Project Cleopatra: Preliminary Offering Memorandum (LW ...
Transcript of Project Cleopatra: Preliminary Offering Memorandum (LW ...
Interim Report for the twelve-month period ended December 31, 2019
Monitchem Holdco 2 S.A., Luxembourg ( C A B B G R O U P )
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Table of Contents
CABB’s business units ................................................................................................................................. 3
Financial reporting ........................................................................................................................................ 6
Business review ........................................................................................................................................... 6
Consolidated statement of profit or loss for the 4th quarter 2019 ............................................................... 11
Consolidated statement of profit or loss for the twelve-month period ended December 31, 2019 ............. 12
Consolidated statement of financial position as of December 31, 2019 ..................................................... 13
Consolidated statement of cash flows for the twelve-month period ended December 31, 2019 ................ 14
Consolidated financial statements as of December 31, 2019 – Monitchem HoldCo 2 S.A. ..................... 16ff.
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CABB’S BUSINESS UNITS
CABB Group is a leading European producer of customized active ingredients, advanced intermediates and diversified specialty chemicals with a strong focus on the agrochemicals industry. Our business operations are organized into two business units, our Custom Manufacturing business unit and our Acetyls business unit.
Custom Manufacturing business unit
The Custom Manufacturing business unit focuses on the production of exclusives and intermediates. Exclusives are active ingredients and advanced intermediates customised for individual customers operating in the agrochemicals, pharmaceutical and specialty chemical industries. Our exclusives are primarily used in herbicides, fungicides and insecticides in the agrochemicals industry and range from pilot scale to large-volume commercial operations.
Our intermediates are products manufactured for multiple customers and include acid chlorides, chemical building blocks and various base chemicals. They are to a large extent used in agrochemical applications but also in other diverse end-uses, such as vitamins for animal feed, coupling agents for silica-reinforced green tires and dyestuffs for textile application.
CABB is one of the leading custom manufacturing suppliers in the European agrochemicals market by revenues, serving the major global agrochemicals companies and holds strategic supplier status with the largest, European-based agrochemical companies for their agrochemicals business. CABB’s customised products are highly integrated in CABB’s key customers’ supply chains, often on an exclusive or near-exclusive basis for selected products so that CABB is closely aligned in demand planning and supply chain coordination in order to set up scalable manufacturing units and efficient production processes. This production know-how, combined with often lengthy product registration, generally results in lower customer churn and high contract renewal rates. Our key agrochemicals customers are active in a structurally growing global market driven by population growth, improving living standards and changing dietary trends especially in emerging markets.
In the Custom Manufacturing business unit, CABB operates complementary multi-purpose production facilities in Pratteln (Switzerland), Kokkola (Finland) and Galena (USA). CABB produces on-site a substantial amount of the raw materials required for production at our Pratteln facility. The facility’s backward integration enables many by-products to be recycled for internal use, thereby reducing waste and helping to maintain a competitive cost structure.
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Acetyls business unit
Our Acetyls business unit is focused on the production of monochloroacetic acid, or MCA, acetyl derivatives and co-products, which are primarily used in agro chemicals, food additives, personal care and cosmetic products but also in applications as varied as textiles, animal feed, vitamins, drilling fluids, etc. Our key customers’ end-markets have historically been relatively unaffected by economic downturns and have exhibited limited cyclicality. We produce MCA in different purity grades (ultra-pure, high pure, technical global and technical local) for different applications and regional markets and in different trade forms (flakes, solution, molten and sodium monochloracetic acid) to enable longer distance transportation based on the customer’s preference and location. We also offer our customers a range of derivatives, including MCA esters, glycolic acid and trichloroacetic acid, among others. Co-products, such as caustic soda and hydrochloric acid, are by-products from the production of chlorine and MCA and are sold to customers or used captively in subsequent processes and production steps.
We are one of the two principal suppliers of MCA to Western Europe and the Americas, and our Acetyls business unit supplies most of the larger MCA consumers in Europe. We attribute our strong market position to the high quality of our products, our long-standing customer relationships, our expertise in technically-demanding chemistry and supply chain management, as well as highly integrated production processes. Our customer relationships exceed ten years for all our top 15 customers, many of whom we supply under evergreen contracts.
Our Acetyls business unit operates three production facilities globally: two in Germany and one in China through our joint venture with Shandong Lutai Chemical Co., Ltd. (former Jining Jinwei Gold Power Co., Ltd.).
Our production facilities in Germany as well as the new plant at our Chinese site use proprietary hydrogenation technology for the production of MCA, which provides significant production cost and product quality advantages over the alternative crystallization technology. Our Gersthofen facility uses backward-integrated electrolysis technology for captive chlorine production, while our Knapsack facility as well as Chinese facility sources chlorine on-site via a pipeline from adjacent third-party chlorine plants who repurchase the hydrochloric acid generated through production of MCA. We believe that the high level of capital investment required to develop integrated and efficient production facilities, combined with the technological expertise required for the production processes, are key factors to our operating success and the limited number of new competitors entering our markets.
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FINANCIAL REPORTING
This report may include forward-looking statements. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this report, including, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we participate or are seeking to participate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, you can identify forward-looking statements by terminology such as ‘‘aim,’’ “anticipate”, “believe”, “continue”, “could”, estimate”, “expect”, “forecast”, “guidance”, “intend”, “may”, “plan”, “potential”, “predict”, “projected”, “should” or “will” or the negative of such terms or other comparable terminology. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that our actual results of operations, including our financial condition and liquidity and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this report. In addition, even if our results of operations, including our financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.
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Business review
Key Financials
Monitchem HoldCo 2 S.A.
4th Quarter 2019
4th Quarter 2018
4th Quarter 2019
4th Quarter 2018
pro forma w/o Jayhawk
as reported
including Jayhawk(1)
restated(1)
in € million in € million in € million in € million
(unaudited) (unaudited) (unaudited) (unaudited)
Sales
Custom Manufacturing ........................................ 88.0 77.3 103.6 87.0
Acetyls ................................................................ 43.5 50.6 43.5 50.6
Inter-segment eliminations ................................... (3.6) (4.4) (3.5) (4.4)
Total Sales ......................................................... 127.9 123.5 143.6 133.2
EBITDA(2)
Custom Manufacturing ........................................ 22.6 17.7 26.5 19.6
Acetyls ................................................................ 8.5 8.6 8.5 8.6
Corporate expenses ............................................ (0.9) (1.2) (0.9) (1.2)
Inter-segment eliminations ................................... 0.0 0.1 0.0 0.1
Operating EBITDA ............................................. 30.2 25.2 34.1 27.1
Non-recurring items ............................................. (2.3) 0.4 (2.6) (4.5)
Depreciation of inventory ..................................... 0.0 (0.1) 0.0 (0.1)
Reported EBITDA .............................................. 27.9 25.5 31.5 22.5
(1) Comparative financial information for the financial year 2018 was restated and includes two months of business activities of Jayhawk Fine Chemicals Corporation (Galena/USA).
(2) We define EBITDA as net profit (loss) for the period adding back taxes on income, financial results, amortisation and depreciation. We define Operating EBITDA as the net profit (loss) for the period adding back taxes on income, financial results, amortisation and depreciation, non-
recurring items and valuation impacts resulting from the purchase price allocation on inventory. We believe that both EBITDA and Operating EBITDA are useful to investors in evaluating our operating performance and our ability to incur and service our indebtedness. Neither EBITDA nor Operating EBITDA is a performance indicator recognised under IFRS. The EBITDA and the Operating EBITDA reported is not necessarily comparable to the performance figures published by other companies as EBITDA or Operating EBITDA or the like. You should exercise caution in comparing EBITDA and Operating EBITDA as reported by us to EBITDA or Operating EBITDA of other companies.
Development of Sales
On a pro forma basis, without the effects resulting from the acquisition of Jayhawk, Group Sales increased by €4.4 million, or 3.6%, from €123.5 millin to €127.9 million year-on-year in the fourth quarter of 2019. This was driven by a strong performance of the BU Custom Manufacturing overcompensating lower sales in BU Acetyls.
For the twelve-month period ended December 31, 2019, Group sales increased by €60.0 million or 13.0% from €463.3 million in 2018 to €523.3 million in 2019, due to a significant sales increase within the business unit Custom Manufacturing, which overcompensated moderately declining sales in the Acetyls business unit.
On a pro forma basis, sales of BU Custom Manufacturing increased by €10.7 million, or 13.8%, year-on-year, from €77.3 million in the prior year’s fourth quarter to €88.0 million in the fourth quarter of 2019. This was mainly due to a volume driven sales increase of our Agrochemicals and Intermediates, which was mainly realised with existing products in combination with new products. Sales in the fourth quarter of 2018 were negatively impacted by a temporary transformer outage at our Pratteln production facility in an amount of €6.4 million. Sales of Specialties increased compared to prior year’s level due to a pilot campaign of a new product for the paper industry. Sales of our Pharmaceuticals remained below prior year’s quarter as a result of a product phasing out in the second quarter of 2019.
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For the twelve-month period ended December 31, 2019, sales of BU Custom Manufacturing increased on a pro-forma basis by €23.9 million, or 8.8%, from €271,9 million in 2018 to €295.8 million in 2019. Sales of agrochemical products increased significantly versus prior year, due to a volume driven growth of existing products in combination with the successful introduction of new products at our production facility in Switzerland. Sales of pharmaceutical products declined due to the expected phase out of some products. Sales of Specialties increased compared to the prior year due to a new product implemented for a customer in the paper industry in Finland. Sales of our intermediates increased moderately year-on-year, mainly due to a volume driven growth of certain products, which, as a result of our capex program, benefitted from an improved plant availability. Although sales were negatively impacted by declining caustic soda prices, we benefitted from favourable product mix effects.
In the fourth quarter of 2019, sales of BU Acetyls decreased by €7.1 million year-on-year from €50.6 million to €43.5 million, driven by a scheduled overhaul standstill in December at our plant in Gersthofen in order to upgrade our electrolysis plant. Driven by lower volumes, sales of our MCA remained below prior year’s quarter. Sales of Co-Products decreased on a year-on-year basis, mainly driven by lower volumes and declining caustic soda prices. Sales of Derivatives increased slightly year-on-year. CABB China is following through its strategy to focus on the more attractive higher purity and differentiated product segments and demonstrated a solid performance in the fourth quarter of 2019.
For the twelve-month period ended December 31, 2019, sales of BU Acetyls decreased by €7.4 million, or 3.7%, year-on-year from €197.5 million to €190.1 million. Sales of the MCA product group decreased moderately versus a strong prior year, due to a lower demand driven by destocking effects in combination with longer than expected standstills at some customers. Sales of our Acetyls Derivatives increased compared to prior year, due to a strong demand in North America and influenced by favourable product-customer-mix. Sales of our Co-products decreased on a year-on-year basis, due to considerably lower volumes and declining caustic soda prices, which however remain on an attractive level.
Development of Earnings
On a pro forma basis, without the effects resulting from the acquisition of Jayhawk, Group Operating EBITDA (i.e., EBITDA before non-recurring items, and PPA-related valuation impacts on inventory) increased by €5.0 million, or 19.8% year-on-year, from €25.2 million in the prior year’s fourth quarter, to €30.2 million in the fourth quarter of 2019. This was driven by a strong operational performance of the BU Custom Manufacturing and a nearly unchanged robust contribution of BU Acetyls. For the twelve-month period ended December 31, 2019, Group Operating EBITDA increased on a pro forma basis by €12.0 million, or 13.8%, year-on-year, from €87.3 million to €99.3 million, due to a significant increase within the business unit Custom Manufacturing, and a moderate increased contribution of our Acetyls business unit.
On a pro forma basis, operating EBITDA of the BU Custom Manufacturing increased by €4.9 million, or 27.7%, year-on-year, from €17.7 million in the prior year’s fourth quarter to €22.6 million in the fourth quarter of 2019. The operational performance in the fourth quarter of 2018 was negatively impacted by a temporary transformer outage at our Pratteln production facility in an amount of €4.0 million. EBITDA contribution of our Agrochemicals and Intermediates increased compared to prior year’s quarter, which was mainly driven by a volume driven topline increase from new products and growth from the existing portfolio. EBITDA contribution of Specialties increased compared to prior year’s fourth quarter, due to a pilot campaign for a new product with an application in the paper industry.
For the twelve-month period ended December 31, 2019, the operating EBITDA of the BU Custom Manufacturing increased on a pro forma basis, by €8.7 million, or 15.0%, from €58.0 million in 2018 to €66.7 million in 2019. The EBITDA contribution of our Agrochemical products increased compared to prior year, which was primarily driven by favourable product mix effects in combination with the ramp-up of new products and a better utilisation of our multipurpose plants, leading to a lower unit cost of goods sold. Our Pharmaceutical products and Specialties remained below prior year’s performance, whereas the EBITDA contribution of Intermediates increased due to positive volume and product mix effects. Although negatively impacted by declining caustic soda prices, the product portfolio of the business unit has benefitted in the financial year 2019 from favorable product mix effects and a continued improvement of operational costs and has consequently realised an attractive contribution margin above prior year’s level.
Operating EBITDA of the Acetyls business unit decreased slightly by €0.1 million, or 1.2%, year-on-year, from €8.6 million in the prior year’s fourth quarter to €8.5 million in the fourth quarter of 2019. The EBITDA contribution of the product group MCA moderately outperformed prior year’s quarter. This was mainly due to decreasing raw material prices (acetic acid) in combination with continuing positive pricing effects resulting from the pass on of higher raw
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material prices incurred in prior quarters, charged on to a large extend with a time lag via formula sales prices. EBITDA contribution of Derivatives products increased compared to prior year’s quarter, driven by a strong demand and higher margins. EBITDA of Co-products decreased year-on-year, driven by lower volumes and higher electricity prices. Nevertheless, the product group benefited from continuous high caustic soda prices.
For the twelve-month period ended December 31, 2019, the operating EBITDA of the BU Acetyls increased by €2.5 million, or 7.6%, year-on-year, from €33.1 million to €35.6 million. The EBITDA contribution of the MCA product group exceeded the prior year’s level, due to noticeably lower raw material prices for acetic acid and anhydride. The contribution of our Derivatives business increased on a year-on-year basis due to higher sales volumes and improved margins. Co-products remained below the prior year’s level, mainly driven by lower volumes and unfavourable pricing effects due to decreasing caustic soda prices.
Non-recurring items are defined as any expenses and income not related to the operational performance of the business, such as transaction costs, restructuring costs, negative past service costs under pension schemes incurred in the financial year 2018 at CABB AG due to the change of a parameter (conversion rate) in the calculation of pension benefits under the Swiss pension scheme, as well as costs for special projects. Non-recurring items amounted to €2.6 million in the fourth quarter of 2019 (fourth quarter of 2018: €4.6 million (restated)).
Group gross profit increased by €4.3 million, year-on-year, from €29.0 million in the fourth quarter of 2019 to €33.3 million in the fourth quarter of 2019, mainly driven by positive topline scale effects in the business unit Custom Manufacturing and increased sales volumes of high-margin Derivatives in the business unit Acetyls.
For the twelve-month period ended December 31, 2019, Group gross profit increased by € 18.3 million, or 18.9%, from €97.0 million to €115.3 million, mainly as a result of a volume driven sales increase in the business unit Custom Manufacturing and higher margins realised in the business unit Acetyls within the product group Derivatives.
Earnings before interest and taxes (EBIT) improved by €8.1 million, from €2.7 million in the fourth quarter of 2018 to €10.8 million in the fourth quarter of 2019. Mainly due to lower non-recurring items, ‘General administrative expenses’, decreased by €3.6 million on a year-on-year basis from €9.8 million in the prior year’s quarter to €6.2 million in the fourth quarter of 2019.
For the twelve-month period ended December 31, 2019, earnings before interest and taxes (EBIT) increased by €17.7 million, from €6.8 million in the financial year 2018 to €24.5 million in 2019. ‘Research and development expenses’ increased year-on-year by €0.8 million. ‘Distribution’ and logistics expenses’ increased, driven by higher sales volumes, by €2.8 million, from €60.4 million to €63.3 million in 2019. ‘General and administrative expenses’ decreased, mainly as a result of lower non-recurring items, by €3.0 million year-on-year, from €26.7 million to €23.7 million.
Depreciation and amortisation increased by €0.9 million year-on-year, to €20.7 million in the fourth quarter of 2019. For the twelve-month period ended December 31, 2019, depreciation and amortisation increased from €74.4 million in 2018 to €80.9 million in 2019.
Financial result improved by €3.4 million from a net loss of €9.3 million in the fourth quarter of 2018 to a net loss of €5.9 million in the fourth quarter of 2019. This was predominately due to a significantly high positive impact of €18.9 million (2018: €-0.2 million) resulting from the subsequent measurement of the financial instruments embedded in the Notes at fair value through profit and loss. ‘Interest expenses and similar’ increased by €13.5 million from €10.4 million in the fourth quarter of 2018 to €23.9 million in the fourth quarter of 2019. This was mainly driven by accrued financing expenses of €12.7 million relating to the former financing agreements, which were recognised in the current year’s profit and loss statement consequently to the successful completion of the refinancing. Financial expenses include in an amount of €3.0 million an early redemption premium paid due the redemption of the Notes financing. The net foreign currency result decreased by €1.7 million, from a net income of €0.9 million in the fourth quarter 2018 to a net loss of €0.8 million in the current year’s fourth quarter.
For the twelve-month period ended December 31, 2019, the negative financial result improved slightly by €1.3 million from a net loss of €34.2 million in 2018 to a net loss of €32.9 million in 2019. The Net foreign currency result decreased by €1.4 million from €5.5 million in 2018 to €4.1 million in 2019 and includes intercompany currency gains of €4.3 million (2018: €5.0 million), which were recognised predominately on EURO-denominated intercompany loans granted to CABB AG (Switzerland).
Taxes on income increased significantly by €17.2 million, from a net expense of €0.5 million in the fourth quarter of 2018 to a net income of €16.7 million in the fourth quarter of 2019. This was predominately due to the release of deferred tax liabilities of €14.8 million recognised at CABB AG consequently to a recently enacted change in the Swiss tax legislation, which foresees a graduated reduction of the corporate income tax rate over a period of five years from currently 20.7% to maximal effective 13.4%.
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For the twelve-month period ended 2019, taxes on income increased significantly by €15.5 million, from a net income of €1.2 million in 2018 to a net income of €16.7 million in 2019. The Group’s tax rate is impacted by financial expenses, which are subject to restrictions under thin capitalisation rules in Germany and Finland, and for which no deferred tax assets are recognised.
Net result for the period improved significantly by €28.7 million year-on-year, from a net loss of €7.1 million in the fourth quarter of 2018 to a net profit of €21.6 million in the fourth quarter of 2019. For the twelve-mont period ended 2019, net result of the period improved significantly by €34.5 million, from a Net Loss of €26.2 million in 2018 to a Net Profit for the financial year 2019 amounting to €8.3 million.
Non-controlling interests reflect the 32.4% (2018: 33.0%) share in CABB - Jinwei Specialty Chemicals (Jining) Co. Ltd., Zhanghuang Town (PRC), that is held by shareholders other than CABB.
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Cash Flow
Cash flow from operating activities for the twelve-month period ended December 31, 2019 increased significantly year-on-year by €61.1million from €61.7 million in 2018 to €122.8 million for the twelve-month period ended December 31, 2019. This favourable development was driven by an improved operating EBITDA amounting to €110.8 million (2018: €89.2 million), non-recurring items of €5.4 million (2018: €8.0 million) and a decrease in net working capital of €21.9 million (2018: increase in net working capital negatively impacting the operating cash flow by €12.6 million).
Cash flow from investing activities increased year on-year by €7.6 million from €52.8 million in 2018 to €60.4 million for the twelve-month period ended December 31, 2019. In our business unit Custom Manufacturing, we started to further expand our production capacities in Finland and finalised investments for new products in our multipurpose plants in Switzerland, in order to serve our customers’ needs. We also continued our efforts to invest in measures enhancing the asset reliability and to continue our “fit for future” program. Within our business unit Acetyls, major investment projects consisted of the strategic investment in the 6th generation electrolysis membrane cells, the construction of MCA storage tanks, the revision of chlorine drying and facilities to recover acetyl chlorine.
Financing activities led to a net cash outflow of €56.6 million in the financial year 2019 (2018: net cash inflow of €50.6 million). Main components of the positive cash flow from financing activities in 2018 were the cash contributions made by Permira Funds (€48.3 million) in conjunction with acquisition of Jayhawk’s business and the proceeds from external bank loans in an amount of €37.4 million. In the financial year 2019, the issuance of the Notes generated a net inflow amounting to €636.3 million, which were predominately used to fund the settlement of the former financing agreements. These payments included the redemption of the former Notes (€588.0 million), the repayment of Jayhawk’s bank loans (€38.7 million) as well as the entire repayment of the credit revolving facilities utilised by CABB Group centrally (€6.9 million) and in China (€1.3 million). Net interest and financing charges paid in the financial year 2019 amounted to €54.8 million (2018: €36.3 million). The significant increase of €18.5 million mainly refers to costs paid to implement the new financing structure (€23.9 million).
Cash closing balance amounted to €29.1 million as of December 31, 2019 (December 31, 2018: €22.3 million), the Group has access to an unutilised revolving credit facility of €75.8 million.
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Consolidated statement of profit or loss for the 4th Quarter 2019
Monitchem HoldCo 2 S.A.
For the 4th Quarter
2019
For the 4th Quarter
2018
in € million in € million
restated(1)
(unaudited) (unaudited)
Sales ................................................................................................................. 143.6 133.2
Cost of Sales ..................................................................................................... (110.3) (104.2)
Gross Profit ...................................................................................................... 33.3 29.0
Research and development expenses ............................................................... (1.0) (1.0)
Distribution and logistics expenses .................................................................... (15.3) (15.5)
General and administrative expenses ................................................................ (6.2) (9.8)
Earnings before interest and taxes (EBIT) ..................................................... 10.8 2.7
Depreciation, amortisation and impairments ...................................................... 20.7 19.8
Reported EBITDA............................................................................................. 31.5 22.5
Interest income and similar ................................................................................ 0.0 0.0
Interest expense and similar .............................................................................. (23.9) (10.4)
Other financial income ....................................................................................... 18.8 0.2
Other financial expenses ................................................................................... 0.0 0.0
Foreign currency (losses)/ gains (net) ................................................................ (0.8) 0.9
Financial result ................................................................................................ (5.9) (9.3)
Earnings before taxes ..................................................................................... 4.9 (6.6)
Taxes on income ............................................................................................... 16.7 (0.5)
Net loss for the period ..................................................................................... 21.6 (7.1)
Attributable to shareholders ............................................................................ 21.6 (6.8)
Attributable to non-controlling interests ........................................................... 0.0 (0.3)
(1) Comparative financial information for the financial year 2018 was restated and includes two months of business activities of Jayhawk Fine Chemicals Corporation (Galena/USA).
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Consolidated statement of profit or loss for the twelve-month period ended December 31, 2019
(1) Comparative financial information for the financial year 2018 was restated and includes two months of business activities of Jayhawk Fine Chemicals Corporation (Galena/USA).
Monitchem HoldCo 2 S.A.
For the twelve-month period ended
Dec. 31, 2019
Dec. 31, 2018
restated(1)
in € million in € million
(audited) (audited)
Sales................................................................................................... 523.3 463.4
Cost of sales ....................................................................................... (408.0) (366.4)
Gross profit ....................................................................................... 115.3 97.0
Research and development expenses ................................................ (3.9) (3.1)
Distribution and logistics expenses ..................................................... (63.3) (60.4)
General and administrative expenses ................................................. (23.7) (26.7)
Earnings before interests and taxes (EBIT)..................................... 24.5 6.8
Depreciation and amortisation ............................................................. 80.9 74.4
Reported EBITDA .............................................................................. 105.4 81.2
Financial income ................................................................................. 19.2 0.5
Financial expenses ............................................................................. (56.1) (40.2)
Foreign currencies gain (net) .............................................................. 4.1 5.5
Financial result .................................................................................. (32.9) (34.2)
Earnings before taxes ......................................................................... (8.4) (27.4)
Taxes on income ................................................................................. 16.7 1.2
Net Result for the period .................................................................. 8.3 (26.2)
Attributable to shareholders 8.8 (24.8)
Attributable to non-controlling interests (0.5) (1.4)
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Consolidated statement of financial position as of December 31, 2019
Monitchem HoldCo 2 S.A.
As of
December 31, 2019
As of December 31,
2018
restated(1)
in € million in € million (audited) (audited)
Assets Non-current assets thereof:
Goodwill .................................................................................................. 190.8 187.9 Other intangible assets ........................................................................... 167.7 191.2 Property, plant and equipment ................................................................ 487.5 461.6 Derivative financial assets ....................................................................... 21.5 0.0
Financial assets ...................................................................................... 0.0 0.0
Non-current assets .................................................................................. 867.5 840.7
Current assets thereof:
Inventories .............................................................................................. 67.4 71.1 Accounts receivable, trade ...................................................................... 70.6 85.4 Contract assets ....................................................................................... 7.0 4.3 Other financial assets ............................................................................. 0.0 3.5 Other non-financial assets ...................................................................... 9.9 10.7 Income tax receivables ........................................................................... 3.2 2.7
Cash and cash equivalents ..................................................................... 29.1 22.3
Current assets .......................................................................................... 187.2 200.0
Total assets .............................................................................................. 1.054.7 1.040.7
Equity and Liabilities
Equity ........................................................................................................ 190.2 164.8
Long-term liabilities thereof:
Provisions for pensions and similar obligations ....................................... 61.3 59.9 Other provisions ...................................................................................... 2.7 2.7 Notes(2) ................................................................................................... 614.7 573.8 Other financial liabilities .......................................................................... 7.6 47.5
Deferred tax liabilities .............................................................................. 63.5 81.1
Long-term liabilities ................................................................................. 749.8 765.0
Short-term liabilities thereof:
Other provisions ...................................................................................... 10.9 11.9 Notes(2) ................................................................................................... 9.4 1.4 Accounts payable, trade .......................................................................... 69.4 69.1 Contract liabilities .................................................................................... 10.7 9.8 Income tax liabilities ................................................................................ 0.0 0.0 Other financial liabilities .......................................................................... 3.8 12.1
Other non-financial liabilities ................................................................... 10.5 6.6
Short-term liabilities ................................................................................ 114.7 110.9
Total equity and liabilities ....................................................................... 1.054.7 1.040.7
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(1) Prior year comparatives are retrospectively restated in order to increase the comparability of financial information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transaction under common control had taken place in the year of acquisition.
(2) The Notes are recognised at amortised cost of purchase (€640.0 million) using the effective interest rate method. Transaction costs, which are amortised over the term of the Notes, are deducted (€27.8 million), the Amortised value of the embedded derivative increases the net book value by €2.5 million. The accrued interests (€9.4 million) are disclosed within short-term liabilities.
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Consolidated statement of cash flows for the twelve-month period ended December 31, 2019
_____________________________
(1) Prior year comparatives are retrospectively restated in order to increase the comparability of financial information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transaction under common control had taken place in the year of acquisition.
Monitchem HoldCo 2 S.A.
For the twelve-month period ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2018
restated(1) as reported in € million in € million in € million (audited) (audited) (audited)
Operating EBITDA .................................................. 110.8 89.2 87.3
Non-recurring items ............................................... (5.4) (8.0) (2.3)
Income taxes paid ................................................. (4.5) (6.9) (6.9)
Change in net working capital and provisions ........ 21.9 (12.6) (10.7)
Cash Flow from Operating Activities. ................... 122.8 61.7 67.4
Capital Expenditures BU CM ................................. (49.2) (47.8) (47.4)
Capital Expenditures BU Acetyls ........................... (11.2) (5.0) (5.0)
Acquisition of subsidiary, net of cash acquired .... 0.7 (71.0) 0.0
Cash Flow from Investing Activities ..................... (59.7) (123.8) (52.4)
Cash proceeds from the issuance of Notes .......... (636.3) 0.0 0.0
Payments due to the redemption .......................... (588.0) 0.0 0.0
Repayment of bank loans ..................................... (38.7) 0.0 0.0
Net interest and financing charges paid ................ (54.8) (36.3) (34.9)
Cash proceeds from capital increase .................... 0.0 48.3 0.0
Proceeds from bank loans ..................................... 0.0 37.4 0.0)
Principal elements of lease payments ................... (6.0) (5.8) (5.7)
Decrease of current financial assets ...................... 2.8 0.0 0.0
Payment of/Proceeds from short term borrowings . (6.9) 6.9 6.9
Change in other financial debt ............................... (1.3) 0.1 0.0
Cash Flow from Financing Activities .................... (56.6) 50.6 (33.7)
Change in cash and cash equivalents……………. 6.5 (11.5) (18.7)
Cash Opening Balance .......................................... 22.3 33.3 33.3
F/X Effect on Cash Held ........................................... 0.3 0.2 0.2
Cash Closing Balance ........................................... 29.1 14.8 14.8
15
Further information Published on April 28, 2020
You can find this and other publications on our website at www.cabb-chemicals.com
Contact
CABB Group GmbH Otto-Volger-Strasse 3c 65843 Sulzbach Deutschland Tel.: +49 6196 9674-153 Fax: +49 6196 9674-199 E-Mail: [email protected]
Consolidated financial statements for the year ended December 31, 2019 (with the report of the Réviseur d’Entreprises agréé thereon)
Monitchem Holdco 2 S.A., Luxembourg RCS B187.114 488, route de Longwy L-1940 Luxembourg
1
Monitchem Holdco 2 S.A., Luxembourg Group management report for the period from January 1, to December 31, 2019
(1) The CABB Group
General
Monitchem Holdco 2 S.A. with registered offices at 488, route de Longwy in L-1940 Luxembourg was
established on May 9, 2014 as a public limited liability company. On May 9, 2014, Monitchem Holdco 2
S.A. founded its subsidiary Monitchem Holdco 3 S.A., Luxembourg, which on May 26, 2014 acquired all
shares of CABB Group GmbH, Sulzbach (Taunus), Germany.
Corporate Structure
Monitchem Holdco 2 S.A. as parent company of the CABB Group is responsible for defining and
pursuing CABB’s corporate objectives and also for the management, control and monitoring of Group-
wide activities, including risk management and the allocation of resources. Monitchem Holdco 2 S.A.
reviews and approves business plans and budgets of CABB Group. Financing of the Group is acquired
centrally by Monitchem Holdco 2 S.A. and Monitchem Holdco 3 S.A. and distributed within the Group.
Monitchem Holdco 2 S.A. is also responsible for all communication to bond holders and lenders.
The implementation of the defined group wide strategy and the operational management and control is
in the responsibility of the management team of CABB Group GmbH. The management of CABB Group
is supported and supervised by the advisory board.
Implementation of the strategies at a business unit and country level is in the responsibility of the local
affiliated companies. The executive bodies of these companies manage their businesses in line with the
relevant statutory regulations, governed by their own articles of association, internal procedural rules
and the principles incorporated in our globally applicable management standards, codes and guidelines.
Business activity
CABB is a leading European producer of customised active ingredients, advanced intermediates and
diversified specialty chemicals with a strong focus on the agrochemicals industry. CABB’s business
operations are organised into two business units (BU), the Custom Manufacturing business unit and the
Acetyls business unit.
The business unit Custom Manufacturing focuses on the production of exclusives and intermediates.
Exclusives are active ingredients and advanced intermediates customised for individual customers
operating in the agrochemicals, pharmaceutical and specialty chemical industries. The exclusives are
primarily used in herbicides, fungicides and insecticides for the agrochemicals industry and range from
pilot scale to large-volume commercial operations.
Intermediates are products manufactured for multiple customers and include acid chlorides, chemical
building blocks and various base chemicals. They are to a large extent used in agrochemical
applications, but also in other diverse end-uses, such as vitamins for animal feed, coupling agents for
silica-reinforced green tires and dyestuffs for textile application.
2
CABB is one of the leading custom manufacturing suppliers in the European agrochemicals market by
sales, serving the major global agrochemicals companies and holding strategic supplier status with the
three largest, European-based agrochemical companies for their agrochemicals business. CABB’s
customised products are highly integrated in CABB’s key customers’ supply chains, often on an
exclusive or near-exclusive basis for selected products so that CABB is closely aligned in demand
planning and supply chain coordination in order to set up scalable manufacturing units and efficient
production processes. This production know-how, combined with often lengthy product registration,
generally results in lower customer churn and high contract renewal rates.
CABB’s key agrochemicals customers are active in a structurally growing global market driven by
population growth, improving living standards and changing dietary trends, especially in emerging
markets, as well as growing demand for biofuels and yield improvements. We believe that we are well-
positioned to benefit from positive long-term growth trends in the agrochemicals market and are
investing in capacity and yield improvement to support the growth of our business.
The growth of our custom manufacturing business is driven by the major agrochemical players’ use of outsourcing as a source of additional production capacity in order to serve the steadily increasing global
demand for agrochemicals. In recent years, agrochemicals companies have allocated a larger share of
production to external custom manufacturers, which provide flexible multi-purpose and multi-product
capacity. Outsourcing reduces agrochemical company’s asset intensity, limits the risks associated with
large, upfront investments and allows them to deploy capital with a stronger focus on their core
capabilities, such as research and development as well as marketing and distribution. This trend is
supported by new molecules becoming increasingly complex and more active, often based on multi-
step synthesis, which requires demanding technical capabilities.
Our strong market position in Custom Manufacturing is supported by high barriers to entry, preventing
new competitors from easily entering these markets. We possess strong technical experience and
process design capabilities, which are important for securing new contracts. We believe that a new
market entrant seeking to replicate our facilities would face large capital investment costs. We are also
protected by high switching costs for our customers due to our high integration into our customers’ supply chains and their participation in capital expenditures related to the developments of new
products.
In the Custom Manufacturing business unit, CABB operates complementary multi-purpose production
facilities in Pratteln (Switzerland), Kokkola (Finland) and Galena (USA). CABB produces on-site a
substantial amount of the raw materials required for production at our Pratteln facility. The facility’s backward integration enables many by-products to be recycled for internal use, thereby reducing waste
and helping to maintain a competitive cost structure. Through systematic optimisation of process
parameters, improvement of maintenance service and change-over scheduling as well as Lean Sigma
tools training, we are aiming to increase our production further in the coming years. The business unit
Custom Manufacturing comprises the Group companies CABB AG (Switzerland), CABB Oy (Finland),
CABB Finland Oy (Finland), CABB Nordic Holding S.à r.l. (Luxembourg), Jayhawk Fine Chemicals
Corporation (USA), Kansas HoldCo 1 Inc. (USA), Kansas HoldCo Inc. (USA) and Monitchem Kansas
S.à r.l. (Luxembourg).
The business unit Acetyls focuses on the production of monochloroacetic acid, acetyl derivatives and
co-products, which have a variety of applications in the agrochemicals, food, pharmaceutical, home and
personal care industries, but also in applications in a variety of markets, such as textiles, animal feed,
vitamins and drilling fluids. CABB’s key customers’ end-markets follow different demand patterns and
demonstrate different levels of cyclicality, leading to a diversified market exposure for CABB and as
such demonstrated relative resilience versus economic downturns. CABB produces MCA in different
purity grades (ultra-pure, high pure, technical global and technical local) for different applications and
regional markets and in different trade forms (flakes, solution, molten and sodium monochloroacetic
acid) to enable longer distance transportation based on the customer’s preference and location. CABB
3
also offers its customers a range of derivatives, including MCA esters, glycolic acid and trichloroacetic
acid, among others. Co-products, such as caustic soda and hydrochloric acid, are by-products from the
production of chlorine and MCA and are sold to customers or used captively in subsequent processes
and production steps.
CABB is one of the principal suppliers of MCA to Western Europe and the Americas, and CABB Acetyls
business unit supplies most of the largest MCA consumers in Europe. CABB attributes its strong market
position to the high quality of the products, its long-standing customer relationships and its expertise in
technically demanding chemistry and supply chain management as well as highly integrated production
processes. CABB’s customer relationships exceed ten years for the majority of our top 15 customers.
Our strong market position in Acetyls is supported by high barriers to entry, preventing new competitors
from easily entering these markets. We believe that a new market entrant seeking to replicate our
facilities would face large capital investment costs. Global MCA trade flows are often characterised by
regional supply and demand due to the corrosive nature of MCA and relatively high transportation costs,
which encourages proximity to customers.
The Acetyls business unit operates three technologically-advanced production facilities: two in Germany
(Gersthofen and Knapsack) and one in China (Jining, Shandong Province) through a cooperation with
Shandong Lutai Chemical Co., Ltd.. The production facilities in Germany as well as the plant at our
Chinese site use state of the art hydrogenation technology for the production of MCA, which provides
significant production cost and product quality advantages over the alternative crystallisation
technology. The Gersthofen facility uses backward-integrated electrolysis technology for captive
chlorine production, while the Knapsack facility as well as the Chinese facility sources chlorine on-site
via a pipeline from the adjacent chlorine plant of a supplier who repurchases the hydrochloric acid
generated through production of MCA. We benefit from cost advantage of operating large-scale, highly
integrated production facilities strategically located near key customers and suppliers as well as
transportation networks. The business unit comprises the following Group companies: CABB GmbH
(Germany), CABB Jinwei Specialty Chemicals (Jining) Co. Ltd. (China), CABB North America Inc.
(USA), CABB Trading (Shanghai) Co. Ltd., Shanghai (PRC). (2) Development of business in the financial year 2019
Economic environment
The global gross domestic product growth decreased from 3.6% in 2018 to 2.9% in 2019 (source:
OECD). Growth rates in the United States (2.3% vs. 2.9% in 2018), in the European Union (1.2% vs.
1.8% in 2018) and in the emerging markets of China were below the previous years’ averages (6.1%
vs. 6.6% in 2018). After a severe recession in the past years, the economic recovery in South America
stabilised. In Brazil, the economy grew by 1.1% (2018: 1.1%).
CABB’s performance is to a large extent driven by the global agrochemical end-market. According to
first estimates of the market consultancy AgbioInvestor, the global crop protection market increased
slightly in 2019 by 2.4% versus prior year, which is the third consecutive year of growth following the
2015 and 2016 decline. Key drivers of market performance in 2019 were weather events ranging from
flooding in the US to very dry weather conditions in Asia and Europe, normalising agrochemical
inventories in Brazil, higher prices due to supply issues from China, currency effects from a
strengthening US$ (currency adjusted market growth of 6.4%) and ongoing trade disputes. In Europe,
the crop protection market decreased by 4.3%, mainly driven by currency translation effects (adjusted:
2.7% increase). Furthermore, high inventory levels carried forward from 2018 as a result of dry weather
impacted sales into the distribution lines. Herbicide sales in Europe were favourably influenced by
turning oilseed planting areas into maize plantings. Fungicides decreased due to dry weather.
Insecticides have been affected by regulatory pressure against neonicotinoid insecticides. The US
4
market declined by 4.1% due to delayed planting from adverse weather conditions heavily impacting
sales of herbicide applications especially during the preplanting phase in spring for maize and soybean.
In Central and South America, a strong market recovery occurred resulting in an approximate growth of
15%, primarily driven by Brazil and Argentina where decreasing inventory levels for agrochemical
products improved overall the pricing.
The core product in the business unit Acetyls, MCA, has a broad array of end uses. The key applications
for MCA include CMC (carboxymethyl cellulose) food additives, personal care, paper, agrochemicals for
herbicides, betaines for surfactants, TGA (thioglycolic acid) for hair care and plastic additives and other
specialty chemical applications such as pharmaceuticals. In the financial year 2019, demand for MCA
within our European markets decreased in all delivery forms due to destocking effects and longer than
expected standstills at some customers during summertime. In the financial year 2019, the Chinese
MCA market remained volatile and price sensitive. Our co-products in Europe continue to benefit from
the impact of the phase out of the mercury cell technology, which led to reduced production capacities
and thus increased prices on selective products, such as caustic soda. Although caustic soda prices
declined in the past months, they are still at an attractive level.
Management system and performance indicators
The management team of CABB Group monitors and controls the implementation of the group wide
strategy and the operational business activities based on quantitative and qualitative information,
covered by the Group’s key performance indicators (KPIs) at least on a monthly basis. In addition, most
of the KPIs are forecasted in a monthly rolling forward approach, which ensures quick responses to the
latest business developments. The management of the Group uses Sales, Operating EBITDA and
capital expenditures as key performance indicators.
The most important performance indicator is Operating EBITDA, which is defined as net profit (loss) for
the period adding back taxes on income, financial results, amortisation and depreciation and non-
recurring items. This measurement basis excludes the effects of non-recurring expenditure such as
restructuring costs, consulting expenses and valuation implications on inventory resulting from the
purchase price allocation accounted for in conjunction with the acquisition completed as of June 27,
2014. Those expenditures are not related to the operational performance of the Group and are therefore
excluded from Operating EBITDA.
For efficient management of the Group, approved budgets for each business unit and product group are
in place. A recurring comparison of these budgets with current developments and forecasts enables to
react to changing business environments.
Results of operations are discussed in the following based on a comparison of these KPI’s with prior
year results and – in the section business performance review – with budget.
5
Results of operations
The following table shows Sales and the EBITDA per segment for 2019 and 2018:
For the twelve-month period ended
For the twelve-month period ended
For the twelve-month period ended
For the twelve-month period ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
restated(1)
pro forma w/o Jayhawk(1)
as reported
in € million in € million in € million in € million
unaudited
Sales
Custom Manufacturing ........................................ 348.6 281.6 295.8 271.9
Acetyls ................................................................ 190.1 197.5 190.1 197.5
Inter-segment eliminations .................................. (15.4) (15.8) (15.4) (15.8)
Total Sales ......................................................... 523.3 463.3 470.5 453.6
EBITDA(2)
Custom Manufacturing ........................................ 78.2 59.9 66.7 58.0
Acetyls ................................................................ 35.6 33.1 35.6 33.1
Corporate expenses ............................................ (2.9) (3.8) (2.9) (3.8)
Inter-segment eliminations .................................. (0.1) (0.1) (0.1) 0.0
Operating EBITDA ............................................. 110.8 89.2 99.3 87.3
Non-recurring items ............................................. (5.5) (7.2) (3.5) (2.3)
Depreciation of inventory ..................................... 0.1 (0.8) 0.1 (0.8)
Reported EBITDA .............................................. 105.4 81.2 95.9 84.2
(1) Comparative financial information for the financial year 2018 was retrospectively restated and includes two months of business activities of Jayhawk Fine Chemicals Corporation (Galena/USA), by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transaction under common control had taken place in the financial year 2018, the year of acquisition of Jayhawk’s business activities by Permira Funds. The comparative financial information was retrospectively restated in order to increase the comparability of financial information.
(2) We define EBITDA as net profit (loss) for the period adding back taxes on income, financial results, amortisation and depreciation. We define Operating EBITDA as the net profit (loss) for the period adding back taxes on income, financial results, amortisation and depreciation, non-recurring items, and depreciation on inventory (depreciation of the purchase price allocation of palladium and other inventories). We believe that both EBITDA and Operating EBITDA are useful to investors in evaluating our operating performance and our ability to incur and service our indebtedness. Neither EBITDA nor Operating EBITDA is a performance indicator recognised under IFRS. The EBITDA and the Operating EBITDA reported is not necessarily comparable to the performance figures published by other companies as EBITDA or Operating EBITDA or the like. You should exercise caution in comparing EBITDA and Operating EBITDA as reported by us to EBITDA or Operating EBITDA of other companies.
Development of sales
Group Sales increased year-on-year by €60.0 million or 13.0% from €463.3 million in 2018 to €523.3
million in 2019, due to a significant sales increase within the business unit Custom Manufacturing, which
overcompensated moderately declining sales in the Acetyls business unit. On a pro-forma basis
(unaudited), without the effects resulting from the acquisition of Jayhawk’s business operations as of November 1, 2018, Group sales increased by €16.9 million from €453.6 million in 2018 to €470.5 million in 2019.
On a pro-forma basis (unaudited), sales of the Custom Manufacturing business increased by €23.9 million from €271,9 million in 2018 to €295.8 million in 2019. Sales in the fourth quarter of 2018 were
negatively impacted in an amount of €6.4 million by a temporary transformer outage at our Pratteln
production facility.
Sales of agrochemical products increased significantly versus prior year, due to a volume driven growth
of existing products in combination with the successful introduction of new products at our production
6
facility in Switzerland. Sales volumes were negatively impacted by a national wide strike, which resulted
in a forced production shutdown of one week of our Finnish production facility. Sales of pharmaceutical
products declined considerably due to products, which were phased out by one of our blue-chip pharma
customers. Sales of specialties increased compared to the prior year due to a new product implemented
for a customer in the paper industry in Finland. Sales of our intermediates increased moderately year-
on-year, mainly due to a volume driven growth of certain products, which, as a result of our capex
program, benefitted from an improved plant availability. Although sales were negatively impacted by
declining caustic soda prices, we benefitted from favourable product mix effects.
Sales in the Acetyls business unit decreased moderately by €7.4 million, from €197.5 million to €190.1 million in 2019. The sales volumes of all product groups were negatively impacted by a two weeks
lasting, scheduled overhaul standstill of the Gersthofen plant in December. Sales of the MCA product
group decreased moderately versus a strong prior year, due to a lower demand in all delivery forms
within our European markets. The Chinese MCA market remained volatile in 2019 and was
characterised by a rather weak pricing. Sales of our Acetyls Derivatives increased slightly compared to
prior year, influenced by favourable product-customer-mix impacts and a strong demand in North
America. Sales of our Co-products decreased on a year-on-year basis, due to considerably lower
volumes and declining caustic soda prices, which still remain on an attractive level.
Development of earnings
Group Operating EBITDA increased by €21.6 million or 24.2%, from €89.2 million in 2018 to €110.8 million in 2019, due to a significant increase within the business unit Custom Manufacturing, and a
moderate increased contribution of our Acetyls business unit. On a pro-forma basis (unaudited), without
the effects resulting from the acquisition of Jayhawk’s business operations as of November 1, 2018,
Group Operating EBITDA increased by €12.0 million, from €87.3 million to €99.3 million.
On a pro-forma basis (unaudited), without the effects resulting from the acquisition of Jayhawk’s business operations as of November 1, 2018, the Operating EBITDA of the business unit Custom
Manufacturing increased by €8.7 million from €58.0 million in 2018 to €66.7 million in 2019. The EBITDA contribution of our agrochemical products increased compared to prior year, which was primarily driven
by favourable product mix effects in combination with the ramp-up of new products and a better
utilisation of our multipurpose plants, leading to a lower unit cost of goods sold. Our pharmaceutical
products and Specialties remained below prior year’s performance, whereas the EBITDA contribution
of Intermediates increased due to positive volume and product mix effects. In the financial year 2019,
the product portfolio of the business unit has realised an attractive contribution margin above prior year’s level.
Operating EBITDA in the Acetyls business unit increased by €2.5 million or 7.6%, from €33.1 million in 2018 to €35.6 million in 2019. The EBITDA contribution of the MCA product group exceeded moderately
the prior year’s level, due to noticeably lower raw material prices for acetic acid and anhydride. The
contribution of our Derivatives business increased moderately on a year-on-year basis, whilst Co-
products remained moderately below the prior year’s level, mainly driven by lower volumes in conjunction with the two weeks lasting, scheduled overhaul standstill of the Gersthofen plant in
December and unfavourable pricing effects due to decreasing caustic soda prices.
Non-recurring items are defined as any expenses not related to the operational performance of the
business, such as restructuring costs, expenses for special projects and negative past service costs
incurred in the financial year 2018 at CABB AG due to the change of a parameter (conversion rate) in
the calculation of pension benefits under the Swiss pension scheme. Furthermore, effects resulting from
the amortisation of fair value measurements of inventory as a result of the purchase price allocation
accounted for in conjunction with the business combination of CABB Group effective as of June 27,
2014 are not included within the Operating EBITDA.
7
(1) Comparative financial information for the financial year 2018 was restated and includes two months of business activities of Jayhawk Fine Chemicals Corporation (Galena/USA).
Gross profit of the Group increased year-on-year by €18.3 million or 18.9% to €115.3 million (2018
restated: €97.0 million).
Research and development expenses (€3.9 million, 2018: €3.1 million) increased by €0.8 million,
Distribution and logistics expenses increased by €2.9 million to €63.3 (2018: €60.4 million) whilst
General and administrative expenses decreased by €3.0 million to €23.7 million (2018: €26.7 million),
mainly driven by non-recurring transaction costs incurred in the prior financial year in conjunction with
the acquisition of Jayhawk Fine Chemicals Corporation.
Depreciation and amortisation expenses increased from €74.4 million in 2018 to €80.9 million in 2019.
The negative financial result improved slightly by €1.3 million from a net loss of €34.2 million in 2018 to
a net loss of €32.9 million in 2019. Financial income increased by €18.7 million, from €0.5 million to m€ 19.2 million in 2019. This was predominately due to a significantly high positive impact of €18.9 million (2018: €-0.2 million) resulting from the subsequent measurement of the financial instruments
embedded in the Notes at fair value through profit and loss. Financial expenses increased by €15.9 million, from €-40.2million to €-56.1million in 2019. This was mainly driven by accrued financing
expenses of €12.7 million relating to the former financing agreements, which were recognised in the
current year’s consolidated statement of profit and loss statement in conjunction with the successfully
completed refinancing. Financial expenses include the early redemption premium in an amount of €3.0 million. The Net foreign currency result decreased by €1.4 million from €5.5 million in 2018 to €4.1 million in 2019 and includes intercompany currency gains of €4.3 million (2018: €5.0 million), which were
recognised predominately on EURO-denominated intercompany loans granted to CABB AG
(Switzerland).
For the twelve-month
period ended For the twelve-month
period ended
Dec. 31,
2019 Dec. 31,
2018
restated(1)
in € million in € million
Sales ................................................................................................... 523.3 463.4
Cost of sales ........................................................................................ (408.0) (366.4)
Gross profit ........................................................................................ 115.3 97.0
Research and development expenses ................................................. (3.9) (3.1)
Distribution and logistics expenses ...................................................... (63.3) (60.4)
General and administrative expenses .................................................. (23.7) (26.7)
Earnings before interests and taxes (EBIT) ..................................... 24.5 6.8
Depreciation, Amortisation and Impairment ......................................... 80.9 74.4
Reported EBITDA............................................................................... 105.4 81.2
Financial income .................................................................................. 19.2 0.5
Financial expenses .............................................................................. (56.1) (40.2)
Foreign currencies gain (net) ............................................................... 4.1 5.5
Financial result .................................................................................. (32.9) (34.2)
Earnings before taxes .......................................................................... (8.4) (27.4)
Taxes on income ................................................................................. 16.7 1.2
Net Result for the period ................................................................... 8.3 (26.2)
Attributable to shareholders 8.8 (24.8)
Attributable to non-controlling interests (0.5) (1.4)
8
Taxes on income increased significantly by €15.5 million, from a net income of €1.2 million in 2018 to a net income of €16.7 million in 2019. This was predominately due to the release of deferred tax liabilities
of €14.8 million recognised at CABB AG consequently to a recently enacted change in the Swiss tax
legislation, which foresees a graduated reduction of the corporate income tax rate over a period of five
years from currently 20.7% to maximal effective 13.4%. The Group’s tax rate is impacted by financial expenses, which are subject to restrictions under thin capitalisation rules in Germany and Finland, and
for which no deferred tax assets are recognised.
Net Result for the period improved significantly by €34.5 million, from a Net Loss of €26.2 million in 2018 to a Net Profit for the financial year 2019 amounting to €8.3 million. Non-controlling interests reflect the
32.4% (2018: 33.0%) share in CABB - Jinwei Specialty Chemicals (Jining) Co. Ltd., Zhanghuang Town
(PRC), that is held by shareholders other than CABB.
Business performance review
The financial year 2019 was positively influenced by a slightly improved global crop protection market,
which however was negatively impacted by adverse weather conditions in the US during the early
planting season and trade conflicts. At the same time, demand in the LATAM countries improved, mainly
as a result of a production shift from the US to South America due to trade tensions.
Within the business unit Acetyls, we saw challenging market conditions particularly in the third quarter,
caused by destocking effects and longer than expected standstills at some customers during
summertime. Furthermore, the caustic soda price declined in the past months, but remained at rather
attractive levels.
Overall, Group sales remained moderately below internal targets, whilst the operating EBITDA remained
slightly below budget. Sales of the business unit Custom Manufacturing remained overall moderately
below budget. Sales of Agrochemical products exceeded the internal targets, however, could not
compensate for the lower than expected sales volumes of our Intermediates, Pharma and Specialties.
Operating EBITDA of the business unit remained moderately below internal expectations, which was
mainly due to intermediates remaining below target. In the fourth quarter of the financial year 2019,
production volumes were negatively impacted by a general strike in Finland which forced a shutdown of
production.
Sales of the business unit Acetyls remained below budget, which was predominately due to a lower than
expected demand for MCA in Europe. Acetyl Derivative sales exceeded internal targets, however, could
not compensate the lower than expected MCA and Co-Product sales. The strong operating EBITDA of
the business unit ahead of budget was supported by additional energy subsidies and by a strong Acetyls
Derivatives business.
Overall, the financial year 2019 has been a challenging year, due to partially adverse market and
weather conditions but overall, in line with expectations. However, our key end-market has
demonstrated to have bottomed out, with key Agrochemical companies reporting year-on-year growth
again and the mid- to longer-term outlook and fundamental growth trends in our key target markets
remain positive.
Net assets
Non-current assets increased by €26.9 million from €840.7 million to €867.5 as of December 31, 2019. This was mainly driven by investments of €60.4 million (2018: €52.8 million) into property, plant and equipment. In our business unit Custom Manufacturing, we started to further expand our production
capacities in Finland and finalised investments for new products in our multipurpose plants in
Switzerland, in order to serve our customers’ needs. We also continued our efforts to invest in measures
9
enhancing the asset reliability and to continue our “fit for future” program. Within our business unit
Acetyls, major investment projects consisted of the strategic investment in the 6th generation electrolysis
membrane cells, the construction of MCA storage tanks, the revision of chlorine drying and facilities to
recover acetyl chlorine. Intangible fixed assets decreased by €23.5 million to €167.7 million as of December 31, 2019. These assets were predominantly recognised in conjunction with the purchase
price allocation performed in June 2014, which are amortised over their initially planned useful live.
Derivative financial assets increased significantly to €21.5 million as of December 2019 and reflect the fair value of the early redemption rights embedded in the Notes, which were issued on October 7, 2019.
Group net operating working capital decreased by €21.0 million from €84.5 million as per December 31,
2018 to €63.4 million as of December 31, 2019, mainly driven by lower trade accounts receivable
(€-14.8 million) and inventories (€-3.7 million).
Provisions for pensions and similar obligations increased slightly by €1.4 million from €59.9 million to €61.1 million as per December 31, 2019, which was mainly due to lower discount rates.
Cash and cash equivalents increased by €6.8 million, from €22.3 million to €29.1 million as of December 31, 2019. This is mainly due to a positive Cash flow from operating activities, which increased
significantly by €61.1 million in 2018 to €122.8 million in the financial year. Besides an improved
operating EBITDA, this favourable development was predominantly due to a lower net operating working
capital.
On October 7, 2019, the Group has successfully completed the refinancing of the Notes and of the
revolving credit facility. The Notes have an aggregated principal amount of €640 million and constitute the main liability of the Group. The following table summarises the nominal and effective interest rate,
the book and market value of the Notes as of December 31, 2018 by category:
As of December 31, 2019, the Group has access to unutilised revolving credit facilities amounting to
€75.8 million (€91.1 million as of December 31, 2018) and a guarantee line of €4.2 million.
Shareholder’s equity attributable to the shareholders of Monitchem Holdco 2 S.A. amounted to €185.4
million as of December 31, 2019 (€167.5 million as of December 31, 2018). In the financial year 2019,
the Group has realised a Net Profit of €8.3 million (2018: Net Loss of €26.2 million).
Aggregate
principal
amount
Market value
as of
Dec. 31, 2019in kEUR in kEUR
Floating Rate Senior Secured Notes 3 months
EURIBOR
plus 525 bps
6,013% p.a. March 15, 2025 175,000 178,760
Fixed Rate Senior Secured Notes 5.250% p.a. 6.021% p.a. March 15, 2025 315,000 331,139Senior Notes 9.500% p.a. 10.784% p.a. September 15, 2026 150,000 152,021Total 640,000 661,920
Accrued financing costs -27,875Amortised value of the embedded derivative 2,540Notes (non-current) 614,665
9,362624,027
Security Description
Nominal
interest rate
Effective
interest rate Maturity date
Accumulated interest payable on notes (current)Total Notes
10
Financing and capital management
Financing of the Group is centrally provided, managed by Monitchem Holdco 2 S.A. and distributed
within the Group. We pursue a conservative and flexible investment and borrowings policy with a
balanced investment and financing portfolio. The primary goals of our financial management is to secure
the liquidity and creditworthiness of the Group, together with ensuring access to the capital market at
any time and generating a sustainable increase in shareholder value. Measures deployed in order to
achieve these aims include optimisation of our capital structure, adoption of an appropriate dividend
policy, equity management, acquisitions, divestments, and debt reduction. Our capital needs and capital
procurement activities are coordinated to ensure that requirements with respect to earnings, liquidity,
security and independence are considered and properly balanced. We cover our short-term financing
needs through an adequate revolving credit facility line.
For the twelve-month
period ended
For the twelve-month
period ended
For the twelve-month
period ended
Dec. 31,
2019 Dec. 31,
2018 Dec. 31,
2018 in € million in € million in € million restated as reported(1)
Operating EBITDA ................................................. 110.8 89.2 87.3
Non-recurring items .............................................. (5.4) (8.0) (2.3)
Income taxes paid................................................. (4.5) (6.9) (6.9)
Change in net working capital and provisions ....... 21.9 (12.6) (10.7)
Cash Flow from Operating Activities.................... 122.8 61.7 67.4
Capital Expenditures BU CM ................................ (49.2) (47.8) (47.4)
Capital Expenditures BU Acetyls........................... (11.2) (5.0) (5.0)
Acquisition of subsidiary, net of cash acquired .... 0.7 (71.0) 0.0
Cash Flow from Investing Activities ..................... (59.7) (123.8) (52.4)
Cash proceeds from the issuance of Notes .......... 636.3 0.0 0.0
Payments due to the redemption of Notes ............ (588.0) 0.0 0.0
Repayment of bank loans .................................... (38.7) 0.0 0.0
Net interest and financing charges paid ............... (54.8) (36.3) (34.9)
Cash proceeds from capital increase .................... 0.0 48.3 0.0
Proceeds from bank loans .................................... 0.0 37.4 0.0)
Principal elements of lease payments ................... (6.0) (5.8) (5.7)
Decrease of current financial assets ..................... 2.8 0.0 0.0
Payment of/Proceeds from short term borrowings . (6.9) 6.9 6.9
Change in other financial debt .............................. (1.3) 0.1 0.0
Cash Flow from Financing Activities.................... (56.6) 50.6 (33.7)
Change in cash and cash equivalents……………. 6.5 (11.5) (18.7)
Cash Opening Balance .......................................... 22.3 33.3 33.3
F/X Effect on Cash Held .......................................... 0.3 0.5 0.2
Cash Closing Balance ........................................... 29.1 22.3 14.8
11
The Net cash flow from operating activities increased significantly year-on-year by €61.1million from €61.7 million in 2018 to €122.8 million for the twelve-month period ended December 31, 2019. This
favourable development was driven by an improved operating EBITDA amounting to €110.8 million (2018: €89.2 million), non-recurring items of €5.4 million (2018: €8.0 million) and a decrease in net
working capital of €21.9 million (2018: increase in net working capital negatively impacting the operating
cash flow by €12.6 million).
Investing activities into our production facilities in both business units led to a cash outflow of €60.4 million (2018: €52.8 million). In our business unit Custom Manufacturing, we started to further expand
our production capacities in Finland and finalised investments for new products in our multipurpose
plants in Switzerland, in order to serve our customers’ needs. We also continued our efforts to invest in measures enhancing the asset reliability and to continue our “fit for future” program. Within our business unit Acetyls, major investment projects consisted of the strategic investment in the 6th generation
electrolysis membrane cells, the construction of MCA storage tanks, the revision of chlorine drying and
facilities to recover acetyl chlorine.
Financing activities led to a net cash outflow of €56.6 million in the financial year 2019 (2018: net cash
inflow of €50.6 million). The main components of the positive cash flow from financing activities in 2018
consist of the cash contributions made by Permira Funds (€48.3 million) in conjunction with acquisition
of Jayhawk’s business and the proceeds from external bank loans in an amount of €37.4 million. In the financial year 2019, the issuance of the Notes generated a net inflow amounting to €636.3 million, which were predominately used to fund the settlement of the former financing agreements. These payments
included the redemption of the former Notes (€588.0 million), the repayment of Jayhawk’s bank loans (€38.7 million) as well as the entire repayment of the credit revolving facilities utilised by CABB Group
centrally (€6.9 million) and in China (€1.3 million). Net interest and financing charges paid in the financial year 2019 amounted to €54.8 million (2018: €36.3 million). The significant increase of €18.5 million mainly refers to costs paid to implement the new financing structure (€23.9 million).
Total net cash flow improved from a net cash outflow of €11.5 million in 2018 to a net cash inflow of €6.5 million in the financial year 2019. Cash closing balance amounted to €29.1 million as of December 31,
2019 (2018: €22.3 million). This cash position, and the access to an unutilised revolving credit facility of
€75.8 million provides a solid basis to enable CABB to meet its financial obligations in the foreseeable
future.
Personnel
On average, the CABB Group employed 1,141 persons in 2019 (2018: 1,018); as of December 31, 2019,
the number of employees was 1,130 (December 31, 2018: 1,093).
Research & Development of the Group
Our research and development activities are primarily focused on process development and process
optimisation, including the reliable scaling up of production processes in close cooperation with our
customers. We utilise our many years of experience with a variety of technologies in order to develop
and implement the most efficient processes. Furthermore, the efficiency of the product is monitored after
the product rollout in order to further optimise the process. Process optimisation measures are focused
on improving yield, reducing raw materials used, recycling solvents and raw materials, preventing waste,
improving throughput and ensuring statistical process controls.
In 2019, we employed an average of 27 employees in research and development functions across the
Group (2018: 21 employees). The majority of our research and development activities are related to the
12
Custom Manufacturing business unit for developing and scaling up synthesis processes associated with
new products. The remainder are related to process optimisation initiatives in our Acetyls business unit
aimed at increasing productivity. Health, Safety, Environment and Quality (HSEQ) of the Group
The CABB Group has implemented and maintained quality and environmental management systems in
compliance with international standards (i.e. EN ISO 9001, EN ISO 14001 and EN ISO 50001). All
standards are currently being updated to the latest releases. The ongoing system-based follow-up and
recertification audits confirm the effectiveness and continuous improvement of the processes and
performance in all legal entities. Due to growing relevance of energy efficiency CABB GmbH
successfully implemented an energy management system in accordance with EN ISO 50001 standard.
Similar standards and targets for energy savings are also being pursued at CABB AG in Switzerland. In
addition, a systematic preventive approach to food safety (HACCP) has been implemented at CABB
GmbH in Gersthofen and the corresponding EN ISO 22000 (food additive sodium acetate) certification
was achieved.
CABB continues its efforts to further strengthen and promote its safety culture by emphasizing
systematic risk assessments and establishing risk management thinking within different levels of the
organization and by enhancing the overall awareness and understanding of safety as a key success
factor. The safety of the plants and the different production processes at the various global locations is
an important basis to sustainably protect CABB`s employees, neighbours and the environment.
Therefore, CABB also pursues the regular systematic safety assessment, evaluation and optimization
of its production processes. HSEQ key performance factors are prepared and reviewed on a monthly
basis. CABB’s embedded safety culture’s objective is to prevent accidents and incidents from the outset.
Overall customer satisfaction is high and the amount of customer complaints is generally at a very low
level at CABB. To demonstrate its commitment to customers, CABB has further intensified its efforts to
continuously develop its new product pipeline, to evaluate organic investment opportunities to support
key customers in their growth ambitions in order to further reinforce its position as the ‘supplier of choice’.
(3) Opportunities and risks report
Business risks of the Group
Within the CABB Group, risk management is an integral part of all decisions. It is embedded in its
management structure as well as planning, reporting and information systems.
Operational opportunities and risks are primarily attributable to the development of the overall economy
as well as energy and commodity prices. Financial opportunities and risks primarily result from the
volatility of foreign currency exchange rates and interest rates.
Future demand of our customers and hence, the development of Group revenues, depend on the
general economic climate, although the majority of CABB’s end-markets (e.g. agrochemicals, food,
pharma and personal care, etc.) are considered less volatile and dependent on the overall economic
sentiment. However, within our broader product portfolio, some areas of application for caustic soda and
hydrochloric acid have a relatively high exposure to the broader economy. At present, order intake for
the financial year 2020 is solid and in line with our expectations. Especially the business unit Acetyls
benefits from the broad range of applications of its products, servicing various sectors.
13
The CABB Group is generally exposed to regulatory risks, especially in the agrochemical business.
However, the Company is pro-actively monitoring and managing its product portfolio to anticipate and
minimise potential future impacts.
The CABB Group is exposed to risks resulting from the outbreak of the coronavirus (COVID-19) disease.
Depending on the future dynamic and swift development of the disease, there are risks of supply chain
disruptions, production shutdowns and a lower demand by our customers in conjunction with a global
economic downturn.
Until now, our business activities in both business units are not materially impacted, as our customers
are active in industries and markets, which are to a smaller extent restricted by partially severe
governmental measures, implemented in order to contain the outbreak of the coronavirus. We
experience challenges and delays in the shipping of our products via sea to Asia, as freight capacities
and container availability have become very tight. Other sea routes are highly booked as well but not
critical for the time being. Road transports within Europe are manageable, but occasional delays might
apply due to local restrictions or national regulations that hinder smooth flow of goods (e.g. by intense
border control). We pre-book shipments as early as possible and to reserve additional freight capacities
on the spot market, even if this measure is associated with increased costs. Further, we try to switch
road transports to intermodal transport wherever possible. We are in close contact with our suppliers
and customers and analyse the supply chain risks on an ongoing basis.
We have a multi-sourcing strategy for key raw materials in place, are considering inventory strategy to
buffer against supply chain disruptions and have implemented further organisational measures to
mitigate those risks in order to safely continue our operations.
CABB has a pandemic preparedness plan in place in order to protect our employees from infections and
to ensure business continuity at our headquarters and our production facilities alike. The plan includes
the nomination of global and local task forces, clear instructions in the case of suspicion and protective
isolative measures such as travel and meeting bans, team splitting in the teams and production shifts.
Based on business continuity risk analysis, key processes and personnel are identified and well
equipped by IT equipment for flexible work options. Furthermore, CABB is in close contact with local
health experts and strictly follows the recommendations of the WHO and relevant national authorities.
The costs of raw materials and supplies represent a significant portion of the Group’s operating EBITDA.
Hence, an increase in energy and raw material prices can in principle have an unfavourable impact on
the profitability of our business. Vice versa, a decrease in energy and raw material prices may lead to
improved profitability. This risk is mitigated by utilising formula-based pricing mechanisms within a
significant portion of the business, whereby similarly outside the scope of the formula-based pricing
agreements, increased raw material prices can in general be passed on to customers. In our financial
planning for the year 2020, we assumed slightly increasing raw material prices.
CABB is committed to integrating environmental protection and socially responsible conduct into its
business activities. Infringements of our voluntary commitments and legal violations represent a
reputational risk and could lead to operational or strategic risks. We set ourselves uniform standards for
the environment, safety, security, health protection, product stewardship and compliance, as well as
labour and social standards. In order to ensure adherence to laws and our voluntary commitments in
these areas, we’ve established monitoring systems, which are also subject to external certification
audits.
CABB relies on a number of IT systems. The non-availability of critical IT systems and applications, the
manipulation or loss of confidential data can have a direct impact on production and logistic processes.
To minimise such risks, CABB has implemented application-specific measures such as stable and
redundantly designed IT systems, backup processes, virus and access protection and encryption
systems as well as integrated, Group-wide standardised IT infrastructure and applications. The systems
14
used for information security are continuously tested and updated. In addition, our employees receive
regular training on information and data protection. IT-related risk management is conducted using
standardised regulations for organisation and application, as well as an internal control system.
Approximately 30% of overall Group revenues are generated in foreign currencies, primarily in Swiss
Franc and USD. Whilst production costs denominated in Swiss Franc are incurred in conjunction with
our production site located in Pratteln, cash receipts in CHF surpass incurred expenses in this currency.
An increase of the Euro exchange rate against the USD can have an unfavourable impact on Group
results. To mitigate this risk, CABB has introduced formula-based prices which are used especially for
medium- and long-term agreements with major clients.
On October 7, 2019, the Group has successfully completed the refinancing of the Notes and of the
revolving credit facility. The Notes have an aggregated principal amount of €640 million and constitute the main liability of the Group. Recurring interest payments and the repayment of the principal amounts
at the maturity date represent significant financial outflows for the Group (€ 40.1 million yearly bond
interest payments and the repayment of the nominal value of the Notes which mature in 2025 (€490 million) and in 2026 (€150 million). Upon the occurrence of certain events constituting a change of
control or an event of default, the Group may be required to make an offer to repurchase all of the
relevant series of Notes at a redemption price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and additional amounts, if any. Current financial liabilities are backed by an
adequate amount of cash and cash equivalents (€29.1 million; 2018: €22.3 million) and by unutilised
credit facilities of €75.8 million.
Borrowings issued at variable interest rates exposes the Group cash flow interest rate risks. On October
7, 2019, the Group has refinanced the existing Floating Rate Notes by issuing Senior Secured Floating
Rate Notes in an amount of kEUR 175.000. These notes bear a nominal interest rate equal to the
3month EURIBOR plus 5.250%, whereby if the 3m EURIBOR is less than zero, such rate is deemed to
be zero. Given the current and prospective short-term interest rate environment, the Group did not enter
into new interest rate swaps during the reporting period. The existing floating-to-fixed interest rate swap,
which mitigated to a large extend the cash flow interest rate risks under the former variable interest rate
financing agreements matured on June 15, 2019.
Our credit risk management system ensures that credit risks are constantly monitored, and bad debts
minimised. This policy, which applies to both new and existing customers, governs the allocation of
credit limits and compliance with those limits, individual analyses of customers’ creditworthiness based on both internal and external financial information, risk classification, and continuous monitoring of the
risk of bad debts at the local level. Collateral received (e.g. documentary letters of credit) and other
safeguards include country-specific and customer-specific protection afforded by credit insurance,
confirmed and unconfirmed letters of credit in export business, as well as warranties and guarantees.
Furthermore, in certain cases down-payments and advance payments are agreed. This ensures that
risks in the Group remain within manageable limits and that losses do not have a material impact on
CABB’s financial position and results.
For potential claims and liability risks, insurances have been concluded. In this way it is ensured that
remaining risks of damage or loss do not threaten the continuing existence of the Group.
15
(4) Outlook
In the financial year 2020, CABB will have to continue to compete in a volatile economic environment at
a high level of uncertainty. The outbreak of the coronavirus (COVID-19) disease is contributing to this,
a global economic downturn will occur, and a worldwide recession is a potential scenario.
Due to the very high uncertainties in basically all markets caused by Covid-19 an outlook for 2020 is
very volatile. Nonetheless both business units are working to achieve for the coming financial year a
stable business performance within all product groups resulting in a stable sales and EBITDA level.
Forward-looking statements are based on currently available information and assumptions, involving
known and unknown risks, uncertainties and other factors, as they relate to events and depend on
circumstances that may or may not occur in the future. Actual outcomes and results of operations within
the next financial years may differ considerably from those made in or suggested by the forward-looking
statements contained in this report.
Events of particular significance after the end of the financial year
In the financial year 2020, CABB will have to continue to compete in a volatile economic environment at
a high level of uncertainty. The outbreak of the coronavirus (COVID-19) disease is contributing to this.
A global economic downturn will occur, and a worldwide recession is a potential scenario.
Until now, our business activities in both business units are not materially impacted, as our customers
are active in industries and markets, which are to a smaller extent restricted by partially severe
governmental measures, implemented in order to contain the outbreak of the coronavirus. However,
depending on the future dynamic and swift development of the disease, there are risks of supply chain
disruptions and production shutdowns. We have implemented measures to mitigate these risks to the
extent possible.
We have multi-sourcing strategies for key raw materials in place, are considering inventory strategy to
buffer against supply chain disruptions and have implemented further organisational measures to
mitigate those risks in order to safely continue our operations. CABB has a pandemic preparedness
plan in place in order to protect our employees from infections and to ensure business continuity at our
headquarters and our production facilities alike. The plan includes the nomination of global and local
task forces, clear instructions in the case of suspicion and protective isolative measures such as travel
and meeting bans, team splitting in the teams and production shifts. Based on business continuity risk
analysis, key processes and personnel are identified and well equipped by IT equipment for flexible work
options. Furthermore, CABB is in close contact with local health experts and strictly follows the
recommendations of the WHO and relevant national authorities. We experience challenges and delays
in the shipping of our products via sea to Asia, as freight capacities and container availability have
become very tight. Other sea routes are highly booked as well but not critical for the time being. Road
transports within Europe are manageable, but occasional delays might apply due to local restrictions or
national regulations that hinder smooth flow of goods (e.g. by intense border control). We pre-book
shipments as early as possible and to reserve additional freight capacities on the spot market, even if
this measure is associated with increased costs. Further, we try to switch road transports to intermodal
transport wherever possible. We are in close contact with our suppliers and customers and analyse the
supply chain risks on an ongoing basis.
There were no further major events after the balance sheet date up to March 30, 2020 (the date when
the annual report was authorised for issue by management).
16
Thanks to staff
Management would like to thank all members of staff for their major commitment and their work for the
Group.
Luxembourg, March 30, 2020
Monitchem Holdco 2 S.A.
Cédric Pedoni
1
Table of contents
Consolidated statement of profit or loss and other comprehensive income ........................................... 3
Consolidated statement of financial position ........................................................................................... 4
Consolidated statement of changes in equity ......................................................................................... 5
Consolidated statement of cash flows ..................................................................................................... 6
Notes to the consolidated financial statements ................................................................................. 7
(1) General ........................................................................................................................................ 7
(2) Principles of preparing the consolidated financial statements .................................................... 8
(3) Accounting policies and valuation methods .............................................................................. 10
(4) Business Combination under Common Control ........................................................................ 23
(5) Scope of Consolidation ............................................................................................................. 27
(6) Segment information ................................................................................................................. 28
Notes to the consolidated statement of profit and loss and other comprehensive income ....... 31
(7) Revenue from contracts with customers ................................................................................... 31
(8) Cost of sales .............................................................................................................................. 32
(9) Research and development expenses ...................................................................................... 32
(10) Distribution and logistics expenses ........................................................................................... 32
(11) General and administrative expenses ....................................................................................... 32
(12) Personnel expenses .................................................................................................................. 33
(13) Depreciation and amortisation on non-current assets ............................................................... 33
(14) Financial result .......................................................................................................................... 33
(15) Taxes on income ....................................................................................................................... 34
Notes to the consolidated statement of financial position ............................................................. 37
(16) Leases ....................................................................................................................................... 37
(17) Intangible assets ........................................................................................................................ 39
(18) Property, plant and equipment .................................................................................................. 41
(19) Inventories ................................................................................................................................. 42
(20) Accounts receivable, trade ........................................................................................................ 42
(21) Other financial assets ................................................................................................................ 43
(22) Other non-financial receivables ................................................................................................. 43
(23) Cash and cash equivalents ....................................................................................................... 43
(24) Capital ....................................................................................................................................... 43
(25) Provisions for pensions and similar obligations ........................................................................ 44
(26) Other provisions ........................................................................................................................ 49
(27) Notes ......................................................................................................................................... 50
(28) Other non-current financial liabilities ......................................................................................... 51
(29) Accounts payable, trade ............................................................................................................ 51
(30) Other current financial liabilities ................................................................................................ 51
(31) Other non-financial liabilities ..................................................................................................... 52
Other disclosures ................................................................................................................................ 53
(32) Related parties .......................................................................................................................... 53
(33) Financial instruments................................................................................................................. 55
(34) Financial risk management ....................................................................................................... 56
2
(35) Reconciliation of movements of financial liabilities and assets to cash flows arising from financing activities ..................................................................................................................... 60
(36) Contingent liabilities................................................................................................................... 61
(37) Information regarding employees .............................................................................................. 61
(38) Auditor’s fees ............................................................................................................................. 61
(39) Events after the balance sheet date .......................................................................................... 62
3
Monitchem Holdco 2 S.A., Luxembourg
Consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2019
(1) The Notes are an integral part of the consolidated financial statements(2) Prior year comparatives are retrospectively restated in order to increase the comparability of financial
information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transactionunder common control had taken place in the year of acquisition (see Note 3(e) and (4)).
kEUR Notes(1) 2019
2018
restated(2)
Revenue 7 523,264 463,353
Cost of sales 8 -407,921 -366,331
Gross profit 115,343 97,022
Research and development expenses 9 -3,917 -3,113
Distribution and logistics expenses 10 -63,280 -60,448
General and administrative expenses 11 -23,680 -26,679
Earnings before interest and taxes (EBIT) 24,466 6,782
Interest income and similar 14 26 28
Interest expense and similar 14 -56,095 -40,044
Other financial income 14 19,180 544
Other financial expenses 14 -36 -228
Foreign currency losses/ gains (net) 14 4,054 5,475
Financial result -32,871 -34,225
Earnings before taxes -8,405 -27,443
Taxes on income 15 16,697 1,247
Net result for the period 8,292 -26,196
Other comprehensive income
Items that will not be reclassified to profit or loss:
Actuarial gains(+)/ losses(-) from defined-benefit plans 25 631 -8,392
Income tax relating to items that will not be reclassified
subsequently -2,167 1,761
-1,536 -6,631
Items that may be reclassified to profit or loss:
Difference from currency translation of financial
statements of foreign operations 24 10,555 10,067
Other comprehensive income, net of income tax 9,019 3,436
Total comprehensive income for the period 17,311 -22,760
Of the net result for the period, the following amounts are
attributable to:
Shareholders of Monitchem Holdco 2 S.A. 8,799 -24,788
Non-controlling interests -507 -1,408
Of the total comprehensive income, the following amounts
are attributable to:
Shareholders of Monitchem Holdco 2 S.A. 17,911 -21,384
Non-controlling interests -600 -1,376
4
Monitchem Holdco 2 S.A., Luxembourg
Consolidated statement of financial position as of December 31, 2019
(1) The Notes are an integral part of the consolidated financial statements(2) Prior year comparatives are retrospectively restated in order to increase the comparability of financial
information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transactionunder common control had taken place in the year of acquisition (see Note 3(e) and (4)).
kEUR Notes(1) Dec. 31, 2019
Dec. 31, 2018
restated(2)
Assets
Goodwill 17 190,840 187,853
Other intangible assets 17 167,693 191,208
Property, plant and equipment 18 487,502 461,560
Derivative financial assets 33 21,475 35
Financial assets 33 10 10
Non-current assets 867,520 840,666
Inventories 19 67,378 71,106
Accounts receivable, trade 20 70,587 85,433
Contract assets 7 7,065 4,343
Other financial assets 21 0 3,481
Other non-financial receivables 22 9,942 10,736
Income tax receivables 15 3,165 2,664
Cash and cash equivalents 23 29,063 22,252
Current assets 187,200 200,015
Total assets 1,054,720 1,040,681
Equity
Subscribed capital and share premium 292,804 292,804
Retained earnings -128,320 -135,583
Other reserves 20,918 10,270
Shareholders’ equity attributable to the shareholders of Monitchem Holdco 2 S.A.
185,402 167,491
Non-controlling interests 4,840 -2,732
Total equity 24 190,242 164,759
Liabilities
Provisions for pensions and similar obligations 25 61,331 59,934
Other provisions 26 2,646 2,642
Notes 27 614,665 573,804
Other financial liabilities 28 7,421 47,391
Deferred tax liabilities 15 63,540 81,124
Non-current liabilities 749,603 764,895
Other provisions 26 10,892 11,963
Notes 27 9,362 1,348
Accounts payable, trade 29 69,394 69,131
Contract liabilities 7 10,708 9,835
Income tax liabilities 15 18 23
Other financial liabilities 30 3,982 12,174
Other non-financial liabilities 31 10,519 6,553
Current liabilities 114,875 111,027
Total equity and liabilities 1,054,720 1,040,681
5
Monitchem Holdco 2 S.A., Luxembourg Consolidated statement of changes in equity for the year ended December 31, 2019
(1) The Notes are an integral part of the consolidated financial statements (2) Prior year comparatives are retrospectively restated in order to increase the comparability of financial
information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transaction under common control had taken place in the year of acquisition (see Note 3(e) and (4)).
kEUR Notes(1)
Subscribed
capital
Share
premium
Retained
earnings
Contribution
Reserve (2)
Other
Reserves /
Translation
Reserve
Shareholders’ equity attributable
to the shareholders
of Monitchem
Holdco 2 S.A.
Non-
controlling
interests
Total
equity
As of December 31, 2017 1,000 232,175 -102,382 0 11,611 142,404 -1,356 141,048
Adjustment on adoption of IFRS 9 (net of tax) 0 0 -199 0 0 -199 0 -199
Adjustment on adoption of IFRS 15 (net of tax) 0 0 -1,583 0 0 -1,583 0 -1,583
As of January 1, 2018 1,000 232,175 -104,164 0 11,611 140,622 -1,356 139,266
Net result for the period, restated(2) 0 0 -24,788 0 0 -24,788 -1,408 -26,196
Other comprehensive income for the period
Difference from currency translation of
financial statements of foreign operations 24 0 0 0 0 10,035 10,035 32 10,067
Actuarial losses of defined-benefit plans (net) 25 0 0 -6,631 0 0 -6,631 0 -6,631
0 0 -6,631 0 10,035 3,404 32 3,436
Total comprehensive income
for the period 0 0 -31,419 0 10,035 -21,384 -1,376 -22,760
Transactions with owners of the Company
Contribution to equity without issue of shares, restated(2) 0 59,629 0 -11,376 0 48,253 0 48,253
Total transactions woth owners of the
company 0 59,629 0 -11,376 0 48,253 0 48,253
As of December 31, 2018, restated(2) 1,000 291,804 -135,583 -11,376 21,646 167,491 -2,732 164,759
Net result for the period 0 0 8,799 0 0 8,799 -507 8,292
Other comprehensive income for the period
Difference from currency translation of
financial statements of foreign operations 24 0 0 0 0 10,648 10,648 -93 10,555
Actuarial losses of defined-benefit plans
(net of tax) 25 0 0 -1,536 0 0 -1,536 0 -1,536
0 0 -1,536 0 10,648 9,112 -93 9,019
Total comprehensive income
for the period 0 0 7,263 0 10,648 17,911 -600 17,311
Changes in ownership interests
Contribution to equity without issue of shares 0 0 0 0 0 0 8,172 8,172
Total changes in ownership interests 0 0 0 0 0 0 8,172 8,172
As of December 31, 2019 1,000 291,804 -128,320 -11,376 32,294 185,402 4,840 190,242
6
Monitchem Holdco 2 S.A., Luxembourg Consolidated statement of cash flows for the year ended December 31, 2019
(1) The Notes are an integral part of the consolidated financial statements (2) Prior year comparatives are retrospectively restated in order to increase the comparability of financial
information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transaction under common control had taken place in the year of acquisition (see Note 3(e) and (4)).
kEUR Notes(1) 2019
2018
restated(2)
8,292 -26,196
14 32,871 34,225
15 -16,697 -1,247
24,466 6,782
+ Depreciation and amortisation 13, 16,
17, 18 80,924 74,425
- Decrease in provisions 25, 26 -1,349 -256
+ Losses/Gains from the disposal of assets 17, 18 645 23
- Income taxes paid (net) 15 -4,515 -6,906
+/- Decrease/Increase in inventories, trade accounts
receivables, contract assets and other non-financial
assets
19, 20,
7, 22
19,455 -15,368
+ Increase in trade accounts payable, contract liabilities
and other non-financial liabilities
29, 7,
31
3,163 3,025
122,789 61,725
- Investments in intangible assets 17 -1,678 -489
- Investments in property, plant and equipment 18 -58,719 -52,276
+/- Acquisition of subsidiary, net of cash acquired 669 -71,018
-59,728 -123,783
+ Cash proceeds from the issuance of Notes 27 636,328 0
- Payments due to the redemption of Notes 27 -588,008 0
- Repayment of bank loans 28 -38,692 0
- Interest and financing fees paid 14, 27 -54,906 -36,353
+ Cash proceeds from capital increase 24 0 48,253
+ Proceeds from Bank loans 28 0 37,445
+ Interest received 14 26 28
- Principal elements of lease payments 16 -5,970 -5,780
+ Decrease of current financial assets 21 2,829 0
- /+ Payment of/Proceeds from short term borrowings 30 -6,874 6,874
- /+ Payment of /Proceeds from other financial liabilities 28, 30 -1,311 98
35 -56,578 50,565
6,483 -11,493
2322,252 33,339
+/ - Change due to movements in exchange rates 328 406
23 29,063 22,252Cash and cash equivalents at year end
Net Result for the period
Financial result
Taxes on income
Earnings before interest and taxes (EBIT)
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Change in cash and cash equivalents
Cash and cash equivalents
at the beginning of the year
7
Monitchem Holdco 2 S.A., Luxembourg
Notes to the consolidated financial statements for the year ended December 31, 2019
(1) General
Monitchem Holdco 2 S.A. with registered office at 488, route de Longwy in L-1940 Luxembourg
(hereafter “the Company”, “the CABB Group”) was established on May 9, 2014 as a public limited
liability company and was registered on May 22, 2014 in the commercial register of Luxembourg under
number B 187114. The Company’s sole shareholder is Monitchem Holdco 1 S.à r.l., Luxembourg, an
entity which is beneficially owned principally by funds advised by Permira Funds.
CABB is one of the leading European producers of customised active ingredients, advanced
intermediates and diversified specialty chemicals with a focus on the agrochemical industry. Our
business operations are organized in two business units, the Custom Manufacturing business unit and
the Acetyls business unit.
The Custom Manufacturing business unit focuses on the production of exclusives and intermediates.
Exclusives are active ingredients and advanced intermediates customised for individual customers
operating in the agrochemicals, pharmaceutical and specialty chemical industries. Our exclusives are
primarily used in herbicides, fungicides and insecticides in the agrochemicals industry and range from
pilot scale to large-volume commercial operations. Our intermediates are products manufactured for
multiple customers and include acid chlorides, chemical building blocks and various base chemicals.
They are to a large extent used in agrochemical applications but also in other diverse end-uses, such
as vitamins for animal feed, coupling agents for silica-reinforced green tires and dyestuffs for textile
application.
The Group is one of the leading custom manufacturing suppliers in the European agrochemicals market
by revenues, serving the major global agrochemicals companies and holds strategic supplier status with
the largest, European-based agrochemical companies for their agrochemicals business. Our
customised products are highly integrated in our key customers’ supply chains (often protected by sole-
supplier relationships for major products) and we are closely aligned in demand planning and supply
chain coordination. Our key agrochemicals customers are active in a structurally growing global market
driven by population growth, improving living standards and changing dietary trends especially in
emerging markets. In the Custom Manufacturing business unit, we operate complementary multi-
purpose production facilities in Pratteln (Switzerland), Kokkola (Finland) and Galena (USA).
The Acetyls business unit is focused on the production of monochloroacetic acid (MCA), acetyl
derivatives and co-products, which have a variety of applications in the agrochemicals, food,
pharmaceutical and personal care industries. Our key customers’ end-markets follow different demand
patterns and demonstrate different levels of cyclicality, leading to a diversified market exposure for
CABB and as such demonstrated relative resilience versus economic downturns. We produce MCA in
different purity grades (ultra-pure, high pure, technical global and technical local) for different
applications and regional markets and in different trade forms (flakes, solution, molten and sodium
monochloroacetic acid) to enable longer distance transportation based on the customer’s preference and location. We also offer our customers a range of derivatives, including MCA esters, glycolic acid
and trichloroacetic acid, among others. Co-products, such as caustic soda and hydrochloric acid, are
by-products from the production of chlorine and MCA and are sold to customers or used captively in
subsequent processes and production steps. We are one of the principal suppliers of MCA to Western
Europe and the Americas. The Acetyls business unit operates three production facilities globally: two in
Germany and one in China through our cooperation with Shandong Lutai Chemical Co., Ltd..
8
(2) Principles of preparing the consolidated financial statements
The consolidated financial statements of Monitchem Holdco 2 S.A. for the year ended December 31,
2019 have been prepared in accordance with International Financial Reporting Standards (IFRS) as
endorsed by the European Union valid on the reference date and in accordance with the Luxembourg
legal and regulatory requirements. All IFRSs and pronouncements of the International Financial
Reporting Interpretations Committee (IFRIC) which are binding for the financial year 2019 have been
applied as endorsed by the European Union.
The consolidated financial statements of the CABB Group are drawn up in euros. Except where
otherwise indicated, amounts are stated in thousands of euros (kEUR) and rounded to the nearest
thousand. Adding individual figures may therefore not always result in the exact total given.
The consolidated financial statements were prepared and authorised for issue by management on
March 30, 2020.
New standards and interpretations adopted by the Group
With effect from January 1, 2019, the Group has, where necessary and appropriate, applied certain new
and amended standards and interpretations published by the International Accounting Standards Board
(IASB) as adopted by the European Union. As required by IAS 8.28(b) and IAS 8.28(e), the nature and
the effect of these changes are disclosed below:
Amendments to IFRS 9 – Financial Assets with a Prepayment Feature with Negative Compensation
(applicable for reporting periods beginning on or after January 1, 2019). The amendments pertain
to the relevant criteria for the classification of financial assets. Financial assets with a prepayment
feature with negative compensation may be recognized under certain conditions at amortised cost
or at fair value through other comprehensive income instead of at fair value through profit and loss.
(An endorsement by the European Union was issued on March 22, 2018)
IFRIC 23 – Uncertainty over Income Tax Treatments (applicable for reporting periods beginning on
or after January 1, 2019). IFRIC 23 expands on the requirements in IAS 12 on how to account for
uncertainties surrounding the income tax treatment of circumstances and transactions with respect
to both actual and deferred taxes. (An endorsement by the European Union was issued on October
23, 2018)
Improvements to IAS 19 Employee Benefits: Plan Amendment, Curtailment or settlement
(applicable for reporting periods beginning on or after January 1, 2019). The amendments relate to
the measurement of pension obligations based on updated assumptions if plan amendment,
curtailment or settlement occurs. After such an event, the past service costs as well as any gains
or losses on the basis of current actuarial assumptions and a comparison of the resulting pension
benefits must be calculated before and after the change. The periods before and after the plan
amendment, curtailment or settlement are treated separately in subsequent measurement. (An
endorsement by the European Union was issued on March 13, 2019)
Amendments to IAS 28 – Long-Term Interests in Associates and Joint Ventures. (applicable for
reporting periods beginning on or after January 1, 2019). The amendments refer to the accounting
treatment of long-term interests in associated companies and joint ventures. They clarify that IFRS
9 is to be applied to long-term interests in associated companies or joint ventures that are not
accounted for using the equity method. (An endorsement by the European Union was issued on
February 8, 2019).
Annual Improvements to IFRSs (2015-2017): (applicable for reporting periods beginning on or after
January 1, 2019). Four standards were amended in the Annual Improvements to IFRSs (2015-
2017). (An endorsement by the European Union was issued on March 14, 2019).
In IFRS 3 Business Combinations, it was clarified that when a party to a joint arrangement obtains
control of a business that is a joint operation and had rights to the assets and obligations for the
9
liabilities relating to that joint operation immediately before the acquisition date, the transaction is a
business combination achieved in stages. The acquirer shall therefore apply the requirement for a
business combination achieved in stages, including remeasuring its previously held interest in the
joint operation.
In IFRS 11 Joint Arrangements, it was clarified that if an entity obtains joint control of a business
that is a joint operation and had rights to the assets an obligations for the liabilities relating to that
joint operation immediately before the acquisition date, the previously held interest in that business
is not remeasured.
IAS 12 Income Taxes was amended to the extent that all income tax effects of dividend payments
must be considered in the same way as the income on which the dividends are based.
IAS 23 Borrowing Costs, it was determined that when entities borrow funds in general for the
acquisition of qualifying assets that those costs for capital borrowed specifically for the acquisition
of qualifying assets should not be considered in the determination of the financing rate until their
completion.
These amendments and clarifications did not have significant impacts on CABB Group’s consolidated financial statements.
The following IFRSs and their interpretations are not yet in force or not yet endorsed by the European
Union in 2019. Other new standards or interpretations have no material impact on CABB Group.
Amendments to References to the Conceptual Framework in IFRS Standards. (applicable for
reporting periods beginning on or after January 1, 2020). The amendments update references to
and quotes from the Conceptual Framework. The revised Conceptual Framework issued on March
29, 2018 replaces the previous Conceptual Framework from 2010. The main changes primarily
relate to the definition, recognition and measurement of assets and liabilities, as well as the
differentiation between income and expense and other comprehensive income. (An endorsement
by the European Union was issued on November 29, 2019).
Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors (applicable for reporting periods beginning on or after
January 1, 2020). The amendments provide a uniform and more precise definition of the materiality
of information provided in the financial statements, together with accompanying examples. In this
connection, the definitions in the Conceptual Framework, IAS 1, IAS 8 and the IFRS Practice
Statement 2 (Making Materiality Judgements) were harmonised. (An endorsement by the European
Union was issued on November 29, 2019).
Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform. (applicable for
reporting periods beginning on or after January 1, 2020. The IASB issued amendments to IFRS 9,
IAS 39 and IFRS 7 on September 26, 2019. They are based on existing uncertainties with regards
to the IBOR reform. According to current hedge accounting policies, pending adjustments to
benchmark interest rates would, in many cases, result in an end to hedging relationships. It is now
possible to continue accounting for existing hedge accounting relationships during the transition
period. The amendments stipulate specific mandatory exceptions to the previous hedge accounting
rules, for example, the assessment of highly probable criteria for expected cash flow hedging
transactions. (An endorsement by the European Union was issued on January 15, 2020).
Amendment to IFRS 3 Business Combinations (applicable for reporting periods beginning on or
after January 1, 2020). (An endorsement by the European Union is pending).
IFRS 17 Insurance Contracts (applicable for reporting periods beginning on or after January 1,
2021). (An endorsement by the European Union is pending).
We are currently evaluating the impact of the application of those standards according to the required
application date in the financial years 2020 to 2022 on the consolidated financial statements. Early
adoption of the standards before endorsement by the European Union is not planned.
10
Use of estimates and assumptions in the preparation of the consolidated financial statements
The extent of the assets, liabilities and provisions, contingencies and other financial obligations shown
in the consolidated financial statements depends to a certain extent on estimates or assumptions. These
are based on the circumstances and assessments prevailing on the balance sheet date, and accordingly
also influence the amount of the income and expenses shown for the respective financial periods. Such
assumptions relate to the definition of the useful lives of depreciable fixed assets or intangible assets,
the measurement of provisions and other assets or obligations. Due consideration is given to factors of
uncertainty for the purpose of establishing the values; however, actual results may differ from the
original estimates.
Areas which are particularly complex or in which extensive estimates are necessary or in which the
estimates or assumptions which have been made have a major impact on the consolidated financial
statements are explained under “Estimates and assumptions” in section (3) of these notes.
(3) Accounting policies and valuation methods
The consolidated financial statements of Monitchem Holdco 2 S.A. have been prepared on the historical
cost basis except for derivative financial instruments measured at fair value and except for provisions
for pensions and similar obligations that are measured at present value of the defined benefit obligation
less fair value of plan assets.
a) Scope of consolidation
The scope of consolidation is based on the application of IFRS 10. According to IFRS 10, a group
consists of a parent entity and the subsidiaries controlled by the parent. “Control” of an investee assumes the simultaneous fulfilment of the following three criteria: (1) the parent company holds
decision-making power over the relevant activities of the investee (2) the parent company has rights to
variable returns from the investee (3) the parent company can use its decision-making power to affect
the variable returns.
b) Balance sheet date
The financial statements of the consolidated companies are prepared as of the balance sheet date of
the consolidated financial statements (December 31).
c) Uniform valuation
The assets and liabilities included in the consolidated financial statements for the companies which
have been integrated are recognised and valued uniformly in accordance with the principles described
in this document.
d) Capital consolidation
Capital is consolidated at the time of acquisition date using the acquisition method when control over
subsidiaries is transferred to the Group. The first step is to measure all identifiable assets acquired and
(contingent) liabilities assumed with their fair values at the acquisition date. The group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at
the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. The consideration transferred is netted with the proportionate revalued shareholders’ equity which has been acquired. Any differences which result from this process are capitalised as goodwill and
are written down only in the event of an impairment. If the proportionate amount of the acquisition of net
assets measured at fair value exceeds the costs of purchase of the business combination, the
identification and valuation of the identified assets, liabilities and contingent liabilities of the acquired
company as well as the measurement of the costs of purchase of the business combination are
reassessed. Any difference remaining after the reassessment is recognised directly in the statement of
11
profit or loss. The acquisition-related costs incurred for carrying out a business combination are
recognised in the consolidated statement of profit or loss as incurred.
e) Business combination under common control
A business combination involving entities under common control is a transfer of net assets or an
exchange of equity interests between entities or businesses, that are ultimately non-transitorilly
controlled by the same party both before and after the business combination. A transaction in which a
parent company contributes its ownership interests or the net assets of a wholly owned subsidiary to
the capital reserves of another subsidiary, falls into the definition of a business combination under
common control. A common-control transaction is similar to a business combination for the entity that
receives the net assets or equity interests. However, as there is no change in control of the net assets
from the perspective of the ultimate parent or the controlling shareholder level, such a transaction is not
governed by IFRS 3 and there is no other specific guidance in the IFRSs. Hence, management needs
to use judgement to develop an accounting policy, that provides relevant and reliable information in
accordane with IAS 8. Interpretation of IFRSs adresses the accounting for common control transactions
from the perspective of the entity that receives the net assets or equity interests and requires the
receiving entity to recognise the assets and liabilities transferred either at their fair value or at their
carrying amounts in the financial statements of the entity that transfers the net assets on the date of
transfer (‘predecessor value method’), rather than at fair value. The consolidated financial statements
for the combined group can then be prepared as a continuation of the accounting acquirer’s financial statements, without the recognition of an additional goodwill, through a retrospective restatement of
comparative financial information, as if the combination had occured at the beginning of the earliest
comparative period presented. CABB has chosen to account for the assets and liabilities transferred at
their carrying amount and as a continuation of the accounting acquirer’s financial statements. Thus,
results of operations for the reporting period comprises those of the previously separate entities
combined from the beginning of the reporting period to the date the transfer is completed and those of
the combined operations from that date to the end of the period.
f) Eliminations
Internal balances and transactions within the Group as well as gains and losses from internal
transactions within the Group are eliminated as parts of the process of preparing the consolidated
financial statements.
g) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the
management of CABB Group that makes strategic decisions.
h) Foreign currency translation
The consolidated financial statements are prepared in thousand Euros. Items included in the financial
statements of each of the group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
In the financial statements of the individual Group companies, transactions in foreign currency are
translated into the respective functional currency using the spot rate prevailing on the dates of the
transaction. Monetary items which are not denominated in the functional currencies of the subsidiaries
are translated on the balance sheet date using the rate applicable at the end of the year. The resulting
currency gains and losses are recognised directly in the financial result.
The assets and liabilities of subsidiaries whose functional currency is not the Euro are translated using
the year-end reference date rate into the reporting currency (Euro), which is also the functional currency
of Monitchem Holdco 2 S.A. Expenses and income are translated using at the rates on the dates of the
12
transactions approximated by the average rates. All cumulative differences resulting from the currency
translation of the shareholders’ equity of foreign subsidiaries attributable to changes in the exchange rates are shown directly in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are
recognised in other comprehensive income.
For the main currencies in the Group, the following exchange rates have been used based on 1 Euro:
(1) The entities acquired through of a common control transaction (see note (4)) were translated into EURO using an average exchange rate of the last two months of the financial year 2018 (based on 1 EURO = 1.1376 USD). The Exchange rate on the acquisition date amounted to 1 EURO = 1.1345 USD.
i) Revenue recognition
Revenue from contracts with customers is recognised in the amount of the consideration the Group
expects to receive in exchange for goods or services when control of the agreed-upon goods or services
and the benefits obtainable from them is available to the customer. This is done on the basis of customer
contracts and the performance obligations contained therein, which are individually identified. The
transaction price is then determined and allocated to the performance obligations in the contract. Finally,
revenue is recognised for each performance obligation in the amount of the allocated portion of the
transaction price as soon as the agreed-upon good or service is provided and the customer gains control
either over time or at a point in time. Control lies with the customer if the customer can independently
determine the use of and consume the benefit derived from a product or servies. Revenues from
products are recognized at a point in time based on an overall assessment of the existence of a right of
payment, the allocation of ownership rights, the transfer of physical possesson, the transfer of risks and
rewards, and acceptance by the customer; this is generally the case upon delivery.
Within the Custom Manufacturing business unit, revenues for the product group “Exclusives”, are recognised over time, whereby for certain contracts within the product group “Exclusives”, the performance obligation consists in ensuring the availability of production capacities in exchange of a
fixed remuneration, which is classified as a “stand ready obligation”.
Within the business unit Acetyls, customer contracts generally only give rise to a single performance
obligation in each case, which is to be fulfilled at a certain point in time based. This is generally the case
upon delivery.
j) Cost of sales
Cost of sales comprises the costs of materials, personnel expenses, proportionate depreciation and
amortisation, repairs and maintenance, energy, analysis and ecology, production overheads, plant
overheads as well as costs of packaging the products.
Average
exchange rate
Exchange rate
on the balance
sheet date
Average
exchange rate
Exchange rate
on the balance
sheet date2019 Dec. 31, 2019 2018 Dec. 31, 2018
Swiss Francs 1.1125 1.0855 1.1548 1.1266
US Dollar (1) 1.1195 1.1227 1.1806 1.1451
Chinese Yuan Renminbi 7.7427 7.8166 7.8097 7.8737
13
k) Distribution and logistics expenses
Distribution and logistics expenses comprise the costs of personnel expenses, proportionate
depreciation on property, plant and equipment and intangible assets as well as transport costs.
l) Research and development
Research costs are recognised immediately as expense when they are incurred. They comprise wages
and salaries, cost of materials, proportionate depreciation on property, plant and equipment and
overheads. Development costs are only capitalised if, on the basis of various criteria, it is probable that
the capitalised amount will be covered by future income.
m) Financial result
This item contains interest income and expenses as well as foreign currency gains and losses. Interest
income and expense is recognised using the effective interest rate method.
n) Borrowing costs
The process of the acquisition, construction or production of intangible assets or property, plant and
equipment does not cover a period of more than one year. Accordingly, no borrowing costs have been
capitalised as part of the costs of purchase or production costs.
o) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired.
Goodwill is only written down in the event of an impairment. The value of goodwill is subject to an annual
impairment test, and is also reviewed if there is any indication of an impairment. The goodwill impairment
test is carried out on the basis of cash-generating units (CGUs) by comparing the recoverable amount
with the carrying amount. The Acetyls and Custom Manufacturing units have been identified as cash-
generating units (the lowest level within the entity at which the goodwill is monitored for internal
management purposes) which carry goodwill.
The carrying value of the CGUs containing the goodwill is compared to the recoverable amount, which
is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised
immediately as an expense and is not subsequently reversed.
p) Intangible assets
Acquired intangible assets – excluding goodwill as well as intangible assets with an indefinite useful life
– are measured at cost of purchase less accumulated straight-line depreciation and eventually less
accumulated impairment losses. The respective useful life is the length of the underlying agreement
and the probable utilisation of the potential use of the intangible asset.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Impairments are recognised if the recoverable amount
is lower than the carrying amount. The recoverable amount is the higher of fair value less costs of
disposal and the value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are largely independent cash inflows (cash-generating units). If the reasons
for an impairment are no longer applicable, corresponding write-ups are recognised. Depending on the
type of the intangible asset, depreciation is shown under Costs of sales, Distribution and logistics
expenses, Research and development expenses or General and administrative expenses.
A European Community law concerning chemicals and the reliable handling of chemicals came into
force on June 1, 2007. This law governs the registration, evaluation, authorisation and restriction of
14
chemicals (REACH). REACH requires the registration of certain substances. The companies of the
CABB Group incur costs within the framework of this registration procedure. These costs are capitalised
as intangible assets in accordance with IAS 38 Intangible Assets, and are depreciated over their
estimated useful life of twelve years using the straight-line method.
Intangible assets are amortised using the straight-line method. The average periods of amortisation are
as follows:
q) Government grants
Government grants related to the acquisition or construction of property, plant and equipment reduce
the acquisition or construction cost of the respective assets. Other government grants or government
assistance are recognised immediately as other operating income or treated as deferred income or
treated as deferred income and released over the underlying period.
r) Property, plant and equipment
Property, plant and equipment is measured at historical cost of purchase or cost of production less
accumulated depreciation recognised over the standard useful life and eventually less accumulated
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of
the items. The costs of production of an asset comprise the directly attributable costs as well as
reasonable amounts of material and production overheads. The revaluation method is not used.
Each item of property, plant and equipment with a significant purchase value in relation to the overall
value of the asset is depreciated separately. If a significant item of property, plant and equipment has a
useful life and a depreciation method which are identical to those applicable for another part of the same
asset, these parts are combined for the purpose of determining the depreciation cost.
Property, plant and equipment is depreciated using the straight-line method. Land is not depreciated.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting year.
The average periods of depreciation are as follows:
Property, plant and equipment is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Impairments are recognised
if the recoverable amount is lower than the carrying amount. The recoverable amount is the higher of
fair value less costs of disposal and the value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating
units). The assessment is made on the basis of the present value of the cash flows expected in the
future less the expected costs for removing an installation. Impairments are recognised in the amount
of the difference between the previous carrying amount and the discounted future cash flows. If the
reason for an impairment is no longer applicable, corresponding write-ups are recognised.
Amortisation on intangible assets in years
Capitalised REACH costs 12
Customer relations 5 - 15
Technology 5
Software 3
Depreciation on property, plant and equipment in years
Buildings and improvements 12 - 40
Technical equipment, plant and machinery 5 - 15
IT and other equipment 3 - 15
Vehicles 5 - 10
15
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are recognised within Earnings before interest and taxes (EBIT) in the consolidated statement of
profit or loss.
s) Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale
if it is highly probable that they will be recovered primarily through sale rather than through continuing
use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair
value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill and then
to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories,
financial assets, deferred tax assets, employee benefit assets, which continue to be measured in
accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are
recognised in other income or other expenses.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer
amortised or depreciated.
t) Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at
the lease commencement date. The right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease payments made at of before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any
lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line-
method from the commencement date to the earlier of the end of the useful life of the right-of-use asset
or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the
same basis as those of property and equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at
the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot
be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following: (a) fixed
payments, including in-substance fixed payments; (b) variable lease payments that depend on an index
or a rate, initially measured using the index or rate as at the commencement date; (c) amounts expected
to be payable under a residual value guarantee; and (d) the exercise price under a purchase option that
the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group
reasonably certain to exercise an extension option, and penalties for early termination of a lease unless
the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured
when there is a change in future lease payments arising from a change in an index or rate, if there is a
change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination
option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the
right-of-use asset has been reduced to zero.
16
The Group presents right-of-use assets that do not meet the definition of investment property in
‘property, plant and equipment’ and lease liabilities in ‘loans and borrowings’ in the statement of financial position.
The Group has elected to recognise right-of-use assets and lease liabilities for short-term leases that
have a lease term of 12 months or less. The Group has elected to not recognise right-of-use assets and
lease liabilities for low-value assets, and recognises the lease payments associated with these leases
as an expense on straight-line basis over the lease term.
In the comparative period, leases were classified as finance leases and operating leases in accordance
with IAS 17.
Assets used by the Group as lessee under operating lease arrangements are not capitalised. The lease
payments to be made are recognised in the consolidated statement of profit or loss on a straight-line
basis over the period of the lease.
A finance lease is defined as a lease in which essentially all risks and rewards of an asset which are
associated with ownership of the asset are transferred to the lessee. Assets used under finance lease
arrangements are shown at the lower of the fair value of the leased property and the present value of
minimum lease payments. The lease payment to be made is broken down into repayment of principal
and an interest component. The repayment of principal reduces the liability, whereas the interest
component is reported as interest expense. Depreciation is recognised over the economic useful life or
the shorter life of the lease. The payment obligations resulting from the future lease instalments are
shown under financial liabilities. Details of the leases are set out in the notes (16).
u) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity. Financial assets and financial liabilities are recognised in
the consolidated statement of financial position, when CABB becomes a party of a financial instrument.
Financial assets are derecognised when the rights to receive cash flows have expired or have been
transferred and the group has transferred substantially all risks and rewards of ownership.
Financial assets comprise receivables, acquired equity and debt instruments, cash and cash
equivalents, and derivatives with positive fair values. Financial assets are recognised in the
consolidated statement of financial position when CABB becomes a party to a financial instrument.
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which
the group commits to purchase or sell the asset. The amount at which a financial asset is initially
recognised comprises its fair value and in most cases the transaction costs.
The classification and measurement of financial assets is based on the one hand on the cash flow
condition (the “solely payments of principle and interest” criterion), that is, the contractual cash flow characteristics of an individual financial asset. On the other hand, it also depends on the business model
used for managing financial asset portfolios. Based on these two criteria, the following measurement
categories are applicable:
Financial assets recognised at fair value through profit or loss include all financial assets whose cash
flow are not solely payments of principal and interest in accordance with the cash flow condition
established in IFRS 9. At CABB, derivatives are allocated to this measurement category, for example.
CABB does not generally exercise the fair value option in IFRS 9, which permits the allocation of
financial instruments not to be measure at fair value through profit or loss on the basis of the cash flow
condition or the business model criterion to the above category under certain circumstances.
Financial assets measured at amortised cost include all assets with contractual terms that give rise to
cash flows on specific dates, provided that these cash flows are solely payments of principal and interest
on the principal amount outstanding in accordance with the cash flow conditions in IFRS 9, to the extent
17
that the asset is held with the intention of collection the expected contractual cash flows over its term.
At CABB, this measurement category includes trade accounts receivables, as well as miscellaneous
assets and certain securities.
Initial measurement of these assets is generally at fair value (except for trade accounts receivables,
which are measured at their transaction price), which usually corresponds to the transaction price at the
time of acquisition. Impairments are recognised for expected credit losses in both initial and subsequent
measurement, even before the occurrence of any default event for financial assets measured at
amortised costs and contract assets. If the counterparty is considered as having defaulted, an individual
valuation allowance is generally recognised for the financial assets measured at amortised cost. In
addition, a valuation allowance must be recognised when the contractual conditions that form the basis
for the receivable are changed through renegotiation in such a way that the present value of the future
cash flows decreases. The extend of expected credit losses is determined based on the credit risk of a
financial asset, as well as any changes to this credit risk: If the credit risk of a financial asset has
increased significantly since initial recognition, expected credit losses are generally recognised over the
lifetime of the asset. If, however, the credit risk has not increased significantly in this period, impairments
are generally only recognised for the 12-month expected credit losses. By contrast, under the simplified
approach for determining expected credit losses permitted by IFRS 9, impairments for receivables such
as trade accounts receivable always cover the lifetime expected credit losses of the receivable
concerned.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than
30 days past due. At CABB, the credit risk of a financial asset is assessed using both internal information
and external rating information on the respective counterparts. A significant increase in the
counterparty’s credit risk is assumed if its rating is lowered by a certain number of notches. The significance of the increase in the credit risk is not reviewed for trade accounts receivable. Furthermore,
it is generally assumed that the credit risk for a counterparty with a high credit rating will not have
increased significantly. Regional and, in certain circumstances, industry-specific factors and
expectations are taken into account when assessing the need for a valuation allowance as part of the
calculation of expected credit losses and individual valuation allowances. In addition, CABB uses
internal and external ratings and the assessments of credit insurers, when available. Individual valuation
allowances are also based on experience relating to customer solvency and customer-specific risks.
Factors such as credit insurance, which covers a portion of receivables measured at amortised costs,
are likewise considered when calculating valuation allowances. Bank guarantees and letters of credit
are used to an immaterial extent. Expected credit losses and individual valuation allowances are only
calculated for those receivables that were not covered by insurance or other collateral. The valuation
allowances for receivables whose insurance includes a deductible are not recognised in excess of the
amount of the deductible. A decrease in valuation allowances due, for example, to a reduction in the
credit risk of a counterparty or an objective event occurring after the valuation allowance is recorded in
profit or loss. Reversals of valuation allowances may not exceed amortised cost, less any expected
future credit losses.
At each reporting date, the Group assesses whether financial assets measured at amortised cost are
credit impaired. This is the case if one or more events that have an impact on the estimated future cash
flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes
the following observable data: significant financial difficulty of the debtor, a breach of contract such a
default or being more than 90 days past due; if it is probable that the debtor will enter bankruptcy or
other financial reorganisation or the disappearance of an active market for a security because of
financial difficulties. Loss allowances are deducted from the gross carrying amount of the assets. The
gross carrying amount of a financial asset is written off when the Group has no reasonable expectations
of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group
has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based
on historical experience of recoveries of similar assets. The Group expects no significant recovery from
18
the amount written off. However, financial assets that are written off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.
Financial assets measured at fair value through other comprehensive income include all assets with
contractual terms that give rise to cash flows on specific dates, which are solely payments of principal
and interest on the principal amount outstanding in accordance with the cash flow condition in IFRS 9,
to the extent that the asset is not just held with the intention of collecting the expected contractual cash
flows of its term, but also generating cash flows from its sale. At CABB, no contract incurred throughout
the financial year 2019, which fulfils the criteria of described measurement category. CABB does not
exercise the option to subsequently measure equity instruments through other comprehensive income.
Assets measured at fair valued through other comprehensive income are initially measured at fair value,
which usually corresponds to the nominal value of the securities, allocated to its category at the time of
acquisition. Subsequent measurement is likewise at fair value. Changes in the time value are
recognised in other comprehensive income and reclassified to the statement of income when the asset
is disposed of.
Impairments on financial assets measured at fair value through other comprehensive income are
calculated in the same way as impairments on financial assets measured at amortised cost and
recognised in the consolidated statement of profit or loss.
The following measurement categories are used for financial liabilities:
Financial liabilities that are measured at amortised cost generally include all financial liabilities, provided
these do not represent derivatives. They are generally measured at fair value at the time of initial
recognition, which usually corresponds to the value of the consideration received. Subsequent
measurement is recognised in profit or loss at amortised cost using the effective interest method. At
CABB, for example, bonds and liabilities to banks reported under financial liabilities are measured at
amortised cost.
Financial liabilities recognised at fair value through profit or loss contain derivative financial liabilities.
These are likewise measured at the value of initial recognition. The latter also represents the
measurement basis for these liabilities in subsequent measurement. The option to subsequently
measure financial liabilities at fair value is not exercised.
Financial liabilities are derecognised when the contractual obligation is discharged, cancelled or has
expired.
Derivative financial instruments can be embedded within other contracts, creating a hybrid financial
instrument. If IFRS requires separation, the embedded derivative is accounted for separately from its
host contract and measured at fair value. If IFRS 9 does not provide for separation, the hybrid instrument
is accounted for at fair value in its entirety.
CABB uses the following valuation techniques for determining the fair values of financial assets and
financial liabilities:
Discounted cash flows (i.e. Derivatives (interest rate swaps)): financial instruments that are not traded
in an active market (for example: derivatives/ interest rate swaps) are valuated considering the present
value of expected future cash flows based on observable yield curves.
Option pricing model (i.e. Embedded derivatives in the indenture): The fair value of embedded
derivatives is calculated using a standard option pricing model based on Monte Carlo simulation. For
the valuation, the credit spread for fixed-rate bonds used in calculation is calibrated such that the model
reproduces the current market price quoted on the Luxembourg Stock Exchange (Bourse de
19
Luxembourg) at the respective valuation date. The option pricing model also considers the risk-free
interest rate as another paramater.
These valuation techniques maximise the use of observable market data where it is available and rely
as little as possible on entity specific estimates. If all significant inputs required to determine the fair
value of a financial instrument are observable, the instrument is included in level 2.
If the inputs used to measure the fair value of an asset or a liability might be categorised in different
levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the
same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting
period during which the change has occurred. As in prior year there were no transfers between the
different levels of the fair value hierarchies in the financial reporting period ended December 31, 2019.
Financial assets and financial liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Group currently has a legally enforceable right to set-off the
amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously. As of December 31, 2019, such contracts did not exist.
v) Taxes
The current taxes on income are calculated using the current or substantively enacted tax rate in relation
to the taxable income of the individual group companies. Management establishes provisions in
situations in which applicable tax regulation is subject to interpretation as appropriate on the basis of
amounts expected to be paid to the tax authorities.
The deferred taxes on income are accrued on the basis of the current or substantively enacted local tax
rate expected to apply when the related deferred income tax asset is realised or the deferred income
tax liability is settled. Deferred tax is calculated in accordance with the liability method in relation to all
temporary differences between the uniform measurement in the Group of assets and liabilities and the
tax measurement of assets and liabilities, except if differences arise from the initial recognition of
goodwill. Deferred income tax assets are recognised on deductible temporary differences arising from
investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in
the forseeable future and there is sufficient taxable profit available against which the temporary
difference can be utilised.
A combined tax rate of 24.94% is used in Luxembourg. Country-specific tax rates are used for the other
companies.
Deferred tax assets resulting from losses carried forward and temporary differences are only recognised
if it is probable that these can be offset against future taxable profits.
Current and deferred taxes are recognised as tax expenses, unless they relate to items which have
been recognised directly as other comprehensive income.
Deferred tax assets and deferred tax liabilities are offset only if they have the same maturity, if there is
a legally enforceable right to offset current tax assets against current tax liabilities and if they are due
in relation to the same tax authority by the same taxable entity or different taxable entities where there
is an intention to settle the balances on a net basis.
20
w) Inventories
Inventories are carried at cost of purchase or cost of production. Cost is determined using moving
average value. If net realisable values are lower, inventories are recognised at these lower values. The
net realisable value is equivalent to the sales proceeds attainable in the normal course of business, less
the directly attributable costs up to the point at which the inventories are sold. Costs of production
comprise the directly attributable costs as well as reasonable amounts of material and production
overheads assuming a normal level of utilisation of the relevant production facilities to the extent that
they are incurred in connection with the manufacturing process. Costs of the Company’s pension
scheme, for social facilities of the operation and voluntary social benefits of the Company as well as
costs of administration are also taken into consideration to the extent that they are attributable to
manufacturing. Financing costs are not included in costs of production.
Raw materials and supplies, including technical material and packagings, are measured at the lower of
cost of purchase and net realisable value. A write-down is recognised to reduce the value of such raw
materials and supplies to a figure which is lower than the cost of purchase only if the net realisable
value of the finished products which include the raw materials and supplies is probably lower than the
cost of production of the finished products.
x) Provisions for pensions and similar obligations
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present
value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets.
Provisions for pensions are based on actuarial computations made according to the projected unit credit
method, which applies, among others, the following valuation parameters: future developments in
compensation, pensions and inflation, the expected performance of plan assets, employee turnover and
the life expectancy of beneficiaries. The resulting obligations are discounted by reference to market
yields at the balance sheet date on high quality corporate fixed rate bonds with an AA rating that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation.
Actuarial gains and losses resulting from periodic recalculation are recognised in other comprehensive
income. They result from the variance between the actual development in pension obligations and
pension assets and the assumptions made at the beginning of the year as well as the updating of
actuarial assumptions. The calculation of pension provisions is based on actuarial reports.
The current service costs which are associated with the work carried out in the reporting period are
shown as personnel expenses in the costs of those functions in which the employees are operating,
except where included in the cost of an asset. Past service costs are recognised immediately in the
consolidated statement of profit or loss.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets both at the beginning of the year. This cost is included in
financial expenses in the consolidated statement of profit or loss.
For defined contribution plans, the group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment
obligations once the contributions have been paid. The contributions are recognised as employee
benefit expense when they are due.
y) Other provisions
Other provisions are recognised if a present legal or constructive obligation exists as a result of a past
event, an outflow of economic resources is probable and the corresponding amount can be reliably
estimated. Provisions are recognised to the extent of the best estimate of the expenditure required to
settle the present obligation.
21
Provisions are recognised for environmental protection measures and risks if, as a result of a past event,
there is a current legal or constructive obligation to carry out measures.
The probable settlement amount of non-current provisions is discounted, if the discounting effect is of
a material nature. In this case, the probable settlement amount is recognised with its present value. The
increase of the discounted amount resulting from the passage of time and the effect deriving from any
change in the discount rate are recognised in the consolidated statement of profit or loss and other
comprehensive income and classified as financial income or expense.
Provisions for service anniversary payments are mainly calculated in accordance with actuarial
principles. For semi-retirement agreements which have been concluded, the wage and salary payments
to be made during the passive phase of the semi-retirement arrangement are accumulated in
instalments, approved supplemental payments are accrued in instalments until the end of the exemption
phase at the latest.
Termination benefits are payable when employment is terminated by the group before the normal
retirement date, or whenever an employee accepts voluntary redundancy in exchange for these
benefits. The group recognised termination benefits at the earlier of the following dates: (a) when the
group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a
restructuring that is within the scope of IAS 37 and involves the payment of termination benefits.
z) Financial risk management
CABB Group is exposed to numerous financial risks within its business activities. These risks comprise
market, credit, interest rate and exchange rate risks. For details, please refer to note (34) (Financial risk
management).
aa) Estimates and assumptions
The process of preparing consolidated financial statements in accordance with the IFRS requires
assessments, assumptions and estimates with regard to the application of accounting policies, and also
requires management to make assumptions regarding future developments. These assessments,
assumptions and estimates are based on experience and other factors which are considered to be
reasonable under the given circumstances. Actual outcomes and results within the next financial periods
may differ materially from current expectations. Hence, a change in the underlying estimates and
assumptions could require a material adjustment to the carrying amount of the affected asset or liability.
Therefore, estimates and assumptions are continuously reviewed. Changes in accounting-relevant
estimates are recognised in the reporting period in which the assessment is revised, and also in future
reporting periods if these future reporting periods are affected by the revised estimates.
In particular, the following items in the consolidated statement of financial position have been affected
by the use of estimates:
Goodwill
Goodwill resulting from the capital consolidation is recognised in the consolidated financial statements
for the year ended December 31, 2019 (see note (17)). Goodwill has to be tested for impairment at least
once every year. For the purpose of the impairment test, long-term cash flow forecasts are to be
compiled for cash-generating units within the context of the expected development of the Group and
the overall economic trends. Estimates of cost of capital are used to determine the pre-tax discount rate
for discounting the cash flows. As these estimates are continuously reviewed, potentially possible
changes might require an adjustment to the carrying amount of the goodwill.
22
Property, plant and equipment and intangible assets
In the course of the purchase price allocation following the business combination with CABB Group,
items of property, plant and equipment (see note (18)) and intangible assets (see note (17)) were
measured at fair value. For this valuation an external expert was engaged. Management determined
the appropriateness of the valuation techniques and inputs for fair value measurement used by the
expert.
The Group reviews the estimated useful lives of property, plant and equipment and intangible assets at
the end of each reporting period. These assets are tested once a year for indications of impairments. If
there are any such indications, estimates of the expected future cash flows from the utilisation and
potential disposal of these assets are made for assessing the impairment. The actual cash flows may
differ appreciably from the discounted future cash flows which are based on these estimates. Factors
such as a change in the planned utilisation of buildings, machinery and equipment, technical aging or
utilisation levels of installations which are lower than original forecasts may reduce the useful service
life or may result in an impairment.
Pension provisions
The valuation of provisions for pensions and similar obligations is influenced by assumptions regarding
the future development of wages and salaries or pensions as well as discount rates.
In Germany, retirement benefits are provided via the pension fund of the employees of the Hoechst
Group VVaG. The Swiss employees of the Group are insured with the pension fund (Pensionskasse –
PK) of CABB AG, Pratteln, Switzerland. The retirement benefits of the Finnish employees are processed
via the pension insurance company Ilmarinen Ltd. The calculations of the liabilities recognised with
regard to these facilities are based on statistical and actuarial calculations of the actuaries. In particular,
the present value of the defined-benefit obligation depends on assumptions such as the discount rate
and the pension growth rate used for calculating the present value of the future pension obligations.
Future salary increases and increases in the other benefits to employees also influence the calculation
of the present value of the future pension obligations. In addition, the independent actuaries engaged
by the Group also use statistical data such as probability of departure and life expectancy of the insured
parties for their assumptions. The discount rate for the actuarial calcuations of the German and Finnish
defined-benefit obligations was determined by applying the Mercer Pension Yield Curve Approach
(MYC). The data and methodology used to create the MYC is reviewed periodically by Mercer to ensure
consistency and improved estimates.
Environmental provisions
The provision recognised for environmental protection measures (see note (26)) represents the best
estimate of the expected outflow of funds. The provision relates to expected costs of rehabilitating toxic
waste sites in Switzerland as well as waste disposal at the production location in Kokkola. The future
development of environmental costs depends on many factors including the rehabilitation method to be
used, the extent of the rehabilitation measures as well as the shares attributable to the Group and to
external parties.
Due to uncertainties related to the prediction of environmental rehabilitation costs, it is possible that
additional costs may occur which exceed the recognised provision. Based on the latest available
information, management considers that the provision as of December 31, 2019 is adequate.
23
(4) Business Combination under Common Control
On October 7, 2019, Monitchem S.à r.l. (Luxembourg) (the “Contributor”), a wholly owned subsidiay of
Permira Funds, and Monitchem Midco S.à r.l., the direct parent company of Monitchem Holdco 1
S.à r.l., entered into a contribution agreement, pursuant to which the Contributor transferred the entire
shares of Monitchem Kansas S.à r.l. (Luxembourg), to Monitchem Midco S.à. r.l. (Luxembourg), which
in turn contributed such shares to the capital reserves of its indirect subsidiary Monitchem Holdco 2
S.A. (Luxembourg), through a contribution in kind without issue of shares. The shares were then
contributed down the chain of subsidiaries, such that Monitchem Kansas S.à r.l. (Luxembourg) is
ultimately held by CABB Europe GmbH (Germany). As this transaction involves only entities, which are
ultimately controlled by Permira funds, the Group decided to account for this transaction by applying
the predecessor value method through a retrospective restatement of comparative financial information,
as if the transaction had occurred in the financial year 2018 (see note (3e)).
The difference between the fair value of the contributed shares as per October 7, 2019 (kEUR 59,629)
and the Subscribed capital and the Share premium of Monitchem Kansas S.à r.l. (Luxembourg)
amounts to kEUR -11,376 and is included in the shareholders’ equity attributable to the shareholders of
Monitchem Holdco 2 S.A.. This Contribution reserve is disclosed as a separate component of the
Reserves in the Consolidated statement of changes in equity for the year ended December 31, 2018.
24
The following table provides a reconciliation of the reported Consolidated statement of financial position
as of December 31, 2018, to the restated Consolidated statement of financial position, for which the
comparative financial information has been retrospectively restated in order to increase the
comparability of financial information by presenting the contribution of Jayhawk’s business to the CABB Group, as if this transaction under common control had taken place in the year of acquisition:
kEUR
Dec. 31, 2018
as reported
Business
combination
under
common
control
Dec. 31, 2018
restated
Assets
Goodwill 183,150 4,703 187,853
Other intangible assets 185,773 5,435 191,208
Property, plant and equipment 408,792 52,768 461,560
Financial assets 45 0 45
Non-current assets 777,760 62,906 840,666
Inventories 56,908 14,198 71,106
Accounts receivable, trade 73,964 11,469 85,433
Contract assets 4,343 0 4,343
Other financial assets 2,815 666 3,481
Other non-financial receivables 9,877 859 10,736
Income tax receivables 2,662 2 2,664
Cash and cash equivalents 14,821 7,431 22,252
Current assets 165,390 34,625 200,015
Total assets 943,150 97,531 1,040,681
Equity
Subscribed capital and share premium 233,175 59,629 292,804
Retained earnings -131,441 -4,142 -135,583
Contribution Reserve 0 -11,376 -11,376
Other reserves 20,782 864 21,646
122,516 44,975 167,491
Non-controlling interests -2,732 0 -2,732
Total equity 119,784 44,975 164,759
Liabilities
Provisions for pensions and similar obligations 59,934 0 59,934
Other provisions 2,642 0 2,642
Notes 573,804 0 573,804
Other financial liabilities 11,497 35,894 47,391
Deferred tax liabilities 75,611 5,513 81,124
Non-current liabilities 723,488 41,407 764,895
Other provisions 10,968 995 11,963
Notes 1,348 0 1,348
Accounts payable, trade 65,915 3,216 69,131
Contract liabilities 5,369 4,466 9,835
Income tax liabilities 19 4 23
Other financial liabilities 11,429 745 12,174
Other non-financial liabilities 4,830 1,723 6,553
Current liabilities 99,878 11,149 111,027
Total equity and liabilities 943,150 97,531 1,040,681
Shareholders’ equity attributable to the shareholders of Monitchem Holdco 2 S.A.
25
The following table provides a reconciliation of the reported Consolidated statement of profit or loss and
other comprehensive income for the year ended December 31, 2018 to the restated Consolidated
financial statements:
Effective November 1, 2018, Monitchem S.à r.l.’s wholly owned indirect subsidiary Kansas HoldCo 1,
Inc. (Delaware/USA) acquired the entire shares of Jayhawk Fine Chemicals Corporation (Nevada/
USA), from the company’s previous shareholder Evonik Corporation (Alabama/USA), a wholly owned
subsidiary of Evonik Industries AG headquarterd in Germany.
Jayhawk Fine Chemicals Corporation (founded in 1941) is headquartered in Galena (Kansas/USA), and
is primarily involved in the Custom Manufacturing business and the production of specialty fine
chemicals, sold into the pharmaceutical, animal health, agrochemical and industrial markets, and has
significant expertise in complex, multi-step batch and semi-continuous chemical synthesis.
kEUR
2018
as reported
Business
combination
under
common
control
2018
restated
Revenue 453,621 9,732 463,353
Cost of sales -358,065 -8,266 -366,331
Gross profit 95,556 1,466 97,022
Research and development expenses -2,932 -181 -3,113
Distribution and logistics expenses -60,073 -375 -60,448
General and administrative expenses -21,624 -5,055 -26,679
Earnings before interest and taxes (EBIT) 10,927 -4,145 6,782
Interest income and similar 25 3 28
Interest expense and similar -39,561 -483 -40,044
Other financial income 544 0 544
Other financial expenses -228 0 -228
Foreign currency losses/ gains (net) 5,408 67 5,475
Financial result -33,812 -413 -34,225
Earnings before taxes -22,885 -4,558 -27,443
Taxes on income 831 416 1,247
Net Result for the period -22,054 -4,142 -26,196
Other comprehensive income
-8,392 0 -8,392
1,761 0 1,761
-6,631 0 -6,631
9,203 864 10,067
Other comprehensive income, net of income tax 2,572 864 3,436
Total comprehensive income for the period -19,482 -3,278 -22,760
Shareholders of Monitchem Holdco 2 S.A. -20,646 -4,142 -24,788
Non-controlling interests -1,408 0 -1,408
Shareholders of Monitchem Holdco 2 S.A. -18,106 -3,278 -21,384
Non-controlling interests -1,376 0 -1,376
Of the net loss for the period, the following amounts are
attributable to:
Of the total comprehensive income, the following amounts
are attributable to:
Actuarial gains(+)/ losses(-) from defined-benefit plans
Items that will not be reclassified to profit or loss:
Income tax relating to items that will not be reclassified
subsequently
Items that may be reclassified to profit or loss:
Difference from currency translation of financial
statements of foreign operations
26
The following table summarises the consideration paid for Jayhawk Fine Chemicals Corporation, the
fair value acquired and liablities assumed as of November 1, 2018:
The total consideration transferred included a cash payment of kEUR 26,477, a repayment of the seller’s debt of kEUR 44,541, less a working capital true up payment received in February 2019 from the seller
to the Company, which is recorded in Other financial receivables as of December 31, 2018.
The goodwill recognised in conjunction with the business combination essentially represents the skills
and technical talent of CABBs’ work force, the market position and profitability of the acquired business
and the intention to invest and to participate in Jayhwak’s ambitious growth strategy in the years ahead.
These benefits are not recognised separately from goodwill because they do not meet the recognition
criteria for identifiable intangible assets. The recognised goodwill is expected to be not deductible for
income tax purposes. The gross contractual amount of Accounts receivable, trade as of November 1,
2018 amounted to kEUR 7,684; no impairments or fair value adjustments were recognised.
Acquisition-related costs of approximately kEUR 4,441 relating to legal fees and due diligence costs are
included in general and administrative expenses in the Consolidated statement of profit or loss and
other comprehensive income for the year ended December 31, 2018.
The Consolidated statements of profit and loss and other comprehensive income for the year ended
December 31, 2018, includes revenues in an amount of kEUR 9,732 and a contribution to the Group’s Net result for the period of kEUR -31, which have been contributed by the aquired company. If the
company had been aquired with effect as of January 1, 2018, Group Revenue would have been higher
kEUR Nov. 1, 2018
Consideration transferred
Consideration paid 26,477
Repayment of seller's debt 44,541
Total consideration paid in financial year 2018 71,018
Working capital true-up received in financial year 2019 -672
Total consideration transferred 70,346
kEUR
Carrying
amount
before
business
combination
- unaudited -
Fair value
adjustment
- unaudited -
Addition due
to business
combination
Assets
Intangible assets 248 5,289 5,537
Property, plant and equipment 45,953 7,649 53,602
Inventories 15,134 821 15,955
Accounts receivable, trade 7,684 0 7,684
Cash and cash equivalents 0 0 0
Total Assets 69,019 13,759 82,778
Liabilities
Other provisions 857 0 857
Contract liability 4,673 -89 4,584
Other financial liabilities 531 0 531
Other non-financial liabilities 5,214 0 5,214
Deferred tax Liabilities 2,528 3,459 5,987
Total Liabilities 13,803 3,370 17,173
Net Assets 55,216 10,389 65,605
Goodwill 4,741
Total consideration transferred 70,346
27
by kEUR 33,305 and the Net result for the period would have been lower by kEUR 752 in the financial
period 2018.
The preliminary purchase price allocation for the acquisition of Jayhawk Fine Chemicals’ business was reviewed at the conclusion of the twelve month valuation period in accordance with IFRS 3. No
adjustment of the purchase price allocation was indicated.
(5) Scope of Consolidation
The scope of consolidation comprises Monitchem Holdco 2 S.A., with registered office in Luxembourg,
as well as all domestic and international subsidiaries. Monitchem Holdco 2 S.A. directly or indirectly
owns a majority of voting rights in these companies. There are no joint ventures or associated
companies.
In addition to Monitchem Holdco 2 S.A. as the parent company, the consolidated financial statements
as of December 31, 2019 include three Luxembourg and fourteen non-Luxembourg companies in which
Monitchem Holdco 2 S.A. has a dominating influence over financial and operating policy, based on the
concept of control. This is generally the case where Monitchem Holdco 2 S.A. holds, directly or
indirectly, a majority of the voting rights (no difference between percentage of holding and voting right).
On August 27, 2018, Monitchem S.à r.l., Luxembourg, the ultimate parent company that is wholly owned
by Permira Funds, founded a new intermediate holding company, Monitchem Kansas S.à r.l.,
Luxembourg, for the Group’s subsidiaries in the United States. The entity was retrospectively included
in the consolidation perimeter at the date of its incorporation in accordance with common control
accounting described above.
On August 27, 2018, Monitchem Kansas S.à r.l., Luxembourg, subscribed to the entire common stocks
in Kansas HoldCo Inc., (USA), a new intermediate holding company formed on August 9, 2018, for the
Group’s subsidiaries in the United states. The entity was retrospectivley included in the consolidation perimeter at the date of its incorporation on .
No. Name, Registered officeShare of
capital
1 Monitchem Holdco 2 S.A., City of Luxembourg, (Luxembourg)
2 Monitchem Holdco 3 S.A., City of Luxembourg, (Luxembourg) 100%
3 CABB Group GmbH, Sulzbach am Taunus (Germany) 100%
4 CABB Holding GmbH, Sulzbach am Taunus (Germany) 100%
5 CABB Europe GmbH, Sulzbach am Taunus (Germany) 100%
6 CABB GmbH, Gersthofen (Germany) 100%
7 CABB North America Inc., Huntersville/NC (USA) 100%
8 CABB AG, Pratteln (Switzerland) 100%
9 CABB UK Ltd., Altrincham (Great Britain) 100%
10 CABB Finland Oy, Helsinki (Finland) 100%
11 CABB Oy, Kokkola (Finland) 100%
12 CABB - Jinwei Specialty Chemicals (Jining) Co. Ltd.,
Zhanghuang Town (PRC)
68%
13 CABB Trading (Shanghai) Co. Ltd., Shanghai (PRC) 100%
14 CABB Nordic Holding S.à r.l., City of Luxembourg, (Luxembourg) 100%
15 Monitchem Kansas S.à r.l., City of Luxembourg, (Luxembourg) 100%
16 Kansas HoldCo, Inc., Wilmington, County of Newcastle, Delaware (USA) 100%
17 Kansas HoldCo 1, Inc., Wilmington, County of Newcastle, Delaware 100%
18 Jayhawk Fine Chemicals Corporation, Galena, Kansas (USA) 100%
28
Kansas HoldCo Inc. (USA), subscribed to the entire common stocks in Kansas HoldCo 1 Inc., (USA), a
new intermediate holding company, formed on August 17, 2018, in order to acquire the share capital of
Jayhawk Fine Chemicals Corporation (USA). The entity was retrospectively included in the
consolidation perimeter at the date of its incorporation.
On November 1, 2018, Kansas HoldCo 1 Inc., (USA), acquired all shares in Jayhawk Fine Chemicals
Corporation, (USA), a company primarily involved in the Custom Manufacturing business and the
production of specialty fine chemicals. The entity was retrospectively included in the consolidation
perimeter as of November 1, 2018.
On December 12, 2019, the shareholders of CABB – Jinwei Specialty Chemicals (Jining) Co. Ltd.,
Zhanghuang Town (PRC) decided to convert parts of the outstanding principal and accrured inteterests
amounts of the shareholder loans into equity. In conjunction with the capital increase, the proportion of
ownership interests held by non-controlling entities decreased from 33.0% to 32.4%.
Although CABB Nordic Holding S.à r.l. is situated in Luxembourg, the entity’s functional currency is Swiss Franc, as the debt and equity financing is denominated in Swiss Francs.
(6) Segment information
The format for reporting the activities of the CABB Group by operating segment is by business unit. This
classification corresponds to the way in which the information is reviewed by CABB Group’s
management for the purposes of allocating resources and assessing performance.
The business activities of the CABB Group are organised in the following reported operating segments:
The business unit Custom Manufacturing focuses on the production of exclusives, which are active
ingredients and advanced intermediates customised for individual customers operating in the
agrochemcial, pharmaceutical and specialty chemical industries.
The business unit Acetyls is focused on the production of monochloroacetic acid, or MCA, acetyl
derivatives and co-products, which are used in a variety of applications in the agrochemical, food,
pharmaceutical and personal care industries.
No operating segments have been aggregated in arriving at the reportable segments of the Group.
a) Segment revenue
Revenue between segments are carried out at arm’s length. The revenue from external parties reported to the chief operating decision-maker is measured consistent to the manner applied in the Consolidated
statement of profit and loss and other comprehensive income and includes the impacts resulting from
the application of IFRS 15 Revenue from contracts with customers and comprises the business activities
of Jayhawk Fine Chemicals Corporation, (USA).
kEUR
2019 2018
restated
Revenue
Custom Manufacturing 348,576 281,623
Acetyls 190,120 197,541
Inter-segment Eliminations -15,432 -15,811
Total revenue from external customers 523,264 463,353
29
b) Segment EBITDA
In determining the segment results, CABB Group applies the same principles of recognition and
measurement as in the consolidated financial statements. The Group measures the performance of its
segments on the basis of a segment income variable referred to by Internal Control and Reportings as
“Operating EBITDA”. This measurement basis excludes the effects of non-recurring expenditures from
the operating segments such as restructuring costs, consulting expenses, as well as negative past
service costs incurred in the financial year 2018 at CABB AG due to the change of a parameter in the
calculation of pension benefits under the Swiss pension scheme. Furthermore, effects resulting from
the amortisation of fair value measurements of inventory as a result of the purchase price allocation
accounted for in conjunction with the business combination of CABB Group are not included within the
“Operating EBITDA”.
For the reconciliation of the segment information with the consolidated financial statements of CABB
Group, Group overheads are reported under Corporate Expenses. Interest income and expenditure are
not allocated to segments, as this type of activity is driven by the central treasury function, which
manages the liquidity of the Group.
kEUR
2019 2018
restated
EBITDA
Custom Manufacturing 78,204 59,942
Acetyls 35,557 33,117
Corporate Expenses -2,855 -3,804
Inter-segment Eliminations -77 -85
Operating EBITDA 110,829 89,170
Non-Recurring Items -5,544 -7,209
PPA valuation on Inventory 105 -754
Reported EBITDA 105,390 81,207
Depreciation -52,706 -45,395
Amortisation -28,218 -29,030
Impairment losses 0 0
Total earnings before interest and taxes (EBIT) 24,466 6,782
30
c) Segment Net Working Capital
The amounts reported to CABB Group’s management with respect to Operating Net Working Capital
are measured in the same way as in the financial statements.
d) Segment additions to non-current assets
The amounts provided to CABB Group’s management with respect to additions to non-current assets
are measured consistently with the consolidated schedule of movements in fixed asset (see notes (17)
and (18)), whereas additions to the fixed asset register recognised in conjunction with IFRS 16 Leases
are not considered and not included in the following breakdown:
Non-current assets by Region
The below table shows non-current assets excluding non-current financial assets by region based on
the location of the group entities. The non-current financial assets are allocated to Luxembourg.
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Net Working Capital
Custom Manufacturing 38,312 55,070
Acetyls 25,375 29,584
Inter-segment Eliminations -240 -165
Operating Net Working Capital 63,447 84,489
Financial Statement figures
Inventories 67,378 71,106
Trade Receivables 70,587 85,433
Contract assets 7,065 4,343
Income Tax Receivable 3,165 2,664
Other non-financial Receivables 9,942 10,736
Trade Payables -69,394 -69,131
Contract liabilities -10,708 -9,835
Income tax liabilities -18 -23
Other non-financial Liabilities -10,519 -6,552
Group Net Working Capital 67,498 88,741
PPA Valuation on Inventory -1,955 -1,849
Net Working Capital of Holding Entities 1,050 241
Other Items and Eliminations -3,146 -2,644
Operating Net Working Capital 63,447 84,489
kEUR
2019 2018
restated
Business units
Custom Manufacturing 48,300 46,026
Acetyls 10,567 6,194
Total 58,867 52,220
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Non-current assets by region
Switzerland 461,605 446,873
Finland 166,383 169,381
Germany 143,483 147,781
United States of America 0 0
Other Countries 74,564 76,586
Non-current assets 846,035 840,621
31
Notes to the consolidated statement of profit and loss and other comprehensive income
(7) Revenue from contracts with customers
a) Disaggregation of revenue from contracts with customers
The Group derives revenue from ensuring the availability of production capacities within the contract
period and from the transfer of goods over time and at a point in time in the following business units:
Revenues within Europe mainly refer to Switzerland and Germany.
The Group derives revenues from three customers, which each account for more than 10 percent of
total Group Sales.
b) Assets and liabilities related to contracts with customers
The group has recognised the following assets and liabilities related to contracts with customers:
Within the Custom Manufacturing business unit, revenue for certain products within the product group
“Exclusives”, are recognised over time, whereby for certain contracts the performance obligation consists in ensuring the availability of production capacities in exchange of a fixed remuneration, which
is classified as a “stand ready obligation”. Within the business unit Acetyls, customer contracts generally
only give rise to a single performance obligation in each case, which is to be fulfilled at a certain point
in time.
kEUR
2019 2018
restated
Segment Revenue
Custom Manufacturing 348,576 281,623
Acetyls 190,120 197,541
Inter-Segment Revenue -15,432 -15,811
Revenue from external Customers 523,264 463,353
Revenue by location of the customers
Europe 409,564 403,379
North America 58,701 33,658
Rest of World 54,999 26,316
Revenue from external Customers 523,264 463,353
Timing of revenue recognition:
At a point in time 322,564 267,895
Over time 200,700 195,458
Revenue from external Customers 523,264 463,353
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
7,066 4,344
Loss allowance -1 -1
Total contract assets 7,065 4,343
10,684 9,786
24 49
Total contract liability 10,708 9,835
Contract assets relating to the Exclusives business
Contract liability relating to the Exclusives business
Contract liability relating to advances received
32
The contract liabilities primarily relate to non-refundable up-front capital recovery fees which are paid
by the customer at the beginning of the project, upon an agreed capacity expansion. CABB is amortising
the capital recovery fees received from customers over the term of the customer contract. The weighted-
average expected period at December 2019 was 3,8 years (2018: 3,1 years).
In the financial year 2019, the Group has recognised revenue in an amount of kEUR 6,802, which are
relating to contract liabilities recognised as of December 31, 2018.
(8) Cost of sales
Other cost of sales mainly refer to health, safety, environment and quality measures.
(9) Research and development expenses
(10) Distribution and logistics expenses
(11) General and administrative expenses
kEUR
2019 2018
restated
Costs of raw materials and supplies 175,803 166,567
Personnel expenses 85,051 71,827
Energy costs 39,796 34,775
Depreciation and amortisation 51,693 44,899
Repair and maintenance expenses 17,389 23,351
Other cost of sales 38,189 24,912
Cost of sales 407,921 366,331
kEUR
2019 2018
restated
Personnel expenses 3,038 2,401
Depreciation and amortisation 273 155
Other 606 557
Research and development expenses 3,917 3,113
kEUR
2019 2018
restated
Depreciation and amortisation 28,618 28,566
Transport costs 26,673 25,556
Personnel expenses 5,165 4,089
Other 2,824 2,237
Distribution and logistics expenses 63,280 60,448
kEUR
2019 2018
restated
Personnel expenses 10,824 11,306
Legal and consultancy costs 2,831 6,615
Insurance premiums 3,392 2,470
Depreciation and amortisation 339 803
Other 6,294 5,485
General and administrative expenses 23,680 26,679
33
(12) Personnel expenses
(13) Depreciation and amortisation on non-current assets
Depreciation and amortisation of non-current assets amounted to kEUR 80,924 in the financial year
2019 (2018: kEUR 74,425).
(14) Financial result
Other interest expenses mainly include transaction costs of kEUR 14,624 (2018: kEUR 4,224), which
are amortised over the term of the Notes (see Note (27)). Consequently to the successfully completed
refinancing of the Notes, accrued financing expenses of kEUR 12,730 relating to the former financing
agreements were recognised in the financial year 2019.
Other financial expenses comprise an early redemption premium of kEUR 3,008, incurred in conjunction
with the settlement of Senior Notes and commitment fees for revolving credit facilities of kEUR 1,153
(2018: kEUR 1,222).
Other financial income predominately comprises the increase in the fair value of the financial
instruments embedded in the Notes issued on October 7, 2019 (kEUR 18,895; in 2018: other financial
expense of kEUR 228).
The foreign currency result (net) is predominately resulting from the foreign currency translation of
group-internal transactions (mainly financing activities) (2019: kEUR 4,304; 2018: kEUR 4,963)
kEUR
2019 2018
restated
Wages and salaries 86,892 74,969
Retirement benefit costs 3,789 3,422
Other costs for social security 13,397 11,232
Personnel expenses 104,078 89,623
kEUR
2019 2018
restated
Interest income 9 23
Other financial income 17 5
Interest income and similar 26 28
Bond interest expenses -32,534 -31,734
Other interest expenses -17,838 -5,919
Net interest expenses on pension obligations -664 -537
Interest expenses on lease liabilities -508 -379
Other financial expenses -4,551 -1,475
Interest expense and similar -56,095 -40,044
Financial instruments at fair value
through profit and loss:
Other financial income 19,180 544
Other financial expenses -36 -228
Foreign currency gains 5,618 5,630
Foreign currency losses -1,564 -155
Foreign currency result (net) 4,054 5,475
Financial result -32,871 -34,225
34
(15) Taxes on income
Monitchem Holdco 2 S.A., Monitchem Holdco 3 S.A. and CABB Nordic Holding S.à r.l. are subject to
Luxembourg corporate income tax rate of 17.0% (2018: 19.26%), leading to a combined overall tax rate
of 24.94% (2018: 26.01%), which is taking into account a 7.0% (2018: 7.0%) employment fund
contribution/solidarity surtax on the corporate income tax rate, plus a municipal business tax on profits
of 6.75% (2018: 6.75%). Since the Group operates across the world, it is subject to income taxes in
several different tax jurisdictions with income tax rates in the range from 20.0% to 29.60% (2018: 20.0%
to 29.61%).
Taxes on income for the financial year 2019 are broken down as follows:
On November 24, 2019, numerous changes to the tax law were enacted in Switzerland, including a
graduated reduction of the corporate income tax rate over a period of five years of currently 20.7% to
maximal effective 13.45%. This change resulted in a gain of kEUR 14,744 related to the remeasurement
of deferred tax assets and liabilities of the Group’s consolidated Swiss entity, CABB AG, being recognised during the financial year ended December 31, 2019.
The effective tax rate of the Group differs from Monitchem Holdco 2 S.A.’s tax rate of 24.94% (2018:
26.01%) as follows:
kEUR 2019
2018
restated
Current income taxes -4,455 -7,653
Income from deferred taxes 21,152 8,900
Taxes on income 16,697 1,247
2019
kEUR in %
Earnings before taxes -8,405 100.0
Expected taxes on income (income) 2,096 -24.9
Change in tax rates 14,763 -175.6
Permanent differences 5,323 -63.3
Non-deductible interest expense -5,403 64.3
Trade tax additions -327 3.9
Other non-deductible expenses -101 1.2
Foreign tax rate differential 601 -7.2
Taxes prior years 0 0.0
Benefits arising from previously unrecognised tax
losses 162 -1.9
Losses for which no deferred tax assets have been -405 4.8
Other differences -12 0.1
Taxes on income 16,697 -198.7
2018
restated
kEUR in %
Earnings before taxes -27,443 100.0
Expected taxes on income (income) 7,138 -26.0
Non-deductible interest expenses -3,604 13.1
Trade tax additions -392 1.4
Other non-deductible expenses -850 3.1
Foreign tax rate differential 229 -0.8
Taxes prior years 24 -0.1
Losses for which no deferred tax assets have been
recognised as well as change in the allowance -1,520 5.5
Benefits arising from previously unrecognised tax
losses 244 -0.9
Other differences -22 0.1
Taxes on income 1,247 -4.5
35
Non-deductible interest expenses predominately incur within the German and Finnish tax jurisdiction,
which limits the deductability of interest expenses to 30.0% or 25.0% of the EBITDA defined for the
purpose of the interest rate cap regulation. The non-deductible portion of net interest expenses
amounted to kEUR 18,858 in the financial year 2019 (2018: kEUR 12,171). Although these amounts
may in principle be carried forward indefinitely and offset against future interest income, no deferred tax
assets in respect to interest tax loss carry-forwards in the amount of kEUR 90,872 (December 31, 2018:
kEUR 72,014) were recognised, as the prerequisites for their usability will not be fullfilled within the
foreseeable future. Furthermore, deferred tax assets have not been recognised in respect of tax loss
carry-forwards amounting to kEUR 19,293 (2018: kEUR 11,845), as it is not probable that sufficient
taxable profit will be available against which they may be utilised. Of these tax losses carried forward,
kEUR 2,866 will expire in two years, kEUR 4,787 will expire in three years, kEUR 4,221 in four years,
kEUR 7,120 in five years and kEUR 299 in 15 years.
In conjunction with actuarial gains/ losses of defined-benefit plans, deferred income taxes amounting to
kEUR -2,167 (2018: kEUR +1,761) are included within other comprehensive income (OCI).
The deferred taxes resulting from temporary differences tax balances and with balances according to
IFRS are broken down as follows:
kEUR
Dec. 31, 2018
restated
Recognised in
profit or loss
Recognised in
OCI (1) Dec. 31, 2019
Deferred tax liabilities
Property, plant and equipment 50,177 -10,639 1,204 40,742
Intangible assets 43,123 -11,389 512 32,246
Inventories 2,299 -196 62 2,165
Receivables 444 -109 13 348Other assets 881 803 53 1,737Provisions 4,437 -22 36 4,451Other liabilities 3,001 -1,594 30 1,437Amounts netted -23,238 1,994 2,139 -19,586
Total Deferred tax liabilities 81,124 -21,152 4,049 63,540
Deferred tax assets
Goodwill 227 -144 0 83
Intangible assets 0 20 0 20
Inventories 678 362 24 1,064
Pension provisions 11,836 -1,025 -1,789 9,022
Other provisions 702 -287 0 415Other assets and liabilities 3,120 2,989 -537 5,572Loss Carry-Forward 7,156 -3,909 163 3,410Amounts netted -23,238 1,994 2,139 -19,586
Total Deferred tax assets 0 0 0 0
36
(1) The amounts disclosed in column “Recognised in Other comprehensive income (OCI)” of the table above includes effects resulting from the translation of financial statements of foreign operations, that may be reclassified to profit or loss; and income taxes relating to actuarial gains and losses from defined-benefit plans, that will not be reclassified to profit or loss subsequently.
kEUR Dec. 31, 2017
Transition to
IFRS 9, 15, 16
Addition
Common
Control
Transaction
Recognised in
profit or loss
Recognised in
OCI (1)
Dec. 31, 2018
restated
Deferred tax liabilities
Property, plant and equipment 41,902 7,650 -568 1,193 50,177
Intangible assets 47,541 1,338 -6,392 636 43,123
Inventories 2,210 208 -180 61 2,299
Receivables 400 30 14 444Other assets 517 1,139 -802 27 881Provisions 4,767 -367 37 4,437Other liabilities 2,098 842 61 3,001Amounts netted -14,254 -1,577 -3,209 -1,944 -2,254 -23,238
Total Deferred tax liabilities 85,181 -438 5,987 -9,381 -225 81,124
Deferred tax assets
Goodwill 371 -144 0 227
Inventories 62 755 -151 12 678
Pension provisions 9,829 -58 2,065 11,836
Other provisions 194 508 0 702Other assets and liabilities 1,034 822 1,664 -412 12 3,120Loss Carry-Forward 3,245 1,545 2,201 165 7,156Amounts netted -14,254 -1,577 -3,209 -1,944 -2,254 -23,238
Total Deferred tax assets 481 0 0 -481 0 0
37
Notes to the consolidated statement of financial position (16) Leases
a) Amounts recognised in the consolidated statement of financial position
As of December 31, 2019, the consolidated statement of financial position shows the following amounts
relating to right-of-use assets:
Right-of-use items within the category “Land and buildings” are amortised over lease terms between 5
and 7.4 years. Assets disclosed within the line “Right-of-use Operational and office equipment, other
installations” mainly refer to rail cars and containers, which are amortised over lease terms between 1
and 10 years.
Additions to the right-of-use assets during the financial year 2019 amounted to kEUR 9,980 (2018:
kEUR 2,501 out of which kEUR 525 were acquired through a common control transaction).
The table below provides a maturity analysis of the lease liabilities:
kEUR Dec. 31, 2019
Dec. 31, 2018
restated
Non-current assets
Other intangible assets
RoU Software 136 268
Property, plant and equipment
RoU Land and buildings 2,684 2,923
RoU Technical Equipment and Machinery 32 70
RoU Operational and office equipment, other
installations 8,196 3,528
Total Right-of-use assets 11,048 6,789
kEUR Dec. 31, 2019
Dec. 31, 2018
restated
Maturity analysis - contractual undiscounted
cash flows
Less than one year 4,096 3,323
One to three years 2,694 3,210
Three years or later 5,526 1,133
Total undiscounted lease liabilities 12,316 7,666
Lease liabilities included in the statement of
financial position
Current - Other financial liabilities 3,784 3,300
Non-current - Other financial liabilities 7,421 3,930
Total Lease liabilities 11,205 7,230
38
b) Amounts recognised in the consolidated statement of profit or loss
For the financial year 2019, the consolidated statement of profit or loss shows the following amounts
relating to leases:
The total cash flow for leases in the financial year 2019 was kEUR 6,478 (2018: kEUR 6,159).
kEUR Dec. 31, 2019
Dec. 31, 2018
restated
Non-current assets
Other intangible assets
RoU Software 136 268
Property, plant and equipment
RoU Land and buildings 2,684 2,923
RoU Technical Equipment and Machinery 32 70
RoU Operational and office equipment, other
installations 8,196 3,528
Total Right-of-use assets 11,048 6,789
39
(17) Intangible assets
Goodwill is allocated to the cash-generating units as follows:
The recoverable amount of the cash-generating units is calculated based on the fair value less costs to
sell approach. The underlying cash flow projection is based on past experiences, current results and on
the best estimate of the future development of influencing factors. Market assumptions, such as the
kEUR Goodwill
Customer
relations Technology Other
Total
intangible
assets
Purchase values
As of December 31, 2017 180,353 286,503 15,908 9,169 491,933
Recognition of Right-of-use assets on
initial application of IFRS 16 0 0 0 385 385
Adjusted balance as of
January 1, 2018 180,353 286,503 15,908 9,554 492,318
Acquisition through common control
transaction 4,741 0 3,438 2,099 10,278
Additions 0 0 0 505 505
Transfers 0 0 0 0 0
Disposals 0 0 0 -3 -3
Effect of movements in exchange rates 2,759 4,199 307 99 7,364As of December 31, 2018 (restated)/
January 1, 2019187,853 290,702 19,653 12,254 510,462
Additions 0 0 0 1,688 1,688
Transfers 0 0 0 0 0
Disposals 0 0 0 -1 -1
Effect of movements in exchange rates 2,987 4,277 350 319 7,933
As of December 31, 2019 190,840 294,979 20,003 14,260 520,082
Cumulative amortisation and
impairments
As of December 31, 2017 0 85,392 11,135 4,265 100,792
Recognition of Right-of-use assets on
initial application of IFRS 16 0 0 0 0 0
Adjusted balance as of
January 1, 2018 0 85,392 11,135 4,265 100,792
Amortisation 0 24,594 3,204 1,232 29,030
Transfers 0 0 0 0 0
Disposals 0 0 0 0 0
Effect of movements in exchange rates 0 1,515 282 -218 1,579As of December 31, 2018 (restated)/
January 1, 20190 111,501 14,621 5,279 131,401
Amortisation 0 24,874 1,636 1,708 28,218
Impairment losses 0 0 0 0 0
Disposals 0 0 0 -1 -1
Effect of movements in exchange rates 0 1,473 339 119 1,931
As of December 31, 2019 0 137,848 16,596 7,105 161,549
Residual carrying amounts
December 31, 2018, restated 187,853 179,201 5,032 6,975 379,061
December 31, 2019 190,840 157,131 3,407 7,155 358,533
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Business units:
Custom Manufacturing 131,352 128,365
Acetyls 59,488 59,488
Goodwill 190,840 187,853
40
development of the overall economy and the market growth are considered using external macro-
economical and industry-specific information sources. The fair value measurement was categorised as
a level 3 fair value.
The financial projections were approved by management and consist of a detailed planning period of
five years. A perpetual growth rate of 1.0% (2018: 1.0%) for the business unit Acetyls and 1.3% (2018:
1.3%) for the Custom Manufacturing unit is applied for the period beyond the five-year period and does
not exceed the long-term average growth rate for both businesses.
For the business unit Acetyls, an average revenue growth of 1.7% (2018: 1.4%) and an average
EBITDA-margin of 20.0% (2018: 16.8%) are assumed. The future cash flows generated by the business
unit Acetyls are discounted at a post-tax rate of 6.8% (2018: 6.6%).
For the business unit Custom Manufacturing, an average revenue growth of 4.8% (2018: 5.0%) and an
average EBITDA-margin of 26.7% (2018: 25.5%) are assumed. The future cash flows generated by the
business unit Custom Manufacturing are discounted at a post-tax rate of 6.6% (2018: 7.5%). The
cashflow projection is influenced by the growth of the agrochemical market.
As of December 31, 2019, the recoverable amount of both business units exceed their carrying
amounts. Hence, no goodwill impairment is indicated.
Customer relations and technologies acquired in connection with the business combination of CABB
Group effective as of June 17, 2014, have been measured as part of the purchase price allocation
process; they are amortised over their expected useful life (between 7.9 and 13.8 years).
Amortisation of intangible assets is included in Cost of sales as well as in Distribution and logistics
expenses.
There are no material contractual obligations for acquiring intangible assets.
41
(18) Property, plant and equipment
Depreciation on property, plant and equipment is mainly included in Cost of sales (see note (8)).
In the financial years 2019 and 2018, no borrowing costs were recognised in the carrying amount of an
item included in property, plant and equipment.
There are contractual obligations of kEUR 10,979 (December 31, 2018: kEUR 10,941) for acquiring
property, plant and equipment. Items of real estate in an amount of kEUR 102,034 (December 31, 2018:
kEUR 102,813) and items of other property, plant and equipment of kEUR 269,166 (December 31,
2018: kEUR 248,200) are pledged as collateral for the notes and the revolving credit facility.
kEUR
Land and
buildings
Technical
equipment and
machinery
Operational and
office
equipment,
other
installations
Work in
progress
Total
property,
plant and
equipment
Purchase values
As of December 31, 2017 128,199 329,226 15,158 36,218 508,801Recognition of Right-of-use assets on
initial application of IFRS 16 3,332 69 6,434 0 9,835
Adjusted balance as of
January 1, 2018 131,531 329,295 21,592 36,218 518,636
Acquisition through common control
transaction 11,910 30,476 2,498 8,718 53,602
Additions 362 1,507 1,879 49,954 53,702
Transfers 2,855 33,412 1,034 -37,301 0
Disposals -115 -1,073 -3,080 0 -4,268
Effect of movements in exchange rates 3,551 7,287 566 1,339 12,743
As of December 31, 2018/
January 1, 2019150,094 400,904 24,489 58,928 634,415
Additions 966 2,608 9,427 54,158 67,159
Transfers 1,322 56,103 5,721 -63,146 0
Disposals -94 -1,999 -2,815 -66 -4,974
Effect of movements in exchange rates 4,128 9,730 849 1,483 16,190
As of December 31, 2019 156,416 467,346 37,671 51,357 712,790
Cumulative depreciation and
impairments
As of December 31, 2017 17,105 104,216 7,057 0 128,378
Recognition of Right-of-use assets on
initial application of IFRS 16 0 0 0 0 0
Adjusted balance as of
January 1, 2018 17,105 104,216 7,057 0 128,378
Depreciation 5,832 33,246 6,317 0 45,395
Transfers 0 0 0 0 0
Disposals -115 -1,087 -2,646 0 -3,848
Effect of movements in exchange rates 471 2,216 243 0 2,930
As of December 31, 2018/
January 1, 201923,293 138,591 10,971 0 172,855
Depreciation 6,802 39,281 6,623 0 52,706
Transfers 0 0 0 0 0
Disposals 0 -1,871 -2,365 0 -4,236
Effect of movements in exchange rates 563 3,042 358 0 3,963
As of December 31, 2019 30,658 179,043 15,587 0 225,288
Residual carrying amounts
December 31, 2018 126,801 262,313 13,518 58,928 461,560
December 31, 2019 125,758 288,303 22,084 51,357 487,502
42
(19) Inventories
Inventories of kEUR 632 (December 31, 2018: kEUR 1,210) are measured at the lower net realisable
value.
In the financial year 2019, the cost of materials amounted to kEUR 175,803 (2018: kEUR 166,567), and
impairments on inventories recognised as cost of sales amounted to kEUR 139 (2018: kEUR 70).
(20) Accounts receivable, trade
Valuation allowances for doubtful receivables developed as follows:
Credit risks
The following table shows details of the credit risks associated with Trade accounts receivable:
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Raw materials and supplies 14,306 18,014
Technical material and packaging 16,483 14,642
Precious metals 9,947 9,529
Unfinished products 7,723 7,258
Finished products 18,919 21,663
Total inventories 67,378 71,106
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Accounts receivable, trade 70,921 85,776
less allowances -334 -343
Total accounts receivable, trade 70,587 85,433
kEUR
2019 2018
restated
As of January 1, 343 240
Adjustment on adoption of IFRS 9 0 250
Additions 6 85
Utilization 0 1
Reversal -19 -238
Effect of movements in exchange rates 4 5
At December 31, 334 343
kEUR
Credit impaired No No Yes Yes Yes
Trade Accounts Receivables, Gross 65,458 5,164 0 0 300 70,922
Weighted average loss rate 0.0% -0.7% 0.0% 0.0% -100.0% -0.5%
Impairment loss allowance 0 -35 0 0 -300 -335
Trade Accounts Receivables, Net 65,458 5,129 0 0 0 70,587
Dec. 31, 2019
Not yet
due
1-90
days
91-180
days
181 days
- 1 year
more than
1 yearTotal
43
With regards to the trade accounts receivables which are neither past-due nor impaired, there are no
indications that the customers, on the basis of their credit history and current credit-worthiness ratings,
are not able to meet their obligations.
(21) Other financial assets
Other financial assets as of December 31, 2018 amounted to kEUR 3,481 and mainly consisted of
current cash deposits (kEUR 2,815), securing a local revolving credit facility of our Chinese subsidiary.
Upon settlement of the local credit facility, the deposit was released and the funds are subsequently
disclosed within the Cash and cash equivalents.
Furthermore, a receivable in amount of kEUR 666 was recorded in conjunction with a stock purchase
agreement closed with Jayhawk’s previous shareholder, based on a net working capital true-up clause,
which was settled in February 2019.
(22) Other non-financial receivables
(23) Cash and cash equivalents
(24) Capital
Share capital and share premium
Share capital
Monitchem Holdco 2 S.A. was established on May 9, 2014 with a subscribed capital of EURO 1,000
with a nominal value of EURO 1 and 1,000 fully paid in shares.
All ordinary shares rank equally with regards to the Company’s residual assets. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general
meetings of the Company
kEUR
Credit impaired No No Yes Yes Yes
Trade Accounts Receivables, Gross 77,803 7,707 12 61 193 85,776
Weighted average loss rate 0.0% -1.0% 0.0% 0.0% -100.0% -0.4%
Impairment loss allowance 0 -80 -9 -61 -193 -343
Trade Accounts Receivables, Net 77,803 7,627 3 0 0 85,433
Total
restated
Not yet
due
1-90
days
91-180
days
181 days
- 1 year
more than
1 year
Dec. 31, 2018
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Other tax receivables 5,425 6,985
Prepayments and deferred charges 2,361 1,846
Miscellaneous 2,156 1,905
Total Current Other non-financial assets 9,942 10,736
kEUR Dec. 31, 2019
Dec. 31, 2018
restated
Cash and cash at bank 29,063 22,252
Total cash and cash equivalents 29,063 22,252
44
Share premium
The share premium results from a contribution in cash of kEUR 220,634 and contributions in kind
amounting to kEUR 71,170 (December 31, 2018: kEUR 71,170).
On October 7, 2019, Monitchem S.à r.l. (Luxembourg), contributed the entire shares held in Monitchem
Kansas S.à r.l. (Luxembourg) to the capital reserves of it’s indirect subsidiary Monitchem Holdco 2 S.A., (Luxembourg), through a contribution in kind without issue of shares. The contribution value of the
transferred shares amount to kEUR 59,629.
Other Reserves
Contribution Reserve
The contribution Reserve amounts to kEUR 11,376 and represents the difference between the
contribution amount of the equity investment in Monitchem Kansas S.à r.l. (Luxembourg) as of October
7, 2019 (contribution date), and the nominal value of the Subscribed capital plus the Share premium of
Monitchem Kansas S.à r.l. (Luxembourg).
Legal reserve
In accordance with Luxembourg company law, the Company is required to transfer a minimum of 5%
of its net profit for each financial year to a legal reserve. This requirement ceases to be necessary once
the balance on the legal reserve reaches 10% of the issued share capital. The legal reserve is not
available for distribution to the shareholders. As of December 31, 2019, the Company is in a loss brought
forward position. Therefore, no allocation to the legal reserve will be required.
Foreign currency translation
The translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
Capital management
The objective of the Group is to maintain an adequate capital base in order to maintain the confidence
of lenders and the market and also in order to strengthen the future business development.
(25) Provisions for pensions and similar obligations
CABB Group provides its employees post-employment defined benefit plans. In Germany, retirement
benefits are provided via the pension fund of the employees of the Hoechst Group VVaG. The Swiss
employees of the Group are insured with the pension plan (Pensionskasse der CABB AG) of CABB AG,
Pratteln, Switzerland. The retirement benefits of the Finnish employees are processed via the pension
insurance company Ilmarinen Ltd., Ilmarinen (Finland).
The pension fund of CABB AG is organised as an independent registered trust (registrierte Stiftung)
and maintains a shift insurance plan and a regular pension plan. According to the deed of foundation,
the trust has the purpose to provide benefits to retired employees of CABB AG in the form of pension
payments for life and in case of disability or death within the framework of the Occupational Pension
Act (Bundesgesetz über die berufliche Alters-, Hinterlassenen- und Invalidenvorsorge BVG).
Alternatively, the employee can request a lump-sum payment of his accrued capital. The level of
benefits provided depends in general on employees’ length of service and their salary for respective
service years.
According to the pension plan rules, the pension benefits are financed by contributions of the
employees, the employer and the fund. Art. 32 of the pension plan determines that in case the means
45
of the fund are insufficient to meet the defined contributions by the fund, those contributions have to be
made by the employer. Contributions to the Swiss pension fund are expected to remain stable in the
short to medium term as payments are based on fixed percentages of pensionable benefits. If there is
a funding shortfall, the Foundation board (Stiftungsrat) can implement measures including: changing
benefits, lowering the returns credited to employees and changing the conversion rate. If the measures
are not sufficient to improve the funding level, and as a last resort, the fund can ask the employer and
employees to make additional contributions to close the gap. CABB AG would then have to bear at least
half of any extra payments. Swiss pension plans are treated as defined benefit plans under IAS 19R,
as although contribution levels are in fact “fixed”, there is a potential risk of extra payments in future.
Basis for the investment of plan assets is the investment regulation of the foundation dated
December 10, 2013. This regulation ensures the compliance with Occupational Pensions Act (BVG)
and best possible return within acceptable risk profile. Foundation board (Stiftungsrat) and Investment
Commission (Anlagekommission) define the long term investment structure as well as objectives and
benchmarks for the investments. Only bonds with solid credit risk rating (at least "BBB-") are selected
for investments. At least 50% of all bond investments are made in bonds with rating of "AA-" and higher.
Investment guidance is reviewed on an annual basis. All persons involved in investment decisions for
plan assets or otherwise employed by the pension fund are subject to confidentiality obligations and
have to follow the ASIP (Swiss pension fund association) Charter.
The defined benefit plans in Finland, Germany and Switzerland typically exposes the Group to actuarial
risks such as:
Interest risk: The present value of the defined benefit plan liability is calculated using a discount
rate determined by reference to high quality corporate bond yields. A decrease in the bond interest
rate will increase the defined benefit obligation. In addition the decrease in interest rate will decrease
interest expense; however, this will be partially offset by an increase in the return on the plan assets.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to
the best estimate of the mortality of plan participants both during and after their employment. An
increase in the life expectancy of the plan participants will increase the defined benefit obligation.
Salary risk: The present value of the defined benefit plan liability is calculated by reference to the
future salaries of plan participants. As such, an increase in the salary of the plan participants will
increase the defined benefit obligation.
In addition, defined benefit plans in Finland and Switzerland typically exposes the Group to the
investment risk: Decrease in the fair value of plan assets can create a plan deficit.
In accordance with IAS 19, the present value of the defined-benefit obligation is calculated using the
actuarial valuation method for current one-off premiums or in accordance with the projected unit credit
method on the basis of specific parameters. The fair value of the plan assets is deducted from the
present value of the pension obligation to show the funded statuts of the obligation. The extent of the
obligation as well as the plan assets are determined at regular intervals of not more than twelve months;
in the case of all defined-benefit plans, they are calculated every year as of December 31.
Actuarial gains and losses in the defined-benefit plans and also costs resulting from the asset ceiling
are recognised in other comprehensive income. Plan assets which exceed the extent of the obligation
are shown under financial assets, with due consideration being given to the capping limits.
46
The following parameters have been used as the basis for determining the present value of the benefit
obligations as of December 31, 2019 for domestic and international companies:
Age- and gender-related fluctuation probabilities have been used.
The average duration of the benefit obligation at December 31, 2019 is 14.5 years (December 31, 2018:
14.3 years).
The actuarial assumptions may differ from the actual results due to the change in market conditions and
economic climate, higher or lower retirement rates, longer or shorter lives of insured parties and also
other estimated factors. These differences can have an impact on the pension obligations recognised
in future reporting periods.
Amounts recognised in comprehensive income in respect of these defined benefit plans are as follows:
Actuarial Dec. 31, 2019
Assumptions Germany Finland Switzerland
Biometric probability RT 2018 G
Dr. Heubeck
Gompertz/
TyEL
BVG
2015 GT
Discount rate 1.38% 1.28% 0.20%
Pension trend 1.75% 1.53% 0.00%
Salary trend 2.50% 1.29% 1.00%
Actuarial Dec. 31, 2018
Assumptions Germany Finland Switzerland
Biometric probability RT 2018 G
Dr. Heubeck
Gompertz/
TyEL
BVG
2015 GT
Discount rate 2.10% 2.03% 0.75%
Pension trend 1.75% 1.73% 0.00%
Salary trend 2.50% 1.49% 1.00%
2019
kEUR Germany Finland Switzerland Total
226 428 2,883 3,537
252 0 0 252
Net Interest expense 233 119 312 664
711 547 3,195 4,453
0 -2,225 -14,681 -16,906
Actuarial losses(+)/ gains(-) arising from
changes in demographic assumptions 0 0 0 0
changes in financial assumptions 1,499 2,268 11,762 15,529
experience adjustments -34 -276 1,056 746
1,465 -233 -1,863 -631
2,176 314 1,332 3,822Total
Return on plan assets (excluding amounts included in net
interest expense)
Remeasurement on the net defined
benefit liability:
Current service cost
Past service cost
Components of defined benefit costs recognised in other
comprehensive income
Service cost:
Components of defined benefit costs recognised in profit or
loss
47
In the financial year 2018, negative past service costs amounting to kEUR 497 have been recognised
in the consolidated statement of profit or loss and other comprehensive income, due to the change of a
parameter in the calculation of pension benefits under the Swiss pension scheme. For the purpose of
the external financial reporting, this item was treated as a non-operating, exceptional item and is,
therefore not included within the Operating EBITDA (see note (5)).
The remeasurement of the net defined benefit liability is included in other comprehensive income.
The amount included in the consolidated statement of finanical position arising from the Group’s obligation in respect of its defined benefit plans is as follows:
The present value of the defined-benefit obligations has developed as follows in the financial year 2019:
2018
kEUR Germany Finland Switzerland Total
253 427 3,065 3,745
174 0 -497 -323
Net Interest expense 218 133 186 537
645 560 2,754 3,959
0 -434 11,368 10,934
Actuarial losses(+)/ gains(-) arising from
changes in demographic assumptions 238 0 0 238
changes in financial assumptions -172 -1,349 -3,115 -4,636
experience adjustments -150 1,201 805 1,856
-84 -582 9,058 8,392
561 -22 11,812 12,351Total
Components of defined benefit costs recognised in other
comprehensive income (1)
Remeasurement on the net defined
benefit liability:
Return on plan assets (excluding amounts included in net
interest expense)
Service cost:
Current service cost
Past service cost
Components of defined benefit costs recognised in profit or
loss
Dec. 31, 2019
kEUR Germany Finland Switzerland Total
Present value of defined-benefit obligation 13,147 30,733 203,423 247,303
Fair value of plan assets 0 -25,059 -160,913 -185,972
Pension provisions 13,147 5,674 42,510 61,331
Dec. 31, 2018
kEUR Germany Finland Switzerland Total
Present value of defined-benefit obligation 11,242 28,886 183,061 223,189
Fair value of plan assets 0 -22,583 -140,672 -163,255
Pension provisions 11,242 6,303 42,389 59,934
2019
Germany Finland Switzerland Total
Defined-benefit obligation at the
beginning of the period 11,242 28,886 183,061 223,189
Current service cost 226 428 2,883 3,537
Interest expense 233 575 1,376 2,184
Contributions made by plan participants 0 0 1,742 1,742
Change in actuarial gains arising from
changes in demographic assumptions 0 0 0 0
changes in financial assumptions 1,499 2,268 11,762 15,529
experience adjustments -34 -276 1,056 746
Pension payments -271 -1,148 -5,713 -7,132
Past service cost 252 0 0 252
Effect of movements in exchange rates 0 0 7,256 7,256
Defined-benefit obligation
at the end of the period13,147 30,733 203,423 247,303
48
The fair value of the plan assets developed as follows in the reporting period:
The plan assets are broken down per investment category as follows:
The fair values of the above equity and debt instruments are mainly determined based on quoted market
prices in active markets whereas the fair values of properties are not based on quoted market prices in
active markets.
For the financial year 2019, the actual income from plan assets amounted to kEUR 15,745 (2018:
kEUR -10,477) in Switzerland and to kEUR 2,681 (2018: kEUR 854) in Finland.
In 2019, additional employer contributions of kEUR 4,590 (2018: kEUR 4,690) were made into statutory
pension insurance schemes (defined-contribution plans).
2018
kEUR Germany Finland Switzerland Total
Defined-benefit obligation at the
beginning of the period 11,052 29,125 179,369 219,546
Current service cost 253 427 3,065 3,745
Interest expense 218 552 1,077 1,847
Contributions made by plan participants 0 0 1,299 1,299
Change in actuarial gains arising from
changes in demographic assumptions 238 0 0 238
changes in financial assumptions -172 -1,349 -3,115 -4,636
experience adjustments -150 1,201 805 1,856
Pension payments -371 -1,070 -5,679 -7,120
Past service cost 174 0 -497 -323
Effect of movements in exchange rates 0 0 6,737 6,737
Defined-benefit obligation
at the end of the period11,242 28,886 183,061 223,189
2019
kEUR Finland Switzerland Total
Fair value at the beginning of the period 22,583 140,672 163,255
Interest income of plan assets 456 1,064 1,520
Contributions made by CABB 943 2,780 3,723
Contributions made by employees 0 1,742 1,742
Change in actuarial gains arising from changes in financial
assumptions
2,225 14,681 16,906
Pension payments -1,148 -5,713 -6,861
Effect of movements in exchange rates 0 5,687 5,687
Fair value at the end of the period 25,059 160,913 185,972
2018
kEUR Finland Switzerland Total
Fair value at the beginning of the period 21,894 147,323 169,217
Interest income of plan assets 420 891 1,311
Contributions made by CABB 905 2,910 3,815
Contributions made by employees 0 1,299 1,299
Change in actuarial gains arising from changes in financial
assumptions
434 -11,368 -10,934
Pension payments -1,070 -5,679 -6,749
Effect of movements in exchange rates 0 5,296 5,296
Fair value at the end of the period 22,583 140,672 163,255
kEUR Dec. 31, 2019 Dec. 31, 2018
Equity instruments 72,178 52,596
Debt instruments 75,878 70,769
Properties 20,453 20,482
Miscellaneous 17,463 19,408
Fair Value of plan assets 185,972 163,255
49
Significant actuarial assumptions for the determination of the defined benefit obligation are discount
rate, expected salary increase and mortality. The sensitivity analysis below has been determined based
on reasonably possible changes of the respective assumptions occurring at the end of the reporting
period, while holding all other assumptions constant:
If the discount rate is 50 basis points higher (lower), the defined benefit obligaton would decrease
by kEUR 16,873 (December 31, 2018: kEUR 15,002) (increase by kEUR 18,803; December 31,
2018: kEUR 16,681).
If the expected pension progression increases (decreases) by 0.5%, the defined benefit obligation
would increase by kEUR 14,600 (December 31, 2018: kEUR 13,028 (decrease by kEUR 13,485;
December 31, 2018: kEUR 12,045).
If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would
increase by kEUR 1,178 (December 31, 2018: KEUR 1,023 (decrease by kEUR 1,151, December
31, 2018: kEUR 1,016).
The sensitivity analysis presented above may not be representative of the actual change in the defined
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another
as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit
obligation has been calculated using the projected unit credit method at the end of the reporting period,
which is the same as that applied in calculating the defined benefit obligation liability recognised in the
statement of financial position.
The Group expects to make a contribution of kEUR 3,838 (December 31, 2018: kEUR 3,830) to the
defined benefit plans during the next financial year.
(26) Other provisions
Provisions for environment and rehabilitation relate to the responsibility of the Group in relation to the
cost of asbestos remediation and the rehabilitating of legacy issues of three landfill sites in Switzerland
as well as waste disposal obligations in Finland. The rehabilitation costs are borne by the major waste
contributors of the past, whereby the share of CABB AG is defined in accordance with a fixed distribution
key. The amount of the provision is the best estimate of management for the future outflow of funds in
connection with the rehabilitation obligations. Although the estimations and assumptions are regularly
reviewed and updated, the actual outcome can significantly differ from the current best estimate. The
rehabilitation of the largest landfill site is completed, which leads to the next phase of renaturation of
the site.
Personnel obligations include short term employee benefits for holiday allowances and overtime
kEUR 3,760 (December 31, 2018: kEUR 3,691), premiums and bonus payments of kEUR 4,375
(December 31, 2018: kEUR 4,987), and service anniversary payments of kEUR 1,649 (December 31,
2018: kEUR 1,605) as well as post-employment benefits of kEUR 989 (December 31, 2018: kEUR 566).
Other provisions mainly comprise provisions for other uncertain liabilities.
kEUR
Environment
and
rehabilitation
Personnel
obligations
Other
provisions Total
As of January 1, 2019, restated 2,718 11,020 867 14,605
Additions 436 10,671 384 11,491
Consumption -1,059 -10,398 -527 -11,984
Reversal 0 -622 -121 -743
Exchange differences 59 107 3 169
As of December 31, 2019 2,154 10,778 606 13,538
Thereof: current 1,644 8,642 606 10,892
50
(27) Notes
The acquisition of the CABB Group was mainly financed by way of public Euro bonds which were issued
by Monitchem Holdco 2 S.A. and Monitchem Holdco 3 S.A. in June 2014. On October 7, 2019, the
Group redeemed the existing indentures and issued the financial instruments described in the following.
The following table shows the nominal and effective interest rate as well as the book and market value
of the Notes as of December 31, 2019 by class.
The Senior Notes were issued by Monitchem Holdco 2 S.A., whereas the Senior Secured Notes and
the Senior Secured Floating Rate Notes were issued by Monitchem Holdco 3 S.A. On the Floating Rate
Senior Secured Notes, the interest is payable quarterly in arrears on March 15, June 15, September 15
and December 15 of each year, commencing on March 15, 2020. On the Fixed Rate Senior Secured
Notes and the Senior Notes, interest is payable semianually in arrears on March 15 and September 15
in each year, commencing on March 15, 2020.
The Senior Secured Notes and the Senior Secured Floating Rate Notes are guaranteed on a general
senior secured basis by Monitchem Holdco 2 S.A., CABB Group GmbH, CABB Holding GmbH, CABB
GmbH, CABB Europe GmbH, CABB AG, CABB Nordic Holding S.à. r.l., CABB Finland Oy, CABB Oy,
Kansas HoldCo 1, Inc. and Jayhawk Fine Chemicals Corporation. They are secured by first-ranking
security interests in the share capital of each of the guaranteeing CABB entities; certain material bank
accounts, intra-group loan receivables, certain material real estate owned by CABB AG and CABB Oy
and certain other assets of CABB Finland Oy, CABB Oy and Jayhawk.
The Senior Notes are guaranteed by the above mentioned CABB entities on a senior subordinated
basis. They are primarily secured by second-ranking security interests in the share capital of Monitchem
Holdco 3 S.A..
The Group may redeem all or, from time to time, part of the Floating Rate Senior Secured Notes due
2025 at any time on or after September 15, 2020; the Fixed Rate Senior Secured Notes due 2025 on
or after September 15, 2021 and the Senior Notes due 2026 on or after September 14, 2022.
Such early redemption options were reported as embedded derivatives. Upon certain events defined
as constituting a change of control the bond issuers are required to make an offer to purchase the
outstanding notes at a purchase price equal to 101% of their principal amount plus accrued and unpaid
interest.
The notes agreement defines certain covenants which, among other things, restrict the ability of the
bond issuers and their subsidiaries to incur or guarantee additional indebtedness, pay dividends,
redeem capital stock or make certain investments, transfer or sell certain assets, merge or consolidate
with other entities or enter into certain transactions with affiliates. Certain covenants will be suspended
if the relevant notes obtain and maintain an investment-grade rating.
Aggregate
principal
amount
Market value
as of
Dec. 31, 2019
in kEUR in kEUR
Floating Rate Senior Secured Notes 3 months
EURIBOR
plus 525 bps
6,013% p.a. March 15, 2025 175,000 178,760
Fixed Rate Senior Secured Notes 5.250% p.a. 6.021% p.a. March 15, 2025 315,000 331,139Senior Notes 9.500% p.a. 10.784% p.a. September 15, 2026 150,000 152,021
Total 640,000 661,920
Accrued financing costs -27,875
Amortised value of the embedded derivative 2,540
Notes (non-current) 614,665
9,362
624,027
Security Description
Nominal
interest rate
Effective
interest rate Maturity date
Accumulated interest payable on notes (current)
Total Notes
51
The notes are recognised at their aggregate principal amounts plus accrued and unpaid interest.
Transaction costs, which are amortised over the term of the notes, are deducted in an amount of
kEUR 27,875 as of December 31, 2019 (December 31, 2018: kEUR 12,730). Embedded derivatives
are added at their amortised value of kEUR 2,540 (December 31, 2018: kEUR 1,534).
The market value of the Notes and the market value of embedded derivatives in the indenture are
categorised as level 2 within the fair value hierarchy.
(28) Other non-current financial liabilities
The decrease in other non-current financial liabilities is mainly driven by the settlement of the bank loan
entered into by Kansas HoldCo 1, Inc., on November 1, 2018.
In December 2019, the minority shareholders contributed the entire outstanding amounts under the
shareholder loan agreements into the equity of our chinese subsidiary.
(29) Accounts payable, trade
Trade accounts payable result from the ongoing sourcing of raw materials and supplies as well as
services. In addition to purchase invoices, they also relate to accruals for invoices outstanding in respect
of goods and services received. They are all due within one year.
(30) Other current financial liabilities
The decrease in current other financial liabilities is mainly driven by the repayment of revolving credit
facilities.
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Lease Liabilities 7,421 3,930
Bank Loan 0 35,793
Loans from Non-controlling interests 0 7,668
Total Non-current other financial liabilities 7,421 47,391
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Lease Liabilities 3,784 3,300
Corporate Revolving Credit Facilitiy 0 6,874
Local Revolving Credit Facility 0 1,286
Bank Loan 0 371
Negative Fair Value of Interest Rate Swap 0 309
Other financial liablities 198 34
Total Current other financial liabilities 3,982 12,174
52
(31) Other non-financial liabilities
The increase in other non-financial liabilities is mainly driven by higher credit notes and increased
liabilities towards employees.
kEUR
Dec. 31, 2019 Dec. 31, 2018
restated
Credit Notes 2,734 467
Employee liabilities 2,331 1,678
Other tax payables 1,279 1,136
Miscellaneous 4,175 3,272
Total Current Other non-financial liabilities 10,519 6,553
53
Other disclosures
(32) Related parties
The sole shareholder of Monitchem Holdco 2 S.A. is Monitchem Holdco 1 S.à r.l., Luxembourg. The
latter is 86.32% (based on the ordinary shares quota) owned by Monitchem MidCo S.à r.l., Luxembourg.
The remaining 13.68% of the ordinary shares are held by CABB Co-Investment 1 GmbH & Co. KG and
CABB Co-Investment 2 GmbH & Co. KG, both Sulzbach (Taunus), Germany. These companies were
established in the course of the acquisition of the CABB Group in order to provide the management
team, the members of the advisory board as well as additional senior executives of the Group with the
opportunity of investing indirectly in this acquisition.
Monitchem MidCo S.à r.l., Luxembourg, is 91.74% (based on the ordinary shares quota) owned by
Monitchem S.à r.l., Luxembourg, the ultimate parent company that is beneficially owned by funds
advised by Permira Funds. The remaining 8.26% of the ordinary shares are held by CABB Co-
Investment 3 GmbH & Co. KG, and CABB Co-Investment 4 GmbH & Co. KG, both Sulzbach (Taunus),
Germany. These companies were established in order to provide members of the management team,
the members of the advisory board as well as additional senior executives of the Group with the
opportunity of investing indirectly in the future development of the Group. In the event of the sale of
Monitchem Holdco 2 S.A. or other Group companies, the shareholders and managing directors as well
as some employees and the members of the advisory board of the CABB Group are therefore entitled
to participate in the disposal proceeds. However, this will not result in any financial charges for
Monitchem Holdco 2 S.A. or another Group company.
Based on domiciliation agreements Monitchem Holdco 2 S.A. and Monitchem Holdco 3 S.A. were
charged at arm’s length by Permira Luxembourg S.à r.l. for services in a total amount of kEUR 43 (2018:
kEUR 30).
The members of the administrative board and key members of management are also considered to be
related parties.
The following persons were managing directors of Monitchem Holdco 2 S.A. in the financial year 2019:
Cédric Pedoni, Luxembourg
Séverine Michel, Luxembourg
Pierre Giacobbi, Luxembourg (since September 5, 2019)
Charles-Henri Beglin, Luxembourg (until August 21, 2019)
Eddy Perrier, Luxembourg (from August 21, 2019 until September 5, 2019)
The following persons belong to the management team of CABB Group and are indirect shareholders
of Monitchem Holdco 2 S.A., unless otherwise stated:
Valerie Diele-Braun, Chief Executive Officer, Aesch, Switzerland
Markus Schürholz, Chief Financial Officer, Düsseldorf, Germany (since January 1, 2019)
Dr. Joachim Dohm, Krefeld, Germany (until May 15, 2019)
Dr. Thomas Eizenhöfer, Köln, Germany
Carsten Wörner, Breuberg-Hainstadt, Germany
Tobias Schalow, Berlin, Germany (since January 1, 2020)
54
The advisory board of CABB Group GmbH consists of the following persons:
Roberto Gualdoni, Wachenheim, Germany
Klaus Edelmann, Krefeld, Germany
Dr. Rüdiger Scheitza, Köln, Germany
Ulrich Gasse, Frankfurt, Germany
Dr. Sebastian Orbe, Frankfurt, Germany (until January 29, 2020)
Sebastian Hoffmann, Frankfurt, Germany (until January 30, 2020)
Florian Kreuzer, London, Großbritannien (since February 4, 2020)
Fabian Selzam, Frankfurt, Germany (since February 4, 2020)
The following legal entities are, in accordance with IAS 24.9 (b) (v) defined to be related parties:
Pensionskasse der CABB AG, Pratteln, Switzerland
Pensionskasse der Mitarbeiter der Hoechst-Gruppe VVaG, Frankfurt, Germany
Duff & Phelps, LLC, New York, USA. Being a portfolio company of Permira, Duff & Phelps was
mandated to prepare a valuation appraisal of Jayhawk Fine Chemicals Corporation (USA) in
conjunction with the application of IFRS 3. The consideration paid in exchange of the appraisal
services were charged at arm’s length.
Total remuneration of key members of management
Key members of management are the members of the advisory board, the managing directors of
Monitchem Holdco 2 S.A. as well as the management team of the CABB Group.
In the financial year 2019, the total remuneration of key members of management (kEUR 4,436;
2018: kEUR 3,593) is broken down as follows:
The total remuneration paid to the members of the management body for the period from January 1, to
December 31, 2019 in the financial year 2019 amounted to kEUR 3,940 (2018: kEUR 3,161). The total
remuneration of the advisory board amounted to kEUR 300 in the financial year 2019 (2018: kEUR 300),
thereof kEUR 50 were unpaid as of December 31, 2019 (December 31, 2018: kEUR 50).
There are no provisions (allowances) for doubtful receivables due from key members of management.
Moreover, no costs have been incurred for irrecoverable or doubtful receivables.
As of December 31, 2019, the payable towards “Pensionskasse der CABB AG” amounts to kEUR 380
(December 31, 2018: kEUR 363) and includes an interest amount of kEUR 0 (December 31, 2018:
kEUR 2). As of December 31, 2019, the receivable from “Pensionskasse der Mitarbeiter der Hoechst-Gruppe VVaG” amounts to kEUR 0 (December 31, 2018: kEUR 0).
kEUR 2019 2018
Short-term employee benefits 4,436 3,590
Post-employment benefits, including contributions
to defined contribution plans
0 3
Total remuneration management 4,436 3,593
55
(33) Financial instruments
The following table shows the carrying amounts and market values of financial assets and liabilities by
category of financial instrument under IFRS 9 and a reconciliation to the corresponding line items in the
consolidated statement of financial position:
(1) AC : at amortised cost FVTPL : at fair value through profit or loss
(2) FVTPL : at fair value through profit or loss; Derivatives that do not qualify for hedge accounting
The following valuation techniques have been used for determining the fair values of financial assets
and financial liabilities:
Market comparison technique (i.e. Notes): financial instruments with standard terms and
conditions which are traded on active markets are valuated based on broker quotes. Similar
contracts are traded in an active market and the quotes reflect the actual transations in similar
instruments.
Discounted cash flows (i.e. Derivatives (interest rate swaps)): financial instruments that are not
traded in an active market (for example: derivatives/ interest rate swaps) are valuated considering
the present value of expected future cash flows based on observable yield curves.
Option pricing model (i.e. Embedded derivatives in the indenture): The fair value of embedded
derivatives is calculated using a standard option pricing model based on Monte Carlo simulation.
For the valuation, the credit spread for fixed-rate bonds used in calculation is calibrated such that
the model reproduces the current market price quoted on the Luxembourg Stock Exchange (Bourse
de Luxembourg) at the respective valuation date. The option pricing model also considers the risk-
free interest rate as another paramater.
These valuation techniques maximise the use of observable market data where it is available and rely
as little as possible on entity specific estimates. If all significant inputs required to determine the fair
value of a financial instrument are observable, the instrument is included in level 2. There are no
financial instruments, which require a determination of fair values based on unobservable inputs (level
3).
Derivative financial instruments (embedded derivatives in the indenture and interest rate swaps not
included in a designated hedging relationship) are categorised as “at fair value through profit or loss” in accordance with IFRS 9. They are recognised at their fair value, depending on their fair value and their
maturity on the reporting date, derivative financial instruments are included in financial assets (positive
fair value) or in financial liabilities (negative fair value). The value of the embedded derivatives is affected
by the interest of the comparable market instrument on each potential exercise date and will rise if the
relevant interest rate declines and vice versa.
kEUR
Measurement
Category
IFRS 9(1)
Carrying
amount
Dec. 31, 2018
restated
Market Value
Dec. 31, 2018
Carrying
amount
Dec. 31, 2019
Market Value
Dec. 31, 2019
Trade accounts receivable AC 85,433 85,433 70,587 70,587
Financial assets Derivatives (embedded) FVTPL (level 2) 36 36 21,475 21,475
Other financial assets AC 3,490 3,490 10 10
Cash and cash equivalents AC 22,252 22,252 29,063 29,063
Total financial assets 111,211 111,211 121,135 121,135
Notes AC (level 2) 575,152 541,266 624,027 661,920
Other financial liabilities
Lease liabilities N/A 7,230 7,230 11,205 11,205
Other financial liabilities AC 52,027 52,027 198 198
Derivatives (interest rate swaps) FVTPL (level 2)(2) 309 309 0 0
Trade accounts payable AC 69,131 69,131 69,394 69,394
Total financial liabilities 703,849 669,963 704,824 742,717
56
Cash and cash equivalents, trade accounts receivable, other financial assets in the category “at amortised cost” under IFRS 9 as well as trade accounts payable and other financial liabilities mainly
have short remaining terms. Accordingly, the figures shown in the balance sheet as of the reference
date are approximately equivalent to the fair value.
Net gains and losses from financial instruments comprise the interest income and expense, the
amortisation of arrangement fees, bank fees and other fees, the result from the translation of foreign
currencies and other effects on the earnings resulting from financial instruments. The line financial
instruments at fair value through profit and loss contains only those gains and losses from instruments
measured at fair value through profit or loss which are not designated as hedging instruments in
accordance with IFRS 9.
Net gains and losses from financial instruments by valuation categories are as follows:
(34) Financial risk management
The operations of the Group are exposed to liquidity, credit, interest rate and exchange rate risks. The
Group’s overall risk management seeks to minimise potential adverse effects on the Group’s financial performance. In November 2019, the Group joined a reverse factoring contract of one of its customers,
in the course of which trade receivables due from a major customer are settled through a bank.
Foreign currency risks
The Group is exposed to changes in exchange rates in the case of monetary assets and liabilities,
including intercompany loans, in foreign currencies that are different from respective functional
currencies of the consolidated entity.
The Group has the objective to keep the risks from foreign currency at an acceptable level. It only
accepts the risks to the extent necessary to finance the foreign subsidiaries and to support the business
operations.
kEUR
2019 2018
restated
of which:
interest result 26 28
currency translation 121 796
147 824
Financial liabilities at amortised cost
of which:
interest result -35,989 -33,175
amortisation of arrangement fees -14,624 -4,224
early redemption fees -3,008 0
commitment and other bank fees -1,519 -1,453
currency translation 3,932 4,679
-51,208 -34,173
Financial instruments at fair value
of which:
interest result -291 -655
subsequent measurement 19,145 316
18,854 -339
Total -32,207 -33,688
Financial assets measured at amortised cost/
Loans and Receivables
57
The following table shows the transaction-related foreign currency risk broken down over the individual
major currencies as of December 31, 2019. A reasonably possible 10% strengthening (weakening) of
the USD, CHF and RMB against all other currencies would have affected the measurement of financial
instruments denominated in a foreign currency and affected equity and profit or loss by the amounts
shown below. This analysis assumes that all other variables, in particular interest rates, remain constant
and ignores any impact of forecast sales and purchases. As the Derivatives embedded in the EURO
Notes are denominated in EURO, no foreign currency exposure with regard to the functional currency
of the Group exists.
Interest rate risk
Interest rate risks result from changes in prevailing market interest rates, which can cause a change in
the fair value of fixed-rate instruments, and changes in the interest payments of variable-rate
instruments. While these risks are relevant to the financing activities of the Group (long term notes),
they are not of significant importance for the Group’s operating activities.
Borrowings issued at variable interest rates exposes the Group cash flow interest rate risks. On October
7, 2019, the Group has refinanced the existing Floating Rate Notes by issuing Senior Secured Floating
Rate Notes in an amount of kEUR 175,000. These notes bear a nominal interest rate equal to the 3
month EURIBOR plus 5.250%, whereby if the 3m EURIBOR is less than zero, such rate is deemed to
be zero. Given the currrent and prospective short term interest rate environment, the Group did not
enter into new interest rate swaps during the reporting period. The existing floating-to-fixed interest rate
swap, which mitigated to a large extend the cash flow interest rate risks under the former variable
interest rate financing agreements matured on June 15, 2019.
positive
exposure
negative
exposure
Total
exposureNet effect
kEUR Dec. 31, 2019 Dec. 31, 2019 Dec. 31, 2019 Dec. 31, 2019
Currency:
USD 41,196 -2,378 38,818 3,882
RMB 0 -2,251 -2,251 -225
CHF 132,369 -24,180 108,189 10,819
Total effect 173,565 -28,809 144,756 14,476
positive
exposure
negative
exposure
Total
exposureNet effect
kEUR
Dec. 31, 2018
restated
Dec. 31, 2018
restated
Dec. 31, 2018
restated
Dec. 31, 2018
restated
Currency:
USD 9,100 -4,609 4,491 449
RMB 0 -17,439 -17,439 -1,744
CHF 138,920 -11,280 127,640 12,764
Total effect 148,020 -33,328 114,692 11,469
58
The following table shows the interest rate profile of the Group’s interest-bearing financial instruments
and the exposure to the interest rate risk:
The following sensitivity analysis shows the reasonably possible effects of a 1% increase or decline in interest rates on the consolidated result after tax for the financial year 2019, while holding all other variables (in particular foreign currency exchange rates) constant:
Credit risk
A default risk of financial instruments arises if counterparties are not able to meet their payment
obligations, or are not able to meet these obligations in full. Cash and cash equivalents are only held
with selected banks and thus with contract partners which is rated at least BBB by S&P or Fitch or at
least Baa2 by Moody’s in order to limit this risk.
The risk attributable to trade accounts receivable or financial receivables is defined as the risk that
outstanding receivables are not settled on time or that they are not settled at all. A credit risk
management system operating on the basis of a globally applied credit policy ensures that credit risks
are constantly monitored and bad debts minimised. This policy, which applies to both new and existing
customers, governs the allocation of credit limits and compliance with those limits, individual analyses
of customers’ creditworthiness based on both internal and external financial and macro-economic
information, risk classification, and continuous monitoring of the risk of bad debts at the local level.
Collateral received (e.g. documentary letters of credit) and other safeguards include country-specific
and customer-specific protection afforded by credit insurance, confirmed and unconfirmed letters of
credit in export business, as well as warranties and guarantees. Furthermore, in certain cases down-
payments and advance payments are agreed. As soon as receivables have reached the second
dunning level, the sales department is required to make clear payment agreements with the customer.
A dunning run is carried out every week. If a receivable reaches the third dunning level, further deliveries
are suspended until payment is actually received. We also monitor our key customer relationships at
the regional and global level. In case a contract partner becomes defaulted, all financial asset with this
counterparty are impaired.
The carrying amount of the financial assets represents the maximum credit exposure.
Nominal amount
kEUR Dec. 31, 2019
Dec. 31, 2018
restated
Fixed-rate instruments
Financial liabilities -476,205 -423,731
-476,205 -423,731
Effect of interest rate swaps 0 -175,000
-476,205 -598,731
Variable-rate instruments
Financial liabilties -175,000 -220,274
Effect of interest rate swaps 0 175,000
-175,000 -45,274
kEUR Dec. 31, 2019
Dec. 31, 2018
restated
1% increase in interest rates -3,054 388
1% decrease in interest rates -1,056 -307
59
Liquidity risk
Liquidity risk is the risk that CABB Group will encounter difficulties in meeting the obligations associated
with its financial liabilities. The Group’s approach to manage liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due. The Group monitors and
reports cash flow on a monthly basis.
The current financial liabilities are backed by cash and cash equivalents (€29.1 million; December 31,
2018: €22.3 million), by unutilised revolving credit facilities of €75.8 million (December 31, 2018:
€91.1 million) and a guarantee line of €4.2 million.
The following table shows the contractual cash flows of financial liabilities (repayment amount and
interest) at the reporting date:
kEUR
Dec. 31, 2019
Total 2020 2021 2022 2023 2024 et seq.
Non-derivative financial liabilities
Notes 914,459 39,982 40,103 40,103 40,103 754,168
Accounts payable, trade 69,394 69,394 0 0 0 0
Lease Liabilities 12,479 4,196 2,758 1,590 1,261 2,674
Other 0 0 0 0 0 0
Financial liabilities 996,332 113,572 42,861 41,693 41,364 756,842
kEUR
Dec. 31, 2018
Total, restated 2019 2020 2021 2022
2023 et seq.
restated
Non-derivative financial liabilities
Notes 677,615 32,202 32,267 432,129 181,017 0
Accounts payable, trade 69,131 69,131 0 0 0 0
Lease Liabilities 7,749 3,323 1,942 1,268 687 529
Other 29,635 11,385 3,446 8,899 5,905 0
Financial liabilities 784,130 116,041 37,655 442,296 187,609 529
Derivative financial liabilities
Interest Rate Swap 309 309
Derivative financial liabilities 309 309
60
(35) Reconciliation of movements of financial liabilities and assets to cash flows arising from financing activities
The following table shows the changes of financial liabilities and assets and specifies the payments
made and received, which are disclosed within the consolidated statement of cash flows under cash
used/ provided in financing activities:
Notes Bank Loan
Loans from Non-
controlling
interests
Interest Rate
Swap
Other financial
Liabilities
Other financial
assets(3) Total
As of December 31, 2017 571,497 0 7,366 859 1,864 -2,955 578,631
Adjustment on adoption of IFRS 16 10,214 10,214
As of January 1, 2018 571,497 0 7,366 859 12,078 -2,955 588,845
+ Acquisition through common
control transaction
531 531
+ Proceeds from bank loans 37,445 37,445
- Interests received -7 -7 (1)
- Interests and financing fees
paid
-32,265 -1,411 -660 -361 -34,697(2)
- Principal elements of lease
payments
-5,780 -5,780
+ Proceeds from short term
borrowings
6,874 6,874
- /+ Changes of other financial
liabilities
-38 98 60
Total changes from
financing cash flows,
restated
-32,265 36,034 -38 -660 1,362 -7 4,426
Changes in fair value -505 -544 228 -821
+ Interest expense 32,239 478 425 654 33,796
+ Recognition of accrued
financing costs
4,186 4,186
- Increase of other financial
assets
-672 -672
- /+ Effect of changes in foreign
exchange rates
-348 -84 79 -120 -473
+ Increase of Finance Lease
Liability
1,905 1,905
Liability-related other
changes, restated36,425 130 341 654 1,984 -792 38,742
575,152 36,164 7,669 309 15,424 -3,526 631,192
+ Cash proceeds from the
issuance of Notes
636,328 636,328
- Payments due to redemption
of Notes
-588,008 -588,008
- Repayment of bank loans -38,692 -38,692
- Interest and financing fees
paid
-50,084 -2,352 -315 -497 -53,248
- Repayment of short term
borrowings
-6,874 -6,874
- Principal elements of lease
payments
-5,970 -5,970
- Interests received -3 -3 (1)
- Interests paid 0 (2)
- Decrease in other financial
assets
2,829 2,829
- /+ Changes in other financial
liabilities
-1,311 -1,311
Total changes from
financing cash flows-1,764 -41,044 0 -315 -14,652 2,826 -54,949
Changes in fair value -285 -18,860 -19,145
+ Interest expense 49,212 3,306 375 291 35 53,219
- Interest income 3 3
+ Increase in lease liablities 10,385 10,385
+ Recognition of accrued
financing costs
1,427 1,427
- Conversion of Loans from Non-
controlling interests into
Equity without issue of Shares
-8,172 -8,172
- /+ Changes in other financial
assets
-1,911 -1,911
- /+ Effect of changes in foreign
exchange rates
1,574 128 211 -17 1,896
Liability-related other
changes50,639 4,880 -7,669 291 10,631 -1,925 56,847
As of December 31, 2019 624,027 0 0 0 11,403 -21,485 613,945
kEUR
As of December 31, 2018,
restated
61
(1) Interest received disclosed in the consolidated statement of cash flows include other interest payments of kEUR 23 (2018: kEUR 21) received due to cash and cash equivalents.
(2) Interests paid disclosed in the consolidated statement of cash flows include other finance charges of kEUR 1,658 (2018: kEUR 1,656), mainly comprise commitment fees incurred due to undrawn revolving credit facilities.
(3) Other financial assets are presented with a negativ sign in order to facilitate the reconciliation of the amounts with the consolidated statement of cash flows.
(36) Contingent liabilities
At the time of preparing the financial statements, there are no major contingent liabilities due to third
parties that require disclosure.
(37) Information regarding employees
CABB Group employed on average of 1,141 persons during the year 2019 (2018: 1,018); the break-
down is as follows:
As of the balance sheet date December 31, 2019, the Group employed 1,130 persons (December 31,
2018: 1,093). (38) Auditor’s fees
The amounts invoiced and accrued, excluding VAT, for services provided to the Company (and its
consolidated subsidiaries) by KPMG Luxembourg, Société Coopérative, Luxembourg, and other
member firms of the KPMG network during the year were as follows:
2019 2018
restated
Production and Technology 944 854
Research and development 27 22
Administration and sales 170 142
Total average 1,141 1,018
kEUR
2019 2018
restated
Audit of financial statements 604 652
Other assurance services 1,430 21
Tax advisory services 44 19
Total 2,078 692
62
(39) Events after the balance sheet date
In the financial year 2020, CABB will have to continue to compete in a volatile economic environment
at a high level of uncertainty. The outbreak of the coronavirus (COVID-19) disease is contributing to
this. A global economic downturn will occur, and a worldwide recession is a potential scenario.
Until now, our business activities in both business units are not materially impacted, as our customers
are active in industries and markets, which are to a smaller extent restricted by partially severe
governmental measures, implemented in order to contain the outbreak of the coronavirus. However,
depending on the future dynamic and swift development of the disease, there are risks of supply chain
disruptions and production shutdowns. We have implemented measures to mitigate these risks to the
extent possible.
We have multi-sourcing strategies for key raw materials in place, are considering inventory strategy to
buffer against supply chain disruptions and have implemented further organisational measures to
mitigate those risks in order to safely continue our operations. CABB has a pandemic preparedness
plan in place in order to protect our employees from infections and to ensure business continuity at our
headquarters and our production facilities alike. The plan includes the nomination of global and local
task forces, clear instructions in the case of suspicion and protective isolative measures such as travel
and meeting bans, team splitting in the teams and production shifts. Based on business continuity risk
analysis, key processes and personnel are identified and well equipped by IT equipment for flexible
work options. Furthermore, CABB is in close contact with local health experts and strictly follows the
recommendations of the WHO and relevant national authorities. We experience challenges and delays
in the shipping of our products via sea to Asia, as freight capacities and container availability have
become very tight. Other sea routes are highly booked as well but not critical for the time being. Road
transports within Europe are manageable, but occasional delays might apply due to local restrictions or
national regulations that hinder smooth flow of goods (e.g. by intense border control). We pre-book
shipments as early as possible and to reserve additional freight capacities on the spot market, even if
this measure is associated with increased costs. Further, we try to switch road transports to intermodal
transport wherever possible. We are in close contact with our suppliers and customers and analyse the
supply chain risks on an ongoing basis.
There were no further major events after the balance sheet date up to March 30, 2020 (the date when
the annual report was authorised for issue by mangement.
Luxembourg, March 30, 2020
Monitchem Holdco 2 S.A.
Management
Cédric Pedoni