Financial instruments and financial risk management


Financial instruments

The following table shows a comparison between the book value of the Group's financial instruments and their fair value.

Analysing the table shows that the fair value is different from the book value only in the case of short-term and long-term fixed-rate financial debts. This difference, corresponding to Euro 6,156 thousand, is generated by a recalculation of these loans at year-end date at current market rates.
Fair value is classified as Level 2 in the fair value hierarchy (see paragraph “Categories of financial assets and liabilities stated in the financial statements and fair value hierarchy”) and was measured using generally accepted discounted cash flow models and a free-risk discount rate..

(in thousands of Euro) Book value Fair value
  12.31.2013 12.31.2012 12.31.2013 12.31.2012
FINANCIAL ASSETS        
Cash and cash equivalents 125,344 85,209 125,344 85,209
Securities held for trading 14 15 14 15
Held-to-maturity investments 7,462 8,199 7,462 8,199
Assets for derivative financial instruments 32 15 32 15
Current financial receivables - - - -
Trade receivables 145,837 155,161 145,837 155,161
Other receivables 7,827 9,109 7,827 9,109
Other assets 3,692 3,559 3,692 3,559
Other financial assets available for sale 439 489 439 489
Non-current trade receivables 4 - 4 -
Non-current financial receivables - - - -
Other non-current receivables 31,582 30,157 31,582 30,157
FINANCIAL LIABILITIES        
Short-term fixed rate financial debts 7,685 11,678 8,058 11,855
Other floating rate short-term financial debts 75,950 86,295 75,950 86,295
Other short-term liabilities for derivative financial instruments 93 1,011 93 1,011
Trade and other payables 285,410 282,050 285,410 282,050
Other current liabilities 8,055 8,765 8,055 8,765
Other fixed rate medium/long-term financial debts 142,886 13,902 148,669 15,558
Other floating rate medium/long-term financial debts 189,453 262,692 189,453 262,692
Other medium/long-term liabilities for derivative financial instruments 21,378 13,708 21,378 13,708

 

Financial risk management

Given that the Group operates on world markets, its activity is exposed to various kinds of financial risks, including fluctuations, up or down, of interest and exchange rates, and cash flow risks (for cash flows generated outside of the Eurozone). In order to minimise these risks, the Group uses derivatives as part of its risk management activities, whereas it does not use or hold derivatives or similar instruments purely for trading purposes.

The Group also has available a whole series of financial instruments other than derivatives, such as bank loans, financial leases, rentals, sight deposits, payables and receivables deriving from normal operating activities.
The Group handles its main hedging operations centrally. Precise instructions have also been issued, laying down guidelines on risk management, while procedures have been introduced to control all transactions in derivatives.

 

Interest risk

The interest risk to which the Group is exposed mainly arises from long-term debts.

These debts may be fixed or floating rate.

Floating rate debts, which represent 65% of the net book value of Group loans, expose the Group to a risk arising from interest rate volatility (cash flow risk).

With regard to this risk, for the purposes of the related hedging, the Group may use derivative contracts which limit the impacts on the Income Statement of changes in the interest rate. At present, hedging transactions cover around 84% of the net book value of the Group's floating-rate debts. After such transactions, floating-rate loans exposing the Group to a cash flow risk fall to 10% of the net book value of the Group's total loans.

The following table gives a breakdown, by maturity, of the book value of the Group's financial assets and liabilities instruments, which are exposed to interest rate risk as of December 31, 2013, split according to whether they are contractually at a fixed or floating rate (for further details see the table shown in the analysis of "Liquidity risk"):

(in thousands of Euro) within 12
months
between
1 and 2
years
between
2 and 3
years
between
3 and 4
years
between 4
and 5 years
beyond 5
years
Total
TOTAL FIXED RATE (7,685) (9,820) (8,887) (14,251) (13,098) (96,830) (150,571)
TOTAL FLOATING RATE - ASSET 132,852 - - - - - 132,852
TOTAL FLOATING RATE - LIABILITIES (76,043) (74,333) (69,559) (56,809) (10,130) - (286,874)

 

Financial instruments booked to “Total floating rate – Asset” refer to “Cash and cash equivalents” and “Other financial assets” (Securities held for trading, Held-to-maturity investments, Assets for derivative financial instruments).
Below there is a sensitivity analysis which shows the impact on the Income Statement, net of tax, and on Equity of a change in interest rates that is considered reasonably possible.

An increase or decrease in interest rates of 100 basis points, applied to floating-rate financial assets and liabilities in existence as of December 31, 2013, including interestrate hedges, would have the following effects:

(in thousands of Euro) 12.31.2013 12.31.2012
Sensitivity Analysis Net profit

Equity

Net profit Equity
+ 100 basis points 951 7,943 (1,113) 2,841
-100 basis points (960) (8,346) 1,113 (2,841)

 

The effect on Equity differs from the effect on the Income Statement by Euro 6,992 thousand (in the event of an increase in interest rates), and by Euro -7,386 thousand (in the event of a decrease in interest rates), which reflects the change in fair value of the instruments hedging the interest rate risk.

 

Foreign currency risk

As it operates at an international level, the Group is exposed to the risk that changes in exchange rates could have an impact on the fair value of some of its assets or liabilities.
Moreover, as can be seen from the segment information given in note 4, the Group produces and sells mainly in countries of the Eurozone, but it is potentially exposed to currency risk, above all in respect of the British Pound, Brazilian Real, US Dollar, Argentine Peso, Chinese Renminbi and Canadian Dollar.
Generally speaking, the Group is not particularly exposed to exchange risk, which is mainly related to the translation of foreign subsidiaries' financial statements, as the currencies in which the foreign operating companies bill and those in which they are invoiced tend to be much the same.

As regards borrowings, there are also policies stating that any funds raised from third parties have to be in the same currency as the functional currency of the company obtaining the loan. If any exception is made to this principle, then the risk is hedged through forward currency purchases.
More specifically, the Holding Company Sogefi S.p.A. made one private placement of bonds for the amount of USD 115 million in 2013. The exchange risk on this financing was hedged through cross currency swap contracts (please see paragraph “Hedging – Exchange risk hedges” for more details).

A sensitivity analysis is provided below, which shows the impact on the Income Statement, especially on "Exchange (gains) losses", net of tax, and on Equity of a change that is considered reasonably possible in exchange rates of the main foreign currencies. Note that the exchange effect of translating the financial statements of foreign subsidiaries into Euro has not been taken into consideration here.
What has been taken into consideration are the financial assets and liabilities outstanding as of December 31, 2013 denominated in a currency other than the functional currency of the individual subsidiaries. This analysis also takes into account any changes in the fair value of the financial instruments used to hedge exchange risk.

As of December 31, 2013, exchange risk was concentrated mainly in transactions with the Euro.

A 5% appreciation or depreciation of the Euro against the other main currencies would have the following effects:

(in thousands of Euro) 12.31.2013 12.31.2012
Sensitivity Analysis Net profit

Equity

Net profit Equity
+ 5% (481) (481) (613) (613)
- 5% 540 540 661 661

 

These effects are mainly due to the following exchange rates:

  • EUR/CNY mainly due to the debt exposure for the trade and financial payables in Euro of Chinese subsidiaries;
  • EUR/ARP mainly due to the debt exposure for the trade payables in Euro of Argentinean subsidiaries.

The cross currency swaps on the private placement mentioned above neutralise the effect of possible fluctuations in the EUR/USD exchange rate.

 

Price risk

The Group is partially exposed to price risk as it makes purchases of various raw materials such as steel, plastics, aluminium, cellulose products.
The risk is handled in the best way possible thanks to centralised purchasing and a policy of having various suppliers for each kind of raw material, operating in different parts of the world.
We would also point out that price risk is generally mitigated by the Group's ability to pass on part of the increase in raw material costs to selling prices.
The price risk on Group investments classified as “Securities held for trading” and “Other financial assets available for sale” is not significant.

 

Credit risk

This is the risk that one of the parties signing a contract of a financial nature defaults on an obligation, thereby provoking a financial loss. This risk can derive from strictly commercial aspects (granting and concentration of credits), as well as from purely financial aspects (choice of counterparties used in financial transactions).
From a commercial point of view, the Group does not have excessive concentrations of credit risk as it operates on distribution channels, both Original Equipment and the Aftermarket, that make it possible not to depend too much on individual customers. For example, Original Equipment sales are largely to car and industrial vehicle manufacturers.
As regards the Aftermarket, on the other hand, the Group’s main customers are important international purchasing groups.
In order to minimise credit risk, however, procedures have in any case been implemented to limit the impact of any customer insolvencies.
As regards counterparties for the management of financial resources, the Group only has recourse to partners that have a safe profile and a high international standing.
The Group's maximum exposure to credit risk as of December 31, 2013 is represented by the book value of the financial assets shown in the financial statements (Euro 322,233 thousand), as well as by the nominal value of the guarantees given in favour of third parties, as mentioned in note 43 (Euro 11,459 thousand).

The exposure to credit risk is essentially linked to trade receivables which amounted to Euro 140,576 thousand as of December 31, 2013 (Euro 156,245 thousand as of December 31, 2012), written down by Euro 4,703 thousand (Euro 5,263 thousand as of December 31, 2012).
Receivables are backed by mainly insurance guarantees for Euro 6,174 thousand (Euro 4,652 thousand as of December 31, 2012). The Group does not have any other guarantees covering trade receivables.

The following table shows the changes in the allowance for doubtful accounts:

(in thousands of Euro) 12.31.2013 12.31.2012
Opening balance 5,263 5,319
Change to the scope of consolidation - -
Accruals for the period 491 706
Utilisations (240) (627)
Provisions not used during the period (660) (104)
Other changes (36) 6
Exchange differences (115) (37)
TOTAL 4,703 5,263


The following is an ageing analysis of gross receivables and the related allowance for doubtful accounts to help evaluate credit risk:

(in thousands of Euro) 12.31.2012
  Gross value Allowance for doubtful accounts Net value
Receivables past due:      
0-30 days 12,631 (3) 12,628
30-60 days 3,981 (39) 3,942
60-90 days 1,783 (153) 1,630
over 90 days 8,938 (5,068) 3,870
Total receivables past due 27,333 (5,263) 22,070
Total receivables still to fall due 128,912 - 128,912
TOTAL 156,245 (5,263) 150,982

 

(in thousands of Euro) 12.31.2013
  Valore lordo Fondo svalutazione Valore netto
Receivables past due:      
0-30 days 6,791 (55) 6,736
30-60 days 4,740 (101) 4,639
60-90 days 2,060 (96) 1,964
over 90 days 7,926 (4,398) 3,528
Total receivables past due 21,517 (4,650) 16,867
Total receivables still to fall due 119,059 (53) 119,006
TOTAL 140,576 (4,703) 135,873

 

As of December 31, 2013, gross receivables past due were Euro 5,816 thousand less than at the end of the previous year; this is mainly attributable to subsidiaries Systèmes Moteurs S.A.S. and Sogefi Engine Systems Canada Corp. The decrease is concentrated in the “0-30 days” bracket (Euro -5,840 thousand).
The impact of gross receivables past due on total receivables stands at 15.3% compared to 17.5% in the previous year.
Past due receivables have been written down by 21.6% of the total (19.3% as of December 31, 2012) and 55.5% (56.7% as of December 31, 2012) considering only the “over 90 days” bracket. Writedowns refer mainly to disputed amounts or receivables that have been due for a significant period of time and can no longer be collected.
Net receivables past due account for 12.4% of total net receivables, compared to 14.6% in the previous year.
The item “Total receivables still to fall due” does not contain significant positions that have been renegotiated.

Considering the nature of the Sogefi Group's customers (cars and industrial vehicles manufacturers and important international purchasing groups), a Credit risk analysis by type of customer is not considered meaningful.

 

Liquidity risk

The Group is subject to a minimum amount of liquidity risk, namely having to handle a situation where it is not able to raise sufficient funds to meet its liabilities.
The Group has always taken an extremely prudent approach to its financial structure, using mainly medium/long-term funding, whereas forms of short-term financing are generally used only to cope with moments of peak requirement.
Its solid capital structure makes it relatively easy for the Group to find additional sources of financing.
It should also be mentioned that the Group has implemented a cash pooling system for all of the main European subsidiaries, which makes it possible to optimise liquidity and cash flow management at a supranational level.

The following table shows an analysis of the Group's financial assets and liabilities instruments by maturity, including the amount of future interests to be paid and trade receivables and payables:

(in thousands of Euro) within 12
months
between
1 and 2
years
between
2 and 3
years
between
3 and 4
years
between 4
and 5 years
beyond 5
years
Total
Fixed rate              
Finance lease Sogefi Filtration Ltd (161) (181) (202) (227) (257) (1,352) (2,380)
Finance lease Allevard Sogefi U.S.A. Inc. (613) (634) (655) (677) (699) (1,723) (5,001)
Private Placement USD 115 million Sogefi S.p.A. - - - (11,913) (11,913) (59,083) (82,909)
Private Placement USD 25 million Sogefi S.p.A. - - - - - (24,926) (24,926)
Sogefi (Suzhou) Auto Parts Col., Ltd loan - (3,972) - - - - (3,972)
Sogefi Filtration do Brasil Ltda loan - - (6,377) - - - (6,377)
Systèmes Moteurs S.A.S. loan (1,710) (437) - - - - (2,147)
Sogefi Engine Systemes Moteurs Canada Corp. loan (597) (635) (676) (658) - - (2,566)
Government financing (589) (623) (620) (507) (229) (365) (2,933)
Other fixed rate loans (4,015) (3,338) (357) (269) - - (7,979)
Future interest (7,055) (7,922) (7,939) (6,186) (5,372) (10,894) (45,368)
Liabilities for derivative financial instruments - - - - - (9,381) (9,381)
TOTAL FIXED RATE (14,740) (17,742) (16,826) (20,437) (18,470) (107,724) (195,939)
Floating rate              
Cash and cash equivalents 125,344 - - - - - 125,344
Financial assets 7,476 - - - - - 7,476
Assets for derivative financial instruments 32 - - - - - 32
Current financial receivables - - - - - - -
Non-current financial receivables - - - - - - -
Bank overdrafts and other short-term loans (6,885) - - - - - (6,885)
Sogefi S.p.A. loans (41,371) (71,040) (65,722) (54,107) - - (232,240)
Shanghai Sogefi Auto Parts Co., Ltd loans (11,009) - - - - - (11,009)
Sogefi Filtration S.A. loan (1,400) (1,400) (700) - - - (3,500)
Systèmes Moteurs S.A.S. loan (3,500) - - - - - (3,500)
Sogefi Engine Systems Canada Corp. Loans (2,039) (636) (674) (653) - - (4,002)
Allevard Rejna Autosuspensions S.A. loan (4,000) - - - - - (4,000)
Finance lease Allevard Rejna Autosuspensions S.A. (344) - - - - - (344)
Other floating rate loans (4,780) (428) (592) (1,017) - - (6,817)
Future interest (10,633) (8,368) (5,314) (2,713) - - (27,028)
Liabilities for derivative financial instruments - exchange risk hedging (93) - - - - - (93)
Future financial expenses on derivative instruments - interest risk hedging * (4,330) (4,498) (4,472) (4,230) (1,637) - (19,167)
TOTAL FLOATING RATE 41,846 (87,199) (78,303) (62,927) (1,637) - (188,220)
Trade receivables 145,837 - - - - - 145,837
Trade and other payables (285,410) - - - - - (285,410)
TOTAL FINANCIAL INSTRUMENT - ASSET 278,689 - - - - - 278,689
TOTAL FINANCIAL INSTRUMENT - LIABILITIES (391,156) (104,941) (95,129) (83,364) (20,107) (107,724) (802,421)

* The amount is different compared to Liabilities for derivative instruments - interest risk hedging (equal to a total amount of Euro 11,998 thousands) representing not discounted cash flow.

 

Hedging

a) exchange risk hedges – not designated in hedge accounting
The Sogefi Group has the following contracts to hedge the exchange risk on financial balances. Note that even though the Group considers these instruments as exchange risk hedges from a financial point of view, it has chosen not to adopt hedge accounting, as this treatment is not considered suitable for the Group's operating requirements. It therefore measures such contracts at fair value, posting the differences to the Consolidated Income Statement (this difference is offset within Income Statement by the fair value change of the asset/liability denominated in a certain currency).

As of December 31, 2013, the Holding Company Sogefi S.p.A. held the following forward sale contracts to hedge exchange risk on intercompany financial positions:

Forward sale Date opened Spot price €/currency Date closed Forward price €/currency
USD 7,230,000 12/20/2013 1.37490 02/20/2014 1.37485
GBP 4,000,000 12/20/2013 0.84010 02/20/2014 0.84050

 

As of December 31, 2013, the fair value of these contracts was negative for Euro 23 thousand in terms of net value and was recognised in “Other financial assets – Assets for derivative financial instruments” (Euro 16 thousand) and to “Other short-term liabilities for derivative financial instruments” (Euro 39 thousand).

The subsidiary Sogefi Filtration Ltd has the following forward purchase contract to hedge the exchange risk on intercompany financial positions:

Forward purchase Date opened Spot price GBP/currency Date closed Forward price GBP/currency
EUR 2,500,000 12/20/2013 0.84010 02/20/2014 0.84050

 

As of December 31, 2013, the fair value of the contract was negative for Euro 19 thousand and was booked to “Other short-term liabilities for derivative financial instruments”.

The subsidiary Systèmes Moteurs S.A.S. holds the following forward purchase contract to hedge the exchange risk on intercompany financial positions:

Forward purchase Date opened Spot price €/currency Date closed Forward price €/currency
CAD 12,300,000 12/20/2013 1.46210 02/20/2014 1.46389


As of December 31, 2013, the fair value of this contract was negative for Euro 27 thousand and was booked to “Other short-term liabilities for derivative financial instruments”.

As of December 31, 2013, subsidiary Filtrauto S.A. held the following forward purchase contracts to hedge the exchange risk on trade positions:

Forward purchase Date opened Spot price €/currency Date closed Forward price €/currency
USD 150,000 12/16/2013 1.37480 01/09/2014 1.37466
USD 200,000 12/16/2013 1.37480 02/10/2014 1.37463


As of December 31, 2013 the fair value of those contracts amounts to zero.

The subsidiary Allevard Springs Ltd held the following forward purchase contracts to hedge the exchange risk on trade positions:

Forward purchase Date opened Spot price GBP/currency Date closed Forward price GBP/currency
EUR 200,000 12/17/2013 0.84470 01/10/2014 0.84473
EUR 200,000 12/17/2013 0.84470 02/10/2014 0.84489

 

As of December 31, 2013, the fair value of these contracts was negative for Euro 5 thousand and was booked to “Other short-term liabilities for derivative financial instruments”.

The subsidiary S.C. Systemes Moteurs S.r.l. holds the following forward purchase contract to hedge the exchange risk on intercompany financial positions:

Forward purchase Date opened Spot price RON/currency Date closed Forward price RON/currency
USD 2,700,000 12/03/2013 4.43850 02/07/2014 4.45200


As of December 31, 2013, the fair value of this contract was positive for Euro 16 thousand and was booked to “Other financial assets – Assets for derivative financial instruments”.

The subsidiary Systemes Moteurs India Pvt Ltd holds the following forward purchase contracts to hedge the exchange risk on intercompany financial positions:

Forward purchase Date opened Spot price INR/currency Date closed Forward price INR/currency
EUR 1,200,000 12/16/2013 85.27000 03/17/2014 87.60000
EUR 800,000 11/19/2013 84.05000 01/17/2014 85.70000

 

As of December 31, 2013, the fair value of these contracts was negative for Euro 3 thousand and was booked to “Other short-term liabilities for derivative financial instruments”.

b) Exchange risk hedges – in hedge accounting
At the end of the year, the Holding Company Sogefi S.p.A had the following contracts in place to hedge its interest rate risk (in thousands of Euro) on financial debts drawdown:

Description of IRS Date opened Contract maturity Notional Fixed rate Fair value at 12.31.2013 Fair value at 12.31.2012
Hedging of Sogefi S.p.A. loan for Euro 200 million (12/04/2012 maturity 12/04/2017), rate:Euribor 3 months + 425 bps 02/19/2013 12/04/2017 30,000 0.838% (210) -
Hedging of Sogefi S.p.A. loan for Euro 200 million (12/04/2012 maturity 12/04/2017), rate:Euribor 3 months + 425 bps 02/20/2013 12/04/2017 30,000 0.860% (208) -
Hedging of Sogefi S.p.A. loan for Euro 200 million (12/04/2012 maturity 12/04/2017), rate:Euribor 3 months + 425 bps 02/21/2013 12/04/2017 30,000 0.857% (203) -
Hedging of Sogefi S.p.A. loan for Euro 200 million (12/04/2012 maturity 12/04/2017), rate:Euribor 3 months + 425 bps 02/20/2013 12/04/2017 30,000 0.856% (204) -
TOTAL     120,000   (825) -

 
In 2011, the Holding Company Sogefi S.p.A. held the following Interest Rate Swap contracts (in thousands of Euro) as part of a macro cash flow hedge strategy aimed at hedging the risk of fluctuations in future cash flows deriving from the envisaged future long term indebtedness of the Company.
Relating cash flows exchanges from June 2013 onwards; as of December 31, 2013 said instruments cover both existing loans on that date and expected future indebtedness (pursuant to 2014-2017 long-term plan approved by Group management).

Description of IRS Date opened Contract maturity Notional Fixed rate Fair value at 12.31.2013 Fair value at 12.31.2012
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/10/2011 06/01/2018 10,000 3.679% (1,117) (1,386)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/23/2011 06/01/2018 10,000 3.500% (1,108) (1,387)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 03/11/2011 06/01/2018 10,000 3.545% (1,128) (1,407)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 03/23/2011 06/01/2018 10,000 3.560% (1,127) (1,345)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 03/27/2011 06/01/2018 10,000 3.670% (1,182) (1,470)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 05/13/2011 06/01/2018 10,000 3.460% (1,092) (1,365)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 06/24/2011 06/01/2018 10,000 3.250% (1,001) (1,261)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 06/28/2011 06/01/2018 10,000 3.250% (1,002) (1,260)
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 11/28/2011 06/01/2018 10,000 2.578% (712) (925)
TOTAL     90,000   (9,469) (11,806)

 
In 2013, the Holding Company Sogefi S.p.A. held the following Interest Rate Swap contracts (in thousands of Euro) as part of a macro cash flow hedge strategy aimed at hedging the risk of fluctuations in future cash flows deriving from the envisaged future long term indebtedness of the Company; future indebtedness is believed to be highly probable as it is envisaged by the 2014-2107 long-term plan approved by management.
Relating cash flows will be exchanged as follows: Euro 35,000 thousand from 2014, Euro 40,000 thousand from 2015 and Euro 25,000 thousand from 2016:

Description of IRS Date opened Contract maturity Notional Fixed rate Fair value at 12.31.2013 Fair value at 12.31.2012
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/07/2013 06/01/2018 15,000 1.445% (79) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/11/2013 06/01/2018 5,000 1.225% (51) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/11/2013 06/01/2018 5,000 1.425% (30) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/19/2013 06/01/2018 10,000 1.440% (62) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/21/2013 06/01/2018 10,000 1.660% (21) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/01/2013 06/01/2018 10,000 1.310% (119) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/06/2013 06/01/2018 10,000 1.281% (109) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/11/2013 06/01/2018 5,000 1.220% (50) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/11/2013 06/01/2018 5,000 1.240% (27) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/12/2013 06/01/2018 5,000 1.420% (52) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/13/2013 06/01/2018 5,000 1.500% (36) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/19/2013 06/01/2018 10,000 1.650% (17) -
Hedging of Sogefi S.p.A. future financial indebtedness for 2013-2018 02/21/2013 06/01/2018 5,000 1.660% (8) -
TOTAL     100,000   (661) -


These financial instruments envisage payment by the Group of an agreed fixed rate and payment by the counterparty of the floating rate that is the basis of the underlying loan.

c) exchange risk hedges – in hedge accounting
On April 30, 2013, the Holding Company Sogefi S.p.A. entered into three cross currency swap (CCS) contracts maturing in June 2023, designated in hedge accounting, in order to hedge exchange rate risk relating to the private placement of USD 115 million bonds. Under these contracts, a fixed interest receivable of 600 basis points on subscribed notional USD amount is collected by the Company on a quarterly basis against payment of a fixed interest payable on a notional amount in EUR corresponding to the USD notional amount converted at the fixed exchange rate of 1.3055.

Details of these contracts are as follows:

Description of CCSwap Date opened Contract maturity Notional (in thousands of Usd) Fixed rate Fair value at 12.31.2013 Fair value at 12.31.2012
Private placement USD 115 million (05/03/2013 maturity 06/01/2013), coupon 600 bps 04/30/2013 06/01/2023 55,000 6.0% USD receivable 5.6775% Euro payables (4,363) -
Private placement USD 115 million (05/03/2013 maturity 06/01/2013), coupon 600 bps 04/30/2013 06/01/2023 40,000 6.0% USD receivable 5.74% Euro payables (3,320) -
Private placement USD 115 million (05/03/2013 maturity 06/01/2013), coupon 600 bps 04/30/2013 06/01/2023 20,000 6.0% USD receivable 5.78% Euro payables (1,698) -
TOTAL     115,000   (9,381) -

 

d) derivatives no longer in hedge accounting
As of December 31, 2013, the Group held the following Interest Rate Swap contracts that had become ineffective according to the effectiveness tests performed as of December 31, 2013, so that the hedging relationship was discontinued and the derivatives were reclassified as a FVTPL instrument.

Derivative held by the Holding Company Sogefi S.p.A.:

Description of IRS Date opened Contract maturity Notional Fixed rate Fair value at 12.31.2013 Fair value at 12.31.2012
Hedging of Sogefi S.p.A. loan for Euro 60 million (04/29/2011 maturity 12/31/2016), rate Euribor 3 months + 200 bps 05/11/2011 12/31/2016 24,000 2.990% (986) (1,791)
TOTAL     24,000   (986) (1,791)

Derivative held by the subsidiary Sogefi Filtration S.A.:

Description of IRS Date opened Contract maturity Notional Fixed rate Fair value at 12.31.2013 Fair value at 12.31.2012
Hedging of Sogefi Filtration S.A. loan for Euro 7 million (05/30/2011 maturity 05/30/2016), rate Euribor 3 months + 225 bps 08/30/2011 05/30/2016 1,750 2.651% (56) (111)
TOTAL     1,750   (56) (111)

The non-application of hedge accounting had the following impact on the financial statements as of December 31, 2013:

  • a financial gain of Euro 336 thousand, representing the amount of the change in fair value of these derivative since the last effectiveness test (June 30, 2013), was immediately recognised in the Income Statement;
  • a financial charge of Euro 200 thousand was recognised in the Consolidated Income Statement; this amount reflects the portion of the reserve previously booked to Other Comprehensive Income that will be recycled in the Consolidated Income Statement over the same period of time as the differentials relating to the underlying hedged item.

e) fair value of derivatives
The fair value of all derivatives was calculated using the forward curves of exchange and interest rates as of December 31, 2013, also taking into account a credit valuation adjustment/ debit valuation adjustment (this is a new element introduced in the measurement method after December 31, 2012). The fair value amounts of derivatives are classified as Level 2 in a hierarchy of levels that describes the significance of the inputs used in fair value measurements.
The aim of these contracts is to limit the risk of changes in interest and exchange rates, this is why they have been treated in hedge accounting as hedging instruments and the related fair value is booked to equity.
Reference should be made to the paragraph on "Interest risk" for further information on the level of hedging of interest risk.

 

Equity management

The main objectives pursued by the Group through its equity risk management are the creation of value for shareholders and the safeguarding of business continuity. The Group also sets itself the objective of maintaining an optimal equity structure so as to reduce the cost of indebtedness and meet the covenants established by the loan agreements.

The Group monitors equity on the basis of the net financial position/total equity ratio (gearing ratio). For the purposes of determination of the net financial position reference is made to note 22. Total equity is analysed in note 21.

As of December 31, 2013, gearing stands at 1.61 (1.48 as of December 31, 2012).

 

Categories of financial assets and liabilities stated in the financial statements and fair value hierarchy

In compliance with the requirements of IFRS 7, the table below provides the information on the categories of financial assets and liabilities held by the Group as of December 31, 2013.
For the financial instruments measured at fair value in the statement of financial position the IFRS 7 requires a classification by hierarchy determined by reference to the source of inputs used to derive the fair value. This classification uses the following three levels:

  • level 1: if the financial instrument is quoted in an active market;
  • level 2: if the fair value is determined using valuation techniques and the inputs used for the valuation (other than quoted prices of financial instruments) are observable in the market. Specifically, fair value was calculated using the forward curves of exchange and interest rates;
  • level 3: if the fair value is determined using valuation techniques and the inputs used for the valuation are non-observable in the market.

The following table therefore shows the fair value level of financial assets and liabilities measured at fair value, as of December 31, 2013.

(in thousands of Euro) Note Book value 2013 Receivables and financial assets Financial assets available for sale Held-to-maturity
investments
Financial
liabilities
Fair Value with changes booked in the Income Statement
              Amount Fair value hierarchy
Current assets                
Cash and cash equivalents 125,344 125,344 - - - - -
Securities held for trading 14 - - - - 14 1
Held-to-maturity investments 7,462 - - 7,462 - -  
Assets for derivative financial instruments 32 - - - - 32 2
Trade receivables 145,837 145,837 - - - -  
Other receivables 7,827 7,827 - - - -  
Other assets 3,692 3,692 - - - -  
Non-current assets                
Other financial assets available for sale 439 - 439* - - -  
Non-current trade receivables 4 4   -      
Other non-current receivables 31,582 31,582 - - - -  
Current liabilities                
Short-term fixed rate financial debts 7,685 - - - 7,685 -  
Short-term variable rate financial debts 75,950 - - - 75,950 -  
Other short-term liabilities for derivative financial instruments 93 - - - - 93 2
Trade and other payable 285,410 - - - 285,410 -  
Other current liabilities 8,055 - - - 8,055 -  
Non-current liabilities                
Medium/long-term fixed rate financial debts 142,886 - - - 142,886 -  
Medium/long-term variable rate financial debts 189,453 - - - 189,453 -  
Other medium/long-term liabilities for derivative financial instruments 21,378 - - - - 21,378** 2

* relating to financial assets valued at cost, as permitted by IAS 39, insofar as a reliable fair value is not avaible.
** of which € 20,336 thousand relating to hedge instruments accounted according to the cash flow hedge method..

The following table therefore shows the fair value hierarchy of financial assets and liabilities measured at fair value, as of December 31, 2012:

(in thousands of Euro) Note Book value 2012 Receivables and financial assets Financial assets available for sale Held-to-maturity investments Financial liabilities Fair Value with changes booked in the income
              Amount Fair value hierarchy
Current assets                
Cash and cash equivalents 85,209 85,209 - - - -  
Securities held for trading 15 - - - - 15 1
Held-to-maturity investments 8,199 - - 8,199 - -  
Assets for derivative financial instruments 15 - - - - 15 2
Trade receivables 155,161 155,161 - - - -  
Other receivables 9,109 9,109 - - - -  
Other assets 3,559 3,559 - - - -  
Non-current assets                
Other financial assets available for sale 489 - 489* - - -  
Other non-current receivables 30,157 30,157 - - - -  
Current liabilities                
Short-term fixed rate financial debts 11,678 - - - 11,678 -  
Short-term variable rate financial debts 86,295 - - - 86,295 -  
Other short-term liabilities for derivative financial instruments 1,011 - - - - 1,011** 2
Trade and other payables 282,050 - - - 282,050 -  
Other current liabilities 8,765 - - - 8,765 -  
Non-current liabilities                
Medium/long-term fixed rate financial debts 13,902 - - - 13,902 -  
Medium/long-term variable rate financial debts 262,692 - - - 262,692 -  
Other medium/long-term liabilities for derivative financial instruments 13,708 - - - - 13,708** 2

* of which € 439 thousand relating to financial assets valued at cost, as permitted by IAS 39, insofar as a reliable fair value is not avaible.
** of which € 14,553 thousand relating to hedge instruments accounted according to the cash flow hedge method.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents amounted to Euro 125,344 thousand versus Euro 85,209 thousand as of December 31, 2012 and break down as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Short-term cash investments 123,747 84,627
Cheques 1,539 521
Cash on hand 58 61
TOTAL 125,344 85,209

 

“Short-term cash investments” earn interest at a floating rate.

For further details, please refer to the Analysis of the net financial position in note 22 and to the Consolidated Cash Flow Statement included in the financial statements.

As of December 31, 2013, the Group has unused lines of credit for the amount of Euro 285,574 thousand. These funds are available for use on demand, because the conditions required for their availability are met.

Please note that this item includes Euro 3,276 thousand held by the Argentinean subsidiaries; use of this amount is temporarily subject to government restrictions that require an official authorisation for foreign payments (including dividend payouts). We would also point out that the Argentine Peso depreciated significantly after the end of the reporting period. Cash and cash equivalents of the Argentinean subsidiaries, considering the exchange rate at February 25, 2014 are Euro 2,725 thousand.

OTHER FINANCIAL ASSETS

“Other financial assets” can be broken down as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Securities held for trading 14 15
Held-to-maturity investments 7,462 8,199
Assets for derivative financial instruments 32 15
TOTAL 7,508 8,229

 

“Securities held for trading” are measured at fair value based on official sources at the time the financial statements are drawn up. They represent readily marketable securities which are used by the companies to optimise cash management.
“Held-to-maturity investments” are valued at amortised cost and include bonds of a Spanish prime banking institution.
“Assets for derivative financial instruments” total Euro 32 thousand and refer to the fair value of forward foreign exchange contracts. Further details can be found in the analysis of financial instruments contained in note 39.

TRADE AND OTHER RECEIVABLES

Current receivables break down as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Trade receivables 140,572 156,245
Less: allowance for doubtful accounts 4,703 5,263
Trade receivables, net 135,869 150,982
Due from Parent Company 9,968 4,179
Tax receivables 20,504 21,815
Other receivables 7,827 9,109
Other assets 3,692 3,559
TOTAL 177,860 189,644

 

“Trade receivables, net” are non-interest bearing and have an average due date of 35 days, against 42 days recorded at the end of the previous year.
It should be noted that as of December 31, 2013, the Group factored trade receivables for Euro 79,541 thousand (Euro 65,114 thousand as of December 31, 2012), including an amount of Euro 46,026 thousand which was not notified and for which the Group continues to manage collection services. The risks and benefits related to these receivables have been transferred to the factor; therefore these receivables have been derecognised in the Statement of Financial Position debiting the consideration received from the factoring company.

Excluding the factoring transactions (Euro 79,541 thousand as at December 31, 2013 and Euro 65,114 thousand as at December 31, 2012) and the negative effect of exchange rates (Euro 8,100 thousand), net trade receivables showed an increase of Euro 7,414 thousand as a result of the increase in the Group’s business activities which occurred in the last quarter of 2013 with respect to the same quarter of the previous year.

Further adjustments were recorded to “Allowance for doubtful accounts” during the year for a total of Euro 491 thousand, against net utilisations of the allowance for the amount of Euro 900 thousand (see note 39 for further details). Writedowns, net of provisions not used during the period, were charged to Income Statement under the item “Variable cost of sales – Variable sales and distribution costs”.

“Due from Parent Company” as of December 31, 2013 is the receivable from the Parent Company CIR S.p.A. arising from the participation in the Group tax filing system on the part of the Italian companies of the Group. Item includes Euro 5,571 thousand referred to 2013 and booked to current taxes.
See chapter F for the terms and conditions governing these receivables from CIR S.p.A..

“Tax receivables” as of December 31, 2013 include tax credits due to the Group companies by the tax authorities of the various countries. The decrease in this item mainly reflects lower VAT credits. It does not include deferred taxes which are treated separately.

“Other receivables” are made up as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Amounts due from social security institutions 195 468
Amounts due from employees 252 293
Advances to suppliers 1,984 1,289
Due from others 5,396 7,059
TOTAL 7,827 9,109

The decrease in “Other receivables” refers for the most part to the remaining portion of the consideration for a real estate property sold during the previous year collected by subsidiary Sogefi Filtration do Brasil Ltda. The item also includes insurance compensations.

The item “Other assets” mainly includes accrued income and prepayments on insurance premiums, rents, indirect taxes relating to buildings and on costs incurred for sales activities.

OTHER FINANCIAL ASSETS AVAILABLE FOR SALE

As of December 31, 2013, these totalled Euro 439 thousand, compared with Euro 489 thousand as of December 31, 2012 and break down as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Equity investments in other companies 439 489
Other securities - -
TOTAL 439 489

 

The balance of “Equity investments in other companies” essentially refers to the 22.62% shareholding in the company AFICO FILTERS S.A.E.. The equity investment was not classified as associate due to the lack of Group’s members in the management bodies of the company (which means the Group does not exert significant influence on the company).
The decrease in the item refers to company Sogefi Allevard Srl, which was wound up in 2013.

FINANCIAL RECEIVABLES AND OTHER NON-CURRENT RECEIVABLES

“Other receivables” break down as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Substitute tax - 576
Pension fund surplus 2,876 2,631
Other receivables 28,706 26,950
TOTAL 31,582 30,157

 

“Pension fund surplus” refers to subsidiary Sogefi Filtration Ltd, as the company is entitled to any surplus upon plan termination, as outlined in note 19.

"Other receivables" include an indemnification asset of Euro 23,368 thousand owed by the seller of Systèmes Moteurs S.A.S.' shares – booked upon the PPA of the Systemes Moteurs Group – relating to the recovery of expenses charged by customers following claims on the quality of products sold, based on warranties given by the same seller(after possible partial indemnities obtained from insurers and suppliers). Sogefi S.p.A. initiated international arbitration proceedings against the seller of Systèmes Moteurs S.A.S' shares to collect the payables, as provided for by the acquisition contract.
The item “Other receivables” also includes tax credits, including fiscal credits on purchases of assets made by the Brazilian subsidiaries, fiscal credits relating to the research and development activity of the French subsidiaries, VAT credits of subsidiary Sogefi (Suzhou) Auto Parts Co., Ltd and non-interest bearing guarantee deposits for leased properties. These receivables will be collected over the coming years.

FINANCIAL DEBTS TO BANKS AND OTHER FINANCING CREDITORS

These break down as follows:

Current portion

(in thousands of Euro) 12.31.2013 12.31.2012
Bank overdrafts and short-term loans 6,885 8,377
Current portion of medium/long-term financial debts 76,750 89,596
of which: leases 1,118 814
TOTAL SHORT-TERM FINANCIAL DEBTS 83,635 97,973
Other short-term liabilities for derivative financial instruments 93 1,011
TOTAL SHORT-TERM FINANCIAL DEBTS AND DERIVATIVE FINANCIAL INSTRUMENTS 83,728 98,984

 

Non-current portion

(in thousands of Euro) 12.31.2013 12.31.2012
Financial debts to banks 213,675 267,773
Other medium/long-term financial debts 118,664 8,821
of which: leases 6,607 4,880
TOTAL MEDIUM/LONG-TERM FINANCIAL DEBTS 332,339 276,594
Other medium/long-term liabilities for derivative financial instruments 21,378 13,708
TOTAL MEDIUM/LONG-TERM FINANCIAL DEBTS AND DERIVATIVE FINANCIAL INSTRUMENTS 353,717 290,302

 

Bank overdrafts and short-term loans

For further details, please refer to the Analysis of the net financial position in note 22 and to the Consolidated Cash Flow Statement included in the financial statements.

Current and non-current portions of medium/long-term financial debts

As of December 31, 2013, details were as follows (in thousands of Euro):

Company Bank/Credit Institute Signing date Due date Original amount loan Interest rate Current portion (in thousands of Euro) Non-current portion (in thousands of Euro) Total amount (in thousands of Euro) Real
Guarantees
Sogefi S.p.A. Unicredit S.p.A. Jun-2006 Mar-2014 100,000 Euribor 3m + 110 bps variable 5,550 - 5,550 N/A
Sogefi S.p.A. European Investment Bank - tr. A Dec - 2010 Apr - 2016 20,000 Euribor 3m + 316 bps variable 5,000 7,444 12,444 N/A
Sogefi S.p.A. Banca Europea degli Investimenti tr. B Dec - 2010 Apr - 2016 20,000 Euribor 3m + 187 bps variabile 5,000 7,443 12,443 N/A
Sogefi S.p.A. Banca Monte dei Paschi di Siena S.p.A. Mar - 2011 Mar - 2017 25,000 Euribor 3m + 225 bps variable 6,250 13,905 20,155 N/A
Sogefi S.p.A. Intesa San Paolo S.p.A. Apr - 2011 Dec-2016 60,000 Euribor 3m + 260 bps variable 8,000 15,603 23,603 N/A
Sogefi S.p.A. Banca Carige Italia S.p.A. Jul - 2011 Sep - 2017 25,000 Euribor 3m + 225 bps variable 4,855 14,126 18,981 N/A
Sogefi S.p.A. Ge Capital Interbanca S.p.A. Oct - 2011 Jun - 2017 10,000 Euribor 3m + 230 bps variable 2,000 4,956 6,956 N/A
Sogefi S.p.A. Syndacate loan Dec - 2012 Dec - 2017 200,000 Euribor 3m + 475 bps variable - 116,235 116,235 N/A
Sogefi S.p.A. Banco do Brasil S.A. Dec - 2012 Apr - 2017 15,000 Euribor 3m + 315 bps variable 3,750 11,157 14,907 N/A
Allevard Rejna Autosuspensions S.A. CIC Bank May - 2013 May - 2014 4,000 Euribor 3m + 150 bps variable 4,000 - 4,000 N/A
Systèmes Moteurs Sas CIC Bank May - 2013 May - 2014 3,500 Euribor year + 150
bps variable
3,500 - 3,500 N/A
Sogefi Filtration S.A. Banco de Sabadell May - 2011 May -2016 7,000 Euribor 3m + 225 bps variable 1,400 2,100 3,500 N/A
Shanghai Sogefi Auto Parts Co., Ltd Unicredit S.pA. May - 2013 May - 2014 5,400 7.28% fixed 5,096 - 5,096 N/A
Sogefi (Suzhou) Auto Parts Co., Ltd* ING Bank Mar - 2013 Mar - 2015 3,972 9.84% fixed - 12.30% fixed - 3,972 3,972 N/A
Sogefi Engine Systems Canada Corp. Ge Capital Nov - 2012 Nov - 2017 2,897 B/A 3m+4.65%
variable
600 1,963 2,563 YES
Sogefi Engine Systems Canada Corp.  Ge Capital Nov - 2012 Nov - 2017 2,897 6.16% fixed 597 1,969 2,566 YES
Sogefi Filtration do Brasil Ltda Banco Itau BBA Feb - 2013 Mar - 2016 6,376 5.5% fixed - 6,377 6.377 N/A
Other loans           21,152 6,425 27,577 N/A
TOTAL           76,750 213,675 290,425  

(*) The amount is originated by some loans stipulated from March to September 2013, whose tax rate is included in the indicated range (tax min. 9.84% - tax max. 12.30%).

Line “Other loans” includes other minor loans, as well as financial lease payments in accordance with IAS 17.

Other short-term liabilities for derivative financial instruments

The item includes the short-term portion of the fair value of interest risk hedging contracts and exchange risk hedging contracts.
Reference should be made to chapter E for a further discussion of this matter.

Other medium/long-term financial debts

As of December 31, 2013, details were as follows (in thousands of Euro):

Company Bank/Credit Institute Signing date Due date Original amount loan Interest rate Total amount (in thousands of Euro) Real
Guarantees
Sogefi S.p.A.  Private placement May - 2013 May - 2023 USD 115,000 Fixed coupon 600 bps 82,908 N/A
Sogefi S.p.A. Private placement May - 2013 May - 2020 Euro 25,000 Fixed coupon 505 bps 24,926 N/A
Other loans           10,830 N/A
TOTAL           118,664  

 

Line “Other financial debts” includes other minor loans, as well as financial lease payments in accordance with IAS 17.

As can be seen from the table above, Sogefi S.p.A. made two private placements in the US bond market in May 2013.
A US private placement of bonds to prime US institutional investors for a total amount of USD 115 million for a 10-year term was completed on May 3, 2013 and will be amortised starting from the fourth year. The fixed coupon rate on this issue is 600 basis points.
A second US private placement of bonds to a prime institutional investor for the amount of Euro 25 million was completed on May 22, 2013 and will be repaid in a single instalment in May 2020. The fixed coupon rate on this issue is 505 basis points.

On May 6, 2013, the Holding Company Sogefi S.p.A. redeemed two loans obtained from Banca Sella S.p.A. in advance for a total amount of Euro 15,000 thousand (Euro 10,000 thousand had been drawn down in July 2012 and were to fall due in January 2014, whereas another Euro 5,000 thousand draw-down made in February 2013 was to fall due in July 2014).

On May 20, 2013, the Holding Company Sogefi S.p.A. repaid the revolving portion of the loan from Intesa Sanpaolo S.p.A. for the amount of Euro 30 million which had been drawn down in December 2012. The funds will remain available for draw-down to the Holding Company Sogefi S.p.A. until the loan expires in December 2016.

Furthermore, note that, contractually, the spreads relating to the loans of the Holding Company Sogefi S.p.A. are reviewed every six months on the basis of the computation of the consolidated NFP/normalised consolidated EBITDA ratio. For an analysis of the covenants relating to loans outstanding at the end of the period, please refer to the note below entitled “Analysis of the financial position”.

Other medium/long-term financial liabilities for derivative financial instruments

The item includes the medium/long-term portion of the fair value of the interest and exchange risk hedging instruments.
Reference should be made to chapter E for a further discussion of this matter.

Finance leases

The Group has finance leases as well as rental and hire contracts for building, plant and machinery that, according to their type, cover almost the entire useful life of the asset concerned. The assets held under these leases, rental and hire contracts are booked in accordance with IAS 17 as though they were fixed assets owned by the company, disclosing their historical cost, depreciation, the financial cost and the residual liability.

Future payments deriving from these contracts can be summarised as follows:

(in thousands of Euro) Instalments Capital
Within 12 months 1,731 1,118
Between 1 and 5 years 4,776 3,533
Beyond 5 years 3,545 3,074
Total lease payments 10,052 7,725
Interests (2,327) -
TOTAL PRESENT VALUE OF LEASE PAYMENTS 7,725 7,725

 

The contracts included in this item refer to the following subsidiaries:

  • Sogefi Filtration Ltd for a long-term rental contract for the production site in Tredegar.
    The contract expires in September 2022 and the original total amount of the contract was Euro 3,179 thousand; the future capital payments amount to Euro 2,382 thousand and the annual nominal rate of interest applied by the lessor is 11.59%.
    The Group has given sureties for this contract.
    This rental contract has been accounted for as financial leases, as required by IAS 17, where the present value of the rent payments coincided approximately with the fair value of the asset at the time the contract was signed.
  • Allevard Rejna Autosuspensions S.A. has a lease contract for the Lieusaint production site. The contract expires in October 2014 and the original total amount of the contract was Euro 2,108 thousand, the future capital payments amount to Euro 344 thousand and the annual nominal rate of interest applied by the lessor is 3-month Euribor plus a spread of 60 basis points. The Group has not given any sureties for this contract.
    There are no restrictions of any nature on this lease. There is a purchase option at the end of the contracts to buy the assets at the price of Euro 1. Given that it is probable that the options will be exercised, considering the low redemption value of the assets, this contract has been accounted for as a finance lease, as foreseen by IAS 17.
  • Allevard Sogefi USA Inc. has entered into the following lease contracts for the Prichard production site relating to:
  1. plant, machinery and improvements to the building for an original amount of Euro 1,160 thousand. The contract expires in May 2019, the future capital payments amount to Euro 684 thousand and the annual interest rate applied by the lessor is equal to 3.92%. The Group has given sureties for this contract;
  2. plant, machinery and improvements to the building for an original amount of Euro 2,175 thousand. The contract expires in July 2019, the future capital payments amount to Euro 1,328 thousand and the annual interest rate applied by the lessor is equal to 3%. The Group has given sureties for this contract.
  3. plant, machinery and improvements to the building for an original amount of Euro 3,151 thousand. The contract expires in June 2023, the future capital payments amount to Euro 2,988 thousand and the annual interest rate applied by the lessor is equal to 3.24%. The Group has given sureties for this contract.
    There are no restrictions of any nature on these leases. Upon expiry of the contracts ownership of the assets is transferred to the lessee without payment of any purchase price. These contracts are therefore accounted for as financial leases, as required by IAS 17.

TRADE AND OTHER CURRENT PAYABLES

The amounts shown in the financial statements can be broken down into the following categories:

(in thousands of Euro) 12.31.2013 12.31.2012
Trade and other payables 285,410 282,050
Tax payables 4,557 12,203
TOTAL 289,967 294,253

 

Details of trade and other payables are as follows:

(in thousands of Euro) 12.31.2013 12.31.2012
Due to suppliers 223,573 212,891
Due to the parent company 130 597
Due to tax authorities for indirect and other taxes 8,442 10,846
Due to social and security institutions 21,671 20,710
Due to employees 27,572 30,024
Other payables 4,022 6,982
TOTAL 285,410 282,050

 

The amounts “Due to suppliers” are not subject to interest and on average are settled in 73 days, in line with the year 2012.
There is no significant concentration of payables due to any one supplier or small group of suppliers.

The amounts “Due to suppliers” increased by Euro 10,682 thousand (by Euro 18,077 thousand on a constant currency basis); this is mainly due to business growth in the last portion of 2013 compared to the same period of 2012.

Item “Due to the Parent Company” reflects the consideration due for the fiscal surplus transferred by companies that have joined the CIR Group tax filing system. For further details, please refer to note 40.

The decrease in amounts “Due to tax authorities for indirect and other taxes” reflects VAT debts and other tax debt for the most relating to the French subsidiaries.

The amounts “Due to employees” were impacted by lower provisions for annual leaves and bonus amounts to be paid.

The decrease in line “Other payables” is mainly due to a reclassification of certain amounts between this item and Trade receivables.

The decrease in “Tax payables” relates for the most part to subsidiaries Sogefi Engine Systems Canada Corp. and LPDN GmbH, which had benefited from lower payment of tax advances for the year during the previous financial period.

OTHER CURRENT LIABILITIES

“Other current liabilities” include adjustments to costs and revenues for the period so as to ensure compliance with the accruals based principle (accrued expenses and deferred income) and advances received from customers for orders still to be delivered.