cash at hand | 98 186 | 120 588 |
| Bank deposits | 8 040 212 | 30 644 304 |
| Treasury applications | 57 611 859 | 35 118 656 |
| Cash and cash equivalents on the balance sheet | 65 750 257 | 65 883 548 |
| Bank overdrafts | 48 361 481 | 16 728 792 |
| Cash and cash equivalents on the statement of cash flows |
17 388 776 | 49 154 756 |
Bank overdrafts include credit balances on current accounts, and are included as Bank loans under current liabilities on the consolidated balance sheet's (note 25).
At 31 December 2008, the item Treasury applications included the amount of 15 993 441 euros which related to the securitization facility described on note 25.3. The item's remaining amount was composed of several very short term treasury applications at banks, with low risk (bank risk) and returns aligned with existing market applications with similar maturity and risk profiles.
At 31 December 2008 and 2007, Sonae Indústria's Share Capital was fully underwritten and paid and was comprised of 140 000 000 common shares, not entitled to fixed income, with a face value of 5 euros per share. At this date, neither the company nor any of its affiliates held any shares in the company.
The caption Legal reserve includes the parent company's reserve set up in accordance with articles 295 and 296 of the Company Law.
Reserves set up by the parent company and by its subsidiaries in accordance with statutory rules or by proposition of the respective Board of Directors approved in the General Shareholders' Meeting;
Currency translation reserves resulting from the conversion to Euros of subsidiaries' financial statements which are expressed in a different functional currency;
Prior periods' net profits pending application;
Consolidation adjustments to any of the aforementioned components.
Sonae Indústria, SGPS, SA is included in the consolidation perimeter of its ultimate parent company, Efanor Investimentos, SGPS, SA.
Changes to this item during 2008 and 2007 were as follows:
| 2008 | 2007 | |
|---|---|---|
| Opening balance | 33 742 417 | 28 100 792 |
| Decrease / (increase) in ownership percentage on consolidated companies | -36 492 529 | - 7 314 987 |
| Change resulting from currency translation | 1 651 803 | 2 033 338 |
| Net profit for the period attributed to minority interests | 4 571 038 | 10 817 464 |
| Others | - 400 038 | 105 810 |
| Closing balance | 3 072 691 | 33 742 417 |
Decrease of Minority interests resulted from the acquisition of all shares of the subsidiary Tafibras, S. A. which were previously held by third parties.
As at 31 December 2008 and 31 December 2007 Sonae Indústria had the following outstanding loans:
| 31.12.2008 | |||||||
|---|---|---|---|---|---|---|---|
| Amortised cost | Nominal value | Fair value | |||||
| Current | Non current | Current | Non current | adjustment | |||
| Bank loans | 105 577 761 | 268 056 483 | 105 577 761 | 268 056 483 | 970 201 | ||
| Debentures | 80 000 000 | 302 147 961 | 80 000 000 | 305 000 000 | |||
| Obligations under finance leases | 3 535 578 | 47 949 761 | 3 535 578 | 47 949 761 | -1 242 400 | ||
| Other loans | 301 760 | 148 419 100 | 301 760 | 148 419 100 | |||
| Gross debt | 189 415 099 | 766 573 305 | 189 415 099 | 769 425 344 | - 272 199 | ||
| Investment | |||||||
| Cash and cash equivalent in balance sheet | 65 750 257 | 65 750 257 | |||||
| Net debt | 123 664 842 | 766 573 305 | 123 664 841 | 769 425 344 | - 272 199 | ||
| Total net debt | 890 238 147 | 893 090 185 |
| 31.12.2007 | ||||||
|---|---|---|---|---|---|---|
| Amortised cost | Nominal value | Fair value adjustment | ||||
| Current | Non current | Current | Non current | Publlicado | Reexpresso | |
| Bank loans | 55 605 328 | 187 543 520 | 55 605 328 | 187 543 520 | -1 829 917 | -1 829 917 |
| Debentures Obligations under finance leases |
100 000 000 3 465 063 |
431 336 457 51 100 454 |
100 000 000 3 465 063 |
435 000 000 51 100 454 |
9 888 477 | 3 488 023 |
| Other loans | 504 957 | 34 506 252 | 504 957 | 34 506 252 | ||
| Gross debt | 159 575 348 | 704 486 683 | 159 575 348 | 708 150 226 | 8 058 560 | 1 658 106 |
| Investment | ||||||
| Cash and cash equivalent in balance sheet | 65 883 548 | 65 883 548 | ||||
| Net debt | 93 691 800 | 704 486 683 | 93 691 800 | 708 150 226 | 8 058 560 | 1 658 106 |
| Total net debt | 798 178 483 | 801 842 026 |
The column "Fair value adjustment" includes the adjustments which would have to be made if the corresponding items were to be stated at fair value.
The aforementioned loans do not include loans granted by related parties.
The bank loans and overdrafts presented in the table in note 25. are included in "Long Term Bank Loans – net of the Short Term portion", "Short Term portion of Long Term Bank Loans", and "Short Term Bank Loans" on the Consolidated Balance Sheet and their composition as at 31 December 2008 are detailed in the following table:
| 31.12.2008 | |||||
|---|---|---|---|---|---|
| Non current | Current | ||||
| Company | Short term portion |
Short term | Bank overdrafts | Total | |
| Sonae Indústria-SGPS,SA | 194 375 000 | 6 250 000 | 20 000 000 | 220 625 000 | |
| Glunz AG | 48 706 700 | 15 089 200 | 5 351 391 | 69 147 291 | |
| Sonae Novobord (Pty) Ltd | 21 577 825 | 5 784 974 | 757 192 | 28 119 991 | |
| Tafisa-Tableros de Fibras, SA | 2 000 000 | 15 518 005 | 17 518 005 | ||
| Taiber,Tableros Aglomerados Ibéricos,SL | 15 697 279 | 15 697 279 | |||
| Isoroy SAS | 4 794 651 | 4 794 651 | |||
| Sonae UK,Ltd. | 2 449 697 | 791 576 | 3 241 273 | ||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 3 375 000 | 330 802 | 3 705 802 | ||
| Tableros Tradema,S.L. | 2 303 083 | 479 461 | 77 230 | 2 859 774 | |
| Others | 1 093 875 | 528 874 | 928 272 | 5 374 157 | 7 925 178 |
| 268 056 483 | 31 507 509 | 25 708 771 | 48 361 481 | 373 634 244 |
a) During 2002 and 2003, Glunz AG., contracted a loan with the European Investment Bank for 119 000 000 Euros (made up by two components). The loan pays interest semi-annually, indexed to a fixed rate of 3,64%, and will be redeemed in 16 consecutive and variable semiannual instalments, the first of which was made in June 2005. At 31 December 2008, outstanding principal was 63 795 000 euros.
b) During the first half of 2005, a loan contracted in 2001 by Sonae SGPS SA with the European Investment Bank, of 50 000 000 Euros, was transferred to Sonae Indústria SGPS, SA. The loan pays interest quarterly, at market rates, and will be redeemed in 16 consecutive semi-annual instalments. At 31 December 2008, the principal outstanding was 15 625 000 euros;
c) On 25 January 2006 Sonae Indústria SGPS, S. A. contracted commercial paper with several financial institutions, subsequently amended on 19 March 2008. This programme has a maximum nominal amount of 190 000 000 euros and will mature on 27 January 2016. At 31 December 2008, commercial paper issued amounted to 155 000 000 euros;
d) On 10 March 2008 Sonae Indústria SGPS, S. A. contracted a new commercial paper programme with a maximum nominal amount of 50 000 000 euros. The programme will mature on 25 March 2010. At 31 December 2008, commercial paper had been issued for the programme's full amount;
e) Sonae Novoboard raised ZAR 200 000 000 in debt from Firstrand Bank. The facility was issued at a fixed rate of 13.18%, interest is payable semi-annually, and principal is repaid in 14 consecutive and variable instalments, the first of which occurred on 30 June 2003. As at 31 December 2008, the principal outstanding was 4 976 081 euros;
f) During the first half of 2007, Sonae Novobord together with Sonae Indústria, SGPS, S. A. contracted a loan with the European Investment Bank, denominated in ZAR, up to a maximum principal of 25 000 000 Euros. The loan pays interest at a market rate and will be redeemed in 14 consecutive and equal semi-annual instalments, the first of which will be made in September 2010. At 31 December 2008, outstanding principal was 16 769 919 euros.
g) During first half 2007 Sonae Novobord contracted a loan with International Finance Corporation (IFC) of 71 800 000 ZAR. The loan pays interest at a market rate and will be redeemed in 16 consecutive and equal semi-annual instalments, the first of which will be made in June 2009. At 31 December 2008, outstanding principal was 5 494 884 euros.
h) Sonae UK signed a loan contract with the European Investment Bank for GBP 35 000 000. This loan pays interest at market rates and is redeemable in 15 consecutive and equal semi-annual instalments, the first of which matured in June 2002. As at 31 December 2008, the principal outstanding was 2 449 693 euros;
i) In 2000, Sonae Indústria – Produção e Comercialização de Derivados de Madeira, SA contracted a 27 000 000 euro loan with the European Investment Bank. The loan pays interest semi-annually in arrears, at a fixed rate of 3.16%, and the principal is repaid in 16 consecutive semi-annual instalments. As at 31 December 2008, the principal outstanding was 3 375 000 euros;
a) Sonae Indústria 2004 bonds, issued on 15 October 2004, with a principal of 80 000 000 euros. Principal will be paid in a single bullet payment 5 years after issue date. Interest is paid semi-annually in arrears on 15 April and 15 October;
b) Sonae Indústria 2005/2013 bonds, issued on 31 March 2005, with a principal amount of 55 000 000 euros, and a bullet repayment 8 years after issue date. Interest is paid semiannually in arrears on 31 March and 30 September;
c) Sonae Indústria 2005/2008 bonds, issued on 27 April 2005, with a principal amount of 100 000 000 euros and a bullet repayment 3 years after issue date. Interest is paid semi-annually in arrears on 27 April and 27 October. This loan was fully repaid on 27 October 2008;
d) Sonae Indústria 2005/2010 bonds, issued on 27 April 2005, with a principal amount of 150 000 000 euros and a bullet repayment 5 years after issue date. Sonae Indústria may anticipate repayment, either partially or for the full amount of principal outstanding, at any interest payment date after April 2008, inclusive. Interest is paid semi-annually in arrears on 27 April and 27 October. This loan was repaid in anticipation, for its full amount, on 27 October 2008;
e) Sonae Indústria 2006/2014 bonds, issued on 28 March 2006, with a principal amount of 50 000 000 euros and a bullet repayment 8 years after issue date. Interest is paid semi annually in arrears on 28 March and 28 September;
f) Sonae Indústria 2006/2013 bonds, issued on 3 July 2006, with a principal amount of 50 000 000 euros and a bullet repayment 7 years after issue date. Sonae Indústria may anticipate repayment, either partially or for the full amount of principal outstanding, at any interest payment date after July 2011, inclusive. Interest is paid semi-annually in arrears on 3 January and 3 July;
g) Sonae Indústria 2006/2014 bonds, issued on 2 August 2006, with a principal amount of 50 000 000 euros and a bullet repayment 8 years after issue date. Interest is paid semi annually in arrears on 2 February and 2 August;
h) Sonae Indústria 2008/2013 bonds, issued on 7 January 2008, with a principal amount of 50 000 000 euros and a bullet repayment 5 years after issue date. Sonae Indústria may anticipate repayment, either partially or for the full amount of principal outstanding, at 6th coupon payment date (7 January 2011). Interest is paid semi-annually in arrears on 7 January and 7 July;
i) Sonae Indústria 2008/2012 bonds, issued on 28 April 2008, with a principal amount of 50 000 000 euros and a bullet repayment 4 years after issue date. Interest is paid semi-annually in arrears on 28 April and 28 October.
The aforementioned bonds pay interest calculated at Euribor 6 months plus a spread ranging from 0.6% to 0.875%.
Other loans, as detailed in the table in note 26, are included in the consolidated Balance Sheet, in "Other Financing" in Current Liabilities and Non-Current Liabilities, and had the following composition on 31 December 2008:
| 31.12.2008 | ||||||
|---|---|---|---|---|---|---|
| Company | Non current | Current | ||||
| Securitization | Others | Others | ||||
| Glunz AG | 49 874 895 | 60 131 | ||||
| Isoroy SAS | 41 672 484 | |||||
| Tableros Tradema,S.L. | 32 750 144 | |||||
| Sonae Tafibra Benelux, BV | 10 119 326 | |||||
| Sonae UK,Ltd. | 9 569 294 | |||||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 2 185 504 | |||||
| Spanboard Products,Ltd | 2 012 904 | 7 080 | ||||
| Others | 234 549 | 234 549 | ||||
| 145 999 047 | 2 420 053 | 301 760 |
During 2004, Sonae Indústra SGPS SA together with its subsidiaries Soane Indústria – Produção e Comercialização de Madeira, S.A (then Sonae Tafibra – Gestão Comercial S.A), Tableros Tradema S.L (then Tafibra, Tableros Aglomerados e de Fibras, A.I.E), Isoroy S.A.S (then Isoroy Diffusion S.N.C.), Glunz AG, Sonae Tafibra Benelux, B.V., Sonae (UK) Limited and Spanboard Products Limited, signed a Securitization facility of up to 120 000 000 euros, later increased to 150 000 000 euros (2006) and 175 000 000 (2007), with ABN Amro Bank, NV and TAPCO – Tulip Asset Purchase Company BV. This facility, which initially matured in
March 2009, was rescheduled to March 2012. As at 31 December 2008, the principal outstanding was 145 999 047 euros.
Trade debtors securitized were kept on the consolidated balance sheet as the criteria set out in IAS 39 for their derecognition were not fully met, namely the whole risks related to the securitized assets were not completely transferred.
Details of finance leases creditors at 31 December 2008 and at 31 December 2007 are as follows:
| Minimum | Present value | |||
|---|---|---|---|---|
| lease payments | of minimum lease payments | |||
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | |
| 2008 | 8 680 765 | 3 465 063 | ||
| 2009 | 8 674 278 | 8 521 200 | 3 535 578 | 3 585 532 |
| 2010 | 8 411 960 | 8 314 972 | 3 807 374 | 3 677 724 |
| 2011 | 8 170 473 | 8 105 780 | 3 915 257 | 3 782 999 |
| 2012 | 8 199 803 | 8 060 689 | 4 229 274 | 4 071 641 |
| 2013 | 8 130 679 | 4 536 945 | ||
| after 2013 (2012) | 36 589 895 | 44 862 204 | 31 460 911 | 35 982 558 |
| 78 177 088 | 86 545 610 | 51 485 339 | 54 565 517 | |
| Lease creditors - current | 3 535 578 | 3 465 063 | ||
| Lease creditors - non current | 47 949 761 | 51 100 454 |
The fair value of derivative instruments is stated as follows:
| Other current assets (note 20) |
(note 32) | Other current liabilities | Other non current liabilities (note 28) |
|||
|---|---|---|---|---|---|---|
| 31.12.08 | 31.12.07 | 31.12.08 | 31.12.07 | 31.12.08 | 31.12.07 | |
| Derivatives at fair value through profit or loss | 16 305 348 | 5 047 080 | 6 244 352 | 942 442 | 9 230 | 216 078 |
| Derivatives at fair value through reserves | 216 109 | 136 807 | 1 168 770 | |||
| 16 521 457 | 5 183 887 | 7 413 122 | 942 442 | 9 230 | 216 078 |
They are made up by exchange rate derivatives (forwards) over which no hedge accounting was applied, and by interest rate derivatives (swaps) which consist on fair value hedges. Gains and losses resulting from changes in fair value are stated under the item Adjustments to fair value of financial instruments at fair value through profit or loss (note 38), which corresponds to a net loss of 26 196 426 euros.
They are made up by interest rate derivatives, mainly swaps, which consist on cash flow hedges. Changes in the fair value of these financial instruments were recorded under Hedging reserves, included in the caption Reserves and retained earning on the balance sheet, for the amount of -1 160 314 euros. No amounts related to instruments which matured in 2008 were transferred from reserves to profit or loss.
The liquidity risk described on note 2.23., c), related to gross debt referred to on note 26, can be analysed as follows:
| Maturity of Gross Debt (note 25) |
Interests | Total | |
|---|---|---|---|
| 2009 | 189 415 099 | 34 121 853 | 223 536 952 |
| 2010 | 113 832 357 | 26 676 947 | 140 509 304 |
| 2011 | 102 994 020 | 32 143 767 | 135 137 787 |
| 2012 | 246 785 276 | 25 627 656 | 272 412 932 |
| 2013 | 163 972 282 | 15 784 015 | 179 756 297 |
| 2014 | 108 208 922 | 8 874 153 | 117 083 075 |
| >2014 | 33 632 487 | 9 106 278 | 42 738 765 |
| 958 840 443 | 152 334 669 | 1 111 175 112 |
The calculation of interest in the previous table was based on interest rates at 31 December 2008 applicable to each item of debt. Gross debt maturing in 2009 includes scheduled repayment of debt along with the repayment of debt as at end 2008 maturing within less than one year (although some credit limits might be rolled over).
The analysis of interest rate risk, described on note 2.23., b), i), consisted on calculating the way net profit before tax would have been impacted if there would have been a change of +0.75 or - 0.75 percentage points in actual 2008 interest rates.
Considering Euribor 6 months as a reference indicator for interest rates of Euro, a change of 0.75 percentage points corresponds to 1,4 times the standard deviation of that variable in 2008.
| Sensitivity Analysis | ||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | |||||
| "Notional" | Effect in Profit and Loss (Euros) |
"Notional" | Effect in Profit and Loss (Euros) |
|||
| (Euros) | 0.75% | -0.75% | (Euros) | 0.75% | -0.75% | |
| Gross Debt excluding banks overdrafts |
||||||
| EUR | - 869 203 094 | - 4 867 321 | 4 867 321 | - 779 188 507 | - 4 204 429 | 4 204 429 |
| GBP | - 14 023 618 | - 113 517 | 113 517 | - 28 470 911 | - 232 060 | 232 060 |
| ZAR | - 27 240 884 | - 152 045 | 152 045 | - 43 337 364 | - 214 466 | 214 466 |
| - 910 467 596 | - 5 132 883 | 5 132 883 | - 850 996 782 | - 4 650 955 | 4 650 955 | |
| Financial Derivatives | ||||||
| EUR | 255 000 000 | 669 311 | - 669 311 | 50 000 000 | ||
| ZAR | 5 008 562 | - 26 297 | 26 297 | 11 370 573 | - 50 299 | 50 299 |
| 260 008 562 | 643 014 | - 643 014 | 61 370 573 | - 50 299 | 50 299 | |
| Treasury applications | ||||||
| EUR | 44 183 441 | 146 352 | - 146 352 | 18 481 066 | 290 269 | - 290 269 |
| BRL | 13 934 946 | 181 466 | - 181 466 | 16 637 589 | 24 056 | - 24 056 |
| 58 118 387 | 327 818 | - 327 818 | 35 118 655 | 314 325 | - 314 325 | |
| - 4 162 051 | 4 162 051 | - 4 386 929 | 4 386 929 |
With respect to exchange rate risk, described on note 2.23., b), ii), the following calculations were performed:
1.1. – Other non current assets and Other trade debtors net of Other non current liabilities and Other current liabilities
| Foreign currency amount | EUR equivalent | 2008 | 2007 | |||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | -1% | +1% | -1% | +1% | |
| CAD | 100 434 904 | 113 800 000 | 59 085 854 | 78 759 842 | - 590 859 | 590 859 | - 787 598 | 787 598 |
| GBP ZAR |
21 668 910 366 512 311 |
16 271 830 202 820 925 |
22 749 539 28 049 187 |
22 188 430 20 221 246 |
- 227 495 - 280 492 |
227 495 280 492 |
- 221 884 - 202 212 |
221 884 202 212 |
The remaining financial assets and liabilities do not include any balances denominated in currencies other than the functional currency of the respective subsidiary which may represent any relevant exchange rate risks.
| Sensitivity Analysis | ||||||||
|---|---|---|---|---|---|---|---|---|
| Foreign currency amount | EUR equivalent | 2008 | 2007 | |||||
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | -1% | +1% | -1% | +1% | |
| CAD | 103 847 243 | 118 665 909 | 61 106 853 | 82 127 420 | 611 069 | - 611 069 | 821 274 | - 821 274 |
| GBP | 22 106 219 | 17 721 904 | 21 637 834 | 24 165 765 | 216 378 | - 216 378 | 241 658 | - 241 658 |
| ZAR | 414 799 722 | 228 076 717 | 32 770 847 | 22 739 249 | 327 708 | - 327 708 | 227 392 | - 227 392 |
At 31 December 2008 and 31 December 2007, details of Other non current liabilities were as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Derivative instruments | 9 230 | 216 078 |
| Goup companies | 72 604 | 72 604 |
| Other creditors | 434 401 | 1 046 562 |
| Financial instruments | 516 235 | 1 335 244 |
| State and other public entities | 44 122 456 | 45 800 911 |
| Other creditors | 74 102 387 | 77 615 354 |
| Liabilities out of scope of IFRS 7 | 118 224 843 | 123 416 265 |
| Total | 118 741 078 | 124 751 509 |
| 31.12.2008 | 2009 | 2010 | 2011 | 2012 | 2013 | After 2013 | Total |
|---|---|---|---|---|---|---|---|
| Maturity of Group Companies | 72 604 | 72 604 | |||||
| Maturity of Other non current creditors | 434 401 | 434 401 | |||||
| 434 401 | 72 604 | 507 005 | |||||
| 31.12.2007 | 2008 | 2009 | 2010 | 2011 | 2012 | After 2012 | Total |
| Maturity of Group Companies | 72 604 | 72 604 | |||||
| Maturity of Other non current creditors | 619 674 | 426 888 | 1 046 562 | ||||
| 619 674 | 426 888 | 72 604 | 1 119 166 |
The item State and other public entities – Others includes the owing amount of ICMS – Tax on Trade of Goods and Services Rendered to be paid by the subsidiary Tafisa Brasil in accordance with the terms of the agreement celebrated with the Government of the State of
Paraná (Brazil), which considers postponing 90% of the payment of each parcel of tax for a twelve-year period, to be updated yearly according to 10% of FCA index.
Other creditors include 74 102 387 euros relating to deferred income-investment subventions.
Various Group companies assumed the liability of giving their employees cash contributions to pension plans for old age, incapacity, early retirement, survival and post retirement medical care. These contributions are determined as a percentage that increases as a result of the number of years that the employee has worked at the company, and which is applied to a salary table that is negotiated on a yearly basis and correspond to defined benefits plans.
Current liabilities associated with past years of service are evaluated every year through actuarial studies and based on the "Projected Unit Credit" methodology. Actuarial assumptions employed on the last study prepared at 31 December 2008 were:
| South Africa | Germany | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31.12.2008 31.12.2007 | Glunz AG | GHP GmbH | Tool GmbH | ||||||
| 31.12.2008 31.12.2007 | 31.12.2008 31.12.2007 | 31.12.2008 31.12.2007 | |||||||
| Mortality table | PA(90) | PA(90) | Richttafeln 2005 G |
Richttafeln 2005 G |
Richttafeln 2005 G |
Richttafeln 2005 G |
Richttafeln 2005 G |
Richttafeln 2005 G |
|
| Salary growth rate | 7,10% | 7,1% | 2,00% | 2,0% | 0,00% | 0,00% | 0,00% | 0,00% | |
| Return on fund | 8,60% | 9,0% | 4,10% | 4,0% | 4,10% | 4,10% | 4,10% | 4,10% | |
| Actuarial tecnical rate | 8,60% | 9,0% | 5,60% | 4,75% | 5,60% | 4,75% | 5,50% | 5,6% | |
| Pension growth rate | 6,10% | 6,1% | 1,50% | 1,5% | 1,50% | 1,50% | 1,50% | 1,50% |
| France | Portugal | ||||
|---|---|---|---|---|---|
| 31.12.2008 31.12.2007 | 31.12.2008 31.12.2007 | ||||
| Mortality table | TPG 1993 | TPG 1993 | TV 88/90 | TV 88/90 | |
| Salary growth rate | 2,0% | 2,0% | 3,0% | 3,0% | |
| Return on fund | - | - | 6,0% | 6,0% | |
| Actuarial tecnical rate | 5,25% | 4,5% | 4,0% | 4,0% | |
| Pension growth rate | 2,0% | 2,0% | 0,0% | 0,0% |
In previous periods, pension funds and provisions for pension liabilities were created by various companies within the Group in the following countries:
The employees of Sonae Novobord (PTY) have the following benefit scheme:
Defined contribution plan composed of a number of assets that are managed by a third party. The Company is obliged to deliver the defined contributions. At 31 December 2008, no contributions were outstanding or unpaid.
Defined Benefit plan with a fund managed by a third party and calculated in accordance with International Accounting Standard 19 and based on actuarial studies performed by an independent party.
Post-Retirement Health Benefit scheme under which the Company will provide for 50% of eligible health expenses incurred after the employee's retirement.
In an actuarial study carried out on 31 December 2008, liabilities amounted to 46 733 999 ZAR (3 576 553 euros) covered by the market value of the fund of 34 130 001 ZAR (2 611 969 euros) and by a provision of 12 603 998 ZAR (964 584 euros), which is recorded as a Pension Liability in Non Current Liabilities on the Consolidated Balance Sheet.
Glunz AG has a defined benefit plan and it has constituted a fund. The plan is calculated according to International Accounting Standard 19, and based on actuarial studies carried out by an independent party. The company has recorded a provision for Pension Liabilities in Non Current Liabilities of 18 633 337 euros, which fully provides for the liabilities calculated by the actuarial study reported to 31 December 2008. On the same date, the value of the fund constituted at the end of the year was 313 448 euros.
GHP GmbH has a defined benefit plan and it has constituted a fund. The plan is calculated according to International Accounting Standard 19. In an actuarial study dated 31 December 2008, liabilities amounted to 1 282 103 euros and were covered by the fund and by provisions for Pension Liabilities in Non Current Liabilities of 349 188 euros and932 915 euros respectively.
Tool GmbH has a defined benefit plan and it has constituted a fund. The plan is calculated according to International Accounting Standard 19. In an actuarial report carried out at 31 December 2008, liabilities amounted to 273 864 euros and were covered by the fund and by provisions for Pension Liabilities in Non Current Liabilities of 49 448 euros and 224 416 euros respectively.
Impaper Europe GmbH & Co. KG has a defined benefit plan and it has constituted a fund. The plan is calculated according to International Accounting Standard 19. In an actuarial report carried out at 31 December 2008, liabilities amounted to 104 561 euros and were covered by the fund and by provisions for Pension Liabilities in Non Current Liabilities of 8 141 euros and 96 420 euros respectively.
Upon retirement of their employees, Isoroy SAS and Darbo SAS are obliged to pay a sum defined under the terms of the sector's collective labour agreement. An actuarial study calculated the liabilities of the two companies on 31 December 2008 to be 1 631 818 euros. This is fully covered by a provision that is recorded as a Pension Liability in Non Current Liabilities on the Consolidated Balance Sheet
Various Group companies have a defined benefit plan and funds managed by third parties, calculated in accordance with International Accounting Standard 19 and based on actuarial studies carried out by independent parties. Employees of eight companies hired until 31 December 1994 are covered by this plan under which they will receive as from retirement, a life long monthly payment equivalent to 20% of their salary at their retirement date. The liability for services provided as at 31 December 2008, based on an actuarial study on the same date, were calculated to be 4 118 473 euros. This was fully covered by the value of the fund and by a provision included as a Pension Liability in Non Current Liabilities on the Consolidated Balance Sheet, of 1 357 582 euros and 2 760 891 euros, respectively.
The main changes, during the periods ending 31 December 2008 and 31 December 2007, to the present value of these liabilities are presented below:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Opening balance of obligations' present value | 29 390 046 | 30 749 539 |
| Interest cost | 1 526 205 | 1 625 181 |
| Current service cost | 966 617 | 802 305 |
| Actuarial (Gains)/Losses | 360 035 | -1 996 561 |
| Paid pensions | 1 982 261 | 1 879 438 |
| Exchange rate effect | - 562 207 | - 60 109 |
| Changes in consolidation perimeter | - 47 243 | 149 129 |
| Closing balance of obligations' present value | 29 651 192 | 29 390 046 |
At 31 December 2008 and 31 December 2007, the amount of liabilities for defined benefits recognised in the consolidated balance sheet is detailed as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Present value of obligations Actuarial Losses/(Gains) not recognised Fair value of plan assets |
29 651 192 - 282 843 4 689 776 |
29 390 046 687 493 5 766 926 |
| Pension liabilities | 25 244 259 | 22 935 627 |
The impact of these liabilities on the 2008 and 2007 consolidated profit and loss statements is detailed as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Interest cost | 1 526 205 | 1 625 181 |
| Current service cost | 966 617 | 802 305 |
| (Increase) / Decrease in fair value of plan assets | - 361 797 | 288 088 |
| Recognized actuarial (Gains)/Losses | - 83 458 | -1 996 561 |
| 2 047 568 | 719 013 |
At 31 December 2008 and 31 December 2007, Trade creditors stated on the consolidated balance sheet showed the following maturities:
| MATURITY OF TRADE CREDITORS | ||||
|---|---|---|---|---|
| 31.12.2008 | 31.12.2007 | |||
| To be paid | ||||
| < 90 days | 165 125 084 | 222 708 799 | ||
| 90 - 180 days | 555 839 | 2 072 418 | ||
| > 180 days | 239 539 | 1 447 469 | ||
| 165 920 462 | 226 228 686 |
At 31 December 2008 and 31 December 2007, State and other public entities had the following composition:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| State and other public entities | ||
| Income Tax | 4 745 839 | 14 877 387 |
| Value Added Tax | 2 176 219 | 3 113 994 |
| Social Security Contribution | 7 685 167 | 8 841 810 |
| Others | 1 700 009 | 2 805 727 |
| 16 307 234 | 29 638 918 |
At 31 December 2008 and 31 December 2007, Other current liabilities were composed of:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Group companies | 34 910 | 201 |
| Derivatives | 7 413 122 | 942 442 |
| Trade debtors advances | 643 804 | 381 327 |
| Fixed assets suppliers | 8 776 582 | 23 143 342 |
| Other creditors | 2 693 380 | 6 385 706 |
| Financial instruments | 19 561 798 | 30 853 018 |
| Other creditors | 7 842 207 | 13 326 882 |
| Accrued expenses: | ||
| Insurances | 55 226 | 31 938 |
| Personnel costs | 23 753 319 | 29 311 940 |
| Accrued financial expenses | 9 137 782 | 8 637 046 |
| Rappel discounts (annual quantity discounts) | 28 919 892 | 33 428 206 |
| External supplies and services | 11 939 042 | 20 730 715 |
| Other accrued expenses | 9 815 327 | 12 445 931 |
| Deferred income: | ||
| Investment subventions | 5 891 717 | 6 768 391 |
| Other deferred income | 64 973 | 5 352 |
| Liabilities out of scope of IFRS 7 | 97 419 485 | 124 686 401 |
| Total | 116 981 283 | 155 539 419 |
| 31.12.2008 | < 90 days | 90 - 180 days | > 180 days | Total | Total balance sheet |
|---|---|---|---|---|---|
| Maturity of current fixed assets' suppliers | 8 680 131 | 37 763 | 58 688 | 8 776 582 | 8 776 582 |
| Maturity of Other current creditors | 1 303 677 | 23 866 | 1 365 837 | 2 693 380 | 2 693 380 |
| 9 983 808 | 61 629 | 1 424 525 | 11 469 961 | 11 469 962 | |
| 31.12.2007 | < 90 dias | 90 - 180 dias | > 180 dias | Total | Total balance sheet |
|---|---|---|---|---|---|
| Maturity of current fixed assets' suppliers | 21 574 773 | 595 449 | 973 120 | 23 143 342 | 23 143 342 |
| Maturity of Other current creditors | 5 866 645 | - 4 184 | 523 245 | 6 385 706 | 6 385 706 |
| 27 441 418 | 591 265 | 1 496 365 | 29 529 048 | 29 529 048 |
Movements occurred in provisions and accumulated impairment losses during the periods ended 31 December 2008 and 31 December 2007 were as follows:
| 2008 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Opening | Exchange | Changes to | Other | Closing | ||||
| Description | balance | rate effect | perimeter | Increase | Utilizations | changes | balance | |
| Accumulated impairment losses on tangible assets (Note 11) | 29 387 203 | - 645 679 | 30 339 095 | 59 154 | - 1 434 185 | 57 587 280 | ||
| Accumulated impairment losses on intangible assets (Note 12) | 19 242 | 19 242 | ||||||
| Accumulated impairment losses on other non-current assets (Note 16) | 14 263 013 | - 3 331 831 | 10 931 182 | |||||
| Accumulated impairment losses on trade debtors (Note 18) | 16 719 680 | - 585 981 | - 370 413 | 5 114 009 | 3 425 777 | - 709 322 | 16 742 196 | |
| Accumulated impairment losses on other debtors (Note 19) | 442 506 | - 422 877 | 19 629 | |||||
| Provisions | 45 824 539 | - 4 624 605 | - 397 614 | 20 127 857 | 11 399 527 | - 422 245 | 49 108 405 | |
| Sub-total | 106 656 183 | - 5 856 265 | - 768 027 | 55 580 961 | 14 884 458 | - 6 320 460 | 134 407 934 | |
| Accumulated impairment losses on investments (Note 10) | 42 677 137 | - 5 671 138 | 37 005 998 | |||||
| Accumulated impairment losses on inventories (Note 17) | 12 588 275 | - 602 043 | - 102 851 | 12 649 774 | 7 434 200 | 17 098 955 | ||
| Total | 161 921 595 | - 6 458 308 | - 870 878 | 68 230 735 | 22 318 658 | - 11 991 598 | 188 512 888 |
| 2007 | |||||||
|---|---|---|---|---|---|---|---|
| Opening | Exchange | Changes to | Other | Closing | |||
| Description | balance | rate effect | perimeter | Increase | Utilizations | changes | balance |
| Accumulated impairment losses on tangible assets (Note 11) Accumulated impairment losses on intangible assets (Note 12) |
45 391 373 | 1 494 925 | 5 526 041 | 15 465 325 19 242 |
9 972 | - 38 480 489 | 29 387 203 19 242 |
| Accumulated impairment losses on other non-current assets (Note 16) | 14 263 036 | - 23 | 14 263 013 | ||||
| Accumulated impairment losses on trade debtors (Note 18) Accumulated impairment losses on other debtors (Note 19) |
18 510 857 443 173 |
- 19 344 | - 506 169 | 7 232 129 | 3 625 747 668 |
- 4 872 046 | 16 719 680 442 505 |
| Provisions | 42 409 827 | 1 653 997 | 770 723 | 10 253 670 | 11 411 299 | 2 147 621 | 45 824 539 |
| Sub-total | 121 018 266 | 3 129 578 | 5 790 595 | 32 970 366 | 15 047 686 | - 41 204 937 | 106 656 182 |
| Accumulated impairment losses on investments (Note 10) | 42 684 744 | - 7 607 | 42 677 137 | ||||
| Accumulated impairment losses on inventories (Note 17) | 15 543 189 | 84 451 | 142 851 | 2 865 174 | 5 791 213 | - 256 177 | 12 588 275 |
| Total | 179 246 199 | 3 214 029 | 5 933 446 | 35 835 540 | 20 838 899 | - 41 468 721 | 161 921 594 |
Impairment losses are offset against the corresponding asset on the consolidated balance sheet.
Increase and utilization of provisions and impairment losses are stated on the Consolidated profit and loss statement as follows:
| 2008 | 2007 | ||||
|---|---|---|---|---|---|
| Losses | Gains Losses |
Gains | |||
| Cost of sales | 7 626 808 | 4 417 623 | 2 442 385 | 1 793 501 | |
| Other operating revenues | 14 884 458 | 15 047 686 | |||
| (Increase) / decrease in production | 5 022 966 | 3 016 577 | 422 789 | 3 997 712 | |
| Provisions and impairment losses | 55 580 961 | 32 970 366 | |||
| Total | 68 230 735 | 22 318 658 | 35 835 540 | 20 838 899 |
At the end of the period the Group performed some impairment tests on some cash generating units, having recognized, as a result, losses amounting to 30 339 095 euros (note 11).
The concept of cash generating unit that was considered in the tests corresponds to the segments used for segmental reporting in note 41, ie, each country where the Group holds assets that represent at least 10% of the consolidated assets.
The impairment tests were carried out in compliance with the requirements and guidance of IAS 36 and consisted basicallly on calculating the present value of the projected cash flows for each segment.
At 31 December 2008 and 31 December 2007, the Group held irrevocable operating leases with the following lease payments:
| Minimun operating | |||||
|---|---|---|---|---|---|
| lease payments | |||||
| 31.12.2008 | 31.12.2007 | ||||
| 2008 | 9 004 028 | ||||
| 2009 | 6 105 343 | 7 372 202 | |||
| 2010 | 3 747 755 | 5 728 588 | |||
| 2011 | 1 756 719 | 3 433 475 | |||
| 2012 | 539 943 | 2 299 769 | |||
| 2013 | 81 762 | ||||
| After 2013 (2012) | 23 860 | 7 004 534 | |||
| 12 255 382 | 34 842 596 | ||||
| Without time limit | 1 937 468 | 1 605 430 |
Balances and transactions with related parties may be summarised as follows:
| Balances | Accounts receivable | Accounts payable | Loans | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Obtained | Granted | ||||||||
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | ||
| Parent company and group companies | 1 584 421 | 1 467 636 | 3 664 534 | 4 405 491 | 14 051 | 3 879 | 247 833 | ||
| Transactions | Sales and services rendered |
Purchases and services obtained |
Interest income | Interest expenses | |||||
| 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | 31.12.2008 | 31.12.2007 | ||
| Parent company and group companies | 4 814 293 | 8 593 508 | 29 997 578 | 36 774 622 | 627 087 | 348 049 | 22 798 |
Remuneration of the Board of Directors of the Company and its subsidiaries is detailed as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Total fixed salaries | 1 373 019 | 1 331 921 |
| Total bonus | 740 985 | 785 443 |
| 2 114 004 | 2 117 364 |
Details of Other operating revenues on the Consolidated Profit and Loss Statement for the periods ended 31 December 2008 and 31 December 2007 are as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Gains on disposals of non current investments | 4 141 587 | |
| Gains on disposals of tangible and intangible assets | 46 734 915 | 38 178 887 |
| Supplementary Revenue | 8 354 048 | 6 671 751 |
| Investment subventions | 6 647 345 | 6 942 279 |
| Tax received | 4 889 155 | 5 612 484 |
| Reversion of impairment losses | 3 484 931 | 3 636 389 |
| Gains on provisions | 11 399 528 | 11 411 298 |
| Others | 28 688 923 | 56 484 757 |
| 114 340 432 | 128 937 845 |
The item Others includes an estimated indemnity of 2 959 481 euros relating to the operating losses resulting from the accident referred to in Note 3.
The item Gains on disposal of tangible and intangible assets includes 40 806 684 euros related to the accident referred to in Note 3.
Details of Other operating costs on the Consolidated Profit and Loss Statement for the 2008 and 2007 are as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Taxes | 9 522 769 | 12 589 235 |
| Losses on disposal of non current investments | 3 355 882 | 65 440 |
| Losses on disposal of tangible and intangible assets | 1 671 066 | 1 357 869 |
| Others | 8 373 537 | 13 119 096 |
| 22 923 254 | 27 131 640 |
Financial results for the periods ended 31 December 2008 and 31 December 2007 were as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Financial expenses: | ||
| Interest expenses | ||
| related to bank loans and overdrafts | 2 317 273 | 11 207 067 |
| related to non convertible debentures | 18 462 648 | 25 847 955 |
| related to finance leases | 5 322 162 | 5 445 381 |
| related to hedged loans (hedge derivatives) | 8 606 977 | 2 520 171 |
| others | 19 310 413 | 3 014 392 |
| 54 019 473 | 48 034 966 | |
| Losses in currency translation | ||
| related to customers | 1 312 490 | 1 224 681 |
| related to suppliers | 3 000 339 | 11 931 361 |
| related to loans | 43 837 254 | 16 975 473 |
| others | 2 562 493 | 249 827 |
| 50 712 576 | 30 381 342 | |
| Cash discounts granted | 20 151 228 | 24 462 717 |
| Adjustment to fair value of financial instruments at fair value through profit or loss | 28 604 010 | 25 260 904 |
| Losses on valuation of hedging derivative instruments | ||
| Fair value of inefficient component of hedge derivatives | ||
| Other finance losses | 11 104 571 | 12 986 501 |
| 164 591 858 | 141 126 430 | |
| Financial revenues: | ||
| Interest income | ||
| related to bank loans | 240 698 | 513 807 |
| related to loans to related parties | 651 406 | 326 120 |
| Others | 5 323 068 | 3 392 627 |
| 6 215 172 | 4 232 554 | |
| Gains in currency translation | ||
| related to customers | 1 608 729 | 1 315 901 |
| related to suppliers | 2 760 289 | 11 205 709 |
| related to loans | 16 764 210 | 15 227 246 |
| others | 860 340 | 437 857 |
| 21 993 568 | 28 186 713 | |
| Cash discounts obtained | 3 224 157 | 2 935 935 |
| Adjustment to fair value of financial instruments at fair value through profit or loss | 54 800 436 | 24 662 235 |
| Gains in valuation of hedging derivative instruments | ||
| Fair value of inefficient component of hedge derivatives | ||
| Other finance gains | 385 211 | 567 899 |
| 86 618 544 | 60 585 335 | |
| Finance profit / (loss) | - 77 973 314 | - 80 541 095 |
Corporate income tax accounted for in 2008 and 2007 is detailed as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Current tax | 2 530 753 | 19 224 040 |
| Deferred tax | 404 014 | 16 048 495 |
| 2 934 767 | 35 272 535 |
Reconciliation of consolidated Earnings before taxes with taxes for the year may be detailed as follows:
| 31.12.2008 | 31.12.2007 | ||
|---|---|---|---|
| Consolidated net profit before tax | -100 941 991 | 124 702 712 | |
| Tax rate | 25.00% | 25.00% | |
| Expectable tax at rate 25.0% | -24 458 476 | 31 175 678 | |
| Differences to foreign tax rates | (+) | -9 471 100 | 4 263 678 |
| Effect of provincial taxes | (+) | -1 304 230 | 2 169 694 |
| Consolidation adjustments | (-) | -1 233 686 | 2 562 610 |
| Permanent differences Non deductible costs Non taxed profits Tax losses carried forward Recognized deferred tax asset Deferred tax asset not recognized in complience with IAS 12 Utilization of tax losses carried forward whose deferred tax was not recognized in prior periods Reverted deferred tax asset Effect of offsetting deferred tax liabilities related to depreciation Effect of change in tax rates |
(+) (-) (+) (-) (+) (+) (+) |
21 940 331 20 594 975 -8 936 308 -36 808 633 -2 550 008 4 834 650 3 494 645 |
2 321 460 5 944 247 -16 124 022 -11 846 526 -4 878 467 6 711 269 3 801 484 5 298 541 |
| Other deferred tax assets and liabilities not recognized in compliance with IAS 12 | (+) | 3 875 202 | 345 972 |
| Others | (+) | -1 937 283 | -3 152 421 |
| Consolidated corporate income tax | 2 934 767 | 35 272 535 |
Earnings per share, excluding the effect of discontinued operations, were calculated as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Net Profit | ||
| Net profit considered to calculate basic earnings per share (Net Profit attributable to equity holders of Sonae Indústria) |
- 108 447 796 | 78 612 713 |
| Effect of potential shares Interest related to convertible bonds (net of tax) |
||
| Net Profit considered to calculate diluted earnings per share | - 108 447 796 | 78 612 713 |
| Number of shares | ||
| Weighted average number of shares used to calculate basic earnings per share | 140 000 000 | 140 000 000 |
| Effect of potential ordinary shares from convertible bonds | ||
| Weighted average number of shares used to calculate diluted earnings per share | 140 000 000 | 140 000 000 |
During 2008 no profit or loss occurred relating to discontinued operations.
The main activity of the Group is the production of wood based panels and derivative products through industrial plants and commercial facilities located in Portugal, Spain, France, Germany, United Kingdom, Switzerland, The Netherlands, Canada, Brazil and South Africa. It is, therefore, an activity characterised by a high geographical dispersion of assets and markets and by a relative homogeneity of products. For segment analysis purposes, the geographic element is considered the main segmentation vector of the Group's activity and it determines how internal management and financial reporting systems are organised.
Geographic segments identified for 2008 and 2007 are as follows:
The contribution of main geographic segments to the Consolidated Profit and Loss Statement for 2008 and 2008, based on location of assets, are detailed as follows:
| 2008 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Portugal | Spain | France | UK | Germany | Others | Brazil | Canada | South Africa | Consolidated | |
| Operating income | 312 575 739 | 325 176 356 | 246 687 781 | 88 075 547 | 707 225 479 | 218 694 756 | 166 389 938 | 154 913 469 | 89 781 772 | |
| Intersegmental eliminations | - 96 151 629 | - 79 156 072 | - 59 580 514 | - 22 371 | - 188 397 724 | - 7 072 162 | - 18 399 | |||
| External Operating income | 216 424 110 | 246 020 284 | 187 107 267 | 88 053 176 | 518 827 755 | 211 622 594 | 166 389 938 | 154 913 469 | 89 763 373 | 1 879 121 966 |
| Allocated Operating Net Profit/(Loss) | 11 879 873 | - 7 664 593 | - 49 242 532 | - 6 769 977 | - 37 050 422 | - 12 289 | 28 799 937 | 32 496 272 | 3 623 733 | - 23 939 998 |
| Non Allocated Operating Net Profit/(Loss) | 785 886 | |||||||||
| Financial Net Profit/(Loss) | - 77 973 314 | |||||||||
| Gains and losses in associated companies | 127 642 | |||||||||
| Gains and losses in investments | 57 794 | |||||||||
| Taxation | 2 934 767 | |||||||||
| Net Consolidated Profit/(Loss) after taxation | - 103 876 757 | |||||||||
| Attributable to Equity Holders of Sonae Industria | - 108 447 795 | |||||||||
| Attributable to Minority Interests | 4 571 038 |
| 2007 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Portugal | Spain | France | Un. Kingdom | Germany | Others | Brazil | Canada | South Africa | Consolidated | |
| Operating income | ||||||||||
| 334 374 720 | 418 473 405 | 325 911 811 126 711 946 | 849 871 324 | 265 305 458 | 154 560 534 | 126 362 128 | 106 654 048 | |||
| Intersegmental eliminations External Operating income |
- 108 993 355 225 381 365 |
- 71 760 315 346 713 090 |
- 85 512 481 | 240 399 330 126 711 946 | - 236 919 092 612 952 232 |
- 9 041 049 256 264 409 |
- 19 477 154 541 057 |
126 362 128 | - 78 208 106 575 840 |
2 195 901 397 |
| Allocated Operating Net Profit/(Loss) | 33 123 816 | 57 409 611 | 3 342 741 | 4 642 553 | 26 055 638 | - 1 788 991 | 30 790 081 | 27 578 013 | 23 944 782 | 205 098 244 |
| Non Allocated Operating Net Profit/(Loss) | - 64 032 | |||||||||
| Financial Net Profit/(Loss) | - 80 541 095 | |||||||||
| Gains and losses in associated companies | 127 321 | |||||||||
| Gains and losses in investments | 82 274 | |||||||||
| Taxation | 35 272 535 | |||||||||
| Net Consolidated Profit/(Loss) after taxation | 89 430 177 | |||||||||
| Attributable to Equity Holders of Sonae Industria | 78 612 713 | |||||||||
| Attributable to Minority Interests | 10 817 464 |
Contributions from the segments to the consolidated balance sheet as at 31 December 2008 and 31 December 2007, based upon geographic location of the assets, were as follows:
| 31.12.08 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Portugal | Spain | France | Germany | United Kingdom |
Brazil | Canada | South Africa |
Others | Consolidated | |
| Net segmental assets | 264 287 988 266 779 505 177 460 329 501 683 648 92 435 341 | 130 324 509 | 181 293 761 101 495 656 | 24 397 597 1 740 158 333 | ||||||
| Non current | 196 974 792 199 269 600 123 300 240 389 680 471 73 936 742 | 101 116 970 | 164 721 085 | 72 140 667 | 891 763 1 322 032 330 | |||||
| Current | 67 313 196 67 509 905 | 54 160 089 112 003 177 18 498 599 | 29 207 539 | 16 572 676 | 29 354 989 | 23 505 834 418 126 003 | ||||
| Investments in associated companies | 341 500 | 2 661 559 | 3 003 059 | |||||||
| Non-allocated net assets | 175 205 101 | |||||||||
| Total net consolidated assets | 1 918 366 492 | |||||||||
| Segmental Liabilities | 43 663 046 64 652 956 | 50 936 954 168 163 623 11 458 398 | 39 463 497 | 15 695 314 | 14 036 268 | 7 135 335 415 205 391 | ||||
| Non current | 5 157 049 19 738 268 | 6 791 542 82 683 123 | 3 122 953 | 17 367 046 | 1 455 421 | 964 584 | 0 137 279 986 | |||
| Current | 38 505 997 44 914 688 | 44 145 412 85 480 500 | 8 335 445 | 22 096 451 | 14 239 893 | 13 071 684 | 7 135 335 277 925 405 | |||
| Non-allocated liabilities | 1 102 988 097 | |||||||||
| Total consolidated liabilities | 1 518 193 488 | |||||||||
| Investment in tangible | ||||||||||
| and intangible assets | 17 835 306 21 484 995 | 6 887 387 35 784 281 | 2 397 259 | 17 895 535 | 17 398 563 | 6 509 020 | 91 038 126 283 384 | |||
| Amortisation and depreciation | 15 446 096 19 157 482 | 15 307 910 37 599 420 | 6 650 254 | 10 032 015 | 12 735 892 | 5 938 113 | 168 048 123 035 230 |
| 31.12.07 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Portugal | Spain | France | Germany | United Kingdom |
Brazil | Canada | South Africa |
Others | Consolidated | |
| Net segmental assets | 279 136 716 282 750 638 | 239 769 252 553 835 059 133 361 753 | 150 665 372 | 208 658 216 128 326 386 | 26 823 472 2 003 326 864 | |||||
| Non current | 197 300 234 200 897 540 | 158 912 176 393 424 206 100 194 373 | 117 280 536 | 189 598 189 | 96 594 869 | 935 772 1 455 137 895 | ||||
| Current | 81 836 482 | 81 853 098 | 80 857 076 160 410 853 33 167 380 | 33 384 836 | 19 060 027 | 31 731 517 | 25 887 700 | 548 188 969 | ||
| Investments in associated companies | 815 475 | 2 533 917 | 3 349 392 | |||||||
| Non-allocated net assets | 161 104 281 | |||||||||
| Total net consolidated assets | 2 167 780 537 | |||||||||
| Segmental Liabilities | 53 362 318 | 75 294 614 | 78 713 295 198 444 814 23 407 161 | 65 358 705 | 33 244 793 | 20 892 961 | 10 885 854 | 559 604 515 | ||
| Non current | 5 773 781 | 21 295 844 | 13 506 626 86 691 442 | 4 499 651 | 47 855 681 | 1 275 043 | 819 414 | 2 679 | 181 720 161 | |
| Current | 47 588 537 | 53 998 770 | 65 206 669 111 753 372 18 907 510 | 17 503 024 | 31 969 750 | 20 073 547 | 10 883 175 | 377 884 354 | ||
| Non-allocated liabilities | 979 344 445 | |||||||||
| Total consolidated liabilities | 1 538 948 960 | |||||||||
| Investment in tangible | ||||||||||
| and intangible assets | 13 038 436 | 18 510 138 | 9 492 951 37 659 285 | 4 297 967 | 4 216 357 | 89 877 107 | 35 336 004 | 265 409 | 212 693 654 | |
| Amortisation and depreciation | 15 566 637 | 17 244 175 | 15 406 162 37 246 301 | 7 724 329 | 9 752 802 | 9 688 585 | 3 990 410 | 186 090 | 116 805 491 |
Inter-segment transactions were executed at market prices and under identical conditions to those applied to third parties.
The average number of employees, by geography, was as follows.
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| 2 305 | 2 623 | |
| Germany | ||
| Portugal | 1 123 | 1 058 |
| Spain | 1 013 | 1 032 |
| France | 809 | 892 |
| South Africa | 439 | 445 |
| Brazil | 356 | 359 |
| Canada | 323 | 314 |
| United Kingdom | 305 | 315 |
| Others | 51 | 57 |
| 6 724 | 7 095 |
Sales and Services Rendered in 2008 and 2007, based on geographic location of the external clients, were the following:
| 2008 | ||||||
|---|---|---|---|---|---|---|
| Segment | '000 Euros | |||||
| Germany | 499 550 | 28% | ||||
| Spain France |
232 845 182 280 |
13% 10% |
||||
| Portugal | 177 298 | 10% | ||||
| Brazil | 148 072 | 8% | ||||
| North America | 112 249 | 6% | ||||
| South Africa | 90 271 | 5% | ||||
| United Kingdon | 74 977 | 4% | ||||
| Others | 251 512 | 14% | ||||
| Total | 1 769 053 |
| 2007 | ||
|---|---|---|
| Segment | '000 Euros | |
| Germany | 532 106 | 26% |
| Spain | 303 956 | 15% |
| France | 245 175 | 12% |
| Portugal | 200 836 | 10% |
| Brazil | 137 869 | 7% |
| United Kingdon | 108 329 | 5% |
| South Africa | 104 661 | 5% |
| North America | 88 582 | 4% |
| Others | 344 771 | 17% |
| Total | 2 066 285 |
| 2008 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash flows arising from: | Portugal | Spain | France | Germany | United Kingdom | Brazil | Canada | South Africa | Others | Inter-segment eliminations |
Consolidated |
| Operating activities | 15 062 966 -19 211 610 -5 973 547 10 480 139 | 2 135 335 42 157 508 -21 272 194 | 60 781 | 695 824 | 57 358 660 | 81 493 862 | |||||
| Investment activities | 150 163 751 92 278 817 -2 871 395 -29 946 026 | -1 386 301 -35 110 972 -37 623 149 | -4 923 928 | -1 182 888 | -274 716 810 | -145 318 901 | |||||
| Financing activities | -140 480 034 -94 767 269 1 308 756 13 081 986 | -5 977 925 -10 619 059 56 531 451 | 667 810 | - 439 477 | 217 358 150 | 36 664 389 | |||||
| Change in cash and cash | |||||||||||
| equivalents | 24 746 683 -21 700 062 -7 536 186 -6 383 901 | -5 228 891 -3 572 523 -2 363 892 | -4 195 337 | - 926 541 | -27 160 650 |
Cash flow by geographic segment, based on geographic location of the assets, were as follows:
| 2007 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash flows arising from: | Portugal | Spain | France | Germany | United Kingdom |
Brazil | Canada | South Africa | Others | Inter-segment eliminations |
Consolidated |
| Operating activities | 36 653 029 | 25 055 766 | 13 335 866 | 22 036 908 | 14 881 795 | 42 144 474 | 43 249 578 | 22 727 299 | -8 539 031 | 141 249 | 211 686 933 |
| Investment activities | 6 123 875 | 3 924 114 | -1 076 071 | -31 536 484 | -1 767 604 | -3 573 026 | -40 595 885 | -38 397 307 | -1 347 065 | -71 222 913 | -179 468 366 |
| Financing activities | -108 303 449 | -88 389 349 | -12 717 604 | -18 585 572 | -7 925 498 | -23 845 247 | -4 244 210 | 16 798 692 | 4 267 042 | 71 081 664 | -171 863 531 |
| Change in Cash and Cash | |||||||||||
| Equivalents | -65 526 545 | -59 409 469 | - 457 809 | -28 085 148 | 5 188 693 | 14 726 201 | -1 590 517 | 1 128 684 | -5 619 054 | -139 644 964 |
In 2008, the segment of wood derivative products, which is the main business segment of the Group, accounted for more than 98% of both revenue and net assets and more than 90% of investment in tangible and intangible assets.
At the beginning of 2009 Sonae Indústria informed the market about consultations being initiated with emplyoees, employees representatives and remaining interested parties, regarding the reorganization of its operations in France, United Kingdom and South Africa. At issue date of these consolidated financial statements, available information did not allow the quantification of any effect that the aformentioned events might have in the Group's consolidated financial statements of 2009 and following periods.
These consolidated financial statements were approved by the Board of Directors and authorised for issuance on 19 February 2009.
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. o′Porto Bessa Leite Complex Rua António Bessa Leite, 1430 - 5º 4150-074 Porto Portugal Tel +351 225 433 000 Fax +351 225 433 499
1 As required by the Portuguese Securities Market Code, we present the Audit Report in respect of the Consolidated and Individual Financial Information included in the Board of Directors' Report and in the Consolidated and Individual Financial Statements of Sonae Indústria, SGPS, SA, comprising the consolidated and individual balance sheet as at 31 December 2008, (which shows total assets of Euros 1,918,366,492 and Euros 1,653,278,849, respectively, a total consolidated equity of Euros 400,173,005 including total minority interests of Euros 3,072,691, an individual equity of Euros 960,241,543, and a net consolidated loss of Euros 108,447,796 and a net individual profit of Euros 6,750,824, the consolidated and individual statement of income by nature, the consolidated and individual statements of changes in equity and the consolidated and individual cash flow statements for the year then ended and the corresponding notes to the accounts.
2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and Consolidated and Individual Financial Statements that present fairly, in all material respects, the financial position of the company and its subsidiaries, the consolidated and individual changes in equity, the consolidated and individual result of their operations, and their consolidated and individual cash flows; (ii) to prepare historical financial information in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU that is complete, true, timeliness, clear, objective and licit, as required by the Portuguese Securities Market Code; (iii) to adopt adequate accounting policies and criteria; (iv) to maintain appropriate systems of internal control; and (v) to disclose any relevant facts that have influenced the activity, the financial position or results of the company and its subsidiaries.
3 Our responsibility is to verify the financial information included in the above mentioned documents, namely if it is complete, true, timeliness, clear, objective and licit, as required by the Portuguese Securities Market Code, and to issue a professional and independent report based on our audit.
SONAE INDUSTRIA, SGPS, SA
4 We conducted our examination in accordance with the Standards and Technical Recommendations approved by the Institute of Statutory Auditors which require that we plan and perform the examination to obtain reasonable assurance about whether the consolidated and individual financial statements are free of material misstatement. Accordingly, our examination included: (i) verification that the subsidiaries' financial statements have been properly examined and for the cases where such an examination was not carried out, verification, on a sample basis, of the evidence supporting the amounts and disclosures in the consolidated financial statements, and assessing the reasonableness of the estimates, based on the judgements and criteria of Management used in the preparation of the consolidated financial statements; (ii) verification of the consolidation operations and the utilization of the equity method; (iii) assessing the appropriateness and consistency of the accounting principles used and their disclosure, as applicable; (iv) assessing the applicability of the going concern basis of accounting; (v) assessing the overall presentation of the consolidated and individual financial statements; and (vi) assessing whether the consolidated and individual financial information is complete, true, timely, clear, objective and licit.
5 Our examination also covered the verification that the financial information included in the Board of Director's report is in agreement with the remaining documents referred to above.
6 We believe that our examination provides a reasonable basis for our opinion.
7 In our opinion, the consolidated and individual financial statements referred to above, present fairly in all material respects, the consolidated and individual financial position of Sonae Indústria, SGPS, SA as at 31 December 2008, the consolidated and individual results of their operations and their consolidated and individual cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the information included is complete, true, timely, clear, objective and licit.
Porto, 19 February 2009
PricewaterhouseCoopers & Associados, S.R.O.C., Lda. Represented by:
António Joaquim Brochado Correia, R.O.C.
(Free translation from the original in Portuguese)
To the Shareholders of Sonae Indústria, SGPS, S.A.
In accordance with current law and the mandate we have been conferred, we herewith submit for your consideration our Report and Opinion regarding the activity undertaken by us together with the Individual and Consolidated Statements of Sonae Indústria SGPS, S.A. with respect to the year ended 31st December 2008, which are the Board of Directors' responsibility.
The Statutory Audit Board has accompanied the Company's Management, the evolution of its activities and businesses together with other companies within the consolidation perimeter and convened meetings with the frequency and extent deemed appropriate. On these occasions, the Statutory Audit Board has always received all information requested from the Board of Directors, the various company departments and other companies within the consolidation perimeter. In particular, the information gathered has allowed the Statutory Audit Board to gain a greater insight into understanding and analysing the progress of the business and its financial performance as well as the management and internal control systems.
The Statutory Audit Board has additionally monitored the process of preparation and disclosure of financial information as well as the review of consolidated and individual financial company statements and has received all requested information and clarifications from the Statutory External Auditor.
Within the scope of its mandate, the Statutory Audit Board has verified the Individual and Consolidated Balance Sheet for the fiscal year ended 31st December 2008, the Individual and Consolidated Statement of Income by nature, Cash Flow Statements and Statements of Changes in Equity and corresponding Appendices for the same period. The Statutory Audit Board has also verified the Management Report for the fiscal year ended 31st December 2008 issued by the Board of Directors and the Statutory External Auditor's Report on the Financial Statements, with which the Statutory Audit Board agrees.
In light of the above, the Statutory Audit Board is of the opinion that information relating to the financial statements in question has been prepared according to the applicable accountancy, legal and statutory norms, reflecting a true and appropriate image of assets and liabilities, the financial situation and results of both the company and other companies within its consolidation perimeter. The Management Report duly states the evolution of the businesses, performance and financial position of both the company and other companies within its consolidation perimeter businesses and contains a description of the main risks and uncertainties they are confronted with.
The Statutory Audit Board expresses its appreciation to the Board of Directors and other departments for their cooperation.
Arising from the above, the Statutory Audit Board is of the opinion that the Shareholders' General Meeting approves the:
Maia, 20th February 2009
Statutory Audit Board
______________________________ Óscar José Alçada da Quinta
______________________________ Armando Luís Vieira de Magalhães
______________________________ Jorge Manuel Felizes Morgado
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