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.
* 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:
* 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:
- 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;
- 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.
- 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.