Annual Report • Apr 7, 2016
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: EUR 812,107,574.17 Publicly Traded Company
201
17 February 2016
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
Sonae Indústria, SGPS, SA Publicly Listed Company Share Capital € 812 107 574.17 Maia Commercial Registry and Tax Number 506 035 034
17 February 2016
| KEY INDICATORS 3 | ||
|---|---|---|
| CHAIRMAN'S MESSAGE 4 | ||
| CEO'S MESSAGE 5 | ||
| 1. | ABOUT SONAE INDÚSTRIA 6 | |
| 1.1. | BUSINESS 6 | |
| 1.2. | HISTORY 7 | |
| 1.3. | PRODUCTS 10 | |
| 1.4. | STRATEGY 11 | |
| 1.5. | IMPROVING OUR WORK (IOW) INITIATIVE 13 | |
| 1.6. | 2015 KEY CORPORATE EVENTS 14 | |
| 2. | SECTOR REVIEW 15 | |
| 3. | BUSINESS REVIEW 18 | |
| 3.1. | TURNOVER & RECURRENT EBITDA 18 | |
| 3.1.1. Sonae Indústria Consolidated 18 | ||
| 3.1.2. Southern Europe 20 | ||
| 3.1.3. Northern Europe 21 | ||
| 3.1.4. Rest of the World (Canada and South Africa) 22 | ||
| 3.2. | CONSOLIDATED FINANCIAL PERFORMANCE 23 | |
| 3.2.1. Consolidated Income Statement 23 | ||
| 3.2.2. CAPEX 24 | ||
| 3.2.3. Consolidated Statement of Financial Position 25 | ||
| 3.3. | INDIVIDUAL RESULTS OF SONAE INDÚSTRIA, SGPS 26 | |
| 3.4. | PROPOSED ALLOCATION OF RESULTS 26 | |
| 3.5. | OUTLOOK FOR 2016 26 | |
| 3.6. | INFORMATION ON SHAREHOLDINGS AND SHARE PERFORMANCE 26 | |
| 3.7. | TRANSACTIONS WITH OWN SHARES 28 | |
| 3.8. | DIVIDEND POLICY 28 | |
| 4. | RISK MANAGEMENT 29 | |
| 4.1. | CREDIT RISK MANAGEMENT POLICY 29 | |
| 4.2. | MARKET RISKS 29 | |
| 4.3. | LEGAL RISKS 31 | |
| 4.4. | OPERATIONAL RISKS 31 | |
| 5. | CORPORATE RESPONSIBILITY 32 | |
| 5.1. | SOCIAL REPORT 32 | |
| 5.2. | ENVIRONMENTAL REPORT 39 | |
| 6. | CLOSING REMARKS AND ACKNOWLEDGEMENTS 44 | |
| APPENDIXES TO THE MANAGEMENT REPORT AND QUALIFIED SHAREHOLDINGS 45 | ||
| APPENDIX REGARDING ARTICLE 447 OF THE COMPANY LAW 45 | ||
| APPENDIX REGARDING ARTICLE 448 OF THE COMPANY LAW 46 | ||
| QUALIFIED SHAREHOLDINGS 46 | ||
| STATEMENT ISSUED UNDER THE TERMS AND FOR THE PURPOSE OF SUB-PARAGRAPH C) OF NO. 1 OF ARTICLE 245 OF THE PORTUGUESE SECURITIES CODE 47 |
||
| GLOSSARY 48 |
Sales by product Continuing operations, 2015
Turnover Million Euros
Working Capital Million Euros
Recurrent EBITDA and % Turnover Million Euros
Million Euros
During 2015, the newly elected board was able to take advantage of the important industrial and financial restructuring work carried out by the previous board. Additionally, with the benefit of our new members, we were able to further support and challenge management in new steps to build a more sustainable and profitable high performance business. Importantly Sonae Indústria completed the restructuring of our industrial portfolio, signed a strategic partnership for our European and South African operations, invested in our product line, our teams and plants and delivered improved results.
We pushed ahead with our drive to ensure we have in place the right combination of assets, with more competitive and efficient plants; the right people, continuously promoting the development of core competences and sharing of best practices; improved processes, leveraging on the "Improving our Work", lean methodology; and the right partners, with whom we can create value for all stakeholders. These represent some of the more critical and fundamental steps to enable us to build a more sustainable and competitive player in the wood based panels industry.
The announced partnership with Arauco was an important milestone. The combination of two strong and reputable companies, with significant and diverse experiences in the wood based panels industry, should enable us to achieve an even stronger operation in the European and South African markets, with enhanced know-how and sharing of best practices. This partnership will also further reinforce and strengthen our balance sheet, better positioning the business to be able to capture future opportunities of growth and improved profitability.
As part of ourstrategy, we have also invested to increase the efficiency and competitiveness of our plants, having started the deployment of the investment in a fifth melamine surfacing line in our North American plant, with Embossed In Register® surfacing capabilities. This deployment follows the investments made during 2014 in additional melamine surfacing capacity in two of our plants in Europe and the launch of our new Innovus melamine collection. These investments clearly demonstrate our commitment to improving our products, providing a better service quality and getting closer to the market and customer needs, reinforcing our commitment to become a truly customer centric company.
Significant focus has been placed on improving the way we work and the way we manage our processes, through our continuous improvement programme. We strive to standardize and optimize all our processes, with the aspiration of achieving 'best in class' levels of operational efficiency and customer service.
Importantly, our results are also coming through with another four consecutive quarters of improved operational profitability in our continued operations. We will continue to push for consistent and sustainable improvements in these as well as for the reduction of losses in the discontinued operations to achieve positive net results and a healthy return on our capital.
It is clear that 2016 will be an exciting, challenging and interesting year, with new partners, a new business configuration and, more importantly, new development opportunities. The company has had to overcome many hurdles and it will have to continue to conquer a few more but the task is manageable, not only because of the work carried out in the last few years, but also because of our strong roots and historical knowledge of our industry and our markets. I believe all of our stakeholders will benefit from this transformational change, and I continue to count on the commitment, team spirit and dedication of all of Sonae Indústria's team and the strong minded leadership of management, that was so evident throughout 2015.
Paulo Azevedo Chairman Sonae Indústria
During 2015 we progressed significantly towards our strategic objectives that will lead us to become a sustainably profitable company. Important milestones include the strategic partnership agreement signed with Arauco, involving our European and South African operations, and the successful completion of our plan to rationalize our industrial footprint, involving the sale of our plants in Ussel and Linxe, in France and Betanzos, in Spain, which were contributing negatively to our cash flow generation.
With the completion of the re-dimensioning of our industrial footprint, we could focus our key strengths and capabilities on further enhancing our market presence in higher value added segments and on optimizing our industrial and management processes through our continuous improvement programme. During the year, we implemented a number of initiatives aimed at aligning our products and service offering closer to customers' needs and market trends. We reinforced our decorative product portfolio with the launch of the Innovus® Coloured MDF collection, and, with the launch of our new melamine Innovus® 2015 collection. This collection includes a wider range of products and types of finishings, including the new Innovus® Essence range, produced at the Embossed in Register® surfacing line of Oliveira do Hospital, which provides to our melamine paper surfaced boards a look and feel of solid wood or painted veneered panels.
To support the development and improvement of our product offering, we also continued to invest in additional melamine surfacing capabilities. We started the project of investing in a fifth surfacing line, with deep embossing capabilities, at our Lac-Mégantic plant in North America. This investment is expected to further improve our product mix in the North American market, allowing for additional sales of melamine-faced boards including deep embossed surfaces, thus continuing to position our Canadian plant as a clear reference in that market.
Importantly, we have also delivered better operating results throughout the year, delivering another four consecutive quarters of improvements in consolidated Recurrent EBITDA for our Continuing Operations, reaching 107 million Euros in 2015 (up by 11 million Euros vs. 2014, on a comparable basis). Recurrent EBITDA margin reached 10.4%, up by 1 p.p. when compared to 2014, the best margin since 2007. Our Continuing Operations delivered a significant reduction in net losses for the year, bringing us closer to the objective of achieving positive net results for the company. In terms of leverage, due to the improved profitability of the business, we were able to achieve another reduction in the Net Debt to Recurrent EBITDA ratio, which improved to 5.3x at the end of 2015, once again the best result since 2008.
We have continued to develop and invest in sound Health & Safety practices, implementing new procedures to minimize accidents and incidents in our operations. During 2015, we have reduced the frequency of accidents, but unfortunately the level of severity has increased, which lead us to review our internal processes and implement additional actions and campaigns in all sites to reinforce the commitment to instill a safety culture in our company.
For 2016, we expect to complete successfully the implementation of our strategic partnership with Arauco and to progress steadily on the execution of initiatives to improve our customer focus, our industrial efficiency and our internal processes. In addition, we will complete the investment on our new melamine surfacing line in our North American plant during the first half of the year and get our new products into the market during the second half of the year.
I thank all our team members throughout the organization for their hard work and commitment to obtaining the company's achievements in 2015 and ask for their continued commitment for 2016, together with the support of all our stakeholders, which has been fundamental for the improvements that we have achieved in terms of operational performance and financial structure.
Rui Correia CEO Sonae Indústria
With a total of 17 plants located in 5 countries on 3 continents, Sonae Indústria is one of the largest wood-based panel producers in the world. At the end of 2015 the company had 3,245 employees worldwide and a consolidated turnover of 1,027 million Euros1 .
Wood-based panels are valuable alternatives to solid wood with some clear advantages, namely in terms of efficiency in 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 clients requirements. Hence, today wood-based panels are 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 a building material. Wood-based panels thus have a positive effect on global warming through improved energy efficiency, which enables homeowners to significantly reduce energy spent. 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
1 Turnover considers only the contribution of continuing operations.
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 into the atmosphere.
Sonae Indústria is the result of an expansion process combining organic growth with acquisitions which began in 1959. Throughout its history, three distinctive periods can be identified:
In the first years of existence, these were the main events that are worth highlighting, marked by the internal growth process:
Throughout the 1990s and until 2007, Sonae Indústria made acquisitions and invested significantly in Greenfield projects in Brazil, Canada, South Africa, Portugal, Spain, and the United Kingdom. It is also important to highlight the spin-off in 2005 from Sonae SGPS, S.A., which had been the shareholder until then. These were the main events that mark the process of internationalization and expansion:
After 2007, now in the context of a global economic and financial crisis, Sonae Indústria was forced to take restructuring measures aimed at increasing its efficiency and flexibility, closing unsustainable industrial units and selling some assets:
Globally, the aforementioned restructuring processes and sale of assetsled to a 5 million m3 reduction in installed production capacity when compared with the maximum level reached in 2007 of 10.1 million m3 . At the end of 2015, Sonae Indústria's installed capacity was 5.1 million m3 .
At the end of November 2015, Sonae Indústria, SGPS, SA announced that entered into a strategic partnership agreement, with Inversiones Arauco Internacional, Limitada (Arauco), aiming to create a 50/50 joint-venture involving the existing European and South African wood based panels and related operations of Sonae Indústria, namely all its production facilities of wood based panels, chemicals and paper impregnation. This strategic partnership will be consummated by Arauco subscribing an amount of 137.5 million Euros to a capital increase
The completion of this deal is subject to certain conditions, which are expected to be fully complied during the first half of 2016, namely (i) obtain the clearance of the competent competition authorities in the EU and South Africa; (ii) execute certain internal transactions to achieve the required business perimeter; and (iii) agree certain amendments to the existing debt facilities of Sonae Indústria group and raise new debt at the future Sonae Arauco perimeter, taking advantage of the resulting much improved financial situation.
With this partnership, Sonae Indústria expects to build a stronger company in the European and South African markets and reinforce its long term growth commitment in the wood based panels industry.
Sonae Indústria has won the third edition of the Açoreana Risk Management Diário Económico Award (Portuguese annual award).
This award aims to value those who invest in competitiveness through security and its purpose is to recognize and reward companies and their respective managers, who stand out in the protection of their assets, namely for excellence in risk management.
At Sonae Indústria, Risk Management is fundamental and is part of the company culture and management processes, being a responsibility of all the managers and employees of the Group, at all levels of the organization.
Risk Management is developed with the aim to create value, through the management
and control of the opportunities and threats that might affect the goals and the continuity of the business. Sonae Indústria seeks in all its areas of expertise to adopt the best practices which ensure the sustainability of its business.
Every year, Sonae companies internally recognize its greatest innovations, rewarding the initiative, effort, and commitment of its employees.
The Chairman's Award is a charismatic and very special prize awarded by the Chairman of Sonae Companies.
After collecting applications from all Sonae companies, the winner is chosen for its level of innovation and for the positive impact it generates.
This year, the Chairman´s Award was attributed to Sonae Indústria's project «Improving Board Density by Weighting Batches» which was developed by Ángel García, Luis Ferrari, Miguel García and Alberto Vicente, from the Valladolid plant, in Spain.
Sonae Indústria also won the Sonae Companies Sustainability Award in 2015 with the «Rewood Project», which was developed by Tafisa Canada. This prize recognizes the implementation of measures that strengthen the sustainable development of all Sonae Companies and distinguishes the best projects that reconcile the economic, environmental and social aspects.
This project makes it possible to recycle 244,100 tons of wood fiber per year, the equivalent to more than two million trees. Furthermore, it helped preserve more than 100 indirect jobs and create 41 new recycling centers with 445 workers.
Sonae Indústria's base products, typically denominated as "raw products & technical" are comprised of:
More than 50% of the "raw board" production is then transformed into value added products such as melamine and wood veneer faced board, sandwich panels with laminates, flooring and accoustic panels. These are used in a great variety of applications such as home and office furniture, kitchen and bath cabinets shelving, doors, wall paneling packaging and interior decoration.
A STRONGER RANGE OF DECORATIVE PRODUCTS: INNOVUS® update
INNOVUS®, the European brand for decorative products, is being reinforced with the development and launch of new products and a redesigned global range of décors and finishes, in line with the latest global trends in interior design and home furnishings. The latest INNOVUS® Global Collection, with over 250 decorative choices, offers unlimited solutions and inspiration for all creative and productive needs.
One of the recent additions to the brand was the INNOVUS® Coloured MDF, a product that combines the strength and technical properties of the Medium Density Fibreboard with the visual appeal of a versatile range of colours. INNOVUS® Coloured MDF can also be combined with the trendy INNOVUS® melamine decors, which results in a unique and truly distinctive decorative solution.
Another recent advance for the INNOVUS® brand has been the development of a new product range, using double-sided embossed in register (EIR®) technology, to obtain decorative panels with the look and feel of real wood in a melamine surfaced panel. INNOVUS® ESSENCE, with its two structures – Rustic and Authentic – and nine wood shades was developed with a variety of applications in mind such as kitchen doors, living room furniture, doors and wall panelling, in applications that really value the natural effect of wood.
New additions to the range of Laminates & Compacts, such as Colour Boom or Labgrade, have also helped to strengthen the decorative products portfolio, hence positioning Sonae Indústria as a comprehensive partner for furniture production and interior design projects, for both residential and commercial applications (hotels, shops, hospitals and other public spaces).
More information at www.innovus.co.
The way in which Sonae Indústria views itself as a company, acts and interacts with each other and with the surroundings represents a corporate culture that promotes continuous improvement – always challenging ourselves to perform better – and is sustained by the company's 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.
Sonae Indústria's values represent the foundation stone on which we build our business and they serve to guide our behaviour. Our value system is focused on four main principles: Ambitious, Innovative, Authentic and Responsible, which can then be sub-divided in the values and capabilities illustrated in the picture below.
During 2011 special attention was dedicated to define and align the four strategic directions to be pursued in the medium to long term, to significantly improve the company's performance. In 2015, the directions were reviewed and adapted to ensure their adequacy to the main objective of building a sustainable player, with a competitive position in all markets where it is present:
1) Become a customer focused company with a reliable integrated offer
Under the defined strategic path, Sonae Indústria keeps implementing the necessary initiatives towards the ambition to grow and run a profitable business with a commitment towards responsible business practices and sustainable value creation for the shareholders.
This Strategic Plan, defined and started in 2011, and that is being implemented, aims to improve the company's operation and economic performance in the medium and long term and comprises the following fundamental strategic directions:
As part of the implementation of this Strategic Plan, Sonae Indústria has been focusing on its more profitable markets/ industrial plants, namely Canada, Germany and Iberian Peninsula, with the installation of a new cleaning line for recycled wood, and increased melamine facing capacity at the Nettgau plant (Germany) and replacement of an old melamine facing line at the Oliveira do Hospital unit (Portugal). During 2015, Sonae Indústria started to build a fifth melamine line in Lac-Mégantic, Canada, an investment of 11 million Euros, which is expected to be concluded until the end of the first half of 2016.
The IoW initiative, Improving our Work, is a key pillar of Sonae's culture and way of working, as a powerful philosophy and methodology to seek productivity and quality, everyday, everywhere, by everyone, creating sustainable value for Sonae's stakeholders.
Based on the improvement cycle, the IoW Model has now a new approach, including a new pillar – Leaders IoW, with a specific goal – Get Management Commitment.
| with a specific goal – Get Management Commitment. | Based on the improvement cycle, the IoW Model has now a new approach, including a new pillar – Leaders IoW, | |
|---|---|---|
| DA ILY IoW to change Gemba Behaviours & Culture |
PROJECT IoW to get Breakthrough Results | |
| MATURITY LEVELS 4. IMPR OVEMENT PDCA 3. BEST PRACTICE SDCA 2. WORKPLACE ORGANIZATION 1. TEAM ORGANIZATION 0. DAILY IOW PLANNING |
3 TO 12 M 1. ONTHS VALUE STREAM SPRINTS DESIGN 0. 2. MISSION 4. ROLL OUT & PR OJECT IoW CONTROL PROJECT CLOSING PLANNING 3. IMPLEMENTATION WITH SUBPROJECTS |
|
| Develop People from GembaNatural Teams TL: Team Leader, TM: Team Member |
CHANGE CAPABILITY |
Transform Processes with Project Teams PM: Project Manager, ABDE: Cross Function Experts |
| LEADERS' IoW to get Management Commitment | SUPPORT IoW to provide Expert Guidance | |
| MATURITY LEVELS 3. STRATEGY DEPLOY MENT 2. GEMBA COMMITMENT 1. VISUAL MANAGEMENT 0. LEADERS IOW PLANNNG |
6 TO 12 M 1. 2. ONTHS 7. PLAN GOVERNANCE KNOWLEDGE MANAGEMENT AUDIT 0. 6. 3. SUPPORT IoW PLANNING COMMUNI TRAINING & CATION AWARENESS 5. 4. BENEFITS COACHING TRACKING |
|
| Management Teams Develop People from MD: Managing Director, M: Managers |
Develop Guidance with IoW Coaches I oWC: IoW Coordinator, C: Coaches |
The IoW Model aims to develop Change Capability in an Organization, fostering behaviours changes and improvements in business processes, ensuring operational excellence, sustained by the four pilars below:
Sonae Industria embraced the IoW programme in an enthusiastic way, as the company believes this is the way to "Improve our Company".
Today, IoW is present in all teams, having more than 70% of the people being trained in IoW Foundations by internal trainers. Currently 30 trainers are certified by an external entity to teach and promote continuous improvement.
Almost all teams are living the experience of implementing Daily IoW, with detailed roadmaps for all the steps. This process includes an audit process in each step to ensure that all requirements are fulfilled. Those audits are made by an external entity or by internal auditors, which are also certified.
Additionally, several projects are considered under IoW umbrella, following Strategy deployment, in order to achieve higher levels of productivity, cost reduction, increase service level and add value for our customers. With a cross team approach, different team members are being exposed to continuous improvement tools and work together in IoW projects, always with the vision of having a significantly impact on the company growth.
| 26 February 2015 | FY14 consolidated results announced |
|---|---|
| 10 March 2015 | Announcement that Sonae Indústria has received a letter from Efanor Investimentos, SGPS, SA, according to which Mr. Belmiro de Azevedo has decided not to be candidate to the membership of Sonae Indústria's Board of Directors. The remaining points of the letter were related with the constitution of the Sonae Indústria's Board of Directors proposed by Efanor Investimentos, SGPS, S.A. |
| 12 March 2015 | Announcement that indirect affiliate, Isoroy SAS, has entered into an agreement for the sale of the business and assets relating to its Ussel plant, located in France |
| 18 March 2015 | Announcement that indirect affiliate, Tafiber, Tableros de Fibras Ibéricos, S.L., has entered into an agreement for the sale of the hardboard business operated at its plant located in Betanzos, Spain |
| 31 March 2015 | Announcement of resolutions taken by the Shareholders' Annual General Meeting and by the Board of Directors Announcement of the completion of the sale of Ussel plant |
| 30 April 2015 | Announcement of the completion of the sale of hardboard business operated at Betanzos plant |
| 7 May 2015 | 1Q15 consolidated results announced |
| 3 June 2015 | Announcement that Sonae Indústria has entered into a new financing facility of up to sixty million Euros, that has a contractual maturity in June 2016 |
| 3 July 2015 | Announcement that affiliates, Tafisa France SAS and Taiber, Tableros Aglomerados Ibéricos, SL, sold 100% of the Share Capital of Darbo SAS (owner of Linxe plant, located in France) |
| 29 July 2015 | 1H15 consolidated results announced |
| 11 November 2015 | 9M15 consolidated results announced |
| 30 November 2015 | Announcement of an agreement for a potential strategic partnership with Arauco for the European and South African markets. This agreement envisages the creation of a 50/50 joint-venture involving the existing European and South African wood based panels and related operations of Sonae Indústria, namely all its production facilities of wood based panels, chemicals and paper impregnation |
During 2015, signs of economic recovery from the debt sovereign crisis continued to be witnessed in Europe, mainly driven by the accommodative monetary policy and the euro depreciation, which smoothed the deterioration of the international trade markets. The reduction in the unemployment rate, the easier credit conditions (short-term interest rate for the Euro area has been negative since May 2015), the higher levels of investment and the growth of private consumptions (led by nominal income increases and low inflation), also contributed to the economic recovery. In relation to the United States economy, it is gradually moving to a more efficient and sustainable growth path led by the domestic demand, as monetary policies remained very accommodative.
Brief analysis by region:
Southern Europe showed some improvements in certain macroeconomic indicators: GDP2 growth rate increased y.o.y. (with the Spanish economy showing an important 3.2% growth rate) and the unemployment rate decreased in Portugal and Spain, remaining stable in France. Nevertheless, unemployment is still a social and economic issue in those countries, especially in Iberian Peninsula. All countries registered a surplus in the current account balance, which is an important indicator about the economy's health, namely the
international competitiveness. The private consumption expenditures continued the positive trend, possibly correlated with the optimistic prospects of the business cycle as evidenced by the higher levels of consumer confidence experienced during 2015. Commodity markets and construction sectors benefited from these positive macroeconomic performances in Portugal and Spain, as indicated by the building permits y.o.y. increases in both countries (+15%3 in Portugal and an even more material growth in Spain, increasing by 29%4 ).
5 Source: German Federal Statistics Office, January 2016 ("Permits for new construction, dwelling", cumulative 10 months evolution until October 2015).
2 GDP: Gross Domestic Product.
3 Source: Instituto Nacional de Estatística, January 2016 ("Nova habitação residencial", cumulative 10 months evolution until October 2015).
4 Source: Ministerio de Fomento, January 2016 (Total "New Housing", cumulative 10 months evolution until October 2015).
and 1.2% for the Canadian economy (down by 1.2 p.p. vs. 2014), representing the lowest GDP growth rate of the last 5 years in Canada. It is also important to note that Canada's GDP decreased in the first half of the year, impacted by the slowdown of the private consumption, when compared with recent years. Unemployment decreased, and both countries continued to exhibit a recurrent deficit in the current account balance (since 2009). The North American construction market is in line with the macroeconomic prospects, witnessing a mixed performance. The weak GDP growth in Canada impacted the demand in the construction sector, as the level of housing starts was kept stable (+0.1%6 y.o.y.). In contrast, the better dynamic experienced by the U.S. economy, explains the improvement in the housing market, showed by significantly y.o.y. increases in the number of housing starts (up by 11%7 ).
South Africa GDP growth rate in 2014 was weak (about 1.5%), when compared to historical performance, and the same growth rate is estimated for 2015. The unemployment is much higher, when compared with the other regions previously mentioned, and the current account balance has been negative, despite the natural richness of this territory. The South African economy, like in the past, is still facing a series of obstacles that prevent it from achieving a sustainable development coincident with its potential, namely: (i) labour disputes; (ii) electricity shortages due to the incapacity of the electricity supply in meeting the increasing demand, penalizing important sectors such as manufacturing industries; (iii) social inequalities. The unpredictable behaviour of the South African economy conditions the consumer decisions, with negative impacts in the construction sector, notwithstanding the 5%8 y.o.y increase in the number of residential building permits.
In the last years, the investments in the wood based panel industry were mainly from strong players, which were able to expand globally through acquisitions and new investments, notwithstanding the crisis, leading to a more concentrated, but still quite disseminated, sector. The fact that, in 2015, the top 15 players represented approximately 40%, 22% and 76% of total world capacity of PB, MDF and OSB, respectively, is an important representation of the concentration levels witnessed in this industry.
In 2015, these were the major investments and operations publicly announced:
8 Source: Statistics South Africa, January 2016 ("Building plans for residential buildings (number)", cumulative 10 months evolution until October 2015).
6 Source: Canada Mortgage and Housing Corporation, January 2016 ("Building permits (units)", cumulative 11 months evolution until November 2015).
7 Source: United States Census Bureau, January 2016 ("New housing units", cumulative 11 months evolution until November 2015).
• Sonae Indústria and Arauco announced an agreement for the establishment of a Joint-Venture involving the existing European and South African wood based panels and related operations of Sonae Indústria, namely all its production facilities of wood based panels, chemicals and paper impregnation. (November, 2015)
According to the estimates of the European Panel Federation (EPF), the demand faced by the European wood panels sector during 2015 is expected to maintain the positive signs of 2014, in line with the macroeconomic improvements described previously.
Analysing the performance by product, the European particleboard production in the EPF members increased 2.5% in 2014 y.o.y., representing a total output of 29 million m3 , 1 p.p. above the projection made last year. For 2015, the projections point to a 0.5% growth when compared to 2014, which should translate into an overall production of circa 29.2 million m3 . In the particleboard segment, 2014 can be seen as the turning point in terms of consumption, increasing 5.3% when compared to 2013. For 2015, is forecasted a 0.5% increase in the consumption level within the EPF members, aligned with the predicted production growth.
Regarding the MDF segment, the production in Europe increased more than 2% in 2014 vs. 2013 (not considering Turkey and Russia), reaching a total output of 11.5 million m3 , still below the peak registered in 2007 with a production of 13.3 million m3 . In turn, European MDF consumption increased 4.1% in 2014, strengthening the recovery trend started in 2013. For 2015 and considering the European market as a whole, MDF consumption is estimated to have increased by 0.8% when compared to 2014.
In terms of OSB production in Europe, is estimated to have increased by circa 3% in 2014, exceeding the 4.8 million m3 of total output. The European OSB consumption improved by 1.1% in 2014, 1.9 p.p. lower than the OSB production growth rate, which can be explained by the different building activity recovery throughout Europe, much more pronounced in some Eastern European countries than the Western region.
In North America, the behaviour of the housing markets between Canada and the United States was quite different in 2015, naturally correlated with the macroeconomic conditions in each country. In Canada, the lower GDP growth impacted the construction sector, as the level of housing starts remained flat, contrasting with a strong growth in the level of U.S. housing starts y.o.y. Notwithstanding these different demand patterns, estimates released by Forest Economic Advisors (FEA) forecasted that total North America particleboard demand will have increased by 6% in 2015 vs. 2014, 1 p.p. higher than the estimated growth for the MDF demand. FEA institute believes that North America particleboard and MDF markets will improve slowly in the next few years, following the overall economy and housing markets behaviour.
In South Africa, in line with 2014 performance, the particleboard segment continued to face difficult conditions, related with furniture retail trends, where demand remains severely depressed, as indicated by the decrease of durable goods consumption y.o.y. In turn, the MDF segment, significantly less developed than the particleboard, is estimated to have registered an improved performance during 2015 in terms of total sales and installed capacity.
According to the estimates of the European Producers of Laminate Flooring (EPLF), the member companies of the EPLF sold circa 467 million m2 of laminate flooring worldwide in 2014, the best performance since 2011, which represented an increase of 1%, when compared to 2013.
For 2015, total sales of laminate flooring experienced an average reduction of circa 1.5% per quarter vs. 2014, translating into a decrease of 4.3% in the first nine months of the year, when compared to same period of last year. If this negative trend was kept throughout 2015, it is expected a total sales volume of circa 450 million m2 , the lowest value since 2009.
Considering the evolution just in terms of the Western European countries, total sales are in line with the overall performance exhibiting a quarter on quarter reduction, when compared to 2014, and below by 9% in the first nine months of the year vs. same period of last year.
At the end of 2014, Sonae Indústria classified as "discontinued operations" the results of the French industrial units Auxerre and Le Creusot (which were sold in April of 2014), Ussel (sold in March of 2015) and Linxe (sold in July 2015), of Pontecaldelas plant, in Spain, (whose production activities were stopped during the 1st half of 2014), and of Betanzos, in Spain, (sold in April 2015). The analysis presented in this chapter excludes the contribution of these operations classified as "discontinued operations".
Consolidated turnover for Sonae Indústria´s continuing operations reached 1,027 million Euros in 2015, representing an increase of 1.3% y.o.y., on a comparable basis. This top line performance was driven by improvements in the average selling pricesthat increased by 1.5% when compared to 2014, as the sales volumes were kept flat y.o.y.. The main contribution to the positive performance of average selling prices came from the improvements witnessed in sales mix, with a growing share of value added products, with different contributions per geography, which more than compensated the decreases felt in OSB prices. As such, it is worth highlighting that the share of surfaced melamine products in total sales volumes increased by 1 p.p., when compared to 2014. On a quarterly basis, consolidated turnover at the 4Q15 increased by 4%, when compared to same period of last year.
Consolidated average unitary variable costs per m3 evidenced a quarter on quarter reduction throughout 2015, translating into an overall improvement in the average unitary variable cost of the year of 0.7%, when compared to 2014. This reduction was achieved due to the positive contributions of chemicals (in this case mostly related with a decline in market prices, combined with efficiency improvements in some of the company's operations) and thermal energy costs, which more than compensated the negative contributions of the remaining variable cost categories.
Regarding fixed costs, and considering exclusively the contribution of the continuing operations, total fixed costs were reduced by circa 4.4 million Euros during 2015, when compared to the previous year. This improvement is also a reflection of the on-going streamlining of the support areas, adapting them to a reduced industrial footprint. At the end of 2015, Sonae Indústria's recurrent fixed costs represented circa 19% of the company's consolidated turnover (approximately the same level of 2014).
Total headcount (considering the contribution of all operations, including discontinued) was of 3,245 FTEs at the end of December 2015, a reduction of 351 FTEs when compared to the end of 2014. This reduction is mainly explained by the impact of: (i) reductions at the head office of the French operations and (ii) sale of plants, namely Ussel and Linxe9 , in France and Betanzos in Spain.
9 Linxe is the manufacturing plant of the sold subsidiary Darbo.
The average capacity utilization index of Sonae Indústria's continuing operations for 2015 improved by 0.6 p.p. to 78.5%, when compared to 2014, mainly due to higher utilization levels of the MDF plants in all of Europe and of the particleboard lines in the Iberian Peninsula. It is also important to highlight that performance of this index in the 4Q15 increased by 1.9 p.p., when compared to the 4Q14, notwithstanding the seasonal maintenance shutdown occurred in line 2 of our North American plant (stopped in 4Q in 2015, instead of 3Q).
Sonae Indústria's Recurrent EBITDA for full year 2015 reached 107 million Euros, representing an increase of 11 million Euros when compared to 2014, with an implicit recurrent EBITDA margin of 10.4% (1 p.p. above the value registered in 2014). Recurrent EBITDA margin in the fourth quarter of 2015 was 10.4%, up by 0.87 p.p. when compared to same period of last year. Non-recurrent EBITDA items were approximately 14.5 million Euros in the year, and were mainly related with redundancy costs (3.4 million Euros) and on-going costs associated with inactive sites and restructuring measures (10 million Euros). Total EBITDA reached 92 million Euros, up by 2.5 million Euros, when compared to 2014. Nevertheless, it must be noted that the 2014 result was positively impacted by a one-off event related with an insurance settlement in the UK, in the amount of 13.2 million Euros. Excluding the contribution of this item, the EBITDA would have presented a significant improvement, increasing by 21% or 16 million Euros, on a comparable basis.
LTM: Last twelve months
Southern Europe performance analysis reflects the performance of the operations considered as "continued" in the Iberian Peninsula, together with the Western Europe and overseas export activities, thus excluding the former French operations and the Betanzos and Pontecaldelas plants.
*Turnover per region includes intercompany group sales (between regions)
In Southern Europe, the macroeconomic environment showed signs of improvement during 2015, namely in terms of economic growth, private consumption expenditure and easier access to credit, which has some positive influences over consumer decisions and the investment in durable goods, which translated into an increased demand in the Southern European construction sector. In Portugal, the new housing indicator experienced an increase of 15%10 y.o.y., being the increase more material in Spain (+29%11 vs. 2014).
Comparing the performance of 2015 with 2014, the following results should be highlighted for this region:
The combination of the above factors led to a Recurrent EBITDA margin of 7.7% in the Southern European region during 2015, up by 1.5. p.p. when compared to 2014. On a quarterly basis, it should be noted the increase of 1.7 p.p. in the Recurrent EBITDA margin of 4Q15 vs. the previous quarter.
10 Source: Instituto Nacional de Estatística, January 2016 ("Nova habitação residencial", cumulative 10 months evolution until October 2015). 11 Source: Ministerio de Fomento, January 2016 (Total "New Housing", cumulative 10 months evolution until October 2015).
*Turnover per region includes intercompany group sales (between regions)
During 2015, the Northern European construction sector showed an overall improved performance, when compared to 2014, as indicated by the evolution of the new house construction permits in Germany, which have increased by 3%12 y.o.y. It also should be noted that this positive outcome was achieved through the improved performance witnessed since June 2015, which has more than reversed the negative trends experienced in the first months of the year.
In terms of the financial performance in the year, and when compared to 2014, the following key items are worth highlighting for this region:
The combination of the above factors led to a Recurrent EBITDA margin of 8.4% in the Northern European region during 2015, up by 0.1. p.p., when compared to 2014. On a quarterly basis, the Recurrent EBITDA margin of 9.3% in 4Q15 was the best of the year, increasing by 1.5 p.p. and 4.1. p.p., when compared to previous quarter and same quarter last year, respectively.
12 Source: German Federal Statistics Office, January 2016 ("Permits for new construction, dwelling", cumulative 10 months evolution until October 2015).
*Turnover per region includes intercompany group sales (between regions)
The North American construction markets' behaviour was aligned with the macroeconomic cycles in the United States and in Canada, witnessing a mixed performance throughout 2015. The Canadian economy, experienced a material slowdown in terms of economic growth, when compared to recent years, which negatively impacted demand in the construction sector, leading to a lacklustre level of housing starts (+0.1%13 vs. 2014). On the other hand, the United States economy had an overall positive performance during 2015, with additional levels of private investment stimulating the demand in the construction sector, as evidenced by the increase of 11%14 in the level of housing starts, when compared to 2014. In South Africa and despite all the social and economic issues that affected consumer's decisions, the local construction sector evidenced a positive trend, with the level of residential buildings increasing by 5%15 y.o.y.
Financial performance during 2015, and when compared to 2014, showed the following evolution in these regions:
The combination of the above factors led to a Recurrent EBITDA margin of 15.5% for the entire region during 2015, up by 1.7. p.p., when compared to 2014. On a quarterly basis, the Recurrent EBITDA margin decreased 0.7 p.p., when compared to the same quarter last year, impacted by the maintenance stoppage of Lac Mégantic line 2 during 4Q15.
15 Source: Statistics South Africa, January 2016 ("Building plans for residential buildings (number)", cumulative 10 months evolution until October 2015).
13 Source: Canada Mortgage and Housing Corporation, January 2016 ("Building permits (units)", cumulative 11 months evolution until November 2015).
14 Source: United States Census Bureau, January 2016 ("New housing units", cumulative 11 months evolution until November 2015).
| CONSOLIDATED INCOME STATEMENT | 2015 / | 4Q15 / | 4Q15 / | |||||
|---|---|---|---|---|---|---|---|---|
| Million euros | 2014 | 2015 | 2014 | 4Q14 | 3Q15 | 4Q15 | 4Q14 | 3Q15 |
| Consolidated turnover | 1,015 | 1,027 | 1.3% | 241 | 250 | 250 | 4 % |
(0%) |
| Southern Europe* | 360 | 339 | (6%) | 8 5 |
7 5 |
8 3 |
(2%) | 10% |
| Northern Europe* | 448 | 423 | (6%) | 9 9 |
103 | 101 | 2 % |
(2%) |
| Rest of the World* | 263 | 291 | 11% | 7 0 |
7 6 |
7 0 |
1 % |
(8%) |
| Other operational income | 40 | 25 | (38%) | 6 | 6 | 6 | 7 % |
12% |
| EBITDA | 90 | 92 | 3 % |
15 | 25 | 19 | 26% | (22%) |
| Recurrent EBITDA | 96 | 107 | 12% | 23 | 27 | 26 | 13% | (3%) |
| Southern Europe | 2 2 |
2 6 |
18% | 7 | 5 | 7 | (10%) | 41% |
| Northern Europe | 3 7 |
3 6 |
(5%) | 5 | 8 | 9 | 80% | 17% |
| Rest of the World | 3 6 |
4 5 |
25% | 1 1 |
1 4 |
1 0 |
(3%) | (29%) |
| Recurrent EBITDA Margin % | 9.4% | 10.4% | 1.0 pp | 9.6% | 10.8% | 10.4% | 0.9 pp | -0.4 pp |
| Depreciation and amortisation | (64) | (63) | 1 % |
(16) | (16) | (15) | 4 % |
2 % |
| Provisions and impairment Losses | (10) | (0) | 96% | 0 | (2) | (1) | - | 20% |
| Operational profit | 18 | 29 | 64% | 0 | 8 | 3 | 575% | (64%) |
| Net financial charges | (50) | (41) | 18% | (11) | (12) | (11) | (1%) | 1 % |
| o.w. Net interest charges | (31) | (24) | 20% | (6) | (6) | (7) | (25%) | (13%) |
| o.w. Net exchange differences | 1 | 2 | (73%) | (0) | (1) | 1 | - | - |
| o.w. Net financial discounts | (13) | (13) | 3 % |
(4) | (3) | (4) | (4%) | (19%) |
| Share in results of Joint Ventures | (3) | (2) | 50% | (1) | (1) | (0) | (68%) | (28%) |
| Profit before taxes continuing operat. (EBT) | (35) | (13) | 63% | (12) | (5) | (9) | 26% | 101% |
| Taxes | (7) | (4) | 47% | (5) | (2) | 2 | 136% | 183% |
| o.w. Current tax | (6) | (9) | (49%) | (2) | (3) | (2) | (9%) | 44% |
| o.w. Deferred tax | (1) | 5 | - | (3) | 1 | 4 | - | - |
| Profit / (loss) from continuing operations | (42) | (17) | 61% | (17) | (7) | (7) | 57% | 12% |
| Profit / (loss) from discontinued operations | (74) | (19) | 74% | (51) | (2) | (0) | (99%) | 79% |
| Consolidated net profit / (loss) for the period | (116) | (36) | 69% | (68) | (8) | (8) | 89% | 8 % |
| Losses (income) attrib. to non-controlling interests | (0) | (0) | 100% | (0) | (0) | 0 | (137%) | - |
| Net profit/(loss) attributable to Equity Holders | (116) | (36) | 69% | (68) | (8) | (8) | 89% | 8 % |
*Turnover per region includes intercompany group sales (between regions).
Consolidated EBITDA for 2015 was 92 million Euros, above the 2014 value by 3% (+2.5 million Euros). It should be highlighted that 2014 value was positively impacted by the receipt of an insurance settlement in the UK in the amount of 13.2 million Euros. If this one-off effect is excluded, Sonae Indústria's total EBITDA would have improved by 16 million Euros, year on year, on a comparable basis. 2015 Recurrent EBITDA was 107 million Euros, 11 million Euros (+12%) above the value registered in 2014, mainly due to the continued improved performance of the Southern Europe and Rest of the World operations. The group's consolidated performance was still negatively impacted by non-recurrent costs, totalling 15 million Euros in 2015, of which 10 million Euros associated with on-going cost with inactive sites and restructuring measures and 3.4 million Euros related with redundancy payments and circa 1 million Euros with a capital loss in the sale of a real estate asset in Portugal (vacant land).
The combination of the above factors led to a Recurrent EBITDA margin for 2015 of 10.4% (1 p.p. above the value registered in 2014). Total Recurrent EBITDA in the fourth quarter was of 26 million Euros (3 million Euros above the 4Q14) with a Recurrent EBITDA margin of 10.4%.
Depreciation and amortization charges for 2015, for continuing operations, were circa 63 million Euros, registering a slight reduction of 1% when compared to 2014. For the quarter, this item totalled 15 million Euros, also marginally down when compared to values booked in both 4Q14 and 3Q15, on a comparable basis.
Provisions and impairments losses booked in 2015, for continuing operations, totalled a net amount of 0.5 million Euros, mainly related with reversal of provisions for the Horn restructuring process (following the dismissal costs incurred during the year), which almost fully compensated the additional impairment losses and provisions booked in the period, mostly associated with costs of the restructuring measures in Germany.
The value of net financial charges for the year was 41 million Euros, improving by 18% when compared with 2014. The main contribution to this reduction was the improvement in the group net interest charges, associated with reduction in the average cost of debt, to 5.3% (reduction of 0.8 p.p. when compared to the average cost of 2014). Net financial charges for 4Q15 were 11.5 million Euros, in line with values booked in both 3Q15 and in the same period of 2014.
Current tax charges booked during 2015 were of 9 million Euros, 3 million Euros above 2014 mostly due to higher tax charges in Canada and South Africa. The current tax charges booked in Canada and South Africa were offset by corresponding reversal of previous recognized deferred tax liabilities. Additionally, during 2015 additional deferred tax assets were booked, in the total amount of 4.3 million Euros for German operations. The corresponding net impact of the deferred tax movements was a positive impact of circa 5 million Euros in 2015 in the consolidated results.
The consolidated Net loss of the group for 2015 was of 36 million Euros, driven in large part by the impact of discontinued operations, with a loss of 19 million Euros. Nevertheless, due to the improved operational performance of the continuing operations and the significant reduction of the negative contribution from the discontinued operations, the consolidated net losses of the group were reduced by circa 69% (-80 million Euros), when compared to 2014. In the last quarter of 2015, the group booked a consolidated Net loss of 8 million Euros, in line with the previous quarter.
Additions to Gross Tangible Fixed Assets reached 22 million Euros in 2015, which compares with 43 million Euros during 2014 and 22 million Euros in 2013. It should be noted that the 2014 capex included almost 23 million Euros related with the strategic investments completed during that year, in additional surfacing and recycling capacities.
The majority of 2015 investments were related with maintenance and health & safety improvements, being circa 7.7 million Euros related with the strategic investment implemented in Lac Megantic plant (in Canada) in the increase of capacity of melamine production.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
|---|---|---|---|
| Million euros | 2014 | 9M15 | 2015 |
| Non current assets | 830 | 770 | 758 |
| Tangible assets | 700 | 641 | 629 |
| Goodwill | 82 | 81 | 81 |
| Deferred tax asset | 28 | 27 | 28 |
| Other non current assets | 20 | 21 | 20 |
| Current assets | 244 | 269 | 243 |
| Inventories | 99 | 100 | 98 |
| Trade debtors | 99 | 117 | 85 |
| Cash and cash equivalents | 12 | 19 | 29 |
| Other current assets | 35 | 32 | 31 |
| Non-current assets classified as available for sale | 12 | 0 | 2 |
| Total assets | 1,086 | 1,039 | 1,003 |
| Shareholders' Funds | 111 | 71 | 58 |
| Equity Holders | 111 | 71 | 58 |
| Non-controlling interests | (0) | (0) | (0) |
| Liabilities | 965 | 968 | 945 |
| Interest bearing debt | 576 | 602 | 599 |
| Non current | 457 | 392 | 7 1 |
| Current | 119 | 210 | 528 |
| Trade creditors | 156 | 141 | 139 |
| Other liabilities | 233 | 225 | 207 |
| Liabilities directly associated with non-current assets | |||
| classified as available for sale | 10 | 0 | 0 |
| Total Shareholders'Funds and liabilities | 1,086 | 1,039 | 1,003 |
| Net debt | 564 | 583 | 570 |
| Net debt to LTM recurrent EBITDA | 5.9 x | 5.6 x | 5.3 x |
| Working Capital | 41 | 76 | 44 |
LTM: last twelve months
At the end of December 2015, the assets (equipment) of Souselas industrial plant, in Portugal, which is inactive, were classified as Non-current assets held for sale as they were available for immediate sale and it was estimated that a sale transaction would be completed in a twelvemonth period.
Sonae Indústria consolidated working capital was, at the end of 2015, 44 million Euros, slightly above the value at December 2014 (+ 3 million Euros), but presenting a significant reduction of 32 million Euros, when compared to September 2015. This decrease was a direct consequence of positive impact of improvements in the average collection period.
Net debt decreased by 13 million Euros, to 570 million Euros, when compared to September 2015, but was slightly above the value registered at the end of December 2014 (+6 million Euros). It should be noted that, according to IFRS rules, given the non-fulfilment of a financial covenant at end of 2015, long-term debt facilities amounting to 314 million Euros were reclassified to current debt. Nevertheless, all the financing institutions involved have formally waived this non fulfilment of financial covenant, and as such, the repayment of such debt continues to be subject to the contractually defined maturity dates.
The combination of the improved level of LTM Recurrent EBITDA with the reduced level of Net Debt led to a reduction of the Net Debt to Recurrent EBITDA ratio to 5.3x, improving by 0.6x when compared to December 2014 and by 0.3x vs. September 2015. This is the lowest value since September 2008, clearly evidencing the deleveraging path that has been pursued in the last years.
Total Shareholder's Funds at the end of December 2015 were negatively impacted by the net losses registered during the year (-36 million Euros) and by the accounting impact associated with the consolidation of the Canadian and South African operations using lower exchange rates, resulting in a negative change of the revaluation reserve in the amount of 14.6 million Euros. It is also worth noting that the 13 million Euro reduction in Shareholder's Funds registered during the 4Q15 was also determined by the devaluations of the CAD and ZAR.
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 232,814,928.99 Euros for 2015.
The Board of Directors will propose at the Shareholders Annual General Meeting to transfer this negative Net Result to retained earnings.
For 2016, and foreseen in the strategic partnership agreement signed with the Arauco group, we expect to successfully complete the tasks necessary to execute this transaction, namely (i) obtain the clearance of the competent competition authorities in the EU and South Africa; (ii) execute certain internal transactions to achieve the required business perimeter agreed with Arauco; and (iii) agree certain amendments to the existing debt facilities of Sonae Indústria group and raise new debt at the future Sonae Arauco perimeter, taking advantage of the resulting much improved financial situation.
In 2016, we will continue to implement our strategic plan, and to successfully implement initiatives to improve our industrial efficiency, our market positioning and internal processes, while investing in training and improvement of our people's capabilities.
We also expect to complete the investment in the new melamine surfacing line in our North American plant during the first half of the year, so our new products are available in the market during the second half of the year.
With the continuous support from our key stakeholders, we expect to be able to successfully complete the execution of the defined strategy and complete the aforementioned strategic partnership, reinforcing the company's long term growth commitment and its competitive position in the wood based panels industry.
Sonae Indústria, SGPS, SA is a company listed in the NYSE Euronext Lisbon, with a majority shareholder – EFANOR – that currently controls approximately 68.6% 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 its people, Sonae Indústria's aim is to be recognized as a sustainable world leader in the wood-based panels industry.
| ISIN Code | PTS3P0AM0017 |
|---|---|
| Bloomberg Code | SONI |
| Reuters Code | SONI.LS |
| 2012 | 2013 | 2014 | 2015 | |
|---|---|---|---|---|
| Share Capital | 700,000,000.00 | 700,000,000.00 | 812,107,574.17 | 812,107,574.17 |
| Total number of shares | 140,000,000 | 140,000,000 | 11,350,757,417 | 11,350,757,417 |
| Net Results | -98,876,879 | -78,045,917 | -115,720,185 | -36,004,592 |
| Net Results per share | -0.706 | -0.557 | -0.010 | -0.003 |
| Dividends per share* | 0.000 | 0.000 | 0.000 | 0.000 |
| Prices | ||||
| Year High | 0.7100 | 0.6630 | 0.8660 | 0.0097 |
| Year Low | 0.3900 | 0.4500 | 0.0059 | 0.0058 |
| Year Average | 0.5600 | 0.5559 | 0.4552 | 0.0077 |
| Share price as at 31-Dec | 0.4890 | 0.5630 | 0.0064 | 0.0080 |
| Market Capitalization as at 31-Dec | 68,460,000 | 78,820,000 | 72,644,847 | 90,806,059 |
| Average trading volumes per day (shares) | 150,479 | 413,413 | 4,390,031 | 8,037,786 |
* distributed in the following year
Sonae Indústria's performance is quite dependent on the business cycles prospects given the correlation with the construction and furniture industries. As such, the share price evolution of Sonae Indústria is impacted by the macroeconomic cycles.
Sonae Indústria's share price evolution during 2015 exhibited a stochastic behaviour, following the PSI 20 trend until the beginning of September and then experienced an important appreciation until the end of the year, contrasting with the PSI 20 evolution that was kept relatively flat during that period. The end of the restructuring
phase combined with the improved financial results and the announcement of the strategic partnership with Arauco, could have contributed to the overall positive market reaction. This has resulted in a better performance of Sonae Indústria's share price vs PSI 20, increasing by 25% during 2015.
The highest daily turnover in Sonae Indústria shares was registered on 27 February (160,276,068 shares), the day after the announcement of the 2014 consolidated results.
In terms of share price, during 2015, the minimum was registered on 10 September (0.0058€) and the maximum on 16 October (0.0097€).
Regarding the liquidity, Sonae Indústria's share had, during 2015, an average turnover of 8,037,786 shares per day.
Sonae Indústria, SGPS, S.A. did not acquire or sell any own shares during the year and as at 31 December 2015, the company did not hold any own shares.
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 only to the extent that the risks and valuation of such derivatives 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 Assets and Liabilities of foreign non-Euro subsidiaries are accounted as Equity under the "Other Accumulated 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:
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 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 2015, Sonae Indústria employed, in total, 3,245 people in 8 different countries. The reduction when compared to the end of 2014 is mostly explained by the sale of three plants, Ussel and Linxe, in France, and Betanzos, in Spain, and by the streamlining of the group support structures.
Workforce by age group
The most representative age group at Sonae Indústria corresponds to ages between 45 and 54 years (corresponding to 34% of the total employees). It should also be noted that women represent circa 17% of the total workforce of the company, exactly the same value registered for 2014.
Over the last years, productivity has been strongly increasing, particularly driven by the restructuring process that the Company went through.
Absenteeism had been consistently decreasing over the last years, but experienced an increase in the last two years, due to long term leaves. In face of these results, Sonae Indústria took the decision in 2014 to set up a working group to address this area in order to reduce the absenteeism levels in a responsible way. The group has already identified some corrective measures to address this topic, which are expected to be implemented during 2016.
Training hours and % by employee
In 2015 the number of training hours per employee increased significantly, representing the highest value of the last five years. This is mainly the result of the IoW (Improving our Work) implementation and the associated training initiatives, which involves a significant number of participants and training hours. These continuous improvement programmes that were supported by external entities, have since 2014 been replaced with 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 four Portuguese universities; Faculdade de Engenharia da Universidade do Porto (FEUP), Escola Superior Tecnológica de Viseu (ESTV), Universidade de Aveiro (UA) and Universidade Nova de Lisboa (UNL), as well as with three research Institutes, Associação Rede de Competência em Polímeros (ARCP), Pólo de Inovação em Engenharia de Polímeros (PIEP) and Centro de Nanotecnologia e Materiais Técnicos, Funcionais e Inteligentes (CENTI). 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, has through one of its subsidiaries, a series of facilities and equipment in the university's campus.
With this partnership Sonae Indústria has privileged access to equipment and techniques, knowledge of the researchers, development of new technologies and methodologies and a permanent access to high value technicians that could potentially be integrated in the company.
16 Volatile organic compound emissions.
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, the employees become involved in social institutions or charities, and the company encourages them to actively participate in these initiatives.
In the different countries where Sonae Indústria operates, the specific needs for help and contribution vary greatly depending on the communities' level of welfare, presence of social security systems as well as the culture and values of the local citizens. Therefore, the community-related activities are prioritized and managed at local level.
Sonae Indústria also takes education seriously and every year awards bursaries to the most promising employee's children.
The company also opens the doors of both its head office and manufacturing plants to high school and university students. In 2015, Sonae Indústria had a visit from Swiss students to the Portuguese factories, allowing the students to have a brief insight of the daily tasks performed at these locations, and to have a better understanding of Sonae Indústria's business.
In 2015, Sonae Indústria has introduced a new activity in this area, holding an Open Day, in July, where the company invited the employee´s children to join them at work for a day.
With this initiative Sonae Indústria tried to bring the children closer to the parent´s working environment, allowing the children to see their parent's work place and make them understand the importance of having a job in a playful and fun way. With this initiative, the company hopes to transmit educational values through playful activities, while appreciating the time and quality of life. By doing so, Sonae Indústria expects to increase motivation and the sense of belonging to the company.
As the feedback was very positive, and every participant considered they had such a great time, Sonae Indústria expects to repeat the experience, as the company is certain this is an experience the children and their parents will not forget.
In Portugal, the T-Shirt voluntary programme has been active since 2008, continuously supporting the local community where Sonae Indústria units are located, through the implementation of initiatives and campaigns to increase awareness among employees by involving them in community issues.
The T-shirt programme gives all company employees the opportunity to put on the socially responsible t-shirt and spend as much as three working days every year doing volunteer work. The days are funded by the company to encourage such activities.
Education and children's wellbeing is an important part of this commitment and in 2015 the group continued to work with the Woody education programme, already in its 4th year. Sonae Indústria's volunteers visit local schools to promote the virtuous cycle of wood to children from pre-school to 4th grade. By starting at an early age, children will grow up with an understanding of the need for recycling and its advantages. With this aim in mind, a 40 page soft covered book was printed 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. Since the programme started in October of 2011, the company volunteers have visited 46 schools, 146 classrooms and had the privilege of spending these hours with 3,100 children.
During the month of December the usual Christmas Campaign was held and once again Sonae Indústria's employees showed their solidarity by donating toys, food, baby products and clothes which were collected and offered to local institutions.
Throughout the year, Sonae Indústria manufacturing units offered various donations to schools, institutions and universities. Products were also distributed to 16 institutions such as schools, local fire departments, social and cultural associations, Rotary clubs and sport associations.
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 an environmental and a socialeconomical perspectives.
In 2015 almost 100 employees, family and friends from Sonae Indústria units were involved in the reforestation process in Lousã, to support Floresta Unida, an organization whose target is to plant 400 million trees in 30 years and protect 150 million others.
Sonae Indústria's Madrid office team organized a toy collecting campaign called "Jugueterada" over the Christmas period and were able to collect 850 toys, which were distributed to children on the 6th of January, on Reyes Magos day (Wise Men Day). A Toy and a smile that helped to build new dreams!
Additionally, and similar to past initiatives, the Spanish held a food collecting campaign over the Christmas period. A total of 509 kilograms of food was donated by the staff from Sonae Indústria's four locations and distributed to the Cruz Roja, Caritas and Banco de Alimento.
In Germany, Sonae Indústria companies once again made various contributions to institutions such as local Fire Brigades, schools and youth associations, amongst others.
The companies have also made contributions of Sonae Indústria's products to a Youth Centre, a Children's Playground, a Sports Association, a Circus and a Museum.
In 2015, Tafisa Canada and its employees continued to uphold their engagement towards the Fondation du Centre de Santé et de Services Sociaux du Granit (Health and Social Services Foundation). The Foundation's main objective is to help maintain and improve the quality and quantity of care and services provided to the entire population of Lac-Mégantic and surrounding communities.
Fun and sports go together and Tafisa Canada is a firm supporter of physical activities, which are essential to good mental and physical health. Tafisa continued to support various long-standing commitments to sports associations involving children, youth and adults.
Community development and involvement are important to Tafisa Canada. This year, Tafisa Canada contributed to several local events but also had a physical presence during these activities. In order to get more engaged and know by the community, booths were set up and employees, several spouses and children volunteered their time to represent the company. They talked about the company, its mission, its values and involvement within the community and handed out beverages and treats to all visitors who came to see them.
In South Africa, Sonae Indústria's company, Sonae Novobord, engaged in several actions, not only through financial assistance, but also through active partnerships, promoting and participating in awareness campaigns.
The main focuses are Education (including bursaries and skills), providing education initiatives to teachers, and Worldwide Fund for Nature (WWF).
The CSI committee is comprised of 5 members, of which the chairperson is independently appointed. The remaining members of the team are Sonae employees who manage this portfolio in conjunction with their own job responsibilities.
In 2015, Sonae Indústria defined the pillars on which it will leverage its sustainable Health and Safety management practices. These pillars are focused on: Training Programme, Hazards' Management, Process Improvement, Incident Investigation & Reporting and Integrated Audits.
Based in these pillars,several actions were launched and implemented in the several industrial sites of the group, to support the continuous improvement of Sonae Indústria's safety indicators.
The figure below represents the country-wide and global Lost Workday Cases (LWC) rate17:
Sonae Indústria's overall LWC rate improved 9% (compared with 2014 rate). Notwithstanding this important result, that is coherent with the previous year's performance, evidencing that we are on the right path in reducing
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).
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.
the number of incidents that result in lost workdays, we regret to report a fatality that occurred in one French site.
During 2015, within the scope of the five pillars defined, different actions were promoted to improve our H&S performance, namely:
All these actions contributed significantly to involve our employees, share experiences and raise awareness for the Health & Safety issues inside the group.
Looking at the results by operation, it is worth highlighting the good results achieved in Germany, Non Board Business (NBB), and the Iberian Peninsula (reductions of 2%, 7%, and 25%, respectively, when compared with last year). In France, several accidents were registered during the year which led to a significant increase in the LWC rate (+84% when compared to 2014). Both South Africa and Tarkett Joint Venture registered increases, of 7% and 13%, respectively. Canada maintained the same level of performance as in the previous year, with no change in the rate.
The Severity rate is related with the seriousness of the injuries based on the days lost. As previously referred, we regret to report that a fatality happened in France, which significantly affected the performance of the Group's Severity rate18 indicator, which increased globally.
Following the previously mentioned fatal accident, inspection actions and campaigns have been reinforced in all sites, to guarantee that the unique conditions found during such an event will never occur again in any of the industrial sites.
18 Severity Rate = Number of workdays lost due to LWC*1,000 / Number of hours worked.
On an individual analysis, when compared to 2014, South Africa, Iberian Peninsula and Tarkett Joint Venture reported improved results (reduction of 13%, 42% and 63% respectively). As for the NBB and German operations, notwithstanding the better performance registered in terms of the LWC rate, the Severity rate of these operations increased when compared with previous year. Canada's indicator was also negatively impacted by an incident that occurred in the beginning of the year, with impact of days lost throughout the year.
Notwithstanding these results, our main aim remains unchanged and we will strive to continue to reduce these rates year on 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 present the global evolution of the wood mix consumption and wood use efficiency
figures, which illustrate our continuous efforts within this key operational area.
Global specific wood consumption for Sonae Indústria's portfolio was slightly lower when compared to 2014 and one of the best performances of the last years. This is a direct result of the increase of PB production in the overall product mix aligned with more efficient industrial operations.
The global wood supply mix of Sonae Indústria continues to reveal an improvement in the value of the recycled raw materials contribution. The effect registered in 2015 was mainly due to the increase in the German operations were recycled wood consumption grew 16 p.p. when compared with previous year. The growth was possible due to the start-up of a new cleaning installation equipment in Nettgau, which enabled an increase in the capacity to process recycled wood, and also due to Iberian Peninsula's activity, were this material intake increased when compared to 2014.
Municipal, surface and underground water
As it is globally well known, 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.
Sonae Indústria specific water consumption has decreased, when compared with 2014, mainly due to the effect of the sale, during 2015, of the hardboard operation, which is a very intensive water consumption process. Other contribution effect was the reduction of MDF production in the global production portfolio of the past year.
Hazardous and non-hazardous waste
The global indicator on specific waste generation registered a slight decrease of 2% when compared to 2014 performance.
This indicator still reflects contribution from inactive operations where wastes needed to be managed during 2015.
Energy is a very relevant aspect of wood-based panel production. It is used in the day to day activities of the manufacturing processes, as for example, drying the wood particles, heating up the presses or driving equipment.
Sonae Indústria has a strong commitment with energy management, aiming to reduce the energy usage (by means of efficiency improvements) and, at the same time, to minimize the use of fossil fuels. A strong evidence of this commitment is the fact that more than 50% of Sonae Indústria's energy use is obtained directly from renewable fuels (biomass and other renewable process by-products) and only circa 15% of energy use is obtained directly from fossil fuels. Furthermore, in 2015, significant investments were made to further reduce fossil fuel consumption, namely, natural gas.
Sonae Indústria Total and Board Business (BB) Energy Use (MWh)
Due to the industrial base reorganization, that took place during the last years, the total energy use has constantly decreased. It should also be noted that circa 98% of total energy use is spent in the Board Business19 .
The specific energy consumption, in a macro analysis, was kept approximately constant in the last years.
19 Board Business: manufacturing units of particleboard, MDF and OSB.
Nonetheless, the macro specific consumption figures do not always translate correctly the real evolution registered in the field – there may be, for example, plant activity levels and/or PB/MDF/OSB mix, among other variables, affecting the global values of this indicator. Removing these two influences, by means of mathematical modelling, the commitment and resources allocated becomes clear. For example, in 2015, the electrical energy savings reached 7.1% (vs. ref. year 2009), as a result of the countless energy efficiency measures implemented continuously since 2009. One of the most common measures implemented is the variable speed drive (VSD) application in electrical motors.
Quality, Environmental and Health & Safety management systems are an important part of Sonae Indústria's standardised way of operating. During 2015, there were no significant changes to the certification situation, in the continued operations.
All Sonae Indústria board operations are currently certified according to Health and Safety, Quality and Environmental management systems.
The situation of Sonae Indústria management systems certifications, at the end of 2015, was the following:
| Horn*** | |||
|---|---|---|---|
*HPL plant
**resins & paper impregnation plant
***components plant
****wood veneer plant
*****sawmill
******paper impregnation plant
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 analyse 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 shareholders, 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.
17 February 2016,
The Board of Directors,
Paulo Azevedo
_________________________
_________________________
_________________________
_________________________
Carlos Moreira da Silva
________________________
________________________
_________________________
_________________________
Albrecht Ehlers
Rui Correia
Javier Vega
Chris Lawrie
José Romão de Sousa
Jan Bergmann
| Acquisitions Date amount € average value |
Sales amount € average value |
Position at 31.12.2015 |
Balance at 31.12.2015 amount |
||
|---|---|---|---|---|---|
| Duarte Paulo Teixeira de Azevedo Efanor Investimentos, SGPS, SA (1) Migracom, SGPS, SA (2) |
Minoritary Dominant |
||||
| Rui Manuel Gonçalves Correia Sonae Indústria, SGPS, SA |
6,807,809 | ||||
| Acquisitions | Sales | Position at 31.12.2015 |
Balance at 31.12.2015 |
||
| Date amount € average value | amount € average value | amount | |||
| (1) Efanor Investimentos, SGPS, SA Sonae Indústria, SGPS, SA Pareuro, BV (3) |
Dominant | 4,842,637,142 | |||
| (2) Migracom, SGPS, SA Sonae Indústria, SGPS, SA Imparfim, SGPS, SA (4) |
Jointly Controlled | 9,732,857 | |||
| (3) Pareuro, BV Sonae Indústria, SGPS, SA |
2,932,687,752 | ||||
| (4) Imparfin, SGPS, SA Sonae Indústria, SGPS, SA |
30,098,752 |
| Number of shares at 31.12.2015 | |
|---|---|
| Efanor Investimentos, SGPS, SA Sonae Indústria,SGPS, SA Pareuro, BV |
4,842,637,142 Dominated |
| Pareuro, BV Sonae Indústria, SGPS, SA |
2,932,687,752 |
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 | 4,842,637,142 | 42.6636% | 42.6636% |
| By Pareuro, BV ( controlled by Efanor Investimentos, SGPS, SA) | 2,932,687,752 | 25.8369% | 25.8369% |
| By Maria Margarida CarvalhaisTeixeira de Azevedo (Director of Efanor Investimentos, SGPS, SA) |
1,010 | 0.000009% | 0.000009% |
| By Migracom, SGPS,SA (Company controlled by Efanor Investimentos, SGPS, SA´s Director, Duarte Paulo Treixeira de Azevedo) |
9,732,857 | 0.0857% | 0.0857% |
| By Linhacom, SGPS,SA (Company controlled by Efanor Investimentos, SGPS, SA´s Director, Maria Cláudia Teixeira de Azevedo) |
2,507,400 | 0.0221% | 0.0221% |
| Total allocation 7,787,566,161 | 68.6083% | 68.6083% |
(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 is the controlling shareholder of Efanor Investimentos SGPS, SA, which, in her turn, is the dominant company of Pareuro BV.
(Free translation from the original in Portuguese)
| Duarte Paulo Teixeira de Azevedo | |
|---|---|
_________________________________
_________________________________
__________________________________ Carlos António da Rocha Moreira da Silva
_________________________________
_________________________________
_________________________________
Albrecht Olof Luther Ehlers
Rui Manuel Gonçalves Correia
Javier Vega de Seoane Azpilicueta
_________________________________
_________________________________
George Christopher Lawrie
José Joaquim Romão de Sousa
Jan Bergmann
| Capacity Utilization Index |
Finished-Available Production (m3 ) / Installed production capacity (m3 ); raw boards only |
|---|---|
| CAPEX | Investment in Tangible Fixed Assets |
| EBITDA | Earnings Before Interests and Taxes + Depreciations and Amortizations + (Provisions and impairment losses - Impairment losses in trade receivables + Reversion of impairment losses in trade receivables) |
| FTEs | Full Time Equivalent |
| Fixed Costs | Overheads + Personnel costs (internal and external); management accounts concept |
| Gross Debt | Bank loans + Debentures + Obligations under finance leases + other loans + Loans from related parties |
| Headcount | Total number of internal FTEs, excluding trainees |
| MDF | Medium Density Fibreboard |
| Net Debt | Gross Debt - Cash and cash equivalents |
| Net Debt to LTM Rec. EBITDA |
Net Debt / Last Twelve Months Recurrent EBITDA |
| OSB | Oriented Strand Board |
| Recurrent EBITDA | EBITDA excluding non-recurrent operational income / costs |
| Recurrent EBITDA margin | Recurrent EBITDA / Turnover |
| Turnover (regions) | Sales Finished Goods and merchandise + Services Rendered; excluding sales of other materials like for ex. wood by-products, management accounts concept |
| Working Capital | Inventories + Trade Debtors – Trade Creditors |
Sonae Indústria, SGPS, SA
Publicly Listed Company Share Capital € 812 107 574.17 Maia Commercial Registry and Tax Number 506 035 034
17 February 2016
| PART I – MANDATORY INFORMATION ON SHAREHOLDER STRUCTURE, ORGANISATION AND CORPORATE GOVERNANCE 3 |
|
|---|---|
| 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 6 |
| II. | Management and Supervision 7 |
| a) | Composition 7 |
| b) | Functioning 11 |
| c) | Committees within the Management and Supervisory bodies and board delegates 15 |
| III. | Supervision 18 |
| a) | Composition 18 |
| b) | Functioning 20 |
| c) | Responsibilities and functions 21 |
| IV. | Statutory External Auditor 22 |
| V. | External Auditor 22 |
| C. | INTERNAL ORGANISATION 24 |
| I. | Articles of Association 24 |
| II. | Reporting of irregularities 24 |
| III. | Internal Control and Risk Management 26 |
| IV. | Investor Relations 37 |
| V. | Website 38 |
| D. | REMUNERATIONS 39 |
| I. | Competencies for approval of remunerations 39 |
| II. | Remunerations Committee 40 |
| III. | Remuneration structure 40 |
| IV. | Disclosure of Remuneration 46 |
| V. | Agreements with impact on Remuneration 47 |
| VI. | Share plans or stock options plans 48 |
| E. | TRANSACTIONS WITH RELATED PARTIES 49 |
| I. | Control mechanisms and procedures 49 |
| II. | Information concerning transactions 50 |
| PART II – ASSESSMENT OF THE CORPORATE GOVERNANCE 51 | |
| 1. | Identification of the corporate governance code adopted 51 |
| 2. | Analysis of compliance with the Corporate Governance Code adopted 51 |
1. Capital structure (share capital, number of shares, capital distribution, etc.), including information regarding shares not admitted to trading on a regulated market, different categories of shares, rights and duties incurred and share capital percentage by category (Article 245-A, number 1, paragraph a))
Sonae Indústria's share capital amounts to 812,107,574.17 Euros and is represented by 11,350,757,417 ordinary nominal shares without nominal value. All shares are admitted to trading on the NYSE Euronext Lisbon. Sonae Indústria´s share capital is distributed according to the below illustration (the qualified shareholding attributed to Efanor in the picture below is better explained in item 7 of this report):
2. Restrictions to the transfer of shares, such as clauses of consent on sale of shares, or restriction on ownership of shares (Article 245-A, number 1, paragraph b))
No restrictions are in place regarding the transfer and sale of the company's shares.
3. Number of own shares, corresponding percentage of share capital and voting rights (Article 245-A, number 1, paragraph a))
The company at the date of 31st December 2015 did not own any of its own shares.
4. Relevant shareholders' agreements which come into force, are amended or cancelled in the event of change of control by means of a public offer, the resulting effects thereof, whose disclosure is not adverse to the company, except when the company is specifically obliged to disclose that information due to legal requirements (Article 245-A, number 1, paragraph j))
As of 31 December 2015, loans from financial institutions, amounted to a total circa 450 million Euros (79% 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.
| Summary | Million € | No. Contracts |
|---|---|---|
| Commercial Paper | 126 | 5 |
| Bonds | 150 | 1 |
| Bank Loans | 174 | 6 |
| Total | 450 | 12 |
Nevertheless, such agreements do not harm the free trading of the company shares, nor they interfere with the shareholders evaluation on the management bodies' performance, as these defend the social interests, aiming to ensure the sustainability of the business in the long term under the current market conditions.
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 its securities or voting rights.
| Shareholder | No. of shares | % Share Capital | % Voting rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, SA (1) | |||
| Directly | 4,842,637,142 | 42.6636% | 42.6636% |
| By Pareuro, BV ( controlled by Efanor Investimentos, SGPS, SA) | 2,932,687,752 | 25.8369% | 25.8369% |
| By Maria Margarida CarvalhaisTeixeira de Azevedo (Director of Efanor Investimentos, SGPS, SA) |
1,010 | 0.000009% | 0.000009% |
| By Migracom, SGPS,SA (Company controlled by Efanor Investimentos, SGPS, SA´s Director, Duarte Paulo Treixeira de Azevedo) |
9,732,857 | 0.0857% | 0.0857% |
| By Linhacom, SGPS,SA (Company controlled by Efanor Investimentos, SGPS, SA´s Director, Maria Cláudia Teixeira de Azevedo) |
2,507,400 | 0.0221% | 0.0221% |
| Total allocation 7,787,566,161 | 68.6083% | 68.6083% |
(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 is the controlling shareholder 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 2015:
| Number of Shares | Number of Shares | |||
|---|---|---|---|---|
| Duarte Paulo Teixeira de Azevedo | (2) Pareuro, BV | |||
| Efanor Investimentos, SGPS, SA (1) | Minoritary | Sonae Indústria, SGPS, SA | 2,932,687,752 | |
| Migracom, SGPS, SA (3) | Dominant | |||
| (3) Migracom, SGPS, SA | ||||
| Rui Manuel Gonçalves Correia | Sonae Indústria, SGPS, SA | 9,732,857 | ||
| Sonae Indústria, SGPS, SA | 6,807,809 | Imparfin, SGPS, SA (4) | Jointly controlled | |
| (4) Imparfin, SGPS, SA | ||||
| Sonae Indústria, SGPS, SA | 30,098,752 | |||
| (1) Efanor Investimentos, SGPS, SA | ||||
| Sonae Indústria, SGPS, SA | 4,842,637,142 | |||
| Pareuro, BV (2) | Dominant |
9. Special powers of the managing bodies, namely in respect to resolutions concerning share capital increase (Article 245-A, number 1, paragraph i)), indicating the date these powers were attributed, the date these competencies expire, the maximum quantitative limit of the share capital increase, the amount issued in accordance with the attribution of powers and the means for accomplishment of the attributed powers
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 or more times, through cash injections under the terms established by law. These powers were renewed in the General Meeting held on 4 April 2014 and may be exercised over a period of five years from that date, notwithstanding the general meeting decision to renew these powers again.
The Board of Directors under the use of the powers that were attributed to it has decided in 2014, with the favourable opinion of the Supervisory Board, to proceed with a share capital increase in an amount up to 150 million euros, limited to the subscriptions collected, which were in the amount of 112,107,574.17 euros.
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 31 March 2015, for the mandate 2015-2017 and is composed by:
Up to the date of the Shareholders' General Meeting mentioned above, the chaiman of the Shareholder's General Meeting was António Agostinho Cardoso da Conceição Guedes.
| 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. Nevertheless, the company is currently developing a system to implement the electronic vote, which is expected to be available for the Shareholder's General Meeting of 2016.
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.
13. Indication of the maximum percentage of voting rights that may be exercised by a single shareholder or by shareholders that are related to him of article 20, number 1
Each share corresponds to one vote, with no limitation.
14. Identification of the shareholders' resolutions that, under the terms of the company´s articles of association, can only be approved by qualified majority, apart from the legal ones, and description of those majorities
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 stand-alone 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 2015 comprised 8 directors, all elected in the Annual General Meeting held on 31 March 2015 for the 2015-2017 mandate.
Date of the Sonae Indústia Directors first appointment:
On 31st December 2015 the Board of Directors of Sonae Indústria was composed of:
Duarte Paulo Teixeira de Azevedo – Chairman (Non-Executive)
Carlos António da Rocha Moreira da Silva Deputy Chairman (Non-Executive and independent)
Up to the Shareholders' General Meeting data, Belmiro de Azevedo was the Chairman of the Board of Directors.
Among the eight (8) directors, three (3) are executive members and five (5) are non-executive members, as indicated in the previous item.
Among the non-executive Directors, four (4) are independent, also as indicated in previous item. 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.
Paulo Azevedo (Chaiman of the Board of Directors): Holds a degree in Chemical Engineering from the Lausanne Polytechnic School (Switzerland) and a post-graduate degree in Business Studies (MBA) from the Oporto Business School (ex-EGP). Was CEO of Optimus – Telecomunicações S.A. between 1998 and 2000; CEO of Sonaecom between 2000 and 2007 and is CEO of Sonae SGPS, S.A. since May 2007. Holds a number of managerial and directorship roles in the Efanor/Sonae Group. Paulo Azevedo is Belmiro de Azevedo's son.
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.
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).
Carlos Moreira da Silva (Deputy Chairman of the Board of Directors and Independent): Degree in Mechanical Engineering – Universidade do Porto, MSc in Management Sci. and Operational Research (University of Warwick – UK) and PhD in Management Sciences (University of Warwick – UK). Auxiliary professor of Faculdade de Engenharia of U.P. between November 1982 and March 1987, director of EDP, Electricidade de Portugal, E.P. (March 1987 and August 1988), occupied several positions in companies of Sonae Group / Sonae Indústria Group between September 1988 and January 2000, having, thereafter, in 2003, occupied the position of CEO of Sonae Indústria, SGPS, SA until April 2005, as well as in other companies of Sonae Indústria Group. Was member of Advisory Board of 3i Spain (2005-2012), member of the Supervisory Board of Jeronimo Martins Dystrybucja, SA (2009 to 2012) and Chairman of the Board of Directors of La Seda de Barcelona (2010-2014). Currently exercises position of Chairman of BA Group and is member of the Board of Directors of Banco BPI.
José Romão de Sousa (Independent): Holds a BSc in Chemical and Industrial Engineering – IST, Universidade de Lisboa (Portugal) and a PhD in Chemical Engineering – Imperial College, University of London (UK). Large experience in the manufacturing industry, in particular in the areas of chemicals (formaldehyde resins, adhesives and water-borne emulsion resins) and plastics (Vinyl and polyolefin extrusion and calendaring). Has had several management functions in the ProHolding group, being still today non-executive Chairman of several group companies and associated companies, including a new venture into biologic fungicides. Experience in the financial sector, namely in private equity, portfolio management and stock broker company. Currently, is Chairman of the Board of Directors of Promotor SGPS, SA and Epoli-Espumas de Polietileno SA, among other companies.
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.
Paulo Azevedo is the son of Belmiro de Azevedo, who, under the terms of paragraph b) of no. 1 of Article 20 and of no. 1 of Article 21 of the Portuguese Securities Code, is the ultimate beneficial owner, since he is the controlling shareholder of Efanor Investimentos SGPS, SA, which, in her turn, is the dominant company of Pareuro BV.
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 of the company is split as follows:
The Board of Directors has delegated powers the broadest managing powers to the Executive Committee to manage operations of the Company, including all legal and statutory competences that are attributed to the Board of Directors, with exception of:
l) selling, acquiring directly or by long-term lease or transacting in any other way, investments classified as tangible fixed assets where the individual transaction value is in excess of 5,000,000 Euros;
m) purchasing or subscribing new shares in the share capital of any subsidiary company where the accumulated amount exceeds 20,000,000 Euros in any financial year;
|--|
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 11 times in 2015, with the respective minutes recording all the deliberations made. The attendance of the Board of Directors members to those meetings was the following (physical or electronic means):
| Board of Directors' member | % assiduity |
|---|---|
| Belmiro de Azevedo | 0% |
| Paulo Azevedo | 100% |
| Carlos Moreira da Silva | 100% |
| Albrecht Ehlers | 81.81% |
| Javier Vega | 63.63% |
| José Romão de Sousa | 66.66% |
| Rui Correia | 100% |
| Christopher Lawrie | 100% |
| Jan Bergmann | 100% |
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.
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:
Sociedade de Iniciativa e Aproveitamentos Florestais Energia, S.A.
Somit Imobiliária, S.A.
LaminatePark GmbH & Co. Kg
OSB GmbH
Glunz AG (Supervisory Board Chairman – "Aufsichtsrat")
Erich-Brost-Institut für Journalismus in Europa GmbH
| 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 and of the Board of Directors can be read on the company website, through the following links:
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 fields of responsibility of the Executive Committee are 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 2015 the Executive Committee convened 16 times, with the respective minutes recording the deliberations made. The attendance level of the Executive members to the meetings was of 100% with exception of Jan Bergmann, whose attendance was of 81.25%.
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 provides the minutes of the Executive Committee's meetings to all the members of both the Board of Directors and the Supervisory Audit Board. 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:
Over the course of 2015, 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:
Monitoring and analysing the conduct of business in society, the impacts in terms of sustainability in its economic, environmental and social as well as corporate governance and ethical standards. It shall safeguard and monitor the implementation of the Code of Conduct, and proceed on its update whenever necessary.
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 once during 2015 and recorder in the minutes their deliberations.
The Ethics Sub Committee met once.
The BNRC is composed of the following Non-Executive Members:
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.
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 2015, the BNRC met on two occasions with the respective minutes having been drafted.
| III. | SUPERVISION |
|---|---|
| a) | Composition |
The company's supervisory body is the Statutory Audit Board, which is elected at the Shareholders' General Meeting.
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 current Statutory Audit Board was elected at the 2015 Shareholders' Annual General Meeting for the 2015- 2017 mandate and has the following composition:
The current members of the Statutory Audit Board were elected for the first time on the following dates:
Up to the date of the Shareholders' Annual General Meeting, the following members were part of the Statutory Audit Board: Armando Luís de Magalhães e Jorge Manuel Felizes Morgado.
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.
The Statutory Audit Board Regulation also states that if, during the course of their term of office, any situation related to loss of independence or incompatibility regarding any member of the Statutory Audit Board arises, the respective member should immediately communicate this to the Chairman of the Board of Directors. Any situation of legal incompatibility shall lead to forfeiture of the term of office of the Statutory Audit Board member.
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.
OSCAR ALÇADA DA QUINTA (Statutory Audit Board 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.
ANTÓNIO AUGUSTO ALMEIDA TRABULO (Statutory Audit Board Member): Degree in Economics – University of Porto, Postgraduate Course in Accounting and Corporate Finance – Open University (Portugal), Sufficiency Researcher Diploma in the field of Economics Financiera y Contabilidad – University of Valladolid (Spain), Phd Course in Management and Business Administration – University of Valladolid (Spain), completed curricular part (in the final stages of completion Thesis), Statutory Auditor. Currently exerts functions of Statutory Auditor, partner of the company Velosa, Silva, Marques and Trabulo, SROC.
PAULO MANUEL CARVALHO DA SILVA (Statutory Audit Board Substitute-Member): Bachelor of Accounting and Administration – ISCAP, Bachelor Customs Expert – ISCAP, Degree in Administration and T. Customs – ISCAP, CEOG course of Católica University. Since 1992, is member of the company Velosa, Silva, Marques and Trabulo, SROC.
All members of the Supervisory Audit Board have adequate competencies o exercise their respective functions.
b) Functioning
The rules regulating how the Statutory Audit Board functions can be read at the company website, through the following links:
http://www.sonaeindustria.com/file_bank/investor/Regulamento%20do%20Conselho%20Fiscal_PT_FINAL.pdf
http://www.sonaeindustria.com/file_bank/investor/Statutory%20Audit%20Board%20Regulation_EN_FINAL.pd f
In 2015 the Statutory Audit Board convened 7 times. The minutes were drawn up recording the respective deliberations. All the members attended 100% 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 2015:
Sonaecom - SGPS, S.A. (Statutory Audit Board)
Sonae Investimentos, SGPS, SA (Statutory Audit Board member)
| c) | Responsibilities and functions |
|---|---|
If the company or any of its subsidiaries has the intention to hire the services of the external auditor or any entities with which they have joint shareholdings or which are part of the same network, other than auditing services, the Statutory Audit Board must previously approve such hiring.
Thus, if Sonae Indústria or any group subsidiary intends to hire services to the External Auditor or to any entity that is in a group relationship with it, the Statutory Audit Board must be previously informed, so that such hiring does not affect the independence of the External Auditor and does not, in the overall services provided, have a significant relevance when compared to the Auditing services. The Statutory Audit Board must also ensure that the necessary conditions to perform such services with autonomy and independence from the executed under the audit process are in place.
The Statutory Audit Board main responsibilities are as follows:
q) approving the hiring of the statutory external auditor or of any entities that are in a participation relationship with it or that are part of the same network, to render services other than audit services.
Besides 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.
40. Indication of the number of consecutive years the statutory external auditor works for the company and/or group
PriceWaterhouseCoopers has been the statutory external auditor of the company since the Annual General Meeting of 2006, and is currently undertaking its fourth three-year mandate.
In 2015 PriceWaterHouseCoopers did not provide other compliance and assurance services to any Sonae Indústria subsidiaries.
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 adopted the principle of not proceeding with the rotation of the external auditor at the end of its third mandate, only if the Statutory Audit Board concludes that, if the external auditor is kept in functions beyond the before mentioned period, it will not collide with its independence, and if the cost-benefit analysis of this replacement are in favour of the renewal of this mandate.
In the proposal presented at the last Shareholders' Annual General Meeting to appoint the statutory external auditor of the company, the Statutory Audit Board considered that the quality of the work performed and the accumulated experience in the sector of activity that Sonae Indústria is part of, both of the statutory audit firm
which election is proposed as well as of the entities belonging to the same network in the countries where Sonae Indústria holds, direct or indirectly, affiliated companies, that are included in her consolidated accounts and where such entities are external auditors of Sonae indústria's affiliated companies constituted an asset that must be taken into account. Having contemplated those facts and the extent of the burden to be supported by Sonae Indústria in an eventual replacement, it was recommended the permanence of such statutory audit firm in the exercise of her functions. The Shareholders' Annual General Meeting has approved the presented proposal.
As for the Statutory External Auditor representative, on top of ensuring compliance with the legal stipulations, it must also be conducted an evaluation to ensure its independence.
The Statutory Audit Board monitors the performance and execution of the works conducted by the external auditor throughout each period, meeting with him whenever it deems fit. Moreover, the Statutory Audit Board evaluates, on a yearly basis, the global performance of the external auditor, including an appraisal on its independence.
During 2015 no subsidiary of Sonae Indústria hired other services to the external auditor. If the company or any of its subsidiaries intends to hire such services, these must be approved by the Statutory Audit Board.
Sonae Indústria and its subsidiaries paid PriceWaterhouseCoopers the following amounts in 2015:
| By the company | |
|---|---|
| Auditing services (€) | 13,730 € / 3.29 % |
| By other group entities | |
|---|---|
| Auditing services (€) | 352,581€ / 84.42% |
| Other reliability guarantee services (€) | 51,359 € / 12.30% |
| I. | ARTICLES OF ASSOCIATION |
|---|---|
The rules applicable to amendments of the Articles of Association are established by law. It is up to 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.
| II. REPORTING OF IRREGULARITIES |
|
|---|---|
| ------------------------------------ | -- |
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:
Customer Focus
The complete code of conduct can be found at the company site www.sonaeindustria.com.
III. INTERNAL CONTROL AND RISK MANAGEMENT
Both Internal Control and Risk Management are important parts of Sonae Indústria culture, being present in the management processes and responsibilities of all group employees, at the different levels of the organization. This is supported by the Group transversal functions, notably the Risk Management, Internal Audit and Planning and Management Control departments, with specialized teams that report hierarchically to the Board of Directors.
The Risk Management department's mission is to support the companies in achieving their business objectives through a structured and systematic approach of identifying and managing risks and opportunities. It has also the objective to promote the consistency of principles, concepts, methodologies and tools to evaluate and manage the risks of all business units of the Group.
The Internal Audit department's mission is to identify and evaluate, in a systematic and independent way, the correct functioning of the risk management and internal control systems, as well as the implementation effectiveness and efficiency of the controls and mitigation actions. It must also inform and alert, on a regular basis, the Board of Directors and the Statutory Audit Board of the more relevant observations and recommendations, identifying improvement opportunities.
The Planning and Management Control (PMC) department promotes and supports the integration of the risk management activities in the planning and management control processes of the companies. This department, supported by robust information systems, produces reports containing operational, financial and compliancerelated information. Through its Procedural Manual, defines and implements a set of rules and procedures relative to the planning processes, reporting, management accounts and investment approval process.
Ongoing monitoring activities of control are in place, namely: 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.
The centralised accounting back-office, Shared Service Centre (SSC) 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.
The reliability and integrity risks of the accounting and financial information are also evaluated and reported by the External Audit activity.
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 Whistle-blower (reporting of irregularities) 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, the Board of Directors, though the Board Audit and Finance Committee, monitors the activities of Internal Audit and Risk Management.
The Internal Audit and Risk Management departments report functionally to and meet 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.
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 related to those activities.
The Statutory Audit Board is presented with the internal audit and risk management plan of activities, and may issue its opinion on it, in addition to the suitability of the resources allocated to the different activities.
The External Auditor reviews the effectiveness and operation of the internal control mechanisms according to work plan aligned with the Statutory Audit Board, to whom it also reports its findings.
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. Additionally, it is also each functional area of the Group the responsibility of controlling and monitoring of the risks inherent to each function.
Sonae Indústria's activity is reliant upon the macroeconomic environment and the profile of the markets in which it operates. Sonae Indústria's subsidiaries' products are fundamentally commodities, having the nature of durable goods, and are mainly intended for the construction and furniture sectors. The Group's operational activity is, therefore, cyclical, being positively correlated with general economic cycles and, in particular, with the evolution of the sectors mentioned. Thus, Sonae Indústria's and its subsidiaries' businesses can be negatively affected by periods of economic recession, in particular by a drop in household consumption levels which, in turn, are influenced, among other things, by wage policies and unemployment levels, as well as prevailing confidence and social protection levels. The availability of credit in the economy is also relevant for Sonae Indústria Group's business due to its potential impact on the property market. Sonae Indústria, through its subsidiaries, has a strong presence in international markets, where it produces and sells, contributing almost 80% of its consolidated turnover. Its most important markets are the Eurozone, North America (namely Canada and the United States) and South Africa. These markets have different macroeconomic, political and social profiles and, as such, are reacting differently to the global economic and financial crisis. In fact, the rate at which the various markets emerge from the current crisis depends on variables outside of Group's control. Equally, possible political and/or social and/or religious tensions in any of the markets may have a material impact on Sonae Indústria Group's operations and financial situation that is impossible to estimate.
The activity developed by Sonae Indústria through its subsidiaries faces stiff competition in all the markets in which it is present (namely in Iberian Peninsula, Germany, Canada and South Africa),which could have adverse effects on the Group's financial situation and results to the extent that new competing factories and/or the adoption of a more aggressive pricing policy by these competitors, could lead to a reduction in turnover and/or the need to review prices by Sonae Indústria's subsidiaries, with a knock-on effect on the profitability and sustainability of its operations. Based on Sonae Indústria's diversified assets and geographical exposure to various European markets, but also the North American and South African markets, and also others through exports, as well as the initiatives taken with respect to resizing the industrial presence by closing and selling the least profitable units, the increased focus on higher added value products as a way of differentiating, and the effort to contain costs as part of a strategy already being implemented, could protect the competitive position of the Company and allow it to achieve its objectives of being recognised as a reference player in the wood-based panels sector. It must also be mentioned that the potential closure or sale of industrial units by Sonae Indústria as part of the ongoing Strategic Plan may affect its market position, where it has a presence, since such closures and/or sales may mean a reduction in installed production capacity and a loss of market position compared to its competitors. This loss of market position may have adverse effects on the Group's profitability, since competing companies may adopt a more aggressive strategy in terms of pricing and supply policy within these markets, with consequences for the sustainability of the Group's turnover and cost structure.
Some of the businesses developed by Sonae Indústria may require additional investment, the conditions of which could depend on the financial framework, on its current indebtedness level and by the evolutions of its activity and that of its subsidiaries. Financing of the additional component may be obtained through its own and/or external capital. Sonae Indústria cannot guarantee that these funds, if necessary, will be obtained, or that they will be subject to the predicted conditions. If there is a need for external capital, the current macroeconomic and financial framework involves a set of constraints, namely a lack of liquidity and the resulting increase in spreads charged to the companies, which may affect or preclude access to bank credit and/or issues of commercial paper. Even under a recovery context, the speed and manner in which this takes place is subject to considerable uncertainty, meaning the financing of Sonae Indústria and/or of its subsidiaries possible future investments cannot be guaranteed.
Since industrial activity in the sector is dependent on considerably large factory units, Sonae Indústria's consolidated cost structure has a significant fixed component, i.e. not dependent on sales volume and upon which the Group can only act through restructuring or efficiency increase initiatives. An insufficient turnover or gross margin on sales to offset fixed costs could determine losses that could be sustained by Sonae Indústria and its subsidiaries.
On the other hand, the variable cost structure of the subsidiaries of Sonae Indústria, notably in the case of raw materials, mainly wood, chemicals and air-dried paper, is exposed to external factors (that are outside the company´s control), with a positive or negative impact on the availability of such raw materials and their purchase price. In particular, the risk associated with access to wood, the raw material essential to the production process, in terms of suitable quantity, type, quality and price, could have ramifications not only for the subsidiaries ability to provide its customers with products according to agreed time frames and conditions, but could also affect expected profitability when it comes to setting a sale price for its products. In an extreme scenario, the inability to access wood in sufficient quantities could lead to a temporary interruption in production at the industrial unit in question, with knock-on effects for operational profitability. To mitigate this risk, Sonae Indústria's subsidiaries have diversified their supply sources and the types of wood used, namely through recycling waste, and introducing different types of wood and alternative by-products.
The ability of Sonae Indústria to develop and offer higher added value products on competitive terms at global level is an increasingly crucial objective in the current context of the wood-based materials sector. This is dependent on technological developments, which may be difficult to predict and monitor. Failure by Sonae
Indústria to monitor and anticipate technological advances, or to predict the receptiveness of new products, could affect its business and the results of its operations.
Sonae Indústria's activities are subject to certain operational risks, especially with respect to industrial production of its subsidiaries. There are multiple factors, not directly controllable by Sonae Indústria nor by its subsidiaries, which may interrupt production and have potentially negative effects on operations and, consequently, its financial situation and results. The manufacture of wood-based panels is an industrial activity that entails high operational risk due to the possibility of accidents involving fire or explosions. As a result, the management of operational risk is a central concern of the Company, which takes an active stance in terms of implementing regulations and best practice, as well as selecting systems capable of reducing industrial risks. In addition, flawed policies for the management and control of operational risks could affect the Group's business and operational results.
The main financial risk that Sonae Indústria is exposed to is the risks associated with its customer portfolio, namely credit risk. The credit risk is related to receivables from customers, i.e. the risk that a customer is late in paying or does not pay for the goods and services acquired, basically due to a lack of liquidity. Sonae Indústria Group's credit risk control systems are, above all, related to receivables from customers, having as main purpose to guarantee the effective collection of the receivables from customers in accordance with the agreed conditions. Among other procedures implemented by Sonae Indústria to mitigate this risk, Sonae Indústria makes use of credit insurance, as a mandatory tool to mitigate this risk, in all regions where it is present and such insurance is available. 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.
It should be noted that none of Sonae Indústria Group's customers represent more than around 8% of its consolidated turnover. Sonae Indústria has been signing multi-annual supply contracts with its largest customers, being the most recent one in place until 31 August 2018. Despite the greater spread of the customers' base, the possible non-renewal of these agreements could impact upon the profitability of Sonae Indústria's business.
The second financial risk is related with the existence of financial covenants in Sonae Indústria financing agreements.
The refinancing agreements signed during 2014 with the two main creditor banks include one financial covenant. Sonae Indústria undertakes to maintain a Financial Autonomy Ratio, calculated annually from 31 December 2015 onwards, higher than 6.97%. The non-compliance with this financial autonomy ratio requirement may lead to an event of default of the contractual obligations assumed in the before mentioned refinancing agreements, which could lead to its termination, including the early repayment of the associated financial debt.
The economic 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. As such, and as an exception to its general rule, Sonae Indústria Group may engage into interest rates derivatives, and is this case, the following principles should be observed: (i) derivatives should not be used for trading, profit making, or speculative purposes; (ii) engage preferably in derivative transactions with Investment Grade financial institutions; (iii) match exact periods, settlement dates and base interest rate of the underlying exposures; and (iv) maximum financial charges (aggregate of the
derivative and the underlying exposure) should be known and limited on the inception of the hedging period. The inefficiencies, whenever they exist, are booked under the financial results item of the consolidated income statement
Foreign Exchange Risk exposure is due to the fact that it is a geographically diversified group, with subsidiaries located in three different continents, and as such it is subject to transactions and balances denominated in pound sterling, South African rand, Canadian dollar, American dollar, Swiss franc and polish zloty. The Consolidated Statements of Financial Position and Income Statement are exposed to the risk of a change in exchange rates (risk relative to the value of capital invested in subsidiaries outside the Eurozone) and Sonae Indústria's subsidiaries are exposed to the risk of a change in both exchange and transaction rates (risk associated with commercial transactions made in currencies other than the euro). Transaction risk arises when there is exchange risk related to a cash flow in other than a subsidiary local currency. The Group company 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 hedging, reducing the Group's transaction risk. In line with this reasoning, Sonae Indústria's subsidiaries only contract debt that is denominated in the respective local currency. Also, in situations where there is a relevant exchange risk as a result of operational activity involving currencies other than the local currency of each subsidiary, the exchange risk must, as a general rule, be mitigated by the subsidiary exposed to the exchange rate risk contracting foreign exchange derivatives. In turn, the currency conversion risk emerges from the fact that, when preparing the Group's consolidated accounts, the financial statements of the subsidiaries denominated in currencies other than that of the consolidated accounts (euro), must be converted into euros. As exchange rates vary between accounting periods and as the value of the subsidiaries' assets do not match their liabilities, volatility in the consolidated accounts arise as a result of conversion in different periods at different exchange rates.
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. For several years now the Group has maintained a series of bank and commercial paper credit facilities to meet treasury needs, for terms typically of up to one year, renewable with the agreement of the respective credit entities. These entities, most of which are also involved in medium and long term loans, are contractually entitled to not renew these credit facilities on maturity, although they have always ensured its renewal or replacement. Furthermore, it is not possible to foresee the level of subscription for commercial paper to be issued by the Company. In case these operations are not renewed, Sonae Indústria will have to find alternative short term financing sources so as to meet its debt service obligations. The Company believes that gains in operating performance attained over the last quarters will have a positive effect on the probability of renewing short term credit facilities as well as on the possibility of contracting additional short term financing facilities with other banks, as already accomplished in 2015. On the other hand, the possible execution of the agreement signed with Arauco Group, which has been disclosed to the market, to set up a strategic partnership involving wood based panels and related activities in Europe and South Africa, will bring about the renegotiation of most of the Group's bank debt. The company estimates that the possible conclusion of these renegotiations with present and new creditor banks, along with a reduction in global debt to be accomplished as a result of an increase in share capital of subsidiary Tableros de Fibras, S. A. for EUR 137.5 million to be subscribed for by Arauco, as stated on the signed agreement, will contribute to a significant improvement in the Company's debt maturity profile and cost.
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.
The activities of Sonae Indústria and its subsidiaries are, as industrial activities, subject to regulatory frameworks in a number of areas, including national regulations, European Union directives and international agreements, by which Sonae Indústria is bound and which may influence its management and strategic decisions. Indeed, Sonae Indústria, through its subsidiaries, is subject not only to different legal frameworks in countries as diverse as Canada, South Africa, Germany, Spain, Portugal or France, but also to legislation in different areas, such as industrial and forestry, environmental, labour, hazardous materials transportation, health and safety, construction and housing, urban planning, among others. The non-compliance with such regulations could lead
to operational restrictions, investment needs or even the revocation of licences, authorization or permits or in sanctions. Possible changes to regulations, legislation, or changes in interpretation on the part of competent authorities, the position of authorities or difficulties in complying with new laws and regulations could lead to increased adjustment costs, namely industrial and operational, or, in the limit, constricting the respective operating income, which could have an adverse impact on Sonae Indústria and its subsidiaries activity and operating results. It should be highlighted the on-going regulatory changes of both REACH1 , on the reclassification of formaldehyde as dangerous substance and of the European Industrial Emissions Directive2 in the definition of the best practices in the wood based panels sector. In the reclassification of formaldehyde – substance used in the manufacturing process of urea-formaldehyde resins, which are the bonding agent of the vast majority of the products manufactured by the Sonae Indústria – there is already a recommendation to reclassify this substance as "category 1B carcinogen" (presumed to have carcinogenic potential for humans, classification largely based on animal evidence)3 .This substance reclassification has entered into force from 1 January 2016 onwards. This reclassification may have consequences both in the definition of the emission standards of Sonae Indústria's industrial operations, and on the restrictive levels of concentration of formaldehyde in the workplace environments. These changes may lead to additional investments needs in Sonae Indústria's manufacturing units. Although a general ban on the utilization of formaldehyde may be a possible theoretical scenario, it is not considered a likely one, being more foreseeable that such regulatory changes result in restrictions as the ones previously described. As for the definition of the best possible practices in the wood based panels sector, Sonae Indústria considers that additional investment may be required to comply with such practices, in a period between two to five years, with the aim of incorporating some of those practices in the activities where they are not currently considered.
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.
3 In experiences performance on animals in relation to which there are enough evidence to support carcinogenicity consequences to animals (presumed carcinogenic for humans).
1 Registration, Evaluation, Authorisation and Restriction of Chemicals; Regulation (CE) n. 1907/2006, of 18 December or Decree-law n. 293/2009, of 13 October.
2 Directive n. 2010/75/EU.
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:
Sonae Indústria adopts global and local insurance policies as a support to its processes of risk management 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 Integrated Risk Management (which includes the area of Insurance Management).
Operational Risk Management reports directly to the company Industrial Manager, in order to be focused on developing and implementing measures to mitigate risks in industrial operations.
A formally coordinated network of Country Risk Officers exists (for Germany and South Africa only) and at each of the sites there is a dedicated Plant Risk Officer.
The Operational Risk Management is also related to the Corporate Department GTech ("Group Technology"). This department is responsible for the implementation and sharing of industrial best practices and procedures, through an effective coordination with local teams, namely 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.
Sonae Indústria has also established an autonomous Continuous Improvement team, which 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 risk management is encompassed into the Internal Audit & Risk Management area.
The goal of the insurance management, which is included in the Integrated Risk management area, 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 2015 to achieve the goals set as regards risk control environment.
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 2015.
The CORS were developed with reference to international standards such as NFPA4 and/or FM5 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 risk management and insurance market fields. 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:
4 National Fire Protection Association.
5 Factory Mutual.
With the objective of complementing the above standards, specific standards that define the ideal protection per type of industrial equipment, started to be developed and implemented in 2015. This information is developed by the Operational Risk Management department together with GTech department, based on the existing equipment suppliers' best-practices and recommendations. These standards expedite the investment approval process, as the industrial already have the specifications necessary for the installation, thus promoting the standardization of the systems.
Under the scope of the risk reduction plan adopted by Sonae Indústria, namely prevention of risk of explosions, a specialized reference company has been selected to implement the mitigation measures. The execution of this plan was started in 2015 in Oliveira do Hospital and Beeskow industrial units.
In 2015, Sonae Indústria incident communication report procedure was revised to include additional and relevant information for the investigation of the accidents occurred in all industrial units.
As part of this procedure, on top of the incidents' report, it was included the report on "Near Misses". The analysis and sharing of this information allows a preventive action to reduce the number of incidents in the group.
It was implemented a monthly report, for each industrial unit, with four improvement actions implemented with the objective of eliminating risk situations. The report compiled with information on all industrial units is shared monthly within all Sonae Indústria group, promoting the benchmark of the corrected situations.
It was also developed and implemented a corporate report that compiles all events occurred in the month, related with people and assets, with identification of the root causes, consequences and mitigation measures implemented. The same reports include a monthly follow-up on these areas indicators.
These reports were widespread with all industrial units and shared with all employees to promote the identification of similar situations.
As Sonae Indústria changed from a Global Insurance program to Local Insurance programs, there is no longer in place a common evaluation to all industrial units.
This evaluation program is now performed in each geography by risk engineers from the insurance companies that are responsible for the corresponding policies in place. Depending on the geography and on the insurance companies, this process of risk evaluation can be either performed on an annual or quarterly basis.
These evaluation results are then translated into recommendations que continue to be scheduled in the Risk plan of each industrial unit.
Following the change to local programs, and to define an evaluation criterion between all industrial units, it was implemented a common internal evaluation process for Safety, Operational Risk Management and Environment area.
During 2015 five industrial units were evaluated according to this new process.
The visits results are reported and a follow-up of the identified commendations is performed.
Each individual plant plan defines a set of measures to be taken towards achieving full compliance with the Corporate Operational Risk Standards, with corporate directives published and with recommendations that result from the internal risk inspections. The main objectives encompass:
Improving Sonae Indústria's Installations Risk Standard with a view to increasing employee and asset safety, and avoiding eventual periods of business interruption;
In 2015 this process was reviewed and is now part of the investment needs preparation for the following year.
For Sonae Indústria, the implemented internal control environment that also covers the process of preparation and disclosure of financial information, is a transversal set of procedures implemented by the Group executive governing bodies, supported in principles of coherence, consistency, transparency, accountability, honesty, integrity, reliability and relevance, aiming to verify the reliability and the accuracy of the financial information, the compliance with accounting rules and regulations, without letting to promote the operational effectiveness. The internal control system seeks to ensure the good management practises and procedures, the compliance with the management established policies and to obtain reasonable assurance relating to the preparation of financial statements, in accordance with adopted accounting principles, and warranting the quality of financial reporting.
In this internal control system, the Group's first point of control is associated with organization, procedures and with the tasks related with the decision processes and execution which they end up to translate, in a systematic, controlled and validated way, in the authorizations of the operations by management.
It is then tried to ensure that those management operations translate into procedures and movements related with accounting and financial records which, in result, are elaborated in a way to allow a reasonable level of certainty that operations are executed in accordance with a general or specific management authorization, that operations are registered in order to enable an appropriate financial statements preparation in accordance with the generally accepted accounting principles and to keep an adequate accounting record of the company financial situation. The accounting evidence of the company financial situation is compared, in frequent time intervals, with existent assets and liabilities and appropriate measures are taken so that relevant material differences are verified.
The reliability, independence, integrity and the opportunity of the financial information are guaranteed through the clear separation between who executes the operations, prepares the information and its internal users (and naturally external), and even through the realization of several control activities throughout the process of preparation, validation and disclosure of financial information.
The internal control system for the accounting and preparation and disclosure of financial information includes the following key controls:
The financial, accounting and management information is reviewed regularly by the management of each business unit and by the persons in charge of the profit centres, ensuring continuous monitoring and related budget control;
During the process of preparation and review of financial information, detailed schedules are established by the Consolidated Accounts Department, which are shared with the areas involved, being all documents reviewed in detail, including the review of principles used, verifying the accuracy of the information and its consistence with principles and policies defined in the Group's accounting policies document and followed in previous periods;
Among the risks that may materially affect the financial and accounting report preparation, the following are worth highlighting:
Balances and transactions with related parties balances and transactions with related parties are disclosed in the notes to the financial statements. These transactions are related mainly to the operational recurrent activities of the Group, and to the granting and obtaining of loans under arm's length conditions and supported in good transfer pricing practices.
Compliance and updated rules and accounting policies The accounting policies produced by the different regulators are permanently updated. Financial statements are presented according with the last available versions and whenever such impacts the disclosure of the financial information reports, to prevent incompleteness, inaccuracy or ill-time of the financial statements, as referred in the notes to the financial statements.
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 email: [email protected]
The company keeps a record of the requests made to the Investor Relations Department and how each request was dealt with. In 2015 the Department received contacts and requests for clarification from 15 investors, of which 6 were non-resident. In overall terms, the average response time to the information requests from investors was less than 48 hours. No information requests from earlier years are pending.
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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)
62. Place where information regarding the identification of the members of the governing bodies, the Representative for the Relations with the Capital Markets, the Investor Relations Department or its equivalent, respective roles and contact details is available
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)
63. Place for disclosure of the company financial statements, which must be available for at least five years, as well as the half-year calendar of corporate events, released at the beginning of each semester, which must include dates of shareholders' general meetings and dates of release of annual, half-year and, if applicable, quarterly results
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) http://web3.cmvm.pt/sdi/emitentes/emit_contas.cfm?num_ent=%25%23D%3FT%21%3D%3C%20%0A
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=2,0,102 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,102 (English version) http://web3.cmvm.pt/sdi/emitentes/emit_convocatorias.cfm?num_ent=%25%23D%3FT%21%3D%3C%20%0A
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=2,0,102 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,102 (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.
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 on 31 of March 2015 for the mandate 2015-2017. Currently this committee is composed by Efanor Investimentos - SGPS, SA, represented by Duarte Paulo Teixeira 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 Paulo 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. Paulo 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 2015 the Remuneration Committee presented a declaration concerning the remuneration and compensation policy of the governing bodies and the Persons Discharging Managerial Responsibilities, and a share attribution plan.
However, the shareholder Efanor Investimentos, SGPS, S.A., taking into consideration that Sonae Indústria's restructuring plan is nearing completion, considers that the main objective of the organization should now be to increase the productivity and profitability of the existing businesses in order to create value for its shareholders. Thus, the variable component of the remuneration of the executive directors should be aligned with those strategic objectives. And, considering that the indexation of that variable component to the trading price of the shares of Sonae Indústria, SGPS, SA, is not the most direct way to ensure the referred to alignment, as an alternative to the proposal submitted by the Shareholders' Remuneration Committee of Sonae Indústria, it proposed the approval of the statement on the remuneration and compensation policy to be applied to the
Company's Statutory Governing Bodies and to Persons Discharging Managerial Responsibilities that presented and which was approved at the General Meeting.
The remuneration and compensation policy to be applied to the Statutory Governing Bodies of Sonae Indústria and other Senior Management 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 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 of comparable companies issuers of securities listed at the stock market.
The fixed remuneration of the Directors is fixed in function of their level of responsibility, is subject to annual review and is placed in the median position in comparable circumstances.
Besides the fixed remuneration, the executive directors participate on an incentives plan, with a variable component, which is divided in three elements, one of short term, other of medium term and other of long term. The total remuneration is placed in the respect to the fixed remuneration in the median, and in the ninth deciles in respect to the variable component, being the total remuneration placed in the third quartile in comparable circumstances.
The fixed remuneration and the incentives plan are decided by the Shareholders' Remuneration Committee in coordination with the Board Nomination and Remuneration Committee.
The incentives plan, 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.
This incentives plan is established based on a set of performance indicators at business level, mainly of an economic and financial nature, also named by "Key Performance Indicators of Business Activity" (or Business KPIs), as also at individual level named as "Personal Key Performance Indicators" (or 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 for the organisation and the compliance with the laws that apply to the Company's activities.
The award of the incentives plan 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.
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 additional benefits system, particularly retirement benefits, in favour of the members of the governing bodies or other "Senior Management", without prejudice of the Shareholders' Remuneration Committee having the option to proceed with the payment of part of the amounts due through the attribution of retirement saving plans.
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.
The definition of the remuneration and compensation policy of members of the Company's statutory bodies, the main objective is to seize talent with high performance level, which represent a relevant and material
contribution to the sustainability of the Company's businesses. With that in mind, remuneration parameters of statutory bodies are set and periodically reviewed in accordance with remuneration practices of comparable national and international companies, aligning, in individual and aggregate terms, the maximum target amounts to be paid to members of the statutory bodies, with market practices, differentiating on an individual and positive manner the members of statutory bodies according to, amongst others, the respective profile and curriculum, the nature and job description and the responsibilities of the relevant statutory body and of the member itself, and the direct correlation degree between individual performance and businesses performance.
To determine the global market reference values is considered the average of values applicable to top management in Europe. The companies considered as peers for remuneration purposes are those included in the group of companies which are listed in Euronext Lisbon, being the maximum potential amounts to be paid to members of the statutory bodies the following, according to market references:
| Board of Directors | Components | Market Positioning |
Circumstances when the amounts are due |
|
|---|---|---|---|---|
| Executive Directors | Fixed | Base Remuneration | Median | N/A |
| Variable | Short Term Variable Component |
Ninth Deciles | Compliance with objective and subjective KPIs |
|
| Medium Term Variable Component |
Compliance with objective KPIs |
|||
| Long Term Variable Component |
Compliance with objective KPIs |
|||
| Non-Executive Directors | Fixed | Remuneration | Median | N/A |
| Statutory Audit Board | Fixed | Remuneration | Median | N/A |
| Statutory External Auditor |
Fixed | Remuneration | Median | N/A |
The Company will not assume any contractual responsibilities which are based on and have as effect the enforceability of any payments regarding dismissal or termination of functions of directors, notwithstanding the legal responsibility regime applicable to the dismissal of directors without due cause.
As for the Company's Statutory Governing Bodies, the approved policy establishes the following:
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 which comprises three elements, (ii.1) a first element of Short Term, awarded in the first half of the year following the year to which it relates (the "Performance Year"), subject to the accomplishment of the objectives fixed for the Performance Year, paid immediately after its award, (ii.2) a second element of Medium Term, awarded in the first half of the year following the year to which it relates, subject to the accomplishment of the objectives and paid after a 3 years deferral period, and (ii.3) a third element of Long Term, awarded in the first half of the year following the year to which it relates, subject to the accomplishment of the objectives fixed in each of the following five years and paid five years after its award.
(i) The fixed component of the remuneration (FR) of the EDs 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 component of the remuneration (VR) is designed to motivate and reward the EDs to achieve predetermined objectives and reinforce the alignment of the EDs with the shareholders' interests and increasing their awareness of the importance of their performance in a sustainable manner on the overall success of the organisation. These objectives should be based on indicators of Company performance, of the working teams under their responsibility and of their own personal performance. This variable component will be awarded after the annual accounts are closed and after their performance evaluation has been completed.
The target value of the short term variable bonus equals, the maximum, to 1/3 of the target value of the total variable component.
The amount of the variable bonus of EDs without a specific geographic responsibility is based on the Company consolidated KPI's, resulting 50% from the Operational Cash Flow, 20% from Fixed Costs and 30% of the other performance indicators to be annually defined by the Shareholders' Remuneration Committee. Thereafter, a multiplication factor will be applied. This multiplication factor results from the individual 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, the calculation is similar to the previously described but the combine result of the Company's Operational Cash Flow and consolidated Fixed Costs has a weight of 50%, of which 35% for the Operational Cash Flow and 15% for Fixed Costs, the weight of the relevant geography represents the 20%, of which 15% is allocated to the Operational Cash Flow and 5% to Fixed Costs, and the remaining 30% depend on the other performance indicators, namely related to the performance of the working teams under the responsibility of the ED, to be annually defined by the Shareholders' Remuneration Committee. The multiplication factor resultant from the individual performance assessment is applied in the same way.
The Medium Term Variable Bonus (MTVB) is designed to reinforce the alignment of the EDs with the strategic objectives of the company and the interests of the shareholders. The payment of the amount awarded is deferred for 3 years and adjusted proportionally in each one of the three years following the year to which it relates, in the portion of one third in each year. The indicators to be used are: (i) the increase of the theoretical value of the shareholders' funds (calculated using a multiple of Recurrent EBITDA), which will have a weight of 60%, and (ii) the increase of productivity in euros at constant prices by employees, with a weight of 40%.
The Long Term Variable Bonus (LTVB) is designed to increase the awareness of the importance of performance in a sustainable manner on the overall success of the organisation. The amount of this bonus in euros is equal to the Short Term Variable Bonus awarded, will be deferred for a 5 years period and will only be due if the company registers consolidated profits in all years during the deferred period and if such profits are, in each year, in an amount equal or higher than 20% of the consolidated Shareholders' Funds registered in the beginning of the year they respect to.
Considering all the elements of short, medium and long term of the variable component, the target values set in advance range between 50% and 70% of the total annual remuneration (fixed remuneration and variable component target value).
In respect to the calculation of the results the total value awarded is limited to the minimum 0% and the maximum of 200% of the total target value set in advance.
The payments may be made by any of the forms of termination of an obligation as set forth in the law and in the Company's articles of association, at the Shareholders' Remuneration Committee criteria, who may, namely, at
its free criteria, fix the receipt of any of the parts of the variable component through the sale of shares of Sonae Indústria, SGPS, S.A. a discount. This discount corresponds to a contribution to the acquisition of shares that will be supported by the persons to whom variable component remuneration was awarded, which shall correspond to a percentage of the trading price of the shares, at the date of the share transmission, up to a maximum percentage of 5% of such value.
The right of receipt of the deferred parts of the variable component remuneration expires if the contractual link between the member and the company ceases before its vesting date.
However, this right will remain valid in case of permanent incapacity or death of the member, in which case the payment is made to the member himself or to his/her heirs on the vesting date.
In case of retirement of the member, the awarded right can be exercised in the respective vesting date.
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. Fixed Remuneration may be increased by up to 5% for those NEDs serving as Chairman of any Board Committee. There is no remuneration as variable bonus.
The remuneration of the members of the Company's Statutory Audit Board shall be based exclusively on fixed 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 amount, based on the Company's situation and benchmarked against the market.
Under the terms of Paragraph 3 of Article 248.º - B of the Portuguese Securities Code, in addition to the members of the Statutory Governing Bodies mentioned above, Persons Discharging Managerial Responsibilities also includes individuals who have regular access to Privileged Information and are involved in taking management and business strategy decisions at the Company.
The remuneration policy applicable to other individuals who, under the terms of the law, are considered to be Persons Discharging Managerial Responsibilities, shall be equivalent to the one adopted for other managers with the same level of function and responsibility, without awarding of any other additional benefits in addition to those which result from the respective Management Level.
The executive directors of Sonae Indústria's subsidiary companies are also eligible to be awarded the variable component, as well as, and in accordance with the remuneration policy approved by the Board of Directors, the employees who, through that policy, are entitled to the incentives plan are also eligible for the award of the referred to component.
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 and the Long-term Variable Bonus is deferred for a 5-year period.
The remuneration policy approved at the General Annual Meeting of 2015 no longer contemplates the remuneration in the form of shares, being still open the share attribution plans mentioned in item 86. To ensure the effectiveness and transparency of the remuneration and compensation policy, the executive directors have not entered and should not enter into agreements with the company or with third parties with the objective of mitigating the risk inherent to the variability of the remuneration that is fixed by the company.
The company does not attribute options.
The parameters and explanation of the annual bonus system are outlined in the remuneration policy in point 69.
76. Main characteristics of the complementary long-term or advanced retirement plans for directors and date of approval at the shareholders' general meeting for each individual
The company has not implemented any supplementary pension or early retirement regime.
| 2015 | Total Fixed Annual Remuneration |
Total Short Term Variable Bonus |
Total Medium Term Variable Bonus |
Total Long Term Variable Bonus |
Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2015 | 2014 (a) | 2015 (b) | 2014 (c) | 2015 (d) | 2015 (e) | 2014 | 2015 | |||
| Belmiro de Azevedo (f) | 182,200 | 44,800 | 182,200 | 44,800 | |||||||
| Paulo Azevedo | 28,300 | 45,685 | 28,300 | 45,685 | |||||||
| Javier Veja | 31,000 | 29,565 | 31,000 | 29,565 | |||||||
| Albrecht Ehlers (g) | 41,400 | 40,860 | 41,400 | 40,860 | |||||||
| Carlos Moreira da Silva (h) | 0 | 30,900 | 0 | 30,900 | |||||||
| José Romão de Sousa (i) | 0 | 24,125 | 24,125 | ||||||||
| Rui Correia | 276,880 | 276,900 | 110,000 (1) | 123,640 (4) | 165,000 (7) | 165,000 (10) | 123,640 (13) | 551,880 | 689,180 | ||
| Cristopher Lawrie | 222,905 | 223,220 | 89,990 (2) | 121,682 (5) | 89,990 (8) | 108,258 (11) | 121,682 (14) | 402,885 | 574,842 | ||
| Jan Bergmann (j) | 250,000 | 250,000 | 93,264 (3) | 112,400 (6) | 139,896 (9) | 150,000 (12) | 112,400 (15) | 483,160 | 624,800 | ||
| Total of Board of Directors | 1,032,685 | 966,055 | 293,254 | 357,722 | 394,886 | 423,258 | 357,722 | 1,720,825 2,104,757 |
(a) Relative to 2014, amount approved and paid in 2015.
(b) Relative to 2015, estimated value subject to real KPI achievement and to subsequent approval by the Shareholder's Remuneration Committee.
(c) Relative to 2014, approved in 2015, deferred for the three-year vesting period until 2018.
(d) Relative to 2015, the initial amount is deferred for 3 years and adjusted proportionally in each one of the 3 years following the year to which it relates, in the portion of one third in each year. The indicators to be used are: (A) the increase of the theoretical value of the shareholders' funds (calculated using a multiple of Recurrent EBITDA), which will have a weight of 60%, and (B) the increase of productivity in euros by employee with a weight of 40%.
(e) Relative to 2015, the initial amount to be allocated will be deferred for a 5 years period and will only be due if the company registers consolidated profits in all years during the deferred period and if such profits are, in each year, in an amount equal or higher than 20% of the consolidated shareholders' funds registered in the beginning of the year they respect to.
(f) Relative to three months in 2015.
(g) Out of the amount paid in 2014, 29,100 Euros were paid by Sonae Indústria, SGPS, SA and 12,300 by Glunz AG. Out of the amount earned in 2015, 28,560 Euros were paid by Sonae Indústria, SGPS, SA and 12,300 Euros by Glunz AG.
(h) Amount not yet paid.
(i) Relative to nine months in 2015.
(j) Amounts fully paid by Glunz AG.
(1) Fixed from the target value of the year in the amount of 110,000 Euros. (2) Fixed from the target value of the year in the amount of 108,258 Euros.
(3) Fixed from the target value of the year in the amount of 100,000 Euros.
(4) Fixed as from the target value of the year in the amount of 110,000 Euros.
(5) Fixed from the target value of the year in the amount of 108,258 Euros.
(6) Fixed from the target value of the year in the amount of 100,000 Euros.
(7) Fixed from the target value of the year in the amount of 165,000 Euros.
(8) Fixed from the target value of the year in the amount of 108,258 Euros.
(9) Fixed from the target value of the year in the amount of 150,000 Euros. (10) Fixed from the target value of the year in the amount of 165,000 Euros.
(11) Fixed from the target value of the year in the amount of 108,258 Euros.
(12) Fixed from the target value of the year in the amount of 150,000 Euros.
(13) Amount equal to the Short Term Variable Bonus granted
(14) Amount equal to the Short Term Variable Bonus granted
(15) Amount equal to the Short Term Variable Bonus granted
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.
No indemnity was paid to the former executive directors upon termination of their functions during the year.
In 2015 the members of the Statutory Audit Board earned the following remuneration:
| Statutory Audit Board member | Remuneration/Euros |
|---|---|
| Manuel Heleno Sismeiro (Chairman) | 9,900 |
| António Trabulo* | 7,100 |
| Óscar Quinta* | 7,100 |
| Armando Magalhães** | 1,500 |
| Jorge Morgado** | 1,500 |
| TOTAL | 27,100 |
| *Appointed at the General Shareholders' Meeting of 31 March 2015 |
|
| ** Cessed duties at the General Shareholders' Meeting of 31 March 2015 |
In 2015 the Chairman of the Board of the General Meeting, in duty until the Annual General Meeting, earned the total remuneration of 1,250 Euros. The Chairman of the Board of the General Meeting elected in that General Meeting earned the total remuneration of 3,750 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.
84. Reference to the existence and description, indicating the amounts involved, of agreements between the company and members of the management bodies and other officers ('dirigentes'), in accordance to the terms of Article 248-B, number 3, of the Securities Code, which foresee compensation in case of resignation, ungrounded dismissal or termination of the work contract subsequent to a change in the company control (Article 245-A, number 1, paragraph l)).
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.
The remuneration policy approved at the Annual Shareholders' General meeting of 2015 does not contemplate any variable remuneration in the form of share attribution plan.
However, and taking into consideration that the previous policies contemplated such remuneration (denominated as Medium-Term Variable Bonus (MTVB)), it is still applicable for the plans that are open the rules established in the Share Attribution Plan that were subject to deliberation of the General Meeting in the year they refer to.
The main characteristics of the Plans that are still open are:
MTVB was one of the components of Sonae Indústria's Remuneration Policy. This component which differed from the others, as it had a restricted and casuistic character, being subject to the eligibility rules set out in the Plant.
MTVB allowed the eligible persons to share with shareholders, the value that is created as a result of their direct influence on the strategy definition and management of the underlying businesses, in the proper measurement of the annual assessment of their performance.
The executive directors of Sonae Indústria and of its subsidiary companies were eligible to be awarded the MTVB.
According with the remuneration policy approved by the Board of Directors, employees who, through that policy, were entitled to the present plan were also eligible for the award of the MTVB.
MTVB was set on an annual basis, for periods of three years. From the beginning of the third consecutive plan it would occur, at each moment, the coexistence of three plans of three years each.
The MTVB was valued at the date of attribution using prices which represent the price of the share, in the Portuguese stock market, considering for this effect the most favourable of the following: closing share price of the first day of trading after the General Meeting of Shareholders or the average closing share price (regarding the thirty-day period of trading prior to the General Meeting of Shareholders).
Members entitled to MTVB have the right to acquire a number of shares corresponding to the division between the amount of MTVB granted and the price of the share at the date of attribution calculated under the terms of the previous paragraph. Such right can be exercised three years after attribution, which may be adjusted, through the deferral period by the completion level of long term KPIs defined by the Shareholders' Remuneration Committee, in order to reinforce the alignment with the long term sustainability business objectives.
In line with the statement of a strengthens policy of the alignment of executive directors with the company's long term interests, the Shareholders' Remuneration Committee could, at its discretion, determine that the executive director contributed to the acquisition of shares up to a percentage that could not exceed 5% of its share price at the date of the share transmission.
If, after the granting date and before its exercise, dividends are distributed, changes in the nominal value of shares or in the share capital of the company occur or any other change in equity with impact in the economic value of the attributed rights, the number of shares attributed will be adjusted to an equivalent figure considering the effect of the mentioned changes.
On the vesting date of the MTVB, the company reserves the right to deliver, instead of shares, cash in the amount the equivalent to its market value at exercise date.
The acquisition right of the shares attributed by the MTVB become due three years after its attribution.
The right to exercise the acquisition right of shares granted under the plan expires if the contractual link between the member and the company ceases before the three year period subsequent to its attribution, notwithstanding situations included in the following paragraphs.
The right will remain valid in case of permanent incapacity or death of the member, in which case the payment is made to the member himself or to his/her heirs on the vesting date.
In case of retirement of the member, the attributed right can be exercised in the respective vesting date.
The current policy is extensive to all active plans regarding which shares have not yet been transmitted.
The company does not have plans to attribute share purchase options.
No control mechanisms are in place regarding an employee participation system in the company's share capital.
| CONTROL MECHANISMS AND PROCEDURES | I. | ||||
|---|---|---|---|---|---|
| ----------------------------------- | ---- | -- | -- | -- | -- |
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.
Monthly, all transactions and operational balances with related parties are identified and verified by a proper team of the company Shared Services Centre and validated with administrative teams of related entities when it refers to external operations.
The less recurrent transactions are subject to an ad-hoc and detailed analysis by the company's appropriate departments (always with the participation of the Tax Department in order to ensure compliance with the transfer prices policies in force) to support the possible transaction values. In the case of an asset transfer/alienation, these are also subject to an external and independent assessment.
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.
91. Description of the procedures and criteria applicable to the intervention of the supervisory body for the purpose of previous assessment of the transactions to be carried out between the company and the holders of a qualified shareholding, or entities related thereto , in accordance to the terms of Article 20 of the Securities Code.
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:
II. INFORMATION CONCERNING TRANSACTIONS
92. Indication of the section in the financial statements documents where the information regarding related parties transactions is made available
The information relative to related parties' transactions may be found in Note No 36 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 during the 2015 exercise. 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 an 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 whether that statutory provision is to be amended or prevails - without super quorum requirements as to the one legally in force - and that in said |
Comply | 13 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| 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 | 21 and 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 a view to their improvement. |
Comply | 15 and 27 to 29 |
| 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 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|
|---|---|---|---|
| members Board. |
II.1.6 The Board of Directors shall include a number of non-executive ensuring effective monitoring, supervision and assessment of the activity of the remaining members of the |
Comply | 17 and 18 |
| independent | II.1.7. Non-executive directors shall include an appropriate number of 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. |
||
| the request. | 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 |
Comply | 28 |
| 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 |
Not applicable |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| 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. |
||
| 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 and 33 |
| 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 an 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 | ||
| 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 | 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. |
Comply | 67 |
| II.3.3 A statement on the remuneration policy of the management and supervisory bodies referred to in Article 2 of Law No. 28/2009 dated 19 June, shall also include the following: |
Comply | 69 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| 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; |
||
| 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. |
Not applicable | |
| 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 |
| III.3 The variable component of the remuneration shall be reasonable overall in relation to the fixed component of the remuneration |
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.
and maximum limits shall be set for all components.
Comply 69 and 72
Comply 69
Comply 69
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| 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 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. |
Comply | 44 |
| 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 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| 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 | 59 to 65 |
| 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 Statement of Financial Position Separate Income Statement Separate Statement of Comprehensive Income Separate Statement of Changes in Shareholders' Funds Separate Statement of Cash Flows Notes to the Financial Statements
SEPARATE STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2015 AND 2014
(Values in EUR)
| ASSETS Notes 31.12.15 31.12.14 NON CURRENT ASSETS: Tangible assets 3 703 1.339 Intangible assets 4 0 0 Investment in associates 6 664.493.068 545.741.926 Available-for-sale investments 6 122.922 122.922 Deferred tax assets 7 2.652.466 4.743.026 Other non current assets 8 284.895.781 378.640.939 Total Non Current Assets 952.164.940 929.250.152 CURRENT ASSETS Trade debtors 9 25.423 24.856 Other debtors 9 11.272.734 11.914.800 Income tax receivable 9 1.311.088 921.022 Other current assets 10 102.685 408.960 Cash and cash equivalents 11 164.408 34.598 Total Current Assets 12.876.338 13.304.235 Total Assets 965.041.278 942.554.387 SHAREHOLDER'S FUNDS AND LIABILITIES SHAREHOLDER'S FUNDS: Share Capital 812.107.574 812.107.574 Legal reserve 3.131.757 3.131.757 Other reserves and retained earnings -432.356.410 -199.435.134 225.852 177.210 Accumulated other comprehensive income Total Shareholder's Funds 12 383.108.773 615.981.407 NON CURRENT LIABILITIES Bank loans - long term - net of current portion 13 4.873.284 114.099.921 Debentures - long term - net of current portion 13 147.604.120 Total Non Current Liabilities 4.873.284 261.704.041 CURRENT LIABILITIES Current portion of long term bank loans 13 7.536.111 7.270.202 Bank loans - short term 13 212.354.481 39.969.550 Current portion of long term debentures 13 147.987.525 0 Trade Creditors 14 185.374 448.843 Other creditors 15 206.170.531 13.995.609 Income tax payable 15 489.624 834.858 Taxes and other contributions payable 15 34.613 57.403 Other current liabilities 16 2.300.962 2.292.474 Total Current Liabilities 577.059.221 64.868.939 Total Liabilities 581.932.505 326.572.980 Total Shareholder's Funds and Liabilities 965.041.278 942.554.387 |
|||
|---|---|---|---|
(Values in EUR)
| Notes | 31.12.14 | 31.12.14 | |
|---|---|---|---|
| Operating Income: | 0 | 0 | |
| Other income and gains | 22 | 229.308 | 91.996 |
| Total operating income | 229.308 | 91.996 | |
| Operating Costs: | - | - | |
| External supplies and services | -828.587 | -491.496 | |
| Staff expenses | 20/21 | -1.222.140 | -1.272.464 |
| Depreciation and Amortization | 3/4 | -636 | -1.462 |
| Other expenses and losses | 22 | -386.153 | -644.211 |
| Total operating costs | -2.437.517 | -2.409.632 | |
| Operating profit/(loss) | -2.208.209 | -2.317.637 | |
| Financial profi/(loss) | 23 | 1.332.878 | 1.220.518 |
| Financial expenses | -17.939.500 | -29.503.565 | |
| Financial income | 19.272.377 | 30.724.083 | |
| Gains and losses in associated companies | 24 | -232.471.666 | -131.619.660 |
| Profit/(Loss) before taxation | -233.346.997 | -132.716.779 | |
| Corporate income tax - current tax | 25 | 2.622.628 | 1.443.167 |
| Corporate income tax - deferred tax p |
25 | -2.090.560 | -784.210 |
| Net Profit/(loss) from continuing operations, after taxation | -232.814.929 | -132.057.822 | |
| Profit/(loss) for the period | |||
| -232.814.929 | -132.057.822 | ||
| Profit (loss) per Share | |||
| Excluding Descontinued operations | |||
| Basic | 26 | -0,02051 | -0,01163 |
| Diluted | -0,02051 | -0,01163 | |
| 31.12.15 | 31.12.14 | ||
|---|---|---|---|
| Net profit/(loss) for the period | 12 | -232.814.929 | -132.057.822 |
| Other comprehensive income | |||
| Other comprehensive income for the period, net of tax | 48.642 | 97.201 | |
| 48.642 | 97.201 | ||
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | - 232 766 287 | - 131 960 621 |
(Values in EUR)
| Acc ula ted oth hen siv e in um er c om pre com e |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sha apit al re c |
Leg al r ese rve |
Oth er R ese rves and ulat ed acc um ning ear s |
Ava ilab le-fo r sale fina ncia l ets ass |
Cas h flo w hed ge der ivat ives |
Pro ty per luat ion reva |
Act ial uar gain s / (los ) on ses ben efit sion pen plan s |
Sha f re o oth er hen si com pre inco of ve me ocia tes ass |
Inco tax me rela ted to oth er hen sive com pre inco me |
Oth er hen siv com pre e in e fo com r the riod pe |
Sub l tota |
Tot al s r's fun har eho lde ds |
||
| NOT ES |
12 | 12 | 12 | ||||||||||
| Bal s at 1 J 20 15 anc e a anu ary |
812 10 7 5 74 |
3 1 31 757 |
-19 9 4 35 134 |
177 21 0 |
17 7 2 10 |
61 5 9 81 408 |
|||||||
| Tot al c hen sive inc om pre om e / Lo Ne t pr ofit ss f or t he iod per Ot her reh ive inco co mp ens me |
12 | - 23 2 8 14 9 29 |
- 23 2 8 14 9 29 |
||||||||||
| To tal |
- 23 2 8 14 9 29 |
- 23 2 8 14 9 29 |
|||||||||||
| Oth ers |
-10 6.3 48 |
48 64 2 |
48 64 2 |
- 5 7 7 06 |
|||||||||
| Bal 31 De ber 20 15 s at anc e a cem |
12 | 812 10 7 5 74 |
3 1 31 757 |
-43 2 3 56 411 |
225 85 2 |
22 5 8 52 |
383 10 8 7 73 |
||||||
| Bal 1 J 20 14 s at anc e a anu ary |
700 00 0 0 00 |
3 1 31 757 |
-65 89 6 2 65 |
80 009 |
80 00 9 |
63 7 3 15 5 01 |
|||||||
| Tot al c hen sive inc om pre om e Ne ofit / Lo ss f he iod t pr or t per Ot her reh ive inco co mp ens me |
12 | - 13 2 0 57 822 |
- 13 2 0 57 822 |
||||||||||
| To tal |
- 13 2 0 57 822 |
- 13 2 0 57 822 |
|||||||||||
| Bal 31 De ber 20 14 s at anc e a cem |
12 | 812 10 7 5 74 |
3 1 31 757 |
-19 9 4 35 134 |
177 21 0 |
17 7 2 10 |
615 98 1 40 8 |
(Values in EUR)
| OPERATING ACTIVITIES | Notes | 2015 | 2014 | ||
|---|---|---|---|---|---|
| Receipts from trade debtors | -567 | 0 | |||
| Payment to trade creditors | 1.729.411 | 1.067.760 | |||
| Payments to staff | 1.175.910 | 1.121.122 | |||
| Net cash flow from operations | -2.905.889 | -2.188.882 | |||
| Payment/(receipt) of corporate income tax | -633.399 | -1.481.922 | |||
| Other receipts/ ( payments) relating to operating activities | 92.864 | 979.822 | |||
| Net cash flow from operating activities [1] | -2.179.625 | 272.862 | |||
| INVESTMENTS ACTIVITIES: | |||||
| Cash receipts arising from: | |||||
| Investments | |||||
| Tangible fixed assets and intangible assets | |||||
| Dividends | 24 | 258.962 | 363.644 | ||
| Cash payments arising to: | |||||
| Investments | 6 | 144.431.770 | 72.537.574 | ||
| Tangible fixed assets and intangible assets | 144.431.770 | 905 | 72.538.479 | ||
| Net cash flow from investing activities [2] | -144.172.808 | -72.174.835 | |||
| FINANCIAL ACTIVITIES | |||||
| Cash receipts arising from: | |||||
| Interest and similar charges | 2.628.520 | 1.199.882 | |||
| Increase in share capital | 110.634.172 | ||||
| Loans granted to related parties | 304.196.781 | 328.780.925 | |||
| Loans obtained | 1.293.733.981 | 1.600.559.282 | 3.357.148.292 | 3.797.763.271 | |
| Cash payments arising from: | |||||
| Interest and similar costs | 17.851.953 | 33.014.061 | |||
| Loans granted to related parties | 212.441.000 | 162.175.000 | |||
| Loans obtained | 1.223.763.752 | 3.530.758.383 | |||
| Others | 1.454.077.039 | 3.725.947.444 | |||
| Net cash used in financing activities [3] | 146.482.243 | 71.815.827 | |||
| Net increase in cash and cash equivalents (4) = (1)+(2)+(3) | 129.810 | -86.147 | |||
| Cash and cash equivalents - opening balance | 11 | 34.598 | 120.745 | ||
| Cash and cash equivalents - close balance | 11 | 164.408 | 34.598 | ||
| Net increase / decrease in cash and cash equivalents | 129.810 | -86.147 |
(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 consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with Interpretations issued by the IFRS Interpretations Committee (IFRS IC), applicable to the period beginning 1 January 2015 and endorsed by the European Union.
In the year ended 31 December 2015 the following standards and interpretations, which have been endorsed by European Union, became effective:
Annual improvements 2011-2013 (effective for periods beginning on or after 1 July 2014). The amendments include changes from the 2011-2013 cycle of the annual improvements project that affect 4 standards: IFRS 1, First Time Adoption, IFRS 3, Business Combinations, IFRS 13, Fair Value Measurement and IAS 40, Investment Property;
IFRIC 21 (new), Levies (effective for periods beginning on or after 1 July 2014). Interpretation to IAS 37 and the recognition of a liability, clarifying that the obligation event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment.
The application of these standards did not produce any significant effects on these consolidated financial statements.
At 31 December 2015, 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:
IAS 1 (amendment), Presentation of Financial Statements (effective for periods beginning on or after 1 January 2016). This amendment contains guidance relating to materiality and aggregation, presentation of subtotals, structure of financial statements and accounting policies;
IAS 16 (amendment), Tangible Fixed Assets, and IAS 38 (amendment), Intangible Assets (effective for periods beginning on or after 1 January 2016). In this amendment the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset;
IAS 19 (amendment), Employee Benefits (effective for periods beginning on or after 1 February 2015). This narrow scope amendment applies to contributions from employees or third parties to defined benefit plans. The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service;
IFRS 11 (amendment), Joint Arrangements (effective for periods beginning on or after 1 January 2016). This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business;
IAS 16 (amendment), Tangible Fixed Assets, and IAS 41 (amendment), Agriculture: 'Bearer Plants' (effective for periods beginning on or after 1 January 2016). This amendment defines the concept of bearer plant and transfers this type of asset from the scope of IAS 41 – Agriculture to the one of IAS 16 – Tangible Assets, with the related effect on measurement. However, biologic assets produced by these plants are kept in the scope of IAS 41 – Agriculture;
Annual improvements 2010-2012 (effective for periods beginning on or after 1 February 2015). These amendments include changes from the 2010-12 cycle of the annual improvements project, that affect the following standards: IFRS 2 - Share-based Payment, IFRS 3 - Business Combinations, IFRS 8 - Operating Segments, IFRS 13 - Fair Value Measurement, IAS 16 - Property, Plant and Equipment, IAS 24 - Related Parties Disclosures and IAS 38 - Intangible Assets;
Annual improvements 2012-2014 (generally effective for periods beginning on or after 1 January 2016). This amendment cycle includes changes to the following standards: IFRS 5 – Non-current Assets Available for Sale and Discontinued Operations, IAS 19 – Employee Benefits and IAS 34 – Interim Financial Reporting.
At 31 December 2015, the following standards had been issued, with effective date on later periods and still pending endorsement by the European Union:
IAS 27 (amendment), Separate Financial Statements (effective for periods beginning on or after 1 January 2016). These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements;
IFRS 9 (new), Financial Instruments (effective for periods beginning on or after 1 January 2018). This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model;
IFRS 10 (amendment), Consolidated Financial Statements, and IAS 28 (amendment), Investment in Associates and Joint Ventures (effective for periods beginning on or after 1 January 2016). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary;
IFRS 10 (amendment), Consolidated Financial Statements, IFRS 12 (amendment), Disclosure of Interests in Other Entities, and IAS 28 (amendment), Investments in Associates and Joint Ventures: 'Investment entities – exemption from consolidation' (effective for periods beginning on or after 1 January 2016). This amendment specifies that an intermediate holding company which is a subsidiary of an investment entity is exempted from consolidation. Furthermore, the optional use of equity method under IAS 28 is extensible to an entity which not being an investment entity, holds an interest in an associate or joint venture which qualifies as investment entity;
IFRS 14 (new), Regulatory Deferral Accounts (applicable for periods beginning on or after 1 January 2016). This standard allows first-time adopting entities to keep recognizing regulatory assets and liabilities according to the accounting policy used in the former standards. However, to enhance comparability with entities using IFRSs, which do not recognize regulatory assets or liabilities, the amounts thereon must be separately disclosed on the financial statements;
IFRS 15 (new), Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018). This new standard only applies to contracts with customers to provide goods or services, and requires an entity to recognize revenue when the contractual obligation to deliver goods or services is fulfilled and for the amount that reflects the consideration the entity is expected to be entitled to, following a five step approach;
The Company does not estimate any significant effect to arise from the application of these standards.
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. 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:
Maintenance and repair costs related to tangible assets are recorded directly as expenses in the year they are incurred.
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, its 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 cashgenerating 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 balance sheet 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 onset of the obligation and the related expenditure, 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 balance sheet date.
All purchases and sales of investments are recognized on the trade date, independently of the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration paid for them.
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 has objective evidence that part or the whole amount receivable will not be paid and as long as the loss can be reliably estimated.
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 Income 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 cost, if any, and then adjusted to their fair value.
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 Income 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 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 Statement of Financial Position against Staff expenses 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.,Agloma Investimentos SGPS SA, Siaf Energia S.A. , Sonae Industria PCDM, S.A., Somit Imobiliaria, S.A. and Imoplamac –Gestão Imoveis S.A.
Sonae Industria - Management Services S.A was removed from this Special Group Tax Regime following its merge in another group company.
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.
The dividends received from investments in subsidiaries and associates are recognized as income in the period they are assigned to the partners or shareholders. Interests 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 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.
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 balance sheet date (adjusting events), are reflected in the financial statements. Events after the balance sheet date that are non-adjusting events are disclosed in the notes when material.
As a result of the relevant portion of floating rate debt on Sonae Indústria 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 Indústria, SGPS does not hedge its exposure to floating interest rates.
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;
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 2015, Sonae Indústria did not hold material investments classified as "available-for-sale".
Liquidity risk management in Sonae Indústria 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 payments obligations when due, under the most favourable terms and conditions.
For this purpose, Liquidity management 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:
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. If an active market is not available, generally accepted valuation techniques are used, based on market assumptions. The resulting fair value corresponds to level 2 of fair value hierarchy, as defined in IFRS
On 30 September 2015, Sonae Indústria entered into a strategic partnership agreement with Inversiones Arauco Internacional, Limitada, a company belonging to Arauco Group. This agreement envisages to set up a joint venture involving wood based panels and related operations presently controlled by Sonae Indústria Group in Europe and South Africa, which will be held in equal parts by Sonae Indústria and Arauco Groups.
This agreement, if implemented, will be carried out by means of an increase in share capital of Sonae Indústria's subsidiary Tafisa – Tableros de Fibras, S: A., for EUR 137.5 million, to be subscribed by Arauco, which will gain ownership of half of this subsidiary's share capital and subsequent joint control. The joint venture that may arise from this agreement will not include Sonae Indústria's operations in North America and the laminates and components business, which will continue to be controlled by Sonae Indústria.
The completion of this transaction is subject to certain conditions, namely, the clearance of the competent Competition Authorities, the execution of certain internal transactions to achieve the required business perimeter and certain amendments to relevant existing debt facilities of Sonae Indústria Group.
The high level of uncertainty that covers this operation derives not only from its contingent nature, as its realization depends on the fulfilment of the abovementioned conditions, but also from the timing of execution and from the values to assign to certain key variables.
Similarly, it is impracticable to reliably quantify the effects this transaction, in case it takes place, would have on the consolidated financial statements of the Company.
A reduction in ownership interest resulting from a capital increase, which would change a position of control to a situation of joint control, could affect the company's net profit or loss in a way that is not possible to reliably identify at this date as it is impossible to identify the value to assign to several key variables to this process.
During the periods ended 31 December 2015 and 2014, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| 3 1.12 .15 | ||||
|---|---|---|---|---|
| M achinery and equipment |
Office equipment |
Advances on account of tangible assets |
Total | |
| Gross asset: | ||||
| Opening balance | 38.099 | 133.355 | 171.454 | |
| Closing Balance | 38.099 | 133.355 | - | 171.454 |
| A ccumulat ed d ep reciat io n and imp airment losses |
||||
| Opening balance | 37.941 | 132.174 | 166.188 | |
| Depreciations for the period | 44 | 592 | 636 | |
| Closing Balance | 37.985 | 132.766 | 170.751 | |
| C arrying amo unt | 114 | 589 | - | 703 |
| 3 1.12 .14 | ||||
| M achinery and equipment |
Office equipment |
Advances on account of tangible assets |
Total | |
| Gross asset: | ||||
| Opening balance | 38.099 | 132.619 | 736 | 171.454 |
| Capital expenditure | 736 | (736) | - | |
| Closing Balance | 38.099 | 133.355 | - | 171.454 |
| A ccumulat ed depreciat io n | ||||
| and imp airment lo sses | ||||
| Opening balance | 37.897 | 130.756 | 166.188 | |
| Depreciations for the period | 44 | 1.418 | 1.462 | |
| Closing Balance | 37.941 | 132.174 | 170.115 |
During the periods ended 31 December 2015 and 2014, movements in intangible assets, accumulated depreciation and impairment losses were as follows:
| 3 1.12 .15 | |||
|---|---|---|---|
| Software | Software | Total | |
| NGI | Total | GI + NGI | |
| Gross asset: | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| A ccumulat ed d ep reciat io n and imp airment lo sses |
|||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| C arrying amo unt | - | - | - |
| 3 1.12 .14 | |||
| Software | Software | Total | |
| NGI | Total | GI + NGI | |
| Gross asset: | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| A ccumulat ed d ep reciat io n | |||
| and imp airment lo sses | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
As of December 31, 2015 and 2014, the assets and liabilities recognized in the statement of financial position correspond to the following categories:
| Loans and |
Assets at fair value through |
Hedge | Available-for-sale | Assets out of scope of |
||||
|---|---|---|---|---|---|---|---|---|
| notes | receivables | profit or loss | derivatives | assets | Sub-total | IFRS 7 | Total | |
| 3 1.12 .15 | ||||||||
| Non current assets | ||||||||
| Available for sale investments | 6 | 122 922 | 122.922 | 122.922 | ||||
| Other non current assets | 8 | 284.895.781 | 284.895.781 | 284.895.781 | ||||
| Current assets Customers |
9 | 25.423 | 25.423 | 25.423 | ||||
| Other current debtors | 9 | 11.272.734 | 11.272.734 | 11.272.734 | ||||
| Other current assets | 10 | 102.685 | 102.685 | |||||
| Cash and cash equivalents | 11 | 164.408 | 164.408 | 164.408 | ||||
| Total | 296.358.346 | 122.922 | 296.481.268 | 102.685 | 296.583.953 | |||
| 3 1.12 .14 | ||||||||
| Non current assets | ||||||||
| Available for sale investments | 6 | 122.922 | 122.922 | 122.922 | ||||
| Other non current assets | 8 | 378.640.939 | 378.640.939 | 378.640.939 | ||||
| Current assets | ||||||||
| Customers | 9 | 24.856 | 24.856 | 24.856 | ||||
| Other current debtors | 9 | 11.914.800 | 11.914.800 | 11.914.800 | ||||
| Other current assets Cash and cash equivalents |
10 11 |
34.598 | 34.598 | 408.960 | 408.960 34.598 |
|||
| Total | 390.615.192 | 122.922 | 390.738.114 | 408.960 | 391.147.074 | |||
| Liabilities at | Liabilities | |||||||
| fair value | Other | out of scope | ||||||
| through | Hedge | financial | of | |||||
| profit or loss | derivatives | Liabilities | Sub-total | IFRS 7 | Total | |||
| 3 1.12 .15 | ||||||||
| Non current liabilities | ||||||||
| Bank loans - net of current portion | 13 | 4.873.284 | 4.873.284 | 4.873.284 | ||||
| Current liabilities | ||||||||
| Bank loans | 13 | 219.890.592 | 219.890.592 | 219.890.592 | ||||
| Debentures | 13 | 147.987.525 | ||||||
| Trade creditors | 14 | 185.374 | 185.374 | 185.374 | ||||
| Other current creditors | 15 | 206.170.531 | 206.170.531 | 206.170.531 | ||||
| Other current liabilities | 16 | 2.300.962 | 2.300.962 | |||||
| Total | 579.107.306 | 431.119.781 | 2.300.962 | 433.420.743 | ||||
| 3 1.12 .14 | ||||||||
| Non current liabilities | ||||||||
| Bank loans - net of current portion | 13 | 114.099.921 | 114.099.921 | 114.099.921 | ||||
| Debentures - net of current portion | 13 | 147.604.120 | 147.604.120 | 147.604.120 | ||||
| Current liabilities | ||||||||
| Bank loans | 13 | 47.239.752 | 47.239.752 | 47.239.752 | ||||
| Debentures | 13 | |||||||
| Trade creditors | 14 | 448.843 | 448.843 | 448.843 | ||||
| Other current creditors | 15 | 13.995.609 | 13.995.609 | 13.995.609 | ||||
| Other current liabilities | 16 | 2.292.474 | 2.292.474 | |||||
| Total | 323.388.245 | 323.388.245 | 2.292.474 | 325.680.720 |
| 31.12.15 | 31.12.14 | |||
|---|---|---|---|---|
| Non current | Current | Non current | Current | |
| Invest ment in g ro up co mp anies | ||||
| Opening balance at 1 January | 1.011.535.370 | - | 938.997.795 | - |
| Acquisition over the period | 351.731.770 | - | 72.537.574 | - |
| Closing balance for the period | 1.363.017.139 | - | 1.011.535.369 | - |
| Accumulated impairment losses | -698.524.071 | - | -465.793.443 | - |
| 664.493.068 | - | 545.741.926 | - | |
| Invest ment s held f o r sale | ||||
| Fair value at 1 January | 122.922 | - | 122.922 | - |
| Fair value at the end of the period | 122.922 | - | 122.922 | - |
| 664.615.990 | - | 545.864.848 | - |
At 31 December 2015 and 31 December 2014, details of investments were as follows:
The main changes is related to
Coverage of losses in subsidiary Taiber Tableros Aglomerados Ibericos SL amounting 30.600 Euros; Coverage of losses in subsidiary Sonae Industria Revestimentos, S.A. amounting 264.465 Euros; Coverage of losses in subsidiary Euroresinas – Industrias Quimicas, S.A. amounting 502.769 Euros;
Coverage of losses in subsidiary Movelpartes – Componentes para a Indústria do Mobiliário, S.A amounting 2.929.254 Euros;
Capital increase in subsidiary Tafisa Tableros Fibras, S.A. amount of 139.799.681 Euros and purchase of shares to minority shareholders, amounting 855,000 Euros corresponding the participation on 31 December 2015 to 287.405 shares;
Purchase of 13.734.113 shares of Megantic BV, for the amount of 207.300.000 Euros. The transaction value was supported by a valuation performed by an independent entity;
Subscribe the entire share capital of a new company Frases e Frações – Imobiliária e Serviços,S.A., which was established in December, amounting 50.000 Euros corresponding to 1.000 shares;
Sale the shares of Sonae Indústria – Management Services, S.A. to Sonae Indústria – Produção e Comercialização de Derivados de Madeira, S.A. by 250.000 Euros;
Registration of impairment losses on the participations of Tafisa Tableros Fibra, S.A. in the amount 229.232.774 Euros;
Registration of impairment losses on the participations of Ecociclo – Energia e Ambiente, S.A. in the amount 691.359 Euros;
Registration of impairment losses on the participations of Movelpartes – Componentes para a Indústria do Mobiliário, S.A. in the amount 2.806.495 Euros.
At 31 December 2015, Sonae Industria, SGPS had the following holdings in Group and Associated Companies:
| Company | % Share | Acquisition Value | Accumulated Impairment Losses |
Shareholder´s Funds |
Net profit | |
|---|---|---|---|---|---|---|
| Euroresinas - Industrias Quimicas, S.A. | 100,00% | 18.169.378 | 0 | 16.356.462 | 609.826 | |
| M aiequipa - Gestão Florestal,S.A. | 100,00% | 3.438.885 | 962.785 | 2.938.397 | -17.070 a)-c) | |
| M ovelpartes - Componentes para Industria do M obiliário,S.A. | 100,00% | 7.661.911 | 6.794.065 | 1.114.613 | -2.291.006 a)-c) | |
| Sonae Industria de Revestimentos,S.A. | 100,00% | 22.552.828 | 10.195.530 | 11.533.574 | 261.247 a)-c) | |
| Imoplamac - Gestão de Imóveis,S.A. | 100,00% | 6.000.000 | 0 | 6.048.535 | 1.108.961 | |
| Ecociclo - Gestão Ambiental,S.A. | 100,00% | 1.720.021 | 691.359 | 213.803 | 20.493 a)-c) | |
| Frases e Frações - Imobiliária e Serviços,S.A. | 100,00% | 50.000 | 0 | 15.496 | -34.504 | |
| M egantic BV | 100,00% | 207.300.000 | 0 | 60.929.402 | -70.947 | |
| Tafisa - Tableros de Fibras,S.A. | 99,86% | 1.087.554.828 | 678.432.472 | 191.575.480 | 170.725.620 b)-c) | |
| Agloma Investimentos,S.A. | 6,54% | 5.000.000 | 0 | 100.421.820 | 3.593.570 | |
| Sonae Industria - Produção e Comercialização de Derivados de M adeira,S.A. | 2,97% | 3.497.787 | 1.447.861 | 72.741.877 | 2.538.101 a)-c) | |
| Siaf Energia, S.A. | 0,20% | 5.000 | 0 | 7.022.267 | 34.186 | |
| Sonae RE, Societé Anonyme | 0,04% | 1.200 | 0 | 1.083.881 | -110.315 | |
| Somit Imobiliaria | 0,02% | 10 | 0 | 3.813.647 | 1.017.175 | |
| Taiber | 0,02% | 65.292 | 0 | 36.689.212 | -82.018.452 | |
| 1.363.017.139 | 698.524.071 |
2015
| Península Ibérica | Alemanha | Africa Sul | ||||||
|---|---|---|---|---|---|---|---|---|
| Discount rate (pre-tax) | 9,19% | 7,68% | 18,13% | |||||
| Growth rate on Perpetuity | 1,00% | 1,00% | 1,00% | |||||
| Growth rate (CAGR 2015-2023): | ||||||||
| Total net income | 1,35% | 1,27% | 2,68% | |||||
| Cost of Goods sold and materials consumed | 1,25% | 1,32% | 2,57% | |||||
| Fixed costs | 0,76% | 0,61% | 2,53% | |||||
| Cash flows projected over | 8 anos | 8 anos | 8 anos | |||||
| 2014 | ||||||||
| Península Ibérica | Alemanha | Africa Sul | ||||||
| Discount rate (pre-tax) | 9,54% | 7,44% | 17,14% | |||||
| Growth rate on Perpetuity | 1,00% | 1,00% | 1,00% | |||||
| Growth rate (CAGR 2015-2023): | ||||||||
| Total net income | 1,31% | 1,24% | 2,49% | |||||
| Cost of Goods sold and materials consumed | 1,20% | 1,51% | 2,08% | |||||
| Fixed costs | 0,72% | 0,71% | 2,45% | |||||
| Cash flows projected over | 8 anos | 8 anos | 8 anos | |||||
| 2015 | ||||||||
| Península Ibérica | Tableros de Fibras Alemanha |
Africa Sul | SIR | M ovelpart es | Ecociclo | Sind PC D M | ||
| Discount rate (pre-tax) | 9,19% | 7,68% | 18,13% | 9,74% | 9,22% | 9,48% | 9,53% | |
| Growth rate on Perpetuity | 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 | |
| Test Conclusions | Impairment | No impairment | Impairment | Impairment | No impairment | |||
| 2014 | Tableros de Fibras | SIR | M ovelpart es | Ecociclo | Sind PC D M | |||
| Península Ibérica | Alemanha | Africa Sul | ||||||
| Discount rate (pre-tax) | 9,54% | 7,44% | 17,14% | 9,89% | 9,96% | 9,70% | 9,60% | |
| Growth rate on Perpetuity | 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 | |
| Test Conclusions | Impairment | Impairment | Impairment | No impairment | No impairment |
As a result of the tests carried out on 31 December 2015, the company recognized impairments related with the company Ecociclo – Energia e Ambiente, S.A. in amount of 691.359 Euros, related with the company Movelpartes-Componentes para a Indústria de Mobiliário, S.A. in amount of 2.806.495 Euros and related with the company Tafisa-Tableros de Fibra, S.A. in amount of 229.232.774 Euros (Note 17).
Available-for-sale investment consists of financial undertakings which do not fulfil the criteria to be stated as subsidiaries or as associates and is detailed as follows:
| Shares INEGI | 109.976 |
|---|---|
| Shares CTIM M | 5.986 |
| Shares PIEP | 5.000 |
| Shares PINUS | 1.496 |
| Shares BIOM ASSA | 297 |
| Deposir guarantee | 167 |
| 122.922 |
| DEFERRED TAXES - BALANCE | ||||||
|---|---|---|---|---|---|---|
| 31.12.15 | 31.12.14 | |||||
| Assets | Liabilities | Assets | Liabilities | |||
| Net losses carried forward | 1.511.726 | - | 2.764.271 | - | ||
| Others | 1.140.740 | - | 1.978.755 | - | ||
| 2.652.466 | - | 4.743.026 | - | |||
| DEFERRED TAXES - FLOWS | ||||||
| 31.12.15 | 31.12.14 | |||||
| Assets | Liabilities | Assets | Liabilities | |||
| Opening Balance | 4.743.026 | - | 5.527.236 | - | ||
| Net losses carried forward | -1.252.545 | - | -1.318.807 | - | ||
| Others | -838.015 | 534.597 | ||||
| Sub-total (Note 25) | -2.090.560 | - | -784.210 | - | ||
| Closing Balance | 2.652.466 | 4.743.026 | - |
Details of deferred tax asset at 31 December 2015 and 31 December 2014 were as follows:
The amount included in Others concerns SIFIDE to deduct tax benefits in the coming years. The movements during the period refers to the use of about 594 thousand Euros in the income statement of 2014, the use of about 454 thousand Euros in calculating the 2015 tax estimate and SIFIDE registration for 2014 in about 210 thousand Euros.
Details of Other Non-Current Assets at 31 December 2015 and 31 December 2014 were as follows:
Loans granted to Group companies have a medium and long term maturity and they yield interest at an average rate of 5,109 %.
No repayment terms are provided, only for interest rate. The repayment is made by availabilities, and is not expected that the repayment will occur on one year.
At 31 December 2015 and 31 December 2014, details of Current Trade Debtors were as follows:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Current customer accounts | 25 423 | 24 856 |
| 25 423 | 24 856 |
At 31 December 2015 and 31 December 2014, the detail of trade debtors' maturities was as follows:
At 31 December 2015 and 31 December 2014, details of Other Current Trade Debtors were as follows:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Group companies -nterest (note 20) | 3.209.190 | 5.117.470 |
| Group companies -current Income Tax (note 20) | 2.999.626 | 1.663.060 |
| Group companies -loans (Note 20) | 5.033.000 | 5.128.000 |
| 11.241.816 | 11.908.530 | |
| Other debtors | 30.917 | 6.270 |
| 11.272.734 | 11.914.800 |
At 31 December 2015 and 31 December 2014, detail of Others Debtors maturities was as follows:
| AGEING OF ADVANCE CREDITORS |
AGEING OF TRADE CREDITORS (ASSET BALANCES) |
TOTAL DEBTORS | |||||
|---|---|---|---|---|---|---|---|
| 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | ||
| Due and not impaired | |||||||
| < 30 days | - | - | 7.768 | 87 | 7.768 | 87 | |
| 30 - 90 days | 23.150 | - | 23.150 | - | |||
| > 90 days | 6.183 | - | 6.183 | ||||
| 23.150 | - | 7.768 | 6.270 | 30.917 | 6.270 | ||
At 31 December 2015 and 31 December 2014, details of State and Other Public entities were as follows:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| C urrent t ax asset | ||
| Income Tax | 1.311.088 | 921.022 |
| 1 311 088 | 921 022 |
Details of Other Current Assets at 31 December 2015 and 31 December 2014 were the following:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Accrued revenue | 29 283 | 27 308 |
| Deferred costs | 73 403 | 381 652 |
| 102 685 | 408 960 |
At 31 December 2015 and 31 December 2014 detail of Cash and cash equivalents was the following:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Cash at Hand | 1 113 | 1 078 |
| Deposits | 163 295 | 33 520 |
| Cash & Cash Equivalents - Balance Sheet | 164 408 | 34 598 |
| Overdraft (1) | (9.999.481) | (5.123) |
| (9.835.073) | 29.475 |
(1) In Statement of Financial Position- Bank loans Short term (Note 13)
Cash & equivalents comprise cash at hand, deposits, treasury applications and short-term deposits with less than three months maturity, and for which the risk of value change is insignificant.
The amount of the item Other receipts/payments relating to operating activities in 2014, relates mainly to expenses incurred with capital increase.
The share capital, is 812.107.574,17 Euros and was comprised of 11 350 757 417 common shares, without face value. At 31 December 2015 and 2014, shares are not entitled to any fixed income. At the same date, neither the Company nor any of its affiliates held any shares in the Company.
The following entities had more than 20% of the subscribed capital on 31 December 2015:
| Entity | % |
|---|---|
| Efanor Investimentos, SGPS, S. A. | 42,66 |
| Pareuro BV | 25,83 |
| 2015 | 2014 | |
|---|---|---|
| Share C ap it al | 8 12 .10 7.574 | 8 12 .10 7.574 |
| Leg al R eserve | 3 .13 1.757 | 3 .13 1.757 |
| Ot her reservs and accumulat ed earning s | - 4 3 2 .3 56 .4 10 | - 19 9 .4 3 5.13 4 |
| Free Reserve | 20.145.630 | 20.145.630 |
| Other Reserves | 245.913.105 | 245.913.105 |
| Accumulated Earnings | -465.600.216 | -333.436.047 |
| Net Income | -232.814.929 | -132.057.822 |
| Ot her accumulat ed co mp rehensive Inco me | 2 2 5.8 52 | 177.2 10 |
| 383.108.773 | 615.981.407 |
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, as well as the amount corresponding to the allocation of shares of the company in accordance with the note 2.10.
Accumulated Earnings: The change of this item relates to costs of capital increase of 106.348 Euros, in addition to the loss recorded in 2014.
Shares Plan: During 2015 was recognized the amount of 147.700 Euros related with Liability for medium and long term incentive plan, 77.131 Euros for the payment of Liability for medium and long term incentive 2011 and 21.927 Euros refers to a deviation between the amount estimated and the real payment.
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 147.700 Euros, recognized on Staff expenses stated in Income statement was registered according to the rules of transactions plans on the basis of shares and settled with own capital.
| 2015 | 2014 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Opening Balance | Converted Opening Balance |
Assigned | Cancelled | Paid | Closing Balance | Opening Balance | Assigned | Cancelled | Paid | Closing Balance | |
| Nº Granted shares | 433.881 | 35.177.700 | 31.545.125 | 11.861.298 | 54.861.527 | 302.747 | 181.586 | 50.452 | 433.881 | ||
| Fair Value | 304.199 | 254.990 | 77.131 | 482.058 | 187.958 | 138.193 | 21.952 | 304.199 | |||
| Payment date | 2018 | 2017 | |||||||||
| Personnel costs | 147.700 | 97.201 |
The liability is recorded under "Reserves – Deferred Premium" and is included in the balance sheet item "Other Comprehensive income" and is detailed as follow:
| 2015 | 2014 | |
|---|---|---|
| Shares Plan | ||
| - Awarded 2012 and payable in 2015 | 90.803 | |
| - Awarded 2013 and payable in 2016 | 81.492 | 51.858 |
| - Awarded 2014 and payable in 2017 | 80.613 | 34.548 |
| - Awarded 2015 and payable in 2018 | 63.748 | |
| 225.852 | 177.210 |
At 31 December 2015 and 31 December 2014 Sonae Indústria SGPS, S.A had the following outstanding loans:
| 31.12.15 | 31.12.14 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 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) | 140.850.000 | 4.513.293 | 140.850.000 | 5.050.000 | 36.650.000 | 112.250.000 | 36.650.000 | 112.250.000 |
| Bank Loans | a) | 69.041.111 | 359.991 | 69.041.111 | 833.333 | 10.584.630 | 1.849.921 | 10.584.630 | 1.944.444 |
| Debentures | b) | 147.987.525 | 150.000.000 | 147.604.120 | 150.000.000 | ||||
| Bank Overdrafts | 9.999.481 | 9.999.481 | 5.123 | 5.123 | |||||
| Gross Debt | 367.878.117 | 4.873.284 | 369.890.592 | 5.883.333 | 47.239.752 | 261.704.041 | 47.239.752 | 264.194.444 | |
| Cash & Cash Equivalent in balance sheet | 164.887 | 164.887 | 34.598 | 34.598 | |||||
| Net Debt | 367.713.230 | 4.873.284 | 369.725.706 | 5.883.333 | 47.205.155 | 261.704.041 | 47.205.155 | 264.194.444 | |
| Total Net Debt | 372.586.514 | 375.609.039 | 308.909.195 | 311.399.599 |
The loans (nominal value) have the following repayment schedule, not considering the reclassifications mentioned below in notes b) and c):
| 31.12.15 | 31.12.14 | |
|---|---|---|
| 2015 | 47.239.752 | |
| 2016 | 116.615.592 | 4.411.111 |
| 2017 | 10.383.333 | 4.133.333 |
| 2018 | 79.475.000 | 86.350.000 |
| 2019 | 84.600.000 | 84.600.000 |
| 2020 | 84.700.000 | 84.700.000 |
| 375.773.926 | 311.434.197 | |
The average interest rates of each class of debt stated in the previous table were as follows:
| 2015 | 2014 | |
|---|---|---|
| Bank Loans | 6,682% | 7,403% |
| Debentures | 4,535% | 5,809% |
| Loans - Commercial Paper | 4,781% | 6,303% |
At 31 December 2015 the contracted loans are summarized as follows:
1) On 05 august 2010 Sonae Industria contracted a loan with a financial institution in the total amount of 10.000.000 Euros, which was amended in august 2014 aiming to postpone maturity from November 2012 to August 2017, interests are calculated at market rate. At 31 December 2015, outstanding principal amounted to 1.944.444 Euros, shown under current liabilities in the amount of 1.111.111 Euros and Non-Current Liabilities in the amount of 833.333 Euros (at 31 December 2014 1.111.111 Euros shown under current liabilities and 1.944.444 Euros under non-current liabilities);
2) On 22 October 2014 Sonae Industria contracted a loan with a financial institution until the total amount 10.000.000 Euros. This loan pays interest at a variable rate. Contract is a 1 year term being automatically renewed for equal periods. On 26 June 2015 the company signed an addendum aiming to postpone maturity to 30 July 2016. At 31 December 2015 outstanding principal amounted to 7.930.000 Euros, shown under current liabilities;
3) On 2 June 2015 Sonae Industria contracted a loan with a financial institution until the total amount 60.000.000 Euros, this loan pays interest at a variable rate. Contract is a 1 year term being automatically renewed for equal periods. At 31 December 2015 outstanding principal amounted to 60.000.000 Euros, show under current liabilities. This loan is collateralized by a pledge of shares of subsidiary Tafisa Canadá Inc;
4) On December 2015 Sonae Industria contracted a loan with a financial institution until the total amount 10.000.000 Euros, this loan pays interest at a variable rate and will run until January 2016. At 31 December 2015 outstanding principal amounted to 9.999.481 Euros, show under current liabilities.
On 21 November 2014 Sonae Industria issued a new Sonae Industria 2014/2020 bonds, through private subscription with a principal amount of 150.000.000 Euros and a six–year period. The maturity of this loan is November 2020 and payment will be done through reduction of nominal value, from the 7th coupon date , in six successive semi-annual instalments .Interest is paid semi-annually on may and November . Sonae Indústria, SGPS is required to fulfil an Equity ratio (Total net shareholders´ funds/Total net assets). This ratio is tested annually based on the company´s consolidated financial statements, from 31 December 2015 to maturity date, and its failure can lead to early maturity of this loan.
At 31 December 2015, conditions established by contract for the Equity ratio referred to in the above mentioned were not fulfilled, which caused loans amounting to EUR 147 987 525 Euros (amortized cost) to be reclassified under Current portion of non-current non-convertible debentures, on the Statement of Financial Position. At the date of approval of these financial statements, the company had obtained a formal statement from the financing institution assuring that repayment would not be required before contractually defined maturity date. As such, this loan will be disclosed under noncurrent liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
1) On September 2010 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 2.500.000 Euros , which was increased to 12.500.000 Euros in march 2014. This programme matures in September 2015. On January 2016, by agreement of the parties, the maturity postpone to June 2016. At 31 December 2015 there was commercial paper issued for the programme's total amount.
2) On June 2013 Sonae Indústria SGPS, S.A. entered into a new agency agreement with a financial institution to issue commercial paper. The programme had a maximum nominal amount of 50.000.000 Euros which was increased to 100.000.000 Euros in December 2013 and the purchase of commercial paper is not underwritten. The programmes mature in June 2018. On November 2014 Sonae Indústria proceeded to repurchase commercial paper in the amount 30.000.000 Euros , 15.000.000 Euros were refinanced under the bond loan (described b-4)) At 31 December 2015 commercial paper issued amounted to 13.650.000 Euros maturing in short term .
3) On July 2014 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 10.000.000 Euros. The programme will be reduced semi-annually from December 2015 until June 2018. At 31 December 2015 there was commercial paper issued for the programme's total amount with short term maturity in the amount of 3.300.000 Euros and long term maturity in amount of 5.050.000 Euros.
4) On august 2014 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 110.000.000 Euros .On November 2014 occurred 1ª issue under this programme with a maximum amount of 103.900.000 Euros, the programme will be reduced semiannually beginning august 2016 until its maturity November 2020.On 29 may 2015 the company signed a addendum, to change the maximum nominal amount to 93.900.000 Euros. At 31 December 2015 there was commercial paper issued for the programme's total amount. Sonae Indústria, SGPS is required to fulfil an Equity ratio (Total net shareholders´ funds/Total net assets). This ratio is tested annually based on the company´s consolidated financial statements, from 31 December 2015 to maturity date, and its failure can lead to early maturity of this loan. At 31 December 2015, conditions
established by contract for the Equity ratio referred to in the above mentioned were not fulfilled, which caused loans amounting to EUR 93.000.000 (amortized cost) to be reclassified under Current portion of non-current bank loans, on the Statement of Financial Position. At the date of approval of these financial statements, the company had obtained formal statements from the financing institutions assuring that repayment would not be required before contractually defined maturity dates. As such, these loans will be disclosed under non-current liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
5) On February 2015, Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 12.500.000 Euros. The programme will be reduced semi- annually beginning august 2016 until its maturity February 2018. Sonae Indústria, SGPS is required to fulfil an Equity ratio (Total net shareholders´ funds/Total net assets). This ratio is tested annually based on the company´s consolidated financial statements, from 31 December 2015 to maturity date, and its failure can lead to early maturity of this loan. At 31 December 2015, conditions established by contract for the Equity ratio referred to in the above mentioned were not fulfilled, which caused loans amounting to EUR 9.375.000 (amortized cost) to be reclassified under Current portion of non-current bank loans, on the Statement of Financial Position. At the date of approval of these financial statements, the company had obtained formal statements from the financing institutions assuring that repayment would not be required before contractually defined maturity dates. As such, these loans will be disclosed under non-current liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
6) On October 2015 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 5.000.000 Euros. This loan pays interest at a variable rate. Contract is one year term being automatically renewed for equal periods. At 31 December 2015 there was commercial paper issued for the programme's total amount maturing in short term.
At 31 December 2015 and 31 December 2014 all amounts recorded under this item resulted from normal operations. Trade creditor maturities were as follows:
| M ATURITY OF TRADE CREDITORS | ||||
|---|---|---|---|---|
| 31.12.15 31.12.14 |
||||
| To be paid | ||||
| < 90 days | 142.925 | 417.226 | ||
| 90 - 180 days | 13.835 | 3.640 | ||
| > 180 days | 28.614 | 27.978 | ||
| 185.374 | 448.843 |
At 31 December 2015 and 31 December 2014 details of this item were as follows:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Other Creditors | ||
| Group companies -current Income Tax (Note 20) | 984.526 | 907.343 |
| Loans from group companies (Note 20) | 18.616.000 | 12.985.500 |
| Other Creditors - financial investments (Note 20) | 186.570.000 | 0 |
| Financial Instrumets | 206.170.526 | 13.892.843 |
| Others Creditors | 5 | 102.767 |
| 206.170.531 | 13.995.609 |
The amount recorded in Others creditors - Financial investments, is related to the amount owed for the acquisition of the company Megantic, BV.
Loans from Group companies have a short term maturity and they yield interest at an average rate of 1,799 %.
| 31.12.15 | 31.12.14 | |
|---|---|---|
| C urrent t ax liabilit y | 4 8 9 6 2 4 | 8 3 4 8 58 |
| Income Tax | 460.545 | 800.325 |
| Tax retention | 29.079 | 34.533 |
| Ot her t axes and cont ribut ions | 3 4 .6 13 | 57.4 0 2 |
| Value Added Tax | 17.462 | 36.340 |
| Social Security Contributions | 17.151 | 21.062 |
| Liabilities out of scope of IFRS7 | 524.237 | 892.260 |
At 31 December 2015 and 31 December 2014 this item had the following detail:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Accrued Costs | ||
| Personal expenses | 269.472 | 247.646 |
| Insurances | 2.851 | 0 |
| Accrued financial expenses | 1.776.999 | 1.539.558 |
| External supllies & services | 251.641 | 505.270 |
| Liabilities out of scope of IFRS7 | 2 300 962 | 2 292 474 |
Changes in provisions and accumulated impairment losses during the period ended December, 31 2015 and December, 31 2014 were the following:
| 31.12.2015 | |||||
|---|---|---|---|---|---|
| Description | Opening Balance | Increase | Utilization | Reversion | Closing Balance |
| Accumulated imparment losses on investments (Note 6) | 465.793.444 | 232.730.628 | 698.524.071 | ||
| 465.793.444 | 232.730.628 | 698.524.071 | |||
| 31.12.2014 | |||||
| Description | Opening Balance | Increase | Utilization | Reversion | Closing Balance |
| Accumulated imparment losses on investments (Note 6) | 333.810.139 | 131.983.304 | 465.793.444 |
Impairment losses are offset against the corresponding asset on Statement of Financial Position. Increase in impairment losses relates as described (note 24)
At the balance sheet date, the company had irrevocable operating lease contracts with the following payment maturities:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| M aturing in em 2015 | 27.441 | |
| M aturing in em 2016 | 25.071 | 25.071 |
| M aturing in em 2017 | 13.224 | 13.224 |
| M aturing in em 2018 | 13.224 | 13.224 |
| M aturing in em 2019 | 1.102 | 1.102 |
| 52.621 | 80.062 |
The liquidity risk described on note 2.17., b), related to gross debt referred to on note 13, can be analysed as follows:
| 2015 Liquidity Risk |
2014 Liquidity Risk |
||||||
|---|---|---|---|---|---|---|---|
| M aturity of Gross Debt |
Interests | Total | M aturity of Gross Debt |
Interests | Total | ||
| 2015 | 47.234.630 | 13.347.874 | 60.582.504 | ||||
| 2016 | 116.615.592 | 14.809.928 | 131.425.520 | 2016 | 4.411.111 | 12.062.340 | 16.473.451 |
| 2017 | 10.383.333 | 12.798.213 | 23.181.546 | 2017 | 4.133.333 | 11.812.634 | 15.945.967 |
| 2018 | 79.475.000 | 11.538.647 | 91.013.647 | 2018 | 86.350.000 | 10.666.037 | 97.016.037 |
| 2019 | 84.600.000 | 7.421.313 | 92.021.313 | 2019 | 84.600.000 | 6.762.174 | 91.362.174 |
| 2020 | 84.700.000 | 3.199.300 | 87.899.300 | 2020 | 84.700.000 | 2.909.008 | 87.609.008 |
| 3 75.773 .9 2 5 | 4 9 .76 7.4 0 1 | 4 2 5.54 1.3 2 6 | 3 11.4 2 9 .0 74 | 57.56 0 .0 6 7 | 3 6 8 .9 8 9 .14 1 |
The calculation of interest in the previous table was based on interest rates at 31 December 2015 and 2014 applicable to each item of debt. Gross debt maturing in 2016 (2015) includes scheduled repayment of debt along with the repayment of debt as at end 2015 (2014) which is maturing within less than one year, and was not affected by reclassifications set out on note 13.b) and 13.c).
Maturities for the remaining financial instruments are stated on the respective notes.
For several years now the Company has maintained a series of bank and commercial paper credit facilities to meet treasury needs, for terms typically of up to one year, renewable with the agreement of the respective credit entities. These entities, most of which are also involved in medium and long term loans, are contractually entitled to not renew these credit facilities on maturity, although they have always ensured its renewal or replacement. Furthermore, it is not possible to foresee the level of subscription for commercial paper to be issued by the Company. In case these operations are not renewed, Sonae Indústria will have to find alternative short term financing sources so as to meet its debt service obligations.
The Company believes that gains in operating performance attained over the last quarters will have a positive effect on the probability of renewing short term credit facilities as well as on the possibility of contracting additional short term financing facilities with other banks, as already accomplished in 2015.
On the other hand, the possible execution of the agreement signed with Arauco Group, which has been disclosed to the market, to set up a strategic partnership involving wood based panels and related activities in Europe and South Africa, will bring about the renegotiation of most of the Group's bank debt. The company estimates that the possible conclusion of these renegotiations with present and new creditor banks, along with a reduction in global debt to be accomplished as a result of an increase in share capital of subsidiary Tableros de Fibras, S. A. for EUR 137.5 million to be subscribed for by Arauco, as stated on the signed agreement, will contribute to a significant improvement in the Company's debt maturity profile and cost.
.
.
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 on 2015 and 2014 if there would have been a change of +/- 0,75 percentage point in actual interest rates of the corresponding period.
| 2015 | Sensitivity Analysis | 2014 | |||||
|---|---|---|---|---|---|---|---|
| "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 | $-18.616.000$ | $-104.064$ | 104.064 | $-12.985.500$ | $-149.275$ | 149.275 | |
| External | -357.844.444 | $-2.054.901$ | 2.054.901 | -307.829.074 | $-2.889.834$ | 2.889.834 | |
| -376.460.444 | $-2.158.965$ | 2.158.965 | $-320.814.574$ | $-3.039.109$ | 3.039.109 | ||
| Financial Instruments | |||||||
| Derivates | |||||||
| Loans to group companies |
274.520.029 | 2.789.286 | $-2.789.286$ | 358.943.053 | 3.687.819 | $-3.687.819$ | |
| Treasury Aplications | |||||||
| 274.520.029 | 2.789.286 | $-2.789.286$ | 358.943.053 | 3.687.819 | $-3.687.819$ | ||
| 630.321 | $-630.321$ | 648.710 | $-648.710$ |
The amount of debt included in the above table excludes bank overdrafts and borrowings that are not subject to changes in interest rate(amounting of 17.929.482 Euros in 2015 and 3.605.123 Euros in 2014) and in particular the amount to settle the Tafisa of 186.570.000 Euros, as described in note 15.
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 14,3 times the standard deviation of that variable in 2015 (35,7 times in 2014).
The interest amounts were calculated based on interest rates in effect at 31 December 2015, for each of the values in debt.
Balances and transactions with related parties may be summarized as follows:
| Balance | Accounts Receivable | Accounts Payable | Other Creditors | Other non Currents Assets | Other debtors | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | |
| 24.606 | 23.166 | 129.760 | 156.292 | 206.170.526 | 13.892.843 | 287.895.781 | 378,640,939 | 11,226.816 | 11,908.530 | |
| - Agloma Investimentos | 104.529 | 78,902 | $\mathbf 0$ | 1.137.738 | 589.463 | |||||
| - Ecociclo | 800.175 | 1.092.921 | 320,000 | 50.794 | 40.003 | |||||
| - Euroresinas | 10.298.214 | 4.036.092 | 2.650.000 | 172.123 | 35.411 | |||||
| - Implamac | 15,330 | 15,330 | 9.356.000 | 6.046.000 | 3.485.852 | 1,906.714 | ||||
| - Sind-podm | 23.714 | 22.274 | 53.538 | 44.934 | 235,275 | 210.021 | 17.642.400 | 21,455,000 | 3.482.942 | 5.229.684 |
| - Maiequipa | 9.317 | 9.217 | 1,200,900 | 1268,900 | 65.670 | 72.851 | ||||
| - M ovelpartes | 892 | 892 | 1.072.051 | 54,007 | 906,000 | 1,045,000 | 64.990 | 228.218 | ||
| - Somit Imobiliária | 9.350 | 160.350 | 517,500 | 1,345,000 | 244.016 | 160.758 | ||||
| - Siaf Energia | 3.356.691 | 3.489.191 | 95.227 | 180.092 | ||||||
| - Sonae Industria Revestimentos | 3.699.594 | 4.721.540 | 84.833 | 51,745 | ||||||
| - Sonae ,sgps | 49,000 | 49,000 | ||||||||
| - Sind - Management services | 5.658 | 25.272 | 938,000 | 176.720 | ||||||
| - Tafisa Tableros Fibra | 186,570,000 | 3.236.871 | 51,149.583 | 1,762.632 | 3.236.871 | |||||
| - Taiber | 255.036.110 | 292.423.456 | ||||||||
| - Raso Viagens Turismo | 25.552 | |||||||||
| - Solinca investimentos Turisticos | 140 | 360 | ||||||||
| - Sonaecent er | 20,200 | 24.525 | ||||||||
| - Sonae RP | 997 | |||||||||
| - SC-Consultadoria | 6 | 273 | ||||||||
| - Imosede | 221 | 332 | ||||||||
| - Herco Consultoria risco | 5.658 | 5.658 | ||||||||
| - Frases e Frações - Imobiliária e Serviços | 580.000 | |||||||||
| Transactions | Purchases & Acquired Services |
Interest Income | Interest Expenses | |||||
|---|---|---|---|---|---|---|---|---|
| 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | 31.12.15 | 31.12.14 | |||
| 186 682 | 191 264 | 19 238 604 | 30 724 083 | 267 282 | 910 557 | |||
| - Agloma Investimentos | 14.694 | 13.314 | ||||||
| - Ecociclo | 16.937 | 19.091 | 7.863 | 1.885 | ||||
| - Euroresinas | 125.033 | 109.768 | 93.582 | 15.741 | ||||
| - Implamac | 444.297 | 321.085 | ||||||
| - SInd-pcdm | 32.344 | 1.154 | 1.269.035 | 1.933.305 | 509 | |||
| - M aiequipa | 64.710 | 70.499 | ||||||
| - M ovelpartes | 66.354 | 48.717 | 4.771 | 7 | ||||
| - Somit Imobiliária | 66.304 | 78.842 | 12.585 | 262 | ||||
| - Siaf Energia | 60.191 | 64.510 | ||||||
| - Sonae Industria Revestimentos | 88.290 | 111.346 | ||||||
| - Sonaecenter II | 9.493 | 10.072 | ||||||
| - Sonae ,sgps | 50.000 | 50.000 | ||||||
| - Sind - M anagement services | 22.146 | 55.200 | -144 | 66.705 | ||||
| - Tafisa | 1.762.632 | 3.236.871 | ||||||
| - Solinca investimentos Turisticos | ||||||||
| - Taiber | 15.408.752 | 24.825.886 | ||||||
| - Pareuro | 716.297 | |||||||
| - SC-Consultadoria | 6 | 444 | ||||||
| - Raso Viagens Turismo | 64.402 | 72.604 | ||||||
| - Solinca investimentos Turisticos | 1.038 | 360 | ||||||
| - Nos | 7.839 | |||||||
| - Sonae RP | -1.486 | |||||||
| - Imosede | 900 | 1.080 | ||||||
| - Cronosaude | 350 |
Remuneration of the Board of Directors of the Company is detailed as follows:
| 2015 | 2014 | |
|---|---|---|
| Total Fixed salaries | 719.310 | 761.815 |
| Total Bonus | 277.121 | 145.618 |
| 996.431 | 907.433 |
Remuneration of the Supervisory Board, General Assembley and Remuneration Committee is detailed as follow:
| 2015 | 2014 | |
|---|---|---|
| Total Fixed salaries | 38.975 | 38.100 |
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 .
| 31.12.15 | 31.12.14 |
|---|---|
| 1.931 | |
| 125.235 | |
| 102.142 | 91.996 |
| 229.308 | 91.996 |
| 31.12.15 | 31.12.14 |
| 140.314 | 400.859 |
| 245.839 | 243.352 |
| 386.153 | 644.211 |
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Financial expenses: | ||
| Interest expenses | 17.091.800 | 27.214.826 |
| Others | 847.699 | 2.288.739 |
| Financia profit/ (loss) | 1.332.878 | 1.220.518 |
| 19.272.377 | 30.724.083 | |
| F inancial inco me | ||
| Interest income (note 20) | 19.272.377 | 30.724.083 |
| 19.272.377 | 30.724.083 |
| Dividends | 2015 | 2014 |
|---|---|---|
| Agloma - Investimentos,SGSPS,S.A. | 258.046 | |
| Siaf Energia,S.A. | 781 | 545 |
| Somit Imobiliaria SA | 135 | 380 |
| Sonae Indústria - M anagement Services, S.A. | 362.720 | |
| Gains related with investments | 258.962 | 363.644 |
| Registration of impairment of participation of SIR,S.A.(Note 6) | -3.607.297 | |
| Registration of impairment of participation of M ovelpartes,S.A.(Note 6) | -2.806.495 | -1.711.570 |
| Registration of impairment of participation of Tafisa,S.A.(Note 6) | -228.232.774 | -125.216.576 |
| Registration of impairment of participation of Ecociclo,S.A.(Note 6) | -691.359 | |
| Registration of impairment of participation of Sind PCDM SA (Note 6) | -1.447.861 | |
| Losses related with investments | -231.730.628 | -131.983.304 |
| Profit/(loss) on other investments | -231.471.666 | -131.619.660 |
The income and deferred taxation recorded at 31 December 2015 and 31 December 2014 were:
| 31.12.15 | 31.12.14 | |
|---|---|---|
| Current tax | 9.093 | 862.735 |
| Deferred tax (Note 7) | 439.429 | (784.210) |
| 448.522 | 78.525 | |
| Current tax -Prior Year adjustment | 83.546 | 580.432 |
| 532.068 | 658.957 | |
| Current tax | 92.639 | 1.443.167 |
| Deferred tax | 439.429 | (784.210) |
| 2015 | 2014 | |
|---|---|---|
| Net income/(loss) before tax | -233.346.997 | -132.716.779 |
| Tax rate | 21% | 23% |
| Expectable tax | 49.002.869 | 30.524.859 |
| Impairment loss of financial assets | -48.873.432 | -30.356.160 |
| Dividends | 54.190 | -83.638 |
| Current tax at special rate | -9.093 | -8.699 |
| Deferred tax asset recognize | 300.498 | 173.074 |
| Others | -26.510 | -170.912 |
| 448.522 | 78.525 |
Earnings per share were calculated as follows:
| Net Profit (loss) | 31.12.15 | 31.12.14 |
|---|---|---|
| Net Profit / (loss) considered to calculate base earnings per share (Periodic Net Profit/(loss)) |
- 232 814 929 | - 132 057 822 |
| Net Profit/(loss) considered diluted earnings per share | - 232 814 929 | - 132 057 822 |
| N umb er o f Shares | ||
| Weighted average number of shares used to calculate basic earning per share | 11 350 757 417 | 11 350 757 417 |
| Weighted average number of shares used to calculate diluted earnings per share | 11 350 757 417 | 11 350 757 417 |
| Basic and diluted earnings per share | -0,02051 | -0,01163 |
During 2015, 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.
Was completed in 2014 the Tax audit to IRC group companies for the year 2012, from this audit resulted corrections to taxable income in the amount of 498.494 Euros, related with current tax the amount of 478.766 Euros, and related with compensatory interest the amount of 19.729 Euros. The company filed a law suit and provided a guarantee, in January 2015, 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 2015 the Tax audit to IRC group companies for the year 2013, from this audit resulted corrections to taxable income in the amount of 297.463 Euros, related with current tax the amount of 277.140 Euros, and related with compensatory interest the amount of 20.323 Euros. The company don´t agree with this fix will present a judicial review and will request the suspension of tax foreclosure process, for that reason the company did not register any adjustment in financial statements
Sonae Industria SGPS has granted a guarantee amounting to 5.049.804 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 leasing contract that Imoplamac has with a bank, in case of disregard of the contract, in the amount of 6.690.000 Euros.
On 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 50.000.000 Euros, which may be withdrawn by each entities over a period up to six months. This loan pays interest at variable rate and matures was in October 2015.On this date, and with agreement of both parties, the maturity of this loan change to July 2016. At 31 December 2015 Taiber, Tableros Aglomerados
Ibéricos, S. L. had withdrawn 39 000 000 Euros (no amount had been withdrawn by Sonae Indústria, SGPS SA). Shares of the subsidiary Sonae Novobord are pledged as a guarantee for this loan.
On October 2014 Sonae Indústria, SGPS, SA and Tableros de Fibras SA contracted a loan with a Portuguese financial institution for a maximum amount of 65.000.000 Euros, withdrawn in November 2014. This loan pays interest at variable rate and matures in November 2022 and will be redeemed in 4 consecutive and equal semi-annual instalments, beginning in may 2021.At 31 December 2015 Tableros de Fibras SA had withdrawn 65.000.000 Euros (no amount had been withdrawn by Sonae Indústria, SGPS SA). Shares of the subsidiary Glunz AG are pledged as a guarantee for this loan.
On November 2015 the affiliate Euroresinas – Indústrias Quimicas, S.A. contracted a loan with a Portuguese financial institution for an amount of 4.000.000 Euros. This contract requires the fulfilment of a ratio calculated based on individual financial statements of Euroresinas – Indústrias Quimicas, S.A:" Net debt/EBITDA". This ratio is tested upon publication of annual financial statements and its failure can lead to early maturity of this loan.
Subsidiary Glunz AG and other German producers of wood-based panels are involved in some litigation filed by some customers for damages resulting from the alleged violation of competition laws, after which Glunz AG and GHP received, in March 2010, a statement of objections from the German Competition Authority. Some of these processes have come to an end in 2015 with the related effects recognized in these consolidated financial statements. For the cases still under way, complaints correspond to a maximum contingency in the amount of EUR 55 million. According to the opinion of our lawyers, at the closing date of these consolidated financial statements, it is not possible to reliably estimate the outcome of the ongoing processes or the amount of any payments that may be established.
On September 2010, Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 2.500.000 Euros , which was increased to 12.500.000 Euros in march 2014. This programme matures in September 2015. On January 2016, by agreement of the parts, the maturity was postponed to June 2016.
As stated on notes 13.b) and 13.c), at the date of approval of these financial statements, the Company had obtained formal statements from financing institutions assuring that until maturity date repayment will not be required for loans whose ratios were not fulfilled taking into considerations figures disclosed in the consolidated financial statements as at 31 December 2015. As such, bank loans amounting to EUR 103.275.000 (amortized cost) and debentures amounting to EUR 147 987 525 (amortized cost) will be reclassified under non-current liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
These financial statements were approved by the Board of Directors and authorised for issuance on 17 February 2016..
Consolidated Statement 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
| ASSETS | Notes | 31.12.2015 | 31.12.2014 |
|---|---|---|---|
| NON CURRENT ASSETS: | |||
| Tangible fixed assets | 11 | 628 779 728 | 700 089 421 |
| Goodwill | 14 | 80 884 032 | 82 096 717 |
| Intangible assets | 12 | 4 203 028 | 7 807 933 |
| Investment properties | 13 | 6 450 977 | 1 224 698 |
| Investment in associates | 10 | 1 493 139 | 1 354 074 |
| Investment in joint ventures | 10 | 5 695 259 | 7 326 715 |
| Investment available for sale | 10 | 1 155 713 | 1 128 608 |
| Deferred tax asset | 15 | 28 358 134 | 27 754 742 |
| Other non current assets Total non current assets |
16 | 804 270 757 824 280 |
972 238 829 755 146 |
| CURRENT ASSETS: | 98 007 573 | 99 271 758 | |
| Inventories Trade debtors |
18 19 |
85 053 009 | 98 523 551 |
| Other current debtors | 20 | 13 202 016 | 13 851 354 |
| Current tax asset | 2 799 769 | 3 312 542 | |
| Other taxes and contributions | 22 | 4 811 295 | 7 296 381 |
| Other current assets | 21, 27 | 10 406 656 | 10 064 096 |
| Cash and cash equivalents | 23 | 28 924 470 | 11 948 475 |
| Total current assets | 243 204 788 | 244 268 157 | |
| Non-current assets held for sale | 17 | 1 535 588 | 11 910 006 |
| TOTAL ASSETS | 1 002 564 656 | 1 085 933 309 | |
| SHAREHOLDERS`FUNDS, NON-CONTROLLING INTERESTS AND LIABILITIES | |||
| SHAREHOLDERS`FUNDS: | |||
| Share capital | 24.1 | 812 107 574 | 812 107 574 |
| Legal reserve | 24.2 | 3 131 757 | 3 131 757 |
| Other reserves and accumulated earnings | 24.3 | - 801 248 687 | - 767 474 878 |
| Accumulated other comprehensive income | 24.4 | 43 785 859 | 63 393 095 |
| Accumulated other comprehensive income directly associated with non-current assets held for sale |
24.4 | ||
| - 27 802 | |||
| Total shareholders' funds attributabble to equity holders of Sonae Indústria | 57 776 503 | 111 129 746 | |
| Non-controlling interests TOTAL SHAREHOLDERS`FUNDS |
25 | - 106 611 57 669 892 |
- 262 099 110 867 647 |
| LIABILITIES: | |||
| NON CURRENT LIABILITIES: | |||
| Bank loans - net of current portion | 26 | 53 413 866 | 231 403 466 |
| Non-convertible bonds | 26 | 147 604 120 | |
| Finance lease creditors - net of current portion | 26 | 16 749 594 | 23 440 018 |
| Other loans | 26 | 1 325 632 | 54 951 368 |
| Post-retirement liabilities | 30 | 26 578 632 | 27 279 500 |
| Other non current liabilities | 29 | 33 589 842 | 42 000 326 |
| Deferred tax liability | 15 | 55 427 496 | 63 291 251 |
| Provisions | 34 | 9 355 417 | 7 488 485 |
| Total non current liabilities | 196 440 479 | 597 458 534 | |
| CURRENT LIABILITIES: | |||
| Current portion of non-current bank loans | 26 | 178 706 758 | 21 562 801 |
| Current bank loans | 26 | 153 596 265 | 85 212 092 |
| Current portion of non-current non-convertible bonds | 26 | 147 987 525 | |
| Current portion of non-current finance lease creditors | 26 | 5 669 033 | 5 829 498 |
| Other loans | 26 | 41 619 187 | 6 186 912 |
| Trade creditors | 31 | 138 586 348 | 156 378 992 |
| Current tax liability | 1 508 253 | 2 614 128 | |
| Other taxes and contributions | 32 | 7 018 495 | 7 005 541 |
| Other current liabilities | 27, 33 | 72 606 959 | 77 936 006 |
| Provisions Total current liabilities |
34 | 1 155 462 748 454 285 |
5 307 416 368 033 386 |
| Liabilities directly associated with non-current assets held for sale | 17 | 9 573 742 | |
| TOTAL SHAREHOLDERS' FUNDS AND LIABILITIES | 1 002 564 656 | 1 085 933 309 |
The notes are an integral part of the consolidated financial statements
| Notes | 31.12.2015 | 31.12.2014 | |
|---|---|---|---|
| Sales | 40, 45 | 1 023 628 488 | 1 009 551 129 |
| Services rendered | 40, 45 | 3 703 569 | 4 980 692 |
| Other income and gains | 37, 40 | 24 620 998 | 39 874 435 |
| Cost of sales | 40, 45 | 537 335 500 | 540 981 344 |
| (Increase) / decrease in production | 40 | - 699 094 | 3 805 614 |
| External supplies and services | 40, 45 | 254 025 760 | 256 553 844 |
| Staff expenses | 40 | 150 225 328 | 151 501 141 |
| Depreciation and amortisation | 11, 12, 13, 43, 45 | 63 275 966 | 64 099 693 |
| Provisions and impairment losses (increase / reduction) | 34, 40, 45 | 450 379 | 10 285 817 |
| Other expenses and losses | 38, 40 | 18 070 511 | 9 312 194 |
| Operating profit / (loss) | 45 | 29 268 705 | 17 866 609 |
| Financial expenses | 41 | 53 295 470 | 62 290 708 |
| Financial income | 41 | 12 405 166 | 12 549 544 |
| Gains and losses in associated companies | 6, 10 | 246 384 | - 224 516 |
| Gains and losses in joint ventures | 5, 10 | - 1 621 962 | - 3 267 193 |
| Net profit/(loss) from continuing operations, before taxation | - 12 997 177 | - 35 366 264 | |
| Taxation | 42 | 3 682 757 | 7 005 794 |
| Consolidated net profit / (loss) from continuing operations, afer taxation | - 16 679 934 | - 42 372 058 | |
| Profit / (loss) from discontinued operations, after taxation | 43 | - 19 325 299 | - 73 507 271 |
| Consolidated net profit / (loss) for the period | - 36 005 233 | - 115 879 329 | |
| Attributable to: | |||
| Equity Holders of Sonae Industria | |||
| Continuing operations | 44 | - 16 679 564 | - 42 315 604 |
| Discontinuing operations | 44 | - 19 325 028 | - 73 404 581 |
| Equity Holders of Sonae Industria | - 36 004 592 | - 115 720 185 | |
| Non-controlling interests | |||
| Continuing operations | - 370 | - 56 454 | |
| Discontinuing operations | - 271 | - 102 690 | |
| Non-controlling interests | - 641 | - 159 144 | |
| Profit/(Loss) per share | |||
| Fom continuing operations: | |||
| Basic | 44 | - 0.0015 | - 0.0340 |
| Diluted | 44 | - 0.0015 | - 0.0340 |
| From discontinued operations: | |||
| Basic | 44 | - 0.0017 | - 0.0589 |
| Diluted | 44 | - 0.0017 | - 0.0589 |
The notes are an integral part of the consolidated financial statements
FOR THE PERIODS ENDED 31 DECEMBER 2015 AND 2014
| Notes | 31.12.2015 | 31.12.2014 | |
|---|---|---|---|
| Net consolidated profit / (loss) for the period (a) | - 36 005 233 | - 115 879 329 | |
| Other consolidated comprehensive income | |||
| Items that may be subsequently transferred to profit or loss | |||
| Change in currency translation reserve | 24.4 | - 14 629 590 | 4 060 084 |
| Change in fair value of available-for-sale financial assets | 8 528 | - 1 838 | |
| Items that may not be subsequently transferred to profit or loss | |||
| Revaluation of tangible fixed assets | 24.4 | - 19 672 832 | |
| Remeasurements of defined benefit plans | 24.4 | 240 357 | - 3 293 237 |
| Income tax relating to items that will not be reclassified | 15, 24.4 | - 48 000 | - 9 167 910 |
| Other consolidated comprehensive income for the period, net of tax (b) | - 14 332 705 | - 9 739 913 | |
| Total consolidated comprehensive income for the period (a) + (b) | - 50 337 938 | - 125 619 242 | |
| Total consolidated comprehensive income attributable to: | |||
| Equity holders of Sonae Industria | - 50 336 776 | - 125 465 886 | |
| Non-controlling interests | - 1 162 - 50 337 938 |
- 153 356 - 125 619 242 |
|
The notes are an integral part of the consolidated financial statements
| Share capital | Legal reserve |
Other Reserves and accumulated earnings |
Accumulated other comprehensive income |
Total shareholders` funds attributable to the equity holders of Sonae Indústria |
Non controlling interests |
Total shareholders' funds |
||
|---|---|---|---|---|---|---|---|---|
| Notes | 24.1 | 24.2 | 24.3 | 24.4 | 25 | |||
| Balance as at 1 January 2014 | 700 000 000 | 3 131 757 | - 647 867 883 | 72 681 459 | 127 945 333 | - 795 247 | 127 150 086 | |
| Total consolidated comprehensive income for the period Net consolidated pofit/(loss) for the period Other consolidated comprehensive income for the period |
-115 720 185 | -9 745 701 | - 115 720 185 - 9 745 701 |
- 159 144 5 788 |
- 115 879 329 - 9 739 913 |
|||
| Total | -115 720 185 | -9 745 701 | - 125 465 886 | - 153 356 | - 125 619 242 | |||
| Increase in share capital Medium term incentive plan Change in ownership percentage Others |
112 107 574 | -1 470 000 201 079 -1 551 038 -1 066 851 |
999 576 - 570 041 |
110 637 574 201 079 - 551 462 -1 636 892 |
117 551 462 134 925 |
110 637 574 201 196 - 1 501 967 |
||
| Balance as at 31 December 2014 | 812 107 574 | 3 131 757 | -767 474 878 | 63 365 293 | 111 129 746 | - 262 099 | 110 867 647 |
| Share capital | Legal reserve |
Other Reserves and accumulated earnings |
Accumulated other comprehensive income |
Total shareholders` funds attributable to the equity holders of Sonae Indústria |
Non controlling interests |
Total shareholders' funds |
|
|---|---|---|---|---|---|---|---|
| Notes | 24.1 | 24.2 | 24.3 | 24.4 | 25 | ||
| Balance as at 1 January 2015 | 812 107 574 | 3 131 757 | -767 474 878 | 63 365 293 | 111 129 746 | - 262 099 | 110 867 647 |
| Total consolidated comprehensive income for the period Net consolidated profit/(loss) for the period Other consolidated comprehensive income for the period |
-36 004 592 | -14 332 184 | - 36 004 592 - 14 332 184 |
- 641 - 521 |
- 36 005 233 - 14 332 705 |
||
| Total | -36 004 592 | -14 332 184 | -50 336 776 | - 1 162 | -50 337 938 | ||
| Medium term incentive plan Change in ownership percentage Transferred to Accumulated earnings Others |
39 028 - 914 847 899 838 2 206 764 |
150 137 - 899 838 -4 497 549 |
39 028 - 764 710 - 2 290 785 |
156 650 | 39 028 - 608 060 - 2 290 785 |
||
| Balance as at 31 December 2015 | 812 107 574 | 3 131 757 | -801 248 687 | 43 785 859 | 57 776 503 | - 106 611 | 57 669 892 |
The notes are an integral part of the consolidated financial statements
(Amounts expressed in Euros)
| Notes | 31.12.2015 | 31.12.2014 | |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Receipts from trade debtors | 1 048 155 395 | 1 119 109 395 | |
| Payments to trade creditors | 832 431 811 | 877 170 912 | |
| Payments to staff | 159 242 660 | 178 068 622 | |
| Net cash flow from operations | 56 480 924 | 63 869 861 | |
| Payment / (receipt) of corporate income tax | 8 742 423 | 8 843 931 | |
| Other receipts / (payments) relating to operating activities | - 6 945 209 | 72 602 | |
| Net cash flow from operating activities (1) | 40 793 292 | 55 098 532 | |
| INVESTMENT ACTIVITIES | |||
| Cash receipts arising from: | |||
| Investments | 4 718 | ||
| Tangible fixed assets and intangible assets | 8 257 926 | 29 037 621 | |
| Investment properties | 1 295 290 | ||
| Investment subventions | 118 777 | 775 301 | |
| Dividends | 9 500 | 45 000 | |
| Non-current assets held for sale | 3 039 998 | 4 466 628 | |
| Cash Payments arising from: | 12 721 491 | 34 329 268 | |
| Investments | 5 373 571 | 124 821 | |
| Tangible fixed assets and intangible assets | 25 582 926 | 40 628 940 | |
| Others | 4 054 | ||
| 30 956 497 | 40 757 815 | ||
| Net cash used in investment activities (2) | - 18 235 006 | - 6 428 547 | |
| FINANCING ACTIVITIES | |||
| Cash receipts arising from: | |||
| Interest and similar income | 722 684 | 676 665 | |
| Loans granted to related parties | 9 175 000 | ||
| Loans obtained | 26.5 | 1 471 693 025 | 3 644 065 246 |
| Increase in share capital | 168 502 | 110 734 770 | |
| 1 472 584 211 | 3 764 651 681 | ||
| Cash Payments arising from: | |||
| Interest and similar charges Loans granted to related parties |
34 633 530 | 48 808 551 9 175 000 |
|
| Loans obtained | 26.5 | 1 448 257 179 | 3 759 942 712 |
| Finance leases - repayment of principal | 4 661 365 | 5 914 358 | |
| Others | 36 031 | 53 930 | |
| 1 487 588 105 | 3 823 894 551 | ||
| Net cash used in financing activities (3) | - 15 003 894 | - 59 242 870 | |
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) | 7 554 392 | - 10 572 885 | |
| Effect of foreign exchange rate | 2 246 997 | - 133 284 | |
| Cash and cash equivalents at the beginning of the period | 23 | 10 500 810 | 20 940 411 |
| Cash and cash equivalents at the end of the period | 23 | 15 808 205 | 10 500 810 |
The notes are an integral part of the consolidated financial statements
FOR THE YEAR ENDED 31 DECEMBER 2015 (Amounts expressed in Euros)
SONAE INDÚSTRIA, SGPS, SA, whose head-office is at Lugar do Espido, Via Norte, Apartado 1096, 4470-909 Maia, Portugal, is the parent company of a group of companies as detailed in notes 4 to 6 ("Group"). The Group's operations and business segments are described in Note 45.
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 International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with Interpretations issued by the IFRS Interpretations Committee (IFRS IC), applicable to the period beginning 1 January 2015 and endorsed by the European Union.
2.1.1. In the year ended 31 December 2015 the following standards and interpretations, which have been endorsed by European Union, became effective:
Annual improvements 2011-2013 (effective for periods beginning on or after 1 July 2014). The amendments include changes from the 2011-2013 cycle of the annual improvements project that affect 4 standards: IFRS 1, First Time Adoption, IFRS 3, Business Combinations, IFRS 13, Fair Value Measurement and IAS 40, Investment Property;
IFRIC 21 (new), Levies (effective for periods beginning on or after 17 June 2014). Interpretation to IAS 37 and the recognition of a liability, clarifying that the obligation event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment.
The application of these standards did not produce any significant effects on these consolidated financial statements.
2.1.2. At 31 December 2015, 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:
IAS 1 (amendment), Presentation of Financial Statements (effective for periods beginning on or after 1 January 2016). This amendment contains guidance relating to materiality and aggregation, presentation of subtotals, structure of financial statements, disclosure of accounting policies and presentation of items of other comprehensive income which arise from investments measured using equity method;
IAS 16 (amendment), Tangible Fixed Assets, and IAS 38 (amendment), Intangible Assets: allowed methods for calculating depreciation and amortization (effective for periods beginning on or after 1 January 2016). In this amendment the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset;
IAS 19 (amendment), Employee Benefits (effective for periods beginning on or after 1 February 2015). This narrow scope amendment applies to contributions from employees or third parties to defined benefit plans. The objective of the amendment is
to simplify the accounting for contributions that are independent of the number of years of employee service;
IFRS 11 (amendment), Joint Arrangements (effective for periods beginning on or after 1 January 2016). This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business;
IAS 16 (amendment), Tangible Fixed Assets, and IAS 41 (amendment), Agriculture: 'Bearer Plants' (effective for periods beginning on or after 1 January 2016). This amendment defines the concept of bearer plant and transfers this type of asset from the scope of IAS 41 – Agriculture to the one of IAS 16 – Tangible Assets, with the related effect on measurement. However, biologic assets produced by these plants are kept in the scope of IAS 41 – Agriculture;
Annual improvements 2010-2012 (effective for periods beginning on or after 1 February 2015). These amendments include changes from the 2010-2012 cycle of the annual improvements project, that affect the following standards: IFRS 2 - Share-based Payment, IFRS 3 - Business Combinations, IFRS 8 - Operating Segments, IFRS 13 - Fair Value Measurement, IAS 16 - Property, Plant and Equipment, IAS 24 - Related Parties Disclosures and IAS 38 - Intangible Assets;
Annual improvements 2012-2014 (generally effective for periods beginning on or after 1 January 2016). This amendment cycle includes changes to the following standards: IFRS 5 – Non-current Assets Available for Sale and Discontinued Operations, IFRS 7 – Financial Instruments: Disclosures, IAS 19 – Employee Benefits and IAS 34 – Interim Financial Reporting.
2.1.3. At 31 December 2015, the following standards had been issued, with effective date on later periods and still pending endorsement by the European Union:
IAS 27 (amendment), Separate Financial Statements (effective for periods beginning on or after 1 January 2016). These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements;
IFRS 9 (new), Financial Instruments (effective for periods beginning on or after 1 January 2018). This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model;
IFRS 10 (amendment), Consolidated Financial Statements, and IAS 28 (amendment), Investment in Associates and Joint Ventures: sale or contribution of assets from an investor to an associate or joint venture (effective for periods beginning on or after 1 January 2016). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary;
IFRS 10 (amendment), Consolidated Financial Statements, IFRS 12 (amendment), Disclosure of Interests in Other Entities, and IAS 28 (amendment), Investments in Associates and Joint Ventures: 'Investment entities – exemption from consolidation' (effective for periods beginning on or after 1 January 2016). This amendment specifies that an intermediate holding company which is a subsidiary of an investment entity is exempted from consolidation. Furthermore, the optional use of equity method under IAS 28 is extensible to an entity which not being an investment entity, holds an interest in an associate or joint venture which qualifies as investment entity;
IFRS 14 (new), Regulatory Deferral Accounts (applicable for periods beginning on or after 1 January 2016). This standard allows first-time adopting entities to keep recognizing regulatory assets and liabilities according to the accounting policy used in the former standards. However, to enhance comparability with entities using IFRSs, which do not recognize regulatory assets or liabilities, the amounts thereon must be separately disclosed on the financial statements;
IFRS 15 (new), Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018). This new standard only applies to contracts with customers to provide goods or services, and requires an entity to recognise revenue when the contractual obligation to deliver goods or services is fulfilled and for the amount that reflects the consideration the entity is expected to be entitled to, following a five step approach;
The Company does not estimate any significant effect to arise from the 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 2.13), and land and buildings, which are stated for their revalued amounts, as described on note 2.3.
The consolidation methods adopted by the Group are as follows:
Investments in companies in which the Group holds, directly or indirectly, control, were included in these consolidated financial statements using the full consolidation method.
The Group holds control of entities when it fulfils all the following conditions: (i) power over the entity; (ii) exposure, or rights, to returns from its involvement with the entity; and (iii) the ability to use its power over the entity to affect the amount of its own returns.
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.
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 noncontrolling 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. Noncontrolling 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 intra-group
transactions, balances, income and expenses and distributed dividends are eliminated on consolidation.
Entities included in these consolidated financial statements are listed on note 4.
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) and in associates (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, under Investments in joint ventures or Investments in associates, on the Consolidated Statement of Financial Position, then adjusted by the amount corresponding to the Group's share of changes in equity (including net profit or loss) of the entity, against losses or profits in the period or against other comprehensive income for the period, and against dividends received.
The excess value resulting from the difference between the acquisition cost and the fair value of the assets and liabilities of the entity at the time of acquisition is recorded under Investments in joint ventures or investments in associates, on the Consolidated Statement of Financial Position. 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.
Adjustments to the financial statements of the entity are performed, whenever necessary, in order to adapt accounting policies to those used by the Group.
An assessment of investments in joint ventures and in associated companies is performed when there is an indication that the asset might be impaired. Any impairment loss is disclosed on the Consolidated 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.
Gains on transactions with joint ventures or associates are eliminated proportionately to the Group's interest in these entities, against the carrying amount of investment. Losses are also eliminated as long as it does not reflect an impairment situation.
Joint-venture companies are detailed in note 5 and associates are detailed in note 6.
c) Goodwill
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 14).
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 on the Consolidated 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.
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 or liquidated, accumulated exchange rate differences are recorded on the Consolidated Income Statement as a gain or loss on the disposal.
Exchange rates used on translation of foreign group, jointly controlled and associated companies are listed below:
| 31.12.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Closing rate Average rate | Closing rate Average rate | |||||
| Great Britain Pound | 0.7340 | 0.7257 | 0.7789 | 0.8060 | ||
| South African Rand | 16.9520 | 14.0885 | 14.0351 | 14.3968 | ||
| Canadian Dollar | 1.5116 | 1.4163 | 1.4063 | 1.4654 | ||
| American Dollar | 1.0887 | 1.1089 | 1.2141 | 1.3267 | ||
| Swiss Franc | 1.0835 1.0670 |
1.2024 | 1.2146 | |||
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, except land and buildings, acquired after that date are recorded at acquisition cost, net of accumulated depreciation and impairment losses.
Land and buildings are recognized for their revalued amounts, net of accumulated depreciation, in case of buildings, and impairment losses.
Increase in tangible fixed assets arising from revaluation is recognized through Other comprehensive income for the period revaluation occurs, which 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 between two successive revaluations.
The Group separately recognizes and depreciates the components of Property Plant and Equipment whose useful lives are significantly different from the related main asset's 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 on the Consolidated Income Statement when it is incurred (note 39).
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.
Non-current assets are stated under Non-current assets held for sale, on the Consolidated Statement of Financial Position, if their carrying amounts will be recovered mainly through a sale transaction rather than through continuing use.
Carrying amount will be recovered through sale when non-current assets are available for immediate sale in their present conditions and the probability of concluding a sale transaction in the following twelve months is high.
Non-current assets held for sale may be either an individual asset or a disposal group when a group of assets is included in the same sale transaction. Disposal groups may include current assets and liabilities as long as they are included in the same sale transaction. Current and non-current assets and liabilities are stated on the Consolidated Statement of Financial Position under Non-current assets held for sale and Liabilities directly associated with noncurrent assets held for sale, respectively.
Non-current assets held for sale and disposals groups are measured at the lower of cost and fair value less estimated costs to sell.
Depreciation of depreciable assets ceases after classification as Non-current assets held for sale.
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.
Assets are assessed for impairment individually. In case of tangible fixed assets that cannot autonomously produce cash flows, impairment is assessed for the cash-generating unit to which the asset is assigned (note 34). Whenever a cash-generating unit includes intangibles assets without defined useful life, impairment is assessed irrespective of events that may indicate that the carrying amount of the cash-generating unit may not be recoverable (note 14).
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized on the Consolidated Income Statement under Provisions and impairment losses.
For tangible fixed assets that were revalued, occurring impairment losses are recognized through other comprehensive income until the revaluation effect is offset. Any additional impairment is recognized on the Consolidated 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.
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 Consolidated 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. Impairment losses on intangible assets without defined useful life are not reversible.
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 Statement of Financial Position.
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.
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 on 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 other comprehensive income, 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 on the Consolidated Statement of Financial Position as current assets unless they mature after twelve months as from the balance sheet date, in which case they will be stated as non-current assets.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
d) Loans
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded on the Consolidated Income Statement on an accruals basis, in accordance with the accounting policy defined in note 2.10. 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 may use 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 Consolidated Income 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 on note 27.
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 under Other Accumulated Comprehensive Income, are transferred to profit or loss of the period or added 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 under the terms described on note 27, 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 30, some of the Group companies are committed to provide benefits to their employees when they get retired. These commitments are considered as defined benefit plans, and autonomous pension funds have been established to this effect.
In order to estimate its obligations, the Group obtains, annually, actuarial valuations according to the "Projected Unit Credit Method".
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 on 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 on 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 on 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 are recorded on individual financial statements of subsidiaries on their functional currency, using applicable exchange rates on 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 2.13.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 45).
The most significant estimations included in these consolidated financial statements refer to:
a) Useful lives of tangible and intangible assets (notes 2.3, 11, 12 and 13);
b) Impairment tests on cash-generating units to which goodwill was allocated (note 14);
c) Impairment analysis of accounts receivable (notes 19 and 20);
d) Adjustments to assets, namely fair value adjustments and, relating to inventories, write-down to net realizable value (note 9, 18 and 34);
e) Calculation of post-employment liabilities (notes 30);
f) Calculation of provisions and impairment losses on intangible assets and tangible fixed assets (note 34);
g) Calculation of income tax (note 42).
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 2015, 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.
The Group discloses non-underlying 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:
Restructuring expenses;
Termination expenses;
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. The resulting fair value corresponds to level 2 of fair value hierarchy, as defined in IFRS 13. When these techniques use mostly or exclusively unobservable information, the resulting fair value corresponds to level 3 or fair value hierarchy, as defined on the aforementioned standard.
a) Credit Risk Management Policy
Sonae Indústria Credit Risk derives mainly from its account receivables items related with its operating activity.
The main objective of Sonae Indústria Credit Risk Management is to guarantee the effective collection of its operating receivables according to the negotiated payment terms.
In order to mitigate Credit Risk related with potential Customers default on payment of outstanding receivables, Group companies exposed to this type of risk:
Have 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, daily monitoring effective exposure to their Customers;
Have protection tools in place, such as credit insurance policies, letters of credit and bank guarantees, where operationally necessary and economically viable;
Make use of credit rating agencies;
Make use of legal proceedings in order to recover bad debt, if applicable.
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, the Canadian Dollar or the South African Rand (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 exactly match settlement dates and base interest rate of the underlying exposures;
Maximum financial charges on the aggregate of the derivative and the underlying exposures are always known and limited on the inception of the hedging period;
Quotes from at least two Financial Institutions are considered before closing any interest rate hedging deal.
As a geographically diversified Group with subsidiaries located in three different continents, Sonae Indústria is exposed to foreign exchange risk. Statement of Financial
Position and Income Statement 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 Translation Reserve, included in Accumulated other comprehensive income, on the Consolidated Statement of Financial Position.
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 2015, 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:
relationship banks to ensure the right balance between satisfactory liquidity and adequate commitment fees.
Liquidity risk is analysed in note 28.
On 30 November 2015, Sonae Indústria entered into a strategic partnership agreement with Inversiones Arauco Internacional, Limitada, a company belonging to Arauco Group. This agreement envisages to set up a joint venture involving wood based panels and related operations presently controlled by Sonae Indústria Group in Europe and South Africa, which will be held in equal parts by Sonae Indústria and Arauco Groups.
This agreement, if implemented, will be carried out by means of an increase in share capital of Sonae Indústria's subsidiary Tafisa – Tableros de Fibras, S. A., for EUR 137.5 million, to be subscribed for by Arauco, which will gain ownership of half of this subsidiary's share capital and subsequent joint control.
The joint venture that may arise from this agreement will not include Sonae Indústria's operations in North America and the laminates and components business, which will continue to be controlled by Sonae Indústria.
The completion of this transaction is subject to certain conditions, namely, the clearance of the competent Competition Authorities, the execution of certain internal transactions to achieve the required business perimeter and certain amendments to relevant existing debt facilities of Sonae Indústria Group.
The high level of uncertainty that covers this operation derives not only from its contingent nature, as its realization depends on the fulfilment of the abovementioned conditions, but also from the timing of execution and from the values to assign to certain key variables.
It is therefore not possible to conclude on the existence of a high probability of realizing this operation within a one-year period, which is the reason why the assets and the liabilities were not treated as a disposal group to be recognized under Non-current assets held for sale and Liabilities directly associated with non-current assets held for sale on the Consolidated Statement of Financial Position as at 31 December 2015.
Similarly, it is impracticable to reliably quantify the effects this transaction, in case it takes place, will have on the future consolidated financial statements of the Company. There are, however, some effects that can be identified presently, among which are:
The implementation of a joint venture implies a change in consolidation method of the companies involved, whose investments will be measured using equity method. This change in method will have a very significant effect on most of the lines of the consolidated statement of financial position, consolidated income statement and consolidated statement of cash flows;
A change from global consolidation method to equity method does not, in theory, produce significant effects on the Group's total consolidated equity;
A reduction in ownership interest resulting from a capital increase, which will change a position of control to a situation of joint control, could affect the company's net profit or loss in a way that is not possible to reliably identify at this date as it is impossible to identify the value to assign to several key variables to this process, namely regarding other comprehensible income to reclassify to profit or loss at the closing date of the transaction (translation reserve of subsidiaries from United Kingdom and South Africa at the date the transaction will possibly take place).
Group companies included in the consolidated financial statements, their head offices and percentage of capital held by the Group as at 31 December 2015 and 31 December 2014 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | ||||
|---|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | |||||
| Direct | Total | Direct | Total | |||
| Agepan Eiweiler Management, GmbH | Eiweiler (Germany) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Agloma Investimentos, SGPS, S. A. | Maia (Portugal) | 100.00% | 99.87% | 100.00% | 98.90% | a) |
| Aserraderos de Cuellar, S.A. | Madrid (Spain) | 100.00% | 99.87% | 100.00% | 98.90% | a) |
| BHW Beeskow Holzwerkstoffe GmbH | Meppen (Germany) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| 1) Darbo, SAS |
Linxe (France) | 100.00% | 99.86% | 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) |
| 2) Frases e Frações – Imobiliária e Serviços, S. A. |
Maia (Portugal) | 100.00% | 100.00% | a) | ||
| GHP Glunz Holzwerkstoffproduktions GmbH | Meppen (Germany) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Glunz AG | Meppen (Germany) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Glunz Service GmbH | Meppen (Germany) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Glunz UK Holdings, Ltd. | Knowsley (United Kingdom) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Glunz UkA GmbH | Meppen (Germany) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Impaper Europe GmbH | Meppen (Germany) | 100.00% | 99.86% | 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% | 99.86% | 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% | 99.86% | 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) |
| Novodecor (Pty) | Woodmead (South Africa) | 100.00% | 100.00% | 100.00% | 100.00% | a) |
| OSB Deustchland | Germany | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Poliface North America | Baltimore (USA) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
|---|---|---|---|---|---|---|---|
| Racionalización y Manufacturas Florestales, S.A. | Madrid (Spain) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Sociedade de Iniciativa e Aproveit. Florestais – Energias, S.A. | Mangualde (Portugal) | 100.00% | 99.86% | 100.00% | 98.79% | a) | |
| Somit – Imobiliária, S.A. | Mangualde (Portugal) | 100.00% | 99.86% | 100.00% | 98.79% | a) | |
| 3) | 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% | 99.86% | 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% | 99.86% | 100.00% | 98.78% | a) | |
| Sonae Tafibra International, B. V. | Woerden (The Netherlands) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Sonae Industria (UK), Limited | Knowsley (United Kingdom) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Spanboard Products Ltd | Belfast (United Kingdom) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tableros de Fibras, S.A. | Madrid (Spain) | 98.42% | 99.86% | 98.42% | 98.78% | a) | |
| Tableros Tradema, S.L. | Madrid (Spain) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tafiber. Tableros de Fibras Ibéricas, S.L. | Madrid (Spain) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tafibra South Africa, Limited | Woodmead (South Africa) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tafisa Canadá Inc | Lac Mégantic (Canada) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| 4) | Tafisa Développement | Rungis (França) | 100.00% | 99.86% | 100.00% | 98.78% | a) |
| Tafisa France S.A.S. | Rungis (France) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tafisa U.K, Ltd. | Knowsley (United Kingdom) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Taiber, Tableros Aglomerados Ibéricos, S.L. | Madrid (Spain) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tafibra Suisse, SA | Tavannes (Switzerland) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tecnologias del Medio Ambiente, S.A. | Barcelona (Spain) | 100.00% | 99.86% | 100.00% | 98.78% | a) | |
| Tool, GmbH | Meppen (Germany) | 100.00% | 99.86% | 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 2015 and 31 December 2014 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | |||
|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | ||||
| Direct | Total | Direct | Total | ||
| Laminate Park GmbH & Co. KG | Eiweiler (Germany) | 50.00% | 49.93% | 50.00% | 49.39% |
| Tecmasa. Reciclados de Andalucia, S. L. | Alcalá de Guadaira (Spain) | 50.00% | 49.93% | 50.00% | 49.39% |
Laminate Park GmbH & Co. KG is a jointly-controlled company based in Germany, where it carries out its activity that consists in producing and selling wood derivative flooring.
Tecmasa, Reciclados de Andalucia, SL is a jointly-controlled company based in Spain. Its activity consists in trading wood for recycling.
Joint control of these companies is established by contract.
Level one fair value of investment in these companies is not available as shares representing their share capital are not listed.
Net assets and net profit/loss for these jointly-controlled companies, whose share was recognized on these consolidated financial statements under equity method, as stated on note 2.2.b), are detailed as follows:
| 31.12.2015 | 31.12.2014 | ||||
|---|---|---|---|---|---|
| Tecmasa, | Tecmasa, | ||||
| Laminate Park | Reciclados de | Laminate Park | Reciclados de | ||
| Andalucia | Andalucia | ||||
| Non-current assets | 32 015 153 | 197 372 | 53 445 843 | 221 063 | |
| Current assets | 18 227 223 | 413 252 | 16 409 392 | 395 501 | |
| Cash and cash equivalents | 266 798 | 222 043 | 691 112 | 168 886 | |
| Other non-current liabilities | 3 559 203 | 6 921 403 | |||
| Current financial liabilities | 4 347 656 | 7 066 011 | |||
| Other current liabilities | 31 443 090 | 108 501 | 27 819 219 | 76 504 | |
| Operating revenues | 80 635 714 | 427 081 | 78 369 514 | 534 737 | |
| Operating expenses | 82 102 503 | 398 021 | 82 780 406 | 450 037 | |
| Depreciation and amortization | 5 048 658 | 26 491 | 4 893 772 | 29 077 | |
| Interest expense | 856 277 | 1 292 837 | 22 | ||
| Taxation | 8 907 | 22 095 | |||
| Net profit/(loss) from continuing operations | - 3 264 027 | 20 117 | - 6 542 770 | 61 976 | |
| Adjustments to the Group's accounting policies | - 36 640 | - 16 951 | |||
| Group's share on net profit/(loss) | - 1 632 014 | 10 059 | - 3 289 705 | 22 513 |
Associated companies, their head offices and the percentage of share capital held as at 31 December 2015 and 31 December 2014 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | ||||
|---|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | |||||
| Direct | Total | Direct | Total | |||
| Serradora Boix | Barcelona (Spain) | 31.25% | 31.21% | 31.25% | 31.21% |
Investments in associated companies are measured on these consolidated financial statements using the equity method, as referred to in note 2.2.b).
The Statement of Financial Position and the Income Statement of the associated companies accounted for using the equity method on these consolidated financial statements, are detailed as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Non-current assets | 6 788 575 | 6 494 033 |
| Current assets | 7 314 753 | 7 279 732 |
| Non-current liabilities | 3 101 405 | 3 481 145 |
| Current liabilities | 5 868 129 | 5 953 110 |
| Operating revenues | 19 706 691 | 22 396 806 |
| Operating expenses | 18 673 820 | 22 667 872 |
| Net profit/(loss) from continuing operations | 1 032 871 | - 719 457 |
| Adjustments to the Group's accounting policies | - | - |
| Group's share on net profit/(loss) | 246 384 | - 224 516 |
Assets, liabilities and results detailed on the previous table refer to the associated company's financial statements for the annual period preceding 31.12.2015 and 31.12.2014, respectively. Based on prior years' information, the Company estimates that no significant effect arises from this time difference.
There are no incurred obligations regarding this associate company.
Changes to the consolidation perimeter during the period that were set out on note 4 did not produce any significant effect on these consolidated financial statements.
In the Consolidated Statements of Financial Position at 31 December 2015 and 31 December 2014, the following financial instruments are included:
| 31.12.2015 | Loans and receivables |
Assets at fair value through profit or loss |
Available-for-sale assets |
Sub-total | Assets out of scope of IFRS 7 |
Total |
|---|---|---|---|---|---|---|
| Non current assets | ||||||
| Available for sale investments | 1 155 713 | 1 155 713 | 1 155 713 | |||
| Other non current assets | 804 270 | 804 270 | 804 270 | |||
| Current assets | ||||||
| Customers | 85 053 009 | 85 053 009 | 85 053 009 | |||
| Other current debtors | 11 961 779 | 11 961 779 | 1 240 237 | 13 202 016 | ||
| Other current assets | 491 159 | 491 159 | 9 915 497 | 10 406 656 | ||
| Cash and cash equivalents | 28 924 470 | 28 924 470 | 28 924 470 | |||
| Total | 126 743 528 | 491 159 | 1 155 713 128 390 400 | 11 155 734 139 546 134 |
| Loans | Assets at fair value |
|||||
|---|---|---|---|---|---|---|
| and | through | Available-for-sale | of | |||
| 31.12.2014 | receivables | profit or loss | assets | Sub-total | IFRS 7 | Total |
| Non current assets | ||||||
| Available for sale investments | 1 128 608 | 1 128 608 | 1 128 608 | |||
| Other non current assets | 970 542 | 970 542 | 1 696 | 972 238 | ||
| Current assets | ||||||
| Customers | 98 523 551 | 98 523 551 | 98 523 551 | |||
| Other current debtors | 12 509 118 | 12 509 118 | 1 342 236 | 13 851 354 | ||
| Other current assets | 99 079 | 99 079 | 9 965 017 | 10 064 096 | ||
| Cash and cash equivalents | 11 948 475 | 11 948 475 | 11 948 475 | |||
| Total | 123 951 686 | 99 079 | 1 128 608 125 179 373 | 11 308 949 136 488 322 |
| 31.12.2015 | Liabilities at fair value through profit or loss |
Hedge derivatives |
Liabilities at amortized cost |
Sub-total | Liabilities out of scope of IFRS 7 |
Total |
|---|---|---|---|---|---|---|
| Non current liabilities | ||||||
| Bank loans - net of current portion | 53 413 866 | 53 413 866 | 53 413 866 | |||
| Debentures - net of current portion | ||||||
| Finance lease creditors - net of current portion | 16 749 594 | 16 749 594 | 16 749 594 | |||
| Other loans | 1 325 632 | 1 325 632 | 1 325 632 | |||
| Other non current liabilities | 2 277 504 | 2 277 504 | 31 312 338 | 33 589 842 | ||
| Current liabilities | ||||||
| Bank loans | 332 303 023 | 332 303 023 | 332 303 023 | |||
| Debentures | 147 987 525 | 147 987 525 | 147 987 525 | |||
| Finance lease creditors | 5 669 033 | 5 669 033 | 5 669 033 | |||
| Other loans | 41 619 187 | 41 619 187 | 41 619 187 | |||
| Trade creditors | 138 586 348 | 138 586 348 | 138 586 348 | |||
| Other current liabilities | 41 908 | 8 195 243 | 8 237 151 | 64 369 808 | 72 606 959 | |
| Total | 41 908 | 748 126 955 | 748 168 863 | 95 682 146 | 843 851 009 |
| Liabilities at | Liabilities | ||||
|---|---|---|---|---|---|
| fair value | Liabilities | out of scope | |||
| through | at amortized | of | |||
| 31.12.2014 | profit or loss | cost | Sub-total | IFRS 7 | Total |
| Non current liabilities | |||||
| Bank loans - net of current portion | 231 403 466 | 231 403 466 | 231 403 466 | ||
| Debentures - net of currentportion | 147 604 120 | 147 604 120 | 147 604 120 | ||
| Finance lease creditors - net of current portion | 23 440 018 | 23 440 018 | 23 440 018 | ||
| Other loans | 54 951 368 | 54 951 368 | 54 951 368 | ||
| Other non current liabilities | 241 495 | 241 495 | 41 758 831 | 42 000 326 | |
| Current liabilities | |||||
| Bank loans | 106 774 893 | 106 774 893 | 106 774 893 | ||
| Debentures | |||||
| Finance lease creditors | 5 829 498 | 5 829 498 | 5 829 498 | ||
| Other loans | 6 186 912 | 6 186 912 | 6 186 912 | ||
| Trade creditors | 156 378 992 | 156 378 992 | 156 378 992 | ||
| Other current liabilities | 35 529 | 9 998 575 | 10 034 104 | 67 901 902 | 77 936 006 |
| Total | 35 529 742 809 337 | 742 844 866 109 660 733 | 852 505 599 |
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 offset against financial liabilities.
Use of fair value in the preparation of these consolidated financial statements may be summarized as follows:
| Financial assets | ||||||
|---|---|---|---|---|---|---|
| Measured at fair value | Not measured at fair value | Total | Description of | |||
| Level of fair value |
Amount | Fair value Fair value not quantified quantified* |
used valuation techniques |
|||
| 31.12.2014 | ||||||
| Non current assets Available for sale investments |
1 | 799 594 | 329 014 | 1 128 608 | note 10 | |
| Other non current assets | - | 970 542 | 970 542 | - | ||
| Current assets | ||||||
| Customers | - | 98 523 551 | 98 523 551 | - | ||
| Other current debtors Other current assets |
- 2 |
99 079 | 12 509 118 | 12 509 118 99 079 |
- note 27 |
|
| Cash and cash equivalents | - | 11 948 475 | 11 948 475 | - | ||
| Total | 898 673 | 124 280 700 | 125 179 373 | |||
| 31.12.2015 | ||||||
| Non current assets Available for sale investments |
1 | 818 462 | 337 251 | 1 155 713 | note 10 | |
| Other non current assets | - | 804 270 | 804 270 | - | ||
| Current assets | ||||||
| Customers | - | 85 053 009 | 85 053 009 | - | ||
| Other current debtors | - | 11 961 779 | 11 961 779 | - | ||
| Other current assets Cash and cash equivalents |
2 - |
491 159 | 28 924 470 | 491 159 28 924 470 |
note 27 - |
|
| 1 309 621 | 127 080 779 | 128 390 400 | ||||
| Measured at fair value | Financial liabilities Not measured at fair value |
|||||
| Level of fair | Fair value Fair value not |
Total | Description of used valuation |
|||
| value | Amount | quantified quantified* |
techniques | |||
| 31.12.2014 | ||||||
| Non current liabilities | ||||||
| Bank loans - net of current portion Debentures - net of currentportion |
- | 231 403 466 147 604 120 |
231 403 466 147 604 120 |
- - |
||
| Finance lease creditors - net of current portion | - 2 |
19 660 333 3 779 685 |
23 440 018 | note 26 | ||
| Other loans | - | 54 951 368 | 54 951 368 | - | ||
| Other non current liabilities | - | 241 495 | 241 495 | - | ||
| Current liabilities | ||||||
| Bank loans Finance lease creditors |
- 2 |
106 774 893 3 176 022 2 653 476 |
106 774 893 5 829 498 |
- note 26 |
||
| Other loans | - | 6 186 912 | 6 186 912 | - | ||
| Trade creditors | - | 156 378 992 | 156 378 992 | - | ||
| Other current liabilities | 2 | 35 529 | 9 998 575 | 10 034 104 | note 27 | |
| Total | 35 529 | 22 836 355 719 972 982 |
742 844 866 | |||
| 31.12.2015 | ||||||
| Non current liabilities | ||||||
| Bank loans - net of current portion | - | 53 413 866 | 53 413 866 | - | ||
| Finance lease creditors - net of current portion Other loans |
2 | 15 204 920 1 544 674 1 325 632 |
16 749 594 1 325 632 |
note 26 - |
||
| Other non current liabilities | - - |
2 277 504 | 2 277 504 | - | ||
| Current liabilities | ||||||
| Bank loans Debentures |
- - |
332 303 023 147 987 525 |
332 303 023 147 987 525 |
- - |
||
| Finance lease creditors | 2 | 4 024 048 1 644 985 |
5 669 033 | note 26 | ||
| Other loans | - | 41 619 187 | 41 619 187 | - | ||
| Trade creditors | - | 138 586 348 | 138 586 348 | - | ||
| Other current liabilities | 2 | 41 908 | 8 195 243 | 8 237 151 | note 27 | |
| 41 908 | 19 228 968 728 897 987 |
748 168 863 |
* as it is estimated to not materially differ from carrying amount.
Investment properties are recognized at cost as referred to on note 2.6. Their fair value is disclosed on note 13.
Land and buildings are recognized for their revalued amounts, which was determined as at 31.12.2013. The accounting policy regarding the periodicity of revaluation of these assets is stated on note 2.3.
These assets are valued at fair value less estimated costs to sell, as described on notes 2.7, 17 and 34.
Fair value hierarchy is described on note 2.26.
At 31 December 2015 and 31 December 2014 details of Investments are as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Non current | Non current | |
| Investment in group companies excluded from consolidation | ||
| Opening balance | 36 969 914 | 36 969 914 |
| Closing balance | 36 969 914 | 36 969 914 |
| Accumulated impairment losses (Note 34) | 36 969 914 | 36 969 914 |
| Net investment in group companies excluded from consolidation | ||
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Non current | Non current | |
| Investment in joint ventures | ||
| Opening balance | 7 326 715 | 5 638 909 |
| Increase in share capital | 5 000 000 | |
| Effect of equity method application (note 5) | -1 631 456 | -3 312 194 |
| Closing balance | 5 695 259 | 7 326 715 |
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Non current | Non current | |
| Investment in associated companies | ||
| Opening balance | 1 354 074 | 1 566 686 |
| Effect of equity method application (note 6) | 139 065 | - 212 612 |
| Closing balance | 1 493 139 | 1 354 074 |
| 31.12.2015 | 31.12.2014 | |
| Non current | Non current | |
| Available-for-sale investment | ||
| Opening balance | 1 144 569 | 1 124 785 |
| Acquisition | 18 579 | 2 267 |
| Change in fair value (note 24.4) | 8 526 | 17 517 |
| Closing balance | 1 171 674 | 1 144 569 |
| Accumulated impairment losses (Note 34) | 15 961 | 15 961 |
| Net available-for-sale investment | 1 155 713 | 1 128 608 |
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 conclusion. 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 investment in subsidiaries or associates. They are recognized at cost as no relevant difference to their fair value is estimated. In addition, it includes an application in the investment fund Hausinvest that is recognized for its market fair value of EUR 818 462, which was calculated based on market information. This fair value is included in the first level of fair value hierarchy.
In 2015 and 2014, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery |
Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Tangible Fixed Assets under construction |
Total tangible fixed assets |
|
| Gross cost: | ||||||||
| Opening balance | 694 614 035 | 1 377 116 456 | 11 741 816 | 13 314 019 | 27 941 909 | 9 895 357 | 42 172 525 | 2 176 796 117 |
| Capital expenditure | 184 458 | 4 009 | 21 163 523 | 21 351 990 | ||||
| Disposals | 1 957 603 | 6 953 789 | 744 358 | 67 224 | 3 936 000 | 152 593 | 3 286 943 | 17 098 510 |
| Reclassifications as investment properties | - 37 123 738 | - 37 123 738 | ||||||
| Transfers and reclassifications | 1 396 592 | 28 516 269 | 122 414 | 49 006 | 3 118 781 | 560 525 | - 37 769 141 | - 4 005 554 |
| Exchange rate effect | - 10 137 932 | - 28 822 167 | - 188 826 | - 103 483 | - 227 960 | - 15 350 | - 723 238 | - 40 218 956 |
| Closing balance | 646 791 354 | 1 370 041 227 | 10 931 046 | 13 196 327 | 26 896 730 | 10 287 939 | 21 556 726 | 2 099 701 349 |
| Accumulated depreciation and impairment losses | ||||||||
| Opening balance | 399 512 236 | 1 016 219 363 | 10 764 186 | 12 437 562 | 26 599 883 | 8 868 508 | 2 304 958 | 1 476 706 696 |
| Depreciations for the period | 11 295 161 | 48 901 305 | 456 370 | 262 521 | 414 069 | 368 453 | 61 697 879 | |
| Impairment losses for the period - on results | 31 265 | 79 979 | 36 | 111 280 | ||||
| Disposals | 226 069 | 6 238 087 | 726 747 | 62 928 | 3 936 185 | 144 444 | 1 530 496 | 12 864 956 |
| Reclassifications as investment properties | - 30 134 419 | - 30 134 419 | ||||||
| Transfers and reclassifications | - 6 367 613 | - 12 770 | 7 174 | 2 937 329 | 128 873 | - 3 307 007 | ||
| Exchange rate effect | - 3 054 692 | - 17 763 562 | - 167 277 | - 102 826 | - 196 523 | - 2 972 | - 21 287 852 | |
| Closing balance | 377 423 482 | 1 034 831 385 | 10 313 762 | 12 541 503 | 25 818 573 | 9 218 418 | 774 498 | 1 470 921 621 |
| Carrying amount | 269 367 872 | 335 209 842 | 617 284 | 654 824 | 1 078 157 | 1 069 521 | 20 782 228 | 628 779 728 |
| 31.12.2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery |
Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Tangible Fixed Assets under construction |
Total Tangible Assets |
|
| Gross cost: | ||||||||
| Opening balance | 745 854 200 | 1 591 424 688 | 14 169 683 | 15 808 030 | 31 972 407 15 335 630 | 22 880 953 2 437 445 591 | ||
| Capital expenditure | 10 759 | 2 412 580 | 188 392 | 11 046 | 13 339 | 3 198 | 40 871 783 | 43 511 097 |
| Disposals | 19 341 432 | 123 356 617 | 1 218 232 | 1 715 236 | 808 441 | 174 974 | 232 619 | 146 847 551 |
| Revaluation | ||||||||
| Transfers and reclassifications | - 35 846 513 | - 105 882 148 | - 1 495 709 | - 811 717 | - 3 335 769 | - 5 270 372 | - 21 813 186 | - 174 455 414 |
| Exchange rate effect | 3 937 021 | 12 517 953 | 97 682 | 21 896 | 100 373 | 1 875 | 465 594 | 17 142 394 |
| Closing balance | 694 614 035 | 1 377 116 456 | 11 741 816 | 13 314 019 | 27 941 909 | 9 895 357 | 42 172 525 2 176 796 117 | |
| Accumulated depreciation and impairment losses | ||||||||
| Opening balance | 404 180 832 | 1 170 290 718 | 12 951 897 | 14 092 480 | 30 332 701 14 055 323 | 67 512 1 645 971 463 | ||
| Depreciations for the period | 13 208 396 | 53 694 066 | 660 535 | 368 669 | 506 641 | 446 900 | 68 885 207 | |
| Impairment losses for the period - on results | 20 234 962 | 23 360 416 | 497 746 | 56 783 | 33 559 | 328 330 | 3 389 134 | 47 900 930 |
| Impairment losses for the period - on Other Comprehensive Income | 8 326 533 | 11 346 297 | 19 672 830 | |||||
| Disposals | 15 424 400 | 116 091 472 | 1 149 271 | 1 198 482 | 783 820 | 93 110 | 7 449 | 134 748 004 |
| Revaluation | ||||||||
| Reversion of impairment losses for the period | 5 787 132 | 74 | 562 | 392 | 67 512 | 5 855 672 | ||
| Transfers and reclassifications | - 32 137 306 | - 128 132 208 | - 2 274 718 | - 903 562 | - 3 575 085 | - 5 869 296 | - 1 076 727 | - 173 968 902 |
| Exchange rate effect | 1 123 218 | 7 538 679 | 77 997 | 21 748 | 86 448 | 754 | 8 848 844 | |
| Closing balance | 399 512 235 | 1 016 219 364 | 10 764 186 | 12 437 562 | 26 599 882 | 8 868 509 | 2 304 958 1 476 706 696 | |
| Carrying amount | 295 101 800 | 360 897 092 | 977 630 | 876 457 | 1 342 027 | 1 026 848 | 39 867 567 | 700 089 421 |
Transfer and reclassifications include mainly tangible fixed assets reclassified as Investment properties (note 13) and as Non-current assets held for sale (nota 17).
Exchange rate effect results mainly from the translation into euro of tangible fixed assets of subsidiaries whose functional currency is the South African Rand (ZAR) or the Canadian Dollar (CAD).
During 2015 and 2014 no interest paid or any other financial charges were capitalized, in accordance with conditions defined on note 2.10.
At 31 December 2015, mortgaged Property, plant and equipment amounted to EUR 299 596 935 (EUR 276 475 044 at 31 December 2014) as guarantee for loans amounting to EUR 125 910 591 (EUR 125 436 696 at 31 December 2014). Furthermore, at the same date the Group had mortgaged Land and buildings in the amount of EUR 4 968 589 as guarantee of tax debts.
On the same date, there were no commitments to the acquisition of tangible fixed assets.
At 31 December 2015 and 2014 details of tangible fixed assets used by the Group under financial leases were as follows:
| 31.12.2015 | 31.12.2014 | ||||
|---|---|---|---|---|---|
| Opening balance |
Increase | Other changes |
Closing balance |
Closing balance | |
| Gross cost: | |||||
| Land and Buildings | 31 314 785 | - 4 074 455 | 27 240 330 | 31 314 785 | |
| Plant and Machinery | 40 758 116 | - 15 006 | 40 743 110 | 40 758 116 | |
| Vehicles | 1 473 420 | - 123 243 | 1 350 177 | 1 473 420 | |
| Fixtures and Fittings | 337 247 | - 23 496 | 313 751 | 337 247 | |
| Closing balance | 73 883 568 | - 4 236 200 | 69 647 368 | 73 883 568 | |
| Accumulated depreciation and impairment losses |
|||||
| Land and Buildings | 6 258 275 | 599 283 | - 1 662 004 | 5 195 554 | 6 258 275 |
| Plant and Machinery | 23 781 998 | 2 810 324 | - 1 985 | 26 590 337 | 23 781 998 |
| Vehicles | 1 230 975 | 204 150 | - 119 227 | 1 315 898 | 1 230 975 |
| Fixtures and Fittings | 321 480 | 4 084 | - 22 655 | 302 909 | 321 480 |
| Closing balance | 31 592 728 | 3 617 841 | - 1 805 871 | 33 404 698 | 31 592 728 |
| Carrying amount | 42 290 840 | - 3 617 841 | - 2 430 329 | 36 242 670 | 42 290 840 |
Other changes include EUR -4 266 521 and EUR -1 601 949 of gross cost and accumulated depreciation, respectively, which were reclassified as own tangible fixed assets after being acquired.
Minimum payments of finance lease are stated in note 26.4.
During 2015 and 2014, movements in intangible assets, accumulated amortization and impairment losses were as follows:
| 31.12.2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 184 848 | 3 520 925 | 15 529 611 | 2 619 273 | 63 454 | 5 412 187 | 1 380 615 | 15 593 065 13 117 848 | 28 710 913 | ||
| Capital expenditure | 1 649 684 | 5 413 | 740 632 | 5 413 | 2 390 316 | 2 395 729 | |||||
| Disposals | 34 666 | 1 071 034 | 14 377 | 3 578 859 | 1 071 034 | 3 627 902 | 4 698 936 | ||||
| Transfers and reclassifications | 298 453 | 407 532 | 621 872 | - 865 241 | - 5 413 | - 1 297 829 | 402 119 | - 1 242 745 | - 840 626 | ||
| Exchange rate effect | - 12 867 | - 318 804 | - 805 | - 318 804 | - 13 672 | - 332 476 | |||||
| Closing balance | 184 848 | 3 771 845 | 14 547 305 | 3 225 963 | 63 454 | 2 617 771 | 823 418 | 14 610 759 10 623 845 | 25 234 604 | ||
| Accumulated depreciation and impairment losses |
|||||||||||
| Opening balance | 162 110 | 3 150 027 | 14 050 169 | 2 308 918 | 63 454 | 1 168 302 | 14 113 623 | 6 789 357 | 20 902 980 | ||
| Amortization for the period | 22 738 | 142 726 | 573 084 | 258 119 | 141 150 | 573 084 | 564 733 | 1 137 817 | |||
| Impairment losses for the period | 343 271 | 343 271 | 343 271 | ||||||||
| Disposals Transfers and reclassifications |
1 048 692 | 14 377 | 1 048 692 | 14 377 | 1 063 069 | ||||||
| Exchange rate effect | - 4 114 | - 285 139 | - 170 | - 285 139 | - 4 284 | - 289 423 | |||||
| Closing balance | 184 848 | 3 288 639 | 13 289 422 | 2 552 490 | 63 454 | 1 652 723 | 13 352 876 | 7 678 700 | 21 031 576 | ||
| Carrying amount | 483 206 | 1 257 883 | 673 473 | 965 048 | 823 418 | 1 257 883 | 2 945 145 | 4 203 028 |
| 31.12.2014 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 188 804 | 3 519 871 17 143 071 | 2 542 928 | 63 454 | 3 758 936 | 783 077 | 17 206 525 | 10 793 616 | 28 000 141 | ||
| Capital expenditure | 3 884 095 | 852 873 | 4 736 968 | 4 736 968 | |||||||
| Disposals | 4 003 | 1 081 773 | 8 225 | 731 530 | 1 081 773 | 743 758 | 1 825 531 | ||||
| Revaluation | |||||||||||
| Transfers and reclassifications | - 672 497 | 84 179 | - 1 499 314 | - 255 335 | - 672 497 | - 1 670 470 | - 2 342 967 | ||||
| Exchange rate effect | 47 | 1 054 | 140 810 | 391 | 140 810 | 1 492 | 142 302 | ||||
| Closing balance | 184 848 | 3 520 925 15 529 611 | 2 619 273 | 63 454 | 5 412 187 | 1 380 615 | 15 593 065 | 13 117 848 | 28 710 913 | ||
| Accumulated depreciation and impairment losses |
|||||||||||
| Opening balance | 136 684 | 3 026 127 14 359 052 | 1 988 754 | 63 454 | 1 027 912 | 14 422 506 | 6 179 477 | 20 601 983 | |||
| Amortization for the period | 22 738 | 123 302 | 1 476 662 | 325 798 | 140 390 | 1 476 662 | 612 228 | 2 088 890 | |||
| Impairment losses for the period | 16 246 | 1 111 | 16 246 | 1 111 | 17 357 | ||||||
| Disposals | 4 003 | 1 081 737 | 4 112 | 1 081 737 | 8 115 | 1 089 852 | |||||
| Reversion of impairment losses for the period | |||||||||||
| Transfers and reclassifications | 6 644 | - 828 678 | - 2 721 | - 828 678 | 3 923 | - 824 755 | |||||
| Exchange rate effect | 47 | 598 | 108 624 | 88 | 108 624 | 733 | 109 357 | ||||
| Closing balance | 162 110 | 3 150 027 14 050 169 | 2 308 918 | 63 454 | 1 168 302 | 14 113 623 | 6 789 357 | 20 902 980 | |||
| Carrying amount | 22 738 | 370 898 | 1 479 442 | 310 355 | 4 243 885 | 1 380 615 | 1 479 442 | 6 328 491 | 7 807 933 | ||
During 2015 and 2014 movements in investment properties, accumulated depreciation and impairment losses were as follows:
| Cost | Total | ||
|---|---|---|---|
| Cost | Total | ||
| 1 667 281 | 1 667 281 | 1 667 281 | 1 667 281 |
| 1 667 281 | 1 667 281 | ||
| 1 667 281 | 1 667 281 | ||
| 442 583 | 442 583 | 398 325 | 398 325 |
| 553 094 | 553 094 | 44 258 | 44 258 |
| 457 335 | 457 335 | ||
| 442 583 | 442 583 | ||
| 6 450 977 | 6 450 977 | 1 224 698 | 1 224 698 |
| 37 123 738 37 123 738 37 123 738 37 123 738 30 134 419 30 134 419 30 672 761 30 672 761 31.12.2015 |
31.12.2014 |
| Rents from investment properties | 250 000 | 227 060 |
|---|---|---|
| Direct operating costs | 14 731 | 76 651 |
Disposals of investment properties comprise the land and the building of former Göttingen industrial plant, in Germany, which were sold during the period ended 31 December 2015.
At the closing date of these consolidated financial statements, Investment properties included the land and the buildings of Betanzos industrial plant, in Spain, which were leased after this plant was closed down (notes 11 and 17), having been reclassified as investment properties during the period ended 31 December 2015. These assets are recognized for their cost. Fair value was determined at 31 December 2015 through independent appraisal and amounted to EUR 6.6 million (level two fair value). Fair value of the land was determined through extraction method, and fair value of the buildings was determined through sales comparison method.
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Gross value: | ||
| Opening balance Decreases |
83 796 717 | 89 567 912 6 027 749 |
| Currency translation | -1 212 685 | 256 554 |
| Closing balance | 82 584 032 | 83 796 717 |
| Accumulated impairment losses: | ||
| Opening balance | 1 700 000 | 7 727 749 |
| Decreases | 6 027 749 | |
| Closing balance | 1 700 000 | 1 700 000 |
| Carrying amount | 80 884 032 | 82 096 717 |
During 2015 and 2014, movements in goodwill arising on consolidation were as follows:
Impairment tests to Goodwill carried out at 31 December 2015 mainly consisted in determining the recoverable amount of each cash-generating unit using the discounted cash flow method. In some cases, fair value less estimated costs to sell of specific assets was determined by independent appraisal.
Goodwill was allocated through cash-generating units, which were aggregated according to synergies generated by the respective business combinations.
Recoverable amounts are compared to the net assets of each cash-generating unit, including allocated goodwill and impairment losses detailed on note 34.
Calculation of recoverable amounts consisted in projecting operating cash flows over an eightyear period, thereafter extrapolated using perpetuity and discounted to 31 December 2014. Weighted Average Cost of Capital, before tax, calculated using 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 German government bonds, to which a spread is added for each country where cash-generating units belong.
The use of an eight-year period for projecting cash flows has taken into consideration the extension and intensity of economic cycles to which the Group's activity is subject to.
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.
| Cash generating units | ||||||
|---|---|---|---|---|---|---|
| Iberian Peninsula | Germany | South Africa | ||||
| Goodwill | 71 460 679 | 3 588 414 | 5 834 939 | |||
| Discount rate (pre-tax) | 9.19% | 7.68% | 18.13% | |||
| Growth rate on perpetuity | 1.00% | 1.00% | 1.00% | |||
| Growth rate (CAGR 2015 - 2023): | ||||||
| Total net income | 1.35% | 1.27% | 2.68% | |||
| Cost of goods sold and materials consumed | 1.25% | 1.32% | 2.57% | |||
| Fixed costs | 0.76% | 0.61% | 2.53% | |||
| Cash flows projected over | 8-year period | 8-year period | 8-year period | |||
| Testing conslusions | No impairment | No impairment | No impairment | |||
CAGR - Compound Average Growth Rate.
| Cash generating units | ||||||
|---|---|---|---|---|---|---|
| Iberian Peninsula | Germany | South Africa | ||||
| Goodwill | 71 460 679 | 3 588 414 | 7 047 624 | |||
| Discount rate (pre-tax) | 9.54% | 7.44% | 17.14% | |||
| Growth rate on perpetuity | 1.00% | 1.00% | 1.00% | |||
| Growth rate (CAGR 2014 - 2022): | ||||||
| Total net income | 1.31% | 1.24% | 2.49% | |||
| Cost of goods sold and materials consumed | 1.20% | 1.51% | 2.08% | |||
| Fixed costs | 0.72% | 0.71% | 2.45% | |||
| Cash flows projected over | 8-year period | 8-year period | 8-year period | |||
| Testing conslusions | No impairment | No impairment | No impairment |
CAGR - Compoud Average Growth Rate.
These impairment tests did not show any impairment loss to be recognized under Goodwill, at 31 December 2015.
The Group carried out a sensitivity analysis to the recoverable amount of cash-generating units, which consisted in testing the sensitivity of recoverable amount to reasonable changes in key assumptions that most affect the present value of discounted cash flows.
Sensitivity test carried out on Iberian Peninsula cash-generating unit, whose goodwill accounts for 88% of goodwill recognized on the Consolidated Statement of Financial Position at 31 December 2015, is detailed as follows:
| Cash Generating Unit Iberian Peninsula (1) |
Increase in WACC by 1.0 p.p. (2) |
Annual increase in turnover by 1.0% (3) |
Reduction in EBITDA/Turnover magin by 0.45 p.p. (4) |
Annual increase in investment in tangible fixed assets by EUR 2 000 000 (5) |
|
|---|---|---|---|---|---|
| Weighted average cost of capital rate (WACC) | 9.19% | 10.19% | 9.19% | 9.19% | 9.19% |
| Turnover CAGR [2015 ; Perpetuity] (6) | 1.38% | 1.38% | 1.00% | 1.38% | 1.38% |
| Average EBITA/Turnover margin [2015 ; Perpetuity] | 8.95% | 8.95% | 8.95% | 8.50% | 8.95% |
| Average investment in tangible fixed assets [2015 - perpetuity] | 6 960 550 | 6 960 550 | 6 960 550 | 6 960 550 | 8 630 550 |
| Present value of discounted cash flows | 251 731 446 | 227 757 276 | 232 355 045 | 230 557 618 | 235 115 100 |
| Fair value less estimated costs to sell (7) | 3 498 000 | 3 498 000 | 3 498 000 | 3 498 000 | 3 498 000 |
| Total recoverable amount | 255 229 446 | 231 255 276 | 235 853 045 | 234 055 618 | 238 613 100 |
| Conclusions of sensitivity analysis | No impairment | No impairment | No impairment | No impairment | No impairment |
(1) Figures included in impairment test carried out on cash-generating unit Iberian Peninsula as at 31.12.2015 (reference table); (2) Increase in weighted average cost of capital by 1 p. p. compared to reference table, ceteris paribus;
(3) A compound average growth rate of turnover of 1.00% was used instead of 1.38% that was used in reference table, ceteris paribus; (4) An average EBITDA/Turnover margin of 8.5% was used instead of 8.95% that was used in reference table, ceteris paribus;
(5) Average annual investment in tangible fixed assets used in reference table was added up by EUR 2 000 000 each year, ceteris paribus;
(6) Compound average growth rate;
(7) Tangible fixed assets whose fair value less estimated costs to sell were determined by independent appraisal.
No impairment was identified as a result of this sensitivity test on Iberian Peninsula cashgenerating unit.
Sensitivity test on South Africa cash-generating unit, whose goodwill accounts for 7.2% of goodwill recognized on the Consolidated Statement of Financial Position, at closing date of these financial statements, is detailed as follows:
| Cash Generating Unit South Africa |
Increase in WACC by 1.0 p.p. |
Annual increase in turnover by 2.5% |
Reduction in EBITDA/Turnover magin by 0.45 p.p. |
Annual increase in investment in tangible fixed assets by EUR 1 000 000 |
|
|---|---|---|---|---|---|
| (1) | (2) | (3) | (4) | (5) | |
| Weighted average cost of capital rate (WACC) | 18.13% | 19.13% | 18.13% | 18.13% | 18.13% |
| Turnover CAGR [2015 ; Perpetuity] (6) | 2.68% | 2.68% | 2.50% | 2.68% | 2.68% |
| Average EBITA/Turnover margin [2015 ; Perpetuity] | 14.56% | 14.56% | 14.56% | 14.11% | 14.56% |
| Average investment on tangible fixed assets [2015 - perpetuity] | 2 549 063 | 2 549 063 | 2 549 063 | 2 549 063 | 3 384 063 |
| Present value of discounted cash flows | 67 484 864 | 64 168 078 | 60 837 141 | 64 477 577 | 62 049 974 |
| Conclusions of sensitivity analysis | No impairment | No impairment | No impairment | No impairment | No impairment |
(1) Figures included in impairment test carried out on cash-generating unit South Africa as at 31.12.2015 (reference table);
(2) Increase in weighted average cost of capital by 1 p. p. compared to reference table, ceteris paribus;
(3) A compound average growth rate of turnover of 2.50% was used instead of 2.68% that was used in reference table, ceteris paribus; (4) An average EBITDA/Turnover margin of 14.11% was used instead of 14.56% that was used in reference table, ceteris paribus; (5) Average annual investment in tangible fixed assets used in reference table was added up by EUR 1 000 000 each year, ceteris paribus;
(6) Compound average growth rate;
No impairment was identified as a result of this sensitivity test on generating unit South Africa.
Sensitivity test on Germany cash-generating unit, whose goodwill accounts for 4.4% of goodwill recognized on the Consolidated Statement of Financial Position, at 31 December 2015, used the same methodology and inputs that were used on the test carried out on Iberian Peninsula cash-generating unit. No impairment was identified as a result of this sensitivity test.
At 31 December 2015 and 31 December 2014, deferred tax assets and liabilities were detailed according to underlying temporary differences as follows:
| Deferred Tax Assets | Deferred Tax Liabilities | ||||
|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | ||
| Harmonisation Adjustments | 38 104 229 | 43 297 564 | |||
| Provisions not Allowed for Tax Purposes | 997 568 | 1 061 768 | |||
| Impairment of Assets | 1 233 414 | 3 413 280 | |||
| Tax Losses Carried Forward | 17 857 583 | 14 913 534 | |||
| Defined benefit plans | 2 262 330 | 2 283 015 | |||
| Derecognized Tangible Fixed Assets | 36 378 | 37 448 | |||
| Revaluation of Tangible Fixed Assets | 14 655 358 | 17 515 958 | |||
| Other Temporary Differences | 5 970 861 | 6 045 697 | 2 667 909 | 2 477 729 | |
| 28 358 134 | 27 754 742 | 55 427 496 | 63 291 251 |
Amounts recognized under deferred tax assets which arise from other temporary differences relate to, namely, deferred income on investment subventions in the amount of EUR 3.1 million (EUR 3.3 million at 31 December 2014).
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | |
| Opening balance | 27 754 742 | 33 241 208 | 63 291 251 | 72 647 868 |
| Effect on profit or loss of continuing operation: | ||||
| Changes in temporary differences affecting profit or loss: | ||||
| Harmonisation adjusments | - 2 147 504 | - 4 279 912 | ||
| Provisions not allowed for tax purposes | 137 133 | - 376 570 | ||
| Impairment of Assets | - 2 179 867 | - 438 608 | ||
| Derecognized tangible assets | - 1 070 | - 10 119 | ||
| Revaluation of tangible assets | - 2 276 500 | - 1 055 418 | ||
| Tax losses carried forward | 2 956 153 | - 5 942 012 | ||
| Others | - 143 518 | 582 222 | 207 476 | 1 403 852 |
| 768 831 | - 6 185 087 | - 4 216 528 | - 3 931 478 | |
| Change in tax rate affecting profit or loss | ||||
| Subtotal (note 42) | 768 831 | - 536 458 - 6 721 545 |
- 4 216 528 | - 1 594 741 - 5 526 219 |
| Effect on profit or loss of discontinued operations: | ||||
| Changes in temporary differences affecting profit or loss: | ||||
| Revaluation of tangible assets | - 7 685 | 3 066 980 | ||
| Tax losses carried forward | 141 467 | |||
| Subtotal | 141 467 | - 7 685 | 3 066 980 | |
| Effect on other comprehensive income: | ||||
| Changes in temporary differences affecting other comprehensive income: | ||||
| Revaluation of tangible fixed assets | - 6 539 414 | |||
| Others | 48 000 | 700 000 | ||
| 48 000 | 700 000 | - 6 539 414 | ||
| Change in tax rate affecting other comprehensice income | - 1 928 496 | |||
| Subtotal | 48 000 | 700 000 | - 8 467 910 | |
| Currency translation effect | - 213 439 | 393 612 | - 3 639 542 | 1 570 532 |
| Closing balance | 28 358 134 | 27 754 742 | 55 427 496 | 63 291 251 |
In accordance with International Financial Reporting Standards, the Group annually assesses deferred tax asset related to tax losses carried forward on the basis of cash flows projected over a five-year period, which resulted in a net increase in deferred tax asset amounting to EUR 2 956 153.
According to the estimation of taxable profit or deductible loss for the fiscal year 2015 and according to the tax returns for the fiscal year 2014, tax losses carried forward and the corresponding deferred tax asset are detailed as follows:
| 31.12.2015 | 31.12.2014 | |||
|---|---|---|---|---|
| To be used until |
Tax loss carried forward |
Deferred tax asset |
Tax loss carried forward |
Deferred tax asset |
| 2018 | 7 198 697 | 1 511 726 | 13 163 195 | 2 764 271 |
| 7 198 697 | 1 511 726 | 13 163 195 | 2 764 271 | |
| Without time limit | 59 140 176 | 16 345 857 | 54 986 088 | 12 149 263 |
| Total | 66 338 873 | 17 857 583 | 68 149 283 | 14 913 534 |
| 31.12.2015 | 31.12.2014 | |||
|---|---|---|---|---|
| To be used until |
Tax loss carried forward |
Tax credit | Tax loss carried forward |
Tax credit |
| 2015 | 40 573 | 8 115 | ||
| 2016 | 208 307 | 41 661 | 208 307 | 41 661 |
| 2017 | 117 849 | 23 570 | 117 849 | 23 570 |
| 2018 | 83 512 | 16 702 | 83 512 | 16 702 |
| 2019 | 119 987 | 23 997 | 119 987 | 23 997 |
| 2020 | 125 844 | 25 169 | 125 844 | 25 169 |
| 2021 | 121 939 | 24 388 | 121 939 | 24 388 |
| 2022 | 1 287 230 | 257 446 | 1 216 494 | 243 299 |
| 2023 | 456 536 | 91 307 | 446 763 | 89 353 |
| 2 521 204 | 504 240 | 2 481 268 | 496 254 | |
| Without time limit | 1 872 632 371 | 546 616 931 | 1 772 854 049 | 522 571 786 |
| Total | 1 875 153 575 | 547 121 171 | 1 775 335 317 | 523 068 040 |
Furthermore, at 31 December 2015 and 31 December 2014, tax losses for which no deferred tax asset was recognized are detailed as follows:
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 2015 and 31 December 2014, details of Other non-current assets on the Consolidated Statements of Financial Position were as follows:
| 31.12.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Trade debtors and other debtors | 804 270 | 804 270 | 970 542 | 970 542 | ||
| Loans to related parties | 10 931 182 | 10 931 182 | 10 931 182 | 10 931 182 | ||
| Financial Instruments | 11 735 452 | 10 931 182 | 804 270 | 11 901 724 | 10 931 182 | 970 542 |
| State and other public entities | ||||||
| Others | 1 696 | 1 696 | ||||
| Assets out of scope of IFRS 7 | 1 696 | 1 696 | ||||
| Total | 11 735 452 | 10 931 182 | 804 270 | 11 903 420 | 10 931 182 | 972 238 |
| AGEING OF NON CURRENT TRADE DEBTORS AND OTHER DEBTORS AND OF LOANS TO RELATED PARTIES |
|||||
|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | ||||
| Not due | 804 270 | 970 542 | |||
| Total | 804 270 | 970 542 |
In the period ended 31 December 2015, the Group sold tangible fixed assets and inventories of Ussel and Betanzos industrial plants, located in France and Spain respectively, which had been stated as Non-current assets held for sale, on the Consolidated Statement of Financial Position as at 31 December 2014. These sale transactions had an irrelevant effect on Net profit (loss) of discontinued operations, after taxation, on the Consolidated Income Statement.
In the same period, the Group sold subsidiary Darbo SAS, located in Linxe, France, whose assets had been classified under Non-current assets held for sale and whose liabilities had been classified under Liabilities directly associated with non-current assets held for sale, as at 31 December 2014. The sale transaction of this subsidiary had an irrelevant effect on Net profit (loss) of continuing operations, after taxation, on the Consolidated Income Statement.
In December 2015, the assets (equipment) of Souselas industrial plant, in Portugal, which is inactive, were classified as Non-current assets held for sale as they were available for immediate sale and it was estimated that a sale transaction will be completed in a twelvemonth period.
At 31 December 2015 and 2014, assets recognized under Non-current assets held for sale and the corresponding liabilities, classified as Liabilities directly associated with non-current assets held for sale were detailed as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Tangible fixed assets | 1 535 588 | 1 049 435 |
| Intangible assets | 576 352 | |
| Inventories | 9 206 410 | |
| Trade debtors | 62 256 | |
| Other current assets | 945 255 | |
| Cash and cash equivalents | 70 298 | |
| Non-current assets classified as available for sale | 1 535 588 | 11 910 006 |
| Non-current loans | 328 961 | |
| Other non-current liabilities | 823 815 | |
| Current loans | 216 308 | |
| Trade creditors | 6 121 321 | |
| Other non-current liabilities | 2 083 337 | |
| Liabilities directly associated to non-current assets classified as | ||
| available for sale | 9 573 742 |
At 31 December 2015 and 31 December 2014, details of Inventories on the Consolidated Statements of Financial Position were as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Merchandise | 6 265 965 | 7 351 265 |
| Finished and intermediate products | 34 934 682 | 35 315 543 |
| Products and working in progress | 710 410 | 661 223 |
| Raw Materials and Consumables | 60 497 525 | 60 108 995 |
| 102 408 582 | 103 437 026 | |
| Accumulated losses on inventories (Note 34) | 4 401 009 | 4 165 268 |
| 98 007 573 | 99 271 758 | |
Inventories consist mainly of wood, raw boards, faced boards and chemical products.
At 31 December 2015 and 31 December 2014, details of Trade debtors on the Consolidated Statements of Financial Position were as follows:
| 31.12.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Trade Debtors | 110 398 793 | 25 345 784 | 85 053 009 | 124 751 624 | 26 228 073 | 98 523 551 |
| 31.12.2015 | 31.12.2014 | |||||
| Not due | 75 066 082 | 82 993 157 | ||||
| Due and not impaired | ||||||
| 0 - 30 days | 5 685 626 | 7 926 753 | ||||
| 30 - 90 days | 1 321 832 | 3 765 896 | ||||
| ' + 90 days | 1 409 929 | 993 317 | ||||
| 8 417 387 | 12 685 966 | |||||
| Due and impaired | ||||||
| 0 - 90 days | ||||||
| 90 - 180 days | 2 040 066 | 2 632 829 | ||||
| 180 - 360 days | 347 692 | 533 957 | ||||
| + 360 days | 24 527 566 | 25 905 715 | ||||
| 26 915 324 | 29 072 501 | |||||
| Total | 110 398 793 | 124 751 624 |
At 31 December 2015 and 31 December 2014, details of Other current debtors on the Consolidated Statements of Financial Position were as follows:
| 31.12.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Other debtors | 2 666 503 | 3 502 | 2 663 001 | 3 205 616 | 3 502 | 3 202 114 |
| Related parties | 9 298 779 | 9 298 779 | 9 307 004 | 9 307 004 | ||
| Financial Instruments | 11 965 282 | 3 502 | 11 961 780 | 12 512 620 | 3 502 | 12 509 118 |
| Other debtors | 1 240 236 | 1 240 236 | 1 342 236 | 1 342 236 | ||
| Assets out of scope of IFRS 7 | 1 240 236 | 1 240 236 | 1 342 236 | 1 342 236 | ||
| Total | 13 205 518 | 3 502 | 13 202 016 | 13 854 856 | 3 502 | 13 851 354 |
| AGEING OF OTHER DEBTORS |
||||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | |||
| Not due | 9 650 058 | 9 293 655 | ||
| Due and not impaired | ||||
| 0 - 30 days | 883 052 | 1 186 323 | ||
| 30 - 90 days | 243 392 | 305 515 | ||
| + 90 days | 1 188 780 | 1 727 127 | ||
| 2 315 224 | 3 218 965 | |||
| Total | 11 965 282 | 12 512 620 |
Other debtors (financial instruments) include amounts receivable from Trade creditors for EUR 1 074 469.
Related parties comprises a loan to the jointly-controlled company Laminate Park GmbH & Co. KG amounting to EUR 9 271 164, which matures in June 2016 and pays interest at a market rate.
At 31 December 2015 and 31 December 2014, details of Other current assets on the Consolidated Statements of Financial Position were as follows:
| 31.12.2015 | 31.12.2014 | ||||
|---|---|---|---|---|---|
| Gross Value | Net Value | Gross Value | Net Value | ||
| Derivatives instruments | 491 159 | 491 159 | 99 079 | 99 079 | |
| Financial Instruments | 491 159 | 491 159 | 99 079 | 99 079 | |
| Accrued income | 4 675 331 | 4 675 331 | 5 174 694 | 5 174 694 | |
| Deferred expenses | 5 240 166 | 5 240 166 | 4 790 323 | 4 790 323 | |
| Assets out of scope of IFRS 7 | 9 915 497 | 9 915 497 | 9 965 017 | 9 965 017 | |
| Total | 10 406 656 | 10 406 656 | 10 064 096 | 10 064 096 |
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 27).
Accrued income includes EUR 2.1 million of estimated sales of electrical power (EUR 2.5 million at 31 December 2014).
Deferred expenses include EUR 3.3 million related to insurance expenses (EUR 3.4 million at 31 December 2014).
At 31 December 2015 and 31 December 2014, details of Other taxes and contributions on the Consolidated Statements of Financial Position were as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Other taxes and contributions: | ||
| Value Added Tax | 3 538 442 | 4 419 272 |
| Social Security Contribution | 68 407 | 54 854 |
| Others | 1 204 446 | 2 822 255 |
| 4 811 295 | 7 296 381 |
At 31 December 2015 and 31 December 2014, the detail of Cash and Cash Equivalents on the Consolidated Statements of Financial Position and on the Consolidated Statements of Cash Flows was as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Cash at Hand | 42 240 | 51 539 |
| Bank Deposits and Other Treasury Applications | 28 882 230 | 11 896 936 |
| Cash and Cash Equivalents on the Consolidated Statement of Financial Position |
28 924 470 | 11 948 475 |
| Bank Overdrafts | 13 116 265 | 1 447 665 |
| Cash and Cash Equivalents on the Statement of Cash Flows | 15 808 205 | 10 500 810 |
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 26.1).
Consolidated net shareholders' funds consist of the following items:
At 31 December 2015 and 31 December 2014, share capital, which was fully underwritten and paid, amounted to EUR 812 107 574.17 and was comprised of 11 350 757 417 common shares, without face value. At this date the Company did not held any own shares.
At 31 December 2015 and 31 December 2014, shares are not entitled to any fixed income.
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 10);
| Accumulated other comprehensive income Atributable to the parent's shareholders |
||||||||
|---|---|---|---|---|---|---|---|---|
| Currency translation |
Available-for sale financial assets |
Revaluation Reserve |
Remeasurements on defined benefit plans |
Share of Other Comprehensive Income of Joint Ventures and Associates |
Income tax related to components of other comprehensive income |
Total | ||
| Balance as at 1 January 2015 | -12 361 951 | 88 083 | 107 383 926 | -6 520 334 | 1 386 912 | 26 611 343 | 63 365 293 | |
| Other consolidated comprehensive income for the period Change in ownership percentage |
-14 629 067 16 053 |
8 526 124 |
136 171 | 240 357 30 234 |
1 921 | - 48 000 34 366 |
-14 332 184 150 137 |
|
| Transferred to Accumulated earnings Others |
-4 486 357 | -1 259 247 | - 11 192 | - 359 409 | - 899 838 -4 497 549 |
|||
| Balance as at 31 December 2015 | -31 461 322 | 96 733 | 106 260 850 | -6 260 935 | 1 388 833 | 26 238 300 | 43 785 859 |
| Accumulated other comprehensive income Atributable to the parent's shareholders |
||||||||
|---|---|---|---|---|---|---|---|---|
| Currency translation |
Available for-sale financial assets |
Revaluation Reserve |
Remeasurements on defined benefit plans |
Share of Other Comprehensive Income of Joint Ventures and Associates |
Income tax related to components of other comprehensive income |
Total | ||
| Balance as at 1 January 2014 | - 16 496 846 | 88 950 | 126 516 277 | - 3 198 741 | 1 371 956 | 35 600 137 | 72 681 459 | |
| Other consolidated comprehensive income for the period | 4 034 431 | - 1 836 | -19 645 347 | -3 288 627 | -9 155 678 | -9 745 701 | ||
| Change in ownership interest | 100 464 | 969 | 1 280 049 | - 32 966 | 14 956 | 363 896 | 999 576 | |
| Outros | - 767 053 | - 197 012 | - 570 041 | |||||
| Balance as at 31 December 2014 | -12 361 951 | 88 083 | 107 383 926 | -6 520 334 | 1 386 912 | 26 611 343 | 63 365 293 |
Currency translation reserve refers mostly to the subsidiaries Tafisa Canada, Sonae Industria (UK) and Sonae Novobord.
Accumulated other comprehensive income directly associated with non-current assets held for sale, on the Consolidated Statement of Financial Position as at 31 December 2014, consisted of remeasurements of defined benefit plans of Linxe and Ussel industrial plants, which were sold in the period ended 31 December 2015 (note 17).
Changes to this item during 2015 and 2014 were as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Opening balance | - 262 099 | - 795 247 |
| Net profit for the period attributed to non-controling interests | - 641 | - 159 144 |
| Other comprehensive income | - 521 | 5 788 |
| Change in ownership percentage | 156 650 | 551 462 |
| Others | 135 042 | |
| Closing balance | - 106 611 | - 262 099 |
As at 31 December 2015 and 31 December 2014 Sonae Indústria had the following outstanding loans:
| Amortised cost | Nominal value | Fair value | |||
|---|---|---|---|---|---|
| Current | Non current | Current | Non current | adjustment - 2015 |
|
| Bank loans Debentures |
332 303 023 147 987 525 |
53 413 866 | 333 573 440 150 000 000 |
53 648 577 | |
| Obligations under finance leases Other loans |
5 669 033 41 619 187 |
16 749 594 1 325 632 |
5 669 033 41 954 760 |
16 749 594 1 325 632 |
-2 416 319 |
| Gross debt | 527 578 768 | 71 489 092 | 531 197 233 | 71 723 803 | -2 416 319 |
| Cash and cash equivalent in balance sheet | 28 924 470 | 28 924 470 | |||
| Net debt | 498 654 298 | 71 489 092 | 502 272 763 | 71 723 803 | - 2 416 319 |
| Total net debt | 570 143 390 | 573 996 566 |
| Amortised cost | Nominal value | Fair value | |||
|---|---|---|---|---|---|
| Current | Non current | Current | Non current | adjustment - 2014 |
|
| Bank loans | 106 774 893 | 231 403 466 | 107 264 090 | 232 322 901 | |
| Debentures | 147 604 120 | 150 000 000 | |||
| Obligations under finance leases Other loans |
5 829 498 6 186 912 |
23 440 018 54 951 368 |
5 829 498 6 186 912 |
23 440 018 55 555 350 |
-2 125 961 |
| Gross debt | 118 791 303 | 457 398 972 | 119 280 500 | 461 318 269 | -2 125 961 |
| Cash and cash equivalent in balance sheet | 11 948 475 | 11 948 475 | |||
| Net debt | 106 842 828 | 457 398 972 | 107 332 025 | 461 318 269 | - 2 125 961 |
| Total net debt | 564 241 800 | 568 650 294 |
| 2015 | 2014 | |
|---|---|---|
| Bank loans | 4.90% | 6.08% |
| Debentures | 4.54% | 5.81% |
| Finance leases | 11.66% | 11.01% |
| Others | 4.80% | 4.49% |
The average interest rates of each class of debt stated in the previous table were as follows:
Bank overdrafts were not taken into consideration for the calculation of these average interest rates as the amounts were irrelevant.
Column "Fair value adjustment" includes the adjustments which would have to be made in the period if the corresponding items were to be stated at fair value. Its calculation consisted in determining the lease rent that would be applicable if the leasehold were subject to a market interest rate (second level of fair value hierarchy).
The maturity schedule of these loans is detailed on note 28.
As set out in point A.I.4 of the Corporate Governance Report, at 31 December 2015 there were loans amounting to EUR 450 million (representing 79% of consolidated net debt) whose repayment may be required by creditors in case of change in shareholder control of Sonae Indústria, SGPS, S. A..
Bank loans (nominal value) presented in the table in note 26 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 2015 and 31 December 2014 is detailed in the following table:
| Non current | Current | |||||
|---|---|---|---|---|---|---|
| Company | Short term portion |
Short term | Bank overdrafts |
Total | ||
| Sonae Indústria-SGPS,SA | 5 883 333 | 110 811 111 | 99 080 000 | 10 009 616 | 225 784 060 | |
| Tafisa-Tableros de Fibras, SA | 65 000 000 | 2 400 000 | 67 400 000 | |||
| Taiber, Tableros Aglomerados Ibéricos,SL | 39 000 000 | 39 000 000 | ||||
| Tafisa Canada Inc. | 30 630 674 | 466 430 | 31 097 104 | |||
| Sonae Novobord (Pty) Ltd | 14 334 570 | 1 769 700 | 16 104 270 | |||
| Euroresinas-Indústrias Quimicas,SA | 2 800 000 | 1 200 000 | 4 000 000 | |||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 3 054 948 | 3 054 948 | ||||
| Imoplamac - Gestão de Imóveis, S. A. | 729 934 | 729 934 | ||||
| Others | 51 701 | 51 701 | ||||
| 53 648 577 | 179 977 175 | 140 480 000 | 13 116 265 | 387 222 017 |
31.12.2014
| Non current | Current | ||||
|---|---|---|---|---|---|
| Company | Short term portion |
Short term | Bank overdrafts |
Total | |
| Sonae Indústria-SGPS,SA | 114 194 444 | 7 270 202 | 39 964 427 | 5 123 | 161 434 196 |
| Taiber, Tableros Aglomerados Ibéricos,SL | 39 000 000 | 39 000 000 | |||
| Tafisa Canada Inc. | 47 754 266 | 1 219 633 | 48 973 899 | ||
| Sonae Novobord (Pty) Ltd | 4 413 225 | 10 280 306 | 1 362 732 | 16 056 263 | |
| Tafisa-Tableros de Fibras, SA | 65 000 000 | 4 800 000 | 69 800 000 | ||
| Imoplamac - Gestão de Imóveis, S. A. | 960 966 | 3 281 857 | 4 242 823 | ||
| Others | 79 810 | 79 810 | |||
| 232 322 901 | 22 051 998 | 83 764 427 | 1 447 665 | 339 586 991 |
Figures on the previous table correspond to the nominal values of bank loans disclosed on note 26.
Non-current bank loans, the related short term portion and current bank loans are detailed as follows:
| Company(ies) | Loan | Contract date | Maturity (with reference to 31.12.2015) |
Currency | Outstanding principal at 31.12.2015 (EUR) |
Outstanding principal at 31.12.2014 (EUR) |
|---|---|---|---|---|---|---|
| Sonae Indústria, SGPS, S.A. | Commercial paper programme |
January 2006 | 1) | EUR | - | 5 000 000 |
| Sonae Novobord (Pty) Limited and Sonae Indústria, SGPS, S.A. |
Bank loan | January 2007 | 2) | ZAR | - | 6 289 594 |
| Sonae Novobord (Pty) Limited and Sonae Indústria, SGPS, S.A. |
Bank loan | June 2007 | 2) | ZAR | - | 1 278 937 |
| Tableros de Fibras S.A. | Commercial paper programme |
July 2010 | to be partly repaid from January 2014 to December 2016, unless it is annually revoked 3) |
EUR | 2 400 000 | 4 800 000 |
| Sonae Indústria, SGPS, S.A. | Bank loan | August 2010 | to be repaid from November 2012 to August 2017 |
EUR | 1 944 444 | 3 055 556 |
| Sonae Indústria, SGPS, S.A. | Commercial paper programme |
September 2010 | January 2016 15) | EUR | 12 500 000 | 12 500 000 |
| Tafisa Canada Inc. | Bank loan (Revolving ) |
July 2011 | to be repaid from September 2014 to July 2019 4) |
CAD | 29 572 204 | 47 075 146 |
| Tafisa Canada Inc. | Bank loan | July 2011 | to be repaid from August 2012 to april 2016 5) |
CAD | 334 117 | 1 436 550 |
| Imoplamac, S.A. | Bank loan | November 2012 | to be repaid from March 2013 to March 2016 6) |
EUR | 729 933 | 4 242 823 |
| Sonae Novobord (Pty) Limited | Bank loan | December 2012 | 2) | ZAR | - | 7 125 000 |
| Sonae Indústria, SGPS, S.A. | Commercial paper programme |
June 2013 | June 2018 Note: programme without subscription guarantee |
EUR | 13 650 000 | 17 500 000 |
| Taiber, Tableros Aglomerados Ibéricos, S.L. and Sonae Indústria, SGPS, S.A. |
Bank loan 7) | November 2013 | July 2016 8) | EUR | 39 000 000 | 39 000 000 |
| Sonae Indústria, SGPS, S.A. | Commercial paper programme |
July 2014 | to be repaid from December 2015 to June 2018 |
EUR | 8 350 000 | 10 000 000 |
| Sonae Indústria, SGPS, S.A. | Commercial paper programme |
August 2014 | to be repaid from May 2018 to November 2020 9) |
EUR | 93 900 000 | 103 900 000 |
| Tableros de Fibras, S.A. and Sonae Indústria, SGPS, S.A. |
Bank loan 10) | October 2014 | to be repaid from May 2021 to November 2022 9) |
EUR | 65 000 000 | 65 000 000 |
| Sonae Indústria, SGPS, S.A. | Bank loan | October 2014 | November 2016, annually renewable |
EUR | 7 930 000 | 3 600 000 |
| Sonae Indústria, SGPS, S.A | Commercial paper programme |
February 2015 | to be repaid from August 2016 to February 2018 9) |
EUR | 12 500 000 | - |
| Sonae Novobord (Pty) Limited | Bank loan 11) | April 2015 | to be repaid from October 2015 to April 2020 12) |
ZAR | 16 104 270 | - |
| Sonae Indústria, SGPS, S.A. | Bank loan 13) | June 2015 | June 2016 | EUR | 60 000 000 | - |
| Sonae Indústria, SGPS, S.A. | Commercial paper programme |
October 2015 | October 2016, renewable | EUR | 5 000 000 | - |
| Euroresinas - Indústrias Químicas, S.A. |
Bank loan 14) | November 2015 | to be repaid from May 2016 to November 2018 |
EUR | 4 000 000 | - |
| Sonae Indústria, SGPS, S.A. | Bank loan | December 2015 | January 2016 | EUR | 9 999 481 | - |
| Several companies | Other bank loans | - | - | EUR | 2 802 439 | 6 374 753 |
| Total | EUR | 385 716 889 | 338 178 359 |
1) In October 2015, this amount was refinanced in the context of a new contract to issue commercial paper;
2) In second half 2015, Sonae Novobord (Pty) Ltd carried out a refinancing process which caused these loans to be repaid in anticipation;
3) Until the date of approval of these consolidated financial statements, no notification revoking this programme had been received;
4) This contract requires the fulfilment of two financial ratios, which are calculated based on individual financial statements of Tafisa Canada Inc.: one ratio is "Financial liabilities / (Net shareholders' funds + Financial liabilities)" and the other ratio is "Free cash flow / Debt service". These ratios are tested every three months until maturity date and its failure can lead to early maturity of this loan;
5) This contract requires the fulfilment of a financial ratio calulated based on individual financial statements of Tafisa canada Inc: "Medium and long term financial liabilities / Net shareholders' funds". This ratio is tested upon publication of annual financial statements and its failure can lead to early maturity of this loan;
6) In December 2015, Imoplamac, S. A. took the initiative to repay some existing contracts before maturity date for a total amount of EUR 217 433.33;
7) This loan is collateralized by a pledge of shares of subsidiary Sonae Novobord (Pty) Limited;
8) In October 2015, by agreement between the parties, the maturity of this loan carried over from October 2015 to July 2016;
9) For these contracts, Sonae Indústria, SGPS, S. A. is required to fulfill an Equity ratio ("Total Net shareholders' funds / Total net assets"). This ratio is tested annually based on the company's consolidated financial statements, from 31 December 2015 to maturity date, and its failure can lead to early maturity of these loans;
10) Collateral for this loan includes a pledge of shares of subsidiary Glunz AG;
11) This loan is collateralized by a pledge of shares of subsidiary Tafibra South Africa (Pty) Ltd;
12) This contract requires the fulfilment of three financial ratios calculated based on the consolidated financial statements of Sonae Novobord (Pty) Limited: "Net debt / EBITDA", "Net debt / Equity" and "Free cash flow / Debt service". These ratios are tested every three months until maturity date and its failure can lead to early maturity of this loan;
13) This loan is collateralized by a pledge of shares of subsidiary Tafisa Canada Inc;
14) This contract requires the fulfilment of a ratio calculated based on individual financial statements of Euroresinas - Indústrias Químicas, S. A.: "Net debt / EBITDA". This ratio is tested upon publication of annual financial statements and its failure can lead to early maturity of this loan.
Figures on the previous table correspond to the amortized cost of bank loans disclosed on note 26.
The aforementioned contracts are subject to variable interest rates.
At the same date, in addition to mortgaged tangible fixed assets disclosed on note 11, there were other assets amounting to EUR 47 975 673 (52 808 593 at 31 December 2014) which were pledged as guarantee of the Group's liabilities. These assets consisted mostly in inventories and accounts receivable.
At 31 December 2015, conditions established by contract for the Equity ratio referred to in the above mentioned point 9) were not fulfilled, which caused loans amounting to EUR 167 308 185 (amortized cost) to be reclassified under Current portion of non-current bank loans, on the Consolidated Statement of Financial Position. At the date of approval of these consolidated financial statements, the Group had obtained formal statements from the financing institutions assuring that repayment would not be required before contractually defined maturity dates. As such, these loans will be disclosed under non-current liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
At the same date, all the other ratios associated to bank loans were fulfilled.
| Company(ies) | Loan | Contract date | Maturity (with reference to 31.12.2015) |
Currency | Outstanding principal at 31.12.2015 (EUR) |
Outstanding principal at 31.12.2014 (EUR) |
|---|---|---|---|---|---|---|
| Sonae Indústria, SGPS, S.A. | Sonae Industria / 2014 - 2020 bonds |
October 2014 | to be repaid from May 2018 to November 2020 1) |
EUR | 150 000 000 | 150 000 000 |
1) Sonae Indústria, SGPS, SA is required to fulfil an Equity ratio ("Total net shareholders' funds / Total net assets"). This ratio is tested annually based on the company's consolidated financial statements, from 31 December 2015 to maturity date, and its failure can lead to early maturity of this loan.
The aforementioned bond loans pay interest at variable rate composed of 6 month Euribor plus a spread.
At 31 December 2015, conditions established by contract for the Equity ratio referred to in the above mentioned point 1) were not fulfilled, which caused loans amounting to EUR 147 987 525 euros (amortized cost) to be reclassified under Current portion of non-current nonconvertible bonds, on the Consolidated Statement of Financial Position. At the date of approval of these consolidated financial statements, the Group had obtained a formal statement from the holder of these bonds assuring that repayment would not be required before contractually defined maturity date. As such, these bonds will be disclosed under non-current liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
Other loans, as detailed in the table in note 26, 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 2015 and 31 December 2014:
| 31.12.2015 | |||||
|---|---|---|---|---|---|
| Company | Non current | Current | |||
| Others | Securitization | Others | |||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 1 197 416 | 12 925 960 | 908 655 | ||
| Glunz AG | 14 645 819 | 78 950 | |||
| Tableros Tradema,S.L. | 128 216 | 7 020 547 | 22 849 | ||
| Sonae Tafibra International, BV | 5 523 691 | ||||
| Sonae Industria (UK), Ltd. | 475 656 | ||||
| Euroresinas-Indústrias Quimicas,SA | 301 231 | ||||
| Isoroy SAS | 51 402 | ||||
| 1 325 632 | 40 643 075 | 1 311 685 |
| 31.12.2014 | |||||
|---|---|---|---|---|---|
| Company | Non current | Current | |||
| Securitization | Others | Others | |||
| Glunz AG | 18 869 853 | 78 950 | |||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 11 617 604 | 2 058 425 | 5 608 211 | ||
| Isoroy SAS | 5 223 534 | ||||
| Tableros Tradema,S.L. | 10 910 505 | 151 546 | 6 131 | ||
| Sonae Tafibra International, BV | 5 485 197 | ||||
| Sonae Industria (UK), Ltd. | 1 135 908 | ||||
| Tafiber, Tableros de Fibras Ibéricas,SL | 102 778 | 102 793 | |||
| Euroresinas-Indústrias Quimicas,SA | 390 827 | ||||
| 53 242 601 | 2 312 749 | 6 186 912 | |||
Figures on the previous table correspond to the nominal values of bank loans disclosed on note 26.
| Company(ies) | Loan | Contract date | Maturity (with reference to 31.12.2015) |
Currency | Outstanding principal at 31.12.2015 (EUR) |
Outstanding principal at 31.12.2014 (EUR) |
|---|---|---|---|---|---|---|
| Several companies | Trade receivables securitization 1) |
August 2012 | September 2016, renewable, with maximum maturity September 2018 |
EUR GBP |
40 167 419 475 656 |
52 102 130 1 140 471 |
| Sonae Indústria - Produção e Comercialização de Derivados de Madeira, S.A. |
Trade receivables factoring |
September 2012 | 2) | EUR | - | 4 445 945 |
1) Trade receivables amounting to EUR 50 888 083 were kept on the Consolidated Statement of Financial Position at 31 December 2015 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 fully transferred; 2) Sonae Indústria - Produção e Comercialização de Derivados de Madeira, S.A. took the initiative to cancel this contract on September 2015, having repaid the total outstanding amount.
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 2015 and at 31 December 2014 are as follows:
| Minimum | Present value | ||||
|---|---|---|---|---|---|
| lease payments | of minimum lease payments | ||||
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | ||
| 2015 | 8 702 976 | 5 829 498 | |||
| 2016 | 7 959 785 | 8 795 008 | 5 669 033 | 6 485 136 | |
| 2017 | 6 737 214 | 6 853 803 | 4 935 621 | 5 044 058 | |
| 2018 | 12 390 083 | 12 425 684 | 11 116 336 | 11 150 419 | |
| 2019 | 444 764 | 505 765 | 413 495 | 476 274 | |
| 2020 | 293 417 | 293 345 | 284 142 | 284 131 | |
| 27 825 263 | 37 576 581 | 22 418 627 | 29 269 516 | ||
| Lease creditors - current | 5 669 033 | 5 829 498 | |||
| Lease creditors - non current | 16 749 594 | 23 440 018 |
Assets recognized under finance lease arrangements are stated on note 11.
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 on note 26.1.
The fair value of derivative instruments is stated as follows:
| Other current assets | Other current liabilities | |||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | |
| Derivatives at fair value through profit or loss: Exchange rate forwards (notes 21 and 33) |
491 159 | 99 079 | 41 908 | 35 529 |
| 491 159 | 99 079 | 41 908 | 35 529 |
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 of fair value hierarchy). 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 (notes 37 and 38), which corresponds to a net gain of EUR 532 072 (net loss of EUR 82 330 at 31 December 2014, disclosed on note 41).
Derivative instruments recognized at fair value through profit or loss held by the Group at 31 December 2015 fully mature in 2016.
In 2015 and 2014 no derivative financial instruments at fair value through reserves were contracted.
Liquidity risk described in note 2.27, c) related to gross debt referred to in note 26, can be analysed as follows:
| 31.12.2015 | |||
|---|---|---|---|
| Maturity of gross debt (note 26) |
Interest | Total | |
| 2016 | 212 475 573 | 25 521 215 | 237 996 788 |
| 2017 | 18 931 005 | 19 728 444 | 38 659 449 |
| 2018 | 96 813 977 | 17 695 624 | 114 509 601 |
| 2019 | 115 638 391 | 11 735 286 | 127 373 677 |
| 2020 | 93 129 495 | 6 556 439 | 99 685 934 |
| 2021 | 32 695 291 | 2 575 337 | 35 270 628 |
| After 2021 | 33 237 304 | 1 101 422 | 34 338 726 |
| 602 921 036 | 84 913 767 | 687 834 803 |
| 31.12.2014 | |||
|---|---|---|---|
| Maturity of gross debt (note 26) |
Interest | Total | |
| 2015 | 119 280 500 | 26 447 965 | 145 728 465 |
| 2016 | 74 669 801 | 20 859 607 | 95 529 408 |
| 2017 | 16 944 096 | 18 147 286 | 35 091 382 |
| 2018 | 104 034 410 | 16 200 031 | 120 234 442 |
| 2019 | 115 113 170 | 10 452 811 | 125 565 980 |
| 2020 | 85 105 647 | 6 015 469 | 91 121 116 |
| After 2020 | 65 451 145 | 3 851 115 | 69 302 260 |
| 580 598 769 | 101 974 284 | 682 573 053 |
The calculation of interest in the previous table was based on interest rates at 31 December 2015 and 31 December 2014 applicable to each item of debt. Gross debt maturing in 2016 (2015) includes scheduled repayment of debt along with the repayment of debt as at end 2015 (2014) which is maturing within less than one year, and was not affected by reclassifications disclosed on notes 26.1 and 26.2.
Maturities for the remaining financial instruments are stated on the respective notes.
For several years now the Group has maintained a series of bank and commercial paper credit facilities to meet treasury needs, for terms typically of up to one year, renewable with the agreement of the respective credit entities. These entities, most of which are also involved in medium and long term loans, are contractually entitled to not renew these credit facilities on maturity, although they have always ensured its renewal or replacement. Furthermore, it is not possible to foresee the level of subscription for commercial paper to be issued by the Company. In case these operations are not renewed, Sonae Indústria will have to find alternative short term financing sources so as to meet its debt service obligations.
The Company believes that gains in operating performance attained over the last quarters will have a positive effect on the probability of renewing short term credit facilities as well as on the possibility of contracting additional short term financing facilities with other banks, as already accomplished in 2015.
On the other hand, the possible execution of the agreement signed with Arauco Group, which has been disclosed to the market, to set up a strategic partnership involving wood based panels and related activities in Europe and South Africa, will bring about the renegotiation of most of the Group's bank debt. The company estimates that the possible conclusion of these renegotiations with present and new creditor banks, along with a reduction in global debt to be
accomplished as a result of an increase in share capital of subsidiary Tableros de Fibras, S. A. for EUR 137.5 million to be subscribed for by Arauco, as stated on the signed agreement, will contribute to a significant improvement in the Company's debt maturity profile and cost.
The analysis of interest rate risk, described on note 2.27, b), i), consisted in calculating the way net profit before tax for 2015 and 2014 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:
| Sensitivity Analysis | ||||||
|---|---|---|---|---|---|---|
| 2015 | 2014 | |||||
| "Notional" (Euros) | Effect in Profit and Loss (Euros) |
"Notional" (Euros) | Effect in Profit and Loss (Euros) |
|||
| 0.75% | -0.75% | 0.75% | -0.75% | |||
| Gross Debt | ||||||
| EUR | -533 109 928 | -2 983 044 | 2 983 044 | 508 770 700 | -3 744 320 | 3 744 320 |
| GBP | - 480 792 | - 7 287 | 7 287 | 1 136 581 | - 8 317 | 8 317 |
| CAD | -30 027 997 | - 270 483 | 270 483 | 48 914 974 | - 152 838 | 152 838 |
| ZAR | -16 103 345 | - 103 578 | 103 578 | 14 693 309 | - 90 936 | 90 936 |
| -579 722 063 | -3 364 392 | 3 364 392 | 573 515 564 | -3 996 411 | 3 996 411 | |
| Bank deposits and other treasury applications |
||||||
| EUR | 1 428 027 | 5 691 | - 5 691 | 1 428 027 | 5 727 | - 5 727 |
| 1 428 027 | 5 691 | - 5 691 | 1 428 027 | 5 727 | - 5 727 | |
| -3 358 701 | 3 358 701 | -3 990 684 | 3 990 684 |
Gross debt on 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 Euro interest rates, a change of 0.75 percentage points corresponds to 14.3 times the standard deviation of that variable in 2015 (7.7 times in 2014).
With respect to exchange rate risk, described in note 2.27., 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 2015 and 2014 exchange rates.
| Amount denominated in foreign currency |
Eur equivalent | Sensitivity analysis (EUR) | ||||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | 2015 | 2014 | |||
| -1% | 1% | -1% | 1% | |||||
| GBP | 16 522 408 | 21 212 459 | - 212 125 | 212 125 | ||||
| ZAR | 17 428 273 | 1 028 094 | - 10 281 | 10 281 |
Sensitivity refers to the effect that -1% and 1% changes in closing exchange rates for 2015 and 2014 financial years would have on net exchange differences disclosed on note 41.
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 27).
Credit risk described on note 2.27, a) is mostly reflected through the amount stated in Trade Debtors (note 19) and Other current debtors (note 20). No relevant differences between the amounts recognized and the corresponding estimated fair value were identified.
At 31 December 2015 and 31 December 2014 details of Other non-current liabilities were as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Other creditors Financial instruments |
2 277 504 2 277 504 |
241 495 241 495 |
| Other creditors Liabilities out of scope of IFRS 7 |
31 312 338 31 312 338 |
41 758 831 41 758 831 |
| Total | 33 589 842 | 42 000 326 |
| 31.12.2015 | 2017 | Total |
| Maturity of Other non current creditors | 2 277 504 | 2 277 504 |
| 2 277 504 | 2 277 504 | |
Other creditors include EUR 24 535 202 (EUR 28 648 958 at 31 December 2014) related to deferred investment subventions and EUR 6 193 800 (EUR 12 377 600 at 31 December 2014) related to the fine imposed by the German Competition Authority, to be paid until 2017 (note 47).
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 2015 and 2014 were:
| Germany | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Glunz AG | GHP GmbH | Tool GmbH | Impaper | ||||||||
| 31.12.2015 31.12.2014 | 31.12.2015 31.12.2014 | 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | ||||||
| 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 growth rate | 2,00% | 2,00% | 0,00% | 0,00% | 0,00% | 0,0% | 2,00% | 2,0% | |||
| Return on fund | 2,30% | 2,45% | 2,30% | 2,45% | 2,30% | 2,45% | 2,30% | 2,45% | |||
| Actuarial tecnical rate | 2,30% | 2,45% | 2,30% | 2,45% | 2,30% | 2,45% | 2,30% | 2,45% | |||
| Pension growth rate | 1,70% | 1,70% | 1,70% | 1,70% | 1,70% | 1,70% | 1,70% | 1,70% | |||
| South Africa | France | Portugal | |||||||||
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | ||||||
| Mortality table | PA(90)-2 | PA(90)-2 | - | INSEE 2007- 2009 |
TV 88/90 | TV 88/90 | |||||
| Salary growth rate | 8,50% | 8,10% | - | 2,0% | 3,0% | 3,0% | |||||
| Return on fund | 3,70% | 11,95% | - | - | 4,6% | 2,7% | |||||
| Actuarial tecnical rate | 9,50% | 9,00% | - | 2,0% | 3,0% | 3,0% | |||||
| Pension growth rate | 5,60% | 5,30% | - | - | 0,0% | 0,0% | |||||
| Trend rate of medical aid obligation | 0,46% | 0.69% |
Benefit plans set up in previous periods by several Group companies are as follows:
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 525 297 was included in the item Staff expenses, on the Consolidated Income Statement, during the period. At 31 December 2015, no contributions were outstanding and 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 survivor's 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 obligation recognized by Sonae Novobord (Pty) Ltd is 18.2 years.
In the actuarial report prepared on 31 December 2015, the defined benefit liability amounted to EUR 759 260.
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 2.30% 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 obligation is:
In accordance with the actuarial reports prepared at 31 December 2015, these companies' defined benefit liabilities amounted to EUR 23 115 731.
Defined benefit responsibilities of subsidiaries Isoroy SAS and Darbo SAS were actuarially estimated to amount to EUR 729 578 at 31 December 2014, when they were stated under Liabilities directly associated with non-current assets held for sale.
As disclosed on note 17, in the period ended 31 December 2015, subsidiary Darbo SAS and Ussel industrial plant, which was included in subsidiary Isoroy SAS, were disposed of. At the closing date of these consolidated financial statements, residual defined benefit responsibilities of subsidiary Isoroy SAS were not calculated as they were estimated to be irrelevant.
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 an independent entity. 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 3.0% 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 obligation recognized by the Portuguese subsidiaries is 22 years.
An actuarial report calculated the liabilities of these companies on 31 December 2015 to be EUR 2 664 044.
The main risk to which these defined benefit plans expose the Group is the liquidity risk. At 31 December 2015 assets funding the plans represented 20.0% (21.1% at 31 December 2014) 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 2015 and 31 December 2014, to the present value of the defined benefit obligations are presented as follows:
| 31.12.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Plan without fund |
Plan with fund | Total | Plan without fund |
Plan with fund |
Total | |
| (+) Opening balance of defined benefit obligations' present value | 860 983 | 33 157 115 | 34 018 098 | 2 131 333 | 30 045 452 | 32 176 785 |
| (+) Interest cost | 73 464 | 1 067 951 | 1 141 415 | 96 408 | 1 255 331 | 1 351 739 |
| (+) Current service cost | 10 576 | 401 070 | 411 646 | 52 882 | 370 828 | 423 710 |
| (+) Employees' contributions | 23 061 | 23 061 | 22 547 | 22 547 | ||
| (+) Remeasurements: | ||||||
| Due to change in financial assumptions | 512 626 | 512 626 | 152 629 | 4 076 172 | 4 228 801 | |
| Due to change in demographic assumptions | - 123 008 | - 123 008 | 95 239 | - 385 180 | - 289 941 | |
| Due to experience adjustements | 5 536 | - 859 759 | - 854 222 | - 205 198 | - 270 029 | - 475 227 |
| (+) Recognised past service cost | - 682 112 | - 682 112 | ||||
| (-) Paid pensions | 33 716 | 1 525 970 | 1 559 686 | 82 297 | 2 094 203 | 2 176 500 |
| (+) Exchange rate effect | - 117 990 | - 650 925 | - 768 915 | 31 677 | 136 197 | 167 874 |
| (-) Amount reclassified as Liability directly associated with non-current | ||||||
| assets held for sale | 729 578 | 729 578 | ||||
| (=) Closing balance of defined benefit obligations' present value | 798 854 | 32 002 161 | 32 801 015 | 860 983 | 33 157 115 | 34 018 098 |
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| (+) Opening balance of plan assets (+) Contribution to plan assets: |
7 163 812 | 7 060 840 |
| Employees | 23 061 | 22 547 |
| Employer | 139 946 | 169 398 |
| (+) Interest income | 452 465 | 492 296 |
| (+) Remeasurements | - 224 247 | 65 269 |
| (-) Paid pensions | 294 064 | 799 739 |
| (+) Exchange rate effect | - 717 749 | 153 201 |
| (=) Closing balance of plan assets | 6 543 224 | 7 163 812 |
During 2015 and 2014 the fair value of the plan assets changed as follows:
Funding assets do not include any assets occupied or used by the Group nor do they include any securities issued by the Company or its subsidiaries.
At 31 December 2015 and 31 December 2014, the amount of liabilities for defined benefits recognized in the Consolidated Statements of Financial Position is detailed as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| (+) Present value of defined benefit obligations | 32 801 015 | 34 018 098 |
| (-) Fair value of plan assets | 6 543 224 | 7 163 813 |
| (+)Effect of asset ceiling | 320 841 | 425 215 |
| (=) Defined benefit liability | 26 578 632 | 27 279 500 |
The asset ceiling, which is the present value of any future refunds from plan assets or of any future reduction in contributions to plan assets is zero, which results in an effect of asset ceiling amounting to EUR 320 841 (EUR 425 215 ate 31 December 2014).
Movements occurred in defined benefit liability during 2015 and 2014 are as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| (+) Opening balance of defined benefit liability's present value | 27 279 500 | 25 651 828 |
| (+) Interest cost | 1 141 415 | 1 351 739 |
| (-) Interest income | 452 465 | 492 295 |
| (+) Current service cost | 411 646 | 423 710 |
| (+) Employees' contributions | 23 061 | 22 547 |
| Remeasurements, of which: | ||
| (+) Due to change in financial assumptions | 512 626 | 4 228 801 |
| (+) Due to change in demographic assumptions | - 123 008 | - 289 941 |
| (+) Due to experience adjustements | - 854 222 | - 475 227 |
| (-) Remeasurements of plan assets | - 224 247 | 65 269 |
| Contribution to plan assets | ||
| (-) Employees | 23 061 | 22 547 |
| (-) Employer | 139 946 | 169 398 |
| (+) Recognised past service cost | - 682 112 | |
| (-) Paid pensions | 1 265 622 | 1 376 761 |
| (+) Exchange rate effect | - 51 165 | 14 672 |
| (+)Asset ceiling | - 104 373 | - 110 669 |
| (+) Changes in consolidation perimeter | ||
| (-) Amount reclassified as Liability directly associated with non-current | ||
| assets held for sale | 729 578 | |
| (=) Closing balance of defined benefit liability's present value | 26 578 632 | 27 279 500 |
Sensitivity of the Health Benefit scheme's obligations can be analysed as follows:
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| - 1,0 pp | Valuation basis |
+ 1,0 pp | Valuation basis |
+ 1,0 pp | ||
| Defined benefit obligation | 885 617 | 759 260 | 658 918 | 1 005 338 | 860 985 | 746 629 |
The valuation basis refers to the actuarial discount rate that was included in the actuarial assumptions disclosed herewith.
Sensitivity of the defined benefit obligation, excluding the health benefit scheme, is as follows:
| 2015 | ||||||
|---|---|---|---|---|---|---|
| Valuation | Valuation | |||||
| -0,5 pp | basis | +0,5 p | -0,5 pp | basis | +0,5 p | |
| Defined benefit obligation | 34 434 122 | 32 002 158 | 29 834 089 | 36 615 768 | 33 886 691 31 547 504 |
The valuation basis refers to the actuarial discount rate that was included in the actuarial assumptions disclosed herewith.
At 31 December 2015 and 31 December 2014, Trade creditors stated on the Consolidated Statements of Financial Position had the following maturities:
| MATURITY OF TRADE CREDITORS | ||||||
|---|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | |||||
| 133 687 601 | 151 284 832 | |||||
| 3 114 563 | 4 381 508 | |||||
| 1 784 184 | 712 652 | |||||
| 138 586 348 | 156 378 992 | |||||
At 31 December 2015 and 31 December 2014 Other taxes and contributions had the following composition:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Other taxes and contributions | ||
| Value Added Tax | 3 189 932 | 3 072 800 |
| Social Security Contribution | 1 498 194 | 2 193 538 |
| Others | 2 330 369 | 1 739 203 |
| 7 018 495 | 7 005 541 |
At 31 December 2015 and 31 December 2014 Other current liabilities were composed of:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Derivatives | 41 908 | 35 529 |
| Tangible fixed assets suppliers | 5 418 520 | 6 064 556 |
| Other creditors | 2 776 725 | 3 934 020 |
| Financial instruments | 8 237 153 | 10 034 105 |
| Other creditors | 7 301 250 | 9 181 367 |
| Accrued expenses: | ||
| Insurances | 335 167 | 1 227 009 |
| Personnel expenses | 17 002 321 | 14 320 967 |
| Accrued financial expenses | 6 503 606 | 5 656 004 |
| Rebates | 15 818 462 | 15 322 111 |
| External supplies and services | 8 005 824 | 9 570 495 |
| Other accrued expenses | 4 977 001 | 6 147 430 |
| Deferred income: | ||
| Investment subventions | 4 277 243 | 6 327 581 |
| Other deferred income | 148 932 | 148 937 |
| Liabilities out of scope of IFRS 7 | 64 369 806 | 67 901 901 |
| Total | 72 606 959 | 77 936 006 |
| 31.12.2015 | < 90 days | 90 - 180 days | > 180 days | Total |
|---|---|---|---|---|
| Maturity of current fixed assets' suppliers | 5 109 140 | 61 339 | 248 041 | 5 418 520 |
| Maturity of Other current creditors | 2 211 440 | 10 510 | 554 775 | 2 776 725 |
| 7 320 580 | 71 849 | 802 816 | 8 195 245 | |
| 31.12.2014 | < 90 days | 90 - 180 days | > 180 days | Total |
| Maturity of current fixed assets' suppliers | 5 588 768 | 128 893 | 346 895 | 6 064 556 |
| Maturity of Other current creditors | 3 372 401 | 181 246 | 380 373 | 3 934 020 |
| 8 961 169 | 310 139 | 727 268 | 9 998 576 |
Movements occurred in provisions and accumulated impairment losses during the periods ended 31 December 2015 and 31 December 2014 were as follows:
| 31.12.2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Opening balance |
Exchange rate effect |
Changes to perimeter |
Increase | Utilization | Reversion | Other changes |
Closing balance |
| Impairment losses: Investment properties |
2 259 929 | 2 259 929 | ||||||
| Tangible fixed assets | 48 044 432 | 111 280 | - 6 465 351 | 41 690 361 | ||||
| Goodwill | 1 700 000 | 1 700 000 | ||||||
| Intangible assets | 30 833 | 343 271 | - 7 668 | 366 436 | ||||
| Other non-current assets | 10 931 182 | 10 931 182 | ||||||
| Trade debtors | 26 228 073 | - 334 577 | 2 587 877 | 1 968 626 | - 1 166 963 | 25 345 784 | ||
| Other debtors | 3 502 | 3 502 | ||||||
| Subtotal impairment losses | 86 938 022 | - 334 577 | 3 042 428 | 1 968 626 | - 5 380 053 | 82 297 194 | ||
| Provisions: | ||||||||
| Litigations in course | 1 504 544 | - 5 072 | 335 067 | 443 085 | 132 431 | 1 523 885 | ||
| Warranties to customers | 541 547 | 2 637 | 64 615 | 59 679 | 549 120 | |||
| Restructuring | 6 055 072 | 11 309 | 2 609 040 | 7 017 096 | - 165 559 | 1 492 766 | ||
| Other | 4 694 739 | 6 188 628 | 4 041 358 | 103 099 | 6 945 108 | |||
| Subtotal provisions | 12 795 901 | 8 874 | 9 197 350 | 11 561 218 | 69 971 | 10 510 879 | ||
| Subtotal impairment losses and provisions | 99 733 923 | - 325 703 | 12 239 778 | 11 561 218 | 1 968 626 | - 5 310 082 | 92 808 073 | |
| Other losses: | ||||||||
| Investments | 36 985 875 | 36 985 875 | ||||||
| Write-down to net realizable value of inventories | 4 165 268 | - 35 296 | 3 833 413 | 2 617 868 | - 944 508 | 4 401 009 | ||
| Subtotal | 140 885 066 | - 360 999 | 16 073 191 | 11 561 218 | 4 586 494 | - 6 254 590 134 194 957 | ||
| Provisions included under Liabilities directly associated with non-current assets held for sale |
66 512 818 | - 43 719 112 | 5 604 755 | 216 735 | - 28 181 726 | |||
| Total | 207 397 884 | - 360 999 | - 43 719 112 | 21 677 946 | 11 561 218 | 4 803 229 | - 34 436 316 134 194 957 | |
| 31.12.2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Opening balance |
Exchange rate effect |
Increase | Utilization | Reversion | Other changes |
Closing balance |
|
| Impairment losses: | ||||||||
| Tangible fixed assets | 65 372 467 | 47 900 930 | 5 855 672 | - 59 373 293 48 044 432 | ||||
| Goodwill | 7 727 749 | - 6 027 749 | 1 700 000 | |||||
| Intangible assets | 19 242 | 17 357 | - 5 766 | 30 833 | ||||
| Other non-current assets | 10 931 182 | 10 931 182 | ||||||
| Trade debtors | 24 524 620 | 96 028 | 3 912 039 | 1 510 989 | - 793 625 26 228 073 | |||
| Other debtors | 3 502 | 3 502 | ||||||
| Subtotal impairment losses | 108 578 762 | 96 028 | 51 830 326 | 7 366 661 | - 66 200 433 86 938 022 | |||
| Provisions: | ||||||||
| Litigations in course | 2 063 278 | 4 518 | 559 735 | - 3 517 | 1 504 544 | |||
| Warranties to customers | 631 797 | 454 | 90 700 | 541 547 | ||||
| Restructuring | 562 548 | 21 005 | 16 903 793 | 11 432 274 | 6 055 072 | |||
| Other | 5 419 376 | 823 028 | 1 458 432 | - 89 237 | 4 694 739 | |||
| Subtotal provisions | 8 676 999 | 21 459 | 17 731 339 | 13 541 141 | - 92 754 12 795 901 | |||
| Subtotal impairment losses and provisions | 117 255 761 | 117 487 | 69 561 665 | 13 541 141 | 7 366 661 | - 66 293 187 99 733 923 | ||
| Other losses: | ||||||||
| Investments | 36 985 875 | 36 985 875 | ||||||
| Write-down to net realizable value of inventories | 6 708 161 | 15 377 | 4 986 548 | 4 343 293 | - 3 201 524 | 4 165 268 | ||
| Subtotal | 160 949 797 | 132 864 | 74 548 213 | 13 541 141 | 11 709 954 | - 69 494 711 140 885 066 | ||
| Provisions included under Liabilities directly associated with non-current assets held for sale |
66 512 818 66 512 818 | |||||||
| Total | 160 949 797 | 132 864 | 74 548 213 | 13 541 141 | 11 709 954 | - 2 981 893 207 397 884 |
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:
| 31.12.2015 | 31.12.2014 | ||||||
|---|---|---|---|---|---|---|---|
| Losses Gains |
Total | Losses | Gains | Total | |||
| Cost of sales | 1 434 646 | 1 058 262 | 376 384 | 1 285 254 | 1 085 079 | 200 175 | |
| (Increase) / decrease in production | 1 324 791 | 1 292 822 | 31 969 | 1 383 720 | 1 910 759 | - 527 039 | |
| Provisions and impairment losses | 9 995 213 | 9 544 834 | 450 379 | 22 446 298 | 12 160 481 | 10 285 817 | |
| Staff expenses | 260 404 | 632 780 | - 372 376 | 190 552 | 872 593 | - 682 041 | |
| Profit / (loss) from discontinued operations | 8 662 892 | 3 835 749 | 4 827 143 | 49 242 389 | 9 222 183 | 40 020 206 | |
| Total (Consolidated Income Statement) | 21 677 946 | 16 364 447 | 5 313 499 | 74 548 213 | 25 251 095 | 49 297 118 |
Provisions and impairment losses recognized under Profit or loss from discontinued operations, on the Consolidated Income statement, are included under the following items detailed on note 43:
| 31.12.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Losses | Gains | Total | Losses | Gains | Total | |
| Cost of sales (discontinued operations-note 43) | 2 397 861 | 421 334 | 1 976 527 | 1 858 290 | 1 092 057 | 766 233 |
| Change in production (discontinued operations-note 43) | 474 453 | 56 425 | 418 028 | 459 284 | 255 398 | 203 886 |
| Provisions and impairment losses (discontinued operations-note 43) | 5 780 513 | 3 291 078 | 2 489 435 | 46 914 382 | 7 748 358 | 39 166 024 |
| Staff expenses (discontinued operations-note 43) | 10 065 | 66 912 | - 56 847 | 10 433 | 126 370 | - 115 937 |
| Profit/(loss) from discontinued operations, after taxation | 8 662 892 | 3 835 749 | 4 827 143 | 49 242 389 | 9 222 183 | 40 020 206 |
34.1. Impairment losses on tangible fixed assets
Movements occurred in impairment losses during the period ended 31 December 2015 were as follows:
Tangible fixed assets are tested for impairment as part of the impairment analysis process to Goodwill, described on note 14. Cash-generating units consist of industrial plants whose activity is described on note 45 and correspond to a level of asset aggregation lower than the one used for cash-generating units identified on note 14. These plants do not include intangible assets with indefinite useful lives as it is not possible to allocate goodwill recognized on the Consolidated Statement of Financial Position and disclosed on note 14, on a non-arbitrary basis, taking in consideration the level of asset aggregation used.
Impairment tests carried out on identified cash-generating units did not identify any impairment of assets thereon. Impairment losses recognized in 2015 in the amount of EUR 111 280 relate to impairment identified on specific individual assets.
At 31 December 2015, the amount of provisions could be detailed as follows:
During the period, the recognition of provisions for the 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 on note 45.
At 31 December 2015 and 31 December 2014 the Group held irrevocable operating leases with the following lease payments:
| Minimun operating | ||||
|---|---|---|---|---|
| lease payments | ||||
| 31.12.2015 | 31.12.2014 | |||
| 2015 | 3 547 938 | |||
| 2016 | 3 817 622 | 2 234 468 | ||
| 2017 | 2 541 807 | 1 274 509 | ||
| 2018 | 1 586 953 | 641 820 | ||
| 2019 | 589 191 | 277 595 | ||
| 2020 | 82 716 | |||
| 8 618 289 | 7 976 330 |
During the period, the Group recognized under External Suppliers and Services, on the Consolidated Income Statement, rents related to operating leases for EUR 6 243 000 (EUR 7 495 000 at 31 December 2014).
| Balances | Accounts receivable | Accounts payable | |||
|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | ||
| Other subsidiaries of the parent company | 329 705 | 355 536 | 4 336 245 | 3 849 032 | |
| Joint ventures and associates | 9 527 339 | 9 585 557 | 1 836 792 | 1 106 626 |
| Transactions | Income | Expenditure | ||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | |
| Other subsidiaries of the parent company | 366 343 | 1 195 116 | 6 276 842 | 7 407 182 |
| Joint ventures and associates | 4 037 839 | 6 030 160 | 21 160 805 | 15 530 970 |
36.2. Remuneration of the Board of Directors of the Company is detailed as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Short term benefits | 1 323 777 | 1 315 777 |
| Medium term benefits | 215 323 | 59 185 |
| 1 539 100 | 1 374 962 |
The amount included under Medium term benefits for 2015, on the previous table, refers to amounts recognized under Staff expenses that relate to members of the Board of Directors.
At 31 December 2015 there were no post retirement liabilities attributed to the members of the board of directors.
36.3. During the period ended 31 December 2015 the Group recognized on these consolidated financial statements the following fees from audit company PricewaterhouseCoopers & Associados, SROC, Lda and respective international network:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Total fees related to audit of end year accounts Total fees related to other realiability assurance services Total fees related to other services |
366 311 51 359 |
388 413 217 486 4 500 |
| 417 670 | 610 399 |
Details of Other operating income on the Consolidated Income Statement for the periods ended 31 December 2015 and 31 December 2014 are as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Gains on disposals of non current investments | 925 | |
| Gains on disp. and write off of invest. prop., tang. and intang. assets | 416 199 | 2 300 760 |
| Supplementary revenue | 6 743 448 | 6 243 593 |
| Investment subventions | 6 576 836 | 7 171 219 |
| Tax received | 4 216 609 | 5 796 048 |
| Positive exchange gains | 3 170 619 | 2 328 916 |
| Others | 3 496 362 | 16 033 899 |
| 24 620 998 | 39 874 435 |
Tax received includes EUR 4 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 (EUR 4.5 million at 31 December 2015).
Details of Other operating expenses on the Consolidated Income Statement for 2015 and 2014 are as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Taxes | 4 222 252 | 3 783 192 |
| Losses on disp. and write off of invest. prop., tang. and intang. assets | 1 895 268 | 507 681 |
| Negative exchange gains | 5 568 373 | 2 109 160 |
| Others | 6 384 618 | 2 912 161 |
| 18 070 511 | 9 312 194 |
During the period, the Group recognized in several items of the Consolidated Income Statement research and development expenses amounting to EUR 673 000 (EUR 711 000 in 2014).
Underlying and non-underlying operating items on the Consolidated Income Statement are detailed as follows:
| 31.12.2015 | 31.12.2015 | 31.12.2015 | 31.12.2014 | 31.12.2014 | 31.12.2014 | |
|---|---|---|---|---|---|---|
| Recurring | Non-recurring | Total | Recurring | Non-recurring | Total | |
| Sales | 1 023 566 522 | 61 966 1 023 628 488 | 1 009 035 477 | 515 652 | 1 009 551 129 | |
| Services rendered | 3 703 569 | 3 703 569 | 4 980 692 | 4 980 692 | ||
| Other income and gains | 20 822 722 | 3 798 276 | 24 620 998 | 27 303 237 | 12 571 198 | 39 874 435 |
| Cost of sales | 536 686 506 | 648 994 | 537 335 500 | 549 645 551 | - 8 664 207 | 540 981 344 |
| (Increase) / decrease in production | - 659 933 | - 39 161 | - 699 094 | 3 377 674 | 427 940 | 3 805 614 |
| External supplies and services | 249 324 199 | 4 701 561 | 254 025 760 | 248 800 596 | 7 753 248 | 256 553 844 |
| Staff expenses | 144 961 238 | 5 264 090 | 150 225 328 | 133 481 862 | 18 019 279 | 151 501 141 |
| Impairment losses in trade debtors (increase/reduction) | 613 291 | 613 291 | 2 389 143 | - 1 035 | 2 388 108 | |
| Other expenses and losses | 10 269 760 | 7 800 751 | 18 070 511 | 7 988 925 | 1 323 269 | 9 312 194 |
| Recurring operating profit/(loss) before amortization, depreciation, provisions and impairment losses (except trade debtors) |
106 897 752 | - 14 515 993 | 92 381 759 | 95 635 655 | - 5 771 644 | 89 864 011 |
Classification of items as either recurring or non-recurring is done in accordance with criteria set out on note 2.25.
Financial results for the periods ended 31 December 2015 and 2014 were as follows:
| 31.12.2015 | 31.12.2014 |
|---|---|
| 24 369 569 | |
| 9 283 684 | |
| 3 350 948 | |
| 2 205 537 | |
| 39 209 738 | |
| 1 509 656 | |
| 3 114 503 | 1 509 656 |
| 13 781 688 | 14 212 870 |
| 629 667 | |
| 6 728 777 | |
| 53 295 470 | 62 290 708 |
| 31.12.2015 | 31.12.2014 |
| 25 331 | |
| 8 456 643 | |
| 70 978 | |
| 8 552 952 | |
| 4 650 230 | 2 399 609 |
| 4 650 230 | 2 399 609 |
| 907 846 | 986 911 |
| 547 337 | |
| 12 735 | 62 735 |
| 12 405 166 | 12 549 544 |
| - 40 890 304 | - 49 741 164 |
| 19 044 119 7 204 138 2 855 722 2 172 284 31 276 263 3 114 503 5 123 016 114 489 6 658 631 61 235 6 834 355 |
Corporate income tax accounted for in 2015 and 2014 is detailed as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Current tax | 8 668 116 | 5 810 468 |
| Deferred tax | - 4 985 359 | 1 195 326 |
| 3 682 757 | 7 005 794 |
Reconciliation of consolidated Net profit/(loss) from continuing operations, before tax, with taxation for the year may be detailed as follows:
| 31.12.2015 | 31.12.2014 | ||
|---|---|---|---|
| Consolidated net profit before tax | -12 997 177 | -35 366 264 | |
| Tax rate | 21.00% | 23.00% | |
| Expectable tax | -2 729 407 | -8 134 241 | |
| Differences to foreign tax rates | (+) | -3 930 209 | -4 851 128 |
| Effect of provincial/municipal taxes | (+) | 2 240 827 | 1 266 555 |
| Consolidation adjustments | (-) | - 908 432 | 756 612 |
| Permanent differences | |||
| Non deductible costs Non taxed profits |
(+) (-) |
3 997 591 248 693 |
6 728 522 3 292 137 |
| Tax losses carried forward | |||
| Deferred tax asset recognized on tax losses of previous years | (+) | -1 730 059 | -2 560 711 |
| Deferred tax asset not recognized in complience with IAS 12 | (-) | -5 974 011 | -12 624 444 |
| Utilization of tax losses carried forward whose deferred tax was not recognized in prior periods | (+) | - 63 490 | - 142 706 |
| Reverted deferred tax asset | (+) | 7 586 087 | |
| Effect of offsetting deferred tax liabilities related to depreciation | (-) | 792 873 | - 833 480 |
| Effect of change in tax rates | (+) | -1 058 283 | |
| Others | (+) | 56 627 | -1 237 476 |
| Consolidated corporate income tax | 3 682 757 | 7 005 794 |
Profit (loss) from discontinued operations, after taxation, on the Consolidated Income statement, includes the results of the Group's components, which consist in geographical or major business segments, that ceased activity or whose assets were classified as Non-current assets held for sale in the period ended 31 December 2015 or in previous years.
Net profit (loss) from discontinued operations, on the Consolidated Income Statement for the period ended 31 December 2015, includes therefore the results of Betanzos (Spain) and Ussel (France) industrial plants, as well as the results of subsidiary Darbo SAS (France), whose assets were sold during the period (note 17), and can be detailed as follows:
| Sales 29 168 204 103 172 472 Services rendered 13 086 94 482 Other income and gains 1 927 254 9 967 809 Cost of sales 19 806 970 59 728 792 (Increase) / decrease in production 2 019 626 4 457 979 External supplies and services 10 936 717 37 716 936 Staff expenses 8 296 377 24 639 893 Depreciation and amortisation 112 825 6 923 441 Provisions and impairment losses (increase / reduction) 2 489 435 39 166 023 Other expenses and losses 709 979 2 272 498 Operating profit / (loss) - 13 263 385 - 61 670 799 Financial expenses 6 687 321 8 795 516 Financial income 564 373 87 447 Net profit/(loss) from descontinued operations, before tax - 19 386 333 - 70 378 868 Taxation - 61 033 3 128 403 Net profit / (loss) from descontinued operations - 19 325 299 - 73 507 271 |
31.12.2015 | 31.12.2014 |
|---|---|---|
Cash flows arising from discontinued operations, which were included line by line on the Consolidated Statement of Cash Flows, are detailed as follows:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Operating activities | - 12 684 642 | - 8 773 424 |
| Investment activities | 4 976 481 | 11 116 134 |
| Financing activities | 8 173 377 | - 6 571 251 |
| 31.12.2015 | 31.12.2014 | ||||||
|---|---|---|---|---|---|---|---|
| Net profit/(loss) | Net profit/(loss) | ||||||
| from continuing operations |
from discontinued 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) |
- 16 679 564 | - 19 325 028 | - 36 004 592 | - 42 315 604 | - 73 404 581 | - 115 720 185 | |
| Net loss considered to calculate diluted earnings per share | - 16 679 564 | - 19 325 028 | - 36 004 592 | - 42 315 604 | - 73 404 581 | - 115 720 185 | |
| Number of shares | |||||||
| Weighted average number of shares used to calculate basic earnings per share |
11 350 757 417 11 350 757 417 11 350 757 417 | 1 245 718 540 | 1 245 718 540 | 1 245 718 540 | |||
| Weighted average number of shares used to calculate diluted earning per share |
11 350 757 417 11 350 757 417 11 350 757 417 | 1 245 718 540 | 1 245 718 540 | 1 245 718 540 | |||
| Basic earnings per share | -0.0015 | -0.0017 | -0.0032 | -0.0340 | -0.0589 | -0.0929 | |
| Diluted earnings per share | -0.0015 | -0.0017 | -0.0032 | -0.0340 | -0.0589 | -0.0929 |
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 2015, the following reportable segments were identified:
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 | |||
|---|---|---|---|
| 31.12.2015 | 31.12.2014 | ||
| Restated | |||
| 422 801 772 | 459 039 555 | ||
| 339 247 136 | 330 113 939 | ||
| 290 545 114 | 267 731 738 | ||
| 1052 594 022 | 1056 885 232 | ||
| (-) | 36 903 271 | 42 353 411 | |
| (+) | 11 641 306 | ||
| 1027 332 057 | 1014 531 821 | ||
| 103 266 954 | |||
| 29 181 290 |
Turnover includes sales and services rendered, which are stated on the Consolidated Income Statement.
Segmental turnover was restated so as to include intercompany turnover, which is then eliminated under "Intercompany turnover".
| Cost of sales | ||||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | |||
| Northern Europe | 230 041 885 | 249 846 642 | ||
| Southern Europe | 163 045 044 | 156 369 384 | ||
| Rest of the world | 144 248 571 | 134 765 318 | ||
| Total segments | 537 335 500 | 540 981 344 | ||
| Southern Europe | ||||
| Discontinued operations | 19 806 970 | 59 728 792 |
| External supplies and services | |||
|---|---|---|---|
| 31.12.2015 | 31.12.2014 | ||
| Northern Europe | 101 649 091 | 108 240 311 | |
| Southern Europe | 90 299 465 | 89 320 882 | |
| Rest of the world | 62 077 204 | 58 992 651 | |
| Total segments | 254 025 760 | 256 553 844 | |
| Southern Europe | |||
| Discontinued operations | 10 936 717 | 37 716 936 | |
| Amortization and depreciation | |||
| 31.12.2015 | 31.12.2014 | ||
| Northern Europe | 25 049 904 | 25 583 062 | |
| Southern Europe | 20 939 114 | 21 685 079 | |
| Rest of the world | 17 286 948 | 16 831 552 |
| Total segments | 63 275 966 | 64 099 693 |
|---|---|---|
| Southern Europe | ||
| Discontinued operations | 112 825 | 6 923 441 |
| Provisions and impairment losses | |||||
|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | ||||
| Northern Europe | 77 272 | 11 926 865 | |||
| Southern Europe | 477 268 | -2 193 927 | |||
| Rest of the world | - 104 161 | 552 879 | |||
| Total segments | 450 379 | 10 285 817 | |||
| Southern Europe Discontinued operations |
2 489 435 | 39 166 023 |
| Operating net profit (loss) | ||||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | |||
| Northern Europe | 1 738 211 | -8 854 323 | ||
| Southern Europe | 157 085 | 7 789 059 | ||
| Rest of the world | 27 396 576 | 18 931 873 | ||
| Total segments Consolidation adjustments not included under Total |
29 291 872 | 17 866 609 | ||
| segments | (+) | - 23 167 | ||
| Consolidated Income statement | 29 268 705 | 17 866 609 | ||
| Southern Europe | ||||
| Discontinued operations | -13 263 385 | -61 670 799 |
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 2015 and 2014, based on geographic location of the external customers, were the following:
| 2015 | ||
|---|---|---|
| Location of customers | Eur | |
| Germany | 269 987 453 | 26% |
| North America | 206 085 408 | 20% |
| Spain | 121 959 327 | 12% |
| Portugal | 118 943 925 | 12% |
| South Africa | 88 192 531 | 9% |
| United Kingdom | 29 178 123 | 3% |
| France | 10 152 527 | 1% |
| Other | 182 832 763 | 17% |
| Total | 1 027 332 057 | 100% |
| 2014 | ||||||
|---|---|---|---|---|---|---|
| Location of customers | Eur | |||||
| Germany | 261 243 627 | 26% | ||||
| North America | 181 800 795 | 18% | ||||
| Portugal | 115 651 666 | 11% | ||||
| Spain | 118 822 578 | 12% | ||||
| France | 14 602 864 | 1% | ||||
| South Africa | 83 765 277 | 8% | ||||
| United Kingdom | 28 100 717 | 3% | ||||
| Other | 210 544 296 | 21% | ||||
| Total | 1 014 531 821 | 100% |
The internal system of financial reporting 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:
| 31.12.2015 | 31.12.2014 | |
|---|---|---|
| Northern Europe | 262 390 216 | 286 474 665 |
| Southern Europe | 281 343 263 | 300 921 917 |
| Rest of the world | 177 388 556 | 204 794 425 |
| Total segments | 721 122 035 | 792 191 007 |
| Non Current Assets (Consolidated Statement of Financial Position) |
721 122 035 | 792 191 007 |
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 on note 2.20.
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.
| 31.12.2015 | 31.12.2014 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Opening balance |
Opening balance - conversion |
Granted | Cancelled | Paid | Closing balance | Opening balance |
Granted | Cancelled | Paid | Closing balance |
|
| Nr. of shares | 986 224 79 960 908 54 879 515 | 5 533 136 27 319 733 | 101 987 554 | 787 612 | 314 669 | 65 605 50 452 | 986 224 | ||||
| Fair value | 665 543 | 421 454 | 44 821 | 206 229 | 835 947 | 491 947 | 239 969 | 44 421 21 952 | 665 543 | ||
| Year of payment | 2 018 | 2 017 | |||||||||
| Staff expenses | 274 466 | - 12 283 | 208 847 |
Conversion of the number of granted shares was done as a consequence of increase in share capital during 2014, after which number of shares representing share capital increased from 140 000 000 to 11 350 757 417.
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. In December 2015, a court sentence ordered this subsidiary to pay a fine and court costs for GBP 327 000 (EUR 449 000).
Following the accident occurred in June 2011 in the subsidiary Sonae Industria (UK) Ltd, about 16 000 individuals filed a lawsuit against the company claiming to have suffered as a result of inhalation of smoke caused by the fire. In July 2015, Liverpool Court handed down a first instance sentence in favour of Sonae Industria (UK) Ltd, which confirmed the Company's expectation that no liability would result from this lawsuit to be recognized on the Consolidated Statement of Financial Position.
The subsidiary Sonae Industria PCDM rendered surety in the amount of EUR 10 691 455 in favour of tax authorities for suspension of tax enforcement procedures initiated against Sonae Indústria, SGPS, SA, having been brought court challenges against the respective settlement.
The subsidiary Sonae Industria PCDM rendered surety in the amount of EUR 2 755 346 in favour of tax authorities for suspension of tax enforcement procedures initiated against the subsidiary Agloma Investimentos SGPS, SA, having been brought court challenges against the respective settlement.
Subsidiary Glunz AG and other German producers of wood-based panels are involved in some litigation filed by some customers for damages resulting from the alleged violation of competition laws, after which Glunz AG and GHP received, in March 2010, a statement of objections from the German Competition Authority. Some of these processes have come to an end in 2015 with the related effects recognized in these consolidated financial statements. For the cases still under way, complaints correspond to a maximum contingency in the amount of EUR 55 million. According to the opinion of our lawyers, at the closing date of these consolidated financial statements, it is not possible to reliably estimate the outcome of the ongoing processes or the amount of any payments that may be established.
As stated on notes 26.1 and 26.2, at the date of approval of these consolidated financial statements, the Group had obtained formal statements from the relevant contracting parties assuring that until maturity date repayment will not be required for loans whose ratios were not fulfilled taking into considerations figures disclosed in the consolidated financial statements as at 31 December 2015. As such, bank loans amounting to EUR 167 308 185 (amortized cost) and bonds amounting to EUR 147 987 525 (amortized cost) will be reclassified under noncurrent liabilities, on interim and annual financial statements for the period beginning 1 January 2016.
These consolidated financial statements were approved by the Board of Directors and authorized for issuance on 17 February 2016.
1 As required by law, we present the Audit Report for Statutory and Stock Exchange Regulatory Purposes on the financial information included in the Directors' Report and in the attached financial statements of Sonae Indústria, SGPS, S.A., comprising the statement of financial position as at 31 December 2015 (which shows total assets of Euro 965,041,278 and total shareholder's equity of Euro 383,108,773 including a net loss of Euro 232,814,929), the statement of income by nature, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the corresponding notes to the accounts.
2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and the financial statements which present fairly, in all material respects, the financial position of the Company, the results and the comprehensive income of its operations, the changes in equity and the cash flows; (ii) to prepare historic financial information in accordance with International Financial Reporting Standards as adopted by the European Union and which is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain an appropriate system of internal control; and (v) to disclose any significant matters which have influenced the activity, financial position or results of the Company.
3 Our responsibility is to verify the financial information included in the financial statements referred to above, namely as to whether it is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of issuing an independent and professional report based on our audit.
4 We conducted our audit in accordance with the Standards and Technical Recommendations issued by the Institute of Statutory Auditors which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Accordingly, our audit included: (i) verification, on a sample basis, of the evidence supporting the amounts and disclosures in the financial statements, and assessing the reasonableness of the estimates, based on the judgments and criteria of the Board of Directors used in the preparation of the financial statements; (ii) assessing the appropriateness of the accounting principles used and their disclosure, as applicable; (iii) assessing the applicability of the going concern basis of accounting; (iv) assessing the overall presentation of the financial statements; and (v) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the financial information.
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. o′Porto Bessa Leite Complex, Rua António Bessa Leite, 1430 - 5º, 4150-074 Porto, Portugal Tel +351 225 433 000 Fax +351 225 433 499, www.pwc.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal
5 Our audit also covered the verification that the information included in the Directors' Report is consistent with the financial statements as well as the verification set forth in paragraphs 4 and 5 of Article 451º of the Companies Code.
6 We believe that our audit provides a reasonable basis for our opinion.
7 In our opinion, the financial statements referred to above, present fairly in all material respects, the financial position of Sonae Indústria, SGPS, S.A. as at 31 December 2015, the results and the comprehensive income of its operations, the changes in equity and the cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and the information included is complete, true, up-to-date, clear, objective and lawful.
8
i) As referred to in the notes 2.20 and 19 of the notes to the separate financial statements, we highlight the fact that the company has a significant part of its short term credit facilities (amounting to 117 million euros as at 31 December 2015) that need to be refinanced, and separately, we also highlight the ongoing process of dilution of the financial interest in Tableros de Fibras, SA and its affiliates with the subsequent change from control to joint control. As referred in the corresponding notes, there is some uncertainty regarding the evolution of these processes and their impact on the group's financing structure, as well as how the potential dilution might impact the 2016 separate financial statements. It is management's expectation that the gains in operating performance achieved over the last quarters and the potential increase of capital amounting to 137.5 million euros in Tableros de Fibras, SA to be subscribed by Arauco will contribute to a significant improvement of the group's debt maturity profile and cost comparing with the one as at 31 December 2015.
ii) As referred to in the note 27 of the notes to the separate financial statements, there are some ongoing litigious processes against one subsidiary, for which, at the closing date of these separate financial statements, it is not possible to estimate the outcome.
9 It is also our opinion that the information included in the Directors' Report is consistent with the financial statements for the year and that the Corporate Governance Report includes the information required under Article 245º-A of the Portuguese Securities Market Code.
18 February 2016
PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. Represented by:
Hermínio António Paulos Afonso, R.O.C.
1 As required by law, we present the Audit Report for Statutory and Stock Exchange Regulatory Purposes on the financial information included in the Directors' Report and in the attached consolidated financial statements of Sonae Indústria, SGPS, S.A., comprising the consolidated statement of financial position as at 31 December 2015 (which shows total assets of Euro de 1,002,564,656 and total shareholder's equity of Euro 57,669,892 including negative non-controlling interests of Euro 106,611 and a net loss of Euro 36,004,592), the consolidated statement of income by nature, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the corresponding notes to the accounts.
2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and the consolidated financial statements which present fairly, in all material respects, the financial position of the Company and its subsidiaries, the consolidated results and the consolidated comprehensive income of their operations, the changes in consolidated equity and the consolidated cash flows; (ii) to prepare historic financial information in accordance with International Financial Reporting Standards as adopted by the European Union and which is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain appropriate systems of internal control; and (v) to disclose any significant matters which have influenced the activity, financial position or results of the Company and its subsidiaries.
3 Our responsibility is to verify the financial information included in the financial statements referred to above, namely as to whether it is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of issuing an independent and professional report based on our audit.
4 We conducted our audit in accordance with the Standards and Technical Recommendations issued by the Institute of Statutory Auditors which require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Accordingly, our audit included: (i) verification that the Company and its subsidiaries' financial statements have been appropriately examined and, for the cases where such an audit was not carried out, verification, on a sample basis, of the evidence supporting the amounts and disclosures in the consolidated financial statements and assessing the reasonableness of the estimates, based on the judgements and criteria of the Board of Directors used in the preparation of the consolidated financial statements; (ii) verification of the consolidation operations and the utilization of
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. o′Porto Bessa Leite Complex, Rua António Bessa Leite, 1430 - 5º, 4150-074 Porto, Portugal Tel +351 225 433 000 Fax +351 225 433 499, www.pwc.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal
the equity method; (iii) assessing the appropriateness of the accounting principles used and their disclosure, as applicable; (iv) assessing the applicability of the going concern basis of accounting; (v) assessing the overall presentation of the consolidated financial statements; and (vi) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the consolidated financial information.
5 Our audit also covered the verification that the information included in the Directors' Report is consistent with the financial statements as well as the verification set forth in paragraphs 4 and 5 of Article 451º of the Companies Code.
6 We believe that our audit provides a reasonable basis for our opinion.
7 In our opinion, the consolidated financial statements referred to above, present fairly in all material respects, the consolidated financial position of Sonae Indústria, SGPS, S.A. as at 31 December 2015, the consolidated results and the consolidated comprehensive income of its operations, the changes in consolidated equity and the consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and the information included is complete, true, up-to-date, clear, objective and lawful.
i) As referred to in the notes 3 and 28 of the notes to the consolidated financial statements, we highlight the fact that the group has a significant part of its short term credit facilities (amounting to 212 million euros as at 31 December 2015) that need to be refinanced, and separately, we also highlight the ongoing process of dilution of the financial interest in Tableros de Fibras, SA and its affiliates with the subsequent change from control to joint control. As referred in the corresponding notes, there is some uncertainty regarding the evolution of these processes and their impact on the group's financing structure, as well as how the potential dilution might impact the 2016 consolidated financial statements of the group. It is management's expectation that the gains in operating performance achieved over the last quarters and the potential increase of capital amounting to 137.5 million euros in Tableros de Fibras, SA to be subscribed by Arauco will contribute to a significant improvement of the group's debt maturity profile and cost comparing with the one as at 31 December 2015.
ii) As referred to in the note 47 of the notes to the consolidated financial statements, there are some ongoing litigious processes against the group, for which, at the closing date of these consolidated financial statements, it is not possible to estimate the outcome.
9 It is also our opinion that the information included in the Directors' Report is consistent with the consolidated financial statements for the year and that the Corporate Governance Report includes the information required under Article 245º-A of the Portuguese Securities Market Code.
18 February2016
PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. Represented by:
Hermínio António Paulos Afonso, R.O.C
(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 2015 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 2015, 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 2015 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, nr. 1, c) 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, 18 February 2016
Statutory Audit Board,
Manuel Heleno Sismeiro
____________________________ António Augusto Almeida Trabulo
____________________________
___________________________
Óscar José Alçada da Quinta
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