Annual Report • Apr 14, 2014
Annual Report
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Registered Office: Lugar do Espido, Via Norte, Maia Registered at the Commercial Registry of Maia Registry and Tax Identification Number 506 035 034 Share Capital: 700 000 000 euros Publicly Traded Company
2013
11 March 2014
Appendix required by Article 447 of Portuguese Company Law
Appendix required by Article 448 of Portuguese Company Law
Qualified Shareholdings
Statement issued according to and for the purposes of paragraph c) of Article 245 of CMVM Code
Statement of Financial Position
Consolidated Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Net Shareholders' Funds Consolidated Statement of Cash Flows Notes to the Consolidated Financial statements
Statutory External Auditor Report Statutory Audit Board Report
| 1. | CHAIRMAN MESSAGE 3 | |
|---|---|---|
| 2. | CEO MESSAGE 4 | |
| 3. | ABOUT SONAE INDÚSTRIA 5 | |
| 3.1. | OUR BUSINESS 5 | |
| 3.2. | OUR HISTORY 6 | |
| 3.3. | OUR PRODUCTS 7 | |
| 3.4. | OUR STRATEGY 8 | |
| 3.5. | OUR 2013 AWARDS 11 | |
| 3.6. | 2013 KEY CORPORATE EVENTS 11 | |
| 4. | SECTOR REVIEW 12 | |
| 5. | BUSINESS REVIEW 14 | |
| 5.1. | TURNOVER & RECURRENT EBITDA 14 | |
| 5.1.1. Sonae Indústria Consolidated 14 | ||
| 5.1.2. Southern Europe 15 | ||
| 5.1.3. Northern Europe 16 | ||
| 5.1.4. Rest of the World (Canada and South Africa) 17 | ||
| 5.2. | CONSOLIDATED FINANCIAL PERFORMANCE 18 | |
| 5.2.1. Profit & Loss Account 18 | ||
| 5.2.2. CAPEX 19 | ||
| 5.2.3. Balance Sheet & Capital Structure 20 | ||
| 5.3. | INDIVIDUAL RESULTS OF SONAE INDÚSTRIA, SGPS 21 | |
| 5.4. | PROPOSED ALLOCATION OF RESULTS 21 | |
| 5.5. | OUTLOOK FOR 2014 21 | |
| 5.6. | INFORMATION ON SHAREHOLDINGS AND SHARE PERFORMANCE 21 | |
| 5.7. | TRANSACTIONS WITH OWN SHARES 23 | |
| 5.8. | SUBSEQUENT EVENTS 23 | |
| 5.9. | DIVIDEND POLICY 23 | |
| 6. | RISK MANAGEMENT 24 | |
| 6.1. | CREDIT RISK MANAGEMENT POLICY 24 | |
| 6.2. | MARKET RISKS 24 | |
| 6.3. | LEGAL RISKS 26 | |
| 6.4. | OPERATIONAL RISKS 26 | |
| 7. | CORPORATE RESPONSIBILITY 27 | |
| 7.1. | SOCIAL REPORT 27 | |
| 7.2. | ENVIRONMENTAL REPORT 33 | |
| 8. | CLOSING REMARKS AND ACKNOWLEDGEMENTS 37 | |
| APPENDIXES TO THE MANAGEMENT REPORT AND QUALIFIED SHAREHOLDINGS 38 | ||
| APPENDIX REGARDING ARTICLE 447 OF THE COMPANY LAW 38 | ||
| APPENDIX REGARDING ARTICLE 448 OF THE COMPANY LAW 39 | ||
| QUALIFIED SHAREHOLDINGS 39 | ||
| STATEMENT ISSUED UNDER THE TERMS AND FOR THE PURPOSE OF SUB-PARAGRAPH C) OF NO.1 OF THE ARTICLE 245 OF THE PORTUGUESE SECURITIES CODE 40 |
The negative macroeconomic and financial environment and the prevailing context of low demand for wood based panel products in most of the countries where we are present, has set the dynamics for yet another challenging year for Sonae Indústria.
Notwithstanding the challenging environment, important organizational changes and business initiatives were achieved in 2013, which, together with other important measures that we will seek to implement during the course of the current year, reinforce my confidence in the capacity of the company to improve its profitability over time, leveraging on its stronger and most competitive assets and distinctive competences.
A new Executive Committee was appointed on February 2013, with a clear mandate to execute the defined strategic plan, which foresees a reduced but more competitive industrial footprint, the building of a high quality, skilful and engaged team, the fostering of a culture that promotes operational excellence and innovation and the transformation of the company into a market focused operation, recognized by its target customers for its reliable and integrated offer.
Accordingly, we have continued to adapt our production capacity to the customer demand and take additional restructuring measures. After the closure of Knowsley plant in UK and Solsona particleboard plant, in Spain, we have, in September 2013, entered into negotiations with the employee representatives of the Horn plant in Germany with the objective of stopping the raw particleboard production in this site and transferring the production to our best asset in Germany, Nettgau, where we currently have over yearly 1 million m3 of production capacity, split between particleboard and oriented strand board.
We have also continued to focus on our people, trying to promote team work, the continuous development of new competences and the sharing of knowledge and best practices across our operations. . An important step forward was taken with the "Improving Our Work" initiative, a program aimed at the development and implementation of a continuous improvement culture. In line with the path previously defined for Sonae Indústria, this initiative seeks to standardise and optimize processes, in order to increase efficiency and productivity levels in all areas of the group. This culture of continuous improvement should be not only present in our industrial processes, but also embedded in the day to day activities of all our organization.
One important cornerstone of our core values and culture is the safety and well being of our employees. We have continued to invest in sound Health & Safety policies, through a systematic approach of minimizing any risk of accidents, incidents or other potential losses caused by the operations. We have thus been able to consistently improve our Health & Safety key indicators, reducing the level and severity of incidents occurred.
I would also like to leave a note of sorrow in relation to the tragic railroad accident occurred on July 6 at centre of Lac-Mégantic, the town where our Canadian plant is located, which has affected directly or indirectly many of our employees there and disrupted for a few days our operations. I would also like to highlight the local team's resilience and capacity to surpass this period of adversity, enabling the restart of normal production at the plant just 5 days after the accident. This ability to face adversities, adapt to the changing environment and strive in midst of uncertainties in an example that I hope other operations of the group can learn from and follow.
In summary, we have been seeking to implement all necessary measures to turn Sonae Indústria into a more competitive company, setting the foundations for future growth and improved profitability and I expect 2014 to be the year of an effective turnaround for the company. This restructuring phase we are going through should be seen as an opportunity to rethink the business and to utilize the resources and capabilities in a more focused and sustainable way.
To face the challenging business environment that still lies ahead, we will continue to develop Sonae Indústria's employees, providing training and searching for talent, but also demanding the very best from each one of us. I thank you again for the dedication, team spirit and hard work evidenced during the past year.
Once again, 2013 has been another challenging year for the European wood based panels industry as a whole, which has had clear impacts on our profitability in the region. The prevailing macroeconomic challenges in Europe continued to translate into low levels of consumer and business confidence, especially in the periphery countries and has led to constrained demand from the industries which we supply our products, namely construction and furniture industries in Southern Europe. However, the improved operational and financial performance of our North American and South African operations, despite the negative impact of weakening local currencies during the year, has contributed to partly mitigate the negative backdrop in Europe.
In terms of consolidated financial performance, turnover decreased by 7%, when compared with the previous year, which is mostly related with our reduced industrial footprint, as a consequence of the closures of the Knowsley (UK) and Solsona (Spain) plants and of the stoppage of raw particleboard production in the Horn (Germany) site. In spite of this top line evolution, it is worth noting that we have been able to increase marginally the average capacity utilization of our plants, when compared to 2012. Mostly as a result of this top line evolution, operational profitability decreased against the previous year with recurrent EBITDA of 80 million Euros in 2013 (down by 19% against 2012), generating a margin of 6.5% over turnover. Importantly, we have continued to implement several initiatives aimed at reducing fixed costs structure. These measures allowed, in 2013, for savings of more than 13 million Euros against 2012, on a comparable basis.
Notwithstanding the above operational performance, we were able to achieve three consecutive quarters with a reduction in our Net Debt figures, evidencing the resilience of the company's cash flow generation even in the current challenging economic conditions. This positive performance was helped by our close monitoring of investments and by a strict working capital management across our operations. Importantly, we have been able to refinance most of our 2013 debt maturities and have already started to implement measures to address the 2014 maturities. As regards our debt structure, we continue to seek the refinancing of our maturing debt and, in this context, we are discussing a more fundamental change to our maturity profile with our three largest creditor banks.
We are still far from the desired levels of consolidated profitability and industrial efficiency that we have set ourselves although progress has been made and, as such, I am confident we will achieve our objectives. In this context we have been implementing additional restructuring measures, including the decision to enter into negotiations with the employees' representatives in relation to the stoppage of our raw particleboard production in Horn (Germany) and the process for the potential sale of two plants in France. These measures, together with the on-going initiatives to improve our product mix and streamline our cost structure, are important steps to strengthen our market position and our financial health, while positioning the company for future growth. These actions, and others that we are undertaking, will help us shape a different, leaner company, by investing in the products and segments that have a higher value added and can contribute positively to our consolidated performance, and by focusing resources on our most efficient and competitive sites.
We continue to count on the commitment and dedication of our employees and on the support of all key stakeholders to achieve these objectives.
Rui Correia, CEO Sonae Indústria
With a total of 24 plants located in 6 countries on 3 continents, we are one of the largest wood-based panel producers in the world. At the end of 2013 our company had 4,170 employees worldwide and a consolidated turnover of 1,232 million Euros.
Wood-based panels are valuable alternatives to solid wood with some clear advantages, namely in terms of efficiency on the use of raw materials. Another particular advantage is their dimensional flexibility which (in contrast to solid wood) allows for the production of tailor-made sizes which can be adapted to the requirements of client applications. Hence, today we see wood-based panels replacing solid wood in an increasing number of applications.
Compared to other construction materials such as steel and concrete, wood has significantly lower adverse environmental impacts when used as building material. Wood-based panels thus have a positive effect on global warming through improved energy efficiency, which enables home owners to significantly reduce energy spend. Additionally, when used for construction purposes, wood-based panels function as carbon stores, thereby helping to mitigate CO2 emissions. At the end of their useful life, wood-based panels can be recycled and transformed into new products, in this way re-entering a continuous recycling process. The demand for wood and wood-based panels in the construction industry is therefore expected to steadily increase over time.
In times where extreme climate events like floods and droughts signal that climate change is much more than a theoretical scientific discussion, societies in general – and businesses in particular – are increasingly looking for ways on how to fight these new climate scenarios and realities.
Wood-based products have an important role to play in this reality. Sonae Indústria believes using more wood is a strong contribution to fight climate change, as it reduces CO2 sources and assures CO2 sinks and the storage of carbon. The reduction of CO2 sources results from the fact that wood is a material that stores energy and that it can replace other materials, in several applications, that require more energy – and emissions – in their production. Wood use can also increase CO2 sinks and storage of carbon, as the forest itself is a unique player in carbon sequestration from the atmosphere: as forests grow they absorb more CO2 while forest products keep the carbon stored during their service life. Using wood products encourages further forest growth, and an effective market for wood products provides a financial incentive to invest in active forest management. Additionally, when wood products are reused or recycled, carbon storage is extended during another service life, avoiding CO2 emissions to the atmosphere.
Since our foundation in 1959, we have undergone a long-term solid expansion process through a combination of organic growth and acquisitions. Throughout the 1990s, a number of acquisitions and significant investments in Greenfield projects were made in Brazil, Canada, South Africa, Spain and in the UK. In 1998, we expanded into Germany and France when we bought the German Group, Glunz. In 2006, we bought the assets of the German Group Hornitex as well as a particleboard plant in France (Darbo). In 2006 we also started the investment in a new particleboard line at the White River plant, in South Africa, which started operating during 2007. By 2007, our raw board production capacity had grown to more than 10 million m3 compared to just 2 million m3 in 1997.
After 2007, driven by the macroeconomic crisis, we were forced to step back, close plants that were unsustainable, divest if better owners were found for specific assets and become a more efficient and leaner company than before. In 2008, two production lines were stopped: one particleboard line in the Valladolid plant (Spain) and one MDF line in the Meppen plant (Germany). In March 2009, we closed our particleboard plants in Coleraine (UK) and in George (South Africa). Additionally, in June, we closed two plants in France, in St. Dizier and Châtellerault. In 4Q09 we closed the Kaisersesch plant (Germany) and in early 2010 we closed the Duisburg plant (also in Germany, which stopped production at the beginning of 2009). Over the course of 2009, we have also decided to sell our Brazilian operations, a transaction that was in line with the strategy of strengthening the balance sheet and which was facilitated by a consolidation process which was underway in that market. In addition, in April 2010, we sold the Lure plant (France) to Swedspan, a subsidiary of the INGKA Group (which also owns the IKEA Group).
More recently, in September 2012, we decided to definitively close the Knowsley pant in the UK due to difficulties in its reconstruction, following the fire accident occurred in that site in the previous year. This decision was taken after long delays in the reconstruction process, driven by the political and licensing difficulties, and also as a result of the prevailing low and unsustainable capacity utilization levels. In December 2012, we started negotiations with the workers representatives regarding the closure of Solsona plant in Spain, due to the strong crisis and the consequent drop in demand, particularly evident in the construction industry in this country. The negotiations were subsequently closed in January 2013, allowing for the definitive closure of that plant
During September 2013, we started negotiations with employee representatives and trade unions regarding a reduction of the particle board activities performed in Horn-Bad Meinberg plant, as a result of lower demand for particle board and industry overcapacity in the region. These negotiations with employees' representatives will only be finalised during the course of 2014.
The decision-making process for the several site closures bore in mind the widest perspective possible for the cost benefit analysis done on a case by case basis. This included the social and environmental impacts associated with each operation, both in present and the future.
The combination of the previously identified restructuring measures and asset disposals resulted in a reduction of our total production capacity by 3.5 million m3 since the maximum levels reached in 2007, bringing total installed capacity to 6.6 million m3 as at the end of 2013.
Our base products, typically denominated as "raw products" are comprised of:
More than 50% of our "raw board" production is then transformed into value added products such as melamine faced board, laminates, flooring and accoustic boards. These are used in a great variety of applications such as furniture, shelving, doors, packaging, interior decoration as well as kitchen and gardening utensils.
With the objective of creating a global and integrated offer, we launched in January 2011 the INNOVUS brand for decorative products. A brand designed as a platform for the development of partnerships with designers, architects, furniture manufacturers, distributors. INNOVUS sets a new path towards creativity, a new way of exploring colours, materials and textures, inspired in simplicity and design and always keeping an eye on the latest trends. A wide and up-to-date collection, available in different products, gives rise to a complete decorative range. Each décor has the finish that best complements it, according to the opinion of many of our customers and the careful selection of our team of experts. A complete decorative solution is also guaranteed by existing complementary products.
More information on the INNOVUS product range can be found at:
Woodforce is an engineered diced pellet that delivers exceptional polymer reinforcement to Polyolefin compounds. This new-patented technology offers many advantages including both weight and cost savings with design opportunities unrivalled in the natural fibre sector.
Woodforce is neither a by-product nor a residue; it is an industrially engineered wood based product that offers natural strength for plastics. As a dynamic wood-based product capable of acting as a mechanical reinforcer for thermoplastic polymers, Woodforce dramatically improves the targeted properties of plastic resin. It is a bio-sourced and renewable mechanical reinforcer that is compatible with an industrial process, has proven performance and favourable economics previously unavailable.
Woodforce can replace glass fibre for short fibre applications. Compared to agricultural fibres, Woodforce is an ideal solution from an industrial perspective. Non-seasonal, it has an efficient supply chain management and is extremely friendly, due to the perfect dosing of the dice pellets.
More information about this innovative product developed by the company can be found at:
The way in which we view ourselves as a company,, act and interact with each other and with our surroundings represents a corporate culture that promotes continuous improvement – always challenging ourselves to perform better – and is sustained by our Mission, Vision and Values.
To be recognised as a sustainable world leader in the wood-based panels industry, consistently providing our customers with the best value products, upholding the highest standards of service and promoting responsible business and environmental practices.
Our aim is to deliver the full potential of wood-based panels for the benefit of our customers, shareholders, employees, and society.
We base our operations on sound corporate governance, continuously improving the efficiency of our operations, actively promoting innovation and providing a motivated, safe and fair working environment.
Our values represent the foundation stone on which we build our business and they serve to guide our behaviour.
AMBITION We set challenging but attainable goals. We continuously challenge ourselves to go beyond previously established limits, focusing on becoming and remaining market leader and creating sustainable value for our shareholders.
KNOWLEDGE/ EDUCATION We believe that knowledge is one of the greatest sources of personal fulfilment and career development. We strive to attract motivated people and expect everyone to contribute ideas and be fully committed to the success of the company. We offer professional training and encourage active participation in academic programs.
RISK TAKING We do not accept the status quo. We search for alternatives, new ideas, new approaches and solutions to overcome barriers. We take calculated risks.
INNOVATION We believe that our long-term competitive advantage depends on our ability and determination to innovate, to achieve continuous improvements and increase our efficiency. We encourage our people to generate new ideas, we evaluate their ability to do so and we expect our managers to set an example. We encourage a risk-taking culture, within adequately managed degrees of risk exposure.
READY TO CHANGE We seek commercial solutions. Our employees and companies must be sufficiently flexible to accept new ideas, new ways of doing business and be ready to embrace changes, improve products, processes and respond to new organizational challenges.
AUTHENTIC We remain true to ourselves and are humble, consistent and coherent.
OPEN AND TRANSPARENT We hold ourselves accountable and expect others to do likewise. We foster a culture of openness, transparency and accountability and welcome the opinion of employees and outside observers as a means of obtaining an independent evaluation of our performance, our degree of compliance with best practices and our own values and principles. We strive to be responsive to stakeholder concerns.
COOPERATION We empower our people and expect them to take responsibility. We believe in cooperation and teamwork as a means of sharing know how, experience and responsibilities amongst our people, both in the execution of day-to-day tasks and when solving complex problems.
ETHICAL BEHAVIOUR Relationships with our stakeholders are founded upon respect, transparency, honesty and integrity and we do not tolerate bribery or corruption in any shape or form. We strive to preserve our independence from political pressures in order to speak and act freely, first and foremost in the interests of the company.
SOCIAL CONSCIENCE We are aware that our business activity impacts our social environment and that we have a responsibility to support local communities. We may become involved with social institutions or charities, support cultural, sporting or other activities as part of our corporate responsibility and encourage active participation of our people at all levels of our organization.
NON-DISCRIMINATION We are an equal opportunities employer. We do not accept any form of discrimination in the workplace be it related to age, gender, race, social background, religion, sexual orientation or physical ability. Our career development and reward systems are based on merit.
HEALTH AND SAFETY The physical and mental welfare of our people is of paramount importance to us and we strive to provide a safe and healthy work environment for all. We expect all employees to comply with safety guidelines and practices.
ENVIRONMENTAL AWARENESS We are conscious of the environmental footprints we leave behind and consider that the responsible management of environmental issues is critical to our business success. We are committed to the concept of eco-efficiency and to sustainable sourcing of raw materials and actively respect these principles in all our business practices.
During 2011 we have dedicated special attention to define and align the four strategic directions that we want to pursue in the medium to long term, to significantly improve our performance, namely:
Increasing development and acceptance of our global INNOVUS collection
4) Develop competitive integrated sites with secure wood and chemicals supply Implementation of initiatives to increase the flexibility of raw material usage.
We have since 2011 been implementing the necessary initiatives that will lead us on the defined strategic path, towards our ambition to grow and run a profitable business with a commitment towards responsible business practices and sustainable value creation for our shareholders.
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Tafisa Canada was the laureate of the prestigious Phenix Award for excellence in environmental protection and sustainability – Business Category, Environmental Achievement, Technology, Process or Practice – awarded by the Quebec Ministry of Sustainable Development, Environment, Wildlife and Parks, the Quebec Ministry of Finance and Economy, Eco Enterprises Quebec and the Quebec Environment Foundation.
Tafisa Canada was chosen, by a panel of experts, from a list of 35 companies for the success of its landmark wood recycling technology ("Rewood"). Following a \$5.4 million upgrade, Tafisa Canada was able to increase the post-consumer recycled wood fibre content in its panel production, enabling the company to recycle 244,000 tons of diverted wood each year – the equivalent of about two million trees.
The Phenix Award laureates – which also included municipal, non-profit and educational/youth categories – were announced on September 25, 2013 during a ceremony in the National Assembly in Quebec City.
Tafisa Canada was also chosen by the public for the Phenix People's Choice award. In the spring of 2013 3,500 people voted on-line for their favourite project. "Rewood" by Tafisa Canada was the project that received the most votes and was thus awarded the prize. ''On behalf of Tafisa, I would like to take this opportunity to thank the environmental community and the public for their support," said Louis Brassard, Tafisa Canada Chief Operating Officer, upon receiving the awards. Brassard, explained that Tafisa Canada is one of the few plants in North America that are re-using wood to this extent. "We're very proud of our company's achievements to renew urban wood waste that would otherwise go to a landfill, eventually releasing harmful carbon emissions back into the air.
| 15 February 2013 | Announcement of changes in the composition of the Executive Committee and proposal of changes in the composition of the Board of Directors |
|---|---|
| 27 February 2013 | FY12 consolidated results announced |
| 9 May 2013 | 1Q13 consolidated results announced |
| 31 July 2013 | 1H13 consolidated results announced |
| 17 September 2013 | Announcement of negotiations regarding the potential reduction of activity in Horn plant, Germany |
| 1 November 2013 | Resignation of a member of the Board of Directors |
| 14 November 2013 | 9M13 consolidated results announced |
During 2013, the world economy continued to face high levels of uncertainty and the recovery of economic activity was only achieved in certain regions. In particular, the euro area continued to be impacted by sluggish economic activity, which was particularly felt in the countries of Southern Europe, as the additional political and fiscal measures taken had harsh consequences over private consumption levels, especially in the category of durable products. A different environment was felt in Northern Europe countries, which began to show some signs of the much-awaited recovery, with improved patterns of private household's investments in the construction sector. According to OECD, "a certain degree of optimism is returning to the euro area"1 . Signs of improvement and upwards trends registered in GDP growth in the region, considered to be slow but positive, evidenced that the recession in Europe could be coming to an end.
In North America, after the implementation of important fiscal consolidation measures, the Canadian economy continued its GDP growth patterns, led by exports and investments activities. In the United States, the economic growth was considered modest, and special attention is being paid to the country's budget and public debt level following the political impasse that lead to government shutdown. Nevertheless, GDP growth was registered during 2013, with favourable consumption patterns towards durable goods, backed by decreasing unemployment rates and somewhat less restrictive lending conditions.
South African economy had a slow start in 2013, but the strong rand depreciation and consequent recovery of the export market allowed the economic activity to pick up in the remaining of the year, although still at low GDP growth rate when compared to the recent historical performance. The country also suffered during 2013 the loss of its ex-president Nelson Mandela and faced a wave of strikes caused by demands for higher wages, a reflection of some social pressure felt in the country.
In terms of environment in the relevant consumer industries for Sonae Indústria, the activity in the construction sector, which was highly impacted in previous years by the sovereign-debt crisis and the associated impacts in terms of restrictive credit conditions, has started to show signs of improvement in some countries. This contrasts with the still decreasing trends registered in the furniture sector. The evolution per geography where Sonae Indústria is present was quite different, as, whilst in the Iberian Peninsula and France housing permits continued to show strong y.o.y. decreases, in Germany, United States and South Africa, the construction market started to show improvements, as evidenced by the positive evolution in terms of new house construction permits when compared to the previous year.
According to the estimates released by the European Panel Federation (EPF) in June 20132 (the latest available data), the demand faced by the European wood panels sector during 2013 was relatively stable, but at historically low levels, as it continued to be affected by a disappointing performance of both the furniture and construction industries. This is a reflection of the current European economic context and the stagnant consumption behaviour, especially for durable goods.
Analysing the performance by product, the European particleboard production in the EPF member countries, after the 5.5% drop experienced in 2012, continued to show low levels of production activity during 2013. Nevertheless, it is estimated that total production may have, for the year as a whole, slightly increased (+1.5%) when compared to 2012, which should translate into an overall production figure slightly above 29 million m3. The behaviour of the production volumes is aligned with the estimated performance of the demand, as measured through the consumptions levels registered in the countries covered by the analysis.
1 OECD, "Economic Challenges and Policy Recommendations for the EURO Area", February 2014
2 EPF, Annual Report 2012-2013, June 2013
In terms of MDF, the value of production in Europe is estimated to have contracted by 6% in 2012 to proximately 11 million m³. For 2013 and in terms of the European market as a whole, MDF consumption is forecasted to remain relatively stable (-0.4%) when compared to the previous year.
European production of OSB contracted moderately 2.3% in 2012 (-2.3%), but still reached a total production level in excess of 3.5 million m³. The 2013 performance should be similar to the one registered in 2012.
Contrasting with the relatively stable evolution in the European markets, the positive business climate experienced in the United States during 2013 has had positive effects in the construction activity and, consequently, in the demand of wood based panel products in the region. The U.S. housing market finished 2013 on a positive note, contrasting with the disappointing evolution registered in the year in terms of housing starts in Canada. Notwithstanding this, estimates released by RISI3 indicate that total North America particleboard consumption in 2013 was 3.1% above the value registered in 2012. Similar to the evolution on the particleboard segment, total consumption level of MDF during 2013 in region is estimated to have registered a 7.9% y.o.y. increase, while OSB consumption is estimated to have grown even more (up by 9.4%, when compared to 2012).
The performance of South Africa wood based panels industry continues to follow the global performance of the economy in general, and the construction and furniture industries in particular. During 2013 it estimated a slight decline in the overall consumption volumes for wood based panels, when compared to the value of 2012. Statistics for furniture production in 2013 registered an increase of 2.9%4 y.o.y.
Although far from the peak historical values of 2007, preliminary figures released by the European Producers of Laminate Flooring (EPLF) indicate that during 2013 a small increase in the total sales of flooring may have occurred (+0.7%5 against the comparable period in 2012). However if the evolution is considered just in terms of the Western European countries, total 2013 sales are estimated to have actually gone down against 2012 by approximately 2.4%, an evolution which is consistent with the aforementioned disappointing trends experienced in the furniture and construction industries in Europe.
3 RISI, North American Wood Panels Forecast - 5-Year, December 2013
4 Innomis, South Africa furniture production, value evolution, y.o.y., February 2014
5 EPLF, Preliminary figures, World Sales of Flooring, evolution y.o.y. , February 2014
* transferring UK values to "discontinued operations", given the stoppage of production activity in the region during the 3Q12
Consolidated turnover for Sonae Indústria was 1,232 million Euros in 2013, 7% below the 2012 level, mainly driven by the reduced industrial footprint and the prevailing lower demand in most European markets. In addition, the devaluation of both the Canadian dollar and the South African rand led to a lower contribution from both operations to the consolidated turnover. This negative exchange rate effect has more than off-set the improved sales performance, in local currency, achieved in both regions. In terms of breakdown, the reduction in the consolidated turnover was due to a combination of reduced sales volumes (7.7% below 2012) and slightly lower average selling prices (-0.8% when compared to 2012).
In the 4Q13, compared to same quarter of 2012, consolidated turnover also decreased by 7%, with the main negative contribution coming from Northern Europe, basically as result of the stoppage of Horn PB press last September.
In consolidated terms, pressure in wood and thermal energy costs were the main contributors to an increase in the average variable cost per m3 produced of the company in 2013, up by 0.9% when compared to the previous year. This increase was partially offset by improvement in chemicals, electricity and maintenance cost of the group. On a quarterly basis, and when compared to previous quarter, unitary variable cost were up by 1.1%.
Importantly, Sonae Indústria was able to achieve a reduction in total fixed costs, on a comparable basis, i.e., without the contribution of the Knowsley and Solsona plants, by approximately 5% in the year, representing a reduction of 13 million Euros when compared to the 2012 value.
It is worth noting that, in 2013, the average capacity utilization index of the plants improved to 73.1% (up by 0.5 p.p. when compared to the average level of 2012). This was achieved by concentrating production in the most efficient sites, by adjusting to the lower levels of market demand and thanks to the improved performance of our OSB line in Nettgau that has been registering record levels of production, benefiting from a context of strong market demand. It should be noted that on a comparable basis, i.e., excluding idle production lines, the average capacity utilization index of the group increases to 74.8%.
Sonae Indústria Recurrent EBITDA was of 80 million Euros, which translated into a recurrent EBITDA margin of 6.5%, down by 1 p.p. when compared to 2012. The non recurrent EBITDA items totalled 15 million Euros in the year and were mainly related with redundancy costs (9.4 million Euros, 5 of which related with Solsona
plant) and additional costs associated with discontinued sites (5 million Euros). As result of these developments, total EBITDA6 for 2013 reached 65 million Euros.
**Turnover includes intercompany group sales
Similar to that experienced in 2012, the Southern Europe performance was negatively impacted by the prevailing challenging macroeconomic conditions. The restrictive credit conditions and the high marginal tax rates over households' disposable income has strongly conditioned the families' investments in durable goods, negatively impacting the demand for furniture goods across all countries in the region.
The above considerations are confirmed by the recent construction statistics released by the competent authorities, with new housing permits granted in Iberia showing strong y.o.y. decreases (-30.4%7 in Portugal and -22%8 in Spain). In relation to France, the activity in the construction sector also showed signs of decline, with new housing permits decreasing by 11%9 against the same period in 2012. Notwithstanding these challenging market conditions, Sonae Indústria was able to partially compensate the lower sales volumes in Southern Europe countries with growth in the export activity to other regions.
In terms of 2013 financial performance, the following key items are worth highlighting:
6 EBITDA = EBIT + D&A + (Provisions and impairment losses - Impairment losses in trade receivables + Reversion of impairment losses in trade receivables)
7 Source: Instituto Nacional de Estatística, January 2014 ("Nova habitação residencial", cumulative YTD evolution until November)
8 Source: Ministierio de Fomento, January 2014 (cumulative YTD evolution until November)
9 Source: Service économie statistiques et prospective (Ministière de l'Écologie, de l'Energie, du Développement durable et de l'Aménagement du territoire), January 2014 (cumulative YTD evolution until December)
**Turnover includes intercompany group sales
Contrasting to the Southern Europe market performance, new house construction permits in Germany were up by 12.1%10 in 2013, evidence that the construction market keeps recovering, which is due to a combination of improving financial market conditions and low interest rates. However, the better performance in the construction sector was not accompanied by furniture industry, where a situation of declining sales still prevailed in the year.
Driven by the above market conditions, the following key evolutions were experienced in Northern Europe during 2013:
10 Source: German Federal Statistics Office, January 2014 (cumulative YTD evolution until November 2013)
associated with correction of over accrued costs, 4Q13 Recurrent EBITDA would have just deteriorated y.o.y. by 0.7 p.p.
**Turnover includes intercompany group sales
In North America, the slow but steady positive evolution of the U.S. economy led to an increase in the level of housing starts in 2013 (up by 18%11 y.o.y.). This positive performance of the U.S. market more than compensated the decline experienced, during 20013, in terms of Canadian housing starts (a reduction of 3.6%12 when compared to same period of the previous year).
A similar trend to the one prevailing in the U.S. market was observed in South Africa, which reported a y.o.y. increase in residential building value permits (up by 9.2% 13 ), a positive sign for the recovery in construction activity that is expected for the country.
In terms of 2013 financial performance, the following items should be highlighted for these regions:
11 Source: RISI, January 2014 (cumulative YTD evolution until December 2013)
12 Source: Canada Mortgage and Housing Corporation, January 2014 (cumulative YTD evolution until November 2013)
13 Source: Statistics South Africa, January 2014 (cumulative YTD evolution until November 2013)
• In spite of the negative contribution of the exchange rate movements occurred in both currencies (South African Rand and the Canadian Dollar), which was particularly evident in the 24% depreciation of the Rand in relation to the Euro during 2013), the segment's Recurrent EBITDA margin during 2013 improved to14.3%, up by 2.1 pp when compared to 2012.
It should be highlighted that our North America plant was able to re-establish its full supply situation following the tragic railway accident occurred on July 6 at centre of Lac Mégantic and notwithstanding this tragic event was able to deliver a good profitability level during 2013 year.
| P&L ACCOUNT | 2013 / | 4Q13 / | |||||
|---|---|---|---|---|---|---|---|
| Million euros | 2012* | 2013 | 2012* | 4Q12* | 3Q13 | 4Q13 | 4Q12* |
| Consolidated turnover | 1,321 | 1,232 | (7%) | 316 | 297 | 293 | (7%) |
| Southern Europe | 518 | 485 | (6%) | 125 | 112 | 118 | (5%) |
| Northern Europe | 572 | 528 | (8%) | 132 | 132 | 122 | (8%) |
| Rest of the World | 278 | 261 | (6%) | 69 | 65 | 61 | (11%) |
| Other operational income | 34 | 29 | (16%) | 13 | 5 | 10 | (24%) |
| EBITDA | 97 | 65 | (33%) | 26 | 16 | 14 | (45%) |
| Recurrent EBITDA | 99 | 80 | (19%) | 23 | 19 | 17 | (26%) |
| Southern Europe | 25 | 15 | (41%) | 4 | 1 | 2 | (49%) |
| Northern Europe | 41 | 28 | (31%) | 9 | 8 | 6 | (30%) |
| Rest of the World | 34 | 37 | 9% | 10 | 10 | 8 | (15%) |
| Recurrent EBITDA Margin % | 7.5% | 6.5% | -1.0 pp | 7.3% | 6.5% | 5.8% | -1.5 pp |
| Depreciation and amortisation | (77) | (75) | 3% | (20) | (19) | (18) | 6% |
| Provisions and impairment Losses | (13) | (32) | - | (12) | 1 | (40) | - |
| Operational profit | 12 | (39) | - | (3) | (1) | (44) | - |
| Net financial charges | (51) | (59) | (15%) | (13) | (13) | (15) | (16%) |
| o.w. Net interest charges | (28) | (37) | (29%) | (8) | (9) | (10) | (27%) |
| o.w. Net financial discounts | (15) | (15) | 1% | (4) | (4) | (4) | 14% |
| Profit before taxes continued operat. (EBT) | (39) | (98) | - | (16) | (15) | (58) | - |
| Taxes | (16) | 19 | - | (11) | (1) | 25 | - |
| o.w. Current tax | (6) | (7) | (30%) | (1) | (2) | (2) | (29%) |
| o.w. Deferred tax | (10) | 27 | - | (9) | 0 | 27 | - |
| Profit / (loss) from continued operations | (55) | (79) | (44%) | (27) | (16) | (34) | (24%) |
| Profit / (loss) from discontinued operations | (45) | - | - | (4) | - | - | - |
| Losses (income) attrib. to minority interests | (1) | (1) | 26% | (0) | (0) | (0) | (22%) |
| Net profit/(loss) attributable to Shareholders | (99) | (78) | 21% | (30) | (16) | (33) | (9%) |
*Transferring UK values to "discontinued operations", given the stoppage of production activity in the region during the 3Q12
Consolidated EBITDA for 2013 was down by 32 million Euros against 2012, mostly as a result of reduced level of activity and of material non-recurrent cost incurred in the year (15 million Euros), related with additional restructuring measures taken by the company (notably cost with the closure of Solsona plant in Spain). The EBITDA performance of 2013 was also negatively impacted by the negative exchange rate movements of both CAD and ZAR in the amount 4.7 million Euros. It should be highlighted that the value of non-recurrent items includes a positive contribution from the sale of non-core assets, namely the sale of two real estate properties: Duisburg (Germany) and George (South Africa).
Depreciations charges for 2013 were of 75 million Euros, 3% lower than in 2012. Despite this effect, the lower EBITDA generation and asset impairment registered mainly in France (for both tangible assets and goodwill), led to an EBIT loss of 15 million Euros in the year.
When compared to 2012, Net Financial charges increased by 8 million Euros (+15%), basically due to a higher average cost of debt that stood at 5.5%, 1.1 p.p. higher than the average cost of 2012. This evolution was fully driven by the increase in spreads prevailing in Portugal and Spain, as Euribor rates remained at historically low levels.
During the last quarter of 2013, additional deferred tax assets in the amount of 27 million Euros were booked: 8.4 million Euros are associated with the operations in Portugal and Germany and 16.4 million Euros are a direct impact of the "Land and Buildings" revaluation. The value of current tax charges registered in 2013 was 1 million Euros higher than the value of 2012.
The combination of the above factors led to a consolidated Net loss from continued operations of 79 million Euros, a deterioration of 24 million Euros when compared to 2012. It is, nevertheless, worth noting that, driven by the impact of discontinued operations (during 2012 the company booked an important impairment related with the closure of the Knowsley operations), total Net results improved by 21% y.o.y.
In cumulative terms, since the beginning of 2013, Additions to Fixed Tangible Assets reached 19 million Euros, which compares with 35 million Euros during the same period in 2012. The majority of investments were associated with maintenance and health & safety improvements and were mostly allocated to the Southern Europe region.
During 2013 it was also booked an amount of approximately 3.5 million Euros in "Advance payments to fixed assets suppliers" related with planned investments in recycling facilities of our German operations.
| BALANCE SHEET | |||
|---|---|---|---|
| Million euros | 2012 | 9M13 | 2013 |
| Non current assets | 936 | 868 | 940 |
| Tangible assets | 806 | 744 | 811 |
| Goodwill | 92 | 90 | 82 |
| Deferred tax asset | 24 | 23 | 34 |
| Other non current assets | 13 | 11 | 13 |
| Current assets | 329 | 348 | 302 |
| Inventories | 130 | 131 | 123 |
| Trade debtors | 141 | 156 | 121 |
| Cash and cash equivalents | 23 | 28 | 27 |
| Other current assets | 34 | 33 | 30 |
| Non-current assets held for sale | 4 | 4 | 4 |
| Total assets | 1,269 | 1,220 | 1,246 |
| Shareholders' Funds | 135 | 77 | 127 |
| Equity Holders | 136 | 78 | 128 |
| Minority interests | (1) | (1) | (1) |
| Liabilities | 1,134 | 1,143 | 1,119 |
| Interest bearing debt | 688 | 707 | 705 |
| Long to medium term | 492 | 251 | 275 |
| Short term | 196 | 456 | 430 |
| Trade creditors | 178 | 179 | 156 |
| Other liabilities | 268 | 257 | 257 |
| Total Shareholders'Funds and liabilities | 1,269 | 1,220 | 1,246 |
| Net debt | 665 | 679 | 678 |
| Net debt to LTM recurrent EBITDA** | 6.7 x | 7.9 x | 8.4 x |
| Working Capital | 93 | 108 | 88 |
Under the scope of IAS 16, Sonae Indústria has changed in 2013 the accounting treatment of tangible assets "Land and Buildings" from a cost model to a revaluation model. To reflect the fair value of these items in the company's accounts, an external company has performed a valuation analysis on the company's assets, which resulted in an increased value of 130 million Euros. A revaluation reserve was booked under Shareholder's Funds for the amount of 93 million Euros, net of the corresponding deferred tax liabilities. It should be noted that the depreciation amount for 2013 was not impacted by this revaluation.
Total Shareholder's Funds were negatively impacted by the restructuring impairments registered in the year and by the accounting impact associated with the consolidation of the Canadian and South African businesses using the lower CAD and ZAR exchange rate. These FX movements translated into a negative combined effect of 19 million Euros in the year. The previous negative effects were, nevertheless, almost fully offset by the aforementioned revaluation reserve, resulting in a net decrease of the Shareholders Funds by 8 million Euros when compared to the end of 2012.
At the end of 2013 working capital of the company was further reduced by 5 million Euros when compared to 2012 year end. This positive evolution is partly, a result of lower activity levels registered throughout the year, a direct consequence of a reduced industrial footprint, but also due to an improvement in the average collection period, reduced by three days.
On yearly basis, net debt increased by 13 million Euros, to 678 million Euros at the end of 2013, but was approximately stable when compared to the end of the 3Q13, a reflection of the company's continuous focus in the improvement of its cash flow generation, even under the current prevailing economic and market challenges.
The combination of the reduced level of recurrent EBITDA with the slightly higher level of Net Debt lead to a deterioration of the Net Debt to Recurrent EBITDA ratio to 8.4x.
Sonae Indústria, SGPS, SA, as the holding company of the Sonae Indústria Group, defines the strategic guidelines for the Group, actively manages shareholdings and monitors the business activity of its subsidiaries. In addition, the holding structure is responsible for the functioning of the group finance activities, allocating funds and managing the treasury requirements of its subsidiaries.
Sonae Indústria SGPS SA, as the holding company of the Group, on an individual accounts basis, generated a negative Net Result of 150,763,751.85 Euros for 2013.
The Board of Directors will propose at the Shareholders Annual General Meeting to transfer this negative Net Result to retained earnings.
For 2014 we expect a stabilisation or, in certain regions, even a marginal improvement, of the trading environment for the industry as a whole. This evolution, together with the implementation of the announced restructuring measures and disposals, should allow us to deliver an underlying financial performance above that registered during 2013, excluding the one off costs arising from the restructuring processes.
In terms of wood costs, we continue to expect a challenging environment in Europe, with the prevailing unbalances between demand and supply continuing to have impacts over prices and availability of wood. We are taking measures to address this via continuously improving our efficiencies and adapting the wood mix consumed to the specific market constraints.
We will continue to pursue our defined strategy of concentrating our production in the most efficient plants, improving our sales mix with higher share of value added products, continuously seeking for operating efficiencies and productivity improvements. In terms of investments, we will execute the defined plan of improving our asset base, by upgrading recycling and melamine equipments coherent with the market positioning we wish to attain in the value added segments and with the sustainable best practice of increasing the usage of recycled material in out plants.
As we have successfully achieved last year, we expect to be able to refinance most of the upcoming debt maturities in 2014 and to adjust the profile of our debt to estimated cash flow generation. With the continuous support from our key stakeholders, we remain confident that we will be able to successfully execute the defined strategy, significantly improving the competitive position of the company and better positioning it for the next phases of the economic cycle.
We will continue to develop long term career opportunities and talent management, as these are key priorities for our company. Investing in training and improving our people's capabilities is an important step for the successful implementation of our strategy, together with the continuous commitment to ensure a healthy and safe working environment for all employees.
Sonae Indústria, SGPS, SA is a company listed in the NYSE Euronext Lisbon, with a majority shareholder – EFANOR – that currently controls approximately 51% of the share capital.
Sonae Indústria was a subsidiary of Sonae, SGPS until 2005 when a spin-off from that company took place, thus allowing the company to focus exclusively on its core competency: the production of wood-based panels. Through sound corporate governance rules, efficient risk management and genuine concerns for the
environment and the safety of our people, our aim is to be recognized as a sustainable world leader in the wood-based panels industry.
The share price performance of Sonae Indústria is typically affected by macroeconomic cycles, as the financial performance of the company is highly dependent on the evolution of both the construction and the furniture industries. Over the past few years, the Sonae Indústria share price may have also been affected by the sovereign debt crisis in Europe, namely as a result of the increased risk aversion of foreign investors towards investments in Portuguese securities.
Despite the significant macroeconomic and financial challenges, the share price of Sonae Indústria increased by approximately 15% during 2013. The highest daily turnover in Sonae Indústria shares was registered on January 23st, the same day that Portugal returned to the long-term debt markets, issuing 2.5 billion Euros and lowering the cost of borrowing to less than 5%.
The minimum share price during 2013 was registered on July 3rd (0.45 Euros per share) immediately after the start of the political crisis in Portugal, a clear demonstration of the stock's sensitivity to the overall performance of the country economic, financial and political performance, notwithstanding the geographical diversity of Sonae Indústria's manufacturing and commercial operations. The maximum share price in 2013 was reached on November 11th, following the decision of the ECB to lower the benchmark rate by 25 basis points.
Importantly, in terms of liquidity, Sonae Indústria's share had an average turnover of 413,413 shares per day during 2013, more than duplicating the level registered during 2012.
| ISIN Code | PTS3P0AM0017 | |||
|---|---|---|---|---|
| Bloomberg Code | SONI | |||
| Reuters Code | SONI.LS | |||
| 2011 | 2012 | 2013 | ||
| Share Capital | 700,000,000 | 700,000,000 | 700,000,000 | |
| Total number of shares | 140,000,000 | 140,000,000 | 140,000,000 | |
| Net Results | -57,817,393 | -98,876,879 | -78,045,917 | |
| Net Results per share | -0.41 | -0.71 | -0.56 | |
| Dividends per share* | 0.00 | 0.00 | 0.00 | |
| Prices | ||||
| Year High | 1.93 | 0.71 | 0.66 | |
| Year Low | 0.50 | 0.39 | 0.45 | |
| Year Average | 1.23 | 0.56 | 0.56 | |
| Share price as at 31-Dec | 0.64 | 0.49 | 0.56 | |
| Market Capitalization as at 31-Dec | 88,900,000 | 68,460,000 | 78,820,000 | |
| Average trading volumes per day (shares) | 162,181 | 150,479 | 413,413 |
* distributed in the following year
Sonae Indústria, SGPS, SA did not acquire or sell any own shares during the year and as at 31st December, 2013, the company did not hold any own shares.
On January 6th of 2014 Sonae Indústria, SGPS, SA indirect affiliate Isoroy SAS following an offer received for the businesses and assets of the Auxerre and Le Creusot plants located in France, which includes the transfer of all the employees dedicated to those businesses, began the process of informing and consulting its employee representatives in relation to such potential transaction, as well as the subsequent downsizing of the headquarters located in Antony, Paris.
The Board of Directors has set a target to distribute to its shareholders 50% of the company's yearly profits.
The actual dividend pay-out ratio is proposed by the Board of Directors each year, taking into consideration the sustainability of the company's capital structure and the available financing sources, as well as the current investment plans.
Sonae Indústria credit risk derives mainly from account receivables items associated 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 most reduced payment terms possible, while maintaining the level of debtors' impairments as low as possible.
In order to mitigate credit risk related with potential customers defaulting on payment of outstanding receivables, Group companies have:
To foster the sharing of experiences, the alignment of procedures and practices and to ensure the enforcement of sound controlling rules, Sonae Indústria promotes, on a regular basis, the "Customer's Credit Risk Management Forum".
In addition to its operating activities and the related trade debtor balances, Group companies have other financial assets, which are mainly associated with its cash management activities and with deposits in financial institutions. As a result of these bank movements and balances, credit risk arises from the potential counterparty default by the applicable financial institutions. This risk is, nevertheless, considered as low due to the limited amounts typically involved in bank deposits and to the creditability of the financial institutions used by group companies.
Due to the significant proportion of floating rate debt on Sonae Indústria's consolidated Statements of Financial Position 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 positive 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 certain interest rates derivatives, solely aimed at hedging existing risk exposures and to only to the extent that the risks and valuation of such derivates can be accurately assessed by the company. Sonae Indústria subsidiaries do not engage in interest rate derivatives for trading, speculative or profit making purposes.
As a geographically diversified Group with subsidiaries spread throughout three different continents, Sonae Indústria is exposed to foreign exchange risk. Consolidated Statements of Financial Position 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, thus mitigating exchange risks.
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 rate agreements contracted by the subsidiary exposed to such 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 transactions would 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 "accumulated other comprehensive income".
Liquidity risk management in Sonae Indústria aims to ensure that the Company can obtain, on a timely basis, the financing required to properly carry on its business activities, implement its strategy and meet its payment obligations when due, under the most favourable terms and conditions.
For this purpose, Liquidity Management at the Group comprises:
It is Sonae Indústria's policy to exclude consolidated financial covenants from its loan agreements that could result in the early repayment of loans. This policy takes into account the unpredictable cyclical nature of the wood based panels business which strongly influences the financial ratios at the different stages of the business cycle.
Sonae Indústria and its subsidiaries are required, and actively promote, respect for applicable laws in countries and regions where they operate. Changes in these legal environments can result in changes or restrictions to the present conditions of exploitation and can lead to increased costs.
Sonae Indústria, SGPS, SA is and intends to continue being recognised for the way it abides by the rules and values of competition based on merit, the force of free markets and unrestricted respect for the consumer. In order to achieve that goal, measures are in place to reinforce the promotion and dissemination of the existing compliance initiatives within the Group. Such measures include training for employees in order to ensure that all parts of our organisation, across all geographies, have a deeper and more complete awareness of and a more rigorous respect for their legal obligations.
The production of wood-based panels is an industrial activity with a significant operational risk, which arises from eventual fire and explosion accidents. Consequently, operational risk management is a key concern of the company and we are active in the implementation of standards and best practices and in the selection of systems that are capable of reducing industrial risks.
For a detailed description of these risks and the initiatives undertaken to mitigate them, please refer to the Corporate Governance Report.
At Sonae Indústria, we believe that people are the support to drive change towards the future. We care for the safety and well-being of our employees and we strive to support their personal and professional development so that they fulfil their own career goals. Each employee is an individual and it is this diversity that makes up the richness in Sonae Indústria's culture. We have expressed our commitment towards our people in the corporate values of Cooperation, Non-discrimination and Health and Safety..
At the end of 2013, Sonae Indústria in total employed 4,170 people in 8 different countries. The reduction against the end of 2012 is mostly explained by the Solsona plant closure.
The most representative age group at Sonae Indústria corresponds to ages between 45 and 54 years old. It should also be noted that women represent approximately 16% of the total workforce of the company.
Number of Employees & Productivity
1) FTE's Excluding Trainnes
2) Hornitex and Darbo
Over the last years, productivity has been strongly increasing, particularly driven by the restructuring process that we went through.
Absenteeism has been consistently decreasing over the last years, but experienced a small increase in 2013 mainly driven by Germany, due to illness leaves, and by corporate areas, due to maternity/paternity leaves.
In spite of the reduced average number of training hours per employee registered in 2013, when compared to previous year, training continues to be a priority for Sonae Industria. Past years continuous improvement training programs, supported by external entities, have now been concluded and the focus has now been moved to internal training activities and best practices sharing in specific forums.
With the objective of developing and improving the characteristics of our products and to build a Centre for Research, Development and Innovation, we have developed a partnership with two Portuguese universities, Faculdade de Engenharia da Universidade do Porto (FEUP) and Escola Superior Tecnológica de Viseu (ESTV), with the support of ARCP - Associação Rede de Competência em Polímeros 14 (an association. This partnership provides the basis for product and process innovation in the group and encourages the proximity between our company and the university community. At the moment, and within a competences framework defined, the main objectives of our research centre are the following:
With the above objectives in mind, Sonae Indústria, though one of its subsidiaries, Eurosinas, has as an example, the following facilities and equipments in the university's campus:
emissions production Analysis of formaldehyde
16 Wood Based panels
14 Association Network for Competence in Polymers
15 Volatile organic compound emissions
With this partnership Sonae Indústria has privileged access to equipments and techniques, knowledge of the researchers, development of new technologies and methodologies and a permanent access to high value technicians that could be potentially be integrated in company.
Irrespective of nationality, at Sonae Indústria most of our people have a common inherent desire to improve the conditions of those in need in the local communities where we are present. In some specific situations we become involved in social institutions or charities, and we encourage our people to actively participate in these initiatives.
In Portugal, a voluntary project was launched by Sonae Indústria in 2008, entitled "T-shirt", which gives all company employees the opportunity to spend as much as three working days every year doing volunteer work. These days are funded by the company with the aim of encouraging employees to engage in local communities and projects.
Education and children's wellbeing is an important part of our commitment. In this specific "t-shirt" program, Sonae Indústria's volunteers visit local schools and promote the virtuous cycle of wood to children from preschool to 4th grade. By starting at an early age, children will grow up with an understanding of the need for and advantages of recycling. With this aim in mind, we printed a 40 page soft covered book were "Woody" tells the story of how he needs the forest and the trees to survive. Woody becomes, as such, a tool to teach children about the important role trees play in the survival of the planet and encourages them to be more aware of the environmental matters and the impact they may have on our daily lives. This project is a reflection of the company's commitment to appeal to the reflection on the impact of the forest in everyday life, and specifically on the environmental, social and economic levels, portraying, for example, life in the forest, the economic activities associated with the forestry sector, the use in day-to-day products and services originating from the forest and also promoting the recycling of wood.
During 2013 we visited 54 classes in 14 schools near four of our plants. In total we reached 1204 students over a period of 7 months. Three of these schools also received an offer of a book collection for their school libraries, kindly donated to us by the Belmiro Azevedo Fundation.
During the month of December the usual toy collection for Christmas was held. The toys collected at the units were then offered to local institutions.
With this initiative, similar to the past few years, Sonae Indústria aims to continue its environmentally responsible attitude, thus helping to protect the forest heritage, contributing to the sustainability of natural resources and drawing attention to the importance of national forests. In addition, it challenges economic players to jointly promote more and better forests, so that it may generate more value, both from environmental and social-economical perspectives.
In 2013, 114 employees, family and friends from five of Sonae Indústria units were involved in the reforestation process in Penacova, to support Floresta Unida, an organization whose target is to plant 400 million trees in 30 years and protect 150 million others.
Tafisa Canada continues to be an active supporter of various activities and endeavours in Lac-Mégantic and the surrounding communities. Tafisa Canada and its employees are major contributors to the Fondation du centre de santé et de services sociaux du Granit (CSSS du Granit, Health and Social Services Foundation). Since 2003, over \$180 000 have been donated to the development of services dedicated to the health and well-being of the community.
It must also be mentioned the events that took place on July 6, 2013 in Lac-Mégantic, which have changed the face of the community. The CSSS du Granit played a major role in helping the individuals affected by the tragedy by providing essential medical care in the hours that followed the events as well as vital emotional support in the aftermath by ensuring that mental health professionals were available to persons seeking help in dealing with loss. Lac-Mégantic also received encouragement and financial support from around the world. Several of our business partners and customers donated to the Canadian Red Cross and the Fondation Avenir Lac-Mégantic to support the community. Many of our employees and their families devoted and volunteered their time to help the people in the community that were impacted by the events of last summer.
Helping the community preserve a certain normalcy was also essential. Tafisa Canada made sure to continue to support long-standing activities and events that provide people with the opportunity to get together and have fun as well as promote the region through tourism. Tafisa Canada also made significant contributions to various sports activities involving children and employees.
In South Africa, our company Sonae Novobord engages in several actions, not only through financial assistance, but also with active partnerships, promoting and participating in awareness campaigns. The main focuses are Education (including bursaries and skills), Worldwide Fund for Nature (WWF) and providing education initiatives to teachers. During 2013, and integrated in the global program of the company, the following activities were carried out:
The management of CSI initiatives is the responsibility of a defined committee that is chaired by an independent consultant, and the remaining members being Sonae Novobord employees.
During 2013, several actions, best practices and improved procedures were implemented across our plants, with the objective of continuously improving Sonae Indústria's safety indicators.
The figure below represents the country-wide and global Lost Workday Cases (LWC) rate17:
17 Lost Workday Cases: Any occupational injury or illness that prevents the employee from reporting to work on any subsequent scheduled shift. Fatal injuries and illnesses are LWCs regardless of the time between injury and decease in length of the illness.
LWC Rate = (Number of LWC x 200,000) / Number of hours worked calculated on a 200,000 employee-hour base (100 full-time employees working 50 weeks, 40 hours per week).
The overall LWC rate of Sonae Indústria improved 12% (compared with 2012). Although we have not yet achieved the set targets, we believe this a positive and consistent trend, evidencing that we are on the right path to achieve our goals in the medium term. In this respect, it is worth highlighting the good results achieved in Iberia, in the JV 50%18 and in Germany (reductions of 40%, 36% and 27%, respectively, when compared with last year).
The Non-Board Business and the operations in South Africa and Canada registered some accidents in the year, which led to a significant increase in the respective LWC rate. In France, as showed in the graph, we also had a slight increase (+1% when compared to 2012). In order to improve our safety levels and, in the regions where the evolution was negative, ensure a turnaround of the results, further actions were implemented during the year, in addition to the ongoing measures aimed at ensuring a sustainably decrease of the root causes of these accidents.
Similarly to the LWC rate, the Severity rate19 decreased globally by 23% when compared with the previous year. An incident occurred in Canada has naturally increased the Severity rate on this operation but did not have a significant impact on the level of the global rate.
18 Joint Venture with Tarkett for the production of Laminate Flooring, in Eiweiler (50% / 50%)
19 Severity Rate = Number of workdays lost due to LWC*1,000 / Number of hours worked
The Severity rate is related with the seriousness of the injuries based on the days lost and is meant to show the extent of safety problems by exposing how critical each injury is. The fact that this rate has decreased in all countries, except Canada, for well know reasons, is a clear indication that the accidents occurred have been less severe. Nevertheless our main aim remains unchanged and we will strive to continue to reduce these rates every year.
Wood is Sonae Indústria's primary raw material. As a major user of this natural, renewable and recyclable material, we believe that using recycled wood and wood by-products in our production is part of our sustained contribution towards mitigating CO2 emissions and climate change.
In the figures below we cover trends in wood mix consumption and wood use efficiency for the last years.
Our global specific wood consumption was stable when compared to 2012 figures, and continues at slightly
The global wood supply mix of Sonae Indústria revealed the impact of the closures of Knowsley and Solsona, which determined a lower contribution of recycled wood raw materials.
The higher contribution of roundwood is also a consequence of a higher relative weight of MDF production, when compared with previous years.
Municipal, surface and underground water
As it is well know, globally, clean water is steadily becoming a scarcer resource. As Sonae Indústria's production processes require water, it is the company's objective to continuously make sustained efforts to re-use treated wastewater and to measure and reduce the levels of water consumption as far as possible.
MDF processes consume significantly higher volumes of water when compared to particleboard or OSB manufacturing. Following a trend of 5 years of gradual improvements, global specific water consumption for Sonae Indústria suffered a slight increase in 2013, when compared to the previous year, mostly driven by the higher contribution of MDF production in our global panel's production portfolio. Nevertheless, this indicator is still better than the level registered in 2011. This effect was mainly observed in the Iberian operations, as a consequence of the closure of Solsona, and the related lower contribution of particleboard production.
Hazardous and non-hazardous waste
Specific waste generation global indicator was also affected by the decreasing production levels that occurred during the last years, as well as by the higher representativeness of MDF production in Sonae Indústria's portfolio.
Within the individual countries performance, only our French operations registered an improvement compared to previous year performance.
The gradual process of integrating Sonae Indústria's quality, environmental and health & safety management systems continued during 2013.
The number of certified sites for their quality (according to ISO 9001 standards), environmental (according to ISO 14001 standards), and occupational health and safety management systems (according to OHSAS 18001 standards) remained stable in 2013.
In the beginning of 2013, we achieved a key objective of obtaining a certification for our operations of chainof-custody for forest-based raw materials.
This achievement includes the following elements:
The current situation of our management systems certifications is the following:
| Quality | Environment | Forest products chain- of-custody |
Health & Safety |
||
|---|---|---|---|---|---|
| ISO 9001 | ISO 14001 | PEFC | FSC | OHSAS 18001 |
|
| International | Organization for Standardization |
PEFC | FSC | ||
| Maia | $\bigodot$ | $\bigodot$ | $\bigodot$ | ||
| Mangualde | $\bigodot$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | |
| Oliveira do Hospital | $\bigodot$ | $\bigodot$ | $\bigcirc$ | $\bigodot$ | |
| Sines | $\bigodot$ | $\bigcirc$ | $\bigcirc$ | ||
| Alcanede | $\bigvee$ | $\bigodot$ | $\bigcirc$ | ||
| Vilela | $\bigtriangledown$ | $\bigodot$ | $\bigcirc$ | ||
| Castelo de Paiva | $\bowtie$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | |
| Betanzos | $\bigotimes$ | $\bigodot$ | $\bigcirc$ | $\bigodot$ | $\bm{\odot}$ |
| Linares | $\small \bigtriangledown$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | $\bigodot$ |
| Valladolid | $\bigcirc$ | $\bigodot$ | $\bigodot$ | $\bm{\odot}$ | |
| Cuellar | $\varphi$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | $\bm{\odot}$ |
| Pontecaldelas | $\mathscr{A}$ | $\bigodot$ | $\bigodot$ | $\odot$ | |
| Auxerre | $\mathscr{A}$ | $\bigodot$ | $\bigodot$ | ||
| Le Creusot | $\bowtie$ | $\bigodot$ | $\bigodot$ | ||
| Linxe | $\bigotimes$ | $\bigodot$ | $\bigodot$ | ||
| Ussel | $\bigotimes$ | $\bigodot$ | $\bigodot$ | ||
| Meppen | $\mathscr{A}$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | $\bigodot$ |
| Eiweiler | $\bigtriangledown$ | $\bm{\odot}$ | $\bm{\odot}$ | $\bigodot$ | $\bm{\odot}$ |
| Nettgau | $\bigotimes$ | $\bigodot$ | $\bigcirc$ | $\bigodot$ | $\bigcirc$ |
| Hörn | $\bigodot$ | $\bigodot$ | $\bigodot$ | $\bm{\odot}$ | |
| Beeskow | $\bigodot$ | $\bm{\odot}$ | $\bigodot$ | $\bm{\odot}$ | |
| Kaisersesch | $\bigotimes$ | $\bigodot$ | $\bigcirc$ | $\odot$ | $\odot$ |
| Panbult | $\bigodot$ | $\odot$ | $\bigodot$ | ||
| White River | $\otimes$ | $\bigodot$ | $\odot$ | $\odot$ | |
| Lac-Mégantic | $\bigotimes$ | $\odot$ | $\odot$ | $\odot$ |
All Non-Executive Board Members of Sonae Indústria are part of the Board Committees (for a full description of composition and main tasks of each committee please refer to the Corporate Governance Report). In this context, these Board Members analyze matters that are within the competence of the respective Committee, giving guidance to the company about them and making proposals to the Board of Directors. Beyond the participation in Board committees, Non-Executive Board Members are actively participating in meetings of the Board of Directors, where they discuss and question the decisions taken. According to their respective professional experience, Non-Executive Board Members also participate in the analysis of industrial optimisation projects, of restructuring and expansion projects and in the development of relevant international networking with possible partners and authorities in current and potential geographical areas of investment.
The Board of Directors would like to thank the customers, suppliers, financial institutions and other business associates of Sonae Indústria for their continuing involvement and for the confidence that they have once more shown in the organisation.
The Board of Directors would also like to express its sincere gratitude towards all employees for their efforts, commitment and dedication demonstrated throughout the year.
11th March 2014,
The Board of Directors,
Belmiro de Azevedo
_________________________
_________________________
_________________________
_________________________
Paulo Azevedo
Rui Correia
_________________________
_________________________
_________________________
Chris Lawrie
Albrecht Ehlers
Jan Bergmann
Javier Vega
| Balance at | ||||||
|---|---|---|---|---|---|---|
| Acquisitions | Sales | 31.12.2013 | ||||
| Date | amount | € average value | amount | € average value | amount | |
| Belmiro Mendes de Azevedo Efanor Investimentos, SGPS, SA (1) ( 1 share is held by the spouse) Sonae Indústria, SGPS, SA |
49.999.997 1.010 |
|||||
| ( held by the spouse ) | ||||||
| Duarte Paulo Teixeira de Azevedo Efanor Investimentos, SGPS, SA (1) Migracom, SGPS, SA (2) |
1 1.969.996 |
|||||
| Rui Manuel Gonçalves Correia Sonae Indústria, SGPS, SA |
12.500 | |||||
| Agostinho Conceição Guedes Sonae Indústria, SGPS, SA |
2.520 | |||||
| Acquisitions | Sales | Balance at 31.12.2013 |
||||
| Date | amount | € average value | amount | € average value | amount | |
| (1) Efanor Investimentos, SGPS, SA Sonae Indústria, SGPS, SA Pareuro, BV (3) |
44.780.000 5.583.100 |
|||||
| (2) Migracom, SGPS, SA Sonae Indústria, SGPS, SA Imparfim, SGPS, SA (4) |
90.000 150.000 |
|||||
| (3) Pareuro, BV Sonae Indústria, SGPS, SA |
27.118.645 | |||||
| (4) Imparfin, SGPS, SA Sonae Indústria, SGPS, SA |
278.324 |
| Number of shares at 31.12.2013 | |
|---|---|
| Efanor Investimentos, SGPS, SA | |
| Sonae Indústria,SGPS, SA | 44.780.000 |
| Pareuro, BV | 5.583.100 |
| Pareuro, BV | |
| Sonae Indústria, SGPS, SA | 27.118.645 |
Complying with Article 8, no.1 b) of the CMVM Regulation nº 05/2008
| Shareholder | No. of shares | % Share Capital | % Voting rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, SA (1) | |||
| Directly | 44.780.000 | 31,9857% | 31,9857% |
| By Pareuro, BV ( controlled by Efanor) | 27.118.645 | 19,3705% | 19,3705% |
| 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 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% |
| Total allocation | 72.013.552 | 51,4383% | 51,4383% |
(1) Under the terms of paragraph b) of no. 1 of Article 20 and of no. 1 of Article 21 of the Portuguese Securities Code, Belmiro Mendes de Azevedo is the ultimate beneficial owner, since he holds around 99% of the share capital and voting rights of Efanor Investimentos SGPS, SA, which, in her turn, is the dominant company of Pareuro BV.
(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 | _______ |
|---|---|
| Rui Manuel Gonçalves Correia | |
| _______ | |
| Duarte Paulo Teixeira de Azevedo | _______ |
| George Christopher Lawrie | |
| _______ | |
| Javier Vega de Seoane Azpilicueta | |
| _______ Jan Kurt Bergmann |
Albrecht Olof Luther Ehlers
_________________________
11 March 2014
| A. | SHAREHOLDER STRUCTURE 3 | |
|---|---|---|
| I. | Capital Structure 3 | |
| II. | Shareholdings and Bonds Held 4 | |
| B. | GOVERNING BODIES AND COMMITTEES 5 | |
| I. | General Meeting 5 | |
| a) | Composition of the general meeting board 5 | |
| b) | Exercise of Voting rights 5 | |
| II. | Management and Supervision 6 | |
| a) | Composition 6 | |
| b) | Functioning 9 | |
| c) | Committees within the Management and Supervisory bodies and board delegates 13 | |
| III. | Supervision 17 | |
| a) | Composition 17 | |
| b) | Functioning 18 | |
| c) | Responsibilities and functions 20 | |
| IV. | Statutory External Auditor 20 | |
| V. | External Auditor 20 | |
| C. | INTERNAL ORGANISATION 21 | |
| I. | Articles of Association 21 | |
| II. | Reporting of irregularities 22 | |
| III. | Internal Control and Risk Management 24 | |
| IV. | Investor Relations 31 | |
| V. | Website 32 | |
| D. | REMUNERATIONS 33 | |
| I. | Competencies for approval of remunerations 33 | |
| II. | Remunerations Committee 33 | |
| III. | Remuneration structure 34 | |
| IV. | Disclosure of Remuneration 38 | |
| V. | Agreements with impact on Remuneration 39 | |
| VI. | Share plans or stock options plans 40 | |
| E. | TRANSACTIONS WITH RELATED PARTIES 41 | |
| I. | Control mechanisms and procedures 41 | |
| II. | Information concerning transactions 42 | |
| PART II – ASSESSMENT OF THE CORPORATE GOVERNANCE 43 | ||
| 1. | Identification of the corporate governance code adopted 43 |
I. CAPITAL STRUCTURE
Sonae Indústria's share capital amounts to 700 million Euros and is represented by 140 million ordinary nominal shares with a nominal value of 5 Euros per share. All shares are listed on the NYSE Euronext Lisbon.
No restrictions are in place regarding the transfer and sale of the company's shares.
The company does not own any of its own shares.
As of 31 December 2013 current loans amounted to circa 131 million Euros (19% of the consolidated net debt), relative to which the respective creditors have the option to consider the debt due in the event of a change in shareholder ownership, whereby such agreements may not harm the free trading of the company shares. No other relevant agreements were established in relation to changes or cessation, in the event of a transfer in the control of the company.
There are no statutory constraints regarding the number of votes that may be cast by a single shareholder.
The company is unaware of the existence of a shareholders' agreement which may restrict the transfer of securities or voting rights.
Corporate Governance Report II. SHAREHOLDINGS AND BONDS HELD
| Shareholder | No. of shares | % Share Capital | % Voting rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, SA (1) | |||
| Directly | 44,780,000 | 31.9857% | 31.9857% |
| By Pareuro, BV ( controlled by Efanor) | 27,118,645 | 19.3705% | 19.3705% |
| 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 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% |
| Total allocation | 72,013,552 | 51.4383% | 51.4383% |
(1) Under the terms of paragraph b) of no. 1 of Article 20 and of no. 1 of Article 21 of the Portuguese Securities Code, Belmiro Mendes de Azevedo is the ultimate beneficial owner, since he holds around 99% of the share capital and voting rights of Efanor Investimentos SGPS, SA, which, in her turn, is the dominant company of Pareuro BV.
The Sonae Indústria directors detained the following company shares as of 31 December 2013:
| No. of shares | No. of shares | ||
|---|---|---|---|
| Belmiro Mendes de Azevedo | (1) Efanor Investimentos, SGPS, SA | ||
| Efanor Investimentos, SGPS, SA (1) | 49,999,997 | Sonae Indústria, SGPS, SA | 44,780,000 |
| ( 1 share is held by the spouse) | Pareuro, BV (3) | 5,583,100 | |
| Sonae Indústria, SGPS, SA | 1,010 | ||
| ( held by the spouse ) | (2) Migracom, SGPS, SA | ||
| Sonae Indústria, SGPS, SA | 90,000 | ||
| Duarte Paulo Teixeira de Azevedo | Imparfim, SGPS, SA (4) | 150,000 | |
| Efanor Investimentos, SGPS, SA (1) | 1 | ||
| Migracom, SGPS, SA (2) | 1,969,996 | (3) Pareuro, BV | |
| Sonae Indústria, SGPS, SA | 27,118,645 | ||
| Rui Manuel Gonçalves Correia | |||
| Sonae Indústria, SGPS, SA | 12,500 | (4) Imparfin, SGPS, SA | |
| Sonae Indústria, SGPS, SA | 278,324 | ||
The Sonae Indústria Board of Directors may decide to increase the company's share capital up to the amount of one thousand and two hundred million Euros, one of more times, through cash injections under the terms established by law. These powers were attributed in the General Meeting held on 28 April 2010 and may be exercised over a period of five years from that date, notwithstanding the general meeting renewing these powers. The Board of Directors has not yet used the powers attributed to it in the referred to General Meeting.
There are no significant commercial relationships between the owners of the qualified shareholdings and the company.
| I. GENERAL MEETING |
||
|---|---|---|
| a) | Composition of the general meeting board |
The Board of the Shareholders' General Meeting was elected at the Shareholders' Annual General Meeting of Sonae Indústria held on 29th March 2012, for the mandate 2012-2014 and was composed as of 31st December 2013 by:
The members of the board of the Shareholder's general meeting have resigned their functions on the beginning of March 2014.
b) Exercise of Voting rights
Under the terms of Sonae Indústria's Articles of Association, the Shareholders' General Meeting is composed only of shareholders with voting rights who provide evidence of their ownership, according to the terms established by law.
The Article 23º-C of the Securities Code, added, establishes that, who is entitled to participate, discuss and vote in the Shareholders' General Meeting, are shareholders who at the record date, which corresponds to 0 hours of the 5th trading day prior to the date of the meeting, hold at least one vote, according to law and the statutes.
Under the terms of Sonae Indústria's Articles of Association, shareholders may be represented at Shareholders' General Meetings under the terms established by the law and by the respective notice of the meeting.
Under Sonae Indústria's Articles of Association, Shareholders' General Meetings can meet at the first session, as long as shareholders representing over fifty percent of the Company's share capital are present or represented.
The Company's Articles of Association stipulate that, while the Company 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 post. The Company'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 General 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 at Sonae Indústria's corporate website www.sonaeindustria.com and at its head offices.
Sonae Indústria Articles of Association stipulate that the postal voting may be exercised by electronic means if this medium is made available to shareholders and is included in the notice of the meeting. This possibility has not been used yet.
The preliminary information for the General Meeting and the proposals submitted by the Board of Directors are available at the time of disclosure of the notice of meeting.
The company has not adopted any mechanism that causes a time-lag between the entitlement to receive dividends or the subscription of new securities and the right to vote of each share.
Each share corresponds to one vote, with no limitation.
The decisions are taken by simple majority, apart from when law stipulates otherwise.
| II. | MANAGEMENT AND SUPERVISION | |
|---|---|---|
| a) | Composition |
The Sonae Indústria's Articles of Association define a corporate governance model of the company composed by a Board of Directors, a Statutory Audit Board and a Statutory External Auditor.
The Board of Directors examines annually the advantages and possible disadvantages of adopting this model.
The Board of Directors believes that the model favours the interests of the company and its shareholders, being effective and having not faced any constraints to its operation.
Under the terms of the Articles of Association, the Board of Directors may consist of an even or odd number of members, with a minimum of five and a maximum of nine, elected by the General Meeting for three-year mandates.
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 standalone proposal to nominate a Director in advance of the Shareholders' General Meeting. Such shareholder cannot support more than one list of Directors and each list must identify at least two eligible persons to fill each position on the Board. If lists are submitted by more than one group of shareholders, the voting will be based on all of 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.
The Sonae Indústria Board of Directors on 31 December 2013 comprised 7 directors, all elected in the Annual General Meeting held on 29 March 2012 for the 2012-2014 mandate, apart from George Christopher Lawrie, who was elected in the Annual General Meeting held on 12 April 2013 until the end of the current mandate.
Belmiro de Azevedo and Paulo Azevedo were initially appointed as of 15 December 2005, the registered date of the merger of the "former" Sonae Indústria - SGPS, SA into Sonae 3P - Panels, Pulp and Paper, SA and the renaming of the latter to Sonae Indústria, SGPS, SA. Rui Correia was initially appointed to the Board of Directors of Sonae 3P on 22 July 2002. Albrecht Ehlers was initially co-opted in September 2011. Javier Vega and Jan Bergmann were elected in the Annual General Meeting of 2012.
On 31st December 2013 the Board of Directors of Sonae Indústria was composed of:
Belmiro Mendes de Azevedo was the president of the Executive Committee until 15 February 2013.
João Paulo dos Santos Pinto, who had been elected to the 2012-2014 mandate and was a member of the Executive Committee, resigned from his post of director as of 31 October 2013.
Among the (7) seven directors, three (3) are executive members and four (4) are non-executive members.
Among the non-executive Directors, two (2) are independent. As for the director Albrecht Olof Lothar Ehlers, it is deemed that the annual payment of 12,300 Euros, which he receives from the subsidiary Glunz, AG for his role as part of its Supervisory Board, does not compromise his independence.
Belmiro de Azevedo (Chairman of the Board of Directors): obtained a degree in 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, SGPS, SA, Chairman of the Board of Sonae Capital, SGPS S.A., and 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 awarded 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 "Ordem 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.
Javier Vega (Independent): obtained a degree in Mining Engineering by the Escuela Técnica Superior de Ingenieros of Minas of Madrid and in Business Management from Glasgow Business School (UK). He was a member of the Board of Directors of several companies such as Robert Bosch, Red Electrica de España, SEAT and Grupo Ferrovial. Currently performs other Board positions.
Paulo Azevedo: holds a degree in Chemical Engineering from the Lausanne Polytechnic School (Switzerland) and a post-graduate degree in Business Studies from the Oporto Institute of Business Studies. Was CEO of Optimus – Telecomunicações S.A. between 1998 and 2000. Today Mr. Paulo de Azevedo is chairman of the executive committee of Sonae SGPS, SA and holds a number of managerial and directorship roles in the Efanor/Sonae Group. Paulo Azevedo is Belmiro de Azevedo's son.
Albrecht Ehlers (Independent): lawyer; law degree from the University of Münster (Germany). From 1987 to 2000 held various positions in the legal and human resources departments of Glunz AG, having been appointed in 1995 to join the Executive Board (Vorstand) of that company, with responsibilities in several areas including human resources and legal department. Between 2000 and 2004 he was senior vice president of Hochtief AG (Germany) with particular responsibility in the areas of human resources and corporate services. From 2004 until 2009 he joined the Executive Board (Vorstand) of that company. Since the year 2010 he holds functions of chancellor at the Technical University of Dortmund (Germany).
Rui Correia (CEO): 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 since 2001, he has also held a number of managerial and directorship roles in the Efanor/Sonae Group. He was appointed as Sonae Indústria CFO in 2005 and Sonae Indústria CEO in February 2013.
Christopher Lawrie (CFO): BA (Honours) Degree in Business Studies and Finance of Greenwich University (UK). He has broad experience in investment banking, having worked with Schroders, BZW and Credit Suisse where he was Director of the Corporate Finance Division covering specifically Southern European Telecoms markets. In 2001, he joined Sonae/Efanor Group as CFO of Sonaecom and, later, he was appointed CEO of Sonae Retail Properties. In 2013, he was appointed CFO of Sonae Indústria.
Jan Bergmann (CITO): obtained a degree in Engineering by Berlin University (Germany), "Dr.-ING" Technical University of Berlin, Business Administration and Finance for Technical Managers – European School of Management and Technology. Held various positions within the Group DuPont and joined Glunz AG in January 2011.
The non-executive director Belmiro de Azevedo is the majority shareholder of Efanor Investimentos, SGPS, SA and the non-executive director Paulo Azevedo is the son of Belmiro de Azevedo.
21. Organisational charts with distribution of competencies of the various statutory bodies, committees and/or departments of the company, including information regarding delegation of competencies, particularly in what concerns the delegation of day-to-day company business
The responsibilities of the different governing bodies and committees is split as follows:
The Board of Directors and the Executive Committee are regulated by the functioning rules that can be read at the company website www.sonaeindustria.com.
The Board of Directors convened 10 times in 2013, with the respective minutes recording all the deliberations made. All the meetings were attended by all the board members 100% of the time, apart from Paulo Azevedo and Albrecht Ehlers who attended 80% of the meetings.
The company's Remuneration Committee, in connection with the Board of Nomination and Remuneration Committee assessed the performance of the executive directors.
The performance assessment criteria of the executive directors are predefined, based on the performance indicators of the company, the working teams under their responsibility and their own individual performance. These criteria are further explained in the Remunerations section of this report.
The pre-determined criteria for evaluation of the executive directors are as follows: objective criteria related to the degree of successful implementation of initiatives and actions that were agreed for implementation in the year in question; and subjective criteria related to the contribution in terms of experience and knowledge to the discussions by the Board of Directors, the quality of preparation of meetings and the
contribution to discussions of the Board of Directors and Committees as well as the commitment to the success of the company, among others.
26. Availability of each member of the Board of Directors indicating offices held in other companies, inside and outside the group, as well as other relevant activities held by those members during the financial year.
The members of the Executive Committee work full time on the management of Sonae Indústria and its subsidiaries.
The other members of the Board of Directors currently perform their roles of members as of the Board of Directors and the Supervisory bodies of other companies, as listed below.
In companies belonging to Efanor Group
Board of Directors Member:
Glunz UK Holdings, Ltd.
Imoplamac Gestão de Imóveis, S.A.
Taiber, Tableros Aglomerados Ibéricos, SL
Tecmasa Reciclados de Andalucia SL (Chairman)
• Glunz AG (Supervisory Board Chairman – "Aufsichtsrat")
In companies not belonging to Efanor Group:
Board of Directors Member:
• Imoassets-Sociedade Imobiliária, SA (Chairman)
• Erich-Brost-Institut für Journalismus in Europa GmbH
Supervisory bodies Member:
c) Committees within the Management and Supervisory bodies and board delegates
To improve the operational efficiency of the Board of Directors and in line with the best practices for company governance, the Board of Directors appointed an Executive Committee, as well as 3 Specialised Committees.
The rules regulating the functioning of the Executive Committee can be read on the company website: www.sonaeindustria.com.
The Executive Committee is appointed by the members of the Board of Directors and comprises 3 members allocated the following areas of responsibility:
| Executive Committee | ||||
|---|---|---|---|---|
| Rui Correia (CEO) |
||||
| Christopher Lawrie (CFO) |
||||
| Jan Bergmann (CITO) |
The Board of Directors has delegated powers to the Executive Committee to manage day-to-day operations of the Company except:
r) defining the corporate structure of Sonae Indústria Group.
Upon the departure of João Paulo Pinto, the fields of responsibility of the Executive Committee were split as follows:
The Executive Committee normally meets at least once every month, excluding August and additionally whenever the Chairman of the Executive Committee calls a meeting. Meetings can only take place if the majority of the members are present or represented. The Chairman of the Executive Committee presides the meeting.
In 2013 the Executive Committee convened 17 times, with the respective minutes recording the deliberations made. All the members attended 100% of the meetings, with the exception of Jan Bergmann, who attended 94% of the meetings.
Decisions made by the Executive Committee are taken with the favourable votes of the majority of the members present or represented, including those voting by post. In the absence of quorum, the Executive Committee must submit the matter under consideration to the Board of Directors for deliberation.
In order to keep the Board of Directors and the Statutory Audit Board constantly updated of the decisions made by the Executive Committee, the Chairman of the Executive Committee provided the minutes of the Executive Committee's meetings to all the members of both Boards. At the end of each year, the Executive Committee drew up the schedule of its meetings for the following year, informing the Board of Directors and the Statutory Audit Board of this schedule.
The members of the Executive Committee provided all the information requested by other members of the governing bodies on time and appropriately.
The Board of Directors also appointed three committees with specialised expertise.
The BAFC is composed of the following Non-Executive Directors:
The BAFC normally meets at least 5 times yearly and is responsible for:
following the trends in the main financial ratios and changes in formal and informal ratings of the Company, including reports from rating agencies;
analysing and advising on any changes in accounting policies and practices;
Over the course of 2013, the BAFC held 5 meetings with the respective minutes having been drafted.
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, analysis of internal and external audit works, risk management processes and the performance of the key financial ratio, among other areas. It also issues recommendations for final deliberation at the Board of Directors, thereby improving its operational functioning.
The SREEC is composed of the following Non-executive Members:
This Committee is responsible for:
This Committee has an Ethics sub-committee composed by an independent non-executive member of the Board of Directors, by the Internal Auditor and by the Global Human Resources Director, which have the function to advise the SREEC. The Ethics sub-committee prepares at least one annual report to the Board of Directors, and when appropriate also the auditing bodies of the related country, issues related with the corporate governance or business ethics.
The current members of the Ethics sub-committee are:
SREEC met twice during 2013 and recorder in the minutes their deliberations.
The Ethics Sub Committee met twice.
The BNRC is composed of the following Non-Executive Members:
• Belmiro de Azevedo (Chairman)
Committee meetings are normally held at least twice a year. The BNRC's main functions are to review and submit proposals and recommendations on behalf of the Board of Directors to the Shareholder's Remuneration Committee in relation to the remuneration and other compensations of Board members. Additionally, it analyses and approves proposals and recommendations on behalf of the Board of Directors in relation to the remuneration and other compensations for other senior executives of the Sonae Indústria Group, depending on the activity performed by them. BNRC is also responsible for finding potential candidates with a profile to be a Board Member both for the company itself and for its affiliated companies.
The BNRC liaises with the Sonae Indústria Shareholders' Remuneration Committee 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 2013, the BNRC met on two occasions with the respective minutes having been drafted.
The Statutory Audit Board may comprise 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 members are elected for three-year mandates.
The Statutory Audit Board was elected at the 2012 Shareholders' Annual General Meeting for the 2012-2014 mandate and has the following composition:
The current members of the Statutory Audit Board were elected for the first time on the following dates:
All members of the Statutory Audit Board comply with the rules of incompatibilities referred to in paragraph 1 of art. 414-A and the criteria of independence set out in paragraph 5 of art. 414, both of the Companies Law.
To ensure at all times the independence of members of the Statutory Audit Board prior to their appointment, such members issued statements attesting that: (i) not to incur in any of the incompatibilities provided in Article 414º-A of the Companies Law as well as they were not in any situation that affects their independence in accordance with paragraph 5 of Article 414º of the same law; (ii) committed themselves to immediately notify the company of anything that may lead to their loss of independence or to any incompatibility during their mandate.
MANUEL HELENO SISMEIRO (Chairman of the Statutory Audit Board): Degree in Finance, SCEF (Portugal), Accountant, ICL (Portugal). Currently he is a specialist consultant in the areas of internal audit and internal control and is Chairman of the Statutory Audit Board of OCP Portugal Produtos Farmacêuticos SA, Sonae Industria, SGPS, SA and Sonae Capital, SGPS, SA. Prior to this he was a partner at Coopers & Lybrand and Bernardes, Sismeiro & Associados and from 1998 to 2008 at PricewaterwhouseCoopers auditors and Statutory External Auditor and responsible for the Audit and official review in various activity sectors. He was also responsible for managing the office of those companies at Porto and Director of Audit Division in the period of 1998 – 2002 as well as member of the management board at PricewaterhouseCoopers.
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). He 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 and currently of Armando Magalhães, Carlos Silva & Associados, SROC, Lda.
JORGE MANUEL FELIZES MORGADO (Statutory Audit Board Member): 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.
OSCAR ALÇADA DA QUINTA (Statutory Audit Board Substitute-Member): Degree in Economics (University of Porto). He 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.
b) Functioning
The rules regulating how the Statutory Audit Board functions can be read at the company website: www.sonaeindustria.com.
In 2013 the Statutory Audit Board convened 6 times. The minutes were drawn up recording the respective deliberations. All the members attended 100% of the meetings with the exception of Jorge Morgado who attended 50% of the meetings.
The Statutory Audit Board members exercised their roles in conjunction with the functions listed below, as outlined in section 33.
Functions exercised by Statutory Audit Board members as of 31 December 2013:
• Sonae Capital, SGPS, SA (Chairman of the Statutory Audit Board)
| Corporate Governance Report |
||
|---|---|---|
| c) | Responsibilities and functions |
The Statutory Audit Board shall approve the hiring, by the company or subsidiary companies of the external auditor or any entities with which they have joint shareholdings or which are part of the same network, to provide services other than auditing services.
The Statutory Audit Board exercises all the responsibilities attributed to it by law.
Desides those responsibilities the Statutory Audit Board must issue prior opinion on any transaction with shareholders or entities with whom they are in any relationship, under Article 20 of the Securities Code (reference shareholders), in the terms set forth in section 91.
The Statutory Audit Board's Report, available on the company website together with the other accounting documents, details the supervisory activity carried out, with no constraints detected.
| IV. | STATUTORY EXTERNAL AUDITOR |
|---|---|
The Statutory External Auditor is PriceWaterHouseCoopers & Associados, SROC, Lda, represented by Hermínio António Paulos Afonso.
PriceWaterhouseCoopers has been the statutory external auditor of the company since the Annual General Meeting of 2006, and is currently undertaking its third three-year mandate.
In 2013 PriceWaterHouseCoopers did not provide any services other than auditing or related services to the company and/or to subsidiary companies.
V. EXTERNAL AUDITOR
The external auditor of the company is PriceWaterHouseCoopers & Associados, SROC, Lda, represented by Hermínio António Paulos Afonso, registered in the CMVM under no. 9077.
PriceWaterhouseCoopers has been the external auditor of the company since 2006. Its current representative, Hermínio Afonso, has represented it since 20 September 2011.
Sonae Indústria has not defined any policy regarding the frequency of the rotation of the external auditor, given that the third mandate for which the current statutory external auditor was elected only ends in 2014. Likewise, in relation to the statutory external auditor partner, Sonae Indústria has not established any policy regarding the frequency. The legal stipulations concerning this issue are scrupulously complied with.
The Statutory Audit Board proposed the election of the Statutory External Auditor at the Shareholders' General Meeting held in 2012, who is also the external auditor of the company. The proposed remuneration policy approved at the 2013 Shareholders' 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 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 from their work through the final audit reports. This allows them to evaluate the work of the external auditor. The Statutory Audit Board may if there is just cause, propose to the Shareholders' General Meeting the dismissal of the Statutory External Auditor since he is elected under the proposal of the Statutory Audit Board.
Throughout 2013 no other services were hired from the external auditor. If the company or any subsidiary intends to hire services from the company auditor on top of the auditing services, the Statutory Audit Board must approve the hiring of these services beforehand.
Sonae Indústria and its subsidiaries paid PriceWaterhouseCoopers the following amounts in 2013:
| By the Company | |
|---|---|
| Auditing Services (€) | 13 730 € / 3.15% |
| Other reliability guarantee services (€) | 1925 € / 0.44% |
| By other group entities | |
| Auditing Services (€) | 386 394 € / 88.63% |
| Other reliability guarantee services (€) | 33 915 € / 7.78% |
I. ARTICLES OF ASSOCIATION
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 through new cash injections up to one thousand and two hundred million Euros, on one or more times.
Sonae Indústria has a Code of Conduct that includes the irregularities communication policy, which is available at the website www.sonaeindustria.com. Sonae Indústria's Code of Conduct and irregularities communication policy aims to create the climate and means for its employees and service providers to express their concerns about any behaviour or decision that they believe does not respect the company's ethics or Code of Conduct.
Any information on a suspected irregularity should be sent via e-mail or post to one of the following addresses:
By e-mail: [email protected]
By post: Sonae Industria SGPS, S.A. Subcomissão de Ética da Comissão de Responsabilidade Social, Ambiente e Ética 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 Ethics Subcommittee of the Social Responsibility, Environment and Ethics Committee, when required.
Each irregularity report will be received by the Ethics Subcommittee, 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 Subcommittee of the Social Responsibility, Environment and Ethics Committee, shall notify the situation to the superior of the employee or the Service Provider's employer in order to apply corrective actions and / or initiate disciplinary proceedings.
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. 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 Ethics Subcommittee of the Social Responsibility, Environment and Ethics Committee.
The company provides a means by which to report irregularities on its intranet
The Ethics Subcommittee shall inform the Statutory Audit Board about any report of non-ethical behaviour received.
The company maintains a record of all complaints and cases investigated as well as their findings which is be available for consultation by the statutory bodies and external auditor.
The Code of Conduct of Sonae Indústria contains a set of standards based on our shared values that govern the activities of Sonae Indústria. It applies to everyone employed by the Group, including members of the statutory bodies of Group companies, managing directors, senior executives, employees and people whose status is equivalent to that of employees, such as temporary staff and service providers. The Code sets out guidance on those matters of business ethics to be complied with by all employees and service providers when carrying out their professional duties.
Sonae Indústria adheres to and actively promotes the highest ethical standards of professional conduct at all levels of the Group. Commitment to standards of conduct must emanate from the top. Therefore, Sonae Indústria's top managers are expected to set an example for the rest of the organisation through their actions, by actively leading the adoption and by monitoring the enforcement of these standards. As such, the
senior managers must guarantee, in their area of responsibility, strict compliance with the law, permanently monitoring such compliance, and clearly explaining to their employees that the transgression of any law will have both legal and disciplinary consequences.
It is particularly important that a commitment to these standards of conduct is accepted by all employees and service providers at all Group companies, wherever they operate. Country operations are also required to adopt appropriate principles and actions to deal with specific ethical issues that may arise in their own countries.
The Code of Conduct of Sonae Indústria was defined in such a way that clearly explains the conduct to be followed with all stakeholders, as well as to connect it with the company's values. The code of conduct is structured in the following way:
The complete code of conduct can be found at the company site www.sonaeindustria.com.
Sonae Indústria has implemented policies and procedures to guarantee compliance with the directives issued by the management bodies. Sonae Indústria has integrated a Skills Centre into the framework of its Global Business Processes and Systems, which works with the local operations and corporate departments as a Centre of Excellence to achieve key objectives, such as: prioritisation, development and implementation of processes and systems (including control activities); definition of the best practices and assessment of the performance of the processes, establishing the connection between the Business needs and the system application component.
Sonae Indústria has ongoing monitoring activities of control in place as diverse as approvals, authorisations, 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 employees to fulfil their responsibilities. Sonae Indústria has a Planning and Management Control (PMC) department which supported by robust information systems, produces reports containing operational, financial and compliance-related information. The PMC, through its Procedural Manual, defines and implements a set of rules and procedures relative to the planning processes, reporting, accounts management and investment approval process.
The Accounts Consolidation department is responsible for the preparation of the consolidated financial information based on reporting packages from the Administrative and Financial responsible of each country. The centralised accounting back-office (Shared Service Centre) performs the accounting of all subsidiaries, with the exception of the Canadian, thus helping to guarantee alignment of policies and strengthening of procedures and controls.
Internal control systems are monitored. Ongoing monitoring activities exist, namely regular management and supervisory activities. Separate evaluations are conducted by the internal audit department, whose scope and frequency depend primarily on an assessment of the risks and effectiveness of ongoing monitoring procedures.
There are procedures for periodic reporting to management and supervisory bodies of major internal control deficiencies and breaches of procedures and policies set by Sonae Industria.
Sonae Indústria has a reasonable level of confidence in the internal control framework which is currently in place. Communication of the Vision, Values and Principles throughout the organization reinforces the importance in terms of ethical behaviour. The existence of the Code of Conduct, of the Whistleblower tool and the Ethics Subcommittee, enhance the control culture of the organisation.
It is the responsibility of the Board of Directors to create the necessary structures and services to ensure that the internal control and risk management system works properly. For this purpose, specific departments were created, some years ago, composed by specialised teams – Internal Audit and Risk Management. The main function of the Internal Audit department is to monitor compliance with procedures and policies defined and to report to the Board of Directors on any irregularities found. The Risk Management department must analyse the potential risks of the company and implement the standards as well as the systems that can reduce those risks.
The person responsible for the Internal Audit department reports functionally to and meets the Statutory Audit Board at least twice a year as well as the Board Audit and Finance Committee, whose chairman is an Independent Director. Both Governing Bodies can request information or clarifications whenever they wish.
Additionally, it is the Board Audit and Finance Committee particular duty to manage the risk, internally controlling the processes and businesses as well as analysing the results of the Internal and External Audit.
The competences of the Statutory Audit Boards include reviewing the effectiveness of the risk management system as well as that of the internal control and audit systems. The Statutory Audit Board has access to all the information whenever it deems necessary and can liaise with the heads of the respective departments, receiving the reports these departments produce.
The Statutory Audit Board is presented with the internal audit plan of action, and may issue its opinion on it, in addition to the suitability of the resources allocated to the different compliance services.
The Statutory External Auditor reviews the implementation of policies and remuneration systems as well at the effectiveness and operation of the internal control mechanisms. In the event of finding any defect or irregularity, this will be reported to the Statutory Audit Board.
Sonae Indústria is based on integrity and ethical values, as outlined in the company's Code of Conduct, which emanate from the top down with the example then being set by management.
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 and the existence of the Code of Conduct are enshrined in such structure.
Sonae Indústria faces a variety of risks from external and internal sources which must be assessed and we have installed 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 updated periodically.
The main financial risk that Sonae Indústria is exposed to is credit risk over its customers, which is the risk of a customer either paying late or failing to pay the acquired products due to lack of liquidity. To mitigate this risk, Sonae Indústria has implemented credit management procedures and credit approval processes. The credit insurance is a mandatory tool used in all geographies where we are present and where such possibility exists to mitigate the credit risk. The credit insurance levels that are offered by external credit insurance partners are continuously revised and updated throughout the year and a close and complementary relationship is kept with these suppliers in order to mitigate the risk we have in common and to allow a better evaluation of the credit risk. In specific situations where we are not able to contract credit insurance to mitigate this risk, alternative and/or complementary solutions (like bank guarantees, letters of credit and confirming, among others) are explored together with our clients in order to achieve the largest possible turnover volumes in an environment of minimum and controlled risk. In the limit situation where we are not able to obtain risk coverage for a specific customer or operation, we develop a detailed internal process with the objective of analysing every particular aspect of such business, so an informed and complete decision can be taken over a possible own risk-taking situation.
The economical risks that Sonae Indústria is exposed to include: Interest Rate Risk, Foreign Exchange Risk and Liquidity Risk.
Interest Rate Risk depends on the proportion of floating rate debt on Sonae Indústria's consolidated Statements of Financial Position and the consequent cash flows related to interest payments. As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates through financial derivatives. This approach is based on the principle of the existence of a positive 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.
Foreign Exchange Risk derives from being a diversified Group with subsidiaries spread throughout three different continents. Consolidated Statements of Financial Position and Profit and Loss are exposed to foreign exchange translation risk and Sonae Indústria subsidiaries are exposed to foreign exchange risk from both translation and transaction type. Whenever possible and economically viable, Group subsidiaries aim to offset assets and liabilities denominated in the same foreign currency.
Liquidity Risk aims mainly to ensure that the company can obtain the financing required to properly carry on its business activities on time, 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 Sonae Indústria mainly comprises consistent financial planning, diversification of financing sources and diversification of debt maturities issued.
Regarding Legal Risks, the main risk of the Group's business relates to legislative changes that may occur at the level of the activity (environmental law and labour, among others) that can encumber the activity to such an extent that its profitability may be affected.
Internal Audit is an independent and objective activity, which aims helping Sonae Industria to achieve their goals by participating in the process of value creation. Uses a systematic and structured approach to evaluate and improve the effectiveness of risk management, internal control procedures and corporate governance.
Internal Audit operates in accordance with International Standards for the Professional Practice of Internal Auditing, established by the Institute of Internal Auditors, including its Code of Ethics.
In fulfilling its responsibilities, Internal Audit has access to any persons, records, information, systems and assets deemed necessary.
Internal Audit reports functionally to the Board Audit and Finance Committee (BAFC) and to the Statutory Audit Board.
The planning of the activity of Internal Audit is essentially developed based on a prior assessment of the systematic business risks of Sonae Indústria. The annual plan of Internal Audit activity is approved in advance by the Executive Committee and submitted to the Board Audit and Finance Committee (BAFC) and to the Statutory Audit Board.
Descriptive reports of the activity of Internal Audit are periodically prepared and sent to the Executive Committee, the Board Audit and Finance Committee (BAFC) and to the Statutory Audit Board of Sonae Industria, which includes the summary of significant internal control deficiencies and shortcomings in procedures and policies set by Company.
The reporting system implemented ensures regular feedback, a proper review of the activities and the possibility to adjust the plan of activities to emerging needs.
Board Audit and Finance Committee (BAFC) and the Statutory Audit Board are responsible for overseeing the effectiveness of the internal audit function. Accordingly, Internal Audit has developed a quality assurance and quality promotion, which includes ongoing analysis and regular and periodic evaluations of the quality conducted internally and externally.
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. Sonae Indústria developed various insurance programs to place the risk, aiming to cover:
Damage in transports;
Damage caused to third parties (Product, Public and Environmental Liability);
Sonae Indústria adopts global policies as a support to its processes of risk management together with local solutions that better approach specific risks and topics and is committed to improve its assets protection and prevention levels to reinforce the partnership with the insurance market.
The production of wood-based panels is an industrial activity with a significant operational risk arising from fire and explosion. Consequently, the operational risk management is active in the implementation of standards and the choice of systems that are capable of reducing industrial unit risks.
The Risk Management Area is separated in two responsibilities to guarantee a more focused and specialized approach - Operational Risk Management and Insurance Management.
Operational Risk Management is integrated in the department responsible for the consolidation of Health and Safety at Work practices (Corporate HSE & Systems Integration Department), reporting directly to the company CITO, in order to focus on developing and implementing measures to mitigate risks in industrial operations.
A formally coordinated network of Country Risk Officers exists in each of the countries where Sonae Indústria operates and at each of the sites there is a dedicated Plant Risk Officer.
The organisation of the Corporate HSE & Systems Integration Department can be analysed in the following diagram:
The Operational Risk Management is also related to the Corporate Department IndBest ("Industrial Best Practices"). This department is responsible for the implementation and sharing of industrial best practices and procedures, through an effective coordination with local teams, namely the Industrial Managers of the several operations and the Plant Managers, and support to the implementation of industrial investments. This team is also responsible for the promotion of several actions to optimise energy efficiency and to ensure a global coordination of the maintenance works carried out at the plants.
The Continuous Improvement team, also part of the IndBest department, promotes the implementation of continuous improvement best practices, which lead to higher efficiency and productivity levels in the group, gradually implementing a cultural change in the company's employees. Its objective is to promote throughout
all people a faster and more efficient way of work, not only in the industrial areas, but also in commercial and support activities of the company.
The integrated insurance management is encompassed into the Compliance & Risk Management Department.
The goal of the insurance management is to bring about more efficient and effective management of the Group's different insurance policies, in order to mitigate insurance risks. It is responsible for drawing up and implementing procedures that minimize exposure to risk, reducing the likelihood of risk situations occurring and ensuring maximum coverage.
This Department is also responsible for implementing the Enterprise Wide Risk Management (EWRM) methodology, detecting, assessing and prioritising the risks and their potential impact on the organisation's activities.
The company Risk model, aggregates the business risks into three categories (Business Division Risk, Business Process Risks and Risk Information for Decision Making) and contains the quantification of the relevance (impact on EBITDA and operating efficiency) as well as probability (frequency of the event or scenario occurring) of the critical risks for Sonae Indústria.
The management of financial risks, incorporated into the business process risks is carried out and monitored within the ambit of the finance function.
Sonae Indústria aims to improve its industrial process by implementing more efficient and sustainable practices. The operational risks are assessed and mitigated in order to raise awareness about the new risks and change behaviour in relation to the current risks.
Operational risk management activities were carried out in 2013 to achieve the goals set as regards risk control.
Taking into account all the risks an industrial activity such as ours entails, the protection of the key assets, as well as the loss prevention activities, are ongoing concerns of the Group, and have been defined as priorities for 2013.
The CORS were developed with reference to international standards such as NFPA1 and/or FM2 data sheets, bringing together the best engineering protective practices against fire at Sonae Indústria, and in the wood industry. These standards were validated with external experts and specialists from the insurance market and risk management field. They aim to ensure standardisation of processes and procedures in all geographies in an effort to improve operational risk management by leaving little or no room for uncertainty.
The Corporate Operational Risk Standards (CORS) are divided into three areas:
In 2013, in the wake of a detailed study carried out by an independent international company that works in all areas of industrial and procedural safety, namely prevention of risk of fire and explosions, an exhaustive list of risks was drawn up linked to the key operational processes (production).
Medium-term action plans were drawn up to mitigate these risks, focusing particularly on the use of Recycled Material, which is planned to increase in the coming years.
In line with the CORS philosophy, additional companies were consulted in the third quarter of 2013 that are specialised in leading-edge techniques in protection against dust explosions, so as to provide suitable technical solutions to minimise and control the risks identified.
The CORS have become the processes and procedures by which the audit risks are oriented to check the exposure of each plant. This permits greater transparency and harmonisation in the audit process.
1 National Fire Protection Association
2 Factory Mutual
A significant change was made in the external auditing process in 2013 and implemented in all plants in relation to the entity that performs the external audit. A cut off was implemented in relation to the previous process where the entity that performed this external audit was changed every year. Therefore it was agreed that until 2014/15 the auditing inspections would be carried out by the same entity in each plant. This change will ensure a more efficient monitoring of the recommendations made.
Upon completing the external audits, a report is issued with a set of recommendations for each plant visited. Since 2000, the Sonae Industria overall QIN has improved from 5.8 to its current value of 7.2.
In 2013, six audits were carried out. The results are reflected in the QIN calculated at the end of the year, as shown in the graph below.
Following the organisational changes made in 2013, the internal visits to some plants focused on compliance with the Corporate Operational Risk Standards.
The result of the visits is reported and the implementation of the recommendations is tracked.
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 and corporate directives published. The main objectives encompass:
In 2013 a quarterly follow up of the active recommendations was implemented, which was subsequently reported to our insurance partners. Each industrial site is responsible for updating the status using a defined template. This information is then centrally uploaded to a website used by the reinsurance panel.
Most of Sonae Indústria's plants are covered by a "Fully Comprehensive" insurance policy, as part of a global and centrally contracted programme.
To correctly impute the cost of the insurance per plant and location, the Insurance Management Department carried out a process this year at all locations, surveying the local conditions in order to bring about a fair distribution of the global premium for each productive plant and risk location.
This process did not lead to significant differences in the distribution of the premium when compared with the previous process but guaranteed the external reliability of a practice that has been implemented in recent years.
For the plants not included in the global programme, demand and selection procedures were carried out at the locations to obtain the best coverage and price
| IV. | INVESTOR RELATIONS |
|---|---|
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 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 investors, either at road shows or in one-to-one meetings upon request, or by participating at conferences.
Sonae Indústria's Investor Relations Department comprises two staff members. Its manager is António Castro. The Department may be contacted,
by e-mail: [email protected] or by telephone: +351 220 100 655.
Sonae Indústria's legal Representative for Relations with Capital Markets is its executive director George Christopher Lawrie, who can be contacted via the Investor Relations Department or alternatively, directly by e-mail: [email protected]
The company keeps a record of the requests made to the Investor Relations Department and how each request was dealt with. In 2013 the Department received contacts and requests for clarification from 35 investors, of which seven were non-resident. In overall terms, the average response time to the information requests from investors was less than 24 hours. No information requests from earlier years are pending.
V. WEBSITE
The company's website is www.sonaeindustria.com.
Information on the company's firm, the quality of publicly traded company, headquarters and other elements mentioned in Article 171 of the Companies Code is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,27 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,27 (English version)
The company's Articles of Association are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,31 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,31 (English version)
The functioning regulations of the Board of Directors, Executive Committee and Statutory Audit Board are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,109 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,109 (English version)
The identity of the members of the company's governing bodies is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,29 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,29 (English version)
Information about the Representative for the Relations with the Capital Markets is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,30 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,30 (English version)
Information about the Investor Relations Department is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,55 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,55 (English version)
The company's accounting documents are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,42 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,42 (English version)
The half-yearly schedule of company events is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,53 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,53 (English version)
The notifications convening the general meetings and all the preparatory information and information subsequent to the meetings are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,32 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,32 (English version)
The record of the deliberations made in the general meetings, capital represented and the results of the votes are available at:
http://www.sonaeindustria.com/page.php?ctx=1,0,32 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,32 (English version)
I. COMPETENCIES FOR APPROVAL OF REMUNERATIONS
As defined in the Articles of Association of the company, the Shareholders' General Meeting is responsible for establishing the remuneration of the members of the governing bodies or for electing a committee for this purpose. As for the members of the Board of Directors, the Remuneration Committee talks to the Board Nomination and Remuneration Committee. Only as such can the Remuneration Committee gain the necessary knowledge about the performance of each director, and especially the executive directors, throughout the year.
II. REMUNERATIONS COMMITTEE
Sonae Indústria's Shareholders' Remuneration Committee is appointed by the Shareholders' General Meeting for a three-year term and was elected at the Shareholders' General Meeting held in March 2012 for the mandate 2012-2014. Currently this committee is composed by Efanor Investimentos - SGPS, SA, represented by Belmiro Mendes de Azevedo, by, Imparfin - SGPS, SA, represented by José Fernando Oliveira de Almeida Côrte-Real and by the Professor José Manuel Neves Adelino.
Professor José Manuel Neves Adelino is an independent member of the Remuneration Committee.
The participation of Belmiro de Azevedo at the Shareholders' Remuneration Committee, who is also Chairman of the Board of Directors, corresponds to the representation of shareholder interests in the Shareholders' Remuneration Committee, as he intervenes in that capacity. Belmiro de Azevedo does not
participate in the discussion nor is present in the moment of the meeting in which his own payment is discussed therefore ensuring the necessary impartiality and transparency.
No company was hired to assist the Shareholders' Remuneration Committee nor the Board Nomination and Remuneration Committee. For the benchmark salary level of Board of Directors members, these Committees use multi-company studies prepared by international consultants present in Portugal which are available in the market.
The representative of Imparfin, José Corte Real, works for the Efanor Group on Human Resources' area; his extensive knowledge and vast experience in Human Resources, namely in regard to remuneration policy contribute very positively to the work of the Shareholders' Remuneration Committee.
III. REMUNERATION STRUCTURE
At the General Meeting held in 2013 the Remuneration Committee approved a declaration concerning the remuneration and compensation policy of the governing bodies and the managers, and a share attribution plan.
The remuneration and compensation policy to be applied to the Statutory Governing Bodies of Sonae Indústria and other Senior Management, which we hereby propose, complies with European guidelines, Portuguese law and the recommendations of the Portuguese Securities Market Commission (CMVM) and is based on the understanding that initiative, competence and commitment are the essential foundations for delivering good performance and that the latter should be aligned with the medium and long term interests of the Company, in order to achieve sustainability.
In determining the remuneration policy comparisons are made with market studies available in Portugal and other European markets, including those prepared by the specialised consultant Hay Group. Comparisons are also made with remuneration practice at the companies that compose the PSI-20 Portuguese Stock Market Index.
The remuneration packages to be awarded to Executive Directors are established by reference to market studies covering "Top Executives" in Portugal and Europe, taking as reference the median position in the market for fixed remuneration levels and the third quartile for total remuneration levels, in comparable circumstances.
The fixed remuneration and target variable remuneration are decided by the Shareholders' Remuneration Committee in coordination with the Board Nomination and Remuneration Committee.
Fixed component of remuneration is aligned, through the use of ranges, with market standards, which are benchmarked to equivalent practice at comparable companies.
The variable component of remuneration, awarded to Executive Directors, is subject to maximum percentage limits and is determined by pre-established and measurable performance criteria - performance indicators agreed with each executive director for each financial year.
The variable component of remuneration is assessed by evaluating performance using a set of performance indicators, both business indicators mainly of an economic and financial nature "Key Performance Indicators of Business Activity" (Business KPIs), and individual indicators, combining the latter performance indicators mainly quantified "Personal Key Performance Indicators" (Personal KPIs). The content of the performance
indicators and their specific weight in determining actual remuneration awarded, ensure the alignment of Executive Directors with the strategic objectives defined and compliance with the laws that apply to the Company's activities.
The variable component of remuneration to be awarded is based on an individual performance assessment, which is made by the Shareholders' Remuneration Committee, in coordination with the Board Nomination and Remuneration Committee. This assessment takes place after the results of the Company are known.
Thus, for each financial year, an evaluation is made of business activity and of the performance and individual contributions to the collective success, which, obviously, impacts the awards of the fixed and variable components of the remuneration package of each Executive Director.
For each financial year, at least fifty per cent of the value of the variable remuneration awarded to an Executive Director, as a result of the evaluation of individual and company performances, has its payment deferred for a period of three years. This deferred component of variable remuneration is linked to the evolution of the share price, under the Plan to Grant Sonae Indústria Shares (the "Medium Term Incentive Plan" or "MTIP") under the terms of the respective "Characteristics and Regulation", attached as an Appendix to this Proposal. The Company reserves the right to pay the equivalent market value in cash, instead of delivering shares.
In applying the Remuneration and Compensation Policy consideration is given to roles and responsibilities performed in affiliated companies.
The Company's Remuneration and Compensation Policy incorporates the principle of not contemplating any compensation to members of the Board of Director, or to members of other Statutory Governing Bodies, related with the termination of a mandate, whether such termination occurs at the end of the respective mandate, or there is an early termination for any reason or on any basis, without prejudice of the Company's obligation to comply with the applicable law.
The Remuneration and Compensation Policy does not include any benefits, particularly retirement benefits, in favour of the members of the governing bodies or other "Senior Management".
To ensure the effectiveness and transparency of the objectives of the Remuneration and Compensation Policy, the Executive Directors:
• have not, and will not, enter into agreements with the Company or third parties that have the effect of mitigating the risk inherent in the variability of their remuneration awarded by the Company;
• will not sell, during the mandate in course, any Company shares that they may have received, through their participation in the Medium Term Incentive Plan, up to a limit of two times the value of their total annual remuneration, with the exception of those shares that may be required to be sold in order to pay taxes on the respective gains.
In what respects to the Board of Directors of Sonae Indústria, the approved policy states that:
The remuneration and compensation policy for the Executive Directors (EDs) includes, in the way it is structured, control mechanisms, taking into account the connection to personal and collective performance, to prevent behaviours that involves excessive risk-taking. This objective is also reinforced by the fact that each Key Performance Indicator is limited to a maximum value.
The remuneration of EDs normally includes two components: (i) a fixed component, which includes a Base Remuneration paid with reference to one year period (remuneration is paid in 12 months) and an annual responsibility allowance, (ii) a variable component, awarded in the first half of the year following the year to which it relates (the "Performance Year") and subject to the accomplishment of the targets and objectives fixed for the Performance Year. The variable component is divided into two parts (a) a Short Term Variable Bonus which is paid immediately after it is awarded, and (b) a Medium Term Variable Bonus which vests and is paid after a 3 year deferral period, considering that the exposure of EDs to fluctuations in the share price is the most appropriate way to align the interests of EDs with those of shareholders.
(i) The fixed remuneration of an ED is based on the personal competences and level of responsibility of the function exercised by each ED and is reviewed annually. Each ED is attributed a classification named internally as Management Level ("Grupo Funcional"). EDs are classified under one of the following Management Levels: "Group Leader", "Group Senior Executive" and "Senior Executive". The Management Levels are structured according to Hay's international model for the classification of corporate functions, thereby facilitating market comparisons as well as helping to promote internal equity.
(ii) The variable remuneration is designed to motivate and reward the EDs to achieve predetermined targets and objectives, which are based on indicators of Company performance, of working teams under their responsibility and of their own personal performance. Variable remuneration is awarded after the annual accounts are closed and after their performance evaluation has been completed. As the amount of the award is subject to the accomplishment of targets and objectives, there is no guarantee that any payment will be made.
This bonus is paid in the first half of the year following the year to which it relates (the "Performance Year").
The calculation model of the Short Term Variable Bonus of EDs without an specific geographic responsibility, that is, CEO and CFO, is based on the Company KPI's, at 100%, resulting 70% from the Operational Cash Flow and 30% from Fixed Costs. Thereafter, a multiplication factor will be applied. This multiplication factor results from the performance assessment and can range between 0 and 150% according with the individual performance classification attributed to the relevant ED. Regarding EDs with geographic responsibility, COO NE&CITO and COO SE&CMSO, the bonus calculation is similar to the previously described but the combine result of the Company's Operational Cash Flow and Fixed Costs has a weight of 70%, 50% for the Operational Cash Flow and 20% for Fixed Costs, and the weight of the relevant geography represents the remaining 30%, of which 20% is allocated to the Operational Cash Flow and 10% to Fixed Costs. The multiplication factor resultant from the performance assessment is applied in the same way.
This bonus is designed to enhance the connection of the EDs with the Company, aligning their interests with the interests of shareholders, and increasing their awareness of the importance of their performance on the overall success of the organisation. The value awarded corresponds to at least 100% of the Short Term Variable Bonus, which means that the Medium Term Variable Bonus, awarded through participation in the Medium Term Incentive Plan, corresponds to at least 50% of the total value of variable remuneration.
The value awarded in euros is divided by the average of the closing share prices of the thirty trading sessions prior to the Shareholders' General Meeting, or alternatively, prior to 30 April, should the Shareholders' General Meeting be held after that date, to determine the number of shares each ED is initially entitled to. The amount initially converted into shares is adjusted for any changes to the share capital that occurred or any dividends distributed (Total Shareholder Return) during the 3 year deferral
period. On the vesting date of the MTIP, the corresponding shares are delivered free of cost, although the Company reserves the right to pay the equivalent market value in cash, instead of delivering shares.
Taking the two variable components together, the target values set in advance range between 40% and 60% of the total annual remuneration (fixed remuneration and target variable remuneration).
At the time of working out results achieved or assessed, the value of each bonus to be awarded is limited to the minimum 0% and the maximum of 120% of the target value set in advance.
The remuneration of the Non-Executive Members of the Board of Directors (NEDs) shall be based on market comparables, and be structured as follows: (1) a Fixed Remuneration (of which approximately 15% depends on attendance at Board of Directors and Board Committee meetings); (2) an Annual Responsibility Allowance. No variable remuneration of any kind is paid to NEDs. Fixed Remuneration may be increased by up to 5% for those NEDs serving as Chairman of any Board Committee.
The remuneration of the members of the Company's Statutory Audit Board shall be based exclusively on fixed annual amounts, which include an Annual Responsibility Allowance. The levels of remuneration are determined by taking into consideration the Company's situation and by benchmarking against the market.
The Company's Statutory External Auditor shall be remunerated in accordance with normal fee levels for similar services, benchmarked against the market, under the supervision of the Statutory Audit Board and the Board Audit and Finance Committee.
The remuneration of the members of the Board of the Shareholders' General Meeting shall correspond to a fixed annual amount, based on the Company's situation and benchmarked against the market.
With regard to the non-executive directors, the attribution of only a fixed remuneration, as explained in the previous point, allows the interests of these directors to be matched to the long-term interests of the company.
As for the executive directors, the attribution of remuneration comprising a fixed component and a variable component, the latter calculated in line with a series of specifically weighted performance indicators, ensures that the executive directors' interests are aligned with the long-term interests of the company and discourages risk taking. The result of the performance assessment of each of the executive directors serves as a multiplier factor of the other defined KPIs (for a more detailed explanation of how the different KPIs work, see the previous point).
As mentioned in the two previous points, the remuneration of the executive directors comprises a variable component, whereby the performance assessment impacts on this part of the remuneration (for more detailed explanation of the impact of the performance assessment on the variable remuneration component see point 69).
The Medium-Term Variable Bonus is deferred for a 3-year period.
The criteria regulating the variable remuneration in shares, the maintenance of these shares, the possible signing of contracts relative to these shares, as well as their proportion of the total annual remuneration, are detailed in the remuneration policy in point 69 and the share attribution plan in point 86.
The company does not attribute options.
The parameters and explanation of the annual bonus system are outlined in the remuneration policy in point 69.
The company has not implemented any supplementary pension or early retirement regime.
| IV. | DISCLOSURE OF REMUNERATION |
|---|---|
| 2013 | Total Fixed Annual Remuneration |
Variable Bonus | Total Short Term | Variable Bonus | Total Medium Term | Total | ||
|---|---|---|---|---|---|---|---|---|
| 2012 | 2013 | 2012 (a) | 2013 (b) | 2012 (c) | 2013 (d) | 2012 | 2013 | |
| Belmiro de Azevedo (Chairman) | 182,200 | 182,010 | 182,200 | 182,010 | ||||
| Paulo Azevedo | 28,300 | 28,110 | 28,300 | 28,110 | ||||
| Javier Vega | 23,490 | 30,200 | 23,490 | 30,200 | ||||
| Albrecht Ehlers (e) | 41,400 | 40,800 | 41,400 | 40,800 | ||||
| Rui Correia | 265,951 | 277,010 | 59,200 | 110,000 | 88,900 | 165,000 | 414,051 | 552,010 |
| João Paulo Pinto (f) | 260,950 | 231,177 | 59,200 | 320,150 | 231,177 | |||
| Christopher Lawrie (g) | 149,267 | 149,267 | ||||||
| Jan Bergmann (h) | 250,000 | 250,000 | 53,800 | 100,000 | 80,700 | 150,000 | 384,500 | 500,000 |
| Total of Board of Directors | 1,052,291 | 1,188,573 | 172,200 | 210,000 | 169,600 | 315,000 1,394,091 1,713,573 |
(a) relative to 2012, amount approved and paid in 2013;
(b) relative to 2013, based on target values, but amount subject to real KPI achievement and to subsequent approval by the Shareholder's Remuneration Committee;
(c) relative to 2012, approved in 2013, deferred for the 3-year vesting period until 2016;
(d) relative to 2013, based on target values, but subject to real KPI achievement and subsequent approval by the Shareholders' Remuneration Committee. The initial amount, to be attributed in 2014 and linked to the share price performance is deferred for a 3-year vesting period until 2017, and will be booked linearly over that 3-year period;
(e) Out of the amount paid in 2012, Sonae Indústria paid 29,100 Euros and Glunz AG 12,300 Euros. Out of the amount earned in 2013, Sonae Indústria paid 28,500 Euros and Glunz AG 12,300 Euros;
(h) amounts paid in their entirety by Glunz AG.
78. Compensation of any kind paid by other companies in relation of domain or group, or subject to a common domain
The amounts paid by other companies in the group are shown in the table in point 77.
The bonuses paid to the executive directors are outlined in the table in point 77.
80. Indemnities paid or due to former executive directors resulting from the termination of their responsibilities during the financial year
No indemnity was paid to the former executive directors upon termination of their functions during the year.
In 2013 the members of the Statutory Audit Board earned a total remuneration of 26,600 Euros. Its Chairman earned 10,200 Euros and each of the two members 8,200 Euros.
In 2013 the Chairman of the Board of the General Meeting earned the total remuneration of 5,000 Euros.
The Remuneration and Compensation Policy approved in the General Meeting maintains its principle of not awarding compensation to the directors upon termination of their mandate, notwithstanding mandatory compliance by the company with the legal stipulations in force concerning this matter.
No agreements were signed between the company and the directors that stipulated indemnity in the event of resignation, dismissal without justification or termination of the employment relationship following a change in the control of the company.
As mentioned earlier, the Share Attribution Plan (Plan) is applicable to the Medium-Term Variable Bonus (MTVB) which the executive directors are entitled to, and which was subject to deliberation by the General Meeting.
The regulations of the Plan establish the following:
MTVB is one of the parts of the variable component established under SONAE INDÚSTRIA's Remuneration and Compensation Policy. This part of the variable component differs from the others, as it has a restricted and discretionary character, being subject to the eligibility rules set out in this document.
MTVB allows participants to share with shareholders, the value that is created as a result of their direct influence on the strategy decisions and management of the underlying businesses.
The MTVB is designed to reward participants for their sustained effort over 4 years (made up of the "Performance Year" [1 year] and the "Deferral Period" [3 years]) and, as a result, to improve business performance, which is a key driver of value creation for shareholders. This value creation is measured by the assessment of the performance of each of the participants during the Performance Year and then the value initially awarded under the Plan is linked to the evolution of the Sonae Indústria share price over the Deferral Period. The value of shares initially attributed under the Plan to each participant, depends on his or her performance during the Performance Year (the percentage of the target value of the MTVB awarded under the Plan is equal to the percentage of the annual KPI´s achieved). The value converted into shares will be adjusted for any changes in the Company's share capital or dividends paid during the Deferral Period, in line with the concept of Total Shareholder Return.
Executive Directors are eligible to be awarded a MTVB and participate in the Plan.
Under the remuneration and compensation policy approved by the Board of Directors, the MTVB may apply to other employExecutive Directors are eligible to be awarded a MTVB and participate in the Plan.
Under the remuneration and compensation policy approved by the Board of Directors, the MTVB may apply to other employees
| Eligible Members | Reference value for the Medium Term Variable Bonus (% of the Short Term Variable Bonus awarded) |
|---|---|
| Sonae Indústria Executive Directors | at least 100% |
| Executive Directors of Business Units | at least 50% |
| Employees | under terms to be defined by the Board of Directors |
The value of the MTVB awarded to Executive Directors corresponds to at least 100% of their Short Term Variable Bonus, which means that the MTVB corresponds to at least 50% of the value of their total variable remuneration. The value initially awarded is converted into an equivalent number of shares of Sonae Indústria, using the average of the closing share prices of the thirty trading sessions prior to the Shareholders' General Meeting or alternatively prior to 30 April, should the Shareholders' General Meeting be held after that date.
If there have been distribution of dividends, changes in the nominal value of the shares, or other changes to the share capital of the Company, the number of shares initially awarded under the Plan will be adjusted based on the standard market methodology used to calculate Total Shareholder Return, over the Deferral Period.
Three years later, on the third anniversary of the conversation date, the Plan vests.
On the vesting date, the corresponding number of shares is transferred to each Executive Director, free of cost. Employees, who were awarded a MTVB, acquire or receive their corresponding shares under the conditions set by the Board of Directors, which can vary in the range of 0% and 10% of their cost.
The Company reserves the right to pay in cash the equivalent market value of the shares on the vesting date, rather than transfer actual shares.
The right to receive benefits under the Plan is lost should the relationship under which the respective Plan was awarded cease, subject to the terms of the paragraphs below.
In the case of death or permanent disability of the participant, their open Plans will be valued at equivalent market value at that date, and the resulting amount will be paid to the participant or their legal heirs.
If a participant retires, his or her rights under their open Plans will remain in force until settlement at the respective vesting date.
The company does not have plans to attribute share purchase options.
88. Internal control tools to be used in a potential participation in the share capital by company employees, so that the voting rights are not directly exercised by them
No control mechanisms are in place regarding an employee participation system in the company's share capital.
| I. | CONTROL MECHANISMS AND PROCEDURES |
|---|---|
| ---- | ----------------------------------- |
The mechanisms implemented by the company for the purposes of controlling transactions with related parties are thorough, transparent and in strict compliance with the market's competition rules. Such transactions are subject to specific administrative procedures that are regulated by rules, namely rules governing transfer prices or the voluntary adoption of internal verification and control systems.
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.
Any transaction with shareholders or entities with whom they are in any relationship, under Article 20 of the Securities Code (reference shareholders), greater than 10 million Euros, should be subject to prior opinion of the Statutory Audit Board. The request for an opinion must be accompanied by all the elements required to allow a comparative analysis with the market and how potential conflicts of interest will be managed.
Transactions that have been contracted with reference shareholders shall be a result of a competitive process and when lower than 10 million Euros will be exempt from the prior opinion of the Statutory Audit Board but will need to be reported to the Statutory Audit Board under the procedures mentioned below.
The Sonae Indústria CFO is responsible for reporting to the Statutory Audit Board:
In 2013 no transaction was subject to control or subject to prior opinion of the Statutory Audit Board.
II. INFORMATION CONCERNING TRANSACTIONS
The information relative to related parties' transactions may be found in Note No 35 of the Notes to the Consolidated Financial Statements.
Sonae Indústria, SGPS, SA adopted the Corporate Governance Code published by CMVM (the Portuguese Securities Market Commission) in 2013, which is posted at www.cmvm.pt.
The decision to select the Corporate Governance Code of the CMVM is justified by the fact that it guarantees a suitable degree of shareholder protection and corporate governance transparency, and is also the Governance Code that the investors are most familiar with.
Sonae Indústria complied with all recommendations of the Corporate Governance Code aforementioned. Besides fulfilling the legal requirements and recommendations of the referred Code, Sonae Industria, being aware of the importance of good corporate governance for business and for its shareholders, constantly seeks to adopt best practices in all areas in which operates, and as such prepared its own Code of Conduct, which can be found on the company's website www.sonaeindustria.com.
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| I. VOTING AND CORPORATE CONTROL |
||
| I.1 Companies should encourage their shareholders to attend and vote at general meeting sand shall not set na excessively large number of shares required for the entitlement of one vote, and implement the means necessary to exercise the right to vote by mail and electronically. |
Comply | 12 and 13 |
| I.2 Companies shall not adopt mechanisms that hinder the passing of resolutions by shareholders, including fixing a quorum for resolutions greater than that provided for by law. |
Comply | 14 |
| I.3 Companies shall not establish mechanisms intended to cause mismatching between the right to receive dividends or the subscription of new securities and the voting right of each common share, unless duly justified in terms of long term interests of shareholders. |
Comply | 12 |
| I.4 The company's Articles of Association that provide for the restriction of the number of votes that may be held or exercised by a single shareholder, either individually or in concert with other shareholders, shall also foresee for a resolution by the General Assembly (five years interval), on |
Comply | 13 |
whether that statutory provision is to be amended or
a view to their improvement.
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| prevails - without super quorum requirements as to the one legally in force - and that in said resolution, all votes issued be counted, without applying said restriction. |
||
| I.5 Measures that require payments or assumption of fees by the company in the event of change of control or change in the composition of the Board and that which appear likely to impair the free transfer of shares and the free assessment by shareholders of the performance of Board members, shall not be adopted. |
Comply | 4 |
| II. SUPERVISION, MANAGEMENT AND AUDITING |
||
| II.1 Supervision and Management | ||
| II.1.1. Within the limits established by Law, and except for the small size of the company, the Board of Directors shall delegate the daily management of the company and said delegated powers shall be identified in the Annual Report on Corporate Governance. |
Comply | 27 and 28 |
| II.1.2. The Board of Directors shall ensure that the Company acts in accordance with its objectives, and shall not delegate its own responsibilities as regards the following: i) definition of the strategy and general policies of the company; ii) definition of the business structure of the Group; iii) decisions considered strategic due to the amount, risk and particular characteristics involved. |
Comply | 28 |
| II.1.3 The General and Supervisory Board, in addition to its supervisory duties, shall take full responsibility at corporate governance level, whereby through the statutory provision or by equivalent means, shall enshrine the requirement for this body to decide on the strategy and major policies of the company, the definition of the corporate structure of the group and the decisions that shall be considered strategic due to the amount or risk involved. This body shall also assess compliance with the strategic plan and the implementation of key policies of the company. |
Not applicable | |
| II.1.4. Except for small-sized companies, the Board of Directors and the General and Supervisory Board, depending on the model adopted, shall create the necessary committees in order to: |
||
| a) Ensure a competent and independent assessment of the performance of the executive directors and its own overall performance, as well as of other committees; |
||
| b) Reflect on the system structure and governance practices adopted, verify its efficiency and propose to the competent bodies, measures to be implemented with |
Comply | 15 and 27 to 29 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| II.1.5. The Board of Directors or the General Supervisory Board, depending on the applicable model, should set goals in terms of risk-taking and create systems for their control to ensure that the risks effectively incurred are consistent with those goals. |
Comply | 50 to 52 |
| II.1.6 The Board of Directors shall include a number of non executive members ensuring effective monitoring, supervision and assessment of the activity of the remaining members of the Board. |
Comply | 17 and 18 |
| II.1.7. Non-executive directors shall include an appropriate number of independent members, taking into account the adopted governance model, the size of the company, its shareholder structure and the respective free float .The independence of the members of the General and Supervisory Board and members of the Audit Committee shall be assessed as per the law in force. The other members of the Board of Directors are considered independent the member is not associated with any group with specific interests in the company nor is under any circumstance likely to affect an exempt analysis or decision, particularly due to: |
||
| a. Having been an employee at the company or at a company holding a controlling or group relationship, in the past three years; |
||
| b. Having, in the past three years, provided services or established a commercial relationship with the company or company with which it is in a controlling or group relationship, either directly or as a partner, board member, manager or director of a legal person; |
Comply | 18 |
| c. Being paid by the company or by a company with which it is in a controlling or group relationship other than the remuneration arising from the exercise of the role of a board member; |
||
| d. Living with a partner or a spouse, relative or any first degree next of kin up to and including the third degree of collateral affinity of board members or individuals who are, directly or indirectly, holders of qualifying holdings; |
||
| e. Being a qualifying shareholder or a representative of a qualifying shareholder. |
||
| II.1.8. When Board members that carry out executive duties are requested by other Board Members shall provide the information requested in a timely and appropriate manner to the request. |
Comply | 28 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| II.1.9. The Chairman of the Executive Board or of the Executive Committee shall submit, as applicable, to the Chairman of the Board of the Directors, the Chairman of the Statutory Audit Board, the Chairman of the Audit Committee, the Chairman of the General and Supervisory Board and the Chairman of the Financial Matters Committee, the convening notices and minutes of the respective meetings. |
Comply | 28 |
| II.1.10 If the Chairman of the Board of Directors has an executive role, said body shall appoint, from amongst its members, an independent member to ensure the coordination of the work of other non-executive members and the conditions so that body can make independent and informed decisions or to ensure the existence of an equivalent mechanism for such coordination. |
Not applicable | |
| II.2. Auditing | ||
| II.2.1 Depending on the applicable model, the Chairman of Statutory Audit Board, the Chairman of the Audit Committee or the Chairman of the Financial Matters Committee shall be independent in accordance with the applicable legal standard and shall have the necessary skills to carry out the respective duties. |
Comply | 32 |
| II.2.2 The Auditing Body shall be the main interface between the external auditor and the first recipient of the relevant reports, and is responsible, inter alia, for proposing the respective remuneration and ensuring that proper conditions for the provision of services are provided within the company. |
Comply | 45 |
| II.2.3 The Auditing Body shall assess the external auditor on na annual basis and propose to the competent body its dismissal or termination of the contract as to the provision of their services when there is a valid basis for said dismissal. |
Comply | 45 |
| II.2.4. The Auditing Body shall assess the functioning of the internal control systems and risk management and propose adjustments as may be deemed necessary. |
Comply | 51 |
| II.2.5. The Audit Committee, the General and Supervisory Board and the Statutory Audit Board decide on the work plans and resources concerning the internal audit services and services that ensure compliance with the rules applicable to the company (compliance services), and should be recipients of reports made by these services at least in what concerns matters related to accounting, identification or resolution of conflicts of interest and detection of potential improprieties |
Comply | 51 |
II.3 Remuneration Setting
| RECOMMENDATION | Degree of compliance |
Corporate Governance |
|---|---|---|
| II.3.1 All members of the Remuneration Committee or alike shall be independent from the executive board members and shall include at least one member with knowledge and experience in matters of remuneration policy. |
Comply | report 67 and 68 |
| II.3.2 Any natural or legal person that provides or has provided services in the past three years to any structure under the Board of Directors, to the Board of Directors itself, or who has a current relationship with the company or a company consultant shall not be hired to assist the Remuneration Committee in the performance of its duties. This recommendation also applies to any natural or legal person that is related by employment contract or provision of services with the above. |
67 | |
| A statement on the remuneration policy of the II.3.3 management and supervisory bodies referred to in Article 2 of Law No. 28/2009 dated 19 June, shall also include the following: |
||
| a) Identification and details of the criteria for determining the remuneration paid to the members of the governing bodies; |
||
| b) Information regarding the maximum potential, in individual terms, and the maximum potential, in aggregate form, to be paid to the members of corporate bodies, and identify the circumstances whereby these maximum amounts may be payable; |
Comply | 69 |
| c) Information regarding the enforceability or unenforceability of payments for the dismissal or termination of appointment of board members. |
||
| II.3.4 The Approval of plans for the allotment of shares and/or options to acquire shares based on share price variation to board members shall be submitted to the General Meeting. The proposal shall contain all the necessary information in order to correctly assess said plan. |
Comply | 85 and 86 |
| II.3.5 Approval of any retirement benefit scheme established for members of corporate bodies shall be submitted to the General Meeting. The proposal shall contain all the necessary information in order to correctly assess said system. |
Not applicable | |
| III. REMUNERATIONS |
||
| III.1 The remuneration of the executive board members shall be based on actual performance and shall discourage taking on excessive risk. |
Comply | 69 |
| III.2 The remuneration of non-executive board members and the remuneration of the members of the Auditing Body shall not include any component dependent on the company performance or of its value. |
Comply | 69 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|
|---|---|---|---|
| III.3 The variable component of the remuneration shall be reasonable overall in relation to the fixed component of the remuneration and maximum limits shall be set for all components. |
Comply | 69 | |
| III.4 A significant part of the variable remuneration shall be deferred for a period not less than three years and its payment shall depend on the continued positive performance of the company during said period. |
Comply | 69 and 72 | |
| III.5 Members of the Board of Directors shall not enter into contracts with the company or with third parties which intend to mitigate the risk inherent to the remuneration variability set by the company. |
Comply | 69 | |
| III.6 The Executive Directors shall keep the company's shares that were allotted by virtue of variable remuneration schemes, up to twice the value of total annual remuneration, except for those shares that must be sold for the payment of taxes on the gains of said shares, until the end of their mandate. |
Comply | 69 | |
| III.7 When the variable remuneration includes stock options, the beginning of the exercise period shall be deferred for a period of not less than three years. |
Not applicable | ||
| III.8 When the dismissal of a board member is not due to serious breach of duties nor to the unfitness for the normal exercise of the functions but, yet, is due to an inadequate performance, the company shall be endowed with the adequate and necessary legal instruments so that any damages or compensation beyond that which is legally due, is unenforceable. |
Comply | 83 | |
| IV. AUDIT | |||
| IV.1 The external auditor, within the scope of its duties, shall verify the implementation of remuneration policies and systems of the corporate bodies, as well as the efficiency and effectiveness of the internal control mechanisms and report any shortcomings to the company's Supervisory Board. |
Comply | 51 | |
| IV.2 The company or any entity with which it maintains a controlling relationship shall not engage the external auditor or any entity with which it finds itself in a group relationship or that incorporates the same network, for services other than audit services. If there are reasons for hiring such services - which must be approved by the Auditing body and must be explained in the Annual Corporate Governance Report - said services should not exceed 30% of the total value of services rendered to the company. |
Comply | 46 and 47 | |
| IIV.3 Companies shall support the rotation of auditors after two or three terms whether these are four or three year mandates, respectively. The continuance beyond this |
Comply | 44 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
||
|---|---|---|---|---|
| period must be based on a specific opinion of the Supervisory Board that explicitly considers the conditions of auditor independence and the benefits and costs of replacement. |
||||
| V. CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS |
||||
| V.1 The company's business with holders of qualifying holdings or entities with which they are in any type of relationship pursuant to Article 20 of the Portuguese Securities Code shall be conducted during normal market conditions. |
Comply | 90 | ||
| V.2 The Supervisory Body or the Auditing Body shall establish procedures and criteria that are required to define the relevant level of significance of business with holders of qualifying holdings - or entities with which they are in any of the relationships described in Article 20/1 of the Portuguese Securities Code - thus significant relevant business is dependent upon prior opinion of that body. |
Comply | 91 | ||
| VI. INFORMATION | ||||
| VI.1 Companies shall provide, via their websites, in both Portuguese and English languages, access to information on their progress as regards the economic, financial and governance state of play. |
Comply | |||
| VI.2 Companies shall ensure the existence of an investor support and market liaison office which responds to requests from investors in a timely manner and which keeps record of the submitted requests and their processing. |
Comply | 56 and 58 |
Separate Statements of Financial Position Separate Income Statements Separate Statement of Comprehensive Income Separate Statements of Changes in Shareholders' Funds Separate Statements of Cash Flows Notes to the Financial Statements
SEPARATE STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2013 AND 2012
(Values in EUR)
| ASSETS | Notes | 31.12.13 | 31.12.12 |
|---|---|---|---|
| NON CURRENT ASSETS: | |||
| Tangible assets | 3 | 2.801 | 3.118 |
| Intangible assets | 4 | 0 | 0 |
| Investment in associates | 6 | 605.187.656 | 745.286.910 |
| Available-for-sale investments | 6 | 122.922 | 122.922 |
| Deferred tax assets | 7 | 5.527.236 | 6.763.505 |
| Other non current assets | 8 | 513.808.092 | 513.844.898 |
| Total Non Current Assets | 1.124.648.706 | 1.266.021.352 | |
| CURRENT ASSETS | |||
| Trade debtors | 9 | 24.150 | 6.584 |
| Other debtors | 9 | 13.302.794 | 2.275.276 |
| Taxes and other contributions receivable | 9 | 1.102.868 | 682.831 |
| Other current assets | 10 | 89.367 | 120.372 |
| Cash and cash equivalents | 11 | 297.991 | 45.504 |
| Total Current Assets | 14.817.170 | 3.130.568 | |
| Total Assets | 1.139.465.877 | 1.269.151.920 | |
| SHAREHOLDER'S FUNDS AND LIABILITIES | |||
| SHAREHOLDER'S FUNDS: | |||
| Share Capital | 12 | 700.000.000 | 700.000.000 |
| Legal reserve | 12 | 3.131.757 | 3.131.757 |
| Other reserves and retained earnings | 12 | -65.896.265 | 84.867.487 |
| Accumulated other comprehensive income | 80.009 | 46.224 | |
| Total Shareholder's Funds | 637.315.501 | 788.045.468 | |
| NON CURRENT LIABILITIES | |||
| Bank loans - long term - net of current portion | 13 | 83.101.488 | 59.735.977 |
| Debentures - long term - net of current portion | 13 | 118.908.927 | 248.344.033 |
| Total Non Current Liabilities | 202.010.415 | 308.080.010 | |
| CURRENT LIABILITIES | |||
| Current portion of long term bank loans | 13 | 6.639.814 | 42.969.697 |
| Bank loans - short term | 13 | 150.677.246 | 52.546.189 |
| Current portion of long term debentures | 13 | 129.918.927 | 55.000.000 |
| Other loans | 14 | 174.361 | 121.973 |
| Trade Creditors | 15 | 7.542.528 | 17.696.869 |
| Other creditors | 15 | 729.554 | 873.102 |
| Taxes and other contributions payable | 16 | 4.457.531 | 3.818.613 |
| Total Current Liabilities | 300.139.961 | 173.026.442 | |
| Total Shareholder's Funds and Liabilities | 1.139.465.877 | 1.269.151.920 |
(Values in EUR)
| Notes | 31.12.13 | 31.12.12 | |
|---|---|---|---|
| Operating Income: | 0 | 0 | |
| Other Operating Income | 21 | 140.636 | 133.506 |
| Total operating income | 140.636 | 133.506 | |
| Operating Costs: | - | - | |
| External supplies and services | (599.065) | (1.095.796) | |
| Staff costs | (1.102.268) | (954.144) | |
| Amortisation and Depreciation | (1.053) | (1.456) | |
| Provisions and impairment losses | 17 | - | (176.179.713) |
| Other operating costs | 21 | (179.024) | (236.740) |
| Total operating costs | (1.881.410) | (178.467.848) | |
| Operating profit/(loss) | (1.740.774) | (178.334.342) | |
| Financial profi/(loss) | 22 | 1.559.453 | (402.110) |
| Custos e perdas financeiras | (26.084.297) | (22.850.529) | |
| Proveitos e ganhos financeiros | 27.643.749 | 22.448.419 | |
| Profit/(loss) on associates | - | - | |
| Profit/(loss) on other investments | 23 | (150.212.759) | - |
| Profit/(Loss) before tax | (150.394.080) | (178.736.452) | |
| Corporate income tax - current tax | 24 | 866.597 | 1.262.617 |
| Corporate income tax - deferred tax | 24 | (1.236.269) | (2.357.332) |
| Net Profit/(loss) on continuing operations | (150.763.752) | (179.831.167) | |
| Profit/(loss) for the period | (150.763.752) | (179.831.167) | |
| Profit (loss) per Share | |||
| Excluding Descontinued operations | |||
| Basic | 25 | -1,08 | -1,28 |
| Diluted | -1,08 | -1,28 |
(Values in EUR)
| NOTES | 31.12.13 | 31.12.12 | |
|---|---|---|---|
| Profit/(loss) for the period | 12 | - 150 763 752 | - 179 831 167 |
| Other comprehensive income for the period | |||
| Change in fair value of available-for-sale financial assets | |||
| Change in fair value of cash flow hedge derivatives | - | - | |
| Gains on property revaluation | |||
| Actuarial gains / (losses) on benefit pension plans | |||
| Share of other comprehensive income of associates | |||
| Income tax relating to components of other comprehensive income | |||
| Other comprehensive income for the period | 33 785 | 46 224 | |
| Other comprehensive income for the period, net of tax | 33.785 | 46.224 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | - 150 729 967 | - 179 784 943 |
(Values in EUR)
| Accumulated other comprehensive income | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital Legal reserve | Other Reserves and Retained earnings |
Available-for sale financial assets |
Cash flow hedge derivatives |
Property revaluation |
Actuarial gains / (losses) on benefit pension plans |
Share of other comprehensi ve income of associates |
Income tax related to other comprehensive income |
Other comprehensiv e income for the period |
Subtotal | Total shareholder's funds |
|||
| NOTES | 12 | 12 | 12 | ||||||||||
| Balance as at 1 January 2013 | 700 000 000 | 3 131 757 | 84 867 487 | 46 224 | 46 224 | 788 045 468 | |||||||
| Appropriation of previous year's net profit / (loss) | |||||||||||||
| Total comprehensive income Net profit / Loss for the period Other comprehensive income |
12 | - 150 763 752 | - 150 763 752 | ||||||||||
| Total | - 150 763 752 | - 150 763 752 | |||||||||||
| Others | 33 785 | 33 785 | 33 785 | ||||||||||
| Balance as at 31 December 2013 | 12 | 700 000 000 | 3 131 757 | -65 896 264 | 80 009 | 80 009 | 637 315 501 | ||||||
| Balance as at 1 January 2012 | 700 000 000 | 3 131 757 | 264 698 654 | 967 830 411 | |||||||||
| Appropriation of previous year's net profit / (loss) | |||||||||||||
| Total comprehensive income Net profit / Loss for the period Other comprehensive income |
12 | - 179 831 167 | - 179 831 167 | ||||||||||
| Total | - 179 831 167 | - 179 831 167 | |||||||||||
| Others Balance as at 31 December 2012 |
12 | 700 000 000 | 3 131 757 | 84 867 487 | 46 224 46 224 |
46 224 46 224 |
46 224 788 045 468 |
||||||
SEPARATE STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED AT 31 DECEMBER 2013 AND 2012
(Values in EUR)
| OPERATING ACTIVITIES | Note | 31.12.2013 | 31.12.2012 | ||
|---|---|---|---|---|---|
| Cash receipts from trade debtors | 241.469 | ||||
| Cash paid to trade creditors | 671.726 | 1.248.761 | |||
| Cash paid to employees | 1.230.788 | 1.100.923 | |||
| Operational Cash Flow | -1.902.515 | -2.108.215 | |||
| Corporate income tax paid / received | -1.059.208 | -881.609 | |||
| Other cash receipts and payments relating to operating activities | 11 | -173.263 | -109.007 | ||
| Net cash flow from operating activities [1] | -1.016.569 | -1.335.613 | |||
| INVESTMENTS ACTIVITIES: | |||||
| Cash receipts arising from: | |||||
| Financial investments | 1.042.543 | ||||
| Tangible assets | 169 | ||||
| Intangible assets | |||||
| Interest assets and similar income | |||||
| Dividends | 23 | 4.570.960 | 5.613.672 | ||
| Cash payments owing to: | |||||
| Financial investments | 6 | 15.727.008 | 8.600 | ||
| Tangible assets Intangible assets |
15.727.008 | 792 | 9.392 | ||
| Net cash flow from investing activities [2] | -10.113.335 | -9.392 | |||
| FINANCIAL ACTIVITIES | |||||
| Cash receipts arising from: | |||||
| Interest and similar charges | 1.700.507 | 2.399.229 | |||
| Loans granted | 251.930.506 | 304.137.086 | |||
| Loans obtained | 2.435.000.000 | 2.688.631.013 | 2.765.000.000 | 3.071.536.315 | |
| Cash payments owing from: | |||||
| Interest and similar costs | 24.579.180 | 22.204.191 | |||
| Dividends | 18 | ||||
| Loans granted | 237.305.303 | 221.447.000 | |||
| Loans obtained | 2.390.495.197 | 2.857.428.197 | |||
| Others | 2.652.379.680 | 3.101.079.406 | |||
| Net cash flow from financing activities [3] | 36.251.334 | -29.543.091 | |||
| Net increase / decrease in cash and cash equivalents | 25.121.429 | -30.888.095 | |||
| Cash and cash equivalents - opening balance | 11 | -25.000.685 | 5.887.410 | ||
| Cash and cash equivalents - close balance | 11 | 120.745 | -25.000.685 | ||
| Net increase / decrease in cash and cash equivalents | 25.121.429 | -30.888.095 |
(Amounts expressed in Euros)
SONAE INDÚSTRIA, SGPS, S.A. is based at Lugar do Espido, Via Norte, Apartado 1096, 4470-177 Maia, Portugal.
The Company's shares are listed on NYSE Euronext.
The main accounting policies adopted in preparing the accompanying financial statements are as follows:
These financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) and International Accounting Standards ( IAS ) issued by the " International Accounting Standards Board " ( " IASB " ) and Interpretations issued by the " International Financial Reporting Interpretations Committee " ( " IFRIC " ) or the earlier " Standing Interpretations Committee " ( " SIC " ) , applicable to the financial year beginning January 1, 2013 and approved by the European Union .
During the year ended december 31, 2013, entered into force the following standards and interpretations:
IAS 1 (amendment ) , ' Presentation of financial statements ' , IAS 12 (amendment ) , ' Income taxes ' , IAS 19 ( revised), ' Employee benefits ' ; Improvements to standards from 2009 to 2011 , IFRS 1 (amendment ) ' first-time adoption of IFRS' , IFRS 7 ( amendment ) ' Disclosures - Offsetting of financial assets and liabilities ' , IFRS 13 ( new ) , " Fair value Measurement and disclosure ' , IFRIC 20 ( new ) , ' costs of discovery the production phase of a mine open pit '.
The introduction of these standards and improvements, as well as the interpretation had no material impact on the financial statements of the company.
The december 31, 2013 were issued and approved by the European Union the following standards and interpretations that have not been applied, since only be mandatory in subsequent years ( on or after January 1, 2014 ) :
IFRS 10 ( new ) , ' Consolidated Financial Statements ' , IFRS 11 ( new ) , ' Joint Arrangements ' , IFRS 12 ( new ) , ' Disclosure of interests in other entities ' ; Amendments to IFRS 10 , IFRS 11 and IFRS 12 , ' transition regime ' , IAS 27 ( revised 2011 ) , ' separate financial statements ' , IAS 28 ( revised 2011 ) , ' Investments in associates and joint ventures ' , IAS 32 (amendment ) ' Compensation of financial assets and liabilities , IAS 36 ( amendment), ' Disclosure of impairment for non-financial assets ' , IAS 39 (amendment ) Renewal derivatives and hedge accounting continued ' ; Amendments to IFRS 10 , IFRS 12 and IAS 27 - ' investment Companies '.
As at december 31, 2013 , were issued the following standards , which are mandatory in subsequent years ( on or after January 1, 2014 ) , which had not yet been adopted by the European Union :
IAS 19 (amendment ) , ' Defined benefit plans - Employee contributions ' ; Improvements to standards from 2010 to 2012 ; Improvements to standards from 2011 to 2013 , IFRS 9 ( new ) , ' Financial instruments - classification and measurement ' ( date of application also not defined ; IFRS 9 ( amendment), ' financial instruments - hedge accounting ' ( date of application not yet defined ) , IFRIC 21 - ' Foreign Government ' ( " Levies " ) .
It is not expected that the future adoption of these rules raise significant to the Financial Statements accompanying impacts.
These financial statements have been prepared from the books and records of the company on a going concern basis and based on historic cost, except for financial instruments which are stated at fair value.
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.
Subsidiaries are all entities (including special purpose entities) over which the Sonae Indústria, SGPS, has the power to govern the financial and operating policies of those normally associated with the control, directly or indirectly, more than half of the voting rights. Associates are those entities in which Sonae Indústria holds between 20% and 50% of the voting rights, or over which the Sonae Indústria has significant influence in shaping financial and operating policies. Beyond the recognition
of the impairment of the investment in Subsidiary / Associate, Sonae Indústria recognize additional losses if incurred obligations or has made payments on behalf of Subsidiary / Associate. Entities that qualify as subsidiaries are listed in Note 6. Entities that qualify as associates are listed in Note 6.
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:
| Other Machinery | 5 <x<20< th=""></x<20<> |
|---|---|
| Office Equipment | 4 |
| 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.
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.
Intangible assets are recognized only if they are identifiable and it is probable that they will result in future economic benefits to the company, are controlled by it and it can reasonably measure its value.
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 ranges from 3 to 6 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 normally recognized 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 capitalized as part of the cost of the qualifying asset. Borrowing costs are capitalized 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 capitalization 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 report date to reflect the best estimate as of that date.
In situations where it is estimated to have a significant period of time between the moment the obligation and when the respective payment occurs, the provision is recorded at its present value.
Investments are classified into the following categories:
Investments measured at fair value through profit or loss includes the investments held for trading by the company to be sold within a short period of time. They are classified as current assets in the statement of financial position.
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 report 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 report 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 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 statement of financial position, 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 report 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 fair value, and then revalued and 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 Statement of Financial Position under Other non current assets, Other current assets, Other non current liabilities and Other current liabilities.
For the periods presented, the company has no financial instruments traded derivatives.
The equity instruments that represent a residual interest in assets after deduction of liabilities and are recorded at the amount received net of any costs of issuance.
The own shares are recorded at acquisition cost as a deduction from equity. Gains or losses on the sale of own shares are recorded in Other reserves included in Other reserves and retained earnings.
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.
Each year the Company grant their employees that belong to a functional group classified as Executive or above a compensation which is related to the value added in the previous period for the shareholders. This compensation consists in granting a number of the Company's shares, which may choose, on payment date, to deliver the shares or to pay the corresponding amount, taking into consideration the market price of the shares on payment date.
This liability is stated on the Statement of Financial Position under Other reserves, and is stated on the Income Statement under Personnel costs, on a straight line basis over the deferral period, taking into consideration the fair value of granted shares on grant date.
If the employee ceases functions during the period over which payment of previously recognized liabilities is deferred, liabilities will be derecognized from the Statement of Financial Position against Personnel costs on Income Statement.
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.
The Special Group Tax Regime 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 Industria - Management Services S.A., Agloma Investimentos SGPS SA, Siaf Energia S.A. , Sonae Industria PCDM, S.A., Somit Imobiliaria, S.A. and Imoplamac –Gestão Imoveis S.A.
Deferred taxes are calculated using the report 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.
Deferred tax liabilities are recognized for all taxable temporary differences, except those relating to: i) the initial recognition of goodwill, or ii) the initial recognition of assets and liabilities that do not result in a business combination and at the time the transaction does not affect accounting profit nor taxable profit. In respect of taxable temporary differences associated with investments in subsidiaries should not be recognized to the extent that: i) the parent company is able to control the timing of the reversal of the temporary difference and ii) it is probable that the temporary difference not reverse in the foreseeable future.
Revenue from services rendered is recognised in the income statement taking into consideration the stage of completion of the transaction at the report date.
Sonae Indústria, SGPS, proceeded to debt management and other services until 2011, the date from which these services were performed by another group company, whereby the company currently does not recognize any value in the item of revenue in separate financial statements.
The dividends received from investments in subsidiaries and associates are recognized as income in the period they are assigned to the partners or shareholders. Interest earned from loans are recorded in the period to which they relate, having regard to the period up to the end of each year.
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 report, 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 report date that provide additional information about conditions that existed at the report date (adjusting events), are reflected in the financial statements. Events after the report date that are non-adjusting events are disclosed in the notes when material.
As a result of the relevant portion of floating rate debt on Sonae Industria report 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 2013, Sonae Indústria 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;
The most significant estimations included in these financial statements refer to:
d) Calculation of provisions and pension liabilities;
e) Calculation of income tax .
These estimations were based on the best available information at the date these 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 financial statements are described in the correspondent notes.
In determining the fair value of an asset or liability if an active market exists, the market price is applied. This is level 1 of the fair value hierarchy as defined in IFRS 13 - Fair Value Measurement. Where there is no active market, valuation techniques generally accepted in the market, based on market assumptions are used. This is level 2 of the fair value hierarchy as defined in IFRS 13. Sonae Indústria, SGPS applies valuation techniques for financial instruments not quoted, such as financial assets available for sale. Valuation models that are used most often are models of discounted cash flows and option valuation models that incorporate, for example, the curves for interest rate and markek volatility. For some types of more complex derivatives, models containing more advanced valuation assumptions and data that are not directly observable in the market, for which Sonae Indústria, SGPS uses internal estimates and assumptions are used. This is level 3 of the fair value hierarchy as defined in IFRS 13.
During the periods ended 31 december 2013 and 2012, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.13 | |||||
|---|---|---|---|---|---|
| M achinery and equipment |
Transport equipment |
Office equipment |
Advances on account of tangible assets |
Total | |
| Gro ss asset: | |||||
| Opening balance | 38.099 | - | 132.619 | - | 170.718 |
| Acquisitions | - | - | 736 | 736 | |
| Closing Balance | 38.099 | - | 132.619 | 736 | 171.454 |
| A ccumulat ed amo rt iz at io ns,dep reciat io ns and | |||||
| im pairment lo sses | |||||
| Opening balance | 37.820 | - | 129.780 | - | 166.188 |
| Depreciations for the period | 77 | 976 | 1.053 | ||
| Closing Balance | 37.897 | 130.756 | 168.653 | ||
| C arrying amo unt | 202 | 1.863 | 736 | 2.801 | |
| 31.12.12 | |||||
| M achinery and equipment |
Transport equipment |
Office equipment |
Advances on account of tangible assets |
Total | |
| Gro ss asset: | |||||
| Opening balance | 38.099 | - | 131.827 | - | 169.926 |
| Disposals | - | - | 792 | 792 | |
| Closing Balance | 792 | (792) | - | ||
| 38.099 | - | 132.619 | - | 170.718 | |
| A ccumulat ed amo rt iz at io ns,dep reciat io ns and | |||||
| im pairment lo sses | |||||
| Opening balance | 37.716 | 128.472 | 166.188 | ||
| Depreciations for the period | 104 | 1.308 | 1.412 | ||
| 37.820 | - | 129.780 | - | 167.600 | |
| C arrying amo unt | 279 | 2.839 | 3.118 |
During the periods ended 31 december 2013 and 2012, movements in intangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.13 | |||
|---|---|---|---|
| Software | Software | Total | |
| NGI | Total | GI + NGI | |
| Gro ss asset: | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| A ccumulated amo rtizatio ns,depreciatio ns and | |||
| impairment losses | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| C arrying amo unt | - | - | - |
| 31.12.12 | |||
| Software | Software | Total | |
| NGI | Total | GI + NGI | |
| Gro ss asset: | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| A ccumulated amo rtizatio ns,depreciatio ns and | |||
| impairment losses | |||
| Opening balance | 506 | 506 | 506 |
| Depreciations for the period | 44 | 44 | 44 |
| Closing Balance | 550 | 550 | 550 |
| C arrying amo unt | - | - | - |
As of December 31, 2013 and 2012, the assets and liabilities recognized in the statement of financial position correspond to the following categories of IAS 39.
| Loans and |
Assets at fair value through |
Hedge | Available-for-sale | Assets out of scope of |
||||
|---|---|---|---|---|---|---|---|---|
| 31.12.13 | notas | receivables | profit or loss | derivatives | assets | Sub-total | IFRS 7 | Total |
| Non current assets | ||||||||
| Available for sale investments | 6 | 122 922 | 122 922 | 122 922 | ||||
| Other non current assets | 8 | 513.808.092 | 513.808.092 | 513.808.092 | ||||
| Current assets | ||||||||
| Customers | 9 | 24.150 | 24.150 | 24.150 | ||||
| Other current debtors | 9 | 13.302.794 | 13.302.794 | 13.302.794 | ||||
| Other current assets Cash and cash equivalents |
10 11 |
297.991 | 297.991 | 89.367 | 89.367 297.991 |
|||
| T o tal | 527.433.027 | 122.922 | 527.555.949 | 89.367 | 527.645.316 | |||
| 31.12.12 | ||||||||
| Non current assets Available for sale investments |
6 | 122 922 | 122 922 | 122 922 | ||||
| Other non current assets | 8 | 513.844.898 | 513.844.898 | 513.844.898 | ||||
| Current assets | ||||||||
| Customers | 9 | 6.584 | 6.584 | 6.584 | ||||
| Other current debtors | 9 | 2.275.276 | 2.275.276 | 2.275.276 | ||||
| Other current assets Cash and cash equivalents |
10 11 |
45.504 | 45.504 | 120.372 | 120.372 45.504 |
|||
| T o tal | 516.172.262 | 122.922 | 516.295.184 | 120.372 | 516.415.556 | |||
| Liabilities at | Liabilities | |||||||
| fair value | Other | out of scope | ||||||
| through | Hedge | financial | of | |||||
| profit or loss | derivatives | Liabilities | Sub-total | IFRS 7 | Total | |||
| 31.12.13 | ||||||||
| Non current liabilities | ||||||||
| Bank loans - net of short term portion | 13 | 83.101.488 | 83.101.488 | 83.101.488 | ||||
| Debentures - net of short term portion | 13 | 118.908.927 | 118.908.927 | 118.908.927 | ||||
| Current assets | ||||||||
| Bank loans | 13 | 157.317.060 | 157.317.060 | 157.317.060 | ||||
| Debentures | 13 | 129.918.927 | 129.918.927 | 129.918.927 | ||||
| Trade creditors Other current creditors |
14 15 |
174.361 7.542.528 |
174.361 7.542.528 |
174.361 7.542.528 |
||||
| Other current liabilities | 16 | 0 | 4.457.531 | 4.457.531 | ||||
| T o tal | 496 963 291 | 496 963 291 | 4 457 531 | 501 420 822 | ||||
| 31.12.12 | ||||||||
| Non current liabilities | ||||||||
| Bank loans - net of short term portion | 13 | 59.735.977 | 59.735.977 | 59.735.977 | ||||
| Debentures - net of short term portion | 13 | 248.344.033 | 248.344.033 | 248.344.033 | ||||
| Current assets | ||||||||
| Bank loans | 13 | 95.515.886 | 95.515.886 | 95.515.886 | ||||
| Debentures | 13 | 55.000.000 | 55.000.000 | 55.000.000 | ||||
| Trade creditors | 14 | 121.973 | 121.973 | 121.973 | ||||
| Other current creditors | 15 | 17.696.869 | 17.696.869 | 17.696.869 | ||||
| Other current liabilities | 16 | 0 | 3.818.613 | 3.818.613 | ||||
| T o tal | 476 414 738 | 476 414 738 | 3 818 613 | 480 233 351 |
| 31.12.13 | 31.12.12 | |||
|---|---|---|---|---|
| Non current | Current | Non current | Current | |
| Investment in group companies | ||||
| Opening balance at 1 January | 944.009.598 | - | 944.006.011 | - |
| Aquisitions over the period | 15.727.008 | - | 3.600 | - |
| Disposals over the period | - | 13 | - | |
| Other | (20.738.811) | - | - | - |
| Closing balance for the period | 938.997.795 | - | 944.009.598 | - |
| Accumulated impairment losses | (333.810.139) | - | (198.722.687) | - |
| 605.187.656 | - | 745.286.910 | - | |
| Investments held for sale | ||||
| Fair value at 1 January | 122.922 | - | 117.922 | - |
| Aquisitions over the period | - | - | - | - |
| Disposals over the period | - | - | - | - |
| Increase/(decrease) in fair value | - | - | - | - |
| Other | - | 5.000 | - | |
| Fair value at the end of the period | 122.922 | - | 122.922 | - |
| 605.310.578 | - | 745.409.832 | - | |
At 31 december 2013 and 31 december 2012, details of investments were as follows:
The main changes is related to, Capital increase in subsidiary Tafisa Tableros Fibras, S.A. amount of 15.727.008 euros, corresponding to 12.581.606 new shares.
Liquidation of the company Agloma – Sociedade Industrial de Aglomerados de Madeira,SA, amounting to 20.738.811 euros, generating a loss in the amount of 19.696.231 euros.
The change in impairment losses relates to the use of existing impairment on the participation of Agloma – Sociedade Industrial de Madeira Aglomerada, S.A. amounting to 20.310.499 euros by the liquidation of the company, the losses related impairment on the participation of Sonae Indústria de Revestimentos, S.A. in the amount of 1.937.000 euros, on the participation of Movelpartes – Componentes para a Indústria de Mobiliário, S.A. amounting to 2.276.000 euros and on the participation Tafisa Tableros Fibras, S.A. amounting to 152.454.642 euros. Concerning the participation of Maiequipa – Gestão Florestal, S.A. was reversed impairment at 1.269.691 euros.
Available-for-sale investment consists of financial undertakings which do not fulfill the criteria to be stated as subsidiaries or as associates.
At 31 december 2013, Sonae Industria, SGPS had the following holdings in Group and Associated Companies:
| Company Share |
Aquisition Value |
Acumulated Impairment Losses |
Sharedolfer´s Funds |
Net profit | |
|---|---|---|---|---|---|
| Euroresinas - Industrias Quimicas, S.A. | 100,00% | 15.838.526 | 0 | 16.094.991 | 200.684 |
| M aiequipa - Gestão Florestal,S.A. | 100,00% | 3.438.885 | 962.785 | 758.805 | -42.853 a)-c) |
| M ovelpartes - Componentes para Industria do M obiliário,S.A . | 100,00% | 4.180.113 | 2.276.000 | 1.191.661 | -879.502 a)-c) |
| Sonae Industria de Revestimentos,S.A . | 100,00% | 21.729.193 | 6.588.233 | 10.952.870 | -559.170 a)-c) |
| Imoplamac - Gestão de Imóveis,S.A. | 100,00% | 6.000.000 | 0 | 5.792.465 | 59.189 |
| Sonae Industria -M anagement Services SA | 100,00% | 250.000 | 0 | 733.306 | 89.893 |
| Taiber | 0,02% | 28.742 | 0 | -26.871.561 | -32.524.813 |
| Tafisa - Tableros de Fibras,S.A. | 99,11% | 877.308.319 | 323.983.122 | 24.611.616 | 12.481.476 b)-c) |
| Ecociclo - Gestão Ambiental,S.A. | 100,00% | 1.720.021 | 0 | 179.546 | 34.949 |
| Sonae Industria - Produção e Comercialização de Derivados de M adeira,S.A. | 2,97% | 3.497.787 | 0 | 70.543.381 | 89.370 |
| Siaf Energia, S.A. | 0,20% | 5.000 | 0 | 7.257.270 | 272.310 |
| Somit Imobiliaria | 0,02% | 10 | 0 | 4.732.495 | 1.936.023 |
| Agloma Investimentos,S.A . | 6,54% | 5.000.000 | 0 | 92.209.217 | 3.793.461 |
| Sonae RE, Societé Anonyme | 1.200 | 0 | 2.307.542 | -692.458 | |
| 938.997.795 | 333.810.139 |
An eight-year period was used for projecting cash flows on the grounds of the extension and intensity of the economic cycles affecting the Group's activity.
Projected cash flows are based on the Group's business plan and are updated annually so as to include changes in the economic outlook of each market where the Group is conducting business.
2013
| Tableros de Fibras | SIR | Maiequipa | Ecociclo | |||||
|---|---|---|---|---|---|---|---|---|
| Península Ibérica | Alemanha | França | Africa Sul | |||||
| Discount rate (pre-tax) | 12,20% | 9,38% | 9,62% | 18,86% | 12,12% | 12,12% | 12,12% | 12,12% |
| Grow th rate on Perpetuity | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% |
| Period | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos |
| Test Conclusions | Impairment | Impairment | No impairment | Impairment | No impairment | |||
| 2012 | ||||||||
| Tableros de Fibras | SIR | Maiequipa | Movelpartes |
| Península Ibérica | Alemanha | França | Africa Sul | Canada | ||||
|---|---|---|---|---|---|---|---|---|
| Discount rate (pre-tax) | 13,42% | 9,56% | 9,14% | 17,06% | 8,96% | 13,27% | 13,45% | 13,27% |
| Grow th rate on Perpetuity | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% |
| Period | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos |
| Test Conclusions | Impairment | Impairment | No impairment | No impairment | ||||
As a result of the tests carried out on 31 December 2013, were recognized impairments related with, the company Sonae Industria Revestimentos, S.A. in amount of 1.937.000 euros, related with the company Movelpartes . Componentes para a Indústria de Mobiliário, S.A. in amount of 2.276.000 euros, and Tafisa-Tableros de Fibra, S.A. in amount of 152.454.642 euros. Related with the company Maiequipa – Gestão Florestal, S.A. the impairment was reversed in the amount of 1.269.691 euros ( Note 17).
Details of deferred tax asset at 31 december 2013 and 31 december 2012 were as follows:
| DEFERRED TAXES - BALANCES | ||||||
|---|---|---|---|---|---|---|
| 31.12.13 | 31.12.12 | |||||
| Assets | Liabilities | Assets | Liabilities | |||
| Impairment of assets | - | 5.077.625 | - | |||
| Net losses carry-forw ard | 4.083.078 | - | - | - | ||
| Others | 1.444.158 | - | 1.685.880 | - | ||
| 5.527.236 | - | 6.763.505 | - | |||
| DEFERRED TAXES - FLOWS | ||||||
| 31.12.13 | 31.12.12 | |||||
| Assets | Liabilities | Assets | Liabilities | |||
| Opening Balance | 6.763.505 | - | 9.120.837 | - | ||
| Recognition in Profit or Loss: | ||||||
| Impairment of assets | (5.077.625) | - | - | - | ||
| Net losses carry-forw ard | 4.083.078 | - | (2.769.634) | - | ||
| Others | (241.722) | 412.302 | ||||
| Sub-total (Note 24) | (1.236.269) | - | (2.357.332) | - | ||
| Closing Balance | 5.527.236 | 6.763.505 | - |
The amount included in Other concerns SIFIDE to deduct tax benefits in the coming years.
In 2013 deferred tax assets relating to tax losses generated in this exercise were created, regarding settlement Agloma, S.A..
Details of Other Non Current Assets at 31 december 2013 and 31 december 2012 were as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Loans Granted To Group Companies (Nota 2.2 e 20) | 513 808 092 | 513 844 898 |
| 513 808 092 | 513 844 898 | |
| Accumulated Imparment Losses (Nota 17) | ||
| 513 808 092 | 513 844 898 | |
Loans granted to Group companies have a medium and long term maturity and they yield interest at an average rate of 5,34%.
No repayment terms are provided, only for interest rate. The repayment is made by availabilities
At 31 december 2013 and 31 december 2012, details of Current Trade Debtors were as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Current Customer Accounts | 24 150 | 6 584 |
| Bills Receivable | - | - |
| 24 150 | 6 584 | |
| Accumulated Imparment Losses | - | - |
| 24 150 | 6 584 |
At 31 december 2013 and 31 december 2012, detail of trade debtors maturities were as follows:
| 31.12.13 | 31.12.12 | ||
|---|---|---|---|
| Not due | 23.278 | 0 | |
| Due and not impaired | |||
| > 90 days | 872 | 6.584 | |
| 872 | 6.584 | ||
| 24.150 | 6.584 |
At 31 december 2013 and 31 december 2012, details of Other Current Trade Debtors were as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Group companies -Interest (Note 20) | 1.464.882 | 612.815 |
| Group companies -current Income Tax (Note 20) | 845.213 | 1.231.623 |
| Group companies -Loans (Note 20) | 10.591.303 | 23.000 |
| 12.901.398 | 1.867.438 | |
| Other debtors | 401.397 | 407.839 |
| 13.302.794 | 2.275.276 | |
| AGEING OF ADVANCE CREDITORS |
AGEING OF TRADE CREDITORS (ASSET BALANCES) |
AGEING OF OTHER DEBTORS | TOTAL DEBTORS | |||||
|---|---|---|---|---|---|---|---|---|
| 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | |
| Due and not impaired | ||||||||
| < 30 days | 1.500 | 140 | 6.018 | 1.500 | 6.158 | |||
| 30 - 90 days | - | 37 | - | - | - | 37 | - | |
| > 90 days | 399.860 | 401.681 | - | - | 399.860 | 401.681 | ||
| 1.500 | - | 399.897 | 401.821 | - | 6.018 | 401.397 | 407.839 |
At 31 december 2013 and 31 december 2012, details of State and Other Public entities were as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| State & Other Public Entities | ||
| Income Tax | 1.102.730 | 682.695 |
| Value Added Tax | 138 | 0 |
| Others | 137 | |
| 1 102 868 | 682 832 |
Details of Other Current Assets at 31 december 2013 and 31 december 2012 were the following:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Accrued Revenue | 39 247 | 10 175 |
| Deferred Costs | 50 120 | 110 197 |
| 89 367 | 120 372 |
At 31 december 2013 and 31 december 2012 detail of Cash and cash equivalents was the following:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Cash at Hand | 812 | 867 |
| Deposits | 297 179 | 44 637 |
| Cash & Cash Equivalents - Balance Sheet | 297 991 | 45 504 |
| Overdraft (1) | (177.246) | (25.046.189) |
| 120.745 | (25.000.685) |
(1) In Statement of Financial Position- Bank loans Short term (Note 13)
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.
On december 31, 2013 Sonae Industria's Share capital was fully underwritten and paid, is represented by 140.000.000 common shares, not entitled to fixed income, with a face value of 5 Euros per share
The following entity had more than 20% of the subscribed capital on 31 december 2013:
| Entity | % |
|---|---|
| Efanor Investimentos, SGPS, S. A. | 31,9 |
Shareholder's Funds Detail:
| 2013 | 2012 | |
|---|---|---|
| Share Capital | 700.000.000 | 700.000.000 |
| Legal Reserve | 3.131.757 | 3.131.757 |
| Free Reserve | 20.145.630 | 20.145.630 |
| Other Reserves | 246.000.759 | 245.966.974 |
| Retained Earnings | -181.198.893 | -1.367.726 |
| Total comprehensive Income | -150.763.752 | -179.831.167 |
| 637.315.501 | 788.045.468 |
Legal Reserve: Commercial legislation establishes that at least 5% of annual net profit has to be intended to strengthen the legal reserve until it represents at least 20% of the capital. This reserve is not distributable to not be in the event of the liquidation of the company, but can be used to absorb losses, after exhausted the other reserves, or incorporated into the capital.
Free Reserves: Relating to profits earned in previous years and are available for distribution, provided it is not necessary to cover losses.
Other Reserves: Includes reserves of the merger of previous years, in amount 245.920.750 euros, which, in terms of Portuguese legislation are not distributable, can be incorporated into the capital.
During 2013 was recognized the amount of 33.785 euros related with Liability for medium and long term incentive plan.
Company changed the medium and long term incentive plan profile according to note 2.10 , concerning of granting a number of company's shares .
The fair value of services acquired was determinate with reference to the fair value of granted shares , calculated based on average stock prices in the 30 days immediately prior to general shareholder's meeting.
The amount, of 33.785 euros, recognized on personnel costs stated in Income statement was registered according to the rules of transactions plans on the basis of shares and settled with own capital.
| 2013 | 2012 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Opening Balance Assigned | Cancelled | Paid | Closing Balance | Opening Balance Assigned Cancelled | Paid | Closing Balance | ||||
| Nº Granted shares | 273.069 | 156.450 | 126.772 | 302.747 | 273.069 | 273.069 | ||||
| Fair Value | 184.896 | 88.900 | 85.838 | 187.958 | 184.896 | 184.896 | ||||
| Payment date | 2015/2016 | 2015 | ||||||||
| Personnel costs | 55.244 | 21.460 | 46.224 | 46.224 |
At 31 december 2013 and 31 december 2012 Sonae Industria SGPS, S.A had the following outstanding loans:
| 31.12.13 | 31.12.12 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Amortised cost | Nominal Value | Amortised cost | Nominal Value | ||||||
| NOTES | Current | Non Current | Current | Non Current | Current | Non Current | Current | Non Current | |
| Loans - Commercial Paper | c) | 137 170 117 | 55 000 000 | 137 500 000 | 55 000 000 | 63 500 000 | 49 399 047 | 63 500 000 | 50 000 000 |
| Bank Loans - Others | a) | 19 969 697 | 28 101 488 | 19 969 697 | 28 409 091 | 6 969 697 | 10 336 930 | 6 969 697 | 10 378 788 |
| Debentures | b) | 129.918.927 | 118 908 927 | 130.000.000 | 120 000 000 | 55 000 000 | 248 344 033 | 55 000 000 | 250 000 000 |
| Bank Overdrafts | 177 246 | 177 246 | 25 046 188 | - | 25 046 188 | - | |||
| Gross Debt | 287 235 986 | 202 010 415 | 287 646 943 | 203 409 091 | 150 515 885 | 308 080 010 | 150 515 885 | 310 378 788 | |
| Cash & Cash Equivalents - Balance Sheet | 297 991 | - | 297 991 | - | 45 504 | - | 45 504 | - | |
| Net Debt | 286 937 995 | 202 010 415 | 287 348 952 | 203 409 091 | 150 470 381 | 308 080 010 | 150 470 381 | 310 378 788 | |
| Total Net Debt | 488 948 410 | 490 758 043 | 458 550 391 | 460 849 169 |
The loans have the following repayment schedule:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| 2013 | 150 515 885 | |
| 2014 | 287.646.943 | 186 969 697 |
| 2015 | 90.909.091 | 33 409 091 |
| 2016 | 37.500.000 | 30 000 000 |
| 2017 | 70.000.000 | 60 000 000 |
| 2018 | 5.000.000 | |
| 491 056 034 | 460 894 673 | |
The average interest rates of each class of debt stated in the previous table were as follows:
| 2013 | 2012 | |
|---|---|---|
| Bank Loans - Others | 7,918% | 6,545% |
| Debentures | 4,064% | 3,230% |
| Loans - Commercial Paper | 7,165% | 4,785% |
At december 31, 2013 the contracted loans are summarized as follows:
On 19 february 2009 Sonae Industria contracted a loan with a financial institution in the total amount of 20.000.000 euros. Interest are calculated at market rate. The loan will be paid between 2009 and 2015.
At 31 december 2013, outstanding principal amounted to 4.545.455 euros, shown under current liabilities in the amount of 3.636.364 euros and Non Current Liabilities in the amount of 909.091 euros.
On 05 august 2010 Sonae Industria contracted a loan with a financial institution in the total amount of 10.000.000 euros. Interests are calculated at market rate. The loan will be paid between 2012 and 2015. At 31 december 2013, outstanding principal amounted to 5.833.333 euros, shown under current liabilities in the amount of 3.333.333 euros and Non Current Liabilities in the amount of 2.500.000 euros.
On 26 december 2012 Sonae Industria contracted a loan with a financial institution in the total amount of 25.000.000 euros. This loan is used within the period between 1 and 31 march. Interests are calculated at market rate. The loan will be paid over a period of 5 years from the 1st use. At 31 december 2013, outstanding principal amounted to 25.000.000 euros, shown under Non Current Liabilities.
On 29 november 2013 Sonae Industria contracted a loan with a financial institution in the total amount of 13.000.000 euros. Interests are calculated at market rate. The loan will be paid between 2012 and 2015. At 31 december 2013, outstanding principal amounted to 13.000.000 euros, shown under Non Current Liabilities
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.
Sonae Industria 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.
Sonae Industria 2010/2017 bonds, issued on 5 May 2010, with a principal amount of 150.000.000 euros and a 7-year period, on 22 October 2012 the contract was amended. Payment will be done through reduction of nominal value, in 7 semi-annual installments, with the first 6 in the amount of 15.000.000 euros and the last in the amount of 60.000.000 euros, beginning on the 8th coupon, payment date, 05 May 2014. Interest is paid semi-annually on 5 May and 5 November.
On 25 january 2006, Sonae Industria SGPS, S.A. signed and subsequently added a Commercial Paper with several financial institutions. The programme matures on 27 january 2016. As at December 31, 2013 issue of commercial paper existed for winning in the amount of 20.000.000 euros, of which 15.000.000 euros maturing in the short term. Interest is calculated at the EURIBOR rate that matches the maturity of the issue.
On 31 march 2011 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 50.000.000 Euros. The programme will mature on long term. At 31 december 2013, the balance was keep at 50.000.000 euros.
On 25 june 2013 Sonae Indústria SGPS, S.A. signed and subsequently added a Commercial Paper programme with a maximum nominal amount of 100.000.000 Euros. The programme will mature on long term. At 31 december 2013, the balance was keep at 57.500.000 euros.
On 13 december 2013 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 65.000.000 Euros. The programme will mature on long term. At 31 december 2013, the balance was keep at 65.000.000 euros.
At 31 december 2013 and 31 december 2012 all amounts recorded under this item resulted from normal operations. Trade creditors maturities were as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| To be paid | ||
| < 90 days | 140.548 | 121.973 |
| 90 - 180 days | 25.000 | - |
| > 180 days | 8.814 | - |
| 174.361 | 121.973 |
At 31 december 2013 and 31 december 2012 details of this item were as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Other Creditors | ||
| Group companies -current Income Tax (Note 20) | 348.259 | |
| Loans From Group Companies (Nota20) | 7.151.000 | 17.676.500 |
| Financial Instrumets | 7.499.259 | 17.676.500 |
| Others Creditors | 20.369 | |
| 43.268 | ||
| 7.542.528 | 17.696.869 |
| 31.12.13 | 31.12.12 | |
|---|---|---|
| State & Other Public Entities | ||
| Income Tax | 684.514 | 806.536 |
| Tax retention | 34.640 | 24.240 |
| Value Added Tax | 3.756 | 6.295 |
| Social Security Contributions | 6.644 | 5.732 |
| Others | 30.299 | |
| Liabilities out of scope of IFRS7 | 729.554 | 873.102 |
At 31 december 2013 and 31 december 2012 this item had the following detail:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Accrued Costs | ||
| Holidays | 200.161 | 373 775 |
| Insurance | 966 | - |
| Interests | 4.159.536 | 3 143 535 |
| External Supllies & Services | 96.869 | 301 303 |
| Liabilities out of scope of IFRS7 | 4 457 531 | 3 818 613 |
Changes in provisions and accumulated impairment losses during the period ended december, 31 2013 and december, 31 2012 were the following:
| Description | Opening Balance | Increases | Utilisation | Reductions | Closing Balance |
|---|---|---|---|---|---|
| Accumulated Imparment Losses on Investments (Nota 6) | 198.722.687 | 156.667.642 | 20 310 499 | 1.269.691 | 333.810.139 |
| 198.722.687 | 156.667.642 | 20.310.499 | 1.269.691 | 333.810.139 | |
| 31.12.2012 | |||||
| Description | Opening Balance | Increases | Utilisation | Reductions | Closing Balance |
| Accumulated Imparment Losses on Investments (Nota 6) | 22.542.975 | 176.179.713 | 0 | 0 | 198.722.687 |
| 22.542.975 | 176.179.713 | 0 | 0 | 198.722.687 |
The decrease in impairment loss on investments relates to the registration of the reversal of impairment loss on the participation of Agloma - Sociedade Industrial de Aglomerados de Madeira, S.A., since that company was liquidated during 2013.
The decrease in impairment loss relates to the reversal of the impairment loss on the participation of Maiequipa – Gestão Florestal, S.A..The increases in impairment losses relate to the registration of impairment on the participation of Sonae Indústria de Revestimentos, S.A. in the amount of 1.937.000 euros, the impairment on the participation of Movelpartes - Components para a Indústria de Mobiliário,S.A. in the amount of 2.276.000 euros and the impairment on the participation of Tafisa Tableros Fibras, S.A. in the amount of 152.454.642 euros.
In 2013, charges for operational lease payments in the amount of 41.175 euros were recorded on the profit and loss statement.
In addition, at the balance sheet date, the company had irrevocable operational lease contracts with the following payment maturities:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Maturing in em 2013 | 31.833 | |
| Maturing in em 2014 | 14.217 | 31.833 |
| Maturing in em 2015 | 14.217 | 31.833 |
| Maturing in em 2016 | 11.847 | 29.463 |
| Maturing in em 2017 | 4.404 | |
| 40.281 | 129.366 | |
The liquidity risk described on note 2.17., b), related to gross debt referred to on note 13, can be analysed as follows:
| 2013 | 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Liquidity Risk | Liquidity Risk | ||||||||
| M aturity of Gross Debt |
Interests | Total | M aturity of Gross Debt |
Interests | Total | ||||
| 2013 | 2013 | 150.515.885 | 16.017.367 | 166.533.252 | |||||
| 2014 | 287.646.943 | 15.621.410 | 303.268.353 | 2014 | 186.969.697 | 14.291.785 | 201.261.482 | ||
| 2015 | 90.909.091 | 12.119.613 | 103.028.704 | 2015 | 33.409.091 | 7.782.720 | 41.191.811 | ||
| 2016 | 37.500.000 | 6.592.354 | 44.092.354 | 2016 | 30.000.000 | 5.648.690 | 35.648.690 | ||
| 2017 | 70.000.000 | 2.706.171 | 72.706.171 | 2017 | 60.000.000 | 2.032.630 | 62.032.630 | ||
| 2018 | 5.000.000 | 172.000 | 5.172.000 | 2018 | - | - | - | ||
| 491.056.034 | 37.211.548 | 528.267.582 | 460.894.673 | 45.773.192 | 506.667.865 |
The calculation of interest in the previous table was based on interest rates at 31 december 2013 and 2012 applicable to each item of debt. Gross debt maturing in 2013 includes scheduled repayment of debt along with the repayment of debt as at end 2013 maturing within less than one year (although some credit limits might be rolled over).
Consistent with the principles described in Note 2.17 b), Sonae Indústria concentrates its efforts in the management of debt maturing in 2014 and 2015 with the objective to provide your management team the necessary room to implement its strategic plan, such as indicated above the market, seeks to reduce the harmful impact of industrial activity, favors the more profitable industrial units and strives for operational efficiency and asset sales.
During the fourth quarter of 2013, the company conducted a detailed analysis of capital structure and debt maturity profile, to identify alternatives to achieve long-term financing solutions that provide you with the time needed to implement your plan strategic (considerable reduction in the amount of debt to be repaid in 2014 and 2015) and that allow obtain the support of its major business partners, in particular its major shareholders and creditor banks .
As a result of this analysis, negotiations are under way with the three major banks in order to find appropriate solutions to the refinancing of debt maturing over the next few years. These negotiations could result in an extension of the maturity of current debt and a Refinancing of conditions attached to it which, together with other leading to improved capital structure of the group initiatives, enable access of society, in the medium term, the markets bank financing and / or capital to refinance its debt , if deemed appropriate.
.
The analysis of interest rate risk, described on note 2.17., b), i), consisted in 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 interest rates of the corresponding period.
| 2013 | 2012 | ||||||
|---|---|---|---|---|---|---|---|
| "Notional" | Effect in Profit and Loss (Euros) |
"Notional" | Effect in Profit and Loss (Euros) |
||||
| 0.75% | $-0.75%$ | 0.75% | $-0.75%$ | ||||
| Gross Debt | |||||||
| Group | $-7.151000$ | $-79.791$ | 79.791 | $-77.676.500$ | $-690.929$ | 690.929 | |
| External | -490.878.788 | $-2.886.843$ | 2.886.843 | -435.848.485 | $-2.906.451$ | 2.906.451 | |
| -498.029.788 | $-2.966.634$ | 2.966.634 | -453.524.985 | $-3.597.381$ | 3.597.381 | ||
| Financial Instruments | |||||||
| Derivates | |||||||
| Loans to group companies |
499.242.695 | 3.889.926 | $-3.889.926$ | 492.303.872 | 4.464.536 | $-4.464.536$ | |
| Treasury Aplications | $\mathbf 0$ | 566 | $-566$ | $\mathbf 0$ | 30.692 | $-30.692$ | |
| 499.242.695 | 3.890.492 | $-3.890.492$ | 492.303.872 | 4.495.228 | $-4.495.228$ | ||
| 923.858 | $-923.858$ | 897.847 | $-897.847$ |
The amounts of debt included in the above table excludes bank overdrafts and borrowings that are not subject to changes in interest rate. Considering the Euribor 6M as a benchmark for the level of interest rates in the Euro, an increase of 0.75 percentage points corresponds to 35.7 times the standard deviation of that variable in 2013 (2 times in 2012).
The interest amounts were calculated based on interest rates in effect at December 31, 2013, for each of the values in debt.
| Balance | Accounts Receivable | Accounts Payable | Other Creditors | Other non Currents Assets | Treasury Apllications | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | |
| 23 173 | 5712 | 123 215 | 87 488 | 7 151 000 | 17 676 500 | 513 808 092 | 513 844 898 | 10 591 303 | ||
| - Agloma | 1.224.000 | 25.000 | ||||||||
| - Agloma Investimentos | 208,500 | 20,000 | ||||||||
| - Ecociclo | 294.000 | 197.000 | 537.000 | 5.000 | ||||||
| - Euroresinas | $\overline{7}$ | 1.199.000 | 1.973.000 | |||||||
| - Glunz | ||||||||||
| - Implamac | 2.841.000 | 882.000 | 1.079.000 | |||||||
| - Slnd-pcdm | 22.274 | 34.925 | 13.287 | 4.328.000 | 24.100.000 | 359.000 | 7.088.303 | |||
| - Isoroy | ||||||||||
| - Maiequipa | 1.021.900 | 1.012.900 | 1.000 | 3.000 | ||||||
| - Movelpartes | 892 | 5.712 | 1.290.500 | 327,000 | ||||||
| - Somit Imobiliária | 458,800 | 2.457.800 | 2.000 | |||||||
| - Siaf Energia | 2.448.000 | 3.827.000 | ||||||||
| - Sonae Industria Revestimentos | 435 | 4.703.000 | 5.127.500 | |||||||
| - Sonae, sgps | 49.000 | |||||||||
| - Sonae Uk | ||||||||||
| - Sind - Management services | 5.553 | 5.402 | 1.377.000 | 811.000 | 116,000 | |||||
| - Tafisa Canadá | ||||||||||
| - Tafisa Tableros Fibra | 50.000.000 | |||||||||
| - Sonae Novobord | ||||||||||
| - Taiber | 434.378.392 | 507.372.198 | ||||||||
| - Novis | 1.056 | |||||||||
| - Raso Viagens Turismo | 11.287 | 13.083 | ||||||||
| - Solinca investimentos Turisticos | 1.206 | |||||||||
| - Sonaecenter | 11.851 | 53.233 | ||||||||
| - Sonae RP | 9.842 | |||||||||
| - SC-Consultadoria | 101 | |||||||||
| - Imosede | 221 | 221 | ||||||||
Balances and transactions with related parties may be summarized as follows:
| Transactions | Purchases & Acquired Services |
Interest Income | Interest Expenses | |||
|---|---|---|---|---|---|---|
| 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | |
| 228 379 | 270 681 | 27 643 696 | 22 417 761 | 262 101 | 2 523 885 | |
| - Agloma | 345 | 556 | 11.487 | |||
| - Agloma Investimentos | 5.748 | 21 | 2.211.343 | |||
| - Ecociclo | 16.961 | 27.583 | 623 | 1.038 | ||
| - Euroresinas | 155.006 | 235.941 | 6.377 | 555 | ||
| - Implamac | 104.616 | 272.314 | 7.019 | |||
| - Sind-pcdm | 14.168 | 17.459 | 886.392 | 163.318 | 23.069 | 18.671 |
| - Isorov | ||||||
| - Maiequipa | 55.644 | 38.941 | ||||
| - Movelpartes | 1.304 | 17.303 | 35.308 | |||
| - Somit Imobiliária | 70.753 | 115.061 | ||||
| - Siaf Energia | 62.033 | 88.400 | ||||
| - Sonae Industria Revestimentos | 354 | 469 | 132.266 | 137.009 | ||
| - Sonaecenter | 23.642 | 45.936 | ||||
| - Sonae, sgps | 50.000 | 50.000 | ||||
| - Sind - Management services | 54.176 | 52.698 | 30.361 | 8.943 | 24.541 | |
| - Tafisa | 1.149.583 | |||||
| - Saphety | 85 | |||||
| - Solinca investimentos Turisticos | 1.015 | |||||
| - Taiber | 25.166.983 | 21.564.026 | ||||
| - Novis | 9.587 | |||||
| - SC-Consultadoria | 538 | |||||
| - Raso Viagens Turismo | 72.237 | 89.724 | ||||
| - Solinca investimentos Turisticos | 3.683 | |||||
| - Digitmarket | 17 | |||||
| - Sonae RP | 10.887 | |||||
| - Imosede | 1.260 | 1.125 |
Remuneration of the Board of Directors of the Company is detailed as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Total Fixed salaries | 923.175 | 818.204 |
| Total Bonus | 159.700 | 185.000 |
| 1.082.875 | 1.003.204 |
Remuneration of the Supervisory Board, General Assembley and Remuneration Committee is detailed as follow:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Total Fixed salaries | 36.750 | 36.750 |
Fees Paid to the Audit company PricewatherhouseCoopers is detailed as follows:
Total Fees related to audit and legal certification of the accounts 13.730
The remuneration policy of the members of the board of directors and supervisory board, as well as the annual amount earned by their members in an individual are presented in the report of government in society .
| Other Operation Gains | 31.12.13 | 31.12.12 |
|---|---|---|
| Supplementary Revenue | 30 299 | 133.466 |
| Others | 110 337 | 40 |
| 140.636 | 133.506 | |
| Other Operation Losses | 31.12.13 | 31.12.12 |
| Losses on disposals of non current investments | 13 | |
| Taxes | 114.427 | 185.652 |
| Others | 64.597 | 51.075 |
| 179.024 | 236.740 |
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Financial Expenses: | ||
| Interest Expenses | 24 616 358 | 21.989.295 |
| Others | 1 467 939 | 861.234 |
| Financial Results | 1.559.453 | -402.110 |
| 26.175.811 | 22.448.419 | |
| Financial Revenues | ||
| Interest Income | 27 643 749 | 22.448.418 |
| Others | 1 | |
| 27.643.749 | 22.448.419 |
| 2013 | 2012 | |
|---|---|---|
| Dividends | ||
| Movelpartes - Componentes p/ind.Mobiliário,S.A. | 500.000 | |
| Imoplamac - Gestão de Imóveis,S.A. | 871.896 | |
| Siaf Energia,S.A. | 3.196 | |
| Somit Imobiliaria SA | 104 | |
| Euroresinas - Indústrias Quimicas,S.A. | 1.250.000 | |
| Sonae Indústria - Management Services, S.A. | 1.500.000 | |
| Sonae Indústria - P.C.D.M.,S.A. | 445.765 | |
| Reversal of Impairment of participation of Maiequipa,S.A.( Nota 6) | 1.269.691 | |
| Reversal of Impairment of paraticipation of Agloma,S.A.(Noat 6) | 20.310.499 | |
| Gains related w ith investments | 26.151.150 | 0 |
| Loss on liquidation of Agloma,S.A.(Nota 6) | -19.696.267 | |
| Registration of impairment of participation of SIR,S.A.(Nota 6) | -1.937.000 | |
| Registration of impairment of participation of Movelpartes,S.A.(Nota 6) | -2.276.000 | |
| Registration of impairment of participation of Tafisa,S.A.(Nota 6) | -152.454.642 | |
| Losses related w ith investments | -176.363.909 | 0 |
| Profit/Loss on other investments | -150.212.759 | 0 |
The income and deferred taxation recorded at 31 december 2013 and 31 december 2012 were:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Income taxation | 661.454 | 1.411.328 |
| Deferred taxation (Note 7) | (1.236.269) | (2.357.332) |
| (574.815) | (946.004) | |
| Current Tax -Prior Year adjustment | 205.143 | (148.711) |
| (369.672) | (1.094.715) |
Reconciliation of Earnings before taxes with taxes for the year may be detailed as follows:
| 2013 | 2012 | |
|---|---|---|
| Net income/(loss) before tax | -150.394.080 | -178.736.452 |
| Current Taxes | 37.598.520 | 44.684.113 |
| Provisions | -99 | -44.044.928 |
| Impairment loss of financial assets | -38.849.488 | |
| Dividends | -1.030.474 | 0 |
| Current tax at special rate | -38.596 | -59.002 |
| Deferred tax | -2.769.634 | |
| Tax savings | 1.709.293 | 1.243.447 |
| Others | 36.029 | |
| -574.815 | -946.004 |
The effective tax rate was (0.38%).
Earnings per share, excluding the effect of discontinued operations, were calculated as follows:
| 31.12.13 | 31.12.12 | |
|---|---|---|
| Net Profit | ||
| Net Profit Considered for Basic EPS Calculation (Periodic Net Profit) |
- 150 763 752 | - 179 831 167 |
| Net Profit Considered for Diluted EPS Calculation | - 150 763 752 | - 179 831 167 |
| 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 | -1,08 | -1,28 |
During 2013, no effect from discontinued operations was recorded.
In october 2010 Sonae Indústria, SGPS, S.A. received a notice of assessment from tax authorities according to which the loss resulting from the dissolution of its subsidiary Socelpac, SGPS, S.A. in 2006, amounting to 74 million Euro, should be considered at 50% for tax calculation purposes. The company filed a lawsuit challenging this interpretation. According to the information available on this
date, the Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was done to current tax and deferred tax asset recognized in these financial statements (Note 7).
Was completed in 2012 the Tax audit to IRC group companies for the year 2009, from this audit resulted corrections to taxable income in the amount of 3.743.609 euros, related with Current Tax the amount of 3.131.296 euros, related with special tax the amount of 337.258 euros and related with compensatory interest the amount of 275.055 euros. The company filed a law suit and provided a guarantee from Sonae Industria PCDM to suspend the tax foreclosure process. The Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was recognized in financial statements.
Was completed in 2013 the Tax audit to IRC group companies for the year 2010, from this audit resulted corrections to taxable income in the amount of 1.897.603 euros, related with current tax the amount of 1.612.926 euros, related with special tax the amount of 1.992 euros and related with disregard deductions the amount of 158.961 euros. The company filed a law suit and provided a guarantee from Sonae Industria PCDM to suspend the tax foreclosure process. The Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was recognized in financial statements.
In the year 2013, was received an additional corrections to taxable income in the IRC group of companies for the year 2009 in the amount of 480.438 euros to fix the value attributed to tax losses reported by AT settlement. The company filed a law suit and provided a guarantee from Sonae Industria PCDM to suspend the tax foreclosure process. The Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was recognized in financial statements.
Sonae Industria SGPS has granted a guarantee amounting to 4.181.794 euros to the Institute of Social Security in order to ensure a contingency from Sonae Industria PCDM with this entity, this contingency is in claim phase.
Sonae Industria SGPS signed an amendment to the leasings contracts that Imoplamac has with a bank, in case of disregard of the contract, in the amount of 8.680.000 euros.
There is nothing significant to report.
These financial statements were approved by the Board of Directors and authorised for issuance on 11 march 2014.
Consolidated Statements of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Shareholders' Funds Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements
(Amounts expressed in Euros)
| ASSETS | Notes | 31.12.2013 | 31.12.2012 | 01.01.2012 | |
|---|---|---|---|---|---|
| Restated | Restated | ||||
| NON CURRENT ASSETS: | |||||
| Tangible fixed assets | 10 | 811 477 229 | 806 163 927 | 915 418 700 | |
| Goodwill | 13 | 81 840 163 | 92 496 051 | 92 620 183 | |
| Intangible assets | 11 | 7 491 577 | 7 137 808 | 8 576 779 | |
| Investment properties | 12 | 1 268 956 | 1 313 215 | 1 357 473 | |
| Associated undertakings and non consolidated undertakings | 9 | 1 566 686 | 2 262 846 | 2 360 890 | |
| Investment available for sale | 9 | 1 108 824 | 1 091 540 | 1 069 440 | |
| Deferred tax asset | 14 | 34 003 208 | 25 046 395 | 37 874 949 | |
| Other non current assets | 15 | 1 073 819 | 1 389 646 | 3 606 230 | |
| Total non current assets | 939 830 462 | 936 901 428 | 1 062 884 644 | ||
| CURRENT ASSETS: | |||||
| Inventories | 17 | 123 468 707 | 129 983 908 | 137 414 763 | |
| Trade debtors | 18 | 121 013 543 | 140 918 477 | 158 400 706 | |
| Other current debtors | 19 | 5 565 730 | 13 801 900 | 13 132 676 | |
| State and other public entities | 21 | 10 182 506 | 8 126 925 | 13 628 325 | |
| Other current assets | 20, 26 | 13 979 041 | 12 548 389 | 21 664 946 | |
| Cash and cash equivalents | 22 | 27 295 811 | 23 182 513 | 23 570 163 | |
| Total current assets | 301 505 338 | 328 562 112 | 367 811 580 | ||
| Non-current assets held for sale | 16 | 4 318 092 | 4 411 224 | 911 164 | |
| TOTAL ASSETS | 1 245 653 892 | 1 269 874 764 | 1 431 607 388 | ||
| SHAREHOLDERS`FUNDS, NON-CONTROLLING INTERESTS AND LIABILITIES | |||||
| SHAREHOLDERS`FUNDS: | |||||
| Share capital | 23 | 700 000 000 | 700 000 000 | 700 000 000 | |
| Legal reserve | 23 | 3 131 757 | 3 131 757 | 3 131 757 | |
| Other reserves and accumulated earnings | 23 | - 647 867 883 | - 569 867 023 | - 460 542 177 | |
| Accumulated other comprehensive income | 23 | 72 681 459 | - 380 018 | - 7 326 625 | |
| Total | 127 945 333 | 132 884 716 | 235 262 955 | ||
| Non-controlling interests TOTAL SHAREHOLDERS`FUNDS |
24 | - 795 247 127 150 086 |
- 939 705 131 945 011 |
329 050 235 592 005 |
|
| LIABILITIES: | |||||
| NON CURRENT LIABILITIES: | |||||
| Bank loans - net of current portion | 25, 27 | 123 145 528 | 128 275 420 | 155 127 941 | |
| N Non convertible debentures ibl d b |
2 25, 27 2 |
118 908 92 927 |
248 344 033 033 |
287 28 993 0 0 050 |
|
| Finance lease creditors - net of current portion | 25, 27 | 30 153 351 | 36 192 908 | 39 494 029 | |
| Other loans | 25, 27 | 2 553 262 | 78 868 673 | 98 597 712 | |
| Post-retirement liabilities | 29 | 25 651 828 | 27 679 582 | 25 204 783 | |
| Other non current liabilities | 28 | 55 758 364 | 64 940 905 | 77 332 116 | |
| Deferred tax liabilities | 14 | 73 558 661 | 60 072 909 | 64 298 186 | |
| Provisions | 33 | 7 433 001 | 7 372 628 | 14 327 908 | |
| Total non current liabilities | 437 162 922 | 651 747 058 | 762 375 725 | ||
| CURRENT LIABILITIES: | |||||
| Current portion of non-current bank loans | 25, 27 | 22 165 408 | 64 693 562 | 111 796 391 | |
| Current bank loans | 25, 27 | 201 693 837 | 68 492 770 | 24 554 807 | |
| Current portion of non-current non convertible debentures | 25, 27 | 129 918 927 | 55 000 000 | 15 000 000 | |
| Current portion of non-current finance lease creditors | 25, 27 | 5 558 615 | 4 114 170 | 4 593 444 | |
| Other loans | 25, 27 | 70 902 123 | 4 060 098 | 1 477 788 | |
| Trade creditors | 30 | 156 380 414 | 177 584 402 | 161 475 903 | |
| Taxes and other contributions payable | 31 | 12 259 031 | 14 103 601 | 13 211 850 | |
| Other current liabilities | 32 | 81 137 986 | 86 115 099 | 101 325 866 | |
| Provisions | 33 | 1 324 543 | 12 018 993 | 203 609 | |
| Total current liabilities | 681 340 884 | 486 182 695 | 433 639 658 | ||
| TOTAL SHAREHOLDERS' FUNDS AND LIABILITIES | 1 245 653 892 | 1 269 874 764 | 1 431 607 388 | ||
The notes are an integral part of the consolidated financial statements
| Notes | 31.12.2013 | 31.12.2012 | |
|---|---|---|---|
| Sales | 39, 44 | 1 227 729 546 | 1 316 690 424 |
| Services rendered | 39, 44 | 3 826 375 | 4 339 792 |
| Other income and gains | 36, 39 | 28 864 462 | 34 400 251 |
| Cost of sales | 39, 44 | 645 471 186 | 679 064 964 |
| (Increase) / decrease in production | 39 | - 301 971 | - 1 496 556 |
| External supplies and services | 39, 44 | 337 068 213 | 357 166 572 |
| Staff expenses | 39 | 196 220 543 | 204 383 493 |
| Depreciation and amortisation | 44 | 74 743 609 | 77 323 387 |
| Provisions and impairment losses (increase / reduction) | 33, 44 | 31 883 425 | 13 184 115 |
| Other expenses and losses | 37, 39 | 14 370 407 | 14 086 910 |
| Operating profit / (loss) | 44 | - 39 035 029 | 11 717 582 |
| Financial expenses | 40 | 63 610 032 | 71 038 941 |
| Financial income | 40 | 5 036 187 | 20 242 177 |
| Gains and losses in associated companies Gains and losses in investments |
- 696 165 | - 212 981 79 861 |
|
| Net profit/(loss) from continuing operations, before tax | - 98 305 039 | - 39 212 302 | |
| Taxation | 14, 41 | - 19 388 908 | 15 628 002 |
| Consolidated net profit / (loss) from continuing operations, afer taxation | - 78 916 131 | - 54 840 304 | |
| Profit / (loss) from discontinued operations, after taxation | 42 | - 45 211 595 | |
| Consolidated net profit / (loss) for the period | - 78 916 131 | - 100 051 899 | |
| Attributable to: | |||
| Equity Holders of Sonae Industria | |||
| Continuing operations | - 78 045 917 | - 54 215 194 | |
| Discontinuing operations | - 44 661 686 | ||
| Equity Holders of Sonae Industria | - 78 045 917 | - 98 876 879 | |
| Non-controlling interests | |||
| Continuing operations | - 870 214 | - 625 111 | |
| Discontinuing operations | - 549 909 | ||
| Non-controlling interests | - 870 214 | - 1 175 020 | |
| Profit/(Loss) per share | |||
| Fom continuing operations: | |||
| Basic Diluted |
43 43 |
- 0.5575 - 0.5575 |
- 0.3873 - 0.3873 |
| From discontinued operations: | |||
| Basic | - 0.3190 | ||
| Diluted | - 0.3190 |
The notes are an integral part of the consolidated financial statements
The board of directors
(Amounts expressed in Euros)
| Notes | 31.12.2013 | 31.12.2012 Restated |
|
|---|---|---|---|
| Net consolidated profit / (loss) for the period (a) | - 78 916 131 | - 100 051 899 | |
| Other consolidated comprehensive income | |||
| Items that may be reclassified subsequently to profit or loss | |||
| Change in currency translation reserve Change in fair value of available-for-sale financial assets |
- 19 431 262 - 4 926 |
- 891 175 - 12 815 |
|
| Income tax relating to items that may be reclassified | |||
| Items that will not be reclassified subsequently to profit or loss | |||
| Remeasurement of defined benefit plans Revaluation of tangible fixed assets |
833 309 129 856 643 |
- 3 824 712 | |
| Income tax relating to items that will not be reclassified | 37 373 865 | - 897 213 | |
| Other consolidated comprehensive income for the period, net of tax (b) | 73 879 899 | - 3 831 489 | |
| Total consolidated comprehensive income for the period (a) + (b) | - 5 036 232 | - 103 883 388 | |
| Total consolidated comprehensive income attributable to: | |||
| Equity holders of Sonae Industria | - 4 984 440 | - 102 671 757 | |
| Non-controlling interests | - 51 792 | - 1 211 631 | |
| - 5 036 232 | -103 883 388 |
The notes are an integral part of the consolidated financial statements
| Sha apit al re c |
al res Leg erv e |
Oth er R ese rve s and ed ear ulat acc um nin gs |
Acc ed oth ulat um er com siv e in hen pre com e |
Tot al s har eho lde rs` fun ds ibu tab le to attr the uity ho lde f eq rs o Son ae I ndú stri a |
Non con trol ling inte ts res |
al sha Tot reh ' fun old ers ds |
||
|---|---|---|---|---|---|---|---|---|
| Not e |
23 | |||||||
| Bal at 1 Ja ry 2 012 stat ed anc e as nua - re |
700 000 000 |
3 1 31 7 57 |
-46 0 54 2 17 7 |
-7 3 26 6 25 |
23 5 26 2 95 5 |
32 9 05 0 |
23 5 59 2 00 5 |
|
| Tot al c olid ated hen sive inc for the riod ons com pre ome pe rofit /(lo ss) for Net soli date d p the iod stat ed con per - re Oth olid ated hen sive inc for the riod ed stat er c ons com pre ome pe - re |
-98 876 87 9 |
-3 7 94 8 78 |
- 98 876 87 9 - 3 794 878 |
- 1 175 020 - 3 6 6 11 |
- 10 0 05 1 89 9 - 3 831 48 9 |
|||
| Tot al - ated rest |
-98 876 87 9 |
-3 7 94 8 78 |
-10 2 67 1 75 7 |
-1 2 11 6 31 |
-10 3 88 3 38 8 |
|||
| Sha re-b d pa nt p lan ase yme Oth ers |
45 | 89 604 -10 537 57 1 |
10 741 485 |
89 604 20 3 9 14 |
- 5 7 12 4 |
89 604 14 6 79 0 |
||
| Bal 31 Dec ber 20 12 - d at tate anc e as em res |
700 000 000 |
3 1 31 7 57 |
-56 9 86 7 02 3 |
- 38 0 0 18 |
132 884 716 |
- 93 9 70 5 |
13 1 94 5 0 11 |
| Sha apit al re c |
al res Leg erv e |
Oth er R ese rve s and ed ear ulat acc um nin gs |
Acc ed oth ulat um er com siv e in hen pre com e |
Tot al s har eho lde rs` fun ds ibu tab le to attr the uity ho lde f eq rs o ndú Son ae I stri a |
Non con trol ling inte ts res |
al sha Tot reh ' fun old ers ds |
||
|---|---|---|---|---|---|---|---|---|
| Not e |
23 | |||||||
| Bal 1 Ja ry 2 013 at anc e as nua |
700 000 000 |
3 1 31 7 57 |
- 56 9 86 7 02 3 |
- 38 0 0 18 |
13 2 88 4 7 16 |
- 9 39 7 05 |
13 1 94 5 0 11 |
|
| for Tot al c olid ated hen sive inc the riod ons com pre ome pe Net soli date d po fit/( loss ) fo r the riod con pe Oth olid ated hen sive inc for the riod er c ons com pre ome pe |
-78 045 917 |
73 0 61 4 77 |
- 78 045 917 73 061 477 |
- 87 0 2 14 81 8 42 2 |
- 78 916 13 1 73 879 89 9 |
|||
| Tot al |
-78 045 917 |
73 061 477 |
- 4 984 440 |
1 79 2 - 5 |
036 232 - 5 |
|||
| Sha re-b d pa lan nt p ase yme Oth ers |
45 | 10 9 44 5 - 64 388 |
10 9 44 5 - 64 388 |
19 6 25 0 |
10 9 44 5 13 1 86 2 |
|||
| Bal at 31 Dec ber 20 13 anc e as em |
700 000 000 |
3 1 31 7 57 |
-64 7 86 7 88 3 |
72 681 45 9 |
127 945 333 |
- 79 5 24 7 |
12 7 15 0 08 6 |
The notes are an integral part of the consolidated financial statements
The board of directors
(Amounts expressed in Euros)
| OPERATING ACTIVITIES | Notes | 31.12.2013 | 31.12.2012 |
|---|---|---|---|
| Receipts from trade debtors | 1 231 670 082 | 1 337 396 093 | |
| P Payments to trade creditors t t t d dit |
995 110 857 | 1 032 592 559 | |
| Payments to staff staff | 201 774 554 554 | 224 566 243 | |
| N t Net cash flow from operations h fl f ti |
34 784 671 671 | 80 237 291 | |
| Payment / (receipt) of corporate income tax tax | 5 677 539 539 | 4 743 238 | |
| Other receipts / payments relating to operating activities | 1 100 143 | 22 808 504 | |
| Net cash flow from operating activities (1) | 42 | 30 207 275 | 98 302 557 |
| INVESTMENT ACTIVITIES | |||
| C Cash receipts arising from: h it ii f |
|||
| Investments | 165 127 127 | 138 848 | |
| Tangible and intangible assets assets | 8 973 018 018 | 16 756 569 | |
| Investment subventions | 156 871 | 297 097 | |
| Non-current assets held for sale Non current sale |
79 861 | ||
| Others | 13 572 425 | ||
| 9 295 016 29 016 | 30 844 800 | ||
| Cash Payments arising from: | |||
| Investments Tangible and intangible assets |
20 692 615 | 192 500 38 101 442 |
|
| Others | |||
| 20 692 615 615 | 38 293 942 | ||
| N t Net cash used in investment activities (2) h d i i t t ti iti |
42 | - 11 397 599 | - 7 449 142 |
| FINANCING ACTIVITIES | |||
| Cash receipts arising from: p g |
|||
| Interest and similar income income | 750 914 914 | 1 240 155 | |
| L Loans obtained bt i d |
2 609 598 270 | 2 910 498 562 | |
| Others | 97 638 | ||
| 2 610 446 822 | 2 911 738 717 | ||
| Cash Payments arising from: | |||
| Interest and similar charges charges | 41 935 652 652 | 37 673 887 | |
| Loans obtained | 2 546 578 785 | 2 974 854 632 | |
| Dividends | 4 518 | ||
| Finance leases - repayment of principal principal | 4 780 235 235 | 4 620 874 | |
| Others | 4 257 653 4 257 653 | ||
| Net cash used in financing activities (3) | 42 | 2 593 294 672 17 152 150 |
3 021 411 564 - 109 672 847 847 |
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) (3) | 35 961 826 | - 18 819 432 | |
| Eff Effect of foreign exchange rate t f f i h t |
49 595 | 6 181 | |
| Cash and cash equivalents at the beginning of the period | 22 | - 17 810 257 257 |
1 015 356 |
| Cash and cash equivalents at the end of the period | 22 | 18 101 974 | - 17 810 257 |
Th t i t l t f th lid t d fi i l t t t The notes are an integral part of the consolidated financial statements
The board of directors
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 4 to 6 ("Group"). The Group's operations and business segments are described in Note 44.
Sonae Indústria, SGPS, SA is included in the perimeter of consolidation of Efanor Investimentos, SGPS, SA, which is both its immediate and ultimate parent company.
The shares of the company are listed on NYSE 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), applicable to the period beginning on 1 January 2013 and endorsed by the European Union.
In the year ended 31 December 2013 the following standards and interpretations became effective:
IAS 1 (amendment), 'Presentation of Financial Statement'. This amendment requires entities to present separately items recognized as Other Comprehensive Income depending on whether they may be later recycled through profit or loss, and its fiscal impact, if items are presented before tax. This amendment changed the presentation of the Group's consolidated statement of comprehensive income;
IAS 12 (amendment), 'Income Taxes'. This amendment requires entities to measure deferred taxes related to assets depending on whether entities expect to recover the carrying amount of the asset either though use or through sale, except for investment properties at fair value. This amendment includes the principles from SIC 21, which is superseded. This amendment had no effects on the Group's consolidated financial statements;
IAS 19 (amendment 2011), 'Employee Benefits'. This amendment includes significant changes to the recognition and measurement of expenses with defined benefits and termination benefits as well as in disclosures of all kinds of employee benefits. Actuarial gains or losses are immediately recognized through Other Comprehensive Income (the corridor method is not allowed anymore). Financial charges of funded plans are calculated on the basis of net unfunded responsibility. Termination benefits only qualify for recognition if the employee has no future service obligation. This amendment affected the Group's consolidated financial statements as set out in notes 3 and 29;
Improvement to the standards 2009-2011. The improvement process for 2009-2011 affects the following standards: IFRS 1 (second adoption of IFRS 1 and related exemptions), IAS 1 (presentation of financial statements following a compulsory or voluntary change in accounting policies), IAS 16 (classification of spare parts and servicing equipment when they meet the definition of tangible fixed asset), IAS 32 (classification and tax effects of transactions involving net equity or dividends) and IAS 34 (exemption from disclosing segmental assets and liabilities). The amendment to IAS 1 affected the presentation of the Group's consolidated financial statements;
IFRS 1 (revision), 'First-time Adoption of IFRSs'. This revision aims to include a specific exemption for entities that formerly operated in hyperinflationary economies and that adopted IFRSs for the first time. This exemption allows an entity to measure some assets and liabilities at fair value and to use that fair value as the deemed cost on the statement of financial position at transition date to IFRSs. Furthermore, date of transition to IFRSs replaces references to specific dates when retrospective application of IFRSs is not
mandatory. This amendment had no effect on the Group's consolidated financial statements as they were already presented under IFRSs.
IFRS 7 (amendment), 'Disclosures – Offsetting Financial Assets and Financial Liabilities'. This amendment is part of IASB's project for offsetting assets and liabilities and introduces new disclosure requirements about non-recognized offsetting rights (of assets and liabilities), about assets and liabilities which were offset and the effect of offsetting on credit risk. This amendment had no effects on the Group's consolidated financial statements;
IFRS 13 (new), 'Fair value: Measurement and disclosure'. This standard aims to increase consistency by defining fair value and setting out a common basis for fair value measurement and disclosure across IFRSs. This amendment had no effects on the Group's consolidated financial statements;
IFRIC 20 (new),'Stripping costs in the production phase of a surface mine. This interpretation refers to the accounting of overburden waste removal costs in the production phase of a surface mine, as an asset, taking into consideration that the waste removal generates two potential benefits: immediate extraction of mineral resources and improved access to further quantities of mineral resources to be extracted in the future. This interpretation had no effects on the Group's consolidated financial statements;
At 31 December 2013 the following standards and interpretations had been issued and endorsed by the European Union, but had not been applied as they only become effective on later periods:
IFRS 10 (new), 'Consolidated Financial Statements' (effective in the European Union for periods beginning on or after 1 January 2014). IFRS 10 replaces all principles related to control and consolidation included in IAS 27 and SIC 12 by changing the definition of control and the criteria to be used for identifying control. The core principle that a consolidated entity presents a parent and its subsidiaries as a single entity remains unchanged. The Group will apply this standard in the annual period in which it becomes effective;
IFRS 11 (new), 'Joint Arrangements' (effective in the European Union for periods beginning on or after 1 January 2014). IFRS 11 focus on rights and obligations arising from joint arrangements rather than on legal form. Joint arrangements may consist of joint operations (rights to the assets and obligations) or joint ventures (rights to the net assets recognized using the equity method). Proportionate consolidation is no longer allowed to measure joint controlled entities. The Group will apply this standard in the annual period in which it becomes effective;
IFRS 12 (new), 'Disclosure of Interests in Other Entities' (effective in the European Union for periods beginning on or after 1 January 2014). This standard sets out disclosure requirements for all types of interests in other entities, including subsidiaries, joint arrangements, associates and specific purpose entities, in order to assess the nature, risks and financial effects related to interest in other entities. The Group will apply this standard in the annual period in which it becomes effective;
Amendments to IFRS 10, IFRS 11 and IFRS 12, 'Transition Guidance' (effective in the European Union for periods beginning on or after 1 January 2014). This amendment clarifies that when the accounting treatment of financial investments under IFRS 10 is different from the one under the former IAS 27/SRC 12, comparative information must only be represented for the immediately preceding period. Any differences arising must be recognized through net equity at beginning date of the comparative period. Specific disclosure requirements are included in IFRS 12. The Group will apply this standard in the annual period in which it becomes effective;
IAS 27 (amended 2011), 'Separate Financial Statements' (effective in the European Union for periods beginning on or after 1 January 2014). IAS 27 was amended after IFRS 10 was issued and contains the recognition and disclosure requirements for investments in subsidiaries, joint ventures and associates of entities that prepare separate financial statements. The Group will apply this standard in the annual period in which it becomes effective;
IAS 28 (amended 2011), 'Investments in Associates and Joint Ventures' (effective in the European Union for periods beginning on or after 1 January 2014). IAS 28 was amended after IFRS 11 was issued and now includes the accounting treatment for investments in associates and joint ventures as well as the requirements for applying the equity method. The Group will apply this standard in the annual period in which it becomes effective;
IAS 32 (amendment), 'Financial Instruments: Presentation – Offsetting Financial Assets and Financial liabilities' (effective in the European Union for periods beginning on or after 1 January 2014). This amendment is part of IASB's project for offsetting assets and liabilities, and aims to clarify the statement "have the right to receive or pay a single net amount". It further clarifies that some systems settling two financial instruments (clearing houses) may be equivalent to settlement of a single amount. The Group will apply this standard in the annual period in which it becomes effective;
IAS 36 (amendment), 'Recoverable amount disclosures for non-financial assets' (effective in the European Union for annual periods beginning on or after 1 January 2014). This
amendment refers to disclosure requirements of impaired assets for which recoverable amounts were measured for fair value less estimated costs to sell. The Group will apply this standard in the annual period in which it becomes effective;
IAS 39 (amendment), 'Novation of derivatives and continuation of hedge accounting' (effective in the European Union for annual periods beginning on or after 1 January 2014). This amendment allows an entity to keep applying hedge accounting for a derivative that was designated as a hedging instrument, when a law or regulation transfers the counterparty rights to a clearing house. The Group will apply this standard in the annual period in which it becomes effective;
Amendments to IFRS 10, IFRS 12 and IAS 27, 'Investment entities' (effective in the European Union for annual periods beginning on or after 1 January 2014). This amendment defines investment entities, which are exempted from applying IFRS 10 to investments in subsidiaries. These ones should be measured at fair value through profit or loss, in accordance with IAS 39. Specific disclosure requirements are included in IFRS 12. The Group will apply this standard in the annual period in which it becomes effective;
The aforementioned changes, namely IFRS 11, will affect the Group's consolidated financial statements upon application. The effects may be assessed with resource to the information disclosed in note 5 – Joint Ventures (assets, liabilities, income and expenses). These companies, which are proportionately consolidated in these consolidated financial statements, will thereafter be recognized using the equity method.
At 31 December 2013 the following standards had been issued, with effective date on later periods and still pending endorsement by the European Union:
IAS 19 (amendment), 'Defined benefit plans: employee contribution' (effective for annual periods beginning on or after 1 January 2014). This standard still needs to be endorsed by the European Union. This amendment intends to simplify the recognition of contributions by employees or third parties to defined benefit plans in situations where contributions are independent of worked years;
Annual improvements to IFRSs 2010 – 2012 cycle (effective for period beginning on or after 1 July 2014). These amendments still need to be endorsed by the European Union. This improvement cycle affects IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38;
Annual improvements to IFRSs 2011 – 2013 cycle (effective for period beginning on or after 1 July 2014). These amendments still need to be endorsed by the European Union. This improvement cycle affects IFRS 1, IFRS 3, IFRS 13, and IAS 40;
IFRS 9 (new), 'Financial instruments' (effective date still not defined). This standard still needs to be endorsed by the European Union. It relates to the first phase of IFRS 9, which includes two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A financial instrument is measured at amortized cost only when the entity holds it to receive its contractual cash flows and these cash flows represent the nominal value and interest. Otherwise, financial instruments are measured at fair value through profit or loss. The Group will apply this standard in the annual period in which it becomes effective;
IFRS 9 (amendment), 'Financial instruments' (effective date still not defined). This standard still needs to be endorsed by the European Union. It relates to the third phase of IFRS 9, and consists of a comprehensive revision of hedge accounting rules included in IAS 39: quantitative assessment of hedge effectiveness is eliminated, allows more hedged items to be designated as such and allow the recognition through other comprehensive income of some effects arising from hedging instruments. This amendment aims to increase consistency between hedge accounting and risk management policies. The Group will apply this standard in the annual period in which it becomes effective.
The Company does not expect any significant effects on its consolidated financial statements arising from the future application of these standards.
The accompanying consolidated financial statements have been prepared from the books and accounting records of the companies included in the consolidation (Note 4) 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 comprehensible income attributable to minority shareholders are shown separately, under the caption Non Controlling Interests, in the Consolidated Statement of Financial Position and in the Consolidated Income Statement, respectively. Companies included in the consolidated financial statements are listed on Note 4.
Comprehensive income and the remaining items of net shareholders' funds are attributed to the holders of non-controlling interests, according to their interest, even if this caption turns negative.
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition. Any excess of the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of noncontrolling holders' investment in the acquired subsidiary, over the Group's interest in the fair value of the identifiable net assets acquired is recognized as goodwill (Note 2.2.d and 14). If the difference between the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of non-controlling holders' investment in the acquired subsidiary, and the fair value of the identifiable net assets acquired is negative, this difference is recognized as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value. Non-controlling interests include their proportion of the fair value of net identifiable assets and liabilities, or alternatively, the fair value of their investment in the subsidiary acquired.
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 5.
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 acquisition cost over the Group's share in the fair value of the identifiable net assets acquired is recognized as part of the investment (note 2.2.d). Any excess of the Group's share in the fair value of the identifiable net assets acquired over cost is recognized 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 6.
The excess of the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of non-controlling holders' investment in the acquired subsidiary, over the Group's interest in the fair value of the identifiable net assets acquired is recognized as goodwill (note 13).
The excess value resulting from the difference between the acquisition cost and the fair value of the assets and liabilities of the joint-venture or associate company at the time of acquisition is recorded as goodwill (note 13).
Goodwill arising on the consolidation of subsidiaries located in foreign countries is accounted for on the functional currency of these subsidiaries and is then translated into the Group's reporting currency (Euro) at the exchange rate of balance sheet date. Exchange rate differences arising from this translation are disclosed in Other Accumulated Comprehensive Income.
Goodwill is not amortized, 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.
If the difference between the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of noncontrolling holders' investment in the acquired subsidiary, and the fair value of the identifiable net assets acquired over cost is negative, this difference is recognized as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value.
Any excess of the Group's share in the fair value of identifiable assets and liabilities in jointly controlled and associated companies over cost, is recognized 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 Other Accumulated Comprehensive Income. Exchange rate differences that originated prior to 1 January 2004 (date of transition to IFRS) were written-off through Other Reserves and Accumulated 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:
| Closing rate |
Average rate |
Closing rate |
Average rate |
|
|---|---|---|---|---|
| 0.8337 | 0.8489 | 0.8161 | 0.8106 | |
| 14.5666 | 12.7730 | 11.1732 | 10.5285 | |
| 1.4671 | 1.3669 | 1.3137 | 1.2837 | |
| 1.3791 | 1.3275 | 1.3194 | 1.2842 | |
| 1.2276 | 1.2308 | 1.2072 | 1.2052 | |
| 31.12.2013 | 31.12.2012 |
Source: Bloomberg
Tangible fixed 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.
In the period ended 31 December 2013 the Group changed subsequent measurement of land and buildings to revaluation method on the basis that it better reflects the economic value of these classes of tangible fixed assets.
Increase in tangible fixed assets arising from revaluation is recognized through Other comprehensive income for the period and will thereafter be transferred to Other reserves and accumulated earnings to match the effect of depreciating or selling the assets.
Further revaluation will be carried out whenever revalued amounts significantly differ from the carrying amount of revalued assets, never exceeding a five-year period.
The Group separately recognizes and depreciates the components of Property Plant and Equipment whose useful lives are significantly different from the related main assets' ones and the components that can only be used in connection with a specific asset. These components are depreciated separately on the basis of their useful lives.
Repair and maintenance expenses are recognized in profit or loss in the period they occur.
Depreciation is calculated on a straight line basis, from the date the asset is available for use, 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 | 20 - 40 |
| Plant & Machinery | 2 - 25 |
| Vehicles | 5 |
| Tools | 5 |
| Fixtures and Fittings | 4 - 10 |
| Other Tangible Assets | 5 |
Tangible assets in progress represent fixed assets still under construction/development and are stated at acquisition cost net of impairment losses. These assets are transferred to the captions of tangible fixed assets according to their nature and are depreciated from the date they are available for use.
Residual values, useful lives and the depreciation method are assessed annually.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognized 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 recognized as an expense recorded in the Income Statement when it is incurred (note 38).
Expenditure on development is recognized 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 from the date the asset is available for use, over the expected useful life, which ranges from 3 to 6 years.
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 finance or operating lease depends on the substance of the transaction rather than the form of the contract.
Tangible assets used by the Group under finance lease contracts as well as the corresponding liabilities are recorded on the Consolidated Statement of Financial Position for the lower of fair value of leased assets and the amount of minimum lease payments. In addition, interest included in rents, depreciation and impairment losses are recognized on the Consolidated Income Statement as expenses of the period they relate to. Depreciation and impairment losses are calculated and recognized as set out in note 2.3 for tangible fixed
assets. Whenever there is no reasonable certainty as to the acquisition of leased assets upon end of contract, the depreciation period of leased assets will be the lower of estimated useful life and leasing period.
Lease payments under operating lease contracts are recognized 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.
Useful lives and the depreciation method are the ones set out in note 2.3. for tangible assets.
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 recognized as income in the same period as the relevant expense.
Grants related to depreciable assets are disclosed as Other non-current liabilities and are recognized 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 recognized 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 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 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 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 normally recognized 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 capitalized as part of the cost of the qualifying asset. Borrowing costs are capitalized 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, respectively.
Provisions are recognized 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.
When a significant time delay occurs between the onset of the obligation and the related expenditure, related provision is recognized for its present value.
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 under Provisions and Impairment losses on the Consolidated Income 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 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 consolidated 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 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 recognized 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.
Recognized 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.
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 as no interest is paid and financial discount is deemed to be not relevant.
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:
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 Other Accumulated Comprehensive Income on the Consolidated Statement of Financial Position, and then reclassified to financial results on the Consolidated 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 as described in note 26.
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, which is included in Other Accumulated Comprehensive Income, 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 Consolidated 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 Income 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 Consolidated Income 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 amortized cost) the book value is adjusted by the amount which is effectively hedged through profit or loss.
Derivative instruments are stated on the Consolidated Statement of Financial Position 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 Other Reserves, under Other Reserves and Accumulated Earnings.
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 Bank Loans on the Consolidated Statement of Financial Position.
As referred to in note 29, 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".
Remeasurements (actuarial gains or losses) arising from experience adjustments and from changes in demographic and financial assumptions are recognized through other comprehensive income, under Net Shareholders' Funds.
Net interest results from the product of discount rates, which are derived from high quality bonds, and the amount of liabilities deducted by the fair value of plan assets.
Past service costs are recorded immediately through profit or loss for the period.
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 recognized 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 recognized and expected to reverse in the same period. At each balance sheet date a review is made of the deferred tax assets recognized, which are reduced whenever their future use is no longer probable.
Deferred tax assets and liabilities are recorded in the Consolidated Income Statement, except if they relate to items directly recorded in other comprehensive income, in which case the corresponding deferred tax is recorded therein.
Revenue from the sale of goods is recognized in the Consolidated 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 recognized 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 recognized in the Consolidated Income Statement taking into consideration the stage of completion of the transaction at the balance sheet date.
Dividends are recognized 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 recognized in the Consolidated 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 Consolidated Income 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).
Each year the Company and its subsidiaries grant their employees that belong to a functional group classified as Executive or above a compensation which is related to the value added in the previous period for the shareholders. This compensation consists in granting a number of the Company's shares, which may choose, on payment date, to deliver the shares or to pay the corresponding amount, taking into consideration the market price of the shares on payment date.
This liability is stated on the Consolidated Statement of Financial Position under Other reserves, and is stated on the Consolidated Income Statement under Staff expenses, on a straight line basis over the deferral period, taking into consideration the fair value of granted shares on grant date.
If the employee ceases functions during the period over which payment of previously recognized liabilities is deferred, liabilities will be derecognized from the Consolidated Statement of Financial Position against Staff expenses on Consolidated Income 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.
At the reporting date reportable segments are assessed on the basis of the internal reporting system of financial information (note 44).
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.
The Group has industrial facilities located in several European countries, which are within the scope of the European Emission Trading Scheme.
The scheme consists of an allowance granted by the State where the facility is located, which is recognized in Other Intangible Assets and Deferred Gains, at the market value of the date it was granted. Deferred gains are transferred to Other Operating Revenues on a straight line basis over the period.
At 31 December 2013 an estimation of emissions produced in the period is recognized in Cost Accruals and Other Operating Costs.
On the following period, when emissions produced are definitely calculated, the amount previously recorded in Other Intangible Assets is written off against Cost Accruals for the rights delivered back to the State. When allowances are excessive and the remainder is sold, a gain or loss corresponding to the difference between cost and market value is recorded in Other Operating Revenues or Other Operating Costs.
During the period ended 31 December 2013 the Group started to disclose nonunderlying items included under operating captions, except under amortization, depreciation, provisions and impairment losses, but including impairment losses on trade debtors, aiming to assist the readers of its consolidated financial statements to better assess the trend of future results.
Underlying items include those events that are infrequent, unusual, exceptional, unique or residual, therefore not expected to occur regularly in the context of the Company's normal activity. In particular, the Group classify as non-underlying items reimbursements from insurance, expenditure related to fines and penalties and income or expenses related to or following the discontinuing of assets, including:
Termination expenses;
Income and expenses of an entity or part of an entity that was internally classified as inactive.
All items that are not classified as non-underlying are therefore classified as underlying.
If an active market is available, market price is used for determining asset and liability fair value. This corresponds to level 1 of fair value hierarchy, as defined in IFRS 13 – Fair Value measurement.
If an active market is not available, generally accepted valuation techniques are used, based on market assumptions. This corresponds to level 2 of fair value hierarchy, as defined in IFRS 13.
Sonae Indústria uses valuation techniques for non-listed financial instruments such as available-for-sale financial assets. The most frequently used valuation models are discounted cash flow models and option valuation models which include interest rate curves and market volatility, for instance.
For some types of complex derivative instruments, more advanced valuation models are used, containing unobservable assumptions and data for which Sonae Indústria SGPS uses internal estimations and assumptions. This corresponds to level 3 of fair value hierarchy, as defined in IFRS 3.
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 in place proactive, active and reactive credit management processes and procedures, backed by advanced information systems;
Have local commissions to analyse and follow up credit risk;
Have teams exclusively dedicated to credit risk and collection of payments from customers;
Establish and review credit limits for their Customers, monitoring effective exposure to their Customers;
Have protection tools in place, such as insurance policies, 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 preferably 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 positive 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 preferably 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.
ii) Foreign Exchange Risk
As a geographically diversified Group with subsidiaries located in three 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 arises 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, included in Other Reserves and Accumulated Earnings, on the Consolidated Balance Sheet.
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.
Interest rate risk and exchange rate risk are analysed in note 28.
iii) Other Price Risks
At 31 December 2013, Sonae Indústria did not hold material investments classified as "available-for-sale".
c) Liquidity Risk Management Policy
Liquidity risk management in Sonae Indústria aims to ensure that the Company can obtain, on a timely basis, the financing required to properly carry on its business activities, implement its strategy and meet its payment obligations when due, under the most favourable terms and conditions.
For this purpose, Liquidity Management at the Group comprises:
It is Sonae Indústria's policy to exclude consolidated financial covenants from its loan agreements that could result in the early repayment of loans. This policy takes into account the unpredictable cyclical nature of the wood based panels business which strongly influences the financial ratios at the different stages of the business cycle.
Liquidity risk is analysed in note 27.
In the period ended 31 December 2013 the Company started to recognize remeasurements, which were formerly designated as actuarial gains and losses, related to defined benefit plans through other comprehensive income. The financial statements of prior period were represented so as to include remeasurements which had not been recognized at 1 January 2012 and 31 December 2012. The effects of this change are stated in note 29.
At 31 December 2013 the Group carried out a revaluation of land and buildings included under Tangible fixed assets, on the Consolidated statement of financial position. The value of these assets was assessed by an independent appraisal by using a combination of valuation methods and corresponds to level 2 fair value.
Valuation methods used were market method and cost method. Under market method properties are compared to similar situations observable in the market for value assessment, and adjusted for dimension, shape, location, accesses and general state. Cost method consists of adding up the value of each asset item within the property, ie, depreciable assets and land. Relating to buildings, replacement cost deducted by wear and tear depreciation was estimated, ie, the cost upon acquisition or production of a similar property for the same industrial purposes.
This revaluation of land and buildings consisted of increasing the cost of both and the accumulated depreciation of the latter so as to reach the carrying amount determined by independent appraisal. The increase in the carrying amount of these assets was accounted for under Revaluation of tangible fixed assets, on the Consolidated statement of comprehensive income. Furthermore, a deferred tax liability related to the taxable temporary difference arising from this revaluation was recognized under Deferred tax liability, on the Consolidated statement of financial position, and under Income tax relating to items that will not be reclassified, on the Consolidated statement of comprehensive income. When tax losses carried forward are available for used against the reversion of the aforementioned taxable temporary difference, a Deferred tax asset was recognized under Deferred tax assets, on the Consolidated statement of financial position, and under Taxation, on the Consolidated Income Statement. Depreciation for the period was not affected by this revaluation.
The main effects of this revaluation of tangible fixed assets are disclosed on note 10 (gross amount and accumulated depreciation), note 14 (deferred tax) and note 23.4 (other comprehensive income).
Group companies included in the consolidated financial statements, their head offices and percentage of capital held by the Group as at 31 December 2013 and 31 December 2012 are as follows:
| COMPANY HEAD OFFICE |
PERCENTAGE OF CAPITAL HELD | TERMS FOR INCLUSION |
|||||
|---|---|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||||||
| Direct | Total | Direct | Total | ||||
| Agepan Eiweiler Management, GmbH | Eiweiler (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Agloma Investimentos, SGPS, S. A. | Maia (Portugal) | 100.00% | 98.90% | 100.00% | 98.90% | a) | |
| 1) | 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% | 98.90% | a) | |
| BHW Beeskow Holzwerkstoffe GmbH | Meppen (Germany) | 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) | |
| Euroresinas - Indústrias Quimicas, S.A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| GHP Glunz Holzwerkstoffproduktions 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 | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Glunz UK Holdings, Ltd. | Knowsley (United Kingdom) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Glunz UkA GmbH | Meppen (Germany) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Impaper Europe GmbH | 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) | |
| Isoroy, SAS | Rungis (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. | Amsterdam (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) | |
| 2) | Novodecor (Pty) | Woodmead (South Africa) | 100,00% | 100,00% | a) | ||
| OSB Deustchland | Germany | 100.00% | 98.78% | 100.00% | 98.78% | 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) | |
| 3) | SCS Beheer, BV | The Netherlands | 100.00% | 98.78% | 100.00% | 98.78% | a) |
| Sociedade de Iniciativa e Aproveit. Florestais – Energias, S.A. | Mangualde (Portugal) | 100.00% | 98.79% | 100.00% | 98.78% | a) | |
| Somit – Imobiliária, S.A. | Mangualde (Portugal) | 100.00% | 98.79% | 100.00% | 98.79% | a) | |
| Sonae Indústria – Management Services, 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) | PARENT | PARENT | PARENT | PARENT | PARENT | |
| Sonae Indústria de Revestimentos, S.A. | Maia (Portugal) | 100.00% | 100.00% | 100.00% | 100.00% | a) | |
| Sonae Novobord (Pty) Ltd | Woodmead (South Africa) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Sonae Tafibra International, B. V. | Woerden (The Netherlands) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Sonae Industria (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 | Woodmead (South Africa) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafisa Canadá Inc | Lac Mégantic (Canada) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafisa Développement | Rungis (França) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafisa France S.A.S. | Rungis (France) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafisa Investissement | Rungis (França) | 100.00% | 98.78% | 100.00% | 98.78% | a) | |
| Tafisa Participation | Rungis (França) | 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) | |
| Tafibra Suisse, 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 on 31 December 2013 and 31 December 2012 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | |||
|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||||
| Direct | Total | Direct | Total | ||
| Laminate Park GmbH & Co. KG | Eiweiler (Germany) | 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).
Assets, liabilities, revenues and costs included proportionately in the consolidation, after elimination of intragroup balances and flows, are as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Non current assets | 21 215 108 | 26 528 525 |
| Current assets | 9 703 623 | 11 143 876 |
| Non current liabilities | 3 074 884 | 3 010 457 |
| Current liabilities | 8 202 012 | 11 388 895 |
| Operating revenues | 35 544 611 | 37 586 196 |
| Operating costs | 44 543 418 | 46 183 692 |
Associated companies, their head offices and the percentage of share capital held as at 31 December 2013 and 31 December 2012 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | |||
|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||||
| Direct | Total | Direct | Total | ||
| Serradora Boix | Barcelona (Spain) | 31.25% | 30.87% | 31.25% | 30.87% |
Associated companies are recognized in the consolidated financial statements using the equity method, as referred to in note 2.2.c).
The aggregated assets, liabilities, operating revenues and net profit or loss of the associated companies accounted for through the equity method in these consolidated financial statements, are as follows:
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Assets | 16 565 084 | 18 686 568 | ||
| Liabilities | 11 328 114 | 11 586 484 | ||
| Operating revenues | 22 631 416 | 22 919 338 | ||
| Net Profit or loss | -2 223 794 | - 689 936 |
There are no incurred obligations regarding this associate company.
Changes to the consolidation perimeter during the period that were set out in notes 5, 6 and 7, did not produce significant effects on these consolidated financial statements.
In the Consolidated Statements of Financial Position at 31 December 2013 and 31 December 2012, the following financial instruments are included:
| 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 | |
|---|---|---|---|---|---|---|---|
| 31.12.2013 | |||||||
| Non current assets | |||||||
| Available for sale investments Other non current assets |
1 072 124 | 1 108 824 | 1 108 824 1 072 124 |
1 696 | 1 108 824 1 073 820 |
||
| Current assets | |||||||
| Customers | 121 013 543 | 121 013 543 | 121 013 543 | ||||
| Other current debtors | 4 151 901 | 4 151 901 | 1 413 829 | 5 565 730 | |||
| Other current assets | 77 618 | 77 618 | 13 901 423 | 13 979 041 | |||
| Cash and cash equivalents | 27 295 811 | 27 295 811 | 27 295 811 | ||||
| Total | 153 533 379 | 77 618 | 1 108 824 | 154 719 821 | 15 316 948 | 170 036 769 |
| Assets at | Assets | ||||||
|---|---|---|---|---|---|---|---|
| Loans | fair value | out of scope | |||||
| and | through | Hedge | Available-for-sale | of | |||
| receivables | profit or loss | derivatives | assets | Sub-total | IFRS 7 | Total | |
| 31.12.2012 | |||||||
| Non current assets | |||||||
| Available for sale investments | 1 091 540 | 1 091 540 | 1 091 540 |
| Other non current assets | 1 387 950 | 1 387 950 | 1 696 | 1 389 646 | ||
|---|---|---|---|---|---|---|
| Current assets | ||||||
| Customers | 140 918 477 | 140 918 477 | 140 918 477 | |||
| Other current debtors | 10 452 746 | 10 452 746 | 3 349 154 | 13 801 900 | ||
| Other current assets | 5 612 | 5 612 | 12 542 777 | 12 548 389 | ||
| Cash and cash equivalents | 23 182 513 | 23 182 513 | 23 182 513 | |||
| Total | 175 941 686 | 5 612 | 1 091 540 | 177 038 838 | 15 893 627 | 192 932 465 |
| Liabilities at | Liabilities | |||||
|---|---|---|---|---|---|---|
| fair value | Liabilities | out of scope | ||||
| through | Hedge | at amortized | of | |||
| profit or loss | derivatives | cost | Sub-total | IFRS 7 | Total | |
| 31.12.2013 | ||||||
| Non current liabilities | ||||||
| Bank loans - net of current portion | 123 145 528 | 123 145 528 | 123 145 528 | |||
| Debentures - net of currentportion | 118 908 927 | 118 908 927 | 118 908 927 | |||
| Finance lease creditors - net of current portion | 30 153 351 | 30 153 351 | 30 153 351 | |||
| Other loans | 2 553 262 | 2 553 262 | 2 553 262 | |||
| Other non current liabilities | 18 803 578 | 18 803 578 | 36 954 787 | 55 758 365 | ||
| Current liabilities | ||||||
| Bank loans | 223 859 245 | 223 859 245 | 223 859 245 | |||
| Debentures | 129 918 927 | 129 918 927 | 129 918 927 | |||
| Finance lease creditors | 5 558 615 | 5 558 615 | 5 558 615 | |||
| Other loans | 70 902 123 | 70 902 123 | 70 902 123 | |||
| Trade creditors | 156 380 414 | 156 380 414 | 156 380 414 | |||
| Other current liabilities | 11 137 917 | 11 137 917 | 70 000 068 | 81 137 985 | ||
| Total | 891 321 887 | 891 321 887 | 106 954 855 | 998 276 742 |
| Liabilities at | Liabilities | ||||
|---|---|---|---|---|---|
| fair value | Liabilities | out of scope | |||
| through | Hedge | at amortized | of | ||
| profit or loss | derivatives | cost | Sub-total | IFRS 7 | Total |
| Non current liabilities | |||||
|---|---|---|---|---|---|
| Bank loans - net of current portion | 128 275 420 | 128 275 420 | 128 275 420 | ||
| Debentures - net of currentportion | 248 344 033 | 248 344 033 | 248 344 033 | ||
| Finance lease creditors - net of current portion | 36 192 908 | 36 192 908 | 36 192 908 | ||
| Other loans | 78 868 673 | 78 868 673 | 78 868 673 | ||
| Other non current liabilities | 20 896 701 | 20 896 701 | 44 044 204 | 64 940 905 | |
| Current liabilities | |||||
| Bank loans | 133 186 332 | 133 186 332 | 133 186 332 | ||
| Debentures | 55 000 000 | 55 000 000 | 55 000 000 | ||
| Finance lease creditors | 4 114 170 | 4 114 170 | 4 114 170 | ||
| Other loans | 4 060 098 | 4 060 098 | 4 060 098 | ||
| Trade creditors | 177 584 402 | 177 584 402 | 177 584 402 | ||
| Other current liabilities | 61 264 | 8 573 544 | 8 634 808 | 77 480 291 | 86 115 099 |
| Total | 61 264 | 895 096 281 | 895 157 545 | 121 524 495 | 1 016 682 040 |
Assets and liabilities out of the scope of IFRS 7 consist essentially of accounts receivable from and payable to the State and the Group's employees and items of accruals and deferrals.
There are no financial assets off set against financial liabilities.
At 31 December 2013 and 31 December 2012 details of Investments are as follows:
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Current | Non current | Current | Non current | |
| Investment in group companies excluded from consolidation | ||||
| Opening balance | 36 969 914 | 37 054 870 | ||
| Liquidation | 84 956 | |||
| Closing balance | 36 969 914 | 36 969 914 | ||
| Accumulated impairment losses (Note 33) | 36 969 914 | 36 969 914 | ||
| Net investment in group companies excluded from consolidation | ||||
| Investment in associated companies | ||||
| Opening balance | 2 262 846 | 2 296 057 | ||
| Increase in share capital | 179 771 | |||
| Effect of equity method application | - 696 160 | - 212 982 | ||
| Closing balance | 1 566 686 | 2 262 846 | ||
| Accumulated impairment losses (Note 33) | ||||
| Net investment in associated companies | 1 566 686 | 2 262 846 | ||
| Associated undertakings and non consolidated undertakings | 1 566 686 | 2 262 846 |
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Current | Non current | Current | Non current | |
| Available-for-sale investment | ||||
| Opening balance | 1 107 501 | 1 085 401 | ||
| Acquisition | 94 | 5 000 | ||
| Change in fair value | 17 190 | 17 100 | ||
| Closing balance | 1 124 785 | 1 107 501 | ||
| Accumulated impairment losses (Note 33) | 15 961 | 15 961 | ||
| Net available-for-sale investment | 1 108 824 | 1 091 540 |
The amount included under Investment in group companies excluded from consolidation refers to the former subsidiary Tarnaise des Panneaux, held indirectly by Sonae Industria, SGPS, SA for 100% of its share capital. In 2001, this company filed for bankruptcy, which is still pending. Consequently control was lost and the company has been excluded from consolidation. The Consolidated Statement of Financial Position includes an impairment loss for the full amount of the investment.
Available-for-sale investment consists of financial undertakings which do not fulfil the criteria to be stated as subsidiaries or as associates. They are recognized at cost as no relevant difference to their fair value is estimated. In addition, it includes an application in an investment fund which is recognized for its market fair value of EUR 782 077, which was calculated based on market information (level 1 fair value).
In 2013 and 2012, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.2013 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery | Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Tangible Assets Under Development |
Total Tangible Assets | |
| Gross cost: | ||||||||
| Opening balance | 434 438 870 | 1 671 554 504 | 16 350 415 | 16 194 874 | 35 099 785 | 14 753 523 | 21 760 715 | 2 210 152 686 |
| Capital expenditure | 26 573 | 2 309 792 | 40 760 | 58 000 | 2 290 | 6 985 | 19 794 686 | 22 239 086 |
| Disposals | 15 504 063 | 8 501 020 | 1 899 987 | 172 134 | 1 857 481 | 73 117 | 28 007 802 | |
| Revaluation | 367 878 974 | 367 878 974 | ||||||
| Transfers and reclassifications | 618 214 | 15 747 182 | 153 034 | 280 368 | 375 366 | 693 772 | - 17 646 271 | 221 665 |
| Exchange rate effect | - 12 162 492 | - 45 870 960 | - 282 173 | - 174 830 | - 352 916 | - 2 167 | - 808 282 | - 59 653 820 |
| Closing balance | 775 296 076 | 1 635 239 498 | 14 362 049 | 16 186 278 | 33 267 044 | 15 378 996 | 23 100 848 | 2 512 830 789 |
| Accumulated depreciation and impairment losses | ||||||||
| Opening balance | 165 204 077 | 1 163 942 606 | 14 273 345 | 14 224 444 | 32 744 799 | 13 599 488 | 1 403 988 759 | |
| Depreciations for the period | 10 191 309 | 59 374 639 | 889 056 | 572 755 | 817 886 | 560 175 | 72 405 820 | |
| Impairment losses for the period | 14 205 052 | 27 468 936 | 67 512 | 41 741 500 | ||||
| Disposals | 8 990 698 | 7 158 017 | 1 874 622 | 172 133 | 1 807 491 | 73 117 | 20 076 078 | |
| Revaluation | 238 022 331 | 238 022 331 | ||||||
| Reversion of impairment losses for the period | 6 734 874 | 95 | 721 | 502 | 6 736 192 | |||
| Transfers and reclassifications | - 1 393 | 1 321 | 72 | |||||
| Exchange rate effect | - 2 994 364 | - 24 337 229 | - 204 055 | - 167 830 | - 288 824 | - 278 | - 27 992 580 | |
| Closing balance | 415 637 707 | 1 212 554 668 | 13 083 724 | 14 457 141 | 31 466 970 | 14 085 838 | 67 512 | 1 701 353 560 |
| Carrying amount | 359 658 369 | 422 684 830 | 1 278 325 | 1 729 137 | 1 800 074 | 1 293 158 | 23 033 336 | 811 477 229 |
| 31.12.2012 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery |
Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Tangible Assets Under Development |
Total tangible assets |
|
| Gross cost: | ||||||||
| Opening balance | 462 786 346 | 1 765 637 982 | 16 383 051 | 17 441 156 | 39 882 841 | 14 752 346 | 31 625 908 | 2 348 509 630 |
| Capital expenditure | 360 031 | 2 715 042 | 823 514 | 2 400 | 23 918 | 30 786 695 | 34 711 600 | |
| Disposals | 4 745 821 | 51 591 866 | 1 143 276 | 1 530 702 | 5 167 039 | 247 796 | 64 426 500 | |
| Transfers and reclassifications | - 23 793 662 | - 43 456 737 | 289 432 | 306 250 | 351 343 | 239 469 | - 40 803 180 | - 106 867 085 |
| Exchange rate effect | - 168 024 | - 1 749 917 | - 2 306 | - 24 230 | 8 722 | 9 504 | 151 292 | - 1 774 959 |
| Closing balance | 434 438 870 | 1 671 554 504 | 16 350 415 | 16 194 874 | 35 099 785 | 14 753 523 | 21 760 715 | 2 210 152 686 |
| Accumulated depreciation and impairment losses | ||||||||
| Opening balance | 163 733 552 | 1 190 133 334 | 14 194 897 | 14 961 908 | 36 765 886 | 13 301 353 | 1 433 090 930 | |
| Depreciations for the period | 11 190 218 | 62 118 887 | 1 213 908 | 823 388 | 1 116 159 | 691 819 | 77 154 379 | |
| Impairment losses for the period | 14 973 551 | 31 545 747 | 2 739 | 13 607 | 80 508 | 2 251 440 | 48 867 592 | |
| Disposals | 3 482 096 | 50 160 326 | 1 118 428 | 1 530 565 | 5 129 738 | 244 382 | 61 665 535 | |
| Reversion of impairment losses for the period | 3 931 656 | 1 885 | 3 933 541 | |||||
| Transfers and reclassifications | - 21 210 440 | - 65 156 180 | - 10 418 | - 28 982 | - 233 783 | - 2 251 440 | - 88 891 243 | |
| Exchange rate effect | - 708 | - 607 200 | - 17 032 | - 20 723 | 7 867 | 3 973 | - 633 823 | |
| Closing balance | 165 204 077 | 1 163 942 606 | 14 273 345 | 14 224 444 | 32 744 799 | 13 599 488 | 1 403 988 759 | |
| Carrying amount | 269 234 793 | 507 611 898 | 2 077 070 | 1 970 430 | 2 354 986 | 1 154 035 | 21 760 715 | 806 163 927 |
At 31 December 2013 the Group carried out a revaluation of land and buildings, whose value was determined by an independent appraisal. As a consequence, the carrying amount of
total tangible fixed assets was increased by Eur 129 856 643. Depreciation for the period was not affected by this revaluation.
Segmental revaluation effects are detailed in note 44.
Increase and reversion of impairment losses on tangible fixed assets, which were recognized in the period ended 31 December 2013, are detailed on note 33.
During 2013 and 2012 no interest paid or any other financial charges were capitalized, in accordance with conditions defined in note 2.9.
At 31 December 2013 mortgaged Land and buildings amounted to EUR 167 568 888 (EUR 172 775 920 at 31 December 2012) as a guarantee for loans amounting to EUR 38 799 617 (EUR 51 984 521 at 31 December 2012).
On the same date, there were commitments for the acquisition of tangible fixed assets amounting to EUR 7.3 million, which consist of a new melamine line in the Oliveira do Hospital plant, Portugal.
At 31 December 2013 and 2012 details of assets bought through financial leases were as follows:
| 31.12.2012 | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Changes in consolidation perimeter |
Increase | Other changes | Closing balance |
Closing balance | |
| Gross cost: | ||||||
| Land and Buildings | 34 771 500 | 34 771 500 | 34 771 500 | |||
| Plant and Machinery | 44 798 579 | 206 462 | 45 005 041 | 44 798 579 | ||
| Vehicles | 5 190 624 | - 1 755 028 | 3 410 318 | 5 190 624 | ||
| Tools | 58 000 | 58 000 | ||||
| Fixtures and Fittings | 361 017 | - 37 747 | 323 270 | 361 017 | ||
| Intangible Assets Under Development | 221 590 | - 221 590 | ||||
| Closing balance | 85 121 720 | 279 590 | - 1 807 903 | 83 568 129 | 85 121 720 | |
| Accumulated depreciation and impairment losses | ||||||
| Land and Buildings | 10 628 394 | 1 461 484 | 12 089 878 | 10 628 394 | ||
| Plant and Machinery | 21 471 138 | 2 987 938 | - 84 | 24 458 992 | 21 471 138 | |
| Vehicles | 3 487 489 | 512 130 | - 1 688 270 | 2 286 071 | 3 487 489 | |
| Tools | 6 767 | 6 767 | ||||
| Fixtures and Fittings | 215 838 | 80 791 | - 28 082 | 268 547 | 215 838 | |
| Closing balance | 35 802 859 | 5 049 110 | - 1 716 436 | 39 110 255 | 35 802 859 | |
| Carrying amount | 49 318 861 | - 4 769 520 | - 91 467 | 44 457 874 | 49 318 861 |
Minimum payments of finance lease are stated in note 25.4.
During 2013 and 2012 movements in intangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.2013 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Costs |
Patents, Royalties And Other Rights |
Software | Other Intangible Assets | Assets Under Development | Total intangible assets | Total | |||||
| Non 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 |
||
| Gross cost: | |||||||||||
| Opening balance | 190 006 | 3 553 260 | 18 030 000 | 2 393 393 | 63 454 | 1 171 470 | 55 172 | 1 328 156 | 18 148 626 | 8 636 285 | 26 784 911 |
| Changes in consolidation perimeter | - 24 940 | - 24 940 | - 24 940 | ||||||||
| Capital expenditure | 2 307 561 | 685 997 | 2 993 558 | 2 993 558 | |||||||
| Disposals | 418 230 | 30 031 | 418 230 | 30 031 | 448 261 | ||||||
| Revaluation | |||||||||||
| Transfers and reclassifications | 535 021 | 188 803 | 346 617 | - 55 172 | - 1 231 076 | 479 849 | - 695 656 | - 215 807 | |||
| Exchange rate effect | - 1 202 | - 8 449 | - 553 462 | - 171 | - 553 462 | - 9 822 | - 563 284 | ||||
| Closing balance | 188 804 | 3 519 871 | 17 593 329 | 2 551 994 | 63 454 | 3 825 648 | 783 077 | 17 656 783 | 10 869 394 | 28 526 177 | |
| Accumulated depreciation and impairment losses |
|||||||||||
| Opening balance | 98 253 | 2 919 687 | 13 989 224 | 1 685 164 | 63 454 | 891 321 | 14 052 678 | 5 594 425 | 19 647 103 | ||
| Changes in consolidation perimeter | - 24 940 | - 24 940 | - 24 940 | ||||||||
| Amortization for the period | 39 633 | 134 098 | 1 651 906 | 331 302 | 136 591 | 1 651 906 | 641 624 | 2 293 530 | |||
| Impairment losses for the period | |||||||||||
| Disposals | 415 079 | 24 609 | 415 079 | 24 609 | 439 688 | ||||||
| Reversion of impairment losses for the period | |||||||||||
| Transfers and reclassifications | |||||||||||
| Exchange rate effect | - 1 202 | - 2 718 | - 437 494 | 9 | - 437 494 | - 3 911 | - 441 405 | ||||
| Closing balance | 136 684 | 3 026 127 | 14 788 557 | 1 991 866 | 63 454 | 1 027 912 | 14 852 011 | 6 182 589 | 21 034 600 | ||
| Carrying amount | 52 120 | 493 744 | 2 804 772 | 560 128 | 2 797 736 | 783 077 | 2 804 772 | 4 686 805 | 7 491 577 |
| 31.12.2012 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Costs |
Patents, Royalties And Other Rights |
Software | Other Intangible Assets | Assets Under Development | Total intangible assets | Total | |||||
| Non 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 |
||
| Gross cost: | |||||||||||
| Opening balance Changes in consolidation perimeter |
183 407 | 3 061 911 | 17 033 706 | 2 024 176 | 63 454 | 1 848 225 | 55 172 | 937 093 | 17 152 332 | 8 054 812 | 25 207 144 |
| Capital expenditure | 1 426 540 | 1 180 390 | 2 606 930 | 2 606 930 | |||||||
| Disposals | 19 905 | 144 257 | 11 013 | 1 953 090 | 144 257 | 1 984 008 | 2 128 265 | ||||
| Revaluation | |||||||||||
| Transfers and reclassifications | 6 939 | 512 946 | 1 242 125 | 380 284 | - 150 206 | - 789 327 | 1 242 125 | - 39 364 | 1 202 761 | ||
| Exchange rate effect | - 339 | - 1 692 | - 101 574 | - 54 | - 101 574 | - 2 085 | - 103 659 | ||||
| Closing balance | 190 007 | 3 553 260 | 18 030 000 | 2 393 393 | 63 454 | 1 171 469 | 55 172 | 1 328 156 | 18 148 626 | 8 636 285 | 26 784 911 |
| Accumulated depreciation and impairment losses |
|||||||||||
| Opening balance | 58 785 | 2 894 237 | 11 509 682 | 1 287 469 | 63 454 | 816 738 | 11 573 136 | 5 057 229 | 16 630 365 | ||
| Changes in consolidation perimeter Amortization for the period |
39 807 | 45 291 | 2 577 457 | 398 425 | 2 577 457 | 483 523 | 3 060 980 | ||||
| Impairment losses for the period Disposals |
19 905 | 770 | 918 | 770 | 20 823 | 21 593 | |||||
| Reversion of impairment losses for the period Transfers and reclassifications |
- 625 | 194 | 74 583 | - 625 | 74 777 | 74 152 | |||||
| Exchange rate effect | - 339 | 64 | - 96 520 | - 6 | - 96 520 | - 281 | - 96 801 | ||||
| Closing balance | 98 253 | 2 919 687 | 13 989 224 | 1 685 164 | 63 454 | 891 321 | 14 052 678 | 5 594 425 | 19 647 103 | ||
| Carrying amount | 91 754 | 633 573 | 4 040 776 | 708 229 | 280 148 | 55 172 | 1 328 156 | 4 095 948 | 3 041 860 | 7 137 808 | |
During 2013 and 2012 movements in investment properties, accumulated depreciation and impairment losses were as follows:
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Cost | Total | Cost | Total | |
| Gross cost: | ||||
| Opening balance | 1 667 281 | 1 667 281 | 1 667 281 | 1 667 281 |
| Closing balance | 1 667 281 | 1 667 281 | 1 667 281 | 1 667 281 |
| Accumulated depreciations and impairment losses: | ||||
| Opening balance | 354 067 | 354 067 | 309 808 | 309 808 |
| Charge for the period | 44 258 | 44 258 | 44 258 | 44 258 |
| Closing balance | 398 325 | 398 325 | 354 066 | 354 066 |
| Carrying amount | 1 268 956 | 1 268 956 | 1 313 215 | 1 313 215 |
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Rents from investment properties | 201 514 | 247 886 |
| Direct operating costs | 92 165 | 181 400 |
Assets stated as investment properties consist of a portion of land and buildings from the former Göttingen industrial plant, in Germany, which was closed down in 2002. At 31 December 2013 the fair value of these assets was not determined by an independent appraisal as the Group estimated it not to be significantly different from the amount recognized on the Consolidated Statement of Financial Position.
During 2013 and 2012 movements in goodwill arising on consolidation, accumulated depreciation and impairment losses were as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Gross value: | ||
| Opening balance | 92 496 051 | 92 620 183 |
| Decreases | 852 508 | |
| Currency translation | -2 075 631 | - 124 132 |
| Closing balance | 89 567 912 | 92 496 051 |
| Accumulated impairment losses: | ||
| Opening balance | ||
| Increases | 7 727 749 | |
| Closing balance | 7 727 749 | |
| Carrying amount | 81 840 163 | 92 496 051 |
Impairment tests carried out at 31 December 2013 consisted in determining the recoverable amount using the discounted cash flow method. Operating cash flows were projected over an eight-year period, thereafter extrapolated using perpetuity and discounted to 31 December 2013. Weighted Average Cost of Capital, before tax, calculated through CAPM (Capital Asset Pricing Model) methodology for each cash generating unit, was used as discount rate. These rates include specific market features and include different risk factors as well as risk-free interest rates of ten-year bonds of each country to which cash generating units belong.
Projected cash flows are based on the Group's business plan and are updated annually so as to include changes in the economic outlook of each market where the Group is conducting business.
Goodwill was allocated through the cash generating units, which were aggregated according to the synergies generated by the respective business combinations.
| Iberian Peninsula | Germany | France | South Africa | |
|---|---|---|---|---|
| Goodwill | 71 461 306 | 3 588 414 | 6 790 443 | |
| Discount rate (pre-tax) | 12.65% | 9.37% | 9.62% | 18.86% |
| Growth rate on perpetuity | 1.00% | 1.00% | 1.00% | 1.00% |
| Growth rate (CAGR 2013-2021): | ||||
| Total income | 1.59% | 2.12% | 4.24% | 3.57% |
| Cost of goods sold and materials consumed | 1.04% | 1.67% | 2.45% | 3.57% |
| Fixed costs | 0.51% | 0.27% | 2.61% | 3.15% |
| Period | 8 years | 8 years | 8 years | 8 years |
| Test conclusions | Impairment | No Impairment | Impairment | No Impairment |
CAGR Weighted average growth rate
CAGR Germany excludes the raw particleboard production component of Horn plant.
The value in use of the cash generating unit Iberian Peninsula was calculated to amount EUR 264 214 758.
| Iberian Peninsula | Germany | France | South Africa | |
|---|---|---|---|---|
| Goodwill | 73 489 917 | 3 588 414 | 6 027 749 | 9 389 971 |
| Discount rate (pre‐tax) | 13.42% | 9.43% | 9.05% | 17.93% |
| Growth Rate on Perpetuity | 1.00% | 1.00% | 1.00% | 1.00% |
| Period | 8 years | 8 years | 8 years | 8 years |
| Test Conclusions | No impairment | No impairment | No impairment | No impairment |
Impairment tests carried out to the carrying amount of Goodwill resulted in impairment of the cash generating units Iberian Peninsula and France. As a consequence, an impairment loss was recognized for EUR 7 727 749, of which EUR 1 700 000 reduce the goodwill of the former and EUR 6 027 749 reduce the goodwill of the latter.
At 31 December 2013 and 31 December 2012 deferred tax assets and liabilities were detailed according to underlying temporary differences as follows:
| Deferred Tax Assets | Deferred Tax Liabilities | |||
|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | 31.12.2013 | 31.12.2012 | |
| Restated | Restated | |||
| Derecognized Deferred Costs | 102 650 | |||
| Harmonisation Adjustments | 47 670 257 | 57 294 360 | ||
| Provisions not Allowed for Tax Purposes | 1 046 495 | 1 811 150 | ||
| Impairment of Assets | 3 851 888 | 1 904 414 | ||
| Tax Losses Carried Forward | 21 744 099 | 16 956 521 | ||
| Derecognized Tangible Fixed Assets | 47 567 | 50 543 | ||
| Revaluation of Tangible Fixed Assets | 23 315 621 | 887 935 | ||
| Other Deferred Taxes | 7 313 159 | 4 221 117 | 2 572 783 | 1 890 614 |
| 34 003 208 | 25 046 395 | 73 558 661 | 60 072 909 |
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | |
| Restated | Restated | |||
| Opening balance | 25 046 395 | 37 874 949 | 60 072 909 | 64 298 186 |
| Impact on results: | ||||
| Resulting from changes in temporary differences | ||||
| Harmonisation adjusments | - 138 000 | - 3 561 860 | - 1 536 560 | |
| Provisions not allowed for tax purposes | - 401 641 | - 101 948 | ||
| Impairment of Assets | 1 947 474 | - 3 792 | ||
| Derecognized tangible assets | - 2 976 | - 2 975 | ||
| Derecognized deferred costs | - 102 650 | |||
| Revaluation of tangible assets | - 75 751 | - 24 525 | ||
| Tax losses carried forward | 18 942 108 | - 11 518 883 | ||
| Others | 3 277 278 | - 1 941 673 | 694 656 | - 2 072 723 |
| 23 659 593 | - 13 707 271 | - 2 942 955 | - 3 633 808 | |
| Resulting from change in tax rate | - 29 530 | |||
| Subtotal | 23 659 593 | - 13 707 271 | - 2 972 485 | - 3 633 808 |
| Impact on reserves: | ||||
| Items of Other Comprehensive Income | - 185 237 | 857 237 | 37 188 628 | - 39 976 |
| Currency translation effect | - 363 013 | - 116 520 | - 6 575 861 | - 689 493 |
| Impact of changes in the consolidation perimeter | ||||
| Reclassification | - 14 154 530 | 138 000 | - 14 154 530 | 138 000 |
| Closing balance | 34 003 208 | 25 046 395 | 73 558 661 | 60 072 909 |
A deferred tax liability related to the revaluation of tangible fixed assets referred to in notes 3 and 10 was recognized for EUR 36 685 302. Simultaneously, a deferred tax asset was recognized for EUR 14 154 530, taking into consideration that a temporary difference arises from this revaluation, which justifies the future use of tax losses carried forward.
In accordance with International Financial Reporting Standards / International Accounting Standards, the Group yearly assesses deferred tax asset related to tax losses carried forward on the base of cash flows projected over a five-year period.
According to the estimation of taxable profit for the fiscal year 2013 and according to the tax returns for the fiscal year 2012, tax losses carried forward and the corresponding deferred tax asset are detailed as follows:
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Limit date to be used |
Tax loss carried forw ard |
Deferred tax asset | Tax loss carried forw ard |
Deferred tax asset |
| 2014 | 3 375 000 | 843 750 | 4 575 000 | 1 143 750 |
| 2017 | 3 162 176 | 948 653 | ||
| 2018 | 12 048 431 | 2 361 053 | ||
| 2019 | 632 230 | 189 669 | ||
| 2020 | 12 032 581 | 3 631 374 | 5 740 083 | 1 722 025 |
| 2021 | 2 042 580 | 612 774 | 710 820 | 213 246 |
| 2022 | 584 146 | 175 244 | ||
| 2023 | 15 397 | 4 619 | ||
| 2024 | 1 101 121 | 330 336 | ||
| 2025 | 15 397 | 4 619 | ||
| 2026 | 1 063 331 | 318 999 | ||
| 2027 | 15 397 | 4 619 | ||
| 2028 | 996 450 | 298 935 | ||
| 2029 | 523 923 | 157 177 | ||
| 2030 | 402 330 | 120 699 | ||
| 2031 | 375 013 | 112 505 | ||
| 38 385 503 | 10 115 025 | 11 025 903 | 3 079 021 | |
| Without time limit | 87 494 308 | 25 783 604 | 46 986 833 | 13 877 500 |
| Sub-total | 125 879 811 | 35 898 629 | 58 012 736 | 16 956 521 |
| Deferred tax off | ||||
| set | - | - 14 154 530 | ||
| Total | 125 879 811 | 21 744 099 |
Furthermore, at 31 December 2013 and 31 December 2012, tax losses for which no deferred tax asset was recognized are detailed as follows:
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Limit date to be used |
Tax loss carried forw ard |
Tax credit | Tax loss carried forw ard |
Tax credit |
| 2014 | 2 320 773 | 577 990 | 6 567 087 | 1 641 772 |
| 2015 | 61 813 | 14 487 | 65 295 | 17 386 |
| 2016 | 223 477 | 46 628 | 55 743 | 14 694 |
| 2017 | 9 189 526 | 2 774 535 | 12 443 799 | 3 722 725 |
| 2018 | 120 238 | 48 598 | 154 623 | 40 495 |
| 2019 | 88 891 087 | 26 685 324 | 90 245 835 | 27 069 575 |
| 2020 | 58 520 943 | 17 564 360 | 64 843 584 | 19 447 076 |
| 2021 | 100 429 541 | 30 147 124 | 101 765 405 | 30 523 330 |
| 2022 | 8 690 189 | 2 536 232 | 8 179 581 | 2 447 787 |
| 2023 | 1 067 531 | 320 259 | 1 082 928 | 324 878 |
| 2024 | 18 315 068 | 5 494 521 | 19 416 189 | 5 824 857 |
| 2025 | 731 428 | 219 428 | 746 825 | 224 047 |
| 2026 | 46 655 781 | 13 996 735 | 47 719 111 | 14 315 733 |
| 2027 | 1 557 668 | 467 301 | 1 573 065 | 471 920 |
| 2028 | 22 962 888 | 6 888 867 | 23 959 338 | 7 187 802 |
| 2029 | 18 845 874 | 5 653 763 | 19 369 797 | 5 810 939 |
| 2030 | 28 400 046 | 8 520 015 | ||
| 2031 | 9 382 661 | 2 814 798 | ||
| 416 366 532 | 124 770 965 | 398 188 205 | 119 085 016 | |
| Without time limit | 1 222 094 458 | 350 072 713 | 1 209 559 465 | 358 392 670 |
| Total | 1 638 460 990 | 474 843 678 | 1 607 747 670 | 477 477 686 |
Deferred tax asset is offset against deferred tax liability in situations where:
(i) The company which generates the respective temporary differences is legally entitled to offset current tax assets and liabilities; or
ii) Calculated deferred tax assets and liabilities are related with income tax payable to the same tax authority:
At 31 December 2013 and 31 December 2012 details of Other non-current assets on the Consolidated Statements of Financial Position were as follows:
| 31.12.2013 | 31.12.2012 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Trade debtors and other debtors | 12 003 306 | 10 931 182 | 1 072 124 | 12 319 132 | 10 931 182 | 1 387 950 |
| Financial Instruments | 12 003 306 | 10 931 182 | 1 072 124 | 12 319 132 | 10 931 182 | 1 387 950 |
| State and other public entities | ||||||
| Others | 1 696 | 1 696 | 1 696 | 1 696 | ||
| Assets out of scope of IFRS 7 | 1 696 | 1 696 | 1 696 | 1 696 | ||
| Total | 12 005 002 | 10 931 182 | 1 073 820 | 12 320 828 | 10 931 182 | 1 389 646 |
| 31.12.2013 | 31.12.2012 | ||
|---|---|---|---|
| Not due | 1 072 124 | 1 387 950 | |
| Total | 1 072 124 | 1 387 950 |
In September 2012 several assets that became available for sale after production was discontinued at Knowsley plant, in England, were reclassified as Non- current assets held for sale. These assets were expected to be sold within a one-year period.
In October 2012 most of the assets, amounting to EUR 13 480 671 (GBP 11 001 576) were sold.
At 31 December 2013 Non-current assets held for sale amounted to EUR 4 318 092 (GBP 3 600 000) and consisted of the remaining assets of Knowsley industrial plant, for which a sale transaction is expected to occur in the short term.
At 31 December 2013 and 31 December 2012, details of Inventories on the Consolidated Statements of Financial Position were as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Merchandise | 8 382 231 | 8 311 186 |
| Finished and intermediate products | 48 735 661 | 50 793 611 |
| Products and working in progress | 1 846 358 | 1 412 663 |
| Raw Materials and Consumables | 71 333 650 | 78 299 588 |
| 130 297 900 | 138 817 048 | |
| Accumulated losses on inventories (Note 33) | 6 829 193 | 8 833 140 |
| 123 468 707 | 129 983 908 |
Inventories consist mainly of wood, raw boards, faced boards and chemical products.
At 31 December 2013 and 31 December 2012, details of Trade debtors on the Consolidated Statements of Financial Position were as follows:
| 31.12.2013 | 31.12.2012 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Trade Debtors | 145 790 391 | 24 776 848 | 121 013 543 | 166 075 209 | 25 156 732 | 140 918 477 |
| 31.12.2013 | 31.12.2012 | ||
|---|---|---|---|
| Not due | 97 831 427 | 100 715 057 | |
| Due and not impaired | |||
| 0 - 30 days | 13 552 663 | 23 537 132 | |
| 30 - 90 days | 3 685 732 | 5 864 869 | |
| ' + 90 days | 3 063 521 | 2 246 958 | |
| 20 301 916 | 31 648 959 | ||
| Due and impaired | |||
| 0 - 90 days | |||
| 90 - 180 days | 2 270 192 | 12 392 802 | |
| 180 - 360 days | 1 459 193 | 7 317 295 | |
| + 360 days | 23 927 663 | 14 001 096 | |
| 27 657 048 | 33 711 193 | ||
| Total | 145 790 391 | 166 075 209 | |
At 31 December 2013 and 31 December 2012, details of Other current debtors on the Consolidated Statements of Financial Position were as follows:
| 31.12.2013 | 31.12.2012 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Other debtors | 4 155 402 | 3 502 | 4 151 900 | 10 468 857 | 16 111 | 10 452 746 |
| Financial Instruments | 4 155 402 | 3 502 | 4 151 900 | 10 468 857 | 16 111 | 10 452 746 |
| Other debtors | 1 413 830 | 1 413 830 | 3 349 154 | 3 349 154 | ||
| Assets out of scope of IFRS 7 | 1 413 830 | 1 413 830 | 3 349 154 | 3 349 154 | ||
| Total | 5 569 232 | 3 502 | 5 565 730 | 13 818 011 | 16 111 | 13 801 900 |
| 31.12.2013 | 31.12.2012 | ||
|---|---|---|---|
| Not due | 9 793 | 38 430 | |
| Due and not impaired | |||
| 0 - 30 days | 1 670 937 | 6 835 120 | |
| 30 - 90 days | 1 378 825 | 2 353 023 | |
| + 90 days | 1 095 847 | 1 242 284 | |
| 4 145 609 | 10 430 427 | ||
| Total | 4 155 402 | 10 468 857 |
Other debtors include amounts receivable from Trade creditors for EUR 2 590 422.
At 31 December 2013 and 31 December 2012, details of Other current assets on the Consolidated Statements of Financial Position were as follows:
| 31.12.2013 | 31.12.2012 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Derivatives instruments (note 26) Financial Instruments |
77 618 77 618 |
77 618 77 618 |
5 612 5 612 |
5 612 5 612 |
||
| Accrued income | 6 252 674 | 6 252 674 | 4 754 959 | 4 754 959 | ||
| Deferred expenses | 7 648 749 | 7 648 749 | 7 787 818 | 7 787 818 | ||
| Assets out of scope of IFRS 7 | 13 901 423 | 13 901 423 | 12 542 777 | 12 542 777 | ||
| Total | 13 979 041 | 13 979 041 | 12 548 389 | 12 548 389 |
At the closing date of these consolidated financial statements, the Group did not hold any cash flow hedging derivative financial instruments. The amounts included in the previous table relate to derivative financial instruments recognized at fair value through profit or loss (note 26).
Accrued income includes EUR 3.9 million of estimated sales of electrical power.
Deferred expenses include EUR 6.1 million related to insurance expenses.
At 31 December 2013 and 31 December 2012, details of State and Other Public Entities on the Consolidated Statements of Financial Position were as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| State and other public entities: | ||
| Income Tax | 2 314 236 | 2 342 037 |
| Value Added Tax | 5 380 631 | 4 774 949 |
| Social Security Contribution | 51 724 | 52 295 |
| Others | 2 435 915 | 957 644 |
| 10 182 506 | 8 126 925 |
At 31 December 2013 and 31 December 2012, the detail of Cash and Cash Equivalents was as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Cash at Hand Bank Deposits and Other Treasury Applications Impairment in Treasury Applications |
55 553 27 240 258 |
64 924 23 117 589 |
| Cash and Cash Equivalents on the Balance Sheet | 27 295 811 | 23 182 513 |
| Bank Overdrafts | 9 193 837 | 40 992 770 |
| Cash and Cash Equivalents on the Statement of Cash Flows | 18 101 974 | - 17 810 257 |
Bank overdrafts include credit balances on current accounts and are included in Bank loans under current liabilities on the Consolidated Statement of Financial Position (note 25.1).
The Consolidated Statement of Cash Flows for the period ended 31 December 2012 includes line by line the flows of the subsidiary Sonae Industria (UK), Ltd, whose results were included under Profit/(loss) from discontinued operations, after taxation, on the Consolidated Income Statement. The contribute of this subsidiary for the consolidated cash flows is detailed in note 42.
At 31 December 2013 and 2012 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 EUR 5 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. This reserve cannot be distributed to shareholders as it can only be used to increase share capital or against accumulated losses.
This caption includes:
Reserves set up by the parent company and the Group's share of reserves set up by subsidiaries included in consolidation in accordance with statutory rules or by proposition of the respective Board of Directors, approved in the General Shareholders' Meeting.
The parent company's net profits or losses of previous years and the subsidiaries' share thereon whose application was not carried out;
The parent company's net profit or loss of the current period and the subsidiaries' share thereon;
Consolidation adjustments to any of the aforementioned components.
This caption includes:
Currency translation reserves resulting from the conversion to Euros of subsidiaries' financial statements which are expressed in a different functional currency;
Change in fair value of available-for-sale assets (note 9);
Hedging derivative instruments (note 26);
| Accumulated other comprehensive income Atributable to the parent's shareholders |
||||||
|---|---|---|---|---|---|---|
| Currency translation |
Available for-sale financial assets |
Revaluation Reserve |
Actuarial gains/(losses) on defined plans |
Income tax related to components of other comprehensive income |
Total | |
| Balance as at 1 January 2013 | 2 699 144 | 93 816 | - 4 019 786 | - 846 808 | - 380 018 | |
| Other consolidated comprehensive income for the period | -19 195 990 | - 4 866 | 128 387 467 | 821 044 | 36 946 178 | 73 061 477 |
| Others | ||||||
| Balance as at 31 December 2013 | -16 496 846 | 88 950 | 128 387 467 | -3 198 742 | 36 099 370 | 72 681 459 |
| Accumulated other comprehensive income Atributable to the parent's shareholders |
||||||
|---|---|---|---|---|---|---|
| Currency translation |
Available for-sale financial assets |
Revaluation Reserve |
Actuarial gains/(losses) on defined plans |
Imposto relativo às componentes de outro rendimento integral |
Total | |
| Balance as at 1 January 2012 - restated | -7 152 005 | 106 475 | - 241 605 | 39 490 | -7 326 625 | |
| Other consolidated comprehensive income for the period - restated | - 890 336 | - 12 659 | -3 778 181 | - 886 298 | -3 794 878 | |
| Others | 10 741 485 | 10 741 485 | ||||
| Balance as at 31 December 2012 - restated | 2 699 144 | 93 816 | -4 019 786 | - 846 808 | - 380 018 |
Currency translation reserve refers mostly to the subsidiaries Tafisa Canada, Sonae Industria (UK) and Sonae Novobord.
Changes to this item during 2013 and 2012 were as follows:
| 31.12.2013 | 31.12.2012 Restated |
|
|---|---|---|
| Opening balance | - 939 705 | 329 050 |
| Net profit for the period attributed to non-controling interests | - 870 214 | -1 175 020 |
| Other comprehensive income | 818 422 | - 36 611 |
| Others | 196 250 | - 57 124 |
| Closing balance | - 795 247 | - 939 705 |
As at 31 December 2013 and 31 December 2012 Sonae Indústria had the following outstanding loans:
| 31.12.2013 | |||||
|---|---|---|---|---|---|
| Amortised cost | Nominal value | Fair value | |||
| Current | Non current | Current | Non current | adjustment | |
| Bank loans | 223 859 245 | 123 145 528 | 224 851 903 | 123 649 567 | |
| Debentures Obligations under finance leases Other loans |
129 918 927 5 558 615 70 902 123 |
118 908 927 30 153 351 2 553 262 |
130 000 000 5 558 615 71 656 925 |
120 000 000 30 153 351 2 553 262 |
-3 228 745 |
| Gross debt | 430 238 910 | 274 761 068 | 432 067 443 | 276 356 180 | -3 228 745 |
| Cash and cash equivalent in balance sheet | 27 295 811 | 27 295 811 | |||
| Net debt | 402 943 099 | 274 761 068 | 404 771 632 | 276 356 180 | - 3 228 745 |
| Total net debt | 677 704 167 | 681 127 812 | |||
| 31.12.2012 | |||||
| Amortised cost | Nominal value | Fair value | |||
| Current | Non current | Current | Non current | adjustment |
| Bank loans | 133 186 332 | 128 275 420 | 133 311 753 | 129 230 007 | |
|---|---|---|---|---|---|
| Debentures | 55 000 000 | 248 344 033 | 55 000 000 | 250 000 001 | |
| Obligations under finance leases | 4 114 170 | 36 192 908 | 4 114 170 | 36 192 908 | -1 038 028 |
| Other loans | 4 060 098 | 78 868 673 | 4 060 098 | 79 716 721 | |
| Gross debt | 196 360 600 | 491 681 034 | 196 486 021 | 495 139 637 | -1 038 028 |
| Cash and cash equivalent in balance sheet | 23 182 513 | 23 182 513 | |||
| Net debt | 173 178 087 | 491 681 034 | 173 303 508 | 495 139 637 | - 1 038 028 |
| Total net debt | 664 859 121 | 668 443 145 |
The average interest rates of each class of debt stated in the previous table were as follows:
| 2013 | 2012 | |
|---|---|---|
| Bank loans | 6.8650% | 5.1752% |
| Debentures | 4.0640% | 3.2296% |
| Finance leases | 10.7560% | 10.1960% |
| Others | 4.7550% | 2.7505% |
Bank overdrafts were not taken into consideration for the calculation of these average interest rates as the amounts were irrelevant.
The column "Fair value adjustment" includes the adjustments which would have to be made in the period if the corresponding items were stated at fair value. Its calculation took into consideration applicable market interest rates (level 2 fair value).
The aforementioned loans do not include loans from related parties, which were non-existent at the closing date of these consolidated financial statements.
The corresponding maturity schedule is detailed in note 27.
Bank loans (nominal value) presented in the table in note 25. include "Non-current Bank Loans – net of the current portion". "Current portion of Non-current Bank Loans". and "Current Bank Loans" on the Consolidated Statement of Financial Position and their composition as at 31 December 2013 is detailed in the following table:
| 31.12.2013 | |||||
|---|---|---|---|---|---|
| Non current | Current | ||||
| Company | Short term portion |
Short term | Bank overdrafts | Total | |
| Sonae Indústria-SGPS,SA | 83 409 091 | 6 969 697 | 150 500 000 | 177 247 | 241 056 035 |
| Taiber, Tableros Aglomerados Ibéricos,SL | 35 000 000 | 35 000 000 | |||
| Tafisa Canada Inc. | 25 266 797 | 6 853 124 | 32 119 921 | ||
| Sonae Novobord (Pty) Ltd | 10 724 846 | 6 472 665 | 1 273 702 | 18 471 213 | |
| Tafisa-Tableros de Fibras, SA | 7 000 000 | 362 403 | 7 362 403 | ||
| Imoplamac - Gestão de Imóveis, S. A. | 4 248 833 | 2 862 580 | 7 111 413 | ||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 4 009 046 | 4 009 046 | |||
| Laminate Park GmbH & Co. | 3 145 859 | 3 145 859 | |||
| Others | 225 580 | 225 580 | |||
| 123 649 567 | 23 158 066 | 192 500 000 | 9 193 837 | 348 501 470 |
| 31.12.2012 | ||||||
|---|---|---|---|---|---|---|
| Non current | Current | |||||
| Company | Short term portion |
Short term | Bank overdrafts | Total | ||
| Sonae Indústria-SGPS,SA | 60 378 788 | 42 969 697 | 27 500 000 | 25 046 189 | 155 894 674 | |
| Tafisa Canada Inc. | 39 314 825 | 3 846 527 | 106 477 | 43 267 829 | ||
| Sonae Novobord (Pty) Ltd | 22 420 645 | 8 438 508 | 77 467 | 30 936 620 | ||
| Tafisa-Tableros de Fibras, SA | 8 000 000 | 8 361 119 | 16 361 119 | |||
| Imoplamac - Gestão de Imóveis, S. A. | 7 115 749 | 1 564 251 | 77 467 | 8 757 467 | ||
| Laminate Park GmbH & Co. | 3 611 667 | 3 611 667 | ||||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 2 780 658 | 2 780 658 | ||||
| Euroresinas-Indústrias Quimicas,SA | 920 083 | 920 083 | ||||
| Others | 11 643 | 11 643 | ||||
| 129 230 007 | 64 818 983 | 27 500 000 | 40 992 770 | 262 541 760 |
Non-current bank loans and the related short term portion are detailed as follows:
a) In January 2006 Sonae Indústria SGPS. S. A. contracted commercial paper with several financial institutions, subsequently amended in September 2010. At 31 December 2013 commercial paper issued amounted to EUR 20 000 000 (EUR 51 000 000 at 31 December 2012);
b) 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, for a maximum amount of ZAR 247 170 000 . The loan pays interest at a market rate and will be redeemed in 14 consecutive and equal semi-annual instalments, the first of which was made in September 2010. At 31 December 2013 outstanding principal was ZAR 123 585 000 (EUR 8 484 110).
c) During first half 2007 Sonae Novobord together with Sonae Indústria, SGPS, S. A. contracted a loan with International Finance Corporation (IFC) of ZAR 71 800 000. The loan pays interest at a market rate and will be redeemed in 16 consecutive and equal semiannual instalments, the first of which was made in June 2009. At 31 December 2013 outstanding principal was ZAR 26 925 000 (EUR 1 848 401).
d) In February 2009 Sonae Indústria, SGPS, SA contracted a loan with a Portuguese financial institution for EUR 20 000 000. This loan pays interest at variable rate and will be redeemed from 2009 to 2015. At 31 December 2013 outstanding principal amounted to EUR 4 545 455.
e) In September 2009 Sonae Indústria, SGPS, SA contracted commercial paper with a Portuguese financial institution for a maximum nominal amount of EUR 40 000 000, which was increased to EUR 65 000 000 in April 2013. This programme matured in October 2013. Sonae Indústria, SGPS, SA thereafter contracted a new commercial paper programme with
the same financial institution for the same amount, maturing January 2014, thereon extended to March 2014. At 31 December 2013 there was commercial paper issued for the programme's total amount.
f) In July 2010 Tableros de Fibras SA contracted a commercial paper programme, which was amended in May 2013 aiming to postpone maturity from December 2013 to December 2016. Maximum nominal amount of EUR 7 000 000 will be reduced beginning January 2014 until its maturity. At 31 December 2013 there was commercial paper issued for the programme's total amount.
g) In August 2010 Sonae Indústria, SGPS, SA contracted a loan for EUR 10 000 000 with a Portuguese financial institution, which pays interest at variable rate and will be redeemed from 2012 to 2015. At 31 December 2013 outstanding principal amounted to EUR 5 833 333.
h) In March 2011 Sonae Indústria, SGPS, SA contacted a commercial paper programme with a maximum nominal amount of EUR 50 000 000 and maturity in 2015. At 31 December 2013 there was commercial paper issued for the programme's total amount.
i) In July 2011 Tafisa Canada Inc. contracted a loan for CAD 81 000 000 with a syndicate of financial institutions from North America. The loan will mature within five years and is divided into two parts: the first one, amounting to CAD 66 000 000, will be redeemed over that period; the second one, with a maximum amount of CAD 15 000 000, will be redeemed when the loan matures (revolving). In June 2013 the company increased the first part of the loan by CAD 7 500 000. At 31 December 2013 the first part amounted to CAD 42 495 139 (EUR 28 965 537) and the second part was not utilized. This loan includes two financial ratios calculated on the basis of the company's individual financial statements: "Financial Liabilities / (Net Shareholders' Funds + Financial Liabilities)" and "Adjusted EBITDA/Debt Service". These ratios are tested quarterly until debt matures and in case of breach, repayment may be required.
j) In July 2011 Tafisa Canada Inc. contracted a loan for CAD 5 000 000 with a Canadian financial institution. This loan, which originally matured in April 2016, is now due to mature in April 2017, including a grace period beginning July 2013 and ending June 2014. At 31 December 2013 the outstanding principal amounted to CAD 3 777 778 (EUR 2 575 009). This loan includes one ratio calculated in the basis of the company's individual financial statements: "Non-current Liabilities/Net Shareholders' Funds". This ratio is tested annually based on the company's end year accounts and in case of breach, repayment may be required.
k) In November 2012 Imoplamac, S. A. contracted a loan with a Portuguese financial institution for EUR 8 680 000. This loan pays interest quarterly at variable rate and will be repaid in quarterly instalments from March 2013 to March 2016. At 31 December 2013 outstanding amount was EUR 7 111 414.
l) In December 2012 Sonae Indústria, SGPS, SA contracted a loan with a Portuguese financial institution for EUR 25 000 000, which was made available in March 2013. This loan pays interest at variable rate and will be redeemed from 2015 to 2018. At 31 December 2013 the outstanding principal amounted to EUR 25 000 000.
m) On 11 December 2012 Sonae Novobord contracted a loan with a South African financial institution for 150 000 000 South African Rands (ZAR). This loan pays interest at market rate and will be repaid in three successive and equal annual instalments, beginning 2013. At 31 December 2013 the outstanding principal amounted to ZAR 100 000 000 (EUR 6 865 000). This loan includes tree ratios calculated on the basis of the company's individual financial statements: "Net Financial Liabilities/EBITDA", "EBITDA/Interest" and "Free Cash Flow/Debt Service". These ratios are tested quarterly until debt matures and in case of breach, repayment may be required.
n) In June 2013 Sonae Indústria, SGPS, SA entered into a new agency agreement with a Portuguese financial institution to issue commercial paper. The programme had a maximum nominal amount of EUR 50 000 000 which was increased to EUR 100 000 000 in December 2013, and the purchase of Commercial Paper is not underwritten. The programme matures in June 2018. At 31 December 2013 there was commercial paper issued under this programme for EUR 57 500 000.
o) In June 2013 Sonae Indústria, SGPS, SA contracted two new commercial paper contracts with a Portuguese financial institution, each one with a maximum nominal amount of EUR 25 000 000. Term of these programmes was extended from October 2013 to January 2014 and thereon further extended to April 2014. At 31 December 2013 no amount had been issued.
p) In November 2013 Sonae Indústria, SGPS, SA and Taiber, Tableros Aglomerados Ibéricos, S. L. contracted a loan with a Portuguese financial institution for a maximum amount of EUR 50 000 000, which may be withdrawn by each entities over a period up to six months. This loan pays interest at variable rate and matures in October 2014. At the date of these consolidated financial statements Taiber, Tableros Aglomerados Ibéricos, S. L. had withdrawn EUR 35 000 000 (no amount had been withdrawn by Sonae Indústria, SGPS, SA). Shares of the subsidiary Sonae Novobord are pledged as a guarantee for this loan.
q) In November 2013 Sonae Indústria, SGPS, SA contracted a loan with a Spanish financial institution for EUR 13 000 000. This contract pays interest at variable rate and will be totally redeemed in November 2014. At 31 December 2013 the outstanding principal amounted to EUR 13 000 000.
As set out in point 1.3. – Voting and Exercising Voting Rights, of the Corporate Governance Report, at 31 December 2013 there were loans amounting to EUR 131 million (representing 19.3% of consolidated net debt) whose repayment may be required by creditors in case of change in shareholder control.
At 31 December 2013 ratios included in the aforementioned contracts complied with contracted conditions.
a) 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. At 31 December 2013 this loan had been totally repaid;
b) 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;
c) 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;
d) Sonae Indústria. 2010/2017 bonds, issued in May 2010 through private subscription with a principal amount of EUR 150 000 000 and a seven-year period. In October 2012 the contract was amended and repayment schedule was altered. Payment will be done through reduction of nominal value, from the 8th coupon payment date, which will take place 5 May 2014, in seven successive semi-annual instalments, the six first of which will amount to EUR 15 000 000, and a last one, which will amount to EUR 60 000 000. Interest is paid semi-annually on 5 May and 5 November.
The aforementioned debenture loans pay interest at variable rate composed of 6 month Euribor plus a spread.
Other loans, as detailed in the table in note 25, are included in the Consolidated Statement of Financial Position, in "Other Loans" in Current Liabilities and Non-Current Liabilities, and had the following composition on 31 December 2013 and 31 December 2012:
| 31.12.2013 | ||||
|---|---|---|---|---|
| Company | Non current | Current | ||
| Others | Securitization | Others | ||
| Glunz AG | 25 284 859 | 78 950 | ||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 2 020 724 | 8 469 207 | 5 917 577 | |
| Isoroy SAS | 11 629 875 | |||
| Tableros Tradema,S.L. | 328 203 | 11 785 008 | 163 687 | |
| Sonae Tafibra International, BV | 7 285 746 | |||
| Sonae Industria (UK), Ltd. | 939 846 | |||
| Tafiber, Tableros de Fibras Ibéricas,SL | 204 335 | 102 170 | ||
| 2 553 262 | 65 394 541 | 6 262 384 |
| 31.12.2012 | |||||
|---|---|---|---|---|---|
| Company | Non current | Current | |||
| Securitization | Others | Others | |||
| Glunz AG | 18 541 795 | 78 950 | |||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 27 749 559 | 4 241 538 | 3 390 461 | ||
| Isoroy SAS | 6 854 880 | ||||
| Tableros Tradema,S.L. | 9 706 638 | 492 359 | 488 599 | ||
| Sonae Tafibra International, BV | 8 598 265 | ||||
| Sonae Industria (UK), Ltd. | 3 225 429 | ||||
| Tafiber, Tableros de Fibras Ibéricas,SL | 306 258 | 102 088 | |||
| 74 676 566 | 5 040 155 | 4 060 098 |
a) In September 2012 Sonae Indústria, SGPS, SA together with its subsidiaries Sonae Indústria – Produção e Comercialização de Derivados de Madeira, S. A., Tableros Tradema, S. L., Isoroy S. A. S., Glunz AG, Sonae Tafibra International, B. V. and Sonae Industria (UK) Limited contracted with ING Belgium SA/NV and Finacity Corporation a Securitization facility of trade receivables for a maximum amount of EUR 100 000 000, renewable for periods of eighteen months over a six-year period. Next renewal will take
place in March 2014. At 31 December 2012 the outstanding principal amounted to EUR 65 394 544.
Trade receivables securitized amounting to EUR 75 997 148 were kept on the consolidated balance sheet as the criteria set out on IAS 39 for their derecognition were not fully met, namely the whole credit risk related to the securitized assets was not completely transferred.
b) In September 2012 Sonae Indústria – Produção e Comercialização de Derivados de Madeira, S. A. contracted a factoring facility of trade receivables for a maximum amount of EUR 5 000 000, for one year, renewable. In September 2013 this contract was renewed for one year. At 31 December 2013 the outstanding principal amounted to EUR 3 971 220.
Trade receivables factored amounting to EUR 4 490 112 were kept on the consolidated balance sheet as the criteria set out on IAS 39 for their derecognition were not fully met, namely the whole credit risk related to the factored assets was not completely transferred.
The estimated fair value of transferred asset and of related liabilities is not significantly different from their respective carrying amounts.
Details of finance leases creditors at 31 December 2013 and at 31 December 2012 are as follows:
| Minimum | Present value | |||
|---|---|---|---|---|
| lease payments | of minimum lease payments | |||
| 31.12.2013 | 31.12.2012 | 31.12.2013 | 31.12.2012 | |
| 2012 | 8 623 429 | 4 114 170 | ||
| 2013 | 9 334 634 | 9 310 896 | 5 919 249 | 6 582 102 |
| 2014 | 9 344 678 | 9 303 918 | 6 440 158 | 6 422 655 |
| 2015 | 8 610 305 | 8 538 608 | 6 285 401 | 6 235 478 |
| 2016 | 6 925 132 | 6 854 035 | 5 111 645 | 5 057 124 |
| 2017 | 12 429 887 | 11 154 117 | ||
| after 2018 (2017) | 841 878 | 18 393 118 | 801 396 | 11 895 549 |
| 47 486 514 | 61 024 004 | 35 711 966 | 40 307 078 | |
| Lease creditors - current | 5 558 615 | 4 114 170 | ||
| Lease creditors - non current | 30 153 351 | 36 192 908 | ||
Assets recognized under finance lease arrangements are stated in note 10.
The amounts stated under cash receipts arising from loans obtained and cash payment arising from loans obtained, on financing activities of the Consolidated Statement of Cash Flows include the rollover of commercial paper programmes detailed in note 25.1.
The fair value of derivative instruments is stated as follows:
| Other current assets | Other current liabilities | ||||
|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | 31.12.2013 | 31.12.2012 | ||
| Derivatives at fair value through profit or loss: Exchange rate forw ards |
77 618 | 5 612 | 61 264 | ||
| 77 618 | 5 612 | 61 264 |
They consist of exchange rate derivatives (forwards) over which no hedge accounting was applied.
The fair value of exchange rate forwards was determined using derivative valuation software and external appraisals when software do not allow some derivatives to be valued, and consisted in updating the receivable/payable amount at maturity date to the balance sheet date (level 2 fair value). Receivable/payable amount, which was used for valuing, corresponds to the amount denominated in foreign currency multiplied by the difference between the contracted exchange rate and the market exchange rate at the maturity date that was determined at valuation date (forward exchange rate determined between valuation and maturity date. using market information).
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 40), which corresponds to a net gain of EUR 354 362 (net loss of EUR 2 884 813 at 31 December 2012).
Derivative instruments recognized at fair value through profit or loss held by the Group at 31 December 2013 fully mature in 2014.
In 2013 and 2012 no derivative financial instruments at fair value through reserves were contracted.
Liquidity risk described in note 2.24, c) related to gross debt referred to in note 26, can be analysed as follows:
| 31.12.2013 | |||||
|---|---|---|---|---|---|
| Maturity of gross debt (note 25) |
Interest | Total | |||
| 2014 | 432 067 443 | 24 496 632 | 456 564 075 | ||
| 2015 | 115 967 016 | 16 669 220 | 132 636 236 | ||
| 2016 | 65 581 309 | 9 434 045 | 75 015 354 | ||
| 2017 | 77 604 446 | 4 557 111 | 82 161 557 | ||
| 2018 | 16 297 804 | 1 450 677 | 17 748 481 | ||
| 2019 | 491 111 | 36 145 | 527 256 | ||
| After 2019 | 414 494 | 14 090 | 428 584 | ||
| 708 423 623 | 56 657 920 | 765 081 543 | |||
| 31.12.2012 | |||||
| Maturity of gross debt (note 25) |
Interest | Total | |||
| 2013 | 196 486 021 | 22 394 728 | 218 880 749 | ||
| 2014 | 293 495 524 | 24 935 968 | 318 431 493 | ||
| 2015 | 60 096 624 | 12 934 337 | 73 030 961 | ||
| 2016 | 62 434 285 | 8 706 115 | 71 140 400 | ||
| 2017 | 66 725 410 | 3 880 985 | 70 606 395 | ||
| 2018 | 11 147 662 | 1 276 681 | 12 424 343 | ||
| After 2018 | 1 240 132 | 50 236 | 1 290 368 | ||
The calculation of interest in the previous table was based on interest rates at 31 December 2013 and 2012 applicable to each item of debt. Gross debt maturing in 2014 (2013) includes scheduled repayment of debt along with the repayment of debt as at end 2013 (2012) maturing within less than one.
Maturities for the remaining financial instruments are stated in the respective notes.
Consistent with the principles described in note 2.25 c), Sonae Indústria is focused on the management of its debt maturing during 2014 and 2015 with the aim of achieving appropriate leeway that would permit the management team to implement its strategic plan, that as already indicated to the market, contemplates the reduction of the industrial footprint, concentration on the most profitable plants, achievement of operating efficiencies and the sale of non-core assets.
During the fourth quarter of 2013 the Company performed, a detailed review of its capital structure and debt maturity profile in order to determine alternatives for achieving long term financing solutions that would give the Company time to implement its strategic plan (reducing considerably the amount of debt repayments during 2014 and 2015) and that would get the support of its key stakeholders, particularly from the shareholders and principal creditor banks.
As a result of this review, discussions are being held with the three main creditor banks, with the purpose of finding adequate solutions for the refinancing of the debt maturing during the next few years. These discussions may result in the extension of current debt maturities and refinement of current financing terms, combined with other initiatives aiming to improve the capital structure of the Company over time so as to enable the Company to access the bank debt market and/or debt capital markets in the medium term to refinance its debt if deemed appropriate.
The analysis of interest rate risk described on note 2.24, b), i), consisted in calculating the way net profit before tax for 2013 and 2012 would have been impacted if there would have been a change of +0.75 or -0.75 percentage points in actual interest rates of the corresponding periods:
| Effect in Profit and Loss (Euros) -0.75% |
"Notional" (Euros) |
2012 Effect in Profit and Loss (Euros) 0.75% |
-0.75% |
|---|---|---|---|
| 3 675 179 | |||
| 52 455 | |||
| 274 683 | 42 038 276 | - 347 144 | 347 144 |
| 134 698 | 30 860 490 | - 113 821 | 113 821 |
| 4 010 170 | 643 075 218 | -4 188 599 | 4 188 599 |
| - 72 331 | |||
| - 11 497 | 3 874 033 | 72 331 | - 72 331 |
| 4 116 268 | |||
| 3 590 896 9 893 - 11 497 3 998 673 |
568 279 783 1 896 670 3 874 033 |
-3 675 179 - 52 455 72 331 -4 116 268 |
Gross debt in the table above excludes bank overdrafts and borrowings which are not subject to change in interest rate. Bank deposits and other treasury applications in the table above exclude demand deposits.
Considering Euribor 6 months as a reference indicator for interest rates of Euro, a change of 0.75 percentage points corresponds to 35.7 2 times the standard deviation of that variable in 2013 (2 times in 2012).
With respect to exchange rate risk, described in note 2.24., b), ii), the following calculations were performed:
a) Sensitivity analysis of amounts denominated in a currency other than the functional currency of each company included in the consolidation, by considering a change of +1% and -1% in actual 2013 and 2012 exchange rates.
| Amount denominated in foreign currency |
Eur equivalent | Sensitivity analysis | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | 2013 31.12.2013 31.12.2012 |
2012 | ||||||||
| -1% | 1% | -1% | 1% | ||||||||
| GBP | 17 795 110 | 13 000 000 | 21 344 700 | 15 929 420 | - 213 447 | 213 447 | - 159 294 | 159 294 |
Sensitivity refers to the effect that -1% and 1% changes in closing exchange rates for 2013 and 2012 would have on net exchange differences disclosed in note 40.
ii) The remaining financial assets and liabilities do not include any amounts denominated in currencies other than the functional currency of the respective subsidiary which may represent any relevant exchange rate risks.
b) Sensitivity analysis of existing derivatives to hedge the exchange rate risk set out in the previous point:
At the closing date of these consolidated financial statements, existing derivative instruments to hedge the exchange rate risk amounted to irrelevant values (note 26).
Credit risk described in note 2.24, a) is mostly reflected through the amount stated in Trade Debtors (note 18). No relevant differences between the amounts recognized and the corresponding estimated fair value were identified.
At 31 December 2013 and 31 December 2012 details of Other non-current liabilities were as follows:
| 31.12.2013 | 31.12.2012 | ||||
|---|---|---|---|---|---|
| Borrow ings from related parties | |||||
| Other creditors | 18 803 577 | 20 896 701 | |||
| Financial instruments | 18 803 577 | 20 896 701 | |||
| Other creditors | 36 954 787 | 44 044 204 | |||
| Liabilities out of scope of IFRS 7 | 36 954 787 | 44 044 204 | |||
| Total | 55 758 364 | 64 940 905 | |||
| 31.12.2013 | 2015 | 2016 | 2017 | 2018 | Total |
| Maturity of Other non current creditors | 7 255 897 | 5 082 216 | 4 823 210 | 1 642 254 | 18 803 577 |
| 7 255 897 | 5 082 216 | 4 823 210 | 1 642 254 | 18 803 577 |
| 3 1.12 .2 0 12 | 2014 | 2015 | 2016 | 2017 | Total |
|---|---|---|---|---|---|
| M aturity of Other non current creditors | 2 101 701 | 6 265 000 | 6 265 000 | 6 265 000 | 20 896 701 |
| 2 101 701 | 6 265 000 | 6 265 000 | 6 265 000 | 20 896 701 |
Other creditors (financial instruments) include EUR 18 561 400 (EUR 20 896 701 at 31 December 2012) related to the fine imposed by the German Competition Authority.
Other creditors (out of scope of IFRS 7) include EUR 35 727 688 (EUR 42 552 874 at 31 December 2013) related to deferred investment subventions.
Various Group companies assumed the liability of giving their employees cash contributions to pension plans for old age, incapacity, early retirement and survival. 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. Furthermore, some subsidiaries have the legal obligation to pay their employees some lump sum amounts when they get retired.
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 report prepared at 31 December 2013 and 2012 were:
| Germany | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Glunz AG | GHP GmbH | Tool GmbH | Impaper | ||||||
| 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | ||
| Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | ||
| Mortality table | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | |
| Salary grow th rate | 2,0% | 0.0% | 0,0% | 0,0% | 0,0% | 0,0% | 2,0% | 0,0% | |
| Return on fund | 3,5% | 3,8% | 3,5% | 3,8% | 3,5% | 3,8% | 3,5% | 3,8% | |
| Actuarial tecnical rate | 3,5% | 5,0% | 3,5% | 5,0% | 3,5% | 5,0% | 3,5% | 5,0% | |
| Pension grow th rate | 1,75% | 1,75% | 1,75% | 1,75% | 1,75% | 1,75% | 1,75% | 1,75% |
| South Africa | France | Portugal | ||||
|---|---|---|---|---|---|---|
| 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | 31.12.13 | 31.12.12 | |
| Mortality table | PA(90)-2 | PA(90) | INSEE 2006- 2008 |
INSEE 2006- 2008 |
TV 88/90 | TV 88/90 |
| Salary grow th rate | 8,0% | 7,7% | 2,0% | 2,0% | 3,0% | 3,0% |
| Return on fund | 9,5% | 8,2% | - | - | 3,3% | 2,7% |
| Actuarial tecnical rate | 9,5% | 8,2% | 3,0% | 2,75% | 4,0% | 5,5% |
| Pension grow th rate | 5,3% | 5,0% | - | - | 0,0% | 0,0% |
| Trend rate of medical aid obligation | 1,2% | 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. The amount of EUR 511 710 was included in the item Staff expenses, on the Consolidated Income Statement, during the period. At 31 December 2013, no contributions were outstanding or unpaid.
Defined Benefit plan with a fund managed by a third party under South African pension fund law. Present value of the defined benefit liability is calculated in accordance with International Accounting Standard 19, taking into consideration applicable law, and based on actuarial reports performed by an independent party. This plan comprises obligations for retirement pensions and survivors pensions.
Post-Retirement Health Benefit scheme under which the Company will provide for 50% of eligible health expenses incurred after the employee's retirement.
The actuarial discount rate of 9.5%, which was used for calculating the defined benefit liability of Sonae Novobord (Pty) Ltd, corresponds to the rate of return of zero coupon South African government bonds with maturity corresponding to the average duration of the defined benefit liability. This rate of return was calculated based on the yield curve of South African zero coupon government bonds published by the Bond Exchange of South Africa, taking into consideration that corporate bond market is not developed in this country.
The estimated average duration of the defined benefit liability recognized by Sonae Novobord is 16.9 years.
In the actuarial report carried out on 31 December 2013, the defined benefit liability amounted to EUR 851 535.
Glunz AG, GHP GmbH, Too GmbH and Impaper Europe GmbH & Co. KG have funded defined benefit plans. The plan is calculated according to International Accounting Standard 19, and based on actuarial reports carried out by an independent party.
The actuarial discount rate of 3.5% used for calculating defined benefit liabilities of German subsidiaries corresponds to the weighted average rate obtained by applying the yield curve of high quality corporate bonds, which is calculated based on information published by Bloomberg of corporate bonds rated at least AA by at least one of the main international rating agencies.
The average duration of the recognized defined benefit liability is:
In accordance with the actuarial reports carried out at 31 December 2013, these companies' defined benefit liabilities amounted to EUR 20 941 758.
Upon retirement of their employees, Isoroy SAS and Darbo SAS are obliged to pay a lump sum defined under the terms of the sector's collective labour agreement.
The actuarial discount rate of 3%, which was used for calculating the defined benefit liability of French subsidiaries, corresponds to the rate of return of AA-rated corporate bonds maturing within more than ten years, from Markit iBoxx index.
The average duration of the recognized defined benefit liability is:
An actuarial report calculated the liabilities of the two companies on 31 December 2013 to be EUR 1 279 800.
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. Employees may choose to be paid a lump sum instead of a monthly amount.
The actuarial discount rate of 4% used for calculating the defined benefit liability of Portuguese subsidiaries was obtained from the yield curves of high quality zero coupon government bonds from the Euro Zone, plus a spread, determined based on iTaxx Europe Main index.
The average duration of the defined benefit liability recognized by the Portuguese subsidiaries is 20 years.
An actuarial report calculated the liabilities of these companies on 31 December 2013 to be EUR 2 578 735.
The main risk to which these defined benefit plans expose the Group is the liquidity risk. At 31 December 2013 assets funding the plans represented 21.9% (20.8% at 31 December 2012) of the defined benefit obligation. However, this risk is mitigated by the long average duration of the Group's defined benefit liabilities and by the fact that employees do not retain any right to benefits if they terminate work.
The main changes, during the periods ending 31 December 2013 and 31 December 2012, to the present value of the defined benefit obligations are presented as follows:
| 31.12.2013 | 31.12.2012 Restated |
|||||
|---|---|---|---|---|---|---|
| Plan w ithout fund |
Plan w ith fund |
Total | Plan w ithout fund |
Plan w ith fund |
Total | |
| (+) Opening balance of defined benefit obligations' present value | 2 405 594 | 32 623 748 | 35 029 342 | 2 285 158 | 29 130 162 | 31 415 320 |
| (+) Interest cost | 113 978 | 1 375 759 | 1 489 737 | 141 280 | 1 569 098 | 1 710 378 |
| (+) Current service cost | 85 942 | 435 792 | 521 734 | 73 866 | 427 174 | 501 040 |
| (+) Actuarial losses/(gains), of w hich: | - 72 433 | - 957 291 | -1 029 724 | 71 566 | 3 577 494 | 3 649 060 |
| Due to change in financial assumptions | - 193 883 | 252 855 | 58 972 | N/A | ND | ND |
| Due to change in demographic assumptions | 74 141 | 191 341 | 265 482 | ND | ND | ND |
| (+) Recognised past service cost | - 21 070 | - 290 906 | - 311 976 | - 131 245 | - 131 245 | |
| (-) Paid pensions | 120 640 | 1 939 680 | 2 060 319 | 100 008 | 1 636 397 | 1 736 405 |
| (+) Exchange rate effect | - 260 038 | -1 201 971 | -1 462 009 | - 66 268 | - 312 536 | - 378 804 |
| (=) Closing balance of defined benefit obligations' present value | 2 131 335 | 30 045 451 | 32 176 785 | 2 405 594 | 32 623 749 | 35 029 344 |
| 31.12.2013 | 31.12.2012 Restated |
|
|---|---|---|
| (+) Opening balance of plan assets | 7 349 940 | 6 210 537 |
| (+) Contribution to plan assets | 696 876 | 694 699 |
| Employees | 24 583 | 99 614 |
| Employer | 672 293 | 595 086 |
| (+) Remeasurements | 811 502 | 962 378 |
| (-) Paid pensions | 629 855 | 292 548 |
| (+) Exchange rate effect | - 1 167 623 | - 225 303 |
| (=) Closing balance of plan assets | 7 060 839 | 7 349 763 |
During 2013 and 2012 the fair value of the plan assets changed as follows:
Funding assets do not include any securities issued by the Company or its subsidiaries nor any assets occupied or used by the Group.
At 31 December 2013 and 31 December 2012, the amount of liabilities for defined benefits recognized in the Consolidated Statements of Financial Position is detailed as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Restated | ||
| (+) Present value of defined benefit obligations | 32 176 785 | 35 029 344 |
| (-) Fair value of plan assets | 7 060 839 | 7 349 762 |
| (+)Asset ceiling | 535 882 | |
| (=) Defined benefit liability | 25 651 828 | 27 679 582 |
The effect of these liabilities on Staff Expenses, on the Consolidated Income Statements for 2013 and 2012, is detailed as follows:
| 31.12.2013 | 31.12.2012 Restated |
|
|---|---|---|
| (+) Interest cost | 1 489 737 | 1 649 469 |
| (+) Current service cost | 521 734 | 493 309 |
| (+) Past service cost | - 311 976 | - 131 245 |
| (+) Employee contributions | - 24 583 | - 37 897 |
| (+) (Increase) / Decrease in fair value of plan assets | - 422 820 | - 414 462 |
| 1 252 092 | 1 559 174 |
Sensitivity of the Health Benefit scheme's obligations can be analysed as follows:
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| - 1,0 pp | Valuation basis |
+ 1,0 pp | - 1,0 pp | Valuation basis |
+ 1,0 pp | |
| -1,0% | 0,0% | +1,0% | -1,0% | 0,0% | +1,0% | |
| Defined benefit obligation | 971 329 | 851 466 | 752 129 | 1 281 282 | 1 122 151 | 984 411 |
The valuation basis refers to the real growth rate of health expenses, which was included in the actuarial assumptions disclosed herewith.
Sensitivity of the defined benefit obligation, excluding the health benefit scheme, is as follows:
| 2013 | ||||
|---|---|---|---|---|
| Valuation | ||||
| -0,5 pp | basis | +0,5 p | ||
| Defined benefit obligation | 33 628 220 | 31 325 319 29 233 630 |
The valuation basis refers to the actuarial discount rate that was included in the actuarial assumptions disclosed herewith.
Change in accounting policy referred to in note 3, a) had the following effects on the Consolidated statement of financial position at 31 December 2012:
| Restated (a) |
Published (b) |
Difference (a) - (b) |
|---|---|---|
| 25 046 395 | 24 189 158 | 857 237 |
| 1269 874 674 | 1269 017 527 | 857 147 |
| - 380 018 | 2 792 960 | -3 172 978 - 39 077 |
| 131 945 011 | 135 157 066 | -3 212 055 |
| 27 679 582 | 23 610 290 | 4 069 292 857 237 |
| - 939 705 1269 874 764 |
- 900 628 1269 017 527 |
At 31 December 2013 and 31 December 2012, Trade creditors stated on the Consolidated Statements of Financial Position showed the following maturities:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| To be paid | ||
| < 90 days | 152 855 419 | 176 272 220 |
| 90 - 180 days | 2 069 288 | 1 287 393 |
| > 180 days | 1 455 707 | 24 789 |
| 156 380 414 | 177 584 402 |
At 31 December 2013 and 31 December 2012 State and other public entities had the following composition:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| State and other public entities | ||
| Income Tax | 3 005 507 | 1 576 844 |
| Value Added Tax | 2 808 408 | 4 391 247 |
| Social Security Contribution | 4 348 791 | 4 911 613 |
| Others | 2 096 325 | 3 223 897 |
| 12 259 031 | 14 103 601 |
At 31 December 2013 and 31 December 2012 Other current liabilities were composed of:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Group companies | 20 334 | 20 334 |
| Derivatives | 61 264 | |
| Tangible fixed assets suppliers | 4 149 672 | 2 875 665 |
| Other creditors | 6 967 919 | 5 677 545 |
| Financial instruments | 11 137 925 | 8 634 808 |
| Other creditors | 1 882 693 | 1 669 098 |
| Accrued expenses: | ||
| Insurances | 194 182 | 628 951 |
| Personnel costs | 16 516 517 | 24 677 139 |
| Accrued financial expenses | 7 048 783 | 5 024 275 |
| Rebates | 17 312 464 | 15 882 431 |
| External supplies and services | 10 529 871 | 13 057 777 |
| Other accrued expenses | 8 127 030 | 8 577 830 |
| Deferred income: | ||
| Investment subventions | 7 604 044 | 7 813 852 |
| Other deferred income | 784 477 | 148 938 |
| Liabilities out of scope of IFRS 7 | 70 000 061 | 77 480 291 |
| Total | 81 137 986 | 86 115 099 |
| 31.12.2013 | < 90 days | 90 - 180 days | > 180 days | Total |
|---|---|---|---|---|
| Maturity of current fixed assets' suppliers | 3 481 071 | 242 345 | 426 256 | 4 149 672 |
| Maturity of Other current creditors | 6 704 969 | 31 887 | 231 063 | 6 967 919 |
| 10 186 040 | 274 232 | 657 319 | 11 117 591 |
| 31.12.2012 | < 90 days | 90 - 180 days | > 180 days | Total |
|---|---|---|---|---|
| Maturity of current fixed assets' suppliers | 2 873 811 | 1 854 | 2 875 665 | |
| Maturity of Other current creditors | 4 745 901 | 506 650 | 424 994 | 5 677 545 |
| 7 619 712 | 508 504 | 424 994 | 8 553 210 |
Movements occurred in provisions and accumulated impairment losses during the periods ended 31 December 2013 and 31 December 2012 were as follows:
| 31.12.2013 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Opening | Exchange | Changes to | Other | |||||
| Description | balance | rate effect | perimeter | Increase | Utilization | Reversion | changes | Closing balance |
| Impairment losses: | ||||||||
| Tangible fixed assets | 32 922 834 | 41 741 500 | 6 736 192 | 1 445 529 | 69 373 671 | |||
| Goodwill | 7 727 749 | 7 727 749 | ||||||
| Intangible assets | 19 242 | 19 242 | ||||||
| Other non-current assets | 10 931 182 | 10 931 182 | ||||||
| Trade debtors | 25 156 732 | - 767 287 | 4 557 159 | 2 204 475 | - 1 965 281 | 24 776 848 | ||
| Other debtors | 16 111 | - 12 609 | 3 502 | |||||
| Subtotal impairment losses | 69 046 101 | - 767 287 | 54 026 408 | 8 940 667 | - 532 361 | 112 832 194 | ||
| Provisions: | ||||||||
| Litigations in course | 2 150 693 | 126 114 | 187 000 | - 26 529 | 2 063 278 | |||
| Warranties to customers | 690 770 | - 362 | 42 611 | 647 797 | ||||
| Restructuring | 10 911 412 | - 85 774 | 86 800 | 8 464 460 | 1 885 430 | 562 548 | ||
| Other | 5 638 746 | - 6 025 | 91 458 | 4 234 448 | 3 994 190 | 5 483 921 | ||
| Subtotal provisions | 19 391 621 | - 92 161 | 304 372 | 12 928 519 | 1 885 430 | 3 967 661 | 8 757 544 | |
| Subtotal impairment losses and provisions | 88 437 722 | - 859 448 | 54 330 780 | 12 928 519 | 10 826 097 | 3 435 300 | 121 589 738 | |
| Other losses: | ||||||||
| Investments | 36 985 875 | 36 985 875 | ||||||
| Write-dow n to net realizable value of | ||||||||
| inventories | 8 833 140 | - 77 864 | 4 889 219 | 5 921 981 | - 893 321 | 6 829 193 | ||
| Total | 134 256 737 | - 937 312 | 59 219 999 | 12 928 519 | 16 748 078 | 2 541 979 | 165 404 806 |
| 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Opening balance |
Exchange rate effect |
Changes to perimeter |
Increase | Utilization | Reversion | Other changes |
Closing balance |
| Impairment losses: | ||||||||
| Tangible fixed assets | 33 529 610 | 30 788 | 48 867 592 | 3 933 541 | - 45 571 615 | 32 922 834 | ||
| Intangible assets | 19 242 | 19 242 | ||||||
| Other non-current assets | 10 931 182 | 10 931 182 | ||||||
| Trade debtors | 23 911 465 | - 199 079 | 9 497 471 | 4 265 976 | - 3 787 149 | 25 156 732 | ||
| Other debtors | 19 628 | - 3 517 | 16 111 | |||||
| Subtotal impairment losses | 68 411 127 | - 168 291 | 58 365 063 | 8 199 517 | - 49 362 281 | 69 046 101 | ||
| Provisions: | ||||||||
| Litigations in course | 8 445 337 | 273 173 | 2 005 808 | 2 719 741 | - 1 842 268 | 2 150 693 | ||
| Warranties to customers | 858 616 | 151 | 18 913 | 62 000 | 124 910 | 690 770 | ||
| Restructuring | 745 571 | - 16 548 | 14 556 730 | 4 321 691 | 52 650 | 10 911 412 | ||
| Other | 4 481 993 | 5 923 | 2 361 638 | 1 123 161 | 34 556 | - 53 091 | 5 638 746 | |
| Subtotal provisions | 14 531 517 | - 10 474 | 17 210 454 | 7 512 660 | 2 931 857 | - 1 895 359 | 19 391 621 | |
| Subtotal impairment losses and provisions | 82 942 644 | - 178 765 | 75 575 517 | 7 512 660 | 11 131 374 | - 51 257 640 | 88 437 722 | |
| Other losses: | ||||||||
| Investments | 37 005 998 | - 20 123 | 36 985 875 | |||||
| Write-down to net realizable value of inventories | 7 836 654 | - 13 224 | 7 031 388 | 5 638 036 | - 383 642 | 8 833 140 | ||
| Total | 127 785 296 | - 191 989 | 82 606 905 | 7 512 660 | 16 769 410 | - 51 661 405 | 134 256 737 |
Impairment losses are offset against the corresponding asset on the Consolidated Statement of Financial Position.
Increase and utilization of provisions and impairment losses are stated on the Consolidated Income Statement as follows:
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Losses | Gains | Total | Losses | Gains | Total | |
| Cost of sales | 1 417 373 | 2 094 676 | - 677 303 | 2 367 053 | 2 023 877 | 343 176 |
| (Increase) / decrease in production | 3 471 846 | 3 827 304 | - 355 458 | 3 692 864 | 3 417 048 | 275 816 |
| Provisions and impairment losses | 54 288 169 | 22 404 744 | 31 883 425 | 27 715 417 | 14 531 302 | 13 184 115 |
| Staf expenses | 42 611 | 1 349 873 | - 1 307 262 | |||
| Total (Consolidated Income Statement) | 59 219 999 | 29 676 597 | 29 543 402 | 82 606 905 | 24 282 070 | 58 324 835 |
Column "Other changes" also includes changes in impairment losses related to sale or writeoff of assets.
In the period ended 31 December 2013 movements recognized through impairment losses are detailed as follows:
Increase in impairment losses in tangible fixed assets relates mostly to assets located in Portugal, Spain, France and Germany that were individually tested for impairment;
Reversion of impairment losses in tangible fixed assets relates to assets located in Portugal and Spain that were individually tested for impairment;
Increase in impairment losses in goodwill relates to cash generating units located in France (EUR 6 027 024) and Iberian Peninsula (EUR 1 700 000).
At 31 December 2013 the amount of provisions could be detailed as follows:
During the period, the recognition of provisions at present value of estimated liabilities did not include any significant amounts.
Provisions and Impairment Losses on the Consolidated Income Statements are detailed into geographical segment in note 44.
At 31 December 2013 and 31 December 2012 the Group held irrevocable operating leases with the following lease payments:
| Minimun operating | |||||
|---|---|---|---|---|---|
| lease payments | |||||
| 31.12.2013 | 31.12.2012 | ||||
| 2013 | 5 253 314 | ||||
| 2014 | 4 669 076 | 3 783 291 | |||
| 2015 | 2 302 536 | 2 003 812 | |||
| 2016 | 1 364 308 | 1 206 185 | |||
| 2017 | 560 910 | 486 993 | |||
| 2018 | 115 859 | ||||
| After 2018 (2017) | 16 366 | 279 211 | |||
| 9 029 055 | 13 012 806 | ||||
During the period the Group recognized under External suppliers and services, on the Consolidated Income Statement, rents related to operating leases for EUR 7 956 000 (EUR 8 828 000 at 31 December 2012).
35.1. Balances and transactions with related parties may be summarized as follows:
| Balances | Accounts receivable | Accounts payable | ||
|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | 31.12.2013 | 31.12.2012 | |
| Other subsidiaries of the parent company | 284 452 | 389 944 | 1 561 097 | 1 658 251 |
| Joint ventures | 116 434 | 252 425 | 307 807 | 303 707 |
| Transactions | Income | Expenditure | |||
|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | 31.12.2013 | 31.12.2012 | ||
| Other subsidiaries of the parent company | 1 184 444 | 1 144 612 | 7 347 030 | 7 428 946 | |
| Joint ventures | 3 744 862 | 4 711 949 | 5 656 688 | 8 344 364 |
35.2. Remuneration of the Board of Directors of the Company is detailed as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Short term benefits Medium term benefits |
1 398 573 42 400 |
1 431 501 46 224 |
| 1 440 973 | 1 477 725 |
The amount included under Medium term benefits for 2013, on the previous table, refers to the amounts recognized under Staff expenses that relate to members of the Board of Directors.
At 31 December 2013 there were no post retirement liabilities attributed to the members of the board of directors.
35.3. During the period ended 31 December 2013 the Group recognized on these consolidated financial statements the following fees paid to the audit company PricewaterhouseCoopers & Associados, SROC, Lda and respective international network:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Total fees related to audit of end year accounts Total fees related to other realiability assurance services Total fees related to tax consulting services |
400 124 35 840 |
403 905 36 808 |
| 435 964 | 440 713 |
Details of Other operating income on the Consolidated Income Statement for the periods ended 31 December 2013 and 31 December 2012 are as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Gains on disposals of non current investments | 66 515 | 98 948 |
| Gains on disp. and w rite off of invest. prop., tang. and intang. assets | 1 754 975 | 372 692 |
| Supplementary revenue | 9 655 118 | 10 357 713 |
| Investment subventions | 7 186 656 | 11 151 058 |
| Tax received | 5 105 618 | 4 382 222 |
| Positive exchange gains | 1 871 261 | 1 602 814 |
| Others | 3 224 319 | 6 434 804 |
| 28 864 462 | 34 400 251 |
Tax received includes EUR 4.6 million relating to tax paid upon consumption of gas and electrical power (recognized under External services and suppliers), which were reimbursed in accordance with attained energetic efficiency levels.
Details of Other operating expenses on the Consolidated Income Statement for 2013 and 2012 are as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Taxes | 7 185 969 | 5 840 832 |
| Losses on disposals of non current investments | 852 507 | 72 585 |
| Losses on disp. and w rite off of invest. prop., tang. and intang. assets | 1 536 092 | 2 839 663 |
| Negative exchange gains | 2 805 662 | 2 241 429 |
| Others | 1 990 177 | 3 092 401 |
| 14 370 407 | 14 086 910 |
During the period the Group recognized in several items of the Consolidated Income Statement research and development expenses amounting to EUR 1 048 458 (EUR 1 260 963 in 2012).
Underlying and non-underlying operating items on the Consolidated income statement are detailed as follows:
| 31.12.2013 | 31.12.2013 | 312.12.2013 | 31.12.2012 | 31.12.2012 | 31.12.2012 | |
|---|---|---|---|---|---|---|
| Recurrent | Non-recurrent | Total | Recurrent | Non-recurrent | Total | |
| Sales | 1227 148 384 | 581 162 | 1227 729 546 | 1316 690 424 | - | 1316 690 424 |
| Services rendered | 3 826 375 | - | 3 826 375 | 4 339 792 | - | 4 339 792 |
| Other income and gains | 25 921 670 | 2 942 792 | 28 864 462 | 29 783 632 | 4 616 619 | 34 400 251 |
| Cost of sales | (645 570 401) | 99 215 | (645 471 186) | (679 064 964) | - | (679 064 964) |
| (Increase) / decrease in production | 1 053 238 | ( 751 267) | 301 971 | 1 496 556 | - | 1 496 556 |
| External supplies and services | (332 516 969) | (4 551 244) | (337 068 213) | (356 731 051) | ( 435 521) | (357 166 572) |
| Staff expenses | (185 707 130) | (10 513 413) | (196 220 543) | (202 350 270) | (2 033 223) | (204 383 493) |
| Impairment losses in trade debtors (increase/reduction) | (2 352 684) | - | (2 352 684) | (5 177 984) | ( 90 074) | (5 268 058) |
| Other expenses and losses | (11 558 260) | (2 812 147) | (14 370 407) | (9 956 210) | (4 130 700) | (14 086 910) |
| Net profit/(loss) before amortization, depreciation, provisions and impairment losses (except trade |
||||||
| debtors) | 80 244 223 | (15 004 902) | 65 239 321 | 99 029 925 | (2 072 899) | 96 957 026 |
Financial results for the periods ended 31 December 2013 and 2012 were as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Financial expenses: | ||
| Interest expenses | ||
| related to bank loans and overdrafts | 19 005 011 | 15 069 447 |
| related to non convertible debentures | 11 144 110 | 10 720 660 |
| related to finance leases | 3 860 246 | 4 032 610 |
| others | 2 729 896 | 1 990 622 |
| 36 739 263 | 31 813 339 | |
| Losses in currency translation | ||
| related to loans | 3 745 718 | 6 809 577 |
| 3 745 718 | 6 809 577 | |
| Cash discounts granted | 15 951 091 | 16 009 211 |
| Adjustment to fair value of financial instruments at fair value through profit or loss | 240 986 | 9 800 890 |
| Other finance losses | 6 932 974 | 6 605 924 |
| 63 610 032 | 71 038 941 | |
| 31.12.2013 | 31.12.2012 | |
| Financial income: | ||
| Interest income | ||
| related to bank loans | 34 023 | 574 524 |
| related to loans to related parties | 128 992 | |
| Related to loans discontinued operations | 2 402 363 | |
| Others | 118 060 | 345 218 |
| 152 083 | 3 451 097 | |
| Gains in currency translation | ||
| related to loans | 3 393 729 | 7 267 571 |
| 3 393 729 | 7 267 571 | |
| Cash discounts obtained | 803 229 | 759 423 |
| Adjustment to fair value of financial instruments at fair value through profit or loss | 595 348 | 6 916 077 |
| Other finance gains | 91 798 | 1 848 009 |
| 5 036 187 | 20 242 177 | |
| Finance profit / (loss) | - 58 573 845 | - 50 796 764 |
Corporate income tax accounted for in 2013 and 2012 is detailed as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Current tax | 7 243 170 | 5 554 539 |
| Deferred tax | - 26 632 078 | 10 073 463 |
| - 19 388 908 | 15 628 002 |
Reconciliation of consolidated Net profit/(loss) from continuing operations, before tax with taxes for the year may be detailed as follows:
| Consolidated net profit before tax | -98 305 038 | -39 212 302 |
|---|---|---|
| Tax rate | 25.00% | 25.00% |
| Expectable tax at rate 25.0% | -24 576 261 | -9 803 076 |
| Differences to foreign tax rates (+) |
-6 459 603 | -4 395 419 |
| Effect of provincial/municipal taxes (+) |
868 034 | 488 655 |
| Consolidation adjustments (-) |
-3 313 554 | 3 267 143 |
| Permanent differences Non deductible costs (+) Non taxed profits (-) |
5 756 854 1 131 598 |
5 159 895 874 706 |
| Tax losses carried forward Deferred tax asset recognized on tax losses of previous years (+) 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 (+) |
-4 123 937 -6 423 428 - 621 598 1 474 000 |
-17 050 828 - 411 076 9 616 397 |
| Effect of offsetting deferred tax liabilities related to depreciation (-) |
1 747 813 | 107 988 |
| Effect of change in tax rates (+) |
135 747 | |
| Others (+) |
1 300 285 | 1 955 659 |
| Consolidated corporate income tax | -19 388 908 | 15 628 002 |
In 2012 the results of the subsidiary Sonae Industria (UK), Ltd were included under Net profit/loss after tax of discontinued operations, on the Consolidated income statement, following the discontinuation of production at Knowsley plant, England. Details are as follows:
| 31.12.2012 | |
|---|---|
| Sales | 24 655 551 |
| Services rendered | 850 424 |
| Other income and gains | 25 749 830 |
| Cost of sales | 13 506 940 |
| (Increase) / decrease in production | 1 975 672 |
| External supplies and services | 12 250 156 |
| Staff expenses | 14 131 917 |
| Depreciation and amortisation | 2 936 231 |
| Provisions and impairment losses (increase / reduction) | 43 747 367 |
| Other expenses and losses | 3 307 438 |
| Operating profit / (loss) | - 40 599 916 |
| Financial expenses | 5 017 199 |
| Financial income | 405 520 |
| Net profit/(loss) from descontinued operations, before tax | - 45 211 595 |
| Taxation | |
| Net profit / (loss) from descontinued operations | - 45 211 595 |
| Attributable to: | |
| Equity Holders of Sonae Industria | - 44 661 686 |
| Non-controlling interests | - 549 909 |
Cash flows of discontinued operations were included line by line on the Consolidated Statement of Cash Flows and are detailed as follows:
| 31.12.2012 | |
|---|---|
| Operating activities | 3 711 002 |
| Investment activities | 14 031 213 |
| Financing activities | - 15 902 699 |
| 31.12.2013 | 31.12.2012 | |||||
|---|---|---|---|---|---|---|
| Net profit/(loss) | Net profit/(loss) | |||||
| from continuing operations |
total | from continuing operations |
from discontinued operations |
total | ||
| Net loss | ||||||
| Net loss considered to calculate base earnings per share (Net loss attributable to equity holders of Sonae Indústria) |
- 78 045 917 | - 78 045 917 | - 54 215 194 | - 44 661 686 | - 98 876 879 | |
| Effect of potential shares Interest related to convertible bonds (net of tax) |
||||||
| Net loss considered to calculate diluted earnings per share | - 78 045 917 | - 78 045 917 | - 54 215 194 | - 44 661 686 | - 98 876 879 | |
| Number of shares | ||||||
| Weighted average number of shares used to calculate basic earnings per share |
140 000 000 | 140 000 000 | 140 000 000 | 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 | 140 000 000 | 140 000 000 | 140 000 000 | |
| Basic earnings per share | -0.5575 | -0.5575 | -0.3873 | -0.3190 | -0.7063 | |
| Diluted earnings per share | -0.5575 | -0.5575 | -0.3873 | -0.3190 | -0.7063 |
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 and South Africa.
At 31 December 2012 identified reportable segments, taking into consideration internal system of reporting to the chief operating decision maker, for which there is a segment manager were as follows:
In 2013 some organizational changes occurred affecting identified reportable segments, which were then:
Each segment's revenue results mainly from the production and sale of particle board products and derivatives products.
Segmental information related to the Consolidated Income Statement is as follows:
| Turnover | |||||
|---|---|---|---|---|---|
| External | Intersegment | ||||
| 31.12.2013 | 31.12.2012 | 31.12.2013 | 31.12.2012 | ||
| Northern Europe | 495 720 051 | 543 373 843 | 36 551 635 | 40 264 828 | |
| Southern Europe | 470 913 494 | 495 316 480 | 24 769 561 | 37 940 721 | |
| Continuing operations | 470 913 494 | 495 316 480 | 24 769 561 | 37 940 721 | |
| Rest of the world | 264 922 375 | 282 339 892 | |||
| Total segments | 1231 555 921 | 1321 030 216 | 61 321 196 | 78 205 550 | |
| Southern Europe | |||||
| Discontinued operations | 25 505 975 |
| Cost of sales | |||
|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||
| Northern Europe | 281 067 981 | 287 481 626 | |
| Southern Europe Continuing operations |
229 350 447 229 350 447 |
244 358 526 244 358 526 |
|
| Rest of the world | 135 052 758 | 147 224 811 | |
| Total segments | 645 471 186 | 679 064 964 | |
| Southern Europe Discontinued operations |
13 506 940 |
| External supplies and services | |||
|---|---|---|---|
| 31.12.2013 31.12.2012 |
|||
| Northern Europe | 127 456 981 | 138 873 480 | |
| Southern Europe Continuing operations |
151 584 441 151 584 441 |
156 339 295 156 339 295 |
|
| Rest of the world | 58 026 790 | 61 953 797 | |
| Total segments | 337 068 213 | 357 166 572 | |
| Southern Europe Discontinued operations |
12 250 156 | ||
| Amortization and depreciation | |||||
|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||||
| Northern Europe | 28 229 008 | 28 345 531 | |||
| Southern Europe Continuing operations |
28 880 136 28 880 136 |
29 092 126 29 092 126 |
|||
| Rest of the world | 17 634 465 | 19 885 730 | |||
| Total segments | 74 743 609 | 77 323 387 | |||
| Southern Europe Discontinued operations |
2 936 231 |
| Provisions and impairment losses | |||||
|---|---|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||||
| Northern Europe | 6 368 481 | -4 647 324 | |||
| Southern Europe Continuing operations |
25 731 692 25 731 692 |
17 845 502 17 845 502 |
|||
| Rest of the world | - 216 747 | - 14 063 | |||
| Total segments | 31 883 425 | 13 184 115 | |||
| Southern Europe Discontinued operations |
43 747 367 |
| Operating net profit (loss) | |||
|---|---|---|---|
| 31.12.2013 | 31.12.2012 | ||
| Northern Europe | -7 919 808 | 22 447 031 | |
| Southern Europe Continuing operations |
-51 119 565 -51 119 565 |
-24 202 532 -24 202 532 |
|
| Rest of the world | 20 004 344 | 13 473 083 | |
| Total segments | -39 035 029 | 11 717 582 | |
Southern Europe Discontinued operations -40 599 916
Finance income and finance charges are not included in the internal system of financial reporting to the chief operating decision maker.
Sales and Services Rendered in 2013 and 2012, based on geographic location of the external customers, were the following:
| 2013 | ||
|---|---|---|
| Location of customers | '000 eur | |
| Germany | 326 663 169 | 27% |
| North America | 176 935 731 | 14% |
| Portugal | 122 353 270 | 10% |
| Spain | 120 286 264 | 10% |
| France | 96 874 187 | 8% |
| South Africa | 90 019 244 | 7% |
| United Kingdom | 27 020 972 | 2% |
| Other | 271 403 084 | 22% |
| Total | 1 231 555 921 | 100% |
| 2012 | ||
| Location of customers | '000 eur | |
| Germany | 294 979 956 | 22% |
| North America Spain |
176 986 900 138 924 522 |
13% 11% |
| Portugal | 117 430 055 | 9% |
| South Africa | 106 000 509 | 8% |
| France | 101 658 330 | 8% |
| United Kingdom | 48 431 976 | 4% |
| Other | 336 617 968 | 25% |
| Total | 1 321 030 216 | 100% |
The internal reporting system of financial information does not include information on segmental assets and liabilities. Segmental non-current assets, included under Tangible Fixed Assets, Intangible Assets, Goodwill, Investment Properties and Other Non Current Assets, on the Consolidated Statement of Financial Position, are as follows:
| 31.12.2013 | 31.12.2012 | |
|---|---|---|
| Northern Europe | 302 959 398 | 239 853 486 |
| Southern Europe | 391 337 437 | 424 233 028 |
| Rest of the world | 208 854 909 | 244 414 133 |
| Total segments | 903 151 744 | 908 500 647 |
| Non Current Assets (Consolidated Statement of Financial Position) |
903 151 744 | 908 500 647 |
Revaluation of land and buildings had the following effect on Tangible fixed assets, on the Consolidated statement of financial position:
| 31.12.2013 | |
|---|---|
| Northern Europe | 46 043 956 |
| Southern Europe | 70 386 435 |
| Rest of the world | 13 426 252 |
| Total segments | 129 856 643 |
Inter-segment transactions were executed at market prices and under identical conditions to those applied to third parties.
The Group has a medium term incentive plan with the characteristics disclosed in note 2.19.
The fair value of services received was determined by reference to the fair value of granted shares, which corresponds to the average price of the Company's shares over the thirty-day period before the Shareholders' General Meeting.
Expenditure recognized under Staff expenses, on the Consolidated Income Statement, was accounted for in accordance with the recognition provisions for Equity-settled share-based payment transactions.
| 31.12.2013 | 31.12.2012 | |||||||
|---|---|---|---|---|---|---|---|---|
| Opening balance | Granted | Cancelled | Closing balance | Opening balance | Granted | Cancelled Closing balance | ||
| Nr. of shares | 529 338 | 385 046 | 126 772 | 787 612 | 562 281 | 32 943 | 529 338 | |
| Fair value | 358 415 | 219 370 | 85 838 | 491 947 | 380 721 | 22 306 | 358 415 | |
| Year of payment | 2 016 | 2 015 | ||||||
| Staff expenses | 130 904 | 21 459 | 89 604 |
In October 2010 Sonae Indústria, SGPS, S. A. received a notice of assessment from tax authorities according to which the loss resulting from the dissolution of its subsidiary Socelpac, SGPS, S.A. in 2006, amounting to EUR 74 million, should be considered at 50% for tax calculation purposes. The company filed a lawsuit challenging this interpretation. According to the information available on this date, the Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was done to current tax and deferred tax asset recognized in these consolidated financial statements.
By the end of 2010 an accident occurred at the subsidiary Sonae Industria (UK) Ltd resulting in two fatalities involving external workers that were carrying out maintenance works in this plant. It is the Company's opinion that any liability which it may possibly incur into, whose quantification is not possible at the closing date of these consolidated financial statements, will be covered by the insurance policy.
Following the accident occurred in June 2011 in the subsidiary Sonae Industria (UK) Ltd (note 3), 10 000 individuals filed a lawsuit against the company claiming to have suffered as a result of inhalation of smoke caused by the fire. It is the Company's opinion that any liability which it may possibly incur into, whose quantification is not possible at the closing date of these consolidated financial statements, will be covered by the insurance policy.
There were no significant subsequent events (note 2.20).
These consolidated financial statements were approved by the Board of Directors and authorized for issuance on 11 March 2014.
Report and Opinion of the Statutory Audit Board (Free translation from the original in Portuguese)
To the Shareholders of Sonae Indústria, SGPS, S.A.
In accordance with current law, statutory norms and the mandate we have been conferred, the Statutory Audit Board presents this report and opinion regarding the management report of Sonae Indústria, S. G. P.S, .S. A. as at 31 December 2013 and further related separate and consolidated financial statements, which are the Board of Directors' responsibility.
During the period the Statutory Audit Board has accompanied the Company's management, the evolution of its activities together with the subsidiaries within the consolidation perimeter and convened meetings with the frequency and extent deemed appropriate. These meetings were attended by the financial area's operational managers, especially the CFO, the internal audit manager and the risk management manager. We kept a close connection with the Statutory External Auditor that kept us informed about the nature and conclusions of performed audit work. The Statutory Audit Board was given by the Board of Directors, the company's services, the subsidiaries included in the consolidation perimeter and the Statutory External Auditor all information and clarifications requested for gaining a greater insight into understanding and assessing the evolution of businesses, performance and financial position as well as the risk management and internal control systems.
The Statutory Audit Board has monitored the process of preparing and disclosing financial information as well as the audit of separate and consolidated financial statements, for which it received from the Statutory External Auditor all requested information and clarifications. Furthermore, within the scope of its competence the Statutory Audit Board has verified the separate and consolidated statements of financial position as at 31 December 2013, the separate and consolidated income statements, the separate and consolidated statements of comprehensive income, the separate and consolidated statements of changes in net shareholders' funds and the separate and consolidated statements of cash flows and corresponding appendices for the period ended on the aforementioned date. It has also verified the management report for the fiscal year ended 31 December 2013 issued by the Board of Directors, and the Statutory External Auditor's Report on the financial statements issued by the Statutory External Auditor, with which the Statutory Audit Board agrees.
In light of the above, the Statutory Audit Board is of the opinion that the information relating to the financial statements in question has been prepared in accordance with the accounting, legal and statutory norms, reflecting a true and appropriate image of the assets and liabilities, the financial position and results of Sonae Indústria, S.G.P.S., S. A. and the subsidiaries included in the consolidation perimeter. The management report duly states the evolution of the businesses, performance and financial position of the company and subsidiaries included in its consolidation perimeter and contains a description of the main risks and uncertainties they are confronted with. Furthermore, the Statutory Audit Board informs that the corporate governance report complies with the provisions of article 245-A of the Portuguese Securities Code.
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:
In accordance with the provisions of article 245, c), nr. 1 of the Securities Code ("Código dos Valores Mobiliários"), the Statutory Audit Board's members state to the best of their knowledge that the information included in the management report and the other financial statements was prepared in compliance with the applicable accounting standards and provides a true and appropriate image of the assets, liabilities, financial position and results of the company and subsidiaries included in its consolidation perimeter.
Furthermore, the Statutory Audit Board is of the opinion that the management report duly states the evolution of businesses, performance and position of the company and subsidiaries included in its consolidation perimeter, and contains a description of the main risks and uncertainties they are confronted with.
Maia, 11 March 2014
Statutory Audit Board,
___________________________ Manuel Heleno Sismeiro
____________________________ Armando Luís Vieira de Magalhães
____________________________ Jorge Manuel Felizes Morgado
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