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Pag. 1 di 224
Dear Shareholders,
the separate financial statements, which we submit for your review and approval, present in 2022 “Total revenues” of Euro 694.3 million and a net profit of Euro 15.9 million, after current and deferred taxes for a net total of Euro 3.6 million.
The Board of Directors of the parent company Aquafil S.p.A., in accordance with the accounting rules, prepared also the Aquafil Group financial statements for 2022, which present “Total revenues” of Euro 684.1 million and a Group net profit of Euro 29.1 million.
Both financial statements were prepared in accordance with international accounting standards issued by the International Accounting Standards Board (IASB), endorsed by the European Union as required by Regulation No. 1606/2002 issued by the European Parliament and European Council and adopted with Legislative Decree No. 38/2005.
1 INTRODUCTION
The Parent Company Aquafil S.p.A. availed of the option contained in Legislative Decree 32/2007 which permits companies which must prepare consolidated financial statements to present a single Directors’ Report for the separate and consolidated financial statements and therefore greater attention was focused in the Report, where appropriate, on the most significant matters concerning the companies included in the consolidation scope.
In accordance with Directive 2014/95/EU and as required by Italian Legislative Decree No. 254/2016, the consolidated non-financial report (NFR) is published separately from this Directors’ Report.
Pag. 2 di 224
CORPORATE INFORMATION OF THE PARENT COMPANY AQUAFIL S.P.A.
Registered Office: Via Linfano, 9 - Arco (TN) - 38062 - Italy
Telephone: +39 0464 581111- Fax: +39 0464 532267
Certified e-mail:pec.aquafil@aquafil.legalmail.it
E-mail: info@aquafil.com
Website: www.aquafil.com
Share capital (at the approval date of the financial statements at 31.12.2022):
• Approved: 50,522,417.18
• Subscribed: 49,722,417.28
• Paid-in: 49,722,417.28
Tax and VAT number: IT 09652170961
Trento Economic & Administrative Registration No. 228169
There are no changes relating to the name of the entity preparing the financial statements or other means of identification with respect to the end of the previous year.
CONSOLIDATION SCOPE
The Group is composed of 21 companies, consolidated on a line-by-line basis as a result of direct or indirect control by Aquafil S.p.A., in addition to the associated company Nofir AS measured at equity.
Production is carried out at 21 plants located in Europe, the United States, South America, Asia and Oceania.
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GENERAL AND ECONOMIC OVERVIEW
Climate change
The Aquafil Group is passionate about its role in the community and is highly cognizant of the effects of its environmental, social and governance policies.
The Group’s organisational structure for many years has considered the environmental impact of its processes and products and continuously assesses possible improvement actions, with an approach firmly focused on sustainability and circularity.
This structure particularly considers the consequences for its activities, processes and local organisations from climate change, whose risk is consistently monitored and assessed. It may be stated that no significant impacts are currently expected on the operating activities carried out in the various regions in which the Group operates.
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Covid-19 pandemic
In relation to the COVID-19 pandemic, the Aquafil Group continues to constantly monitor developments, also in terms of the circulation of the range of variants, at all operational locations globally, confirming the key objective of protecting the health of its employees and collaborators.
Thanks to this focus adopted since the beginning of the pandemic, in compliance with the health safety measures, the Group has effectively tackled and limited to a few exceptions infections among employees in the workplace and without significant health impacts.
The very restrictive measures adopted by the Chinese authorities in 2022 and the sudden normalisations introduced before the 2023 Chinese new year had no significant impact on the functioning of the production units and the various departments of the company Aquafil Synthetic and Polymers (Jiaxing).
The Group has constantly monitored the real and potential impact of the COVID-19 emergency on the Group's various business activities, financial position, credit risk, liquidity risk and overall operating performance and it may be stated that the health crisis did not substantially impact the annual results, nor did it gave rise to significant criticalities.
Conflict in Ukraine
With regards to commercial relations with parties located in the countries involved in the conflict, the Group does not have a dependence on particular products and/or suppliers/clients in these areas which may impact upon operations. No direct consequences were therefore felt from the stoppage of import/exports of the products and businesses subject to limitations.
In particular, it should be noted that the Group had only limited business relations with a Russian supply of caprolactam flakes, a supplier that was permanently discontinued in October 2022.
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The conflict between Russia and Ukraine that began on February 24, 2022 has brought severe repercussions to Europe in terms of economic instability, resulting in significant inflation for the broad range of products, caused particularly by the sudden unavailability of imports from Russia and Belarus of the products subject to sanctions and the high price levels of energy components. The price of TTF natural gas listed on the Amsterdam Stock Exchange on August 26 peaked at Euro 343 per megawatt hour - the oil equivalent of nearly USD 580 per barrel. Gas prices then fell steadily through December and continued the decline in early 2023 to below Euro 50 per megawatt hour. Naval and land transport costs have also been severely impacted by the war crisis and have been further affected by the anti-Covid restrictive measures imposed by Chinese authorities, which have seriously impacted upon carrier availability and the mobility of goods between regions globally. Europe suffered the greatest economic consequences, with slowdown in consumption in most sectors. The Euro-Dollar exchange rate reached a low of 0.95 in the autumn of 2022, then returned above parity and closed the year at 1.06. Inflation also reached very high levels in the U.S., driven by rising import and energy prices.
Against this backdrop, the Aquafil Group in the year reacted promptly by, on the one hand, seeking regional diversification where possible of raw material procurement sources and, on the other hand, by recovering the incremental purchase and service cost components on the products sold within the three product lines. Thanks to a strong competitive positioning and the overall resilience of the fiber markets, it is therefore possible to recover the margin absorbed by the increased costs through relying on the continuity and close collaboration of the entire logistics and production chain and of the markets of the various regions served by the Group.
SIGNIFICANT EVENTS IN 2022
The Group’s key events in the year included:
1. Aquafil Chile SpA : The newly-incorporated company Aquafil Chile S.p.A., based in Santiago, Chile,
a wholly-owned subsidiary of Aquafil SLO doo, was acquired with the corporate scope of mainly purchasing fishing nets and other plastic material waste, managing their storage, processing, transport
Pag. 6 di 224
and sale to third parties, as a raw material for reuse in subsequent ECONYL® recycling and regeneration processes.
2. Bluloop Srl benefit company : On June 22, Bluloop S.r.l. was incorporated as a benefit company, a
wholly-owned subsidiary of Aquafil S.p.A., whose main corporate scope is to sell products made with ECONYL® polyamide to end consumers on the e-commerce channels. The company also has communication, training and intervention objectives on environmental and social sustainability issues in the areas in which the Aquafil Group operates.
3. Dividend distribution : On April 28, 2022, the Shareholders' Meeting of Aquafil S.p.A. approved the
distribution of dividends totalling Euro 6 million, which were paid out on May 11, 2022.
4. Purchase of treasury shares : as part of the share buy-back plan approved by the Shareholders' Meeting
of October 20, 2021, the number of shares purchased and held by the company at December 31, 2022 totalled 1,181,685, equal to 2.3071% of the share capital, for a total value of Euro 8 million. Please also refer in this regard to paragraph 14.2 of this Directors’ Report.
5. Business Alliance Agreement with Itochu: on March 15, 2022, the signing was announced of a
Business Alliance Agreement, on a non-exclusive basis, with Japan-based ITOCHU Corporation to promote and expand the circular nylon business.
6. Settlement of registration tax: the relevant Tax Agency Department in May and June fully repaid to
Aquafil S.p.A the amount of Euro 0.84 million which was previously disputed.
7. Assessment of 2015-2016 taxes: the company settled the assessment notices for the 2015 and 2016
fiscal years, with the payment of taxes, sanctions and interest, respectively for Euro 0.42 million and Euro 0.29.
8. Joint Audit – Aquafil SpA / Aqualeuna Gmbh: Following the settlement of the tax dispute for the 2016
and 2017 fiscal years, the company Aqualeuna G.m.b.H. was challenged by the “Bundeszentralamt fur Steuern” in terms of the deductibility of the restructuring and closure expenses incurred in 2018 and 2019 totalling Euro 6.4 million. The subsidiary, while formally contesting this charge, has prudently written off deferred tax assets of Euro 1.2 million calculated on the remaining tax losses. It is considered that, consistent with previous years, Aquafil SpA may obtain the authorisation to offset these costs within Italy (as per Article 31- quater Presidential Decree No. 600/73).
Pag. 7 di 224
9. Listing of Aquafil S.p.A.'s ordinary shares on the OTCQX Best Market : on October 13, 2022, Aquafil
S.p.A. announced the listing of its ordinary shares on the OTCQX Best Market, a US trading platform managed by OTC Markets Group, with the “ECNLF” ticker. The transaction involves the cross- trading of its ordinary shares in the United States and in Italy. The company’s ordinary shares continue to be traded on the Euronext STAR Milan under the “ECNL” ticker. The OTCQX platform supports the transparent trading in US Dollars of Aquafil S.p.A.’s ordinary shares during the United States’ trading hours, allowing easier access for investors who prefer to trade securities in local currencies on their domestic markets. The cross-trading on the OTCQX seeks to expand Aquafil’s investor base and to further support liquidity on the Euronext STAR Milan. The transaction does not constitute a share capital increase. New ordinary shares were not issued and Aquafil S.p.A. shall continue to trade on the Euronext STAR Milan under the "ECNL" ticker.
10. Signing of a non-binding Term Sheet for the possible undertaking of a stake in the Indian company
Gujarat Polyfilms Private Limited: On August 24, 2022, Aquafil S.p.A. signed a non-binding term
sheet covering the possible acquisition of a majority stake in the Indian company Gujarat Polyfilms Private Limited, which produces nylon 6 polymer and textile fibers at its Surat site in Gujarat, India. For the last year ended March 31, 2022, the company reported revenues of Euro 55 million, with a margin in line with the sector. The Indian market currently presents the world’s highest rates of internal growth and the potential acquisition seeks both to provide polymerization capacity on the Asian market and to continue the globalisation of textile fibers. In addition, the geographical positioning and competitiveness of local cost factors may allow the evaluation of a further possible expansion of the Group's activities in the Asian region. Due diligence activities aimed at obtaining a complete understanding and assessment of the company's industrial and commercial activities have been largely completed to allow for a full evaluation and it is believed that in the coming months the process of negotiating and drafting the contractual documents necessary to put the transaction into place can begin.
11. Lapse of the possibility to exercise the Market Warrant option and conversion of class C shares into
ordinary shares: on December 4, 2022, the deadline for exercising the financial instruments known
as Aquafil Warrants expired, as 60 months had elapsed since the date of listing of Aquafil ordinary shares (ISIN IT0005241192). Following the fulfilment of that indicated at Article 5 of the By-Laws of Aquafil S.p.A., 100% of the class C shares (i.e. 80,000 class C shares), were automatically converted into ordinary shares, according to the conversion ratio of 1 ordinary share for each class C share, without the expression of interest from their respective holders and without any change in the total
Pag. 8 di 224
amount of the company share capital. As a result of this share conversion, the Group’s share capital remains at Euro 49,722,417.28 while the number of ordinary shares increases from 42,822,774 to 42,902,774, while the class B shares remained unchanged (8,316,020 shares) and consequently the total number of shares remains unchanged (51,218,794 shares). Therefore, the processes of updating and filing the new By-Laws at the company’s registration office began, in order to reflect the new share capital composition.
AQUAFIL ON THE STOCK MARKET
At December 30, 2022, the Aquafil share price (ISIN IT0005241192) was Euro 6.14, decreasing approx. 19% on December 30, 2021 (Euro 7.66), against a decline in the FTSE MIB index during the year of 15%.
The Aquafil share generally declined in the period, between a minimum of Euro 4.885 (on October 12, 2022) and a maximum of Euro 8.01 (on January 5, 2022).
The average traded volume for the year was 36,881 shares, with a maximum daily volume (traded on May 18, 2021) of 291,997 shares and a minimum daily volume (traded on September 9, 2022) of 1,947 shares.
AQUAFIL GROUP AND PARENT COMPANY FINANCIAL HIGHLIGHTS
Definition of alternative performance indicators
Pag. 9 di 224
Gross operating profit (EBITDA)
This is an alternative performance indicator not defined under IFRS but used by company management to monitor and assess the operating performance as not impacted by the effects of differing criteria in determining taxable income, the amount and types of capital employed, in addition to the amortisation and depreciation policies. This indicator is defined by the Aquafil Group as the net result for the year adjusted by the following components:
• income taxes,
• investment income and charges,
• amortisation, depreciation and write-downs of tangible and intangible assets,
• provisions and write-downs,
• financial income and charges,
• non-recurring items.
Adjusted EBIT
Calculated as EBITDA, to which the accounts “amortisation, depreciation and write-downs” and “provisions and write-downs” are added. Adjusted EBIT differs from EBIT in terms of the non-recurring components and other charges, as specified in the notes to the “Parent Company Key Financial Highlights” table.
Net Financial Position
On April 29, 2021, Consob issued “Call to attention No. 5/21” in which it highlighted that the new “ESMA Guidelines” of March 4, 2021 replaced on May 5, 2021 those of preceding Consob communications. In particular, guideline No. 39 requires that financial statement disclosure includes the following definition of net financial debt:
A. Liquidity
B. Other liquidity
Pag. 10 di 224
C. Other current financial assets
D. Liquidity (A+B+C)
E. Current financial debt (including debt instruments but excluding the current portion of non-current financial debt)
F. Current portion of non-current financial debt
G. Current financial debt (E + F)
H. Net current financial debt (G - D)
I. Non-current financial debt (excluding current portion and debt instruments)
J. Debt instruments
K. Trade payables and other non-current payables
L. Non-current financial debt (I + J + K)
M. Total financial debt (H + L)
Application of the new definition of debt according to the above format has not resulted in any change to the Group’s Net Financial Position for the period under review or for the preceding comparative periods.
Key Group Financial Highlights
in Euro thousands
At December 31, 2022
At December 31, 2021
Net Profit for the year
29,151
10,670
Income taxes
7,717
3,934
Investment income and charges
(23)
Amortisation, depreciation and write-downs
47,851
44,964
Provisions and write-downs
180
129
Financial items (*)
4,484
9,890
Non-recurring items (**)
2,901
2,489
EBITDA
92,261
72,075
Revenues
684,074
569,701
Pag. 11 di 224
EBITDA margin
13.5%
12.7%
in Euro thousands
At December 31, 2022
At December 31, 2021
EBITDA
92,261
72,075
Amortisation, depreciation and write-downs
(47,851)
(44,964)
Provisions and write-downs
(180)
(129)
Adjusted EBIT
44,229
26,983
Revenues
684,074
569,701
Adjusted EBIT margin
6.5%
4.7%
(*) Comprises: (i) financial income for Euro 4.9 million, (ii) interest expense on loans and other bank charges for Euro 8.4 million, (iii) customer cash discounts for Euro 3.8 million and (iv) exchange gains for Euro 2.8 million.
(**) Comprises: (i) non-recurring charges related to the expansion of the Aquafil Group for Euro 0.4 million; (ii) non-recurring costs and revenue for ECONYL ® development for a net cost of Euro - 0.9 million; (iii) restructuring charges of Euro 1.1 million; (iv) costs for fiscal disputes of Euro 0.1 million; (v) other non-recurring costs of Euro 0.5 million and (vi) non-recurring revenue of Euro 0.1 million. Reference should be made to paragraph 8.14 of the notes to the consolidated financial statements.
For an analysis of the highlights indicated above, reference should be made to the paragraph “Group operating performance” below.
Key Group balance sheet and financial indicators
(in Euro thousands)
At December 31, 2022
At December 31, 2021
Consolidated Shareholders' Equity
175,402
152,102
Net Financial Position
247,885
179,318
NFP/EBITDA
2.687%
2.488%
The comments on the movements in the Net Financial Position are reported in the “Group balance sheet and financial position” paragraph.
Pag. 12 di 224
Parent Company Aquafil S.p.A. Key Financial Highlights
(Euro thousands)
At December 31, 2022
At December 31, 2021
Net Profit for the year
15,930
11,153
Income taxes
3,625
1,495
Investment income and charges
(183)
(6,794)
Amortisation, depreciation and write-downs
10,711
10,798
Provisions and write-downs
360
147
Financial items (*)
6,975
11,139
Non-recurring items (**)
922
1,005
EBITDA
38,340
28,942
Revenues
694,343
569,835
EBITDA margin
5.5%
5.1%
(Euro thousands)
At December 31, 2022
At December 31, 2021
EBITDA
38,340
28,942
Amortisation, depreciation and write-downs
(10,711)
(10,798)
Provisions and write-downs
(360)
(147)
Adjusted EBIT
27,269
17,998
Revenues
694,343
569,835
Adjusted EBIT margin
3.9%
3.2%
(*) Comprises: (i) financial income for Euro 5.2 million, (ii) interest expense on loans and other bank charges for Euro 9.3 million, (iii) customer cash discounts for Euro 3.4 million and (iv) exchange gains for Euro 0.5 million.
(**) Comprises: (i) non-recurring charges related to the expansion of the Aquafil Group for Euro 0.4 million, (ii) consultancy costs for tax disputes for Euro 0.1 million and (iii) company restructuring charges of Euro 0.1 million and other non-recurring charges of Euro 0.3 million. For further details, see paragraph 9 of the Notes to the Separate Financial Statements.
The income statement figures of the Parent Company report revenues and acquisition costs which differ from the consolidated financial statements as including inter-company purchase and sales activities undertaken by Aquafil S.p.A. with the investees, which however in the consolidation process are eliminated. Therefore, the margins on revenues are not representative of the company’s actual profitability. Operating income and the net result also do not incorporate the positive income statement results of the subsidiaries, in view of the investments’ valuation method adopted. For all other detailed information, see the section “Group operating performance” below and the Notes to the separate financial statements of the Parent Company.
Key balance sheet and financial indicators of the Parent Company Aquafil S.p.A.
Pag. 13 di 224
(Euro thousands)
At December 31, 2022
At December 31, 2021
Shareholders’ Equity
120,679
116,091
Net Financial Position
298,938
235,264
The net financial position of the Parent Company Aquafil S.p.A. does not reflect the real debt of the company as not taking account of liquidity available in the bank accounts of the subsidiaries at year-end (Euro 58 million). Funding from the financial system in fact was undertaken largely by the parent company, which plays a financial support role for all of the subsidiaries. The only funding line undertaken by subsidiaries is the loan taken out in July 2020 by Tessilquattro S.p.A. for a total of Euro 5 million.
For all other detailed information, reference should be made to the separate financial statements of the company.
GROUP OPERATING PERFORMANCE
The 2022 Income Statement compared with the previous year is reported below:
CONSOLIDATED INCOME STATEMENT
(in Euro thousands)
Note
2022
of which non- recurring
2021
of which non- recurring
Revenues
8.1
684,074
1,160
569,701
784
of which related parties
435
52
Other revenues and income
8.2
13,031
218
4,612
751
of which related parties
0
0
Total revenues and other revenues and income
697,105
1,378
574,313
1,535
Cost of raw materials and changes to inventories
8.3
(317,815)
(480)
(283,622)
(150)
of which related parties
0
0
Service costs and rents, leases and similar costs
8.4
(168,472)
(1,581)
(112,567)
(1,820)
of which related parties
(465)
(414)
Labour costs
8.5
(126,875)
(1,565)
(114,228)
(1,700)
Other costs and operating charges
8.6
(4,038)
(653)
(3,420)
(354)
of which related parties
(70)
(70)
Amortisation, depreciation & write-downs
8.7
(47,851)
(44,964)
Provisions and write-downs
8.8
(222)
(254)
(Write-down)/recovery of financial assets (receivables)
8.8
42
125
Increase in internal work capitalised
8.9
5,687
6,099
Operating Profit
37,561
(2,901)
21,482
(2,489)
Investment income/charges
23
0
of which related parties
183
0
Financial income
8.10
4,869
915
Pag. 14 di 224
Financial charges
8.11
(8,368)
(7,550)
of which related parties
(140)
(159)
Exchange gains/losses
8.12
2,783
(243)
Profit before taxes
36,868
(2,901)
14,604
(2,489)
Income taxes
8.13
(7,717)
(3,934)
Profit for the year
29,151
(2,901)
10,670
(2,489)
Minority interest net profit
0
0
Group Net Profit
29,151
(2,901)
10,670
(2,489)
Basic earnings per share
8.15
0.57
0.21
Diluted earnings per share
8.15
0.57
0.21
Revenues
2022 Consolidated revenues increased on the previous year by Euro 114.4 million ( 20.1%), from Euro 569.7 million to Euro 684.1 million.
This increase is mainly attributable to the increase in average sales prices, having been adjusted to match the increase in the value of raw materials.
Other Revenue and Income
Other revenues and income increased Euro 8.4 million, compared to Euro 4.6 million in 2021. The increase on the previous year is mainly due to the receivables for government grants received by Aquafil S.p.A. for Euro 6.7 million and by Tessilquattro S.p.A. for Euro 1.1 million, principally due to the tax credits for electricity intensive and natural gas intensive companies meeting the regulations requirements.
Raw material costs
Raw materials, ancillaries and consumables amount to Euro 317.8 million, increasing 12.2% on the previous year (Euro 34.2 million). This increase is due both to quantities and the higher price of raw materials.
Service costs and rent, lease and similar costs
Service costs and rent, lease and similar costs amounted to Euro 168.5 million, increasing Euro 55.9 million on 2021 (Euro 112.6 million). Not considering "non-recurring costs”, service costs represented
Pag. 15 di 224
24.6% of revenues, compared to 19.5% in the previous year. The increase is mainly due to higher unit prices, increased energy costs, in addition to higher transportation costs.
Labour costs
Labour costs totalled Euro 126.9 million, increasing Euro 12.6 million on 2021 ( Euro 114.2 million). The overall labour costs account for 18.5% of revenues, compared to 20.0% in 2021. Labour costs, net of non-recurring components, amounting to Euro 1.6 million (slightly decreasing on the previous year’s figure of Euro 1.7 million), amounted to Euro 125.3 million. Labour costs net of non-recurring components account for 18.3% of revenues, compared to 19.8% in 2021. The average workforce for the Group decreased by 48 employees, from an average of 2,748 in 2021 to 2,7 96 for 2022.
The increase in labour cost is mainly due to the increase in average cost due to salary increases.
Other Costs and Operating Charges
Other costs and operating charges amounted to Euro 4 million, compared to Euro 3.4 million in 2021, increasing therefore by Euro 0.6 million (+18.0%). Excluding the effects of non-recurring costs, the increase would have amounted to Euro 0.3 million, accounting for 0.5% of revenues (in line with 2021).
Increases for internal work
Increases for internal work amounted to Euro 5.7 million, substantially in line with 2021 (Euro 6.1 million).
EBITDA
EBITDA was Euro 92.3 million, increasing Euro 20.2 million ( 28%) on 2021 (Euro 72.1 million).
The EBITDA Margin in 2022 was 13.5%, compared to 12.7% in 2021.
Pag. 16 di 224
Amortisation, depreciation and write-downs
Amortisation, depreciation and write-downs of Euro 47.9 million increased by Euro 2.9 million on 2021 (Euro 45 million). This figure, substantially in line with the preceding period, relates to the straight-line amortisation and depreciation of fixed assets.
Provisions and write-downs
“Provisions and write-downs” totalled Euro 0.2 million, substantially in line with 2021 (Euro 0.3 million).
EBIT
The 2022 EBIT was Euro 37.6 million, compared to Euro 21.5 million in 2021 (up Euro 16.1 million). This increase is mainly due to the higher EBITDA.
Financial Management Result
Net financial charges of Euro 0.7 million were reported in 2022, compared to net charges of Euro 6.9 million in 2021. The improvement is mainly due to the fair value measurement of IRS derivatives due to the movement in the interest rate curve, in addition to the benefit from exchange rate movements for Euro 3 million.
Income taxes
Income taxes totalled Euro 7.7 million, increasing on Euro 3.9 million on 2021, due to the increase in the “profit before taxes” of Euro 22.2 million, from Euro 14.6 million to Euro 36.9 million in 2022.
Consolidated Result
The Group net profit was Euro 29.2 million, compared to Euro 10.7 million in 2021.
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DISCLOSURE BY OPERATING SEGMENT
IFRS 8 defines an “Operating segment” as a component (i) involving business activities generating revenues and costs, (ii) whose operating results are reviewed periodically at the highest decision-making level and (iii) for which separate financial data is available.
The operating segments of the company are identified on the basis of the information analysed by the Board of Directors, which constitutes the highest decision-making level for strategic decisions, the allocation of resources and the analysis of results.
For IFRS 8 purposes, the Group activities are identifiable as a single operating segment whose results are reviewed periodically by the Board of Directors.
In fact, the Group structure identifies a strategic and singular vision of the business and this representation is consistent with the manner in which management takes its decisions, allocates resources and defines the communication strategy. Dividing the business into separate divisions is therefore currently viewed as detrimental to its economic interests. Therefore, the information required by IFRS 8 corresponds to that presented in the consolidated income statement.
The breakdown of consolidated revenues by region and by product line is therefore reported below.
Breakdown of revenues by region and product line
The breakdown of revenues by region and product line is presented in the following table (Euro millions) and also in percentage terms, alongside an analysis of the movements against the previous year:
BCF (fibre for carpet)
NTF (fibre for fabrics)
Polymers
TOTAL
YTD 2022
YTD 2021
Change
Change %
YTD 2022
YTD 2021
Change
Change %
YTD 2022
YTD 2021
Change
Change %
YTD 2022
YTD 2021
Change
Change %
EMEA
217.9
186.3
31.6
16.9%
103.3
90.2
13.1
14.5%
51.8
68.8
(17.1)
(24.8) %
372.9
345.4
27.5
8.0%
North America
166.1
91.6
74.5
81.3%
31.9
28.9
3.0
10.5%
4.0
7.7
(3.7)
(47.8) %
202.1
128.3
73.8
57.6%
Asia and Oceania
100.3
87.4
12.9
14.7%
4.1
5.1
(1.0)
(19.6) %
1.4
0.8
0.6
77.7%
105.8
93.3
12.5
13.4%
RoW
0.8
0.2
0.5
N/A
2.5
2.2
0.3
16.0%
0.0
0.4
(0.4)
(99.9) %
3.3
2.8
0.5
17.9%
TOTAL
485.0
365.5
119.5
32.7%
141.8
126.4
15.4
12.2%
57.2
77.8
(20.6)
(26.4) %
684.1
569.7
114.4
20.1%
Pag. 18 di 224
The comparison indicates the following:
1. EMEA revenues increased 8% (Euro 27.5 million) in 2022 against the previous year, where:
a. the BCF product line continued its recovery, particularly in the residential and automotive segments;
b. the NTF product line has continued growing on the strength of sales of ECONYL ® fibre and agreements with global fashion brands;
c. the Polymers product line confirmed the exceptional performance it had enjoyed throughout the year.
2. North American revenues increased 57.6% (Euro 73.8 million), where:
a. the BCF product line posted growth in the automotive and contract segments;
b. the NTF product line confirmed the growth seen throughout the year.
3. Asia Oceania revenues were up 13.4% (Euro 12.5 million), attributable to the residential segment.
GROUP BALANCE SHEET AND FINANCIAL SITUATION
The following table reclassifies the consolidated equity and financial position of the Group at December 31, 2022, and December 31, 2021.
GROUP BALANCE SHEET AND FINANCIAL SITUATION
in Euro thousands
At December 31, 2022
At December 31, 2021
Change
Trade receivables
28,553
31,233
(2,680)
Inventories
260,808
177,243
83,565
Trade payables
(126,840)
(126,566)
(274)
Tax receivables
580
423
158
Other current assets
15,861
12,853
3,008
Other current liabilities
(25,163)
(25,608)
445
Non-current assets held for sale
0
0
0
Net working capital
153,800
69,578
84,222
Property, plant and equipment
247,469
240,489
6,980
Intangible assets
21,596
23,551
(1,954)
Pag. 19 di 224
Goodwill
15,647
14,735
912
Financial assets
1,850
1,703
146
Net fixed assets
286,561
280,478
6,083
Employee benefits
(5,192)
(5,910)
719
Other net assets/(liabilities)
(11,883)
(12,726)
843
Net Capital Employed
423,287
331,420
91,867
Cash and banks
110,682
152,656
(41,974)
ST bank payables and loans
(60,481)
(48,384)
(12,098)
M-LT bank payables and loans
(202,234)
(166,315)
(35,919)
M-LT bond loan
(70,301)
(83,210)
12,910
ST bond loan
(13,108)
(7,459)
(5,649)
Current loans
9,964
860
9,104
Other financial payables
(22,407)
(27,466)
5,058
Net Financial Position
(247,885)
(179,318)
(68,567)
Group shareholders' equity
(175,401)
(152,101)
(23,300)
Equity attributable to non-controlling interests
(1)
(1)
0
Total shareholders’ equity
(175,402)
(152,102)
(23,300)
In the consolidation process, the balance sheet items expressed in foreign currencies were impacted by the write-back/write-down of opening balance sheet items in 2022 (currency translation effects) principally between the Euro the US and Chinese currencies: the changes in the balance sheet items compared to 2021 arose partly due to this factor.
Net working capital amounts to Euro 153.8 million, increasing Euro 84.2 million on Euro 69.6 million in 2021.
The movement is mainly due to the increased value of inventories, both in view of their quantity and the increased price of raw materials.
Fixed assets at December 31, 2022 amounted to Euro 286.6 million, an increase of Euro 6.1 million compared to the Euro 280.5 million of the previous year, due to the combined effect of:
1. net investment activities in tangible and intangible assets of Euro 48.4 million, including Euro 9.7 million regarding the increase in the year concerning the movement in goods recognised as per IFRS 16;
2. positive conversion differences and other minor items for Euro 5.8 million;
3. amortisation and depreciation in the year of Euro 47.9 million.
Pag. 20 di 224
Investments in property, plant and equipment are outlined in detail in the Notes and mainly concerned: (a) the technological upgrading and improvement of existing plant and equipment; (b) efficiency increases at the ECONYL® regenerated caprolactam production plant (c) projects to improve industrial and production efficiency; (d) an increase in production capacity in the various product lines and geographic areas in which the Group operates; (e) the construction of a demo-plant for the production of bio-nylon 6 using renewable raw materials; and (f) rights-of-use pursuant to IFRS 16.
The increase in intangible assets is mainly due to: (a) development costs for textile fibre samples, which comply with the criteria set out by IAS 38; (b) the development of technology to produce bio-caprolactam and, consequently, bio-nylon 6 from renewable raw materials and their testing by producing prototypes; and (c) Information and Communication Technology operations. These changes are also outlined in the Notes.
Shareholders' Equity increased by Euro 23.3 million, from Euro 152.1 million to Euro 175.4 million, substantially due to the consolidated net profit of Euro 29.2 million and the positive exchange differences from the translation of the financial statements expressed in currencies other than the Euro for Euro 5.6 million, partially offset by the distribution of dividends (Euro 6 million) and the purchase of treasury shares for Euro 5.5 million.
The Net Financial Position (net debt) at December 31, 2022 amounted to Euro 247.9 million, compared to Euro 179.3 million in the previous year, increasing Euro 68.6 million. The main factors are outlined in the consolidated cash flow statement and principally concern (a) cash flow generated by operating activities of Euro 85.4 million, (b) the changes in net working capital which absorbed cash of Euro 98.5 million mainly due to the value of inventories and (c) cash flows from investing activities which absorbed Euro 39 million, excluding the IFRS 16 effects which do not generate cash flows. The distribution of dividends and the purchase of treasury shares absorbed cash of Euro 11.5 million.
Group company current account liquidity, diversified by region and institution, decreased from Euro 153 million at December 31, 2021 to Euro 111 million at December 31, 2022.
New loans totalling Euro 94 million were agreed in the year. A breakdown of the bank debt is provided in the Notes.
The short-term credit lines granted to the Group companies were available for a total amount at period- end of Euro 74.1 million, and all the relative lines remain permanently unused. A “Shelf Facility” line was in addition available, related to the bond loan signed by the Prudential Group companies for a total amount of approx. USD 50 million.
Pag. 21 di 224
INTERCOMPANY TRANSACTIONS AND TRANSACTIONS WITH RELATED COMPANIES
Inter-company transactions
Aquafil Group operations directly involve - both in terms of production and distribution - the Group companies, which are assigned (depending on the case) the processing, special processing, production and sales phases for specific regions.
The main activities of the various group companies and principal events in 2022, broken down by each of the three product lines, were as follows.
BCF (Bulk Continuous Filament for textile floor covering) Line
The core business of the Aquafil Group is the production, re-processing and sale of yarn, mainly polyamide 6-based yarn, partly petroleum based and partly from regenerated ECONYL ® , for the higher- quality end-markets. The Group also produces and markets polyester fibres for certain textile flooring applications.
The Group companies involved in the production and sales processes for this product line are the parent company Aquafil S.p.A., with production site in Arco (Italy), Tessilquattro S.p.A., with production based in Cares (Italy) and in Rovereto (Italy), Aquafil SLO d.o.o., with facilities in Ljubljana, Store and Ajdovscina (Slovenia), Aquafil USA Inc. with two facilities in Aquafil Drive and Fiber Drive in Cartersville (U.S.A.), Aquafil Synthetic Fibres and Polymers Co. Ltd with facilities in Jiaxing (China), Aquafil Asia Pacific Co. Ltd with facilities in Rayong (Thailand), Aquafil UK, Ltd. with facilities in Kilbirnie (Scotland), the commercial company Aquafil Benelux-France B.V.B.A. based in Harelbeke (Belgium) and the commercial company Aquafil Oceania Pty Ltd., Melbourne (AUS).
Pag. 22 di 224
Group commercial operations for this product line are undertaken with industrial clients, which in turn produce for the intermediate/end-consumer markets, whose sectors are principally (a) the “contract” markets (hotels, offices and large public environments), (b) internal high-end car floors and (c) residential textile flooring. Ongoing product and process technology innovation involves frequent updates to the yarns comprising the customer’s collection; the research and development is carried out by the internal development centre in collaboration with developers within client companies and architectural studies upon the final users of carpets.
NTF Line (Nylon Textile Filament - Fibres for textile/clothing use)
The NTF product line produces and reprocesses polyamide 6 and 66 fibres, Dryarn® polypropylene microfibers for men’s and women’s hosiery, knitwear and non-run fabrics for underwear, sportswear and special technical applications. The markets concern producers in the clothing, underwear and sportswear sectors, on which the main clothing brands operate.
The production/sale of fibers for textile/clothing use is undertaken by the companies Aquafil S.p.A. (Arco), Aquafil SLO d.o.o. with facilities in Ljubljana and Senozece (Slovenia), AquafilCRO d.o.o., with facilities in Oroslavje (Croatia), Aquafil O’Mara Inc., with facilities in Rutherford College (North Carolina) and Aquafil Tekstil Sanayi Ve Ticaret A. S., with commercial operations based in Istanbul (Turkey).
The percentage of NTF polyamide-6 fibre made from caprolactam obtained from the ECONYL ® regeneration process continues to increase, and the product is being increasingly well-received by clothing brands that are sensitive to environmental issues.
Nylon 6 polymer line
The Group produces and sells polymers and polyamide 6 for end segments, including “engineering plastics” (moulding).
The polymers are mainly produced/sold by Aquafil S.p.A., Aquafil SLO d.o.o. and Aquafil USA Inc. Cartersville (U.S.A.). The companies Tessilquattro S.p.A. and Aquafil S.p.A. have begun the sale of engineering plastics for the plastic moulding industry, with production carried out at the new production site in Rovereto (TN).
Pag. 23 di 224
ECONYL ® regeneration process
A significant proportion of polyamide-6 fibres, for both the BCF and the NTF product lines, as well as for polymers, are produced using the caprolactam from regenerated ECONYL ® , a logistical-production system which obtains top-quality caprolactam from the transformation of materials, and mainly recovered industrial (pre-consumer) polyamide 6 and/or (post-consumer) materials disposed of at the end of their life cycle.
The caprolactam monomer obtained at the Ljubljana plant from the ECONYL® process supports all three product lines - BCF, NTF and polymers - as an alternative raw material to that from fossil sources, for applications (a) in textile flooring with a specific sustainability focus, (b) in clothing and accessories, in particular at the request of the leading international fashion brands more dedicated to a concrete circular economy and (c) in the design and manufacture of innovative polyamide 6 based plastic products, instead of other plastic materials that can not be restored to their orignal state by way of chemical regeneration such as polyamide 6.
The ECONYL® regeneration process is fed by recovering polyamide-6 textile flooring materials and fish netting at the end of their useful lives and a series of other industrial and consumer waste materials with high polyamide-6 content. The process is completed at the facilities of AquafilSLO d.o.o. in Ljubljana (SLO), while taking advantage of synergies within a single system of logistics and production across multiple Group companies. For the regeneration of textile flooring, certain stages of material collection and pre-treatment of used carpeting are carried out by the companies Aquafil Carpet Recycling (ACR) #1 Inc. in Phoenix, Arizona (USA) and Aquafil Carpet Collection (ACC) Inc., Phoenix, Arizona (USA), Miramar, Chula Vista and Anaheim (California); the company ACR #1 is engaged in the processes of extraction of nylon 6 and other by-products from the “end-of-life" carpets and subsequent regranulation in pellets in order to effectively support the ECONYL® industrial process at the Ljubljana plant. the company ACR #2, during the year stopped production activities related to the ECONYL ® process by transferring the production lines to ACR #1 and AquafilSLO d.o.o. and maintained the activity of leasing logistics space to third parties. For the regeneration of fish netting, an interest was acquired in the company Aquafil Chile SpA, Santiago (Chile), in order to strengthen and consolidate the procurement of good quality polyamide 6 based fishing nets to ensure consistent and stable support for the ECONYL ® regeneration process, while the collaboration continued with the company in which a minority interest is held Nofir AS in Bodǿ, Norway, a European leader in the collection and treatment of end-of-life fish netting.
Pag. 24 di 224
Other activities
The Slovakian company Cenon S.r.o . (Slovakia) does not undertake production activities. On January
12, 2022, the company sold the assets held in Slovakia to third parties, without generating income statement impacts as the relative assets have already been fully written-down. The company is not operative and will likely be the subject of voluntary liquidation.
Aquafil Engineering G.m.b.H. , Berlin (Germany), carries out industrial chemical plant design and supply for customers outside the Group and in part for Group companies.
Aqualeuna G.m.b.H., with registered office in Berlin (Germany), does not conduct operations-related
activities and is solely the holding company, with a 100% stake, of Aquafil Engineering G.m.b.H. The company currently has a tax dispute pending with the German Tax Agency, a detailed explanation of which may be found in the Notes.
The subsidiary Aquafil India Private Ltd (India) does not undertake operational activities.
In June 2022, the company Bluloop S.r.l. Società Benefit entered the consolidation scope. The company
is engaged in the sale, also through e-commerce channels, of sustainability-focused products and services. For further details, reference should be made to chapter 4 of this report.
With the other related companies to which reference is not expressly made, commercial operations are undertaken at arm’s length, in consideration of the features of the goods and services rendered.
Related party transactions
The transactions of the Aquafil Group with related parties, as defined by international accounting standard IAS 24, relating to the consolidated financial statements for the year ended December 31, 2022, are presented below. The Aquafil Group undertakes commercial and financial transactions with its related companies, consisting of transactions relating to ordinary operations and at normal market conditions, taking into account the features of the goods and services provided.
The Group has made available on its website www.aquafil.com, in the Corporate Governance section, the Related Parties Transactions Policy.
Pag. 25 di 224
The Aquafil Group undertakes transactions with the following related parties:
• Parent Company and other companies at the head of the chain of control (Parent Companies);
• other parties identified as related parties in accordance with IAS 24 (other related parties).
The transactions between the Parent Company, its subsidiaries outside of the consolidation scope and the Aquafil Group concern financial transactions, commercial leases and transactions for the settlement of accounts receivable and payable arising from the tax consolidation of Aquafin Holding S.p.A., which includes, in addition to Aquafil S.p.A., the company Tessilquattro S.p.A.. The transactions are shown in the notes to the financial statements.
The transactions were executed at market conditions; for a breakdown of the income statement and balance sheet amounts generated by related party transactions included in the Group consolidated financial statements at December 31, 2022, reference should be made to the Explanatory Notes.
With the exception of that indicated above there were no other transactions or contracts with related parties which, with regard to materiality upon the financial statements, may be considered significant in terms of value or conditions.
RESEARCH AND DEVELOPMENT
Introduction
The Aquafil Group has a Research & Development unit that manages and oversees all product and process innovation applied to BCF yarns, NTF yarns, PA6 polymers and ECONYL ® and the continued upgrading and pre-industrialisation of the bio caprolactam production process.
Pag. 26 di 224
Technological research, development and innovation for 2022 concerned the main stages of production and the materials used, from the production inputs to the by-products of polymerisation, spinning, reprocessing and, for ECONYL ® , regeneration and recycling of materials.
A number of projects - due to their complexity - last many years and are undertaken in collaboration with outside partners; other less complex projects present results in a short timeframe.
More specifically, R&D led to actions regarding efficiency, performance, product functioning, eco- design, recycling, use of auxiliary products from natural origins, the study of micro-plastics, the development of polymerisation processes, and sectors in areas of product application, taking advantage of outside contributions coming in the form of market input, new technologies, new materials, and the use of solutions recommended by qualified research partners.
Research and Development carried out by the Aquafil Group in 2022 incurred operating costs and investment activity totalling Euro 13 million, corresponding to 1.9% of consolidated revenues.
Summary and description of the individual projects
Technological research, development and innovation concerned numerous projects, some of which began in 2022, while others began in prior years. The main projects are listed below:
1. "Ecodesign": identification of basic knowledge and technology for the creation of industrial prototypes of textile flooring designed at origin to recover the residual value of the materials at the end-of-use. The project is carried out in collaboration with carpet manufacturers and suppliers of the materials they use (e.g., primary backing, latexes, etc.) to create know-how that has industrial value. Various options have been preliminarily tested, such as the use of innovative fillers, separator layers, less cross-linked binders for easier removal at the recycling stage, pre-processing of the carpet backing;
2. as part of the EcoDesign activities, Aquafil participates in the CISUFLO: (CIrcular SUstainable FLOor covering) European project, with a total duration of 4 years and funded by the European Commission under the Horizon 2020 program. The project involves 23 consortium members and aims to identify innovative EcoDesign solutions and recycling technologies dedicated to flooring. Aquafil S.p.A. participates in two capacities: as a recycler
Pag. 27 di 224
of polyamide 6, with responsibility for assessing the effectiveness of new design criteria in terms of recyclability of developed carpet tiles; as an innovator of the product (EcoDesign) and dedicated recycling technologies. In this regard, Aquafil has invested in the building of innovative machinery capable of separating the polyamide obtained from carpet tiles (carpet tiles), from rubber mats (rubber mats) and from woven carpets (aviation segment);
3. continuation of the development and fine-tuning of process technology for the selection and recycling of end-of-life polyamide carpets, which is being conducted in both Slovenia by AquafilSLO and the USA by the companies ACR #1 Inc. and Aquafil Carpet Collection LLC in order to improve the quality of materials to feed the process of producing ECONYL ® polyamide 6;
4. development of BCF yarns that are intrinsically flame retardant and feature objective approaches applied to the fibres in order to improve cleaning and stain resistance; development of methods of cleaning and sanitising PA6 rugs/carpets that have a low environmental impact;
5. development of new NTF fibers with high conductivity for application in the carpet industry, and testing of functionality by partners in accordance with ISO standards;
6. study and engineering of stabilising molecules aimed at increasing the UV and heat resistance of polyamide 6 for outdoor applications of nylon textile fibres (NTFs);
7. development of antibacterial and antiviral NTF fibers, multi and microfilament fibers for clothing segment applications, development of a new mass-dyed NTF fiber with a high content of recycled material and a reduced GWP (Global Warming Potential) value;
8. study of innovative auxiliary products, including those of a natural origin, aimed at improving the chemical and physical characteristics of BCF and NTF yarns;
9. redesign of the opacifier master batch production method in order to produce nylon textile filaments (NTF) by way of the development of technologically innovative solutions;
10. research and development of ECONYL ® PA6-based materials (with special additives developed in-house) that can be used in 3D printing. 3D printed items are always recyclable in the ECONYL ® process without the need for the pre-separation of the various components. The compound produced was the subject of patent application in November 2022.
11. study and development of “cast” nylon based on polyamide 6 ECONYL® with high mechanical performance, conducted in collaboration with the University of Trento’s Department of Mechanical and Industrial Engineering, to produce mono-material composite polymers that can be fully regenerated using the ECONYL ® process; In 2022, in
Pag. 28 di 224
addition to testing at the University's laboratories, samples of anionic polymer matrix were produced in various sizes, geometries and types of PA6 fibers. A multipurpose pilot plant suitable also for moulding ECONYL ® anionic rods and sheets was set up at Aquafil S.p.A.;
12. development of standard approaches to determining the micro-plastics found in various forms (i.e. solid, liquid, gas) in the textile industry and other segments;
13. “EFFECTIVE” project, coordinated by AquafilSLO and financed by the Circula Bio-based Europe (CBE, previously the Bio-Based Industries Joint Undertaking - BBI JU) public- private partnership between the European Union and a consortium of circular bio- economics enterprises and research centres) under the EU research programme Horizon 2020 aimed at developing fibres and films for consumer goods derived from bio-polyamides and bio-polyesters that fit within the circular economy. Regarding PA6 bio polyamide in 2022 with polymer obtained from Aquafil and subsequently processed into BCF and NTF yarns, prototypes of textile flooring, textiles and sportswear (beach and cycling wear) were successfully obtained. In addition, bio PA6 frames were produced for the eyewear industry. In the area of biopolymers, the process for the production of PA6.9 polymer has been developed and tested successfully, particularly for the production of blow and cast monomaterial films. In addition, the production of PA6,9-6 copolymers as hot melt adhesives in the textile flooring and apparel industry has been developed in accordance with end-of-life recycling;
14. “organic caprolactam” project in collaboration with Genmatica Inc., in San Diego, California (USA). This project involved the start-up of a demonstration plant (representative of industrial scale) dedicated to the transformation of intermediate organic 6-ACA into bio- caprolactam at the AquafilSLO plant in Ljubljana. In early 2022, the first batch of bio- caprolactam (in the range of several tonnes) was produced, which - as part of the EFFECTIVE project - was subsequently converted to bio-Nylon 6 in industrial batch autoclaves at the Arco site. The polymer obtained was later used for the production of the BCF and NTF yarns being reprocessed by the project partners into end-consumer goods. In the second half of 2022, the bio-caprolactam production campaign at the demonstration plant was repeated, which, based on previous experience, led to a significant improvement in the quality of the product obtained;
15. research and development of processes aimed at the chemical recovery of polymers from polycondensation (polyamides and polyesters), also in composite form: this is being done in collaboration with the University of Padua and has produced interesting research results,
Pag. 29 di 224
including two new patents held by Aquafil S.p.A. on end-of-life depolymerization catalysts and on separation processes of composite materials with glass fiber already subject to international extension in 2022. This project also led to the need to build a flexible, multipurpose system that is midway between a lab system and a pilot system and makes it possible to conduct testing of new polymer regeneration processes;
16. efforts to increase the efficiency of polymerisation processes and of new polymerisation technologies in order to enhance the mechanical properties of the polymers;
17. development of a proprietary system for the on-field identification of various polymer classes with a specific algorithm developed for analysing the composition of waste from the textile, plastics processing, fisheries and aquaculture and carpet industries, with data traceability and cloud storage;
18. identification, development and assessment of an appropriate technology for recovery and utilisation of by-products of the depolymerisation process through dedicated pyrolysis processes, enabling the transformation of residual polymer and organic mixes into non-fossil fuels;
19. optimisation of polymerisation and depolymerisation production processes, in order to reduce energy and water consumption;
20. as part of the continuous improvement of the ECONYL ® process, optimization of caprolactam distillation and purification processes aimed at reducing energy consumption and decreasing process by-products;
21. in order to initiate the recovery of PA6-based materials through the ECONYL ® process, a process was developed to separate polymer fibers (as such and/or in the form of fabrics) from elastomers by means of liquid phases, avoiding the use of organic solvents. The process was also found to be suitable for PA66- and PET-based fabrics and was therefore the subject of a special patent application filed in December 2022.
Patent developments
The following is a list of patents that have been filed:
Pag. 30 di 224
a) patent registered to Aquafil S.p.A. 8.6.2017, PCT, on the composition of fish-net coatings;
b) patents filed by AquafilSLO d.o.o., published on June 28, 2018, with validity in all 152 countries subscribing to the Patent Cooperation Treaty (PCT), regarding a method to recover copper from discarded fishing nets in support of the ECONYL ® process; in 2020, the patent was approved in the United States and Japan and from 2021 will be approved in China and in the 38 member states of the European Patent Organisation; extension of the patent to Canada, Chile and India is currently under way;
c) patent filed by AquafilSLO d.o.o., published on November 29, 2018, and valid in the USA, on the process of recovering and separating scrap material from polyamide carpets at the end of their life cycle, and the international patent valid in PCT member countries was published on December 6, 2018. A further patent application for integrations on the same process by Aquafil SLO is currently in the publication process;
d) patent filed by AquafilSLO d.o.o. in 2017 and published on June 20, 2019, in all PCT- member countries, with specific national/regional extensions in countries in which there are caprolactam production sites, including the EU, the USA, China, Russia and Japan, related to the improvement and optimisation of solvent-free caprolactam purification technology. As a result of these activities, the situation at year-end was:
• patent definitively granted in the 38 members states of the EPO;
• definitive approval in Japan;
• Eurasian patent no. 038223, covering 9 nations including Russia and Belarus, was obtained in July 2021;
• in December 2021, the US Patent Office, in addition to the original patent, confirmed approval of the second Divisional Patent for the USA;
• publication is confirmed in China whose Patent Office issued two opinions on the claims between August and December 2022 to which comprehensive answers and technical explanations were given and forwarded by the agent to the relevant office. The concession in China is also expected to be obtained during 2023;
Pag. 31 di 224
e) patent filed in February 2021 and published in August 2022 under the name AquafilSLO d.o.o., on a new multi-component NTF fiber with reduced impact on GWP (Global Warming Potential) and related manufacturing process;
f) as part of the project relating to the development of bio-caprolactam, the patent application was filed on December 28, 2018, at the Italian Patent Office, jointly by Aquafil S.p.A. and Genomatica Inc., San Diego, California (USA), and relating to the transformation phase of the initial linear intermediate obtained through fermentation processes into the final cyclic ring monomer used for the production of bio-nylon 6; in December 2019, the Italian patent was then filed under the PCT with the code WO2020/136547 with validity in all 152 participating nations; on July 2, 2020, the PCT patent was published. In 2020 and 2021, the national patents between Aquafil and Genomatica were extended with reference to the areas in which there is both caprolactam production and availability of renewable raw materials; the applications have been filed with:
• EP, European patent organisation that includes 38 European countries,
• Eurasian Patent Organization (Russia and 7 former Soviet Union countries),
• USA, Mexico, Brazil,
• China, Japan, South Korea, Thailand and India;
In 2022, the assessments from the patent offices in the various regions arrived, which are currently being followed up in order to obtain confirmation of the concession. Activities will continue into 2023; the patent was published in 2022 by Eurasia and USA;
g) as part of the development of the PET recycling process, a patent application has been filed in Italy with No. 102021000012617; the patent is owned by Aquafil S.p.A. with joint inventors Aquafil and the Department of Industrial Engineering of the University of Padua. The application was filed on May 17, 2021. On May 16, 2022, following further interesting additions in the laboratories of Aquafil and the University of Padua, the application was submitted to PCT Patent.
The international patent was published on November 24, 2022 WO 2022/243832A1.
The opinion of the International Research Authority reviewing the PCT patent was received in August 2022, and the preparation of responses to the observations commenced with the
Pag. 32 di 224
support of experimental activities again undertaken with the Department of Engineering of Padua. In 2023, extensions in individual countries and regions will be carried out within the deadlines;
h) with regard to research into materials that can feed the ECONYL ® caprolactam regeneration process, our focus is on reinforced PA6 fibreglass, which is widely available and is being reused to a limited extent by way of mechanical recycling, but most of which ends up in landfills. Within the scope of the collaboration with the University of Padua, a pilot process has been developed that results in the separation of a partially depolymerised PA6 polymer and in unaltered fibreglass. A patent application was filed in Italy on November 10, 2021 (No. 102021000028601), with Aquafil as the patent holder and co-inventors Aquafil and the Department of Industrial Engineering of the University of Padua. In July 2022, an opinion was received from the UIBM (Italian Patent and Trademark Office) using the European Patent Office in which all claims were found to be innovative and inventive. On November 10, 2022, the international extension was made as a PCT, which will be published in the first half of 2023, when the specific regional and national extensions will be made;
i) as part of the studies for the application of PA6 polyamide for 3D printing, an Italian patent application owned by Aquafil S.p.A. was filed on November 3, 2022 as No. 102022000022578 for a printable additive polyamide-based compound; the compound then also becomes directly chemically recyclable without any prior physical separation pre- treatment. During 2023, the first opinion of the EPO through UIBM is expected to proceed with the extension of the international PCT patent;
j) for the purpose of separating elastomers from polymeric materials such as synthetic threads and PA6-based fabrics, a process and methodology has been developed that integrates with the ECONYL ® process. The process has been the subject of a patent application under the ownership of Aquafil S.p.A.. The filing was made at the Italian office on December 9, 2022, IT No. 102021000028601, and within 12 months the first opinion will be obtained from the UIBM, for which the European office (EPO) is in charge for Italy, which will allow the evaluation of the innovation and possible additions to proceed with the extension of the international PCT patent.
CORPORATE GOVERNANCE
Pag. 33 di 224
For further information on corporate governance, reference should be made to the Corporate Governance and Ownership Structure Report, prepared in accordance with Article 123-bis of Legs. Decree 58/1998, approved by the Board of Directors, together with the Directors’ Report made available at the registered office of the company and on the Group website (
http://ir.aquafil.com/ita/bilanci-
relazioni
) .
Certain disclosure within the scope of the Corporate Governance and Ownership Structure report is covered by the “Remuneration Report” drawn up as per Article 123-ter of Legislative Decree 58/1998. Both reports, approved by the Board of Directors, are published in accordance with law on the company website
www.aquafil.com
.
OTHER INFORMATION
Management and co-ordination
The Company is not subject to management and co-ordination pursuant to Article 2497 and subsequent of the Civil Code.
The Parent Company Aquafin Holding S.p.A. does not exercise management and co-ordination over Aquafil as substantially operating as a holding company, without an independent organisational structure and, consequently, de facto does not exercise direct management over Aquafil S.p.A..
All of the Italian direct or indirect subsidiaries of Aquafil S.p.A. have met the publication requirements under Article 2497-bis of the Civil Code, indicating Aquafil S.p.A. as the company exercising management and co-ordination.
Treasury shares
Pag. 34 di 224
At December 31, 2022, the Company held a total of 1,181,685 treasury shares, purchased following authorisation by the Shareholders on October 20, 2021, and comprising 2.3071% of share capital. Shares were purchased for a total value of Euro 8,014,531, of which 5,469,675 related to purchases completed during 2022. At the date of approval of this report, as a result of purchases made in January 2023, the Company holds a total of 1,278,450 treasury shares, comprising 2.4961% of the share capital, for a total value of Euro 8,612,054.
Group IRES (Corporate Income Tax) taxation procedure
Aquafil S.p.A. is the consolidating company of the group taxation procedure, as chosen by Aquafin Holding S.p.A. for the 2021-2023 three-year period in accordance with Articles 117 to 128 of Presidential Decree 917/1986, as amended by Legs. Decree No. 344/2003. Similarly, the company Tessilquattro S.p.A. is a consolidated company within the Group taxation procedure, in accordance with the option exercised by Aquafin Holding S.p.A. as consolidating company.
In preparing the interim financial statements of these companies, the effects of the transfer of the tax positions due to the consolidated tax accounts were taken into account; in particular, the subsequent accounts receivable from/payable to the consolidating company were recognised.
Organisation, management and control model in accordance with Legs. Decree 231/2001
The Italian companies of the Aquafil Group have supplemented the organisation, management and control model as per Legislative Decree No. 231 of June 8, 2001, including the conduct code and operating procedures, as updated by: (a) Law No. 3 of January 9, 2019, “Measures to combat offenses against the public sector, as well as on the statute of limitations and the transparency of political parties and movements”, with particular reference to the new offense as per Article 346 bis of the Italian Criminal Code - Exercising of undue influence, introduced by Article 25 of Legislative Decree 231/01; (b) Law No. 157 of December 19, 2019, “Conversion into law, with amendments, of Legislative Decree No. 124
Pag. 35 di 224
of October 26, 2019, containing urgent provisions on tax matters and for unavoidable needs”, which introduces tax offences into the catalogue as per Legislative Decree No. 231/01; (c) Legislative Decree No. 75 of July 14, 2020, “Implementation of Directive (EU) 2017/1371 on the fight against fraud to the EU’s financial interests by means of criminal law”.
Impairment Test Procedure
In order to conduct impairment tests for the purpose of verifying the recoverability of assets, as described below, the Parent Company has adopted specific, formal procedures as approved by the Board of Directors on February 15, 2019.
RECONCILIATION BETWEEN THE PARENT COMPANY AND GROUP SHAREHOLDERS’ EQUITY AND OPERATING RESULT AT DECEMBER 31, 2022
A breakdown of the composition and movement of shareholders’ equity of the parent company and the Group consolidated financial statements at December 31, 2022 is presented in the following table:
(Euro thousands)
Share. Equity
Net Result
Parent company net equity and net result
120,679
15,930
Consol. Adjustments on parent company
3,010
4,294
Elimination of carrying amounts of consolidated investments
Difference between Shareholders' Equity & Carrying amount
50,773
Pro-quota results of investees
18,540
18,540
Elimination of the effects of transactions between consolidated companies
Reversal of write-downs net of revaluations of investments
0
0
Inter-company dividends
0
0
Pag. 36 di 224
Inter-company profit/(loss) included in inventories & other minor
(12,001)
(4,014)
Translation reserve
(5,600)
(5,600)
Net equity and net result as per consolidated financial statements
175,402
29,151
Minority interest net equity and net result
1
0
Group net equity and net result
175,401
29,151
OUTLOOK
2022 demonstrated the Aquafil’s Group’s capacity to successfully navigate challenging economic conditions to deliver excellent results.
2023 shall again feature a significant degree of Aquafil Group market volatility due to the continually changing economic and geopolitical environment.
In order to tap into the opportunities and take on the challenges of 2023, the Aquafil Group shall continue to execute its strategic operating plans of recent years, i.e.:
a) the geographic diversification of activities, which has been - and increasingly will be - a key factor for growth and efficiency;
b) a key focus on social and environmental sustainability and corporate governance, which shall continue to be a driver of strategic decision-making with a view to increase value creation.
c) the extension of production and sales activities in order to ensure the Group’s ongoing growth and an improved customer product range;
d) ongoing research and development to optimise production processes and maintain our technological advantage over the competition.
Pag. 37 di 224
Pag. 38 di 224
CONSOLIDATED BALANCE SHEET
(in thousands of Euro)
Note
At December 31, 2022
At December 31, 2021
Intangible assets
7.1
21.596
23.551
Goodwill
7.2
15.647
14.735
Property, plant & equipment
7.3
247.469
240.489
Financial assets
7.4
831
710
of which parent companies, related parties, associates
318
318
Investments valued at equity
7.4
1.018
1.018
Other assets
7.5
426
626
of which parent companies, related parties
0
0
Deferred tax assets
7.6
11.519
12.269
Total non-current assets
298.506
293.398
Inventories
7.7
260.808
177.243
Trade receivables
7.8
28.553
31.233
of which parent companies, related parties
376
71
Financial assets
7.4
9.964
860
Tax receivables
7.9
580
423
Other assets
7.10
15.862
12.853
of which parent companies, related parties
247
3.152
Cash and cash equivalents
7.11
110.682
152.656
Assets held-for-sale
0
0
Total current assets
426.449
375.268
Total assets
724.955
668.666
Share capital
7.12
49.722
49.722
Reserves
7.12
96.528
91.709
Group net result
7.12
29.151
10.670
Total parent company net equity
175.401
152.101
Minority interest net equity
7.12
1
1
Minority interest net profit
7.12
0
0
Total consolidated net equity
175.402
152.102
Employee benefits
7.13
5.192
5.910
Financial liabilities
7.14
285.385
263.421
of which parent companies, related parties
5.262
6.359
Provisions for risks and charges
7.15
1.975
1.929
Deferred tax liabilities
7.6
9.237
11.158
Other liabilities
7.16
8.985
10.813
of which parent companies, related parties
0
0
Total non-current liabilities
310.774
293.231
Financial liabilities
7.14
83.146
69.438
of which parent companies, related parties
2.957
2.240
Current tax payables
7.9
3.630
1.721
Trade payables
7.17
126.840
126.566
of which parent companies, related parties
270
352
Other liabilities
7.16
25.163
25.608
of which parent companies, related parties
230
230
Total current liabilities
238.779
223.333
Total net equity & liabilities
724.955
668.666
Pag. 39 di 224
CONSOLIDATED INCOME STATEMENT
(in Euro thousands)
Note
At December 31, 2022
of which non- recurring
At December 31, 2021
of which non- recurring
Revenues
8.1
684.074
1.160
569.701
784
of which related parties
435
52
Other revenues and income
8.2
13.031
218
4.612
751
of which related parties
0
0
Total revenues and other revenues and income
697.105
1.378
574.313
1.535
Cost of raw materials and changes to inventories
8.3
(317.815)
(480)
(283.622)
(150)
of which related parties
0
0
Service costs and rents, leases and similar costs
8.4
(168.472)
(1.581)
(112.567)
(1.820)
of which related parties
(465)
(414)
Labour costs
8.5
(126.875)
(1.565)
(114.228)
(1.700)
Other costs and operating charges
8.6
(4.038)
(653)
(3.420)
(354)
of which related parties
(70)
(70)
Amortisation & write-downs
8.7
(47.851)
(44.964)
Provisions and write-downs
8.8
(222)
(254)
(Write-down)/recovery of financial assets (receivables)
8.8
42
125
Increase in internal work capitalised
8.9
5.687
6.099
Operating Profit
37.561
(2.901)
21.482
(2.489)
Investment income/charges
23
0
of which related parties
183
0
Financial income
8.10
4.869
915
Financial charges
8.11
(8.368)
(7.550)
of which related parties
(140)
(159)
Exchange gains/(losses)
8.12
2.783
(243)
Profit before taxes
36.868
(2.901)
14.604
(2.489)
Income taxes
8.13
(7.717)
(3.934)
Profit for the year
29.151
(2.901)
10.670
(2.489)
Minority interest net profit
0
0
Group Net Profit
29.151
(2.901)
10.670
(2.489)
Basic earnings per share
8.15
0,57
0,21
Diluted earnings per share
8.15
0,57
0,21
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
(in Euro thousands)
Note
At December 31, 2022
At December 31, 2021
Profit for the year
29.151
10.670
Actuarial gains/(losses)
724
(95)
Tax effect from actuarial gains and losses
(81)
23
Other income items not to be reversed to income statement in subsequent periods
643
(72)
Currency difference from conversion of financial statements in currencies other than the Euro
4.957
17.128
Other comprehensive income
5.600
17.056
Total comprehensive income
7.12
34.751
27.726
Minority interest comprehensive income
0
0
Group comprehensive income
7.12
34.751
27.726
Pag. 40 di 224
CONSOLIDATED CASH FLOW STATEMENT
(in thousands of Euro)
Notes
At December 31, 2022
At December 31, 2021
Operating activities
Profit for the year
7.12
29.151
10.670
of which related parties:
(57)
(591)
Income taxes
8.13
7.717
3.934
Financial (Income)/expenses on investments
(23)
0
of which related parties:
-183
0
Financial income
8.10
(4.869)
(914)
of which related parties:
0
0
Financial charges
8.11
8.369
7.550
of which related parties:
(140)
(159)
Net exchange gains/(losses)
8.12
(2.783)
243
Asset disposal (gains)/losses
(183)
(210)
Provisions and write-downs
8.8
222
254
Write-downs of financial assets (receivables)
8.8
(42)
(126)
Amortisation, depreciation & write-downs of tangible and intangible assets
8.7
47.851
44.975
Cash flow from operating activities before working capital changes
85.410
66.376
Decrease/(Increase) in inventories
7.7
(83.469)
(26.323)
Increase/(Decrease) in trade payables
7.17
245
57.398
of which related parties:
(82)
(51)
Decrease/(Increase) in trade receivables
7.8
2.722
(9.092)
of which related parties:
(305)
(5)
Changes to assets and liabilities
(4.169)
8.149
of which related parties:
2.905
35
Net paid financial charges
(8.005)
(6.636)
Income taxes paid
(3.840)
(237)
Utilisation of provisions
(2.012)
(587)
Cash flow generated/(absorbed) from operating activities (A)
(13.118)
89.048
Investing activities
Investments in tangible assets
7.3
(34.864)
(34.632)
Disposal of tangible assets
7.3
384
353
Investments in intangible assets
7.1
(4.163)
(4.977)
Disposal of intangible assets
7.1
132
28
Aquafil Chile and Bluloop Effect
(146)
0
of which fixed assets
(37)
0
of which goodwill
0
0
of which liquidity
0
0
of which current assets
(109)
0
Investments in financial assets
7.4
(160)
(1.018)
Dividends received
183
0
of which related parties:
183
0
Cash flow generated by investing activities (B)
(38.634)
(40.246)
Financing activities
Drawdown non-current bank loans and borrowings
7.14
94.000
30.000
Repayment non-current bank loans and borrowings
7.14
(53.244)
(123.457)
Net changes in current and non-current financial assets and liabilities (including IFRS 16)
7.14
(9.802)
(2.295)
of which related parties:
(380)
(168)
Non-monetary change IFRS 16
7.3
(9.660)
(6.803)
of which related parties:
(1.828)
(3.095)
Dividends distributed
(6.046)
0
of which related parties:
(3.576)
0
Acquisition of treasury shares
7.12
(5.470)
(2.545)
Cash flow from generated/(absorbed) by financing activities (C)
9.778
(105.100)
Net cash flow in the year (A)+(B)+(C)
(41.974)
(56.298)
Opening cash and cash equivalents
7.11
152.656
208.954
Closing cash and cash equivalents
7.11
110.682
152.656
Pag. 41 di 224
PROSPETTO DELLE VARIAZIONI DEL PATRIMONIO NETTO CONSOLIDATO
(Euro thousands)
Share capital
Legal reserve
Translatio n reserve
Share premium reserve
Listing cost reserve
FTA Reserve
IAS 19 Reserve
Treasur y shares
Retained earnings
Net result
Total parent share. equity
Min. interest share. equity
Total consol. share. equity
At December 31, 2020
49.722
665
(25.180)
19.975
(3.287)
(2.389)
(988)
0
87.784
595
126.897
1
126.897
Sale minority interest
0
0
Other changes
(2.545)
23
(2.522)
(2.522)
Allocation of prior-year result
35
560
(595)
0
Distribution dividends
0
0
Result for the year
10.670
10.670
10.670
Actuarial gains/(losses) employee benefits
(72)
(72)
(72)
Translation difference
17.128
17.128
17.128
Comprehensive income
17.128
(72)
10.670
27.726
27.726
At December 31, 2021
49.722
700
(8.052)
19.975
(3.287)
(2.389)
(1.060)
(2.545)
88.367
10.670
152.101
1
152.102
Sale minority interest
0
0
Other changes
(5.470)
65
0
(5.405)
(5.405)
Allocation of prior-year result
558
10.112
(10.670)
0
0
Dividends distributed
(6.046)
(6.046)
(6.046)
Share capital increase
0
0
Result for the year
29.151
29.151
29.151
Actuarial gains/(losses) employee benefits
643
643
643
Translation difference
4.957
4.957
4.957
Comprehensive income
4.957
643
0
29.151
34.751
34.751
At December 31, 2022
49.722
1.258
(3.095)
19.975
(3.287)
(2.389)
(417)
(8.015)
92.498
29.151
175.401
1
175.402
Pag. 42 di 224
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
1.1 Introduction
Aquafil S.p.A. , with registered office at Via Linfano, 9 – Arco (TN) – 38062 Italy , (“Aquafil”, “Company” or “Parent company” and, together with its subsidiaries, “Group” or “Aquafil Group”), renowned for the production and distribution of fibers and polymers, principally polyamide, is a joint stock company listed on the Italian Stock Exchange, STAR Segment since December 4, 2017, resulting from the business combination through merger by incorporation of Aquafil S.p.A. (pre-merger), founded in 1969 in Arco (TN), into Space3 S.p.A., as an Italian registered Special Purpose Acquisition Company (SPAC), with efficacy from December 4, 2017.
The majority shareholder of Aquafil S.p.A. is Aquafin Holding S.p.A., with registered office in Via Leone XIII No. 14, 20145 Milan, Italy, which however does not exercise management and co-ordination activities. The ultimate Parent Company, which draws up specific consolidated financial statements, is GB&P S.r.l. with registered office in Via Leone XIII No. 14, 20145 Milan, Italy.
The Aquafil Group produces and sells fibers and polymers, principally polyamide 6, on a global scale through the:
(i) BCF Product Line (carpet fibers), or synthetic yarns mainly intended for the textile flooring sector and used in “contract” segments (hotels, airports, offices, etc.), residential buildings and the automotive market;
(ii) NTF Product Line (clothing fibers), or synthetic yarns mainly intended for the clothing sector (sportswear, classic, technical or specialist apparel);
(iii) Polymers Product Line, or plastic raw materials, mainly targeting the engineering plastics sector for subsequent use in the moulding industry.
Group products are also sold on the market under the ECONYL® brand, which offers the Group’s products obtained by regenerating industrial waste and end-of-life products.
Pag. 43 di 224
The Group enjoys a consolidated presence in Europe, the United States and Asia .
1.2 Consolidated Financial Statement Presentation
These consolidated financial statements were prepared for the year ended December 31, 2022 (“Consolidated Financial statements”) in accordance with EU Regulation 809/2004, in compliance with International Financial Reporting Standards, issued by the International Accounting Standards Board and endorsed by the European Union (“IFRS”).
The Consolidated Financial Statements were approved by the Board of Directors of the company on March 16, 2023 and audited by PricewaterhouseCoopers S.p.A., statutory auditors of the company.
2. ACCOUNTING POLICIES AND MEASUREMENT CRITERIA
The main accounting policies adopted in the preparation of the Consolidated Financial Statements are reported below. These accounting policies were applied in line with the year 2021 and those applied at December 31, 2022.
2.1 Basis of preparation
As previously indicated, these consolidated financial statements were prepared in accordance with IFRS, i.e. all “International Financial Reporting Standards”, all “International Accounting Standards” (“IAS”), all interpretations of the International Reporting Interpretations Committee (“IFRIC”), previously called the Standards Interpretations Committee (“SIC”) which, at the approval date of the Consolidated Financial Statements, were endorsed by the European Union pursuant to EU Regulation No. 1606/2002 of the European Parliament and European Council of July 19, 2002.
These consolidated financial statements were prepared:
• on the basis of extensive knowledge on the IFRS and taking into account best practice; any further orientations and interpretative updates will be reflected in subsequent years, in accordance with the provisions of the accounting standards;
• under the historical cost convention, except for the measurement of financial assets and liabilities where the obligatory application of the fair value criterion is required.
Pag. 44 di 224
• on a going-concern basis of the Group, as the directors verified the absence of financial, operating or other indicators which may suggest difficulties with regards to the Group’s capacity to meet its obligations in the foreseeable future and in particular in the next 12 months.
2.2 Form and content of the financial statements
The Consolidated Financial Statements were prepared in Euro, which corresponds to the principal currency of the economic activities of the entities within the Group. All the amounts included in the present document are presented in thousands of Euro, unless otherwise specified.
The financial statements and the relative classification criteria adopted by the Group, within the options permitted by IAS 1 “Presentation of financial statements” (“IAS 1”) are illustrated below:
• the consolidated balance sheet is presented with separation between “current and non-current” assets and liabilities;
• the consolidated income statement was prepared separately from the comprehensive income statement, and was prepared classifying operating costs by expense type;
• the comprehensive income statement which includes, in addition to the result for the period, also the changes to equity relating to income items which, in accordance with International Accounting Standards, are recognised under equity;
• the cash flow statement prepared in accordance with the “indirect method” .
The financial statements utilised are those which best represent the result, equity and financial position of the Group.
2.3 Consolidation scope and basis of consolidation
The Consolidated Financial Statements includes the equity and financial position and results of the subsidiaries and/or associated companies, approved by the respective boards and prepared on the basis of the relative accounting entries and, where applicable, appropriately adjusted in line with international accounting standards IAS/IFRS.
The following table summarises, with reference to the subsidiaries and associated companies, details on company name, registered office, share capital, result from draft financial statements prepared for
Pag. 45 di 224
approval, direct and indirect holding, of the company and the consolidation method applied at December 31, 2022:
Company
Registered office
Share capital
Net profit/(loss)
Currency
Group holding
% of
votes
Method
of consol-
idation
Parent company:
Aquafil S.p.A.
Arco (IT)
49,722,417
15,930,426
Euro
Subsidiary companies:
Aquafil SLO d.o.o.
Ljubjiana (SLO)
50,135,728
5,262,460
Euro
100.00%
100.00%
Line-by- line
Aquafil USA Inc.
Cartersville (USA)
77,100,000
11,479,959
US Dollar
100.00%
100.00%
Line-by- line
Tessilquattro S.p.A.
Arco (IT)
3,380,000
(3,240,033)
Euro
100.00%
100.00%
Line-by- line
Aquafil Jiaxing Co. Ltd
Jiaxing (CHN)
355,093,402
79,145,985
Chinese Yuan
100.00%
100.00%
Line-by- line
Aquafil UK Ltd
Ayrshire (UK)
3,669,301
(994,365)
UK Sterling
100.00%
100.00%
Line-by- line
Aquafil CRO d.o.o.
Oroslavje (CRO)
71,100,000
19,235,149
Croatian Kuna
100.00%
100.00%
Line-by- line
Aquafil Asia Pacific Co. Ltd
Rayoung (THA)
53,965,000
54,220,962
Baht
99.99%
99.99%
Line-by- line
Aqualeuna G.m.b.H.
Berlin (GER)
2,325,000
(1,292,061)
Euro
100.00%
100.00%
Line-by- line
Aquafil Engineering G.m.b.H.
Berlin (GER)
255,646
256,919
Euro
100.00%
100.00%
Line-by- line
Aquafil Tekstil Sanayi Ve Ticaret A.S.
Istanbul (TUR)
1,512,000
6,304,504
Turkish Lira
99.99%
99.99%
Line-by- line
Aquafil Benelux France B.V.B.A.
Harelbake (BEL)
20,000
110,358
Euro
100.00%
100.00%
Line-by- line
Cenon S.r.o.
Zilina (SLO)
26,472,682
(193,314)
Euro
100.00%
100.00%
Line-by- line
Aquafil Carpet Recycling #1, Inc.
Phoenix (USA)
250,000
(3,445,921)
US Dollar
100.00%
100.00%
Line-by- line
Aquafil Carpet Recycling #2, Inc.
Woodland California (USA)
250,000
(2,250,446)
US Dollar
100.00%
100.00%
Line-by- line
Aquafil Oceania Ltd
Melbourne (AUS)
49,990
14,478
Australia n Dollar
100.00%
100.00%
Line-by- line
Aquafil India Private Ltd
New Delhi(IND)
85,320
Indian Rupee
99.97%
99.97%
Line-by- line
Aquafil O'Mara Inc.
North Carolina (USA)
36,155,327
125,383
US Dollar
100.00%
100.00%
Line-by- line
Aquafil Carpet Recycling
Phoenix (USA)
3,400,000
(1,545,314)
US Dollar
100.00%
100.00%
Line-by- line
Pag. 46 di 224
Aquafil Japan
Chiyoda (JP)
150,000,000
(121,070,024)
Japanese Yen
100.00%
100.00%
Line-by- line
Bluloop Srl
Arco (IT)
50,000
(5,144)
Euro
100.00%
100.00%
Line-by- line
Aquafil Chile SpA
Santiago (CL)
1,000,000
(37,387,392)
Chilean Peso
100.00%
100.00%
Line-by- line
Associated companies:
Nofir
Bodo (NO)
663,700
929,083
Corona Norveges e
31.66%
31.66%
Sharehol ders’ Equity
The changes in the Aquafil Group consolidation scope for the year concerned:
- in May 2022 the newly-incorporated company Aquafil Chile S.p.A., based in Santiago, Chile, a wholly- owned subsidiary of Aquafil SLO doo, was acquired with the corporate scope of mainly purchasing fishing nets and other plastic material waste, managing their storage, processing, transport and sale to third parties, as a raw material for reuse in subsequent ECONYL® recycling and regeneration processes;
- in June 2022, Bluloop S.r.l. was incorporated as a benefit company, a wholly-owned subsidiary of Aquafil S.p.A., whose main corporate scope is to sell products made with ECONYL® polyamide to the end consumer on the e-commerce channels; the company also has communication, training and intervention objectives in the areas in which the Aquafil Group operates in terms of environmental and social sustainability issues.
The main criteria adopted by the Group for the definition of the consolidation scope and the relative consolidation principles are illustrated below.
Subsidiaries
A party controls an entity when it is: i) exposed, or has the right to participate, in the relative variable economic returns and ii) able to exercise its decisional power on the activities relating to the entity in order to influence these returns. The existence of control is verified where events or circumstances indicate an alteration to one of the above-mentioned factors determining control. Subsidiaries are consolidated under the line-by-line method from the date control is acquired and ceases to be consolidated from the date in which control is transferred to third parties. The year-end of the subsidiary companies coincides with that of the Parent Company. The criteria adopted for line-by-line consolidation were as follows:
Pag. 47 di 224
• the assets and liabilities, and the charges and income of the companies are recorded line-by-line, attributing to the minority shareholders, where applicable, the share of net equity and net result for the period pertaining to them; this share is recorded separately in the net equity and in the income statement;
• the gains and losses, with the relative fiscal effect, deriving from operations between fully consolidated companies and not yet realised with third parties, are eliminated, except for losses which are not eliminated where the transaction indicates a reduction in the value of the asset transferred. The effects deriving from reciprocal payables and receivables, costs and revenues, as well as financial income and charges are also eliminated.
• with regard to equity investments acquired subsequent to the acquisition of control (non-controlling interest acquisitions), any difference between the acquisition cost and the corresponding portion of equity acquired is recognised to Group equity; similarly, the effects from the sale of the non- controlling share without loss of control are recognised to equity. Conversely, the sale of a share in investments which results in the loss of control are recognised in the comprehensive income statement:
(i) of any gains/losses calculated as the difference between the payment received and the corresponding share of consolidated net equity sold;
(ii) of the effect of the remeasurement of any residual investment in line with the relative fair value;
(iii) of any values recorded under other items of the comprehensive income statement relating to the investee which is no longer controlled and which must be reversed through the comprehensive income statement, or where the amount should not be reversed through the comprehensive income statement, to the net equity account “Retained earnings”.
The value of any investment maintained, aligned to the relative fair value at the date of loss of control, represents the new initial recognition value of the investment, which also constitutes the value for subsequent measurement in accordance with the measurement criteria applicable.
Associated Companies
Associated companies are companies in which the Group has a significant influence, which is presumed to exist when the percentage held is between 20% and 50% of the voting rights. Associated companies
Pag. 48 di 224
are measured under the equity method and are initially recorded at cost. The equity method is as described below:
• the book value of these investments is aligned to the net equity of the company adjusted, where necessary, to reflect the application of IFRS and includes the recognition of the higher value attributed to the assets and liabilities and to any goodwill, identified on acquisition; in line with a similar process to that previously described for business combinations;
• the profits and losses pertaining to the Group are recognised when the significant influence begins and until the significant influence ceases to exist. In the case where, due to losses, the company valued under this method indicates a negative net equity, the carrying value of the investment is written down and any excess pertaining to the Group, where this latter is committed to comply with legal or implicit obligations of the investee, or in any case to cover the losses, is recorded in a specific provision; the equity changes of the companies valued under the equity method, not recorded through the income statement, are recorded directly in the comprehensive income statement;
• the gains and losses not realised, generated on transactions between the Company/Subsidiaries and investments measured under the equity method are eliminated based on the share pertaining to the Group in the investee, except for losses, when they represent a reduction in value of the underlying asset, and dividends which are fully eliminated.
When there is objective evidence of an impairment, the recovery is verified comparing the carrying value with the relative recoverable value adopting the criteria indicated in the paragraph “Impairments of tangible and intangible assets”. When the reasons for the impairment no longer exist, the investments are revalued within the limits of the write-downs, with effects recognised to the income statement.
The transfer of shareholdings resulting in the loss of joint control or significant influence over the investee company determines the recognition in the comprehensive income statement:
• of any gain/loss calculated as the difference between the amount received and the corresponding fraction of the carrying amount transferred;
• of the effect of the remeasurement of any residual investment in line with the relative fair value;
• of any values recorded under other comprehensive items related to the investee for which reclassification to the comprehensive income statement is envisaged.
The value of any equity investment aligned to its fair value at the date of the loss of joint control or significant influence, represents the new carrying amount and, therefore, the reference value for the subsequent valuation according to the applicable valuation criteria.
Pag. 49 di 224
Once an equity investment, or a share of this equity, measured under the equity method is classified as held for sale in so far as it meets the criteria for such classification, the equity investment or share of equity, is no longer measured under the equity method.
Translation of foreign companies' financial statements
The financial statements of subsidiaries are prepared in the primary currency in which they operate. The rules for the translation of financial statements of companies in currencies other than the functional currency of the Euro are as follows:
• the assets and the liabilities were translated using the exchange rate at the balance sheet date;
• the costs and revenues were translated at the average exchange rate for the period;
• the “translation reserve” recorded among comprehensive income and, therefore, directly within shareholders’ equity, includes both the currency differences generated from the translation of foreign currency transactions at a different rate from that at the reporting date and those generated from the translation of the opening shareholders’ equity at a different rate from that at the reporting date;
• the goodwill, where existing, and the fair value adjustments related to the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate at the reporting date.
The exchange rates utilised for the conversion of these financial statements are shown in the table below:
December 2022
December 2021
Period-end
rate
Average
rate
Period-end
rate
Average
rate
US Dollar
1.07
1.05
1.13
1.18
Croatian Kuna
7.54
7.53
7.52
7.53
Chinese Yuan
7.36
7.08
7.19
7.63
Turkish Lira
19.96
17.41
15.23
10.51
Baht
36.84
36.86
37.65
37.84
UK Sterling
0.89
0.85
0.84
0.86
Australian Dollar
1.57
1.52
1.56
1.57
Japanese Yen
140.66
138.03
130.38
129.88
Chilean Peso
913.82
917.86
Translation of accounts in foreign currencies
Transactions in currencies other than the Euro are recognised at the exchange rate at the date of the transaction. Assets and liabilities denominated in currencies other than the Euro are subsequently
Pag. 50 di 224
adjusted to the exchange rate at the reporting date. Exchange differences are recognised to the income statement under “Exchange gains and losses”.
Business combinations
Business combinations are recognised in accordance with IFRS 3 (2008), and IFRS 3 Revised. Specifically, business combinations are recognised using the acquisition method, where the purchase cost (consideration transferred) is equal to the fair value, at the acquisition date, of the assets sold and of the liabilities incurred or assumed, as well as any equity instruments issued by the purchaser. The purchase cost includes the fair value of any potential assets and liabilities.
The costs directly attributable to the acquisition are recorded in the income statement. The consideration transferred and allocated recognises the identifiable assets, liabilities and contingent liabilities of the purchase at their fair value at the acquisition date. Any positive difference between the consideration transferred, measured at fair value at the acquisition date, compared to the net value of the identifiable assets and liabilities of the purchase measured at fair value, is recognised as goodwill or, if negative, in the Income statement. Where the business combination was undertaken in several steps, on the acquisition of control the previous holdings are remeasured at fair value and any difference (positive or negative) recorded in the Income statement. Any potential consideration is recognised at fair value at the acquisition date. Subsequent changes in the fair value of the potential consideration, classified as an asset or a liability, or as a financial instrument as per IFRS 9, are recorded in the Income statement. Potential consideration not within the scope of IFRS 9 is measured based on the specific IFRS/IAS standard. Potential consideration which is classified as an equity instrument is not remeasured, and, consequently is recorded under equity.
Where the fair value of the assets, liabilities and contingent liabilities may only be determined provisionally, the business combination is recorded utilising these provisional values. Any adjustments, deriving from the completion of the valuation process, are recorded within 12 months from the acquisition date, restating the comparative figures.
No business combinations were undertaken in the period.
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2.4 Accounting principles and policies
The most significant accounting policies adopted in the preparation of the Consolidated Financial Statements are reported below.
CLASSIFICATIONS OF CURRENT AND NON-CURRENT ASSETS AND LIABILITIES:
The Group classifies an asset as current when:
• it is held for sale or consumption, in the normal operating cycle;
• it is principally held for trading;
• it is expected to be realised within 12 months from the reporting date; or
• it comprises cash or cash equivalents whose use is not restricted or restrictions such as to impede its use for at least 12 months from the reporting date.
All assets that do not meet the conditions listed above are classified as non-current.
The Group classifies a liability as current when:
• it is expected to be settled within the normal operating cycle;
• it is principally held for trading;
• it must be settled within twelve months of year-end; or
• the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
All the liabilities which do not satisfy the above-mentioned conditions are classified as non-current.
INTANGIBLE ASSETS
An intangible asset is an asset without physical substance, identifiable, controlled by the Group and capable of generating future economic benefits. The requisite of identifiability is normally met when an intangible asset is:
• attributable to a legal or contractual right; or
• separable, that is, it can be sold, transferred, leased or exchanged independently.
Control over an intangible asset consists of the right to take advantage of future economic benefits arising from the asset and the possibility of limiting its access to others.
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Intangible assets are initially recognised at purchase and/or production cost, including the costs of bringing the asset to its current use. All other subsequent costs are expensed in the income statement in the year incurred. Research expenses are recorded as costs when incurred.
An intangible asset, generated during a project’s development phase, which complies with the definition of development on the basis of IAS 38, is recognised as an asset if:
• the cost can be measured reliably;
• the product/process is technically feasible;
• it is likely that the company will obtain the future economic benefits that are attributable to the asset developed, and
• where the company intends to complete the project’s development and has sufficient resources to do so.
The following main intangible assets can be identified within the Group:
Intangible assets with definite useful lives
Intangible assets with definite useful lives are recognised as cost, as previously described, net of accumulated amortisation and any impairment.
Amortisation begins when the asset is available for use and is recognised on a straight-line basis in relation to the residual possibility of use and thus over the estimated useful life of the asset; for the amount to be amortised and its recoverability the criteria to be utilised is that outlined, respectively, in the paragraphs “Property, plant and equipment” and “Impairment of property, plant and equipment and intangible assets” below.
The estimated useful life for the Group of the various categories of intangible assets is as follows:
Estimated useful life
Concessions, licences & trademarks
10 years
Development costs
5 years
Industrial patents & intellectual property rights
10 years
Other intangible assets
Duration of contract
The Group also recognises under intangible assets in progress development costs incurred for the research of specific new products and raw materials, whose commercial production or use has not yet commenced.
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These costs are capitalised only when all of the following conditions set out in IAS 38 are met:
• the technical feasibility of developing new products and raw materials which will then be available for sale or use respectively;
• the Group's willingness to complete development, its ability to reliably assess the costs necessary for development and therefore the availability of sufficient technical and financial resources to execute it;
• the forecast likely future economic benefits that new products and new raw materials will be able to generate through sale and use for commercial purposes, in order to at least ensure the full recovery of costs incurred.
Once the development project is completed and the related finished product begins to be sold or the raw material used, these costs will begin to be amortised over the foreseeable period over which they will generate economic benefits.
PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment are measured at purchase or production cost, net of accumulated depreciation and any impairments. The purchase or production cost includes charges directly incurred for bringing the asset to their condition for use, as well as dismantling and removal charges which will be incurred consequent of contractual obligations, which require the asset to be returned to its original condition. The financial charges directly attributable to the acquisition, incorporation or production of property, plant and equipment whose realisation requires timeframes above one year, are capitalised and depreciated based on the useful life of the asset to which they refer.
The expenses incurred for the maintenance and repairs of an ordinary nature are charged to the income statement when they are incurred. The capitalisation of costs relative to the expansion, modernisation or improvement of the structural elements whether owned or leased, is solely made within the limits established to be separately classified as assets or part of an asset. The assets recorded in relation to leasehold improvements are amortised based on the duration of the rental contract, or on the basis of the specific useful life of the asset, if lower.
Depreciation is charged on a straight-line basis, which depreciates the asset over its economic/technical useful life. Applying the principle of the component approach, when the asset to be depreciated is
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composed of separately identifiable elements whose useful life differs significantly from the other parts of the asset, the depreciation is calculated separately for each part of the asset.
The estimated useful life of the main categories of property, plant and equipment is as follows:
Estimated useful life
Buildings and light constructions
10 - 17 - 33 - 40 years
General plant and machinery
7 - 8 - 10 - 13 years
Industrial and commercial equipment
2 - 4 - 8 years
Other assets
4 - 5 - 8 years
Right-of-Use
Duration of contract
Land, including that adjacent to production facilities, is not depreciated. The useful life of property, plant and equipment is reviewed and updated, where necessary, at least at the end of each year.
A tangible fixed asset is eliminated from the financial statements when the asset is sold or when no expected economic benefits exist from its use or disposal. Any gains or losses (calculated as the difference between net income from sales and the net book value of the asset sold) are recognised in the income statement in the year of disposal.
LEASED ASSETS
International Accounting Standard IFRS 16 identifies the principles for the recognition, measurement and presentation in the financial statements of leasing contracts, as well as enhancing the relative disclosure requirements.
Specifically, IFRS 16 defines leasing as a contract which assigns to the client (lessee) the right-of-use of an asset for a set period of time in exchange for consideration, without distinguishing finance leases from operating leases such as rental and hire.
The definition of a contractual agreement as a lease transaction (or containing a lease transaction) is based on the substance of the agreement and requires an assessment of whether fulfilment of the agreement depends on the use of one or more specific assets and if the agreement transfers the right to use them.
Companies that operate as lessee therefore recognise in their financial statements, at the effective date of the lease, an asset representing the right to use of the asset (defined as the “Right-of-Use") and a liability, attributable to the obligation to make the payments provided for in the contract. The lessee should subsequently recognise the interest concerning the lease liability separate from the depreciation
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of the right-of-use assets. IFRS 16 also requires lessees to restate the amounts of the lease liability on the occurrence of certain events (e.g. a change to the duration of the lease, a change to the value of the future payments due to a change in an index or rate utilised to determine these payments). In general, the restatement of the amount of the lease liability implies an adjustment also to the right-of-use asset.
Differing from that required for lessees, for the purposes of the preparation of the financial statements of lessors (the lessor), the new International Accounting Standard maintains the distinction between operating and finance leases as per IAS 17.
IMPAIRMENT OF INTANGIBLE AND TANGIBLE ASSETS
Intangible and tangible assets with definite useful life
A verification is carried out at each reporting date to establish whether there are indicators that tangible and intangible assets may have suffered an impairment. To this end, both internal and external sources of information are considered. With regard to the former (internal sources), obsolescence or the asset’s physical deterioration and any significant changes in the asset’s use and the asset’s economic performance in comparison to projections are taken into consideration. As regards external sources, the trend in the assets’ market prices, any technological, market or regulatory discontinuities, the trend in market rate interest rates or the cost of capital used to evaluate investments are considered.
Where these indicators exist, an estimate of the recoverable value of the above-mentioned assets is made, recording any write-down compared to the relative book value in the income statement. The recoverable value of an asset is the higher between the fair value, less costs to sell, and its value, determined discounting the estimated future cash flows for this asset, including, where significant and reasonably determinable, those deriving from the sale at the end of the relative useful life, net of any transaction costs. In defining the value in use, the expected future cash flows are discounted utilising a pre-tax rate that reflects the current market assessment of the time value of money, and the specific risks of the asset. For an asset that does not generate independent cash flows, the recoverable value is determined in relation to the cash generating unit to which the asset belongs.
A loss in value is recognised in the income statement when the carrying value of the asset, or of the relative CGU to which it is allocated, is higher than its recoverable value. The loss in value of CGU`s are firstly attributed to the reduction in the carrying value of any goodwill allocated and, thereafter, to a
Pag. 56 di 224
reduction of other assets, in proportion to their carrying value and in the limit of the relative recoverable value. When the reasons for the write-down no longer exist, the book value of the asset is restated through the income statement, up to the value at which the asset would be recorded if no write-down had taken place and amortisation or depreciation had been recorded.
Impairment test
The impairment test assesses whether there exist any indications that an asset may have incurred a reduction in value. For goodwill and any other indefinite useful life intangible assets an assessment should be made at least annually that their recoverable value is at least equal to the book value and, when considered necessary, or rather in the presence of trigger events (IAS 16 paragraph 9), the impairment test must be undertaken more frequently.
The goodwill arising from the business combinations (in previous years) was therefore subject to a recoverability test as per IAS 36 as indicated also in note 7.2 “Goodwill” below. In particular, it is noted that the recoverable value of a non-current asset is based on the estimates and on the assumptions utilised for the determination of the cash flows and of the discount rate applied. Where it is considered that the book value of a non-current asset has incurred a loss in value, the asset is written-down up to the relative recoverable value, estimated with reference to its utilisation and any future disposal, based on the most recent business plans.
In assessing the recoverable value of property, plant and equipment, of investment property, of intangible assets and of goodwill, the Group generally applies the criterion of the value in use.
The value in use is the present value of the expected future cash flows to be derived from an asset. In defining the value in use, the expected future cash flows are discounted utilising a pre-tax rate that reflects the current market assessment of the time value of money, and the specific risks of the asset.
The estimated future cash flows utilised to determine the value in use is based on the most recent business plans, approved by management and containing forecasts for volumes, revenues, operating costs and investments.
These forecasts cover the period of the next two years; consequently, the cash flows relating to the subsequent years are determined on the basis of a growth rate which does not exceed the average growth rate for the sector and the country.
Where the book value of an asset is higher that its recoverable value a loss in value is recognised which is recorded in the income statement under “Amortisation, depreciation and write-downs”.
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The loss in value of a cash-generating unit (the Aquafil Group has only one CGU) are firstly attributed to the reduction in the carrying value of any goodwill allocated and, thereafter, to a reduction of other assets, in proportion to their carrying value.
When the reasons for the write-down no longer exist, the carrying value of the asset is restated through the income statement, in the account “Amortisation, depreciation & write-downs”, up to the value at which the asset would be recorded if no write-down had taken place and amortisation or depreciation had been recorded.
The original value of the goodwill is not restated even when in subsequent years the reasons for the reduction in value no longer exist.
SECURITIES OTHER THAN EQUITY INVESTMENTS
Any securities other than equity investments, included under “Financial assets”, are held in portfolio until maturity. They are recognised at acquisition cost (with reference to the “trading date”) including transaction costs.
LOANS, RECEIVABLES AND FINANCIAL ASSETS HELD-TO-MATURITY
The financial assets are measured based on IFRS 9.
The Group assesses at each reporting date whether a financial asset or a group of financial assets have incurred a loss in value .
IMPAIRMENT OF FINANCIAL ASSETS
At each reporting date, all financial assets are analysed in order to verify whether they have suffered a loss in value. An impairment loss is recognised if, and only if, this evidence exists as a result of one or more events that have an impact on the asset’s expected future cash flows, occurring after its initial recognition.
In the valuation account is also taken of future economic conditions.
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For financial assets accounted for through the amortised cost criterion, when a loss in value has been identified, its value is measured as the difference between the asset’s carrying amount and the present value of expected future cash flows, discounted on the basis of the original effective interest rate. This value is recognised in the income statement under the item "Provisions and write-downs". When, in subsequent periods, the reasons for the write-down no longer exist, the value of the financial assets are restated up to the value deriving from the application of the amortised cost criterion.
INVENTORIES
Inventories are recorded at the lower of purchase or production cost and realisable value represented by the amount that the Group expects to obtain from their sale in the normal course of operations of the assets, net of accessory costs. The cost of raw material inventories is calculated using the weighted average cost method. The value of finished or semi-finished product inventories includes direct or indirect processing costs. To determine the weighted average cost of production or processing, the Group considers the weighted average cost of the raw material and the direct and indirect production costs, generally taken as a percentage of direct costs.
The value of inventories was recorded net of any impairment provisions.
TRADE AND OTHER RECEIVABLES (CURRENT AND NON-CURRENT)
Trade receivables and other current and non-current receivable are considered financial instruments, principally relating to customer receivables, non-derivative, not listed on an active market, from which fixed or determinable payments are expected. Trade receivables and other receivables are classified in the consolidated balance sheet under current assets, except for amounts due beyond 12 months from the reporting date, which are classified as non-current. These financial assets are recorded in the balance sheet when the Group becomes part of the related contracts and are derecognised when the right to receive the cash flow is transferred together with all the risks and benefits associated with the asset sold.
Trade and other current and non-current receivables are initially recorded at their fair value, and subsequently with the amortised cost method using the effective interest rate, reduced for any impairment.
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Impairments on receivables are recognised in the income statement when there is objective evidence that the Group will not be able to recover the credit on the basis of contractual conditions.
The write-down amount is measured as the difference between the asset’s carrying amount and the present value of expected future cash flows.
The value of receivables is shown net of the corresponding doubtful debt provision.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash, on-demand deposits and financial assets with an original maturity of three months or less, readily convertible into cash and subject to an insignificant risk of changes in value. The items included in cash and cash equivalents are measured at fair value and the relative changes are recorded in the consolidated income statement.
EMPLOYEE BENEFITS
For the defined benefit plans, which include post-employment benefit provisions due to employees pursuant to Article 2120 of the Italian Civil Code, the amount to be paid to employees is quantifiable only after the termination of the employment service period, and is related to one or more factors such as age, years of service and remuneration. Therefore, the relative charge is recorded in the income statement based on actuarial calculations. The liability recorded in the accounts for defined benefit plans corresponds to the present value of the obligation at the reporting date. The obligations for the defined benefit plans are determined annually by an independent actuary utilising the projected unit credit method. The present value of the defined benefit plan is determined discounting the future cash flows at an interest rate equal to the obligations (high-quality corporate) issued in Euro and takes into account the duration of the relative pension plan. The actuarial gains and losses deriving from these adjustments and the changes in the actuarial assumptions are recognised in the comprehensive income statement.
From January 1, 2007, the Finance Act and relative decrees enacted introduced important amendments in relation to post-employment benefits, among which was the choice given to the employee to determine where the benefit matured in the period is invested. In particular, the new post-employment benefits can be utilised by the employee for their own chosen pension scheme or they may choose to leave the amount in the company; in this case, when the company has more than 50 employees, those matured from 2007 are paid into INPS. In the case of allocation to external pension funds, the company is only liable to pay
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a defined contribution to the selected fund and as from that date, the newly matured portion are in the nature of defined contribution plans and are therefore not subject to actuarial valuation.
TRADE AND OTHER PAYABLES (CURRENT AND NON-CURRENT)
Financial liabilities (with the exclusion of derivative financial instruments) relate to trade and other payables and are initially recorded at fair value, net of directly allocated accessory costs. After initial recognition, they are measured at amortised cost, recording any differences between cost and repayment amount in the income statement over the duration of the liability, in accordance with the effective interest rate method. When there is a change in the expected cash flows, the value of the liabilities is recalculated to reflect this change, based on the new present value of the expected cash flows and on the effective internal rate initially determined.
DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES
Financial assets (or, where applicable, part of a financial asset or part of a group of similar financial assets) are derecognised from the financial statements when:
• the right to receive the financial flows of the asset terminate;
• the Group retains the contractual right to receive the cash flows from the asset, but assumes a contractual obligation to pay the cash flows fully and without delay to a third party;
• the Group has transferred its right to receive the cash flows from the asset and (a) has transferred substantially all of the risks and rewards of ownership of the financial asset or (b) has not transferred or retained substantially all of the risks and rewards of the asset, but has transferred control over same.
A financial liability is derecognised from the financial statements when the underlying liability is settled, cancelled or fulfilled.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are only used by the Aquafil Group for the hedging of financial risks related to interest rate fluctuations on bank debt.
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A derivative is a financial instrument or other contract:
• whose value changes in response to changes in an underlying defined parameter such as the interest rate, the price of a security or commodity, foreign currency exchange rate, the index of prices or rates, credit rating or another variable;
• that requires a zero initial net investment, or lower than what would be required for contracts with a similar response to changes in market conditions;
• which is settled at a future date.
The Group’s financial derivative instruments are undertaken to hedge against the interest rate risk. In accordance with IAS 39, which remains applicable optionally with respect to IFRS 9 in the case of the hedging of interest rate exposure, derivative financial instruments are accounted for in accordance with the procedures established for hedge accounting only when:
• the hedging instrument is formally designated and documented at the start of hedging;
• the hedge is expected to be highly effective;
• such efficacy can be reliably measured;
• the hedge is highly effective during the various accounting periods for which it is designated.
It should be noted that the derivative instruments currently in place (IRS - Interest Rate Swaps), although subscribed for hedging purposes with regard to changes in interest rates, have been treated, for accounting purposes and consistently with the past, as non-hedging instruments (and therefore the relative fair value is recognised in the income statement), as it is very complex to prepare the mandatory hedging relationship.
MEASUREMENT OF THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value measurement of the financial instruments is undertaken applying IFRS 13 “Fair value measurement” (IFRS 13). Fair value concerns the price that will be received for the sale of an asset or which will be paid for the transfer of a liability in an ordinary transaction settled between market operators, at the measurement date.
Fair value measurement is based on the assumption that the sale of the asset or transfer of the liability is undertaken on the principal market, or rather the market in which the largest volume and levels of transaction take place for the asset or liability. In the absence of a principal market, it is assumed that the transaction takes place on the most advantageous market to which the Group has access, or rather the
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market which would maximise the results of the sales transaction of the asset or minimise the amount to be paid for the transfer of the liability.
The fair value of an asset or of a liability is determined considering the assumptions which the market participants would use to define the price of the asset or of the liability, under the presumption that they act in accordance with their best economic interests. Market participants are independent knowledgeable acquirers or sellers able to enter into a transaction for the asset or the liability and motivated but not obliged or coerced into making the transaction.
In the fair value measurement, the Group takes into account the specific characteristics of the asset or the liability, in particular, for the non-financial assets, the capacity of a market operator to generate economic benefits utilising the asset to its maximum and best use or by selling to another market operator that would utilise the asset to its maximum or best use. The fair value measurement of assets and liabilities utilises appropriate techniques for the circumstances and for which sufficient data is available, maximising the use of observable inputs.
IFRS 13 identifies the following fair value hierarchy which reflect the importance of the inputs used in the relative measurement:
• Level 1 Quoted Price (active market): data used in valuations are represented by prices quoted on markets in which identical assets and liabilities are traded with those being valued.
• Level 2 Use of Observable Market Parameters (for example, for derivatives, the exchange rates recorded by the Bank of Italy, market interest rate curves, volatility provided by qualified providers, credit spreads calculated on the basis of CDS’, etc.) other than level 1 quoted prices.
• Level 3 Use of Non-Observable Market Parameters (internal assumptions, for example, financial flows, risk-adjusted spreads, etc.).
WARRANTS
The company has issued warrants, that is, financial instruments that give the holder the right to purchase (call warrants) a determined quantity of ordinary shares (underlying) at a predefined price (strike-price) within a set deadline. The warrants issued were of two types: "Market warrants," which were also listed and were fully cancelled in FY2022 due to expiration of the term, and unlisted "Sponsor warrants" which remain outstanding.
These financial instruments can have different terms and characteristics and, on the basis of these, can be alternatively considered as: (i) a financial liability that must therefore be measured at fair value at the time of issue and any subsequent variation recorded directly in the income statement, or as (ii) an equity
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instrument and therefore classified in a specific equity reserve from which they will be released only at the time they are exercised or on their maturity as indicated by IAS 32.
Warrants issued by the company have the characteristics to be considered as equity instruments since both instruments contain a pre-set execution value (defined as the "fixed for fixed criteria").
Specifically for the Sponsor warrants, an exchange between equity instruments and cash at an already pre-determined value is provided in case of execution. Information on these instruments is available in the paragraph on shareholders’ equity.
PROVISION FOR RISKS AND CHARGES
Provisions for risks and charges relate to costs and charges of a defined nature and of certain or probable existence whose amount or date of occurrence are uncertain at the reporting date. Accruals to provisions are recorded when:
• the existence of a present obligation, legal or implicit, deriving from a past event is probable;
• it is probable that compliance with the obligation will result in a charge;
• the amount of the obligation can be estimated reliably.
Provisions are recorded at the value representing the best estimate of the amount that the entity would reasonably pay to discharge the obligation or to transfer it to a third party at the reporting date. When the financial effect of the passing of time is significant and the payment dates of the obligations can be reliably estimated, the provision is determined by discounting the expected cash flows taking into account the risks associated with the obligation; the increase of the provision due to the passing of time is recorded in the income statement in the account “Financial charges”.
The provisions are periodically updated to reflect the changes in the estimate of the costs, of the time period and of the discounting rate; the revision of estimates is recorded in the same income statement accounts in which the provision was recorded.
REVENUES AND COSTS
Revenues from the sale of goods and services as well as the purchase costs of goods and services are recognised on the transfer of the risks and rewards connected to the ownership or completion of the service.
Revenues are shown net of discounts, allowances and returns; they are recorded at fair value to the extent in which it is possible to reliably determine such value and the likelihood that the relative economic
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benefits will be enjoyed. Revenues are recognised in accordance with IFRS 15 and therefore as per the following 5 steps:
1) Identification of the contract with the customer. The standard contains specific provisions to assess whether two or more contracts should be combined and to identify the accounting implications of any contractual amendments;
2) Identification of the contractual obligations contained in the contract;
3) Calculation of the transaction price, which should be made taking into consideration, among others, the following elements: any amounts paid on behalf of third parties, which must be excluded from the consideration, variable price components (such as performance bonuses, penalties, discounts, reimbursements, incentives, etc...) and any financial component, present where the payment terms granted to the customer contain a significant extension period;
4) Allocation of the transaction price to the contractual obligations, on the basis of the stand-alone sales price of each good or service; separately;
5) Recognition of the revenue, when (or if) each contractual obligation is satisfied through the transfer of the goods or service, which occurs when the customer obtains the control and therefore has the capacity to decide upon and/or control its use and substantially obtain all the benefits. Control may be transferred at a specific point in time or over time.
The analysis undertaken indicated that the obligations arising for the Group companies to its clients mainly concern the production and supply of finished products according to the terms and conditions requested, and in particular:
• payment deadlines are on average between 45 and 60 days, in line with generally applied market averages. “Cash discounts” are contractually granted in the case of early settlement and were recognised as a direct reduction in revenues. No payment deferments are granted which could be considered as qualifying as a loan;
• the finished product is sold without the granting of warranty periods and/or without return and/or suspension of ownership clauses. Any returns and reimbursements are agreed among the parties on a case by case basis following critical analysis of the reasons which may have resulted in any non- compliance issues.
It is therefore considered that:
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(i) the moment of transfer of control to clients of their products coincides with the transfer of the associated risks and benefits, as contractually defined by the delivery terms applied and which are in line with those generally accepted within the sector;
(ii) the consideration does not include any financial component, with the exception of the cash discounts which are recognised as a reduction in revenues, while the component of the transport service and insurance (applicable only with specific delivery terms) is however completed in the same period as the transfer of control of the goods and therefore accrues to the same period;
(iii) no contractual obligations are in place which suspend the transfer of control of the goods and therefore only the returns/reimbursements that may be agreed (concerning the goods sold in the year) may be recognised as a reduction of the relative revenues.
Costs incurred by the company however are recognized on an accrual basis.
FINANCIAL INCOME AND CHARGES
Financial income and charges are recognized in the income statement in the period in which they are earned or incurred according to IFRS 9.
DIVIDENDS
Dividends received are recognised when (i) shareholders become entitled to receive the payment, which coincides with the date of the investee company’s shareholders’ meeting approving distribution, (ii) it is probable that the economic benefits associated with the dividend will flow to the entity and (iii) the amount of the dividend can be measured reliably.
The distribution of dividends to Aquafil S.p.A.’s shareholders is represented as a movement of shareholders’ equity and recorded as a liability in the financial year in which this distribution is approved by the Shareholders’ Meeting.
INCOME TAXES
Current taxes are determined on the basis of estimated taxable income, in compliance with tax regulations applicable to Group companies and are recorded in the consolidated income statement under the item "Income taxes for the year", with the exception of those relating to items directly debited or credited to a
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shareholders’ equity reserve; in such cases, the relative tax effect is directly recognised in the respective shareholders’ equity reserves. The consolidated comprehensive income statement shows the amount of income taxes for each item included in the "other components of the consolidated comprehensive income statement".
Deferred tax assets and liabilities are calculated in accordance with the balance sheet liability method. Deferred taxes are calculated on temporary differences between the values recorded in the consolidated financial statements and the corresponding values recognised for tax purposes. The deferred tax assets, including those relating to any tax losses carried forward, are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. Tax assets and liabilities are offset, separately for current taxes and for deferred taxes, when the income tax is applied by the same fiscal authority, there is a legal right of compensation and the payment of the net balance is expected. Deferred tax assets and liabilities are calculated utilising the tax rates which are expected to be applied in the years when the temporary differences will be realised or settled, taking into account current tax regulations or substantially in force at the reporting date. Other taxes not related to income, such as indirect taxes and duties are included under “Other operating costs and charges”.
From the year 2018, Aquafil S.p.A. was included in the tax consolidation regime with the parent company Aquafin Holding S.p.A. This was interrupted in 2017 due to its merger by incorporation into Space3 S.p.A. The tax consolidation regime is also confirmed for the year 2022.
Therefore, the consolidated financial statements take account of the effects of the transfer of tax positions arising from the “tax consolidation” and specifically recognise the consequent credit/debit relationships towards the tax consolidating company.
In addition, in relation to the Parent Company, it should be noted that Article 12 of Legislative Decree No. 142 of 29/11/2018 defined the concept of "non-financial holding companies” ( "Industrial Holdings" ), for which, "the prevalent exercise of acquiring investments in parties other than financial intermediaries exists when, based on the figures of the last approved year-end financial statements, the total amount of investments in these parties and other equity elements undertaken between them, considered as a whole, is higher than 50 per cent of the total assets on the balance sheet", with effect from the year 2018.
Due to this amendment by Legislative Decree 142/2018, therefore, as of the year 2018, previously excluded companies fall under "industrial holdings" and particularly those which have holdings but whose financial income predominantly comprises revenues from industrial activity.
The Parent Company which qualifies as an "Industrial Holding" must calculate the Irap taxable base in accordance with Article 6, paragraph 9 of the Irap Decree, that is, by adding to the normally determinable taxable base, 100% of the interest income and other financial income and subtracting 96% of the interest expense and similar charges; in addition, the increased rate envisaged for banks and other financial
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institutions must be applied to the value of production relevant for IRAP purposes. It should be noted that also for 2022, the IRAP rate for the industrial holding companies in the province of Trento, applicable to non-financial holding companies and similar entities pursuant to paragraph 9 of Article 6 of Legislative Decree No. 446/97 is 4.65%, and the benefits normally granted to industrial companies are not applied.
ASSETS AND LIABILITIES AVAILABLE FOR SALE AND DISCONTINUED OPERATIONS
Non-current assets and current assets and non-current assets of discontinued operations are classified as held-for-sale where their book value will principally be recovered through sale. This condition exists when the sale is highly probable and the asset or discontinued operation is available for an immediate sale in its current conditions. Non-current assets held-for-sale, current assets and non-current assets of discontinued operations and the liabilities directly related to them are recorded separately to company assets and liabilities in the balance sheet. Any non-current assets held-for-sale are not depreciated and are valued at the lower of the subscription value and their fair value, less selling costs. Any difference between the book value and the Fair Value less selling costs is recorded in the income statement as a write-down; any subsequent recoveries in value are recognised for the amount of the write-downs previously recorded, including those recognised before the definition of the asset as held-for-sale. Non- current assets and current and non-current assets of disposal groups classified as held-for-sale constitute discontinued operations if, alternatively:
• they represent a significant autonomous branch of activity or a significant geographical area of activity; or
• is part of a disposal programme of an important independent activity or geographical area of activity;
• are a subsidiary acquired exclusively for the purpose of sale.
The results of discontinued operations, as well as any capital gain/loss realised following disposal, are shown separately in the income statement under a specific account, net of the related tax effects; the income statement values of discontinued operations are also presented for the comparative years. If there is a plan to sell a subsidiary that results in the loss of control, all the assets and liabilities of that subsidiary are classified as held-for-sale. It should be noted that at December 31, 2022, the Aquafil Group had only assets held-for-sale consisting of machinery and equipment and had no discontinued operations.
EARNINGS PER SHARE
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a) Basic earnings per share
The basic earnings per share is calculated by dividing the result of the Group by the weighted average number of ordinary shares outstanding during the year, excluding treasury shares.
b) Diluted earnings per share
The diluted earnings per share is calculated by dividing the result of the Group by the weighted average number of ordinary shares outstanding during the year, excluding treasury shares. In order to calculate the diluted earnings per share, the average weighted number of shares outstanding is adjusted assuming the exercise of all the rights which have potential dilution effect, while the result of the Group is adjusted to take into account the effects, net of income taxes, of the exercise of these rights.
USE OF ACCOUNTING ESTIMATES
The preparation of the financial statements requires the directors to apply accounting principles and methods that, in some circumstances, are founded on difficult and subjective valuations and estimates, based on historical experience and assumptions which are from time to time considered reasonable and realistic under the relative circumstances. The application of these estimates and assumptions impact upon the amounts reported in the financial statements, the balance sheet, the income statement, the comprehensive income statement, the cash flow statement, the statement of changes to shareholders’ equity and the notes to the accounts. The final outcome of the accounts in the financial statements which use the above-mentioned estimates and assumptions may differ, even significantly from those reported in the financial statements due to the uncertainty which characterises the assumptions and the conditions upon which the estimates are based.
Numerous items in the financial statements are subject to estimates and while not all of these accounts are individually significant, they are significant on an overall basis. The accounting policies which require greater subjectivity by the directors in the preparation of the estimates and for which a change in the underlying conditions or the assumptions may have a significant impact on the financial results of the Group are briefly described below.
Impairments
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The tangible and intangible assets with definite useful lives and goodwill are verified to ascertain if there has been a loss in value, which is recorded by means of a write-down, when it is considered there will be difficulties in the recovery of the relative net book value through use. The verification of such difficulties requires the directors to make valuations based on the information available within the Group and on the market, as well as from historical experience. In addition, when it is determined that there may be a potential reduction in value, the Group determines this through using the most appropriate technical valuation methods available. The correct identification of the indicators of a potential reduction in value of tangible and intangible assets, as well as the estimates for their determination depends on factors which may vary over time, impacting upon the valuations and estimates made by the directors.
Amortisation & Depreciation
The cost of property, plant and equipment and intangible assets is depreciated or amortised on a straight- line basis over the estimated useful life of the asset. The useful life of these assets is determined by the directors when the assets are purchased. This is based on the historical experience for similar assets, market conditions and considerations relating to future events which could have an impact on the useful life, such as changes in technology. Therefore, the effective useful life may differ from the estimated useful life.
Inventories
Inventories of products which are obsolescence or slow moving are periodically subject to valuation tests and written down when the recoverable value is lower than the carrying amount. The write-downs are made based on assumptions and estimates of the directors deriving from experience and historic results.
Doubtful debt provision
the recoverability of receivables is valued taking account of the non-payment risk, of aging of receivables and of the losses recorded in the past on similar receivables.
Provisions for risks and charges
Provisions for risks and charges are recorded to cover known or likely losses or liabilities, the timing and extent of which are not known with certainty at the reporting date.
They are recorded only where a present obligation exists (legal or implicit) for a future payment resulting from past events and it is probable that the obligation will be settled. This amount represents the best
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estimate of the costs required to settle the obligation. The rate used in the determination of the present value of the liability reflects the current market values and the specific risk associated to each liability.
If the financial effect of the period is significant and the payment dates of the obligations can be reliably estimated, the provisions are valued at the present value of the expected payment, utilising a rate which reflects market conditions, the change in the cost of money in the period and the specific risk related to the obligation. The increase in the value of the provision from changes in the cost of money in the period is recognised as a financial charges.
Possible risks that may result in a liability are disclosed in the notes on potential liabilities without any provision.
Deferred tax assets
Deferred tax assets are recognized with respect to deductible temporary differences between the values of assets and liabilities expressed in the financial statements compared to the corresponding tax value and tax losses that can be carried forward, to the extent that the existence of adequate future taxable profit is likely, with respect to which these losses may be used. A discretionary assessment is required of the directors to determine the amount of deferred tax assets that can be accounted for, which depends on the estimate of probable timing and the amount of future taxable profits.
2.5 Accounting standards not yet applicable
The developments in the IFRS and the relative interpretations (IFRIC) applicable from periods subsequent to December 31, 2022 are outlined below.
Document title
Issue date
Effective entry date
Date approved
EU Regulation and publication date
May 17
(EC) 2021/2036
IFRS 17 - Insurance contracts (including amendments published in June 2020)
Jun-20
January 1, 2023
Nov 19, 21
Nov 23, 21
(EU) 2022/357
Definition of accounting estimates (Amendments to IAS 8)
Feb-21
January 1, 2023
Mar 2, 22
Mar 3, 22
(EU) 2022/357
Information on accounting standards (Amendments to IAS 1[1])
Feb-21
January 1, 2023
Mar 2, 22
Mar 3, 22
(EU) 2022/1392
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Deferred taxes related to assets and liabilities arising from a single transaction (Amendments to IAS 12)
May 21
January 1, 2023
Aug 11, 22
Aug 12, 22
(EU) 2022/1491
First-time application of IFRS 17 and IFRS 9 - Comparative information (Amendments to IFRS 17)
Dec 21
January 1, 2023
Sep 8, 22
Sep 9, 22
At the reporting date, the European Union had not yet completed its endorsement process for the adoption of the following standards and amendments:
Expected endorsement date
Document title
Issue date by IASB
Effective entry date of the IASB document
by EU
Standards
IFRS 14 Regulatory Deferral Accounts
Jan 14
January 1, 2016
The approval process suspended pending the new accounting standard on "rate-regulated activities".
Amendments
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
Sep 14
Deferred until the completion of the IASB project on the equity method
Endorsement process suspended pending the conclusion of the IASB project on the equity method
Jan 20
Jul 20
Classification of liabilities as current or non-current (Amendments to IAS 1) and Non current liabilities with covenants (Amendments to IAS 1)
Oct 22
January 1, 2024
TBD
Lease liability in a sale and leaseback (Amendments to IFRS 16)
Sep-22
January 1, 2024
TBD
The document published by the IASB includes amendments to 'IFRS Practice Statements 2 - Making Materiality Judgements' which was not subject to EU endorsement as it is not an accounting standard or interpretation.
3. FINANCIAL RISK MANAGEMENT
The principal business risks identified, monitored and, as illustrated below, actively managed by the Group are as follows:
• market risk, deriving from fluctuations in exchange rates between the Euro and the other currencies in which the Group operates, the interest rate and raw material prices;
• Counterparty default risk;
• liquidity risk, deriving from insufficient financial resources to meet financial commitments.
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The Group’s objective is to maintain a balanced management of its financial exposure over time to ensure a liability structure that is in equilibrium with the composition of assets and capable of ensuring the necessary operational flexibility through the use of liquidity generated by current operating activities and recourse to bank financing.
The ability to generate liquidity from ordinary operations and debt capacity allow the Group to adequately meet its operational requirements, the financing of operating working capital and investment capital, and to meet its financial obligations.
The Group’s financial policy and management of the relative financial risks are guided and monitored at central level. In particular, the central finance function is tasked with evaluating and approving forecast financial needs, monitoring the trend and, where necessary, implementing suitable corrective actions.
The following section provides qualitative and quantitative information on the impact of these risks on the Group.
3.1. Market risk
3.1.1. Currency risk
Exposure to the risk of exchange rate variations arises from the Group’s commercial activities which are also carried out in currencies other than the Euro. Revenues and costs denominated in foreign currencies may be influenced by exchange rate fluctuations with an impact on trade margins (economic risk), just as trade and financial payables and receivables denominated in foreign currency may be affected by the conversion rates used, with an effect on the economic result (transaction risk). Finally, exchange rate fluctuations also reflect on the consolidated results and shareholders’ equity since the financial statements of certain Group companies are drawn up in currencies other than the Euro and are subsequently converted (translation risk).
The principal exchange rates the Group is exposed to are:
- EUR/USD, in relation to transactions carried out in US Dollars;
- EUR/GBP, in relation to transactions carried out in UK Sterling;
- EUR/CNY, in relation to transactions carried out in renminbi mainly on the Asian market.
The Group does not generally adopt specific policies to hedge exchange rate fluctuations, with the exception of contracts occasionally entered into due to the contingent requirements of its commercial activities. It should be noted that there is periodic massive offsetting between the values of purchase components in foreign currencies, mainly US dollars, and the values of sales in the same currency, which significantly mitigates the Group's currency risk. Many Group companies are however exposed to a
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contained level of exchange rate risk stemming from operations as, in the individual countries, a portion of cash flows, sales and also costs are denominated in the same accounting currency of the country (natural hedging).
3.1.2. Analysis of sensitivity of exchange rate risk
For the purposes of an exchange rate sensitivity analysis, balance sheet items as at December 31, 2022 (financial assets and liabilities) denominated in a currency other than the functional currency of each Group company were identified. In assessing the potential effects arising from changes in exchange rates, inter-company payables and receivables in currencies other than the account currency were also taken into consideration.
Two scenarios were considered for the purposes of the analysis which respectively reflect a 10% appreciation and depreciation of the nominal exchange rate between the currency in which the balance sheet item is denominated and the accounting currency.
The table below highlights the results of the analysis:
+10%
-10%
(Euro thousands)
Consolidated financial statements
Exposition to currency risk (aggregated)
Gains/(Losses)
Gains/(Losses)
Financial assets
Cash and cash equivalents
110,682
23,853
(2,385)
2,385
Trade receivables
28,553
2,763
(276)
276
Tax effect
639
(639)
Total financial assets
(2,022)
2,022
Financial liabilities
Trade payables
(126,840)
(5,047)
505
(505)
Tax effect
(121)
121
Total financial liabilities
384
(384)
Total
(1,639)
1,639
Note: the plus sign indicates a higher profit and an increase in shareholders’ equity; the minus sign indicates a lower profit and a decrease in shareholders’ equity.
It should also be noted that, for the purposes of consolidated reporting, the Company recognises currency differences generated by the year-end translation of the financial statements of foreign subsidiaries prepared in a currency other than the Euro among comprehensive income and, therefore, directly within the shareholders’ equity “translation reserve”.
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Therefore, there is the risk that fluctuations in exchange rates in countries where the Group’s subsidiaries operate (esp. the USA and China) could have an impact on consolidated shareholders’ equity. In 2022 specifically, this translation had a positive effect of Euro 4,957 thousand as shown in the statement of changes in shareholders’ equity and in the consolidated comprehensive income statement.
3.1.3 Raw material price risk
The Group’s production costs are influenced by the price trends of the main raw materials used. The price of these materials varies depending on a wide range of factors, to a large extent uncontrollable by the Group and difficult to predict.
Specifically, the Group implements a strategy to offset the price volatility risk of the main production factors used through contractual hedging which limits changes to the prices of raw materials, energy sources and partly, selling prices.
3.1.4 Interest rate risk
The Group uses external debt funding and places available liquidity in market instruments. Changes in the interest rates impact on the cost and return of the various forms of loans and uses, with an effect therefore on the consolidated financial charges. The Group policy seeks to limit interest rate fluctuation risk through undertaking fixed or variable rate medium/long-term loans linked to hedging derivatives; hedging is carried out through the trading of derivative instruments (e.g. IRS - Interest Rate Swaps), utilised only for hedging purposes and not for speculative purposes. These contracts, although subscribed for hedging purposes relating to the financial exposure of the Group, were not treated as hedges for accounting purposes, given the technical complexity of the accounting demonstration of the hedging relationship and the relative effectiveness, and therefore with end-of-period Mark to Market (MTM) adjustment effects recognised directly in the consolidated income statement.
The following tables summarise the main information concerning hedging derivatives on interest rates as at December 31, 2022 (held exclusively by the Parent Company):
(Euro thousands)
Contract opening date
Contract maturity date
Notional value at signing date in foreign currency
Notional currency
Fair value at
December 31, 2022
IRS Intesa San Paolo
28/12/2021
31/12/2027
30,000
Euro
2,514
IRS Credit Agricole
29/05/2017
28/06/2024
10,000
Euro
68
IRS Intesa San Paolo
19/06/2018
31/01/2024
15,000
Euro
77
IRS Banca Popolare Milano
20/06/2018
30/06/2025
25,000
Euro
434
IRS Banca Popolare Milano
06/06/2019
30/06/2025
15,000
Euro
322
IRS Credit Agricole
09/08/2019
28/12/2025
10,000
Euro
323
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IRS Intesa San Paolo
25/09/2019
31/12/2024
20,000
Euro
325
Total
125,000
4,063
3.1.5 Sensitivity analysis related to interest rate risk
With reference to interest rate risk, a sensitivity analysis was carried out to determine the effect on the consolidated income statement and consolidated shareholders’ equity resulting from a hypothetical positive and negative change of 100 bps in interest rates compared to those actually recorded in each period.
The analysis was carried out by primarily focusing on the following items:
• cash and cash equivalents;
• short and medium/long-term financial liabilities.
With reference to cash and cash equivalents, reference was made to the average funds held and the average rate of return for the period. For short and medium/long-term financial liabilities, the impact was calculated on an actual basis. Financial payables settled at a fixed rate and those hedged through derivative instruments were not included in this analysis.
The table below highlights the results of the analysis:
(Euro thousands)
Impact on Net Profit
Effect on Net Equity
Change
+ 100 bps
- 100 bps
+ 100 bps
- 100 bps
FY 2022
(668)
668
(668)
668
Note: the plus sign indicates a higher profit and an increase in shareholders’ equity; the minus sign indicates a lower profit and a decrease in shareholders’ equity.
3.2 Credit risk
The Group’s exposure to credit risk relates to the possibility of insolvency (default) and/or in the deterioration of the credit rating of a counterparty and is managed through adequate valuation instruments of all counterparties by a dedicated department, utilising the appropriate instruments to carry out constant monitoring, on a daily basis, of the behaviour and credit rating of clients. The Group hedges its credit risk through insurance policies on the client exposure, undertaken with primary debt insurance companies. External companies providing corporate information are utilised both to initially evaluate the reliability and for on-going monitoring of the economic and financial situation of clients.
Pag. 76 di 224
The top 10 clients on the total Group trade receivables at December 31, 2022 was 48% (34% at December 31, 2021).
The following table provides a breakdown of trade receivables at December 31, 2022, grouped by due date and net of the doubtful debt provision:
(Euro thousands)
At December 31, 2022
Not yet due
Overdue within 30 days
Overdue between 31 and 90 days
Overdue between 91 and 120 days
Overdue beyond 120 days
Guaranteed trade receivables (a)
26,968
21,837
3,442
1,284
97
308
Non-guaranteed trade receivables (b)
3,426
2,141
887
175
58
165
Non-guaranteed trade receivables impaired (c)
216
16
0
0
0
200
Trade receivables before doubtful debt provision [(a)+(b)+(c)]
30,610
23,994
4,329
1,459
155
673
Doubtful debt provision
(2,057)
0
(1,346)
(454)
(48)
(209)
Trade receivables
28,553
23,994
2,983
1,005
107
464
3.3 Liquidity risk
Liquidity risk relates to the risk of the Group being unable to meet its payment obligations due to the inability to source new funds or liquidate assets on the market. This results in a negative impact on economic performance if it is obliged to incur additional costs to meet its commitments or insolvency.
The liquidity risk to which the Group is exposed relates to the inability to source sufficient funding for operations, in addition to industrial and commercial operations. The principal factors which determine the liquidity situation of the Group are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the maturity dates and the renewal of the payable or liquidity of the financial commitments and also market conditions.
The Group can avail of on-demand liquidity of Euro 111 million at December 31, 2022, and has a significant availability of credit lines granted by a number of leading Italian and international banks. The directors consider that the funds and credit lines currently available, in addition to those that will be generated from operating and financial activities, will permit the satisfaction of its requirements deriving from investment activities, working capital management and the repayment of debt in accordance with their maturities.
The total Group bank credit lines at year-end amount to Euro 74.1 million, completely unutilised.
The table below shows an analysis of amounts due, based on contractual repayment obligations relating to the convertible bond, leasing contracts, trade payables and other liabilities as at December 31, 2022:
Pag. 77 di 224
(Euro thousands)
December 2022
Within 1 year
Between 1 and 5 years
Beyond 5 years
Bond loan
83,409
13,108
51,729
18,571
Other current and non-current financial liabilities
285,122
70,038
208,039
7,045
Trade payables
126,840
126,840
0
0
Other current and non-current liabilities
34,148
25,165
8,983
0
Total
529,519
235,151
268,751
25,617
All the amounts in the table above refer to the nominal amounts not discounted, stated with regards to the residual contractual maturities, both in terms of the capital and interest portions. The Group expects to meet these commitments by liquidating financial assets and through cash flows that will be generated by operations.
In this risk analysis, we add the more detailed conclusions of the Directors’ Report on the impact of the spread of Covid-19 (coronavirus). In particular, it can be stated that - overall and in view of the information currently available and the health emergency in progress - no impact and/or effect is seen (i) on the value of the assets shown in the financial statements (ii) on the recoverability of trade receivables (iii) on the net realisable value of inventories. As mentioned previously, the impact on the business thus far has remained, on the whole, limited. Therefore, no specific risks have been identified in terms of the Group's ability to meet its future commitments (including compliance with the "covenants" set out in certain loan agreements) and/or which may impact the Group's ability to continue as a going concern.
With regards to the conflict between Russia and Ukraine, it is confirmed that this situation does not have direct impacts on the company, as currently not having (i) any investment in either of the countries, nor (ii) financial instruments or liquidity in Roubles.
3.4 Climate change risks
The Aquafil Group is passionate about its role in the community and is highly cognizant of the effects of its environmental, social and governance policies.
Pag. 78 di 224
The Group’s organisational structure for many years has considered the environmental impact of its processes and products and continuously assesses possible improvement actions, with an approach firmly focused on sustainability and circularity.
This structure particularly considers the consequences for its activities, processes and local organisations from climate change, whose risk is consistently monitored and assessed. It may be stated that no significant impacts are currently expected on the operating activities carried out in the various regions in which the Group operates.
4. MANAGEMENT OF CAPITAL
The Group’s capital management is aimed at ensuring a solid credit rating and adequate levels of capital indicators to support investment plans, in accordance with contractual obligations entered into with lenders.
The Group acquires the necessary capital to finance the needs for business development and operations; financing sources are divided into a balanced mix of risk capital and debt capital to ensure a balanced financial structure and the minimisation of the total cost of capital, for the consequent benefit of all stakeholders.
The remuneration of risk capital is monitored on the basis of the market trend and business performance, once all other obligations have been met, including the debt service; therefore, in order to ensure an adequate remuneration of capital, the safeguarding of business continuity and business development, the Group constantly monitors the development of the debt level in relation to shareholders’ equity, business performance and forecasts of expected cash flows in the short and medium/long-term.
5. CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
Pag. 79 di 224
The tables below illustrate the breakdown of financial assets and liabilities of the Group required by IFRS 7, as per the categories identified by IAS 39, at December 31, 2022:
(Euro thousands)
Financial assets and liabilities measured at fair value through P&L
Loans and receivables
AFS financial assets
Financial liabilities at amortised cost
Total
Current and non-current financial assets
4,063
7,751
0
0
11,814
Trade receivables
28,553
28,553
Current tax receivables
0
580
0
0
580
Other current & non-current assets
0
16,288
0
0
16,288
Cash and cash equivalents
110,682
0
0
0
110,682
Total
114,745
53,172
0
0
167,917
Current and non-current financial liabilities
0
0
0
368,531
368,531
Trade payables
0
0
0
126,840
126,840
Other current and non-current liabilities
0
0
0
34,148
34,148
Total
0
0
0
529,520
529,519
The other financial assets and liabilities are short-term and regulated at market interest rates and therefore the book value is considered to reasonably approximate fair value.
5.1 Measurement of the fair value
In relation to financial instruments measured at fair value, the table below reports information on the method chosen to measure the fair value. The methods applied are broken down into the following levels, based on the information available, as follows:
• Level 1: fair value determined with reference to listed prices (not adjusted), on active markets for identical financial instruments;
• Level 2: fair value determined with valuation techniques with reference to observable variables on active markets;
• Level 3: fair value determined with valuation techniques with reference to non-observable variables on markets;
The fair value calculation is determined in accordance with the methods classified in Level 2 and the general criterion utilised for this calculation is the present value of the expected future cash flows of the instrument subject to measurement - a method commonly applied in financial practice. There were no transfers between hierarchical levels of the fair value in the periods considered.
Pag. 80 di 224
The table below summarises the assets and liabilities measured at fair value at December 31, 2022, on the basis of the level which reflects the inputs utilised in the determination of the fair value.
(Euro thousands)
December 2022
December 2021
Derivative financial instruments - Assets
4,063
25
Derivative financial instruments – Liabilities
0
(468)
Total
4,063
(443)
6. DISCLOSURE BY OPERATING SEGMENT
For the purposes of IFRS 8 – Operating Segments, Group activity is identifiable in a single operating segment.
In fact, the Group structure identifies a strategic and singular vision of the business and this representation is consistent with the manner in which management takes its decisions, allocates resources and defines the communication strategy. Dividing the business into separate divisions is therefore currently viewed as detrimental to its economic interests.
7 NOTES TO THE CONSOLIDATED BALANCE SHEET
7.1. Intangible assets
The breakdown in the account and changes in the period were as follows:
(Euro thousands)
Development costs
Patents & property rights
Trademarks, concessions and licenses
Other intangible assets
Intangibl e assets in progress
Non Contractual Customer relationship s
Total
Balance at December 31, 2020
3,459
52
405
3,491
12,422
3,750
23,578
Historic cost
4,039
5,211
4,751
16,355
12,422
5,625
48,403
Acc. amort.
(581)
(5,159)
(4,346)
(12,863)
(1,875)
(24,825 )
Reclassifications
0
0
39
1,923
(1,906)
0
55
Increases
2,330
0
7
1,212
1,429
0
4,977
Decreases
0
(28)
0
(28)
Amortisation
(1,129)
(91)
(1,823)
(739)
(3,782)
Write-downs
(1,650)
(1,650)
Exchange diff. - Historic Cost
0
2
1
27
0
647
677
Exchange diff. - Acc. Amort.
0
(2)
(1)
(13)
0
(260)
(276)
Pag. 81 di 224
Balance at December 31, 2021
4,660
52
359
4,789
10,295
3,397
23,551
Historic cost
6,370
5,213
4,767
19,485
10,295
6,272
52,401
Acc. amort.
(1,710)
(5,162)
(4,408)
(14,696)
(2,875)
(28,850 )
Reclassifications
0
0
159
9,805
(9,798)
0
166
Increases
1,675
0
60
1,437
991
0
4,163
Decreases
0
0
0
(132)
(132)
Amortisation
(1,482)
(108)
(3,617)
(797)
(6,004)
Exchange diff. - Historic Cost
0
(1)
(120)
24
0
(139)
(236)
Exchange diff. - Acc. Amort.
0
1
1
(6)
0
94
90
Balance at December 31, 2022
4,852
52
350
12,432
1,355
2,555
21,596
Historic cost
8,044
5,212
5,152
30,692
1,355
6,132
56,587
Acc. amort.
(3,192)
(5,160)
(4,802)
(18,260)
(3,577)
(34,991 )
"Other intangible assets" mainly includes the costs of development projects incurred by the Parent Company for the digitization of processes. During 2022, the bio-caprolactam production process was started on a pilot basis, resulting in a Euro 9.1 million transfer from intangible assets in progress to other intangible assets and consequently amortisation over a 5-year period began. This project ("Effective”) was coordinated by Aquafil and funded by the Bio-Based Industries Joint Undertaking (BBI JU) as part of the European Horizon 2020 research programme and focused on the production of bio-caprolactam.
The increases in the year, overall amounting to Euro 4.2 million, mainly relate to:
- for Euro 1.7 million new product development costs (IAS 38);
for Euro 1 million costs incurred for the implementation and upgrading of the Aquafil Group's digitization processes.
Amortisation in the year included for Euro 2 million, the beginning of amortisation on the “Effective” project, as described above.
7.2. Goodwill
Goodwill was Euro 15,647 thousand at December 31, 2022. This figure includes the goodwill recognised on the Aquafil O’Mara business combination in 2019 and the goodwill on the acquisition in 2020 of Aquafil Carpet Recycling, now Aquafil Carpet Collection LLC.
It should also be noted that the goodwill related to Aquafil O’Mara and Aquafil Carpet Collection LLC, having been recognised by the direct subsidiary Aquafil USA, was positively affected by the translation from Dollars to Euro as part of the consolidation process.
Pag. 82 di 224
This value represents the excess between the consideration transferred, measured at fair value at the acquisition date, as subsequently updated, compared to the net value of the identifiable assets and liabilities of the purchase measured at fair value.
After initial recognition the goodwill is not amortised but subject to an annual impairment test as described in the previous paragraph “Impairment test - verification of recoverability”.
In accordance with the provisions of IAS 36 the Group therefore undertook a specific impairment test in order to verify the recoverability of the goodwill recognised.
The impairment test was carried out determining the value in use with the discounted cash flow method (DCF) net of income taxes in line with the post-tax discount rate utilised.
The cash flows used to apply the DCF are those included in the Group's 2023 - 2025 business plan approved by the Parent Company's board of directors on February 15, 2023.
The growth rate (g) applied was 2.7%, which is equal to the expected global average growth beginning in 2023.
The discounting of the cash flows was carried out on the basis of a weighted average cost of capital which reflects the current market assessment of the cost of money. The value identified was 8.2%.
A sensitivity analysis was also carried out in order to determine the change to the value assigned to the base assumptions which, after having considered any amendments as a result of this change on the other variables utilised, renders the recoverable value of the CGU equal to its carrying amount.
This analysis indicated that only significant deviations in the achievement of the Group's business objectives, interest rates and perpetual growth rates would reduce the recoverable value to a level close to the book value, so it is not necessary, as required by IAS 36, to report in this note the effects of a sensitivity simulation.
From the impairment test carried out therefore no adjustments are required to the value of the goodwill.
7.3. Property, plant & equipment
The breakdown in the account and changes in the period were as follows:
(thousands of Euro)
Land & buildings
Plant & equipment
Industrial and commercial equipment
Other assets
Assets in progress
Investment property
Total before Right-of- Use
Right- of-Use
Total
Balance at December 31, 2020
57,689
123,373
396
2,048
26,990
356
210,852
18,643
229,495
Historical cost
125,238
475,020
11,027
6,728
26,990
793
597,304
29,619
626,924
Acc. deprec.
(67,549)
(351,647)
(10,631)
(4,680)
0
(437)
(386,452)
(10,976 )
(397,429)
Reclassifications
1,198
11,895
13
67
(13,228)
0
(55)
(55)
Increase
205
4,342
84
138
29,863
0
34,632
7,062
41,694
Pag. 83 di 224
Decreases
0
(121)
0
(4)
(38)
0
(163)
(259)
(424)
Write-downs
(1,016)
(276)
0
0
0
0
(1,292)
(1,292)
Depreciation
(4,237)
(25,338)
(113)
(628)
0
(12)
(30,328)
(7,913)
(38,251)
Exchange diff. - Historic Cost
1,245
13,864
0
402
1,433
0
16,944
1,145
18,081
Exchange diff. - Acc. Deprec.
(316)
(7,805)
1
(248)
0
0
(8,368)
(413)
(8,781)
Balance at December 31, 2021
54,769
119,935
381
1,775
45,020
344
222,224
18,265
240,489
Historic cost
126,870
499,888
10,503
7,257
45,020
793
690,331
35,855
726,186
Acc. deprec.
(72,102)
(379,953)
(10,122)
(5,482)
0
(449)
(468,108)
(17,591 )
(485,699)
Change in consolidation scope
0
9
0
0
28
0
36
0
36
Reclassifications
1,873
39,134
47
38
(41,280)
0
(188)
0
(188)
Increases
371
10,119
310
489
23,574
0
34,863
10,545
45,408
Decreases
(8)
(23)
0
(5)
(163)
0
(199)
(885)
(1,084)
Depreciation
(4,374)
(28,697)
(137)
(589)
0
(12)
(33,809)
(8,329)
(42,138)
Exchange diff. - Historic Cost
2,203
4,748
(25)
141
1,244
0
8,311
747
9,058
Exchange diff. - Acc. Deprec.
65
(3,740)
(2)
(153)
0
0
(3,830)
(283)
(4,113)
Balance at December 31, 2022
54,898
141,485
574
1,696
28,423
333
227,407
20,060
247,467
Historic cost
128,288
543,135
10,798
7,690
28,423
793
719,127
36,122
755,249
Acc. deprec.
(73,390)
(401,650)
(10,224)
(5,994)
0
(460)
(491,718)
(16,062 )
(507,780)
The increases in the year, excluding the effect of changes in “Right-of-use”, amounted to Euro 34.9 million and mainly refer to:
- for Euro 13.0 million, the technological improvement and upgrading of the existing plants and equipment;
- for Euro 7.7 million, the increase in industrial and energy efficiency at Group plant;
- for Euro 7.0 million to activities to improve industrial and energy efficiency in the production of ECONYL® caprolactam and its raw materials;
- for Euro 6.0 million to expand existing production capacity as well as the completion of the moulding polymer production project.
The reclassification from Assets in progress to other financial statement items, mainly Plant and Machinery, for a total of Euro 41 million, mainly concerns:
(i) approx. Euro 16 million to the reorganisation and reallocation within the Group of production plant for the treatment of end-of-life carpets (depreciated for the period of operation only);
(ii) for approx. Euro 2 million increases on land and buildings;
(iii) for approx. Euro 4 million the technological improvement and upgrading of existing plant and equipment;
(iv) for approx. Euro 10.1 million the completion of the Engineering Plastics investment;
(v) for approx. Euro 9 million projects to improve production efficiency, projects for the improvement and technological upgrading of existing plant.
Pag. 84 di 224
All assets in progress concern industrial investments that are either incomplete or not fully operational, but for which full operability is certain and currently envisaged in the Group’s strategic plans.
The recoverability of both intangible assets and property, plant and equipment has been assessed by way of impairment testing as described in the paragraph “Goodwill” above, and no issues concerning their recoverability have been identified.
The table below, in accordance with IFRS 16, presents the right-of-use of the non-current asset subject to the leasing contract. In particular this refers to buildings, equipment and transport and motor vehicles as illustrated in the table below.
(Euro thousands)
Right-of-use buildings
Right- of- use equipment and transport vehicles
Right-of-use motor vehicles
Right-of-use other
Total
Balance at December 31, 2020
14,428
3,470
673
72
18,643
Historical cost
22,548
5,982
995
94
29,619
Acc. deprec.
(8,120)
(2,511)
(322)
(23)
(10,976)
Increase
5,392
822
848
0
7,062
Decreases
(107)
(17)
(135)
(259)
Depreciation
(6,111)
(1,453)
(329)
(20)
(7,913)
Exchange diff. - Historic Cost
981
124
32
8
1,145
Exchange diff. - Acc. Deprec.
(346)
(59)
(6)
(3)
(413)
Balance at December 31, 2021
14,237
2,887
1,084
57
18,265
Historic cost
28,417
5,720
1,616
102
35,855
Acc. deprec.
(14,180)
(2,833)
(532)
(45)
(17,591)
Increases
7,848
2,356
341
0
10,545
Decreases
(329)
(483)
(72)
(885)
Depreciation
(6,452)
(1,434)
(420)
(22)
(8,329)
Exchange diff. - Historic Cost
618
87
36
6
747
Exchange diff. - Acc. Deprec.
(230)
(46)
(4)
(3)
(283)
Balance at December 31 st 2022
15,691
3,366
964
39
20,060
Historic cost
27,912
6,385
1,717
109
36,122
Acc. deprec.
(12,221)
(3,018)
(753)
(70)
(16,062)
Increases for the year of Euro 10.5 million refer mainly to AquafilSLO for Euro 3.9 million, the subsidiary Tessilquattro S.p.A. for Euro 1.8 million, due to new contracts for the rental of industrial vehicles and to the renewal of the contract of the property leased in Via del Garda, to Aquafil Carpet Collection for Euro 1.6 million and to the parent company Aquafil S.p.A. for Euro 1.5 million, of which Euro 0.6 million related to the renewal of the contract of the property leased in Via del Garda - Rovereto.
Pag. 85 di 224
7.4. Current and non-current financial assets and investments valued at equity
The breakdown of the account is shown below (including current and non-current):
(Euro thousands)
December 2022
December 2021
Receivables from parent companies
234
234
Equity investments in group companies
6
6
Investments valued at equity
1,018
1,018
Receivables from related parties
79
79
Escrow bank deposits
5,943
901
Investments in other companies
14
18
Current and non-current financial assets
457
308
Derivative financial instruments - Current
4,062
25
Total
11,813
2,563
of which current
9,964
860
of which non-current
1,849
1,728
"Receivables from parent companies" refer to guarantee deposits paid by Aquafil S.p.A. to the parent company Aquafin Holding S.p.A. over the multi-year leasing contract for the industrial and logistical use property located in Viale dell’Industria No.5 – Verona.
“Equity investments valued at equity” concern the acquisition on October 10, 2021 of a 32% interest in the Norwegian company Nofir AS, based in Mørkved, Bodǿ, Norway, a European leader in the collection and treatment of end-of-life fish netting (see the Directors’ Report for more information).
"Receivables from other related parties" refer to guarantee deposits paid by Tessilquattro S.p.A. and Aquafil S.p.A. to Aquaspace S.p.A. over a multi-year leasing contract for the industrial and logistical use property located in Via del Garda 40 - Rovereto.
Pag. 86 di 224
“Investments in other companies” relates to minor holdings.
The fair value of derivative financial instruments (IRS) reports an increase of Euro 4 million substantially due to the change in the market interest rate curve. As previously illustrated, these derivatives have not been treated, for accounting purposes and consistently with the past, as non-hedging instruments (and therefore the relative fair value is recognised in the income statement), as it is very complex to prepare the mandatory hedging relationship.
The “Escrow bank deposits”, amounting to Euro 5.9 million, are held by the Group companies Aquafil Jiaxing Co Ltd and Aquafil USA Inc. These bank deposits are interest-bearing with short-term restriction and, in particular, had been subscribed by the Chinese subsidiary as early as 2021 in relation to specific collections, and the increase for the year relates entirely to that subsidiary.
7.5. Other non-current assets
The amount of Euro 426 thousand, relates to the receivable of the parent company Aquafil S.p.A. and Aquafil SLO d.o.o. from the European Union for the grants recognised on the “Effective” project, co- ordinated by Aquafil and funded by Bio-Based Industries Joint Undertaking (BBI JU) as part of the European Horizon 2020 research programme, with the entire chain (from raw material manufacturers to brands) involved in validating the use of bio Nylon 6 and other bio-polymer consumer market products. For further details, reference should be made to the Directors’ Report.
In particular, with the signing of the agreement between the partners and other lenders, an overall amount of Euro 3.3 million was stipulated, with deferred income recognised under Other liabilities (Note 7.16) which was equal to Euro 1.8 million at December 31, 2022. The receivable is reduced for the amounts effectively paid by the European Union, substantially recognised on the basis of the convention rules which provides for payment based on the state of advancement. At December 31, 2022, the residual receivable amounted to Euro 426 thousand.
Pag. 87 di 224
7.6 Deferred tax assets and liabilities
The breakdown of the items "Deferred tax assets” and “Deferred tax liabilities" is shown below:
(Euro thousands)
December 2022
December 2021
Deferred tax assets
11,519
12,269
Deferred tax liabilities
(9,237)
(11,158)
Total
2,281
1,111
The relative movement is comprised of:
(Euro thousands)
Values at
January 1, 2022
Provisions / releases to net equity
Provisions / releases to income P&L
At December 31, 2022
Deferred tax assets
Provision for risks and charges
133
72
205
Doubtful debt provision
325
(30)
(4)
292
Measurement of employee benefits as per IAS 19
730
(83)
(164)
483
Intangible and tangible fixed assets
4,294
76
(95)
4,276
Tax losses
4,900
139
(2,606)
2,433
Inventories
1,360
27
1,513
2,900
Other
527
(163)
589
953
Total deferred tax assets
12,269
(33)
(716)
11,519
Deferred tax liabilities
Intangible and tangible fixed assets
9,314
437
(1,099)
8,652
Other
1,844
(187)
(1,072)
585
Total deferred tax liabilities
11,158
251
(2,171)
9,237
Total net deferred tax assets
1,111
(284)
1,455
2,281
Tax transfer to parent company
(1,912)
Total deferred tax assets and liabilities recognised to the income statement
(457)
The breakdown of deferred tax assets is shown below:
- deferred tax assets on tangible and intangible assets, totalling Euro 4.3 million and referring mainly for Euro 3.6 million to deferred tax assets on tax relief relating to costs incurred for research and development at AquafilSLO, for Euro 0.5 million to the reversal of intangible assets due to the adoption of IAS and for the remainder mainly due to the tax effect related
Pag. 88 di 224
to the reversal of capital gains realised between Group companies recognised to the financial statements of the individual companies, but not reported in the consolidated financial statements;
- allocation of deferred tax assets on tax losses, amounting to Euro 2.4 million, concerning accumulated losses recorded (i) by the American subsidiaries for Euro 0.8 million; (ii) by AquafilSlo for Euro 0.6 million and (iv) by Aquafil S.p.A. for Euro 1.0 million related to the “Joint Audit” of fiscal year 2017; all tax losses are deemed fully recoverable. The decrease on the previous year is mainly due to:
(i) write off of deferred tax assets in Aqualeuna of Euro 1,207 thousand, following the conclusion of the audits on fiscal years 2018 and 2019, as commented further in the section "Contingent liabilities," and
(ii) re-absorption of tax losses in Aquafil USA of Euro 1,407 thousand
- allocation of deferred tax assets on inventories, which amount to Euro 3 million, and mainly refer to the adjustment between HGB and IFRS accounting standards concerning the engineering contracts of the subsidiary Aquafil Engineering GmbH and the reversal of the value of intercompany profits and losses included in the warehouse value.
The “Deferred tax liabilities” mainly refers to the tax effect calculated on the temporary differences between book and tax depreciation.
The overall net decrease of Euro 2.2 million relates mainly to the reabsorption of timing differences in relation to Aquafil Engineering GmbH and the release in the parent company of deferred taxes following the lease back of a leased property.
7.7 Inventories
The changes in the account were as follows:
(Euro thousands)
December 2022
December 2021
Raw materials, ancillary and consumables
98,093
75,902
Finished products and goods
162,653
100,889
Advances to suppliers
63
452
Total
260,808
177,243
Inventories are recorded net of the obsolescence provision amounting to Euro 0.6 million and relates to slow-moving stock.
Pag. 89 di 224
The increase is substantially and equally due to the following two factors:
- the significant increase in the prices of raw materials and of industrial cost components and
- the increase in volumes in stock at year-end particularly of raw materials.
7.8. Trade receivables
The changes in the account were as follows:
(Euro thousands)
December 2022
December 2021
Trade receivables
30,235
32,927
Parent, associates and other related parties
376
71
Doubtful debt provision
(2,057)
(1,767)
Total
28,553
31,233
The following table shows the movement of the doubtful debt provision:
(in Euro thousands)
December 2022
December 2021
Balance at January 1, 2022
(1,765)
(2,153)
Provisions
47
126
Decrease
(324)
290
Other changes
(15)
(30)
Balance at December 31, 2022
(2,057)
(1,767)
The decrease in trade receivables is mainly due to the improvement in collection times.
Reference should be made to the previous paragraph 3.2 for details on the credit risk management policy.
7.9. Current tax receivables and payables
Current tax receivables of Euro 0.6 million refer to payments on accounts paid by the company Aquafil Carpet Recycling #1 Inc. for Euro 0.5 million.
Current tax liabilities, which amounted to Euro 3.6 million and presented an increase over the previous year of Euro 1.9 million, mainly refer to amounts owed by AquafilCRO for Euro 1.2 million, Aquafil China for Euro 1.1 million and Aquafil Usa Inc. for Euro 0.8 million.
Pag. 90 di 224
7.10. Other current assets
The changes in the account were as follows:
(Euro thousands)
December 2022
December 2021
Tax receivables
9,408
3,119
Supplier advances
885
834
Pension and social security institutions
406
195
Employee receivables
275
298
Tax receivables from parent
247
3,152
Other receivables
974
1,868
Prepayments and accrued income
3,665
3,387
Total
15,861
12,853
This amounted to Euro 15.9 million and presented an increase of Euro 3 million compared to the previous year ended December 31, 2021 (Euro 12.9 million). The account comprises:
• receivables from the tax authorities of Euro 9.4 million, which mainly refer for Euro 2.9 million to receivables for Value Added Tax (VAT) and for Euro 6.5 million to tax credits related to various concessions granted to the parent company and Tessilquattro S.p.A. regarding energy credits, research and development credits and tax credits for Industria 4.0 investments (see also the comments in the following paragraph "Disclosures pursuant to Article 1, paragraph 125 of Law No. 124 of August 4, 2017);
• tax receivables from parent companies which refer to tax receivables from Aquafin Holding S.p.A. generated by the transfer of the tax losses of Tessilquattro S.p.A. to the tax consolidation, with Aquafin Holding S.p.A. as the consolidating entity, but through Aquafil S.p.A., which for the tax consolidation agreement remains responsible for netting in the calculation of tax receivables and payables relating to IRES (company income tax) as per Article 228 and subsequent of the Income Tax Law for the latter and Tessilquattro SpA. The sharp decrease stems from the increase in Aquafil S.p.A.'s current taxes, as a result of the profit reported for the year, which in the context of the tax consolidation reduces the receivable from the consolidated Aquafil Holding S.p.A.;
• prepayments and accrued income of Euro 3.7 million, relating for Euro 1.7 million to the parent company Aquafil S.p.A., substantially due to the prepayments for insurance premiums, ICT consultancy costs, maintenance materials and photovoltaic contributions;
Pag. 91 di 224
• other receivables of Euro 0.9 million and receivables from personnel and social security institutions totalling Euro 0.7 million. The decrease in other receivables on the previous year is due for Euro 0.8 million to the collection of the receivable of the parent company from the company Domo Chemicals Italy S.p.A. for the financial support granted to the latter as part of the tax dispute outlined in the “Contingent liabilities” paragraph .
7.11 Cash and cash equivalents
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Cash and equivalents
19
18
Bank and postal deposits
110,662
152,638
Total
110,682
152,656
Liquidity at year-end on the current accounts of the various operating companies of the Group, decreased from Euro 152.7 million to Euro 110.7 million.
The item relates to the current account balances of the different Group companies.
The breakdown of cash and cash equivalents in Euro of foreign currencies is illustrated in the table below:
(Euro thousands)
At December 31, 2022
EUR
69,962
HRK
14
TRL
118
USD
26,226
THB
716
CNY
7,569
AUD
274
GBP
1,865
JPY
3,940
Total
110,682
The decrease in cash and cash equivalents at December 31, 2022 compared to the previous year is due to the reduction of the excess liquidity which has significantly increased in 2020 as a prudent measure to tackle the possible effects of the continuing COVID pandemic.
In 2022 we report:
- new medium-term, unsecured loans underwritten by the Parent Company Aquafil S.p.A. for a total of Euro 94 million;
Pag. 92 di 224
- repayments of loans totalling Euro 52 million by the Parent Company Aquafil S.p.A..
There were no restrictions on liquidity. .
7.12 Shareholders’ Equity
Share capital
At December 31, 2022, the Company authorised share capital amounted to Euro 50,522 thousand, whose subscribed and paid-up capital amounts to Euro 49,722 thousand, while the unsubscribed and unpaid portion relates to: (i) Euro 800 thousand, the capital increase in service of Aquafil Sponsor Warrants. The subscribed and paid-up share capital is divided into 51,218,794 shares without nominal value divided into:
• 42,902,774 ordinary shares, identified by the ISIN Code IT0005241192;
• 8,316,020 special Class B shares, identified by the ISIN Code IT0005285330 which, in compliance with any legal limits, assign 3 exercisable voting rights pursuant to Art. 127-sexies of Legislative Decree No. 58/1998 in shareholders’ meetings of the company and which may be converted into ordinary shares under specific conditions and circumstances as regulated by the By-Laws, at the rate of one ordinary share for each Class B share.
Following the fulfilment of that indicated at Article 5 of the By-Laws of Aquafil S.p.A., 100% of the Class C shares (i.e. 80,000 class C shares), were automatically converted into ordinary shares, according to the conversion ratio of 1 ordinary share for each Class C share, without the expression of interest from their respective holders and without any change in the total amount of the company share capital.
It is recalled that the 80,000 special Class C shares, identified by the ISIN Code IT0005241747, were without voting rights in the ordinary and extraordinary shareholders’ meetings of the company and excluded from the right to receive profits which the company resolves to distribute as an ordinary, non- transferable dividend until April 5, 2022 and automatically converted into ordinary shares in the conversion ratio of 4.5 ordinary shares for each Class C share according to specific conditions and circumstances laid down by the By-Laws.
Pag. 93 di 224
As a result of this share conversion, the Group’s share capital remains at Euro 49,722,417 while the number of ordinary shares increases from 42,822,774 to 42,902,774, while the class B shares remained unchanged (8,316,020 shares) and consequently the total number of shares remains unchanged (51,218,794 shares).
The breakdown of Aquafil S.p.A.’s subscribed and paid-up share capital at December 31, 2022 is shown below:
Type of shares
No. shares
% of Share Capital
Listing
Ordinary
42,902,774
83.76%
MTA, STAR Segment
Class B
8,316,020
16.24%
Non-listed
Class C
0
0.00%
Non-listed
Total
51,218,794
100%
On the basis of communications sent to the National Commission for Companies and the Stock Exchange (CONSOB), and received by the Company pursuant to Article 120 of Legislative Decree No. 58 of February 24, 1998, as well as the effect of the conversion of Market Warrants in the year, holders of a significant shareholding as at December 31, 2022 - i.e. considering Aquafil S.p.A.’s qualification as an SME pursuant to Article 1 (w-quater). 1 of the CFA, of a shareholding of greater than 5% of Aquafil S.p.A. share capital with voting rights.
The declarant or subject at the top of the equity chain
Direct shareholder
Type of shares
No. shares
No. of voting
rights
GB&P S.r.l.
Aquafin Holding S.p.A.
Ordinary
21,554,705
21,554,705
Class B
8,316,020
24,948,060
Total
29,870,725
46,502,765
Holding
58.32%
68.52%
Warrants
The following were initially issued on listing:
(i) 7,499,984 Aquafil Market Warrants, listed and identified by the ISIN Code IT0005241200, which incorporate the right to the allocation of Aquafil S.p.A. shares of Conversion Market Warrants and are exercisable under the conditions set out in the relative regulation approved by the Space3
Pag. 94 di 224
extraordinary shareholders’ meeting by resolution of December 23, 2016. Pursuant to the Aquafil S.p.A. Market Warrant Regulation (ISIN IT0005241200), December 4, 2022 was the deadline for the exercise of the Aquafil Warrants financial instruments, as 60 (sixty) months had elapsed since the date of admission to listing of Aquafil’s ordinary shares (ISIN IT0005241192);
(ii) 800,000 Aquafil Sponsor Warrants, identified by the ISIN Code IT0005241754, non-listed and exercisable within ten years from the date of December 4, 2017, payable at the unit exercise price of Euro 13.00 (on achieving a "Strike Price" of Euro 13.00), in response to the allocation of an Aquafil Share of Aquafil Conversion Sponsor Warrants for each Sponsor Warrant exercised. As commented in the Directors' Report, it should be noted that on December 4, 2022, the exercise deadline for the Aquafil Warrants financial instruments concluded, and therefore as of December 31, 2022, 2,014,322 Aquafil Market Warrants have been converted with the allotment of 498,716 Conversion Shares. As of December 31, 2022, therefore, no other Market Warrants are outstanding, while it is noted that no Aquafil Sponsor Warrants have been converted.
Legal reserve
The legal reserve at December 31, 2022 was equal to Euro 1.3 million; the increase of Euro 0.6 million was approved by the Shareholders’ Meeting of April 28, 2022 which allocated to this reserve one twentieth of the profit for the year 2021.
Translation reserve
The translation reserve, negative at December 31, 2022 for Euro 3.1 million (increased by a positive effect of Euro 5 million in the year), includes all the differences arising from the translation into Euro of the subsidiaries’ financial statements included in the consolidation scope expressed in foreign currency.
This is the effect of statement translation, so it had no impact on profits for the year, but is recognised on the consolidated comprehensive income statement as reserves to be carried forward.
Share premium reserve
The item amounted to Euro 19.98 million at December 31, 2022 and is derived from the merger transaction between Aquafil S.p.A. and Space 3 S.p.A. in December 4, 2017.
Pag. 95 di 224
Listing costs / Share capital increase reserve
The item amounted to Euro 3.29 million at December 31, 2022 as a decrease in shareholders’ equity and relates to the costs incurred in 2017 for the listing and thereafter the share capital increase.
“First Time Adoption” Reserve (FTA)
The item amounts to Euro 2.39 million as a reduction of shareholders’ equity and represents the conversion effects from Italian GAAP to IFRS.
IAS 19 reserve
At December 31, 2022, it was equal to a Euro 0.4 million reduction in shareholders’ equity and includes the actuarial effects at that date of severance indemnities and all the other benefits for employees of Group companies.
Negative reserve for treasury shares in portfolio
The negative reserve for treasury shares in portfolio totalled Euro 8 million at December 31, 2022.
It should be noted that, on October 20, 2021, Aquafil S.p.A. announced that the Company’s Shareholders authorised the purchase of treasury shares in accordance with Article 2357 of the Italian Civil Code. This authorisation by Shareholders has a duration of 18 months from the date of the authorising resolution. The operation is aimed at enabling the Company to purchase and/or make use of the Company’s ordinary shares for: (i) making investments and limiting anomalous changes in share prices so as to promote regular trading outside of normal fluctuations tied to market trends, while, in any event, observing applicable laws and regulations; and (ii) establishing a securities reserve for future uses in accordance with the strategies that the Company intends to pursue as payment in corporate transactions with other parties or other extraordinary uses. The Shareholders authorised the purchase, in one or more tranches,
Pag. 96 di 224
of ordinary shares up to a maximum number which, taking account of the ordinary shares which may be held in portfolio by the company and by its subsidiary, does not total more than 3% of share capital.
As a result of the purchases made as of December 31, 2022, Aquafil holds 1,181,685 treasury shares, equivalent to 2.3071% of the share capital for a value of Euro 8,015 thousand.
Retained earnings
At December 31, 2022, the account amounts to Euro 92.5 million and represents the results generated by the Aquafil Group in previous years (including pre-merger with Space3 S.p.A.) net of the distribution of dividends.
Dividends
The Shareholders' Meeting held on April 28, 2022 approved the distribution of a gross dividend of Euro 6 million, which was paid out on May 11, 2022.
Equity attributable to non-controlling interests
As illustrated in paragraph 2.3 “Consolidation scope” and consolidation criteria, the minority interests shareholders’ equity substantially reduced to zero.
7.13. Employee benefits
The account is comprised of:
(Euro thousands)
Balance at December 31, 2021
5,910
Financial charges
66
Advances and settlements
(159)
Actuarial gains/(losses)
(625)
Balance at December 31, 2022
5,192
Pag. 97 di 224
The post-employment benefits provision includes the effects of discounting as required by the IAS 19 accounting standard. The following is a breakdown of the main economic and demographic assumptions used for actuarial valuations:
Financial assumptions
December 31, 2022
Discount rate
3.57%
Rate of inflation
2.30%
Annual increase in employee leaving indemnity
3.23%
Demographic assumptions
Death
The RG48 mortality tables published by the General State Controller
Disability
INPS tables by age and gender
Retirement
100% on satisfying AGO requirements
Annual frequency of Turnover and leaving indemnity advances
Frequency advances
4.50%
Frequency turnover
2.50%
The bond’s average duration at December 31, 2022 is approximately 6.4 years.
7.14 Current and non-current financial liabilities
The account is comprised of:
(Euro thousands)
December 2022
of which current portion
December 2021
of which current portion
Medium/long term bank loans
263,114
60,880
215,248
48,932
Accrued interest and accessory charges on medium/long-term bank loans
(399)
(399)
(549)
(549)
Total medium/long-term bank loans
262,715
60,481
214,699
48,384
Bond loans
83,158
12,857
90,353
7,143
Accrued interest and charges on bonds
251
251
316
316
Total bond loan
83,409
13,108
90,670
7,459
Leasing and RoU financial payables
21,074
8,224
26,820
13,393
Other lenders and banks – short term
1,333
1,333
203
203
Total
368,531
83,146
332,859
69,438
Medium/long term bank loans
Pag. 98 di 224
This item refers to payables relating to financing agreements obtained from credit institutions.
These agreements stipulate the payment of interest at a fixed rate or, alternatively, at a variable rate typically linked to the Euribor rate for the period plus a spread.
At year-end all the Group’s loans had been contracted by Aquafil S.p.A., in view of its positive rating and the favourable situation within the Italian financial market. During the year, Aquafil S.p.A. thus provided financial support, through loans and share capital increases, to the investment activities of subsidiaries, particularly in Slovenia.
During 2022, loans were repaid on schedule and new medium/long term loans totalling Euro 94 million were entered into with leading banking institutions.
The funds raised were used to maintain liquidity.
With reference to the loans granted, there are no mortgages or guarantees registered on company assets.
(Euro thousands)
Original amount
Granting date
Maturity date
Loan repayments
Rate applied
At December 31, 2022
of which current portion
Medium/long term bank loans - fixed rate
Cassa Centrale Banca – Credito Cooperativo del Nord Est (ex Casse rurali trentine) (*)
15,000
2019
2026
quarterly from 30/09/2021
1.25% fixed from July 1, 2024, 3 mo. Euribor + 1
10,598
2,981
Cassa Centrale Banca (*)
11,000
2022
2029
22 quarterly instalments
1.20% fixed for the first 4 years
11,000
484
Credito Valtellinese (*)
15,000
2018
2024
quarterly from 05/10/2018
1 fixed %
7,566
4,307
Mediocredito Trentino Alto Adige
3,000
2022
2026
half-yearly from 15/10/202
0.85% fixed until 10/15/2022 - Euribor 3 months +1
3,000
247
Cassa Depositi e Prestiti (*)
20,000
2020
2027
half-yearly from 20/06/2023
1.48% fixed
20,000
4,000
Total Medium/long term bank loans - fixed rate
52,164
12,019
Medium/long term bank loans - variable rate
Deutsche Bank (*)
5,000
2018
2024
quarterly from 15/01/2019
Euribor 3 months + 1.20%
2,188
1,250
Deutsche Bank (*)
20,000
2022
2028
20 quarterly from 1/10/2023
Euribor 3 months + 1.20%
20,000
2,000
Cassa Risparmio di Bolzano (*)
20,000
2018
2025
quarterly from 31/03/2020
Euribor 3 months + 0.85%
12,102
4,000
Cassa Risparmio di Bolzano (*)
10,000
2022
2028
16 quarterly from 1/10/2023
Euribor 3 months + 1.05%
10,000
0
Banca intesa (*)(**)
15,000
2018
2024
half-yearly from 31/7/2019
Euribor at 6 months + 0.95%
5,143
2,571
Pag. 99 di 224
Banca intesa (*)(**)
30,000
2021
2027
half-yearly from 30/06/2023
Euribor at 6 months + 1.10%
30,000
6,000
Banca di Verona
3,500
2016
2023
quarterly from 30/06/2017
Euribor 3 months + 1.80%
333
333
Banca di Verona
15,000
2017
2024
quarterly from 30/06/2017
Euribor 3 months + 2%
5,836
3,210
Banca di Verona
3,000
2019
2024
quarterly from 06/08/2021
Euribor 3 months + 1.30%
1,909
727
Banca di Verona
5,000
2022
2027
quarterly from 27/4/2024
Euribor 6 months + 1.20%
5,000
0
Credito Valtellinese
3,000
2017
2023
quarterly from 05/07/2017
Euribor 3 months + 0.90%
457
459
Cassa Rurale Raiffeisen Alto Adige
3,000
2017
2023
quarterly from 30/06/2018
Euribor 3 months + 0.90%
191
191
Banca Popolare di Milano (*) (**)
25,000
2018
2025
quarterly from 31/03/2020
Euribor 3 months + 0.90%
16,011
4,394
Banca Popolare di Milano (*) (**)
15,000
2019
2025
quarterly from 30/09/2020
Euribor 3 months + 1.05%
9,070
2,926
Banca Popolare Emilia Romagna (*) (**)
10,000
2019
2025
monthly from 26/09/2020
Euribor 3 months + 0.75%
6,700
2,497
Banca Nazionale del Lavoro (*)
7,500
2018
2025
half-yearly from 31/12/2019
Euribor 6 months + +1.40%
4,091
2,045
Banca Nazionale del Lavoro (*)
12,500
2018
2025
half-yearly from 31/12/2019
Euribor 6 months +1.25%
6,818
3,409
Banca Nazionale del Lavoro (*)
20,000
2022
2027
quarterly from 08/12/2023
Euribor 3 months + 1.40%
20,000
1,250
Banca Popolare di Sondrio
5,000
2017
2023
monthly from 31/08/2018
Euribor 1 month + 0.80%
739
739
Credit Agricole Friuladria (ex Banca Popolare Friuladria) (*) (**)
10,000
2017
2025
quarterly from 31/03/2019
Euribor 3 months + 1.30%
4,607
1,800
Credit Agricole Friuladria (ex Banca Popolare Friuladria) (*) (**)
10,000
2019
2025
half-yearly from 28/12/2020
Euribor 6 months + 1.05%
5,455
1,819
Monte dei Paschi (*)
15,000
2018
2025
half-yearly from 31/12/2019
Euribor 6 months + 0.80%
9,375
3,750
Crediti Emiliano
5,000
2022
2027
quarterly from 16/9/2023
Euribor 3 months + 0.90%
5,000
522
Banca del Mezzogiorno (*) (**)
10,000
2019
2026
quarterly from 09/11/2020
Euribor 1 month + 1.20%
6,500
2,000
Cassa Depositi e Prestiti (*)
20,000
2022
2027
half-yearly from 30/6/2024
Euribor 6 months + 1.55%
20,000
0
Credito Valtellinese (*)
5,000
2020
2025
quarterly from 30/9/2021
Euribor 3 months + 1.40%
3,425
969
Pag. 100 di 224
Total Medium/long term bank loans - variable rate
210,950
48,861
Accrued interest on medium/long term bank loans
(399)
(399)
Medium/long term bank loans - fixed and variable rate
262,715
60,481
* Loans that provide for compliance with financial covenants
** Loan to which an interest rate swap contract is linked under which interest to be paid to the bank is fixed and equal to the value shown in the table
Certain loan agreements provide for compliance with financial and equity covenants, as summarised below:
Loan
Period
Parameter
Reference
Limit
Banca Friuladria
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net debt / EBITDA net of lease costs
≤ 3.75
Banca Intesa
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Cassa di risparmio di Bolzano
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Banca Nazionale del Lavoro
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Banca Popolare di Milano
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Credito Valtellinese
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Deutsche Bank
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Monte dei paschi
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Casse Centrali C.R. Trentine
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Banca Pop. Emilia Romagna
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
MCC/Banca del Mezzogiorno
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Cassa Depositi e Prestiti
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
annually
Net Debt / Net Equity
≤ 2.50
As at December 31, 2022, all covenants were met.
With reference to the loans granted, there are no mortgages registered on Group assets.
Bond loans
Pag. 101 di 224
The Company has two fixed-rate bonds outstanding, with a total original value of Euro 90 million, which at December 31, 2022 amounted to Euro 83.4 million, decreasing on the previous year by approx. Euro 7.3 million due to the repayment of the instalment due in 2022. The outstanding bonds have the following features:
• a first bond loan (“A”), initially issued on June 23, 2015 and subscribed by companies belonging to the US Group Prudential Financial Inc., with a value equal to Euro 50 million, to be repaid in 7 equal instalments of Euro 7.1 million, of which the first with maturity on September 20, 2022 and the last on September 20, 2028, subject to a fixed interest rate of 3.70% with the application of a "margin ratchet" condition which provides for a gradual increase in the rate up to a maximum of 1% on the fluctuation of the NFP/EBITDA ratio of the Group. With effect from September 20, 2019, as a result of the variation in the NFP/EBITDA ratio in the first half of 2019, the interest rate increased to 4.70%. Application of this interest rate was confirmed until September 30, 2021. The NFP/EBITDA ratio resulting from approval of the financial statements at June 30, 2021 led to a reduction in the interest rate applicable for the period September 2021 to March 2022 to 4.20%. With the ratio reported at December 31, 2021, the margin ratchet has been brought to zero, bringing the interest rate for the six months subsequent to March 2022 to 3.70%. Due to the NFP/EBITDA ratio resulting from the approval of the 2022 half-yearly consolidated financial statements, the application of the interest rate at 3.70% is confirmed until March 2023. It is noted that the first instalment of Euro 7.1 million was repaid on September 20, 2022;
• in addition to the line of credit used for the "A" bond loan, the Prudential Group has granted the company a so-called "Shelf Facility" available on request and usable up to a maximum amount of approx. USD 90 million. This line was partially used to cover the issuance of the second bond ("B") and remains available at current market conditions for approx. USD 50 million. Bond B was issued on May 24, 2019 to finance the business combination of Aquafil O’Mara Inc., and subscribed by companies belonging to the US Group Prudential Financial Inc. for a total of Euro 40 million; the terms provide for repayment in 7 annual instalments from May 24, 2023, a fixed interest rate equal to 1.87%, with the application of the same margin ratchet condition as for bond A, which brought the rate to 2.87% until November 24, 2021, whereas, from November 25, 2021, to May 24, 2022, following changes in the NFP/EBITDA ratio, the rate will be 2.37%. With the ratio reported at December 31, 2021, the margin ratchet has been brought to zero, bringing the interest rate for the six months subsequent to May 2022 to 1.87%. Due to the NFP/EBITDA ratio resulting from the approval of the 2022 half-yearly consolidated financial statements, the application of the interest rate at 1.87% is confirmed until May 2023.
Pag. 102 di 224
The following table summarises the main characteristics of the aforementioned bond loans:
Bond loan
Total Nominal Value
Issue date
Maturity date
Capital portion repayment plan
Interest rate applied
Bond loan A
50,000,000
23/06/2015
20/09/202 8
7 annual instalments from 20/09/2022
3.70%
Bond loan B
40,000,000
24/05/2019
24/05/202 9
7 annual instalments from 24/05/2023
1.87%
Bond loans envisage compliance with the following financial covenants, as contractually defined, to be calculated on the basis of the Group’s consolidated financial statements:
Bond loan A-B
Financial parameters
Parameter
Covenant limit
Interest Coverage Ratio
EBITDA / Net financial charges
> 3.50
Leverage Ratio (*)
Net Debt / EBITDA
< 3.75
Net Debt Ratio
Net Debt / Net Equity
Minimum Net Equity threshold levels
(*) This indicator must be calculated with reference to the 12-month period which terminates on December 31 and June 30 for all years applicable.
Non-compliance with just one of the above financial parameters, where not resolved within the contractual deadlines provided, would constitute a circumstance for the bond loan’s compulsory early repayment. The terms and conditions of the above bond loans also envisage, as is customary for financial transactions of this type, a structured series of commitments to be borne by the Company and Group companies ("Affirmative Covenants") and a series of limitations on the possibility of carrying out certain transactions, if not in compliance with certain financial parameters or specific exceptions provided for by the agreement with the bondholders ("Negative Covenants"). Specifically, there are in fact certain limitations on the assumption of financial debt, on carrying out certain investments and on acts of disposal of corporate assets. To ensure the timely and correct fulfilment of obligations arising on account of the Parent Company from the issue of securities, the companies Aquafil Usa Inc. and Aquafil SLO d.o.o. have issued joint corporate guarantees in favour of underwriters:
As specified previously, the covenants at December 31, 2022 have been met for bond loans also. It should also be noted that on the basis of the Group’s earnings and debt forecasts, to date there are no elements to consider compliance with the above covenants to be at risk in the near future.
Pag. 103 di 224
Lease liability
Financial payables for leases, which amounted to Euro 21.1 million, reducing on December 31, 2021 (amounting to Euro 26.8 million), refer to the effects of the application of IFRS 16 and whose current portion amounted to Euro 8.2 million. The decrease is mainly due to the down-payment of Euro 5.5 million on the Trentino Sviluppo SpA leasing contract of the parent company.
7.15. Provisions for risks and charges
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Agents’ supplementary indemnity provision and others
1,734
1,361
Guarantee fund on client engineering orders
241
567
Total
1,975
1,929
The balance at December 31, 2022 of Euro 1.9 million is in line with December 31, 2021.
7.16 Other current and non-current liabilities
The account is comprised of:
(Euro thousands)
December 2022
of which current portion
December 2021
of which current portion
Employee payables
12,532
12,532
12,824
12,824
Social security payables
3,229
3,229
3,103
3,103
Payables to parent for income taxes
230
230
230
230
Tax payables
2,125
2,125
2,535
2,535
Other payables
1,215
1,215
2,514
2,514
Accrued liabilities and deferred income
14,817
5,832
15,215
4,402
Total
34,148
25,163
36,421
25,608
“Employee payables" refers to sums due by Group companies to their employees at the end of the year and amounts to Euro 12.5 million, in line with December 31, 2021 (Euro 12.8 million). This movement, although amid higher labour costs, is due to a number of factors, including turnover and the utilisation of vacation periods.
Pag. 104 di 224
“Social security payables” mainly includes the amount owed at year-end by the Group companies and their employees to social security institutions and amounts to Euro 3.2 million, in line with December 31, 2021.
“Payables to parent for income taxes” entirely refer to Tessilquattro S.p.A. payables to the parent company Aquafin Holding S.p.A. as per the tax consolidation regime.
"Tax payables" mainly include withholding taxes and other tax payables.
Accrued liabilities and deferred income mainly comprise:
• the commercial contract with the US group Interface, involving a worldwide collaboration for supply and product development. In particular, Aquafil SpA undertook an obligation until 2026 to guarantee Interface conditions of supply, against which the client, in addition to committing to annual minimum volumes, paid to Aquafil USD 24 million in advance. At December 31, 2022, this deferred revenue (recognised to deferred income) amounts to Euro 7.4 million;
• deferral of the industry 4.0 tax credit obtained due to the investment related to the new three production lines installed at the Rovereto plant in the Engineering Plastics segment for Tessilquattro amounting to Euro 1.9 million (for further details, please refer to the following section "Other revenues and income";
• the deferral of the portion pertaining to future years of the contribution obtained from the European Union for the “Effective” research project, described in the Directors’ Report and also commented on in the notes 7.5 and 7.1. The original deferred income recognised for Euro 3.3 million which concerns the overall contribution recorded at the signing date of the agreement with lending banks (with counter-entry to Other non-current assets), amounts to Euro 1.8 million at December 31, 2022. It should be noted that from 2019 onwards, costs relating to the “Effective” project have been capitalised under intangible assets in progress for the portion eligible under IAS 38. Therefore, the residual contribution concerning the capitalised portion is recognised to the income statement from the present year, for a period of 5 years, as the asset has been capitalised and is depreciated over that timeframe.
7.17. Trade payables
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Trade payables
125,445
122,507
Payables to parent, associates and other related parties
270
352
Payments on account
1,126
3,707
Pag. 105 di 224
Total
126,840
126,566
Trade payables amount to Euro 126.8 million, substantially in line with December 31, 2021 (Euro 126.6 million).
At December 31, 2022 there were no commercial payables falling due over five years.
8. NOTES TO THE CONSOLIDATED INCOME STATEMENT
8.1. Revenues
The breakdown of revenues is shown below:
2022
2021
change
in Euro millions
%
in Euro millions
%
in Euro millions
%
EMEA
372.91
55%
345.37
57%
27.54
8%
North America
202.09
30%
128.26
25%
73.83
58%
Asia and Oceania
105.79
15%
93.29
17%
12.50
13%
Rest of the world
3.28
0%
2.78
0%
0.50
18%
Total
684.07
100%
569.70
100%
114.37
20%
Revenues almost entirely include the value of the sale of goods of the three Group product lines described above, that is, the BCF Product Line (carpet fibers), the NTF Product Line (clothing fibers) and the Polymers Product Line.
Revenues by Product Line are presented in the Directors’ Report, which reports that the significant increase in revenues mainly relates to the BCF line (increase of Euro 119.5 million, +32.7% on 2021) and particularly on the North American market (increase of Euro 74.5 million, +81.3% on 2021). The Polymers segment however reported a decrease of Euro 20.6 million due to the market slowdown.
In general, the increase in revenues related to an increased quantity of volumes sold, in addition to an increase in sales prices prompted by the higher raw material and production costs.
Pag. 106 di 224
“Revenues” include, in accordance with IFRS 15, “cash discounts” as a direct reduction, amounting to Euro 3.8 million at December 31, 2022 (Euro 3 million at December 31, 2021).
8.2. Other revenues and income
“Other revenues and income" amount to Euro 13 million and refers mainly to:
- Euro 7.2 million for the energy and gas tax credit subsidy granted during the year (to Aquafil S.p.A. and Tessilquattro S.p.A.) for electricity-intensive and natural gas-intensive companies that have met the requirements under the regulations (Decree Law No. 4 of 01/27/2022); the increase in the other revenues item is mainly related to this subsidy;
- Euro 0.3 million regarding the year's portion of deferral of tax credits for 4.0 investments, due to the higher investments made starting from the year 2020, eligible for the tax relief provided by Article 1 of Law 232 of December 11, 2016 and subsequent. It should be noted that the recognised credit amounts to Euro 2.6 million and will be used to offset other taxes.
- Euro 4.1 million grants received for the U.S. activities, mainly for the recovery of end-of-life carpets;
- Euro 0.6 million regarding the portion in the year of the deferral related to the grant recognised by the EU for the "Effective" research project, relating to the parent company Aquafil S.p.A. for Euro 0.3 million and the subsidiary AquafilSlo for Euro 0.3 million.
8.3. Raw material costs
The account includes raw materials and consumables costs, in addition to changes in inventories.
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Raw materials and semi-finished goods
275,505
250,103
Ancillaries and consumables
34,830
28,433
Other purchases and finished products
7,480
5,086
Total
317,815
283,622
Pag. 107 di 224
Raw materials, ancillaries and consumables amount to Euro 317.8 million, increasing Euro 34.2 million on the previous year (+12%). This increase is mainly due to the increase in raw material purchase prices (mainly caprolactam and polymer) in the year.
8.4. Service costs
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Transport, shipping & customs
34,940
21,626
Electricity, propulsive energy, water and gas
77,529
44,048
Maintenance
10,364
9,092
Services for personnel
6,210
3,820
Technical, ICT, commercial, legal & tax consultancy
10,360
9,405
Insurance
3,428
2,455
Marketing and advertising
4,341
3,739
Cleaning, security and waste disposal
4,002
3,619
Warehousing and external storage
4,483
3,913
External processing
5,777
4,401
Other sales expenses
298
201
Statutory auditors fees
161
166
Other service costs
4,068
3,866
Rentals and hire
2,510
2,217
Total
168,472
112,567
Service costs amount to Euro 168.5 million, increasing Euro 55.9 million on 2021 (Euro 112.6 million). This increase, related to the increase in production and sales volumes , was particularly evident for energy costs in terms of the increases in the year, in addition to transport and shipping costs.
8.5 Labour costs
These costs are broken down as follows:
(Euro thousands)
December 2022
December 2021
Wages and salaries
97,772
88,415
Social security charges
20,783
18,837
Post-employment benefits
2,003
1,944
Other non-recurring costs
1,565
1,700
Director fees
4,753
3,332
Total
126,875
114,228
Pag. 108 di 224
Labour costs amount to Euro 126.8 million, increasing Euro 12.6 million on 2021. This increase is mainly due to the increased average cost in view of salary rises.
Other non-recurring costs mainly concern the leaving incentives incurred by Aquafil Carpet Collection LLC for Euro 0.5 million, AquafilSLO for Euro 0.4 million and Aquafil S.p.A. for Euro 0.2 million.
The number of employees, broken down by category, is as follows:
31.12.2022
31.12.2021
Average 2022
Average 2021
Managers
47
52
51
51
Middle managers
160
154
157
145
White-collar
433
433
433
428
Blue-collar
2,132
2,166
2,155
2,124
2,772
2,805
2,796
2,748
8.6. Other operating costs and charges
These costs are broken down as follows:
(Euro thousands)
December 2022
December 2021
Taxes, duties & sanctions
2,494
2,533
Losses on asset sales
167
102
Other operating charges
1,377
785
Total
4,038
3,420
“Other operating costs and charges” amounted to Euro 4 million, increasing Euro 0.6 million on 2021. The account mainly comprises “Taxes, duties and sanctions” for Euro 2.5 million, which mainly concern local property taxes and for Euro 1.4 million “Other operating charges”.
8.7 Amortisation, depreciation and write-downs of tangible and intangible assets
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Amortisation
6,252
3,482
Pag. 109 di 224
Depreciation
33,270
30,327
RoU (Right-of-Use) depreciation
8,329
7,913
Write-down of intangible assets
0
1,650
Impairment - other tangible assets
0
1,292
Total
47,851
44,964
Amortisation and depreciation totalled Euro 47.9 million, increasing Euro 2.9 million on 2021. The increase concerns straight-line amortisation and depreciation of fixed assets, which have increased significantly in recent years and the beginning of amortisation and depreciation on the bio-caprolactam project.
8.8 Provisions and write-downs
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Doubtful debt provision
(42)
(126)
Provisions for risks and charges
222
254
Total
180
129
”Provisions and write-downs” total Euro 180 thousand and were substantially in line with 2021 (Euro 129 thousand).
8.9 Costs for internal work capitalised
In 2022 this item, amounting to Euro 5,7 million (Euro 6.1 million in 2021), refers to capitalisation of the following projects:
- Euro 1.7 million on new product development costs (IAS 38);
- Euro 1.1 million on improving industrial and energy efficiency at Group plant;
- Euro 0.7 million on the improvement and technological upgrading of existing plant and equipment;
- for Euro 0.6 million to activities to improve industrial and energy efficiency in the production of ECONYL® caprolactam and its raw materials;
Pag. 110 di 224
8.10. Financial income
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Derivative financial instruments
4,506
599
Other interest
73
7
Interest income current accts.
290
308
Total
4,869
915
”Financial income” amounted to Euro 4.9 million, increasing Euro 4 million on the previous year, substantially due to the increase in the fair value of derivatives (IRS) due to interest rate curve movements. As previously illustrated, “hedge accounting” was not applied to these derivatives as, although entered into for hedging purposes, have been considered for accounting purposes and consistently with the past, as non-hedging instruments (and therefore the relative fair value is recognised in the income statement), as it is very complex to prepare the mandatory hedging relationship.
8.11. Financial charges
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Interest on bank loans and borrowings
3,197
2,478
Interest on bonds
2,705
3,454
Interest exp. on current accounts
797
846
Write-down of derivative financial instruments
0
0
Financial charges and interest expense
1,669
772
Total
8,369
7,550
"Financial charges" of Euro 8.4 million increased Euro 0.9 million on the previous year, mainly due to the increase in interest on bank loans, partially offset by the lower interest on outstanding bonds.
8.12. Exchange gains and losses
The breakdown of the account is as follows:
(Euro thousands)
December 2022
December 2021
Total exchange gains
16,068
5,221
Total exchange losses
(13,286)
(5,463)
Total exchange differences
2,783
(243)
Pag. 111 di 224
A net gain of Euro 2.8 million is reported for 2022, as the net balance between realised exchange gains and losses.
8.13 Income taxes
The breakdown of the account is as follows:
(Euro thousands)
December 2022
December 2021
Current taxes
7,259
2,557
Deferred taxes
458
1,376
Total
7,717
3,934
Current taxes in 2022 totalled Euro 7.3 million and concern for Euro 6 million the income taxes of the overseas investees and for Euro 0.6 million the IRAP paid by the parent company Aquafil S.p.A. and for Euro 0.6 million the prior year taxes of the parent company following the settlement of the assessments for tax years 2015 and 2016, as outlined in detail in the “Contingent liabilities” paragraph.
Aquafil S.p.A. and Tessilquattro S.p.A. opted for the group taxation procedure as chosen by Aquafin Holding S.p.A. in accordance with Article 117 and subsequent of the Income Tax Code. Therefore, the consolidated financial statements take account of the effects of the transfer of tax positions arising from the “tax consolidation” and specifically recognise the consequent credit/debit relationships towards the consolidating company. For 2022, taxable income was transferred to the consolidating company, generating deferred tax liabilities (i.e. costs from tax consolidation) of Euro 1.9 million.
The table below shows the reconciliation of the theoretical rate of income tax with the actual impact on the result:
(Euro thousands)
At December 31, 2022
%
At December 31, 2021
%
Pre-tax profit
36,868
14,604
Tax calculated on applicable rate
8,848
24%
3,505
24%
Effect difference between local and actual rates
3,725
10%
2,464
17%
Prior year taxes
647
(662)
Tax losses carried forward for which no deferred tax asset recorded
(1,912)
(1,999)
Tax effect other changes
(2,121)
(1,073)
Other income taxes and other minor effects
(1,929)
322
Total current income taxes
7,259
20%
2,557
18%
Pag. 112 di 224
Deferred tax income & charges
458
1,376
Total income taxes
7,718
21%
3,934
27%
The difference between theoretical rate and effective rate in the year is mainly due to government grants received by the parent company Aquafil S.p.A. and its subsidiary Tessilquattro S.p.A. that are not taxable.
8.14 Non-recurring items
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Non-recurring charges
530
235
Expansion costs Aquafil Group
417
275
ACR1 and ACR2 non-recurring costs and revenues
853
1,623
Restructuring and other labour costs
1,109
505
Tax disputes
123
276
Total non-recurring costs
3,032
2,915
Extraordinary income
(132)
(426)
Non-current deferred tax assets
Total non-recurring income
(132)
(426)
Non-operating income and charges
2,901
2,489
The item "Non-recurring charges" mainly refers to costs relating to previous years.
"Expansion costs of the Aquafil Group" refer to costs incurred for the activities and projects related to the expansion of the Group, in particular in India and the listing on the US OTC Markets.
The tax dispute refers to costs for fiscal consulting incurred in relation to the joint audit consequent to the position paper received by Aqualeuna G.m.b.H. on the tax audit by the “Bundeszentralamt fur Steuern” office responsible for intercompany transactions in the region for the years 2016 and 2017.
“Non-recurring ACR2 costs” refer mainly to costs incurred by Aquafil Carpet Recycling # 2, whose production lines were transferred to other Group companies, as part of the project to reallocate assets in order to achieve production efficiency gains in support of the ECONYL® system.
Pag. 113 di 224
“Restructuring and other labour costs” refer mainly to the provisions of AquafilSlo for its restructuring process and the leaving incentive settled by the parent company. Reference should also be made to paragraph 8.5 on labour costs.
The tax dispute refers to costs for fiscal consulting incurred by the parent company in relation to the joint audit consequent to the position paper received by Aqualeuna G.m.b.H. on the tax audit by the “Bundeszentralamt fur Steuern” office responsible for intercompany transactions in the region.
Extraordinary income includes some individually insignificant items recognized by various Group companies.
The percentage of the non-recurring items of the result, of cash flows, of the equity position, and of the net debt, are reported below.
(Euro thousands)
of which non- recurring
Percentage
Net profit
29,151
(2,901)
(10.0)%
Net cash flow in the year
(41,974)
(2,342)
5.6%
(*)
Total assets
724,955
(559)
(0.1)%
(**)
Net financial debt
(247,885)
(2,342)
0.9%
(*)
(*) This amount concerns the non-recurring items paid in the year.
(**) amount of non-recurring income statement items yet to be paid at year-end
8.15 Earnings per share
The breakdown of the account is as follows:
(Euro thousands)
December 2022
December 2021
Profit attributable to the owners of the Parent
29,151
10,670
Weighted average number of shares
51,139
51,139
Earnings per share (in Euro)
0.57
0.21
Earnings per share – diluted (in euro)
0.57
0.21
We point out that diluted earnings per share is equal to the above-mentioned earnings per share because there are no stock option plans.
Pag. 114 di 224
9. Net financial debt
Below is the breakdown of the net financial debt at December 31, 2022 and December 31, 2021, determined in accordance with the ESMA Guidelines (32-382-1128):
NET FINANCIAL DEBT
(in Euro thousands)
At December 31, 2022
At December 31, 2021
A. Cash
110,682
152,656
B. Cash and cash equivalents
C. Other current financial assets
9,964
860
D. Liquidity (A) + (B) + (C)
120,646
153,516
E. Current financial debt (including debt instruments but excluding the current portion of non-current financial debt)
(1,333)
(203)
F. Current portion of non-current financial debt
(81,814)
(69,236)
G. Current financial debt (E + F)
(83,146)
(69,438)
H. Net current financial debt (G - D)
37,500
84,078
I. Non-current financial debt (excluding current portion and debt instruments)
(215,084)
(180,185)
J. Debt instruments
(70,301)
(83,210)
K. Trade payables and other non-current payables
L. Non-current financial debt (I+J+K)
(285,385)
(263,396)
M. Total financial debt (H+L)
(247,885)
(179,318)
The net financial reconciliation between the beginning and end of the period are presented below. The effects indicated include the currency effects.
(Euro thousands)
current portion
non-current portion
Net Debt at December 31, 2021
(179,318)
84,078
(263,396)
Net cash flow in the year
(41,973)
(41,973)
Decrease in liquidity subject to restrictions
5,041
5,041
New bank loans and borrowings
(94,000)
(4,503)
(89,497)
Repayment / reclass. bank loans and borrowings
53,244
53,244
Leasing New Funding
(10,545)
(210)
(10,335)
Repayment / reclass. lease liability
16,291
16,291
Change in fair value derivatives
4,506
4,506
Other changes
(1,131)
(1,131)
Net Debt at December 31, 2022
(247,885)
110,837
(358,722)
Pag. 115 di 224
10. RELATED PARTY TRANSACTIONS
Transactions and balances with related parties are illustrated in the tables below. The companies indicated are considered related parties as directly or indirectly related to the majority shareholder of the Aquafil Group. Transactions with related parties were undertaken in line with market conditions.
Payables and receivables of the Group with related parties are illustrated in the table below:
(Euro thousands)
Parent companies
Subsidiari es
Associate s
Related parties
Total
Total book value
% on total account items
Non-current financial assets
At December 31, 2022
234
6
1,018
79
1,336
1,849
72.26%
At December 31, 2021
234
6
1,018
79
1,336
1,729
77.27%
Trade receivables
At December 31, 2022
305
71
376
28,553
1.32%
At December 31, 2021
71
71
31,233
0.23%
Other current assets
At December 31, 2022
247
247
15,862
1.56%
At December 31, 2021
3,152
3,152
12,853
24.52%
Non-current financial liabilities
At December 31, 2022
(831)
(4,431)
(5,262)
285,385
(1.84)%
At December 31, 2021
(1,370)
(4,989)
(6,359)
263,421
(2.41)%
Current financial liabilities
At December 31, 2022
(537)
(2,420)
(2,957)
(83,146)
3.56%
At December 31, 2021
(524)
(1,716)
(2,240)
(69,438)
3.23%
Trade payables
At December 31, 2022
(270)
(270)
(126,840 )
0.21%
At December 31, 2021
(352)
(352)
(126,566 )
0.28%
Other current liabilities
At December 31, 2022
(230)
(230)
(25,163)
0.91%
At December 31, 2021
(230)
(230)
(25,608)
0.90%
The transactions of the Group with related parties are illustrated in the table below:
(Euro thousands)
Parent companies
Other related parties
Total
Book value
% on total account items
Revenues
December 2022
250
185
435
684,074
0.06%
December 2021
52
52
569,701
0.01%
Service costs and rent, lease and similar costs
December 2022
(465)
(465)
(168,472)
0.28%
December 2021
(414)
(414)
(112,567)
0.37%
Other operating costs and charges
Pag. 116 di 224
December 2022
(70)
(70)
(4,038)
1.73%
December 2021
(70)
(70)
(3,420)
2.05%
Investment income/charges
December 2022
183
183
23
795.65%
December 2021
0
0
0
0.00%
Financial charges
December 2022
(32)
(108)
(140)
(8,369)
1.67%
December 2021
(43)
(116)
(159)
(7,550)
2.11%
The following table summarises cash flows with related parties of the Group and their percentage out of the cash flow indicated in the cash flow statement:
(Euro thousands)
Total cash flow statement account
of which related parties
% on total account items
Result for the year
29,151
(57)
(0)%
Financial charges
8,369
(140)
(2)%
Increase/(Decrease) in trade payables
245
(82)
(33)%
Increase/(Decrease) in trade receivables
2,722
(305)
(11)%
Changes to assets and liabilities
(3,834)
2,905
(76)%
Net changes in current and non-current financial assets and liabilities (including IFRS 16)
(9,802)
(380)
4%
Non-monetary change IFRS 16
(9,660)
(1,828)
19%
Dividends distributed
(6,046)
(3,576)
59%
11. OTHER INFORMATION
11.1 Commitments and risks
Other commitments
At December 31, 2022, the parent company Aquafil S.p.A. provided sureties in favour of credit institutions in the interest of subsidiaries, companies subject to the control of the parent company and third parties for a total of Euro 22,6 million.
Contingent liabilities
Pag. 117 di 224
Provided below is a list of fiscal positions and disputed defined and pending as at the balance sheet date that concern the Parent Company, Aquafil S.p.A. We are not aware of the existence of further disputes or proceedings that are likely to have significant repercussions on the Group’s economic and financial situation.
1) Tax audit Aqualeuna G.m.b.H.
The company Aqualeuna G.m.b.H. was involved in a tax audit by the competent German federal tax office in Leuna concerning inter-company transactions. On July 15, 2021, the company was notified by the German tax administration’s audits unit in Halle of the conclusion of the tax audits for fiscal years 2013-2017. The upward adjustment to Aqualeuna's assessable income concerned:
(a) for the period 2013-2015, not subject to international cooperation with the Italian administration, for Euro 735 thousand, offset by the equal utilisation of the company's prior year losses;
(b) for the period 2016, subject to joint audit by the two administrations, upward adjustment for Aqualeuna of Euro 1.4 million, with corresponding equal adjustment to the benefit of Aquafil in Italy, for which during the first half of 2022 the corresponding adjustment was made official by the Trento Provincial Office. In fact, on July 26, 2022, the Office recognised the amount of Euro 410 thousand upon closure of the reimbursement file and therefore without impact on the consolidated results;
(c) for the 2017 period, not subject to joint audit by the two administrations, upward adjustment for Aqualeuna of Euro 3.7 million and the submission of a request to recognise a decrease in IRES and IRAP assessable income, filed by Aquafil on January 21, 2022. Given the use of past losses of Aqualeuna, the increased taxes for the company for 2013-2017 came to Euro 207 thousand. Aquafil, on January 21, 2022, forwarded to the International Dispute Resolution and Prevention Office of the Large Taxpayers Central Directorate in Rome of the Tax Agency a special Application pursuant to Article 31-quater, paragraph 1, letter c) of Presidential Decree September 29, 1973, No. 600 for the unilateral recognition for IRES and IRAP purposes of the downward adjustment of income against the upward adjustment amounting to Euro 3,733 thousand made in Germany for the stated tax period; the initiation of the procedures provided for in Arbitration Convention No. 90/436/EEC of July 23, 1990, on the elimination of double taxation in the case of adjustments to profits of associated companies. On December 22, 2022, the aforementioned International Dispute Resolution and Prevention Office notified the Company that the mutual agreement procedure pursuant to Article 6 of Arbitration Convention No. 90/436/EEC resulted in an agreement being reached between the competent Italian and German Authorities on the basis of which it was agreed to confirm the adjustments made by the German tax authorities in the amount of Euro 3,733 thousand and to recognise Aquafil the same amount as a corresponding adjustment by the Italian tax authorities.
The German competent authority sent a similar notice to Aqualeuna.
Pag. 118 di 224
Both companies have sent acceptance of the agreement in relation to the year 2017 to their respective competent authorities.
Similarly to 2016, on February 15, 2023 Aquafil S.p.A. submitted, pursuant to Article 3, paragraph 1, of Law No. 99 of March 22, 1993, a refund application for IRES and IRAP purposes to the Provincial Directorate of Trento for Euro 997 thousand (Euro 896 thousand for IRES, Euro 101 thousand for IRAP) and thus awaits the refund authorisation measure.
For tax years 2018 and 2019, not the subject of the aforementioned audits and during which Aqualeuna recognised further tax losses, the German tax administration began another audit in September 2021, requesting that the Italian tax administration launch a joint audit similar to the one conducted for 2016. The German Tax Administration Finanzamt Halle, after analysing the documentation produced by Aqualeuna, made available audit reports No. 1 dated 9/11/2022 and No. 2 dated 16/11/2022. It can be inferred from the reports that Finanzamt Halle intends to: (i) disallow the deductibility for Aqualeuna of the plant renovation and closure expenses incurred by the company in 2018 (approx. Euro 2,301 thousand) and 2019 (approx. Euro 4,000 thousand); (ii) in continuity with the previous audit, apply the mark-up of 1.4% to the total production costs of semi-finished products produced by Aqualeuna for the Company (the correction/recovery would be approx. Euro 162 thousand and approx. Euro 1,077 thousand for 2018 and 2019, respectively). Since it has not yet been concluded (Aqualeuna, in its memorandum submitted on 1/25/2023, has in any case strongly contested these possible findings), it is not possible at this stage to provide an opinion on the outcome of the audits for the 2018 and 2019 tax periods. However, the subsidiary Aqualeuna as a result of the above, has fully released to the income statement the remaining deferred tax assets allocated on tax losses amounting to Euro 1,207 thousand. Moreover, and consistent with that previously expressed in relation to the previous audit, it shall in any case be possible also with reference to these years that Aquafil S.p.A. will initiate, as it did for the 2017 tax period, the procedure set out in Article 31-quater, lett. c) of Presidential Decree No. 600/1973, with the consequence that it will in any case be reasonably certain that, upon the outcome of the relevant procedures, the competent authorities of the two States will take pursuant to Directive 2017/1852 (implemented in Italy by Legislative Decree No. 49 of June 10, 2020) a decision by mutual agreement (guaranteed outcome) aimed at eliminating the double taxation that might arise at Group level . Any upward adjustment in taxable income imposed in Germany by Aqualeuna for its transactions with Aquafil can thus be neutralized by a corresponding opposing adjustment granted to the latter by the AdE.
In view of that outlined, it is considered that there are no additional contingent liabilities on the part of Aqufil S.p.A. and the Aqufil Group to be covered by an allocation to a risk provision.
2) “ACE” tax deduction appeal
On October 24, 2022, the Large Taxpayers Central Directorate responded to the ACE petition filed by the Company on July 5, 2022 with reference to the 2021 tax year, expressing a favourable opinion
Pag. 119 di 224
regarding the request for the disapplication of the anti-avoidance rules set forth in Article 10, paragraphs 2 and 3 (a) and (c) of the new ACE Decree.
3) Settlement notice for registry tax on sale of Aquafil EP S.p.A.
On December 21, 2017, the Trento provincial office of the Italian tax administration issued Aquafil S.p.A. and Domo Chemicals Italy S.r.l. a settlement notice for registration tax, demanding a proportionate tax of 3% on the sale of the share package of Aquafil EP S.p.A. (later becoming Domo Engineering Plastic S.p.A.) on May 31, 2013, in the amount of Euro 1.3 million plus interest of Euro 210 thousand. Domo Chemicals Italy S.r.l. has provided for the payment of 100% of the tax plus interest, to which Aquafil contributed half of the total sum. On September 27, 2021, prior to the hearing, the Trento office notified the companies of the self-protection nullification of the notice and of the decision to refund the amount paid. On January 11, 2022, the Trento Provincial Commission issued notice that the matter was declared closed. The relevant office of the Tax Agency, in May and June 2022, fully reimbursed Aquafil S.p.A. and Domo Chemicals Italy S.r.l. the registration tax of Euro 1,562 thousand, divided equally, plus statutory interest. This tax had been paid by Domo Chemicals Italy S.r.l. on February 16, 2018. The total collection of Aquafil S.p.A. for the tax refund and interest due amounts to Euro 84 thousand.
4) Audit of income tax and IRAP for 2015
In February 2019, the Trento Office of the Italian tax authority launched a general audit of the 2015 tax period for Aquafil S.p.A., which concluded with the notification, on June 14, 2019, of a tax assessment, funnelled into the assessments notified on October 8, 2021, and November 16, 2021, that revealed a number of findings in relation to transfer pricing, without penalties given that the transfer pricing documentation was deemed to be sufficient.
On May 5, 2022, following the submission of an application for an agreed settlement for IRES purposes, while restating the correctness of its conduct and solely in order to avoid a lengthy and exhausting dispute, the Company agreed to settle the IRES assessment notice as follows: IRES settlement Euro 1,568 thousand, higher IRES Euro 431 thousand, sanctions Euro 3 thousand and interest Euro 18 thousand.
On May 27, 2022, following the agreed settlement of higher ICT service revenues also relevant for IRAP purposes, the Company signed the mediation agreement drawn up by the Trento Office based on the same amounts defined for the IRES settlement. The amount settled in mediation was total IRAP recoveries of Euro 954 thousand, higher IRAP Euro 18 thousand, penalties Euro 2 thousand and interest of Euro 4 thousand.
As of the reporting date of the 2022 annual financial statements, therefore, the assessment notices for 2015 have therefore been fully settled.
5) Suspension of VAT refund – 2019 fiscal year
Pag. 120 di 224
On June 22, 2020, the Company filed for a VAT refund in the amount of Euro 488,147 by way of the 2020 tax return (for 2019 income). The reason given was the lower excess credit not transferable for the payment of group VAT (as per Articles 33 and 73 of Italian Presidential Decree 633/1972). On June 17, 2022, the Tax Office, after lengthy investigative and documentary verification activities, notified the Company of the recognition of the 2019 annual VAT credit requested for reimbursement in the amount of Euro 488 thousand, and also in June settled the entire amount, including interest, as required by law.
6) Initiation of audit for direct taxes on 2016, 2017, 2018 and 2019 tax years
On May 11, 2022, the Trento Tax Agency notified the Company of four notices of the initiation of an audit on the 2016, 2017, 2018 and 2019 tax years, with reference to the transfer prices charged by Aquafil to overseas subsidiaries for IT services, in addition to the interest rates applied on loan agreements.
On June 7, 2022, the Company delivered to the Tax Office all the required documentation under the citations.
On August 26, 2022 and August 30, 2022, the Trento Office notified the Company of two citations (IRES and IRAP) issued pursuant to Article 5- ter of Legislative Decree No. 218/1997 for the establishment of a ruling with reference to the 2016 tax period, which includes a potential tax recovery of a total of Euro 1,287 thousand.
On September 15, 2022, the case involving both invited parties began, in which the many aspects that were not agreeable, both in the “an et quantum” (“if and how much”) were highlighted, agreeing to the drafting of a brief filed on October 3, 2022.
On November 22, 2022, while reaffirming the legitimacy of its conduct, and solely in order to avoid long and exhausting litigation, the Company reached an agreed settlement, after submission of the IPEC Application by the consolidating company Aquafin Holding, paying the amount of Euro 16 thousand (IRAP and interest) and Euro 279 thousand (IRES).
To date, with respect to the 2017, 2018 and 2019 tax periods, no findings of the Tax Office have been moved in relation to these audits. At present, therefore, any quantification of contingent liabilities is considered premature, as it is necessary to await the development of the Tax Office's investigative activities for the proper estimation of the findings .
Pag. 121 di 224
11.2 Remuneration of senior management
The remuneration and benefits in favour of members of the Board of Directors and Senior Executives and the compensations due to the members of the Board of Statutory Auditors are presented below:
Director and Statutory Auditor fees (in Euro thousands)
2022
Short-term benefits
4,870
Other long-term employee benefits
50
Total
4,920
Senior Executive fees (in Euro thousands)
2022
Short-term benefits
3,532
Other long-term employee benefits
94
Total
3,626
11.3 Significant events after December 31, 2022
1. With regard to the purchase of treasury shares as approved by the Aquafil S.p.A. shareholders on October 20, 2021, which brought total treasury shares purchased to Euro 8,014,530.59, as detailed above, it should be noted that, in January 2023, Aquafil continued to purchase shares up to a total of 1,278,450 treasury shares held, equal to 2.4961% of the share capital for a total value of Euro 8,612,053.54. The authorisation by shareholders has a validity of 18 months from the date of the related resolution and authorises the purchase, in one or more tranches, of ordinary shares up to a maximum number which, taking account of the ordinary shares which may be held in portfolio by the company and by its subsidiary, does not total more than 3% of share capital. The operation is aimed at enabling the Company to purchase and/or make use of the Company’s ordinary shares for: (i) making investments and limiting anomalous changes in share prices so as to promote regular trading outside of normal fluctuations tied to market trends, while, in any event, observing applicable laws and regulations; and (ii) establishing a securities reserve for future uses in accordance with the strategies that the Company intends to pursue as payment in corporate transactions with other parties or other extraordinary uses.
2. On January 18, 2023 through its subsidiary Aquafil Chile S.p.A., a joint venture was created with Chile Atando Cabos Chile S.p.A. called ACCA S.p.A., with registered office in Santiago, Chile, and share capital of CLP 1 million, with the corporate purpose of acquiring, storing and recycling fishing nets, nautical ropes and other plastic waste.
Pag. 122 di 224
11.4 Disclosure as per Article 1, paragraph 125, of Law No. 124 of August 4, 2017
With regards to that required by Article 1, paragraph 125 of Law 124/17, the Company (and the companies of the Group) recorded in 2022 the following:
i) Euro 94 thousand relating to the sale of the external electricity distribution network produced by the photovoltaic plants;
ii) Euro 93 thousand related to training grants at Aquafil S.p.A. and Euro 18 thousand at Tessilquattro S.p.A., respectively;
iii) Euro 13 thousand relating to De Minimis grants on leases.
in) Euro 7.2 million for the energy and gas tax credit subsidy granted during the year (to Aquafil S.p.A. and Tessilquattro S.p.A.) for electricity-intensive and natural gas-intensive companies that have met the requirements under the regulations (Decree Law No. 4 of 01/27/2022);
v) Euro 0.3 million regarding the year's portion of deferral of tax credits for 4.0 investments, due to the higher investments made starting from the year 2020, eligible for the tax relief provided by Article 1 of Law 232 of December 11, 2016 and subsequent. It should be noted that the recognised credit amounts to Euro 2.6 million and will be used to offset other taxes.
vi) Euro 4.1 million grants received for the U.S. activities, mainly for the recovery of end-of-life carpets;
vii) Euro 0.6 million regarding the portion in the year of the deferral related to the grant recognised by the EU for the "Effective" research project, relating to the parent company Aquafil S.p.A. for Euro 0.3 million and the subsidiary AquafilSlo for Euro 0.3 million.
With regards to any subventions, contributions or other financial benefits received by the Company in 2022 from the Tax Agency, reference should be made to the preceding paragraphs covering the tax items.
Pag. 123 di 224
Attachment 1 - Disclosure pursuant to Article 149 of the Consob Issuer’s Regulation
The following table, drawn up pursuant to Article 149- duodecies of the Consob Issuers’ Regulation, highlights the fees charged in the year 2022 for auditing and non-auditing services rendered by this appointed independent audit firm and by the companies in its network.
Company providing service
Recipient of service
Type of services
Fees 2022
PwC SpA
Aquafil SpA
Audit separate financial statements
139,028
Audit consolidated financial statements
43,775
ESEF accounts audit
30,000
PwC SpA
Italian subsidiary companies
Audit separate financial statements and Group Reporting Package
27,273
PwC (1)
Foreign subsidiaries
Audit separate financial statements and Group Reporting Package
128,410
PwC SpA
Aquafil SpA
Limited Audit of the 2022 consolidated half-year report
31,823
PwC SpA
Italian subsidiary companies
Limited Audit 2022 half-year Group Reporting Package
11,900
PwC (1)
Foreign subsidiaries
Limited Audit 2022 half-year Group Reporting Package
56,312
Total Audit services provided in 2022 to the Aquafil Group by Worldwide Audit firm
468,521
PwC SpA
Aquafil SpA
Limited Audit of Consolidated Non-Financial Report 2022
61,716
PwC SpA
Aquafil SpA
Audit of the statement of the 2021 R&D costs for the purposes of the tax credit Law 145/18
4,800
PwC SpA
Aquafil SpA
Agreed audit procedures required by the EFFECTIVE EU project
7,500
PwC (1)
Foreign subsidiaries
Other assistance services allowed
9,450
Total other audit services provided in 2022 to Aquafil Group by Audit Firm
83,466
PwC (1)
Foreign subsidiaries
Other assistance services allowed
2,000
Total services provided in 2022 to companies of the Aquafil Group by entities belonging to PwC network
2,000
(1) Other companies belonging to the same PwC SpA network
Arco, March 16, 2023
The Chairperson of the Board of Directors The Executive Officer
Pag. 124 di 224
Mr. Giulio Bonazzi Mr. Sergio Calliari
Pag. 125 di 224
Statutory
Financial Statements
2022
Pag. 126 di 224
Pag. 127 di 224
BALANCE SHEET AND FINANCIAL POSITION
(in Euro)
Notes
At December 31, 2022
At December 31, 2021
Intangible assets
7.1
12,705,447
14,269,602
Property, plant & equipment
7.2
37,623,832
37,128,840
Financial assets
7.3
348,114,481
311,828,809
of which parent companies, related parties
40,084,048
3,812,976
Other assets
7.4
303,660
503,660
Deferred tax assets
7.5
2,172,164
2,058,856
Total non-current assets
400,919,583
365,789,767
Inventories
7.6
65,403,742
53,644,502
Trade receivables
7.7
115,824,894
84,123,145
of which parent companies, related parties
115,597,486
79,120,012
Financial assets
7.3
5,012,834
6,200,000
of which parent companies, related parties
950,000
6,200,000
Tax receivables
7.8
2,470
0
Other assets
7.9
7,361,179
6,712,799
of which parent companies, related parties
247,224
3,152,454
Cash and cash equivalents
7.10
52,712,510
79,697,664
Assets held-for-sale
7.11
1,755,493
1,885,944
Total current assets
248,073,121
232,264,055
Total assets
648,992,704
598,053,822
Share capital
7.12
49,722,417
49,722,417
Reserves
7.12
55,026,253
55,215,528
Profit for the year
7.12
15,930,426
11,153,279
Total shareholders’ equity
120,679,096
116,091,225
Employee benefits
7.13
1,804,990
2,176,221
Financial liabilities
7.14
281,537,972
258,357,023
of which parent companies, related parties
10,626,608
10,522,931
Provisions for risks and charges
7.15
1,082,731
819,422
Deferred tax liabilities
7.5
13,013
929,116
Other liabilities
7.16
6,032,549
9,226,450
Total non-current liabilities
290,471,256
271,508,231
Financial liabilities
7.14
75,125,790
62,830,227
of which parent companies, related parties
814,339
673,357
Current tax payables
7.18
73,016
593,102
Trade payables
7.17
146,839,867
133,076,719
of which parent companies, related parties
70,824,101
52,288,648
Other liabilities
7.16
15,803,680
13,954,319
of which parent companies, related parties
2,829,855
1,289,505
Total current liabilities
237,842,353
210,454,367
Total shareholders’ equity & liabilities
648,992,704
598,053,823
Pag. 128 di 224
INCOME STATEMENT
(in Euro)
Notes
2022
of which non- recurring
2021
of which non- recurring
Revenue
8.1
694,343,333
569,834,692
of which related parties
332,084,678
238,480,330
Other revenues and income
8.2
7,099,124
39,298
372,432
28,798
of which related parties
0
0
Total revenues and other revenues and income
701,442,456
39,298
570,207,124
28,798
Cost of raw materials and changes to inventories
8.3
(554,993,034)
0
(462,799,467)
(29,600)
of which related parties
(370,480,079)
(290,792,688)
Service costs and rents, leases and similar costs
8.4
(75,189,985)
(527,595)
(44,907,503)
(447,153)
of which related parties
(2,401,474)
(3,171,282)
Labour costs
8.5
(37,732,601)
(178,933)
(38,085,855)
(393,493)
of which related parties
153,108
172,553
Other costs and operating charges
8.6
(883,657)
(254,674)
(738,548)
(163,855)
of which related parties
(26,000)
(26,000)
Depreciation and amortisation
8.7
(10,710,713)
(10,797,594)
Provisions and write-downs
8.8
(359,777)
(146,502)
(Write-down)/recovery of financial assets (receivables)
Increase in internal work capitalised
8.9
1,412,246
1,647,112
EBIT
22,984,936
(921,905)
14,378,767
(1,005,303)
Investment income/charges
8.10
183,028
6,794,358
of which related parties
182,659
6,794,147
Financial income
8.11
5,219,302
1,056,584
of which related parties
632,636
448,979
Financial charges
8.12
(9,312,339)
(9,983,114)
of which related parties
(2,008,626)
(3,331,910)
Exchange gains/losses
8.13
480,933
401,186
Profit before taxes
19,555,859
(921,905)
12,647,782
(1,005,303)
Income taxes
8.14
(3,625,433)
0
(1,494,502)
Profit for the year
15,930,426
(921,905)
11,153,279
(1,005,303)
COMPREHENSIVE INCOME STATEMENT
(in Euro)
Note
2022
2021
Profit for the year
15,930,426
11,153,279
Actuarial gains/(losses)
(227,999)
(62,776)
Tax effect from actuarial gains and losses
54,720
15,066
Other income items not to be reversed to income statement in subsequent periods
(173,279)
(47,709)
Currency difference from conversion of financial statements in currencies other than the Euro
0
0
Other income items to be reversed to income statement in subsequent periods
0
0
Total comprehensive income
7.12
15,757,147
11,105,570
Pag. 129 di 224
CASH FLOW STATEMENT
(in Euro)
Not e
At December 31, 2022
At December 31, 2021
Operating activities
Profit for the year
15,930,426
11,153,279
Income taxes
8.14
3,625,433
1,494,502
Investment income and charges
8.10
(183,028)
(6,794,358)
of which related parties:
(182,659)
(6,794,147)
Financial income
8.11
(5,219,302)
(1,056,584)
of which related parties:
(632,636)
(448,979)
Financial charges
8.12
9,312,339
9,983,114
of which related parties:
2,008,626
3,331,910
Exchange gains/(losses)
8.13
(480,933)
(401,186)
Asset disposal (gains)/losses
(289,155)
(56,558)
Provisions and write-downs
8.8
359,777
146,502
Amortisation, depreciation and write-downs of tan. assets
8.7
10,710,713
10,797,594
Cash flow from operating activities before working capital changes
33,766,271
25,266,304
Decrease/(Increase) in inventories
7.6
(11,759,239)
(8,109,721)
Increase/(Decrease) in trade payables
7.17
13,763,149
56,733,346
of which related parties:
18,535,453
19,117,359
Decrease/(Increase) in trade receivables
7.7
(62,410,668)
(44,275,345)
of which related parties:
(67,186,393)
(41,749,318)
Changes to assets and liabilities
(5,189,051)
3,210,386
of which related parties:
4,566,662
403,550
Net paid financial charges
(8,598,997)
(8,926,530)
Income taxes paid
(1,132,058)
0
Dividends received
183,028
7,000,000
Utilisation of provisions
(462,698)
(380,392)
Cash flow generated/(absorbed) from operating activities (A)
(41,840,264)
30,518,049
Investing activities
Investments in tangible assets
7.2
(6,811,367)
(5,008,340)
Disposal of tangible assets
7.2
863,247
694,805
Investments in intangible assets
7.1
(2,182,808)
(2,407,493)
Disposal of intangible assets
7.1
132,440
14,400
Investments in financial assets
7.3
(50,000)
(2,159,905)
Disposal of financial assets
7.3
0
211
Cash flow generated by investing activities (B)
(8,048,488)
(8,866,322)
Financing activities
Drawdown non-current bank loans and borrowings
94,000,000
30,000,000
Repayment non-current bank loans and borrowings
(52,285,013)
(122,835,240)
Net changes in current and non-current financial assets and liabilities (including IFRS 16)
(6,072,101)
18,491,547
of which related parties:
(67,494)
20,766,132
Non-monetary increase/decrease IFRS 16
(1,223,456)
(1,650,311)
of which related parties:
(631,831)
(1,152,982)
Dividends distributed
7.12
(6,046,158)
of which related parties:
(3,576,364)
Acquisition of minority interests
Acquisition of treasury shares
(5,469,675)
(2,544,855)
Cash flow from generated/(absorbed) by financing activities (C)
22,903,596
(78,538,859)
Net cash flow in the year (A)+(B)+(C)
(26,985,155)
(56,887,132)
Opening cash and cash equivalents
7.10
79,697,665
136,584,797
Closing cash and cash equivalents
7.10
52,712,510
79,697,665
Pag. 130 di 224
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(in Euro)
Share capital
Legal
reserve
Share premium reserve
Negative reserve for treasury shares in portfolio
Non- distributable reserve for listing costs
FTA Reserve
IAS 19 Reserve
Other reserves
Retained earnings
Net result
Total reserves
Total Shareholders’ Equity
At January 1, 2021
49,722,417
664,471
19,975,348
0
(3,287,529)
(2,156,097)
(307,019)
22,484,182
19,740,699
694,036
57,808,092
107,530,510
Share capital increase
0
0
Allocation of prior- year result
34,702
659,334
(694,036)
0
Distribution dividends
0
Treasury share purchases
(2,544,855)
(2,544,855)
(2,544,855)
Profit for the year
11,153,279
11,153,279
11,153,279
Actuarial gains/(losses) employee benefits
(47,709)
(47,709)
(47,709)
Comprehensive income
0
0
0
0
0
(47,709)
0
0
11,153,279
11,105,570
11,105,570
2021
49,722,417
699,173
19,975,348
(2,544,855)
(3,287,529)
(2,156,097)
(354,728)
22,484,182
20,400,033
11,153,279
66,368,807
116,091,224
Share capital increase
0
0
Allocation of prior- year result
557,664
10,595,615
(15,930,426)
0
Dividends distributed
(6,046,158)
(6,046,158)
(6,046,158)
Treasury share purchases
(5,469,675)
(5,469,675)
(5,469,675)
Profit for the year
15,930,426
15,930,426
15,930,426
Actuarial gains/(losses) employee benefits
173,279
173,279
173,279
Comprehensive income
0
0
0
0
0
173,279
0
0
15,930,426
16,103,705
16,103,705
At December 31, 2022
49,722,417
1,256,837
19,975,348
(8,014,531)
(3,287,529)
(2,156,097)
(181,449)
16,438,024
30,995,648
15,930,426
70,956,679
120,679,097
Pag. 131 di 224
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
1.1 Introduction
Aquafil S.p.A. (“Aquafil”, “Company” or “Parent company” and, together with its subsidiaries, “Group” or “Aquafil Group”) is a joint stock company listed on the Italian Stock Exchange, Euronext STAR Segment since December 4, 2017, resulting from the business combination through merger by incorporation of Aquafil S.p.A. (pre-merger), founded in 1969 in Arco (TN) and renowned for the production and distribution of fibers and polymers, principally polyamide, into Space 3 S.p.A., as an Italian registered Special Purpose Acquisition Company (SPAC), with efficacy from December 4, 2017.
The majority shareholder of Aquafil S.p.A. is Aquafin Holding S.p.A., with registered office in Via Leone XIII No. 14, 20145 Milan, Italy, which however does not exercise management and co-ordination activities. The ultimate parent company, which draws up specific consolidated financial statements, is GB&P S.r.l. with registered office in Via Leone XIII No. 14, 20145 Milan, Italy.
Aquafil produces and sells fibers and polymers, principally polyamide 6, on a global scale through the:
(i) BCF Product Line (carpet fibers), or synthetic yarns mainly intended for the textile flooring sector and used in “contract” segments (hotels, airports, offices, etc.), residential buildings and the automotive market;
(ii) NTF Product Line (clothing fibers), or synthetic yarns mainly intended for the clothing sector (sportswear, classic, technical or specialist apparel);
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(iii) Polymers Product Line, or plastic raw materials, mainly targeting the engineering plastics sector for subsequent use in the moulding industry.
The Company’s products are also sold on the market under the ECONYL® brand, which offers the Company’s products obtained by regenerating industrial waste and end-of-life products.
The Company enjoys a consolidated presence in Europe, the United States and Asia.
1.2 Financial Statement Presentation
These financial statements were prepared for the year ended December 31, 2022, in accordance with EU Regulation 809/2004, in compliance with International Financial Reporting Standards, issued by the International Accounting Standards Board and endorsed by the European Union (IFRS).
The Financial Statements were approved by the Board of Directors of the company on March 16, 2023, and audited by PricewaterhouseCoopers S.p.A., statutory auditors of the company.
1.3 Non-Financial Report
Aquafil S.p.A., as an Entity of Significant Public Interest (“EIPR”) and the parent company of the Aquafil Group, prepares and presents, from financial year 2017, the “Consolidated Non-Financial Report”, as per Article 5 “Placement of the report and communication” as per Legislative Decree 254/2016 concerning the communication of non-financial and diversity disclosure by certain large enterprises and groups. Therefore, Aquafil, as per Article 6 exemptions and special cases, is not subject to the obligation to prepare an individual non-financial report relating to only the separate financial statements.
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2. ACCOUNTING POLICIES AND MEASUREMENT CRITERIA
The main accounting policies adopted in the preparation of the Separate Financial Statements are reported below. These accounting policies were applied in line with the year 2021 presented for comparative purposes and those applied at December 31, 2022.
2.1 Basis of preparation
As previously indicated, these financial statements were prepared in accordance with IFRS, i.e. all “International Financial Reporting Standards”, all “International Accounting Standards” (“IAS”), all interpretations of the International Reporting Interpretations Committee (“IFRIC”), previously called the Standards Interpretations Committee (“SIC”) which, at the approval date of the Financial Statements, were endorsed by the European Union pursuant to EU Regulation No. 1606/2002 of the European Parliament and European Council of July 19, 2002.
These financial statements were prepared:
• on the basis of extensive knowledge on the IFRS and taking into account best practice; any further orientations and interpretative updates will be reflected in subsequent years, in accordance with the provisions of the accounting standards;
• on a going-concern basis of the company, as the directors verified the absence of financial, operating or other indicators which may suggest difficulties with regards to the company’s capacity to meet its obligations in the foreseeable future and in particular in the next 12 months.
• under the historical cost convention, except for the measurement of financial assets and liabilities where the obligatory application of the fair value criterion is required.
2.2 Form and content of the financial statements
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The financial statements of Aquafil S.p.A. have been prepared in euro. The financial statements and the relative classification criteria adopted by the company, within the options permitted by IAS 1 “Presentation of financial statements” (“IAS 1”) are illustrated below:
• the balance sheet is presented with separation between “current and non-current” assets and liabilities;
• the income statement was prepared separately from the comprehensive income statement, and was prepared classifying operating costs by expense type;
• the comprehensive income statement which includes, in addition to the result for the period, also the changes to equity relating to income items which, in accordance with International Accounting Standards, are recognised under equity;
• the cash flow statement prepared in accordance with the “indirect method”.
The financial statements utilised are those which best represent the result, equity and financial position of the company.
Subsidiaries
A party controls an entity when it is: (i) exposed, or has the right to participate, in the relative variable economic returns and (ii) able to exercise its decisional power on the activities relating to the entity in order to influence these returns. The existence of control is verified where events or circumstances indicate an alteration to one of the above-mentioned factors determining control. The year-end of the subsidiary companies coincides with that of Aquafil S.p.A..
Associated Companies
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Associated companies are companies in which the Company has a significant influence, which is presumed to exist when the percentage held is between 20% and 50% of the voting rights.
Business combinations
The company did not undertake in the year any business combinations as defined by IFRS 3.
Impairment test
The impairment test assesses whether there exist any indications that an asset may have incurred a reduction in value. For indefinite useful life intangible assets an assessment should be made at least annually that their recoverable value is at least equal to the book value and, when considered necessary, or rather in the presence of trigger events (IAS 36 paragraph 9), the impairment test must be undertaken more frequently.
In assessing the recoverable value of its property, plant and equipment, investment property and intangible assets, the Group generally applies the criterion of the value in use, where required, i.e. the presence of trigger events.
The value in use is the present value of the expected future cash flows to be derived from an asset. In defining the value in use, the expected future cash flows are discounted utilising a pre-tax rate that reflects the current market assessment of the time value of money, and the specific risks of the asset.
The estimated future cash flows utilised to determine the value in use is based on the most recent business plans, approved by management and containing forecasts for volumes, revenues, operating costs and investments.
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These forecasts cover the period of the next three years; consequently, the cash flows relating to the subsequent years are determined on the basis of a growth rate which does not exceed the average growth rate for the sector and the country.
Where the book value of an asset is higher that its recoverable value a loss in value is recognised which is recorded in the income statement under “Amortisation, depreciation and write-downs”.
When the reasons for the write-down no longer exist, the carrying value of the asset is restated through the income statement, in the account “Amortisation, depreciation & write-downs”, up to the value at which the asset would be recorded if no write-down had taken place and amortisation or depreciation had been recorded.
Translation of accounts in foreign currencies
Transactions in currencies other than the Euro are recognised at the exchange rate at the date of the transaction. Assets and liabilities denominated in currencies other than the euro are subsequently adjusted to the exchange rate at the reporting date. Exchange differences are recognised to the income statement under “Exchange gains and losses”.
Non-monetary assets and liabilities denominated in currencies other than the euro are recorded at historical cost, utilising the exchange rate on the initial recording of the transaction.
The primary exchange rates adopted for the translation of the monetary assets and liabilities in foreign currencies with the euro are shown in the table below:
December 2022
December 2021
Period-end
rate
Average
rate
Period-end
rate
Average
rate
US Dollar
1.07
1.05
1.13
1.18
Croatian Kuna
7.54
7.53
7.52
7.53
Chinese Yuan
7.36
7.08
7.19
7.63
Turkish Lira
19.96
17.41
15.23
10.51
Baht
36.84
36.86
37.65
37.84
UK Sterling
0.89
0.85
0.84
0.86
Australian Dollar
1.57
1.52
1.56
1.57
Japanese Yen
140.66
138.03
130.38
129.88
Chilean Peso
913.82
917.86
Pag. 137 di 224
2.3 Accounting standards
The most significant accounting policies adopted in the preparation of the Financial Statements are reported below.
Classifications of current and non-current assets and liabilities
The company classifies an asset as current when:
• it is held for sale or consumption, in the normal operating cycle;
• it is principally held for trading;
• it is expected to be realised within 12 months from the reporting date; or
• it comprises cash or cash equivalents whose use is not restricted or restrictions such as to impede its use for at least 12 months from the reporting date.
All assets that do not meet the conditions listed above are classified as non-current.
The Company classifies a liability as current when:
• it is expected to be settled within the normal operating cycle;
• it is principally held for trading;
• it must be settled within twelve months of year-end; or
• the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
All the liabilities which do not satisfy the above-mentioned conditions are classified as non-current.
Intangible assets
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An intangible asset is an asset without physical substance, identifiable and capable of generating future economic benefits. The requisite of identifiability is normally met when an intangible asset is:
• attributable to a legal or contractual right; or
• separable, that is, it can be sold, transferred, leased or exchanged independently.
Control over an intangible asset consists of the right to take advantage of future economic benefits arising from the asset and the possibility of limiting its access to others.
Intangible assets are initially recognised at purchase and/or production cost, including the costs of bringing the asset to its current use. All other subsequent costs are expensed in the income statement in the year incurred. Research expenses are recorded as costs when incurred.
An intangible asset, generated during a project’s development phase, which complies with the definition of development on the basis of IAS 38, is recognised as an asset if:
• the cost can be measured reliably;
• the product/process is technically feasible;
• it is likely that the company will obtain the future economic benefits that are attributable to the asset developed, and
• where the company intends to complete the project’s development and has sufficient resources to do so.
Intangible assets with definite useful lives
Intangible assets with definite useful lives are recognised as cost, as previously described, net of accumulated amortisation and any impairment.
Pag. 139 di 224
Amortisation begins when the asset is available for use and is recognised on a straight-line basis in relation to the residual possibility of use and thus over the estimated useful life of the asset; for the amount to be amortised and its recoverability the criteria to be utilised is that outlined, respectively, in the paragraphs “Property, plant and equipment” and “Impairment of property, plant and equipment and intangible assets”.
The estimated useful life of the various categories of intangible assets is as follows:
Estimated useful life
Concessions, licences & trademarks
10 years
Development costs
5 years
Industrial patents & intellectual property rights
10 years
Other intangible assets
Duration of contract
Property, plant & equipment
Property, plant and equipment are measured at purchase or production cost, net of accumulated depreciation and any impairments. The purchase or production cost includes charges directly incurred for bringing the asset to their condition for use, as well as dismantling and removal charges which will be incurred consequent of contractual obligations, which require the asset to be returned to its original condition. The financial charges directly attributable to the acquisition, incorporation or production of property, plant and equipment whose realisation requires timeframes above one year, are capitalised and depreciated based on the useful life of the asset to which they refer.
The expenses incurred for the maintenance and repairs of an ordinary nature are charged to the income statement when they are incurred. The capitalisation of costs relative to the expansion, modernisation or improvement of the structural elements whether owned or leased, is solely made within the limits established to be separately classified as assets or part of an asset. The assets recorded in relation to leasehold improvements are amortised based on the duration of the rental contract, or on the basis of the specific useful life of the asset, if lower.
Depreciation is charged on a straight-line basis, which depreciates the asset over its economic/technical useful life. Applying the principle of the component approach, when the asset to be depreciated is
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composed of separately identifiable elements whose useful life differs significantly from the other parts of the asset, the depreciation is calculated separately for each part of the asset.
The estimated useful life of the main categories of property, plant and equipment is as follows:
Estimated useful life
Buildings and light constructions
10 - 17 - 33 years
General plant and machinery
7 - 8 - 10 - 13 years
Industrial and commercial equipment
2 - 4 - 8 years
Other assets
4 - 5 - 8 years
Right-of-Use
Duration of contract
Land, including that adjacent to production facilities, is not depreciated. The useful life of property, plant and equipment is reviewed and updated, where necessary, at least at the end of each year.
A tangible fixed asset is eliminated from the financial statements when the asset is sold or when no expected economic benefits exist from its use or disposal. Any gains or losses (calculated as the difference between net income from sales and the net book value of the asset sold) are recognised in the income statement in the year of disposal.
Leased assets
International Accounting Standard IFRS 16 identifies the principles for the recognition, measurement and presentation in the financial statements of leasing contracts, as well as enhancing the relative disclosure requirements.
Specifically, IFRS 16 defines leasing as a contract which assigns to the client (lessee) the right-of-use of an asset for a set period of time in exchange for consideration, without distinguishing finance leases from operating leases such as rental and hire.
The definition of a contractual agreement as a lease transaction (or containing a lease transaction) is based on the substance of the agreement and requires an assessment of whether fulfilment of the agreement depends on the use of one or more specific assets and if the agreement transfers the right to use them.
Companies that operate as lessee therefore recognise in their financial statements, at the effective date of the lease, an asset representing the right to use of the asset (defined as the “Right-of-Use”) and a
Pag. 141 di 224
liability, attributable to the obligation to make the payments provided for in the contract. The lessee should subsequently recognise the interest concerning the lease liability separate from the depreciation of the right-of-use assets. IFRS 16 also requires lessees to restate the amounts of the lease liability on the occurrence of certain events (e.g. a change to the duration of the lease, a change to the value of the future payments due to a change in an index or rate utilised to determine these payments). In general, the restatement of the amount of the lease liability implies an adjustment also to the right-of-use asset.
Differing from that required for lessees, for the purposes of the preparation of the financial statements of lessors (the lessor), the new International Accounting Standard maintains the distinction between operating and finance leases as per IAS 17.
Impairment of intangible and tangible assets
Intangible and tangible assets with definite useful life
A verification is carried out at each reporting date to establish whether there are indicators that tangible and intangible assets may have suffered an impairment. To this end, both internal and external sources of information are considered. With regard to the former (internal sources), obsolescence or the asset’s physical deterioration and any significant changes in the asset’s use and the asset’s economic performance in comparison to projections are taken into consideration. As regards external sources, the trend in the assets’ market prices, any technological, market or regulatory discontinuities, the trend in market rate interest rates or the cost of capital used to evaluate investments are considered.
Where these indicators exist, an estimate of the recoverable value of the above-mentioned assets is made, recording any write-down compared to the relative book value in the income statement. The recoverable value of an asset is the higher between the fair value, less costs to sell, and its value in use, determined discounting the estimated future cash flows for this asset, including, where significant and reasonably determinable, those deriving from the sale at the end of the relative useful life, net of any transaction costs. In defining the value in use, the expected future cash flows are discounted utilising a pre-tax rate that reflects the current market assessment of the time value of money, and the specific risks of the asset. For an asset that does not generate independent cash flows, the recoverable value is determined in relation to the cash-generating unit to which the asset belongs.
Pag. 142 di 224
A loss in value is recognised in the income statement when the carrying value of the asset, or of the relative CGU to which it is allocated, is higher than its recoverable value. The loss in value of CGU`s are firstly attributed to the reduction in the carrying value of any goodwill allocated and, thereafter, to a reduction of other assets, in proportion to their carrying value and in the limit of the relative recoverable value. When the reasons for the write-down no longer exist, the book value of the asset is restated through the income statement, up to the value at which the asset would be recorded if no write-down had taken place and amortisation or depreciation had been recorded.
Equity investments
In subsidiaries:
Investments in subsidiaries are recorded at acquisition or subscription cost.
Where there is an indication of a loss in value, the recoverability of the recognition value is verified through a comparison between the carrying amount and the higher between the value in use, determined discounting the future cash flows of the investment and, where possible, the hypothetical sales value determined based on recent transactions or market multiples.
The share of the loss exceeding the carrying amount is recorded in a specific provision for the amount that the company considers there exists legal or implied obligations to cover the losses or in any case within the limits of the book net equity. Where there is a subsequent improvement in the performance of the investee subject to the write-down such as to consider the reasons for the impairment no longer existing, the investments are revalued within the limits of the write-downs recognised in previous years. The dividends from subsidiaries are recorded in the income statement in the year in which they are approved.
In associates:
Associated companies are companies in which the Company has a significant influence, which is presumed to exist when the percentage held is between 20% and 50% of the voting rights. Associated
Pag. 143 di 224
companies are measured under the equity method and are initially recorded at cost. The equity method is as described below:
• the book value of these investments is aligned to the net equity of the company adjusted, where necessary, to reflect the application of IFRS and includes the recognition of the higher value attributed to the assets and liabilities and to any goodwill, identified on acquisition; in line with a similar process to that previously described for business combinations;
• the profits and losses pertaining to the Company are recognised when the significant influence begins and until the significant influence ceases to exist. In the case where, due to losses, the company valued under this method indicates a negative net equity, the carrying value of the investment is written down and any excess pertaining to the Company, where this latter is committed to comply with legal or implicit obligations of the investee, or in any case to cover the losses, is recorded in a specific provision; the equity changes of the companies valued under the equity method, not recorded through the income statement, are recorded directly in the comprehensive income statement;
• the gains and losses not realised, generated on transactions between the Company/Subsidiaries and investments measured under the equity method are eliminated based on the share pertaining to the investee, except for losses, when they represent a reduction in value of the underlying asset, and dividends which are fully eliminated.
When there is objective evidence of an impairment, the recovery is verified comparing the carrying value with the relative recoverable value adopting the criteria indicated in the paragraph “Impairments of tangible and intangible assets”. When the reasons for the impairment no longer exist, the investments are revalued within the limits of the write-downs, with effects recognised to the income statement.
The transfer of shareholdings resulting in the loss of joint control or significant influence over the investee company determines the recognition in the comprehensive income statement:
• of any gain/loss calculated as the difference between the amount received and the corresponding fraction of the carrying amount transferred;
• of the effect of the remeasurement of any residual investment in line with the relative fair value;
• of any values recorded under other comprehensive items related to the investee for which reclassification to the comprehensive income statement is envisaged.
Pag. 144 di 224
The value of any equity investment aligned to its fair value at the date of the loss of joint control or significant influence, represents the new carrying amount and, therefore, the reference value for the subsequent valuation according to the applicable valuation criteria.
Once an equity investment, or a share of this equity, measured under the equity method is classified as held for sale in so far as it meets the criteria for such classification, the equity investment or share of equity, is no longer measured under the equity method.
Securities other than equity investments
Securities other than equity investments, included under “Financial assets”, are held in portfolio until maturity. They are recognised at acquisition cost (with reference to the “trading date”) including transaction costs.
Loans, receivables and financial assets held-to-maturity
The financial assets are measured based on IFRS 9.
Company assesses at each reporting date whether a financial asset or a group of financial assets have incurred a loss in value.
Impairments of financial assets
At the reporting date, all the financial assets, other than those measured at fair value through the comprehensive income statement, are analysed in order to verify whether there is evidence of a loss in
Pag. 145 di 224
value. An impairment loss is recognised if, and only if, this evidence exists as a result of one or more events that have an impact on the asset’s expected future cash flows, occurring after its initial recognition.
In the valuation account is also taken of future economic conditions.
For financial assets accounted for through the amortised cost criterion, when a loss in value has been identified, its value is measured as the difference between the asset’s carrying amount and the present value of expected future cash flows, discounted on the basis of the original effective interest rate. This value is recognised in the income statement under the item "Provisions and write-downs". When, in subsequent periods, the reasons for the write-down no longer exist, the value of the financial assets are restated up to the value deriving from the application of the amortised cost criterion.
Inventories
Inventories are recorded at the lower of purchase or production cost and realisable value represented by the amount that the Company expects to obtain from their sale in the normal course of operations of the assets, net of accessory costs. The cost of inventories is calculated using the weighted average cost method. The value of finished or semi-finished product inventories includes direct or indirect processing costs. To determine the weighted average cost of production or processing, the Company considers the weighted average cost of the raw material and the direct and indirect production costs, generally taken as a percentage of direct costs.
The value of inventories was recorded net of any impairment provisions.
Trade and other receivables (current and non-current)
Trade receivables and other current and non-current receivable are considered financial instruments, principally relating to customer receivables, non-derivative, not listed on an active market, from which fixed or determinable payments are expected. Trade receivables and other receivables are classified in the balance sheet under current assets, except for amounts due beyond 12 months from the reporting date, which are classified as non-current. These financial assets are recorded in the balance sheet when
Pag. 146 di 224
the company becomes part of the related contracts and are derecognised when the right to receive the cash flow is transferred together with all the risks and benefits associated with the asset sold.
Trade and other current and non-current receivables are initially recorded at their fair value, and subsequently with the amortised cost method using the effective interest rate, reduced for any impairment.
Impairments on receivables are recognised in the income statement when there is objective evidence that the Company will not be able to recover the credit on the basis of contractual conditions.
The write-down amount is measured as the difference between the asset’s carrying amount and the present value of expected future cash flows.
The value of receivables is shown in the balance sheet net of the corresponding doubtful debt provision.
Cash and cash equivalents
Cash and cash equivalents include cash, on-demand deposits and financial assets with an original maturity of three months or less, readily convertible into cash and subject to an insignificant risk of changes in value. The items included in cash and cash equivalents are measured at fair value and the relative changes are recorded in the income statement.
Employee benefits
For the defined benefit plans, which include post-employment benefit provisions due to employees pursuant to Article 2120 of the Italian Civil Code, the amount to be paid to employees is quantifiable only after the termination of the employment service period, and is related to one or more factors such as age, years of service and remuneration. Therefore, the relative charge is recorded in the income statement based on actuarial calculations. The liability recorded in the accounts for defined benefit plans corresponds to the present value of the obligation at the reporting date. The obligations for the defined benefit plans are determined annually by an independent actuary utilising the projected unit credit method. The present value of the defined benefit plan is determined discounting the future cash flows at
Pag. 147 di 224
an interest rate equal to the obligations (high-quality corporate) issued in euro and takes into account the duration of the relative pension plan. The actuarial gains and losses deriving from these adjustments and the changes in the actuarial assumptions are recognised in the comprehensive income statement.
From January 1, 2007, the Finance Act and relative decrees enacted introduced important amendments in relation to post-employment benefits, among which was the choice given to the employee to determine where the benefit matured in the period is invested. In particular, the new post-employment benefits can be utilised by the employee for their own chosen pension scheme or they may choose to leave the amount in the company. In the case of allocation to external pension funds, the Company is only liable to pay a defined contribution to the selected fund and as from that date, the newly matured portion are in the nature of defined contribution plans and are therefore not subject to actuarial valuation.
Trade and other payables (current and non-current)
Financial liabilities (with the exclusion of derivative financial instruments) relate to trade and other payables and are initially recorded at fair value, net of directly allocated accessory costs. After initial recognition, they are measured at amortised cost, recording any differences between cost and repayment amount in the income statement over the duration of the liability, in accordance with the effective interest rate method. When there is a change in the expected cash flows, the value of the liabilities is recalculated to reflect this change, based on the new present value of the expected cash flows and on the effective internal rate initially determined.
Elimination of financial assets and liabilities
Financial assets (or, where applicable, part of a financial asset or part of a group of similar financial assets) are derecognised from the financial statements when:
• the right to receive the financial flows of the asset terminate;
• the company retains the contractual right to receive the cash flows from the asset, but assumes a contractual obligation to pay the cash flows fully and without delay to a third party;
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• the company has transferred its right to receive cash flows from the asset and (a) has transferred substantially all of the risks and rewards of ownership of the financial asset or (b) has not transferred or retained substantially all of the risks and rewards of the asset, but has transferred control over same.
A financial liability is derecognised from the financial statements when the underlying liability is settled, cancelled or fulfilled.
Derivative financial instruments
Derivative financial instruments are only used by Aquafil for the hedging of financial risks related to interest rate fluctuations on bank debt.
A derivative is a financial instrument or other contract:
• whose value changes in response to changes in an underlying defined parameter such as the interest rate, the price of a security or commodity, foreign currency exchange rate, the index of prices or rates, credit rating or another variable;
• that requires a zero initial net investment, or lower than what would be required for contracts with a similar response to changes in market conditions;
• which is settled at a future date.
The financial instruments are undertaken to hedge against the interest rate risk. In accordance with IAS 39, which remains applicable optionally with respect to IFRS 9 in the case of the hedging of interest rate exposure, derivative financial instruments are accounted for in accordance with the procedures established for hedge accounting only when:
• the hedging instrument is formally designated and documented at the start of hedging;
• the hedge is expected to be highly effective;
• such efficacy can be reliably measured;
• the hedge is highly effective during the various accounting periods for which it is designated.
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It should be noted that the derivative instruments currently in place (IRS - Interest Rate Swaps), although subscribed for hedging purposes with regard to changes in interest rates, have been treated, for accounting purposes and consistently with the past, as non-hedging instruments (and therefore the relative fair value is recognised in the income statement), as it is very complex to prepare the mandatory hedging relationship.
Measurement of the fair value of financial instruments
The fair value measurement of the financial instruments is undertaken applying IFRS 13 “Fair value measurement” (IFRS 13). Fair value concerns the price that will be received for the sale of an asset or which will be paid for the transfer of a liability in an ordinary transaction settled between market operators, at the measurement date.
Fair value measurement is based on the assumption that the sale of the asset or transfer of the liability is undertaken on the principal market, or rather the market in which the largest volume and levels of transaction take place for the asset or liability. In the absence of a principal market, it is assumed that the transaction takes place on the most advantageous market to which the company has access, or rather the market which would maximise the results of the sales transaction of the asset or minimise the amount to be paid for the transfer of the liability.
The fair value of an asset or of a liability is determined considering the assumptions which the market participants would use to define the price of the asset or of the liability, under the presumption that they act in accordance with their best economic interests. Market participants are independent knowledgeable acquirers or sellers able to enter into a transaction for the asset or the liability and motivated but not obliged or coerced into making the transaction.
In the fair value measurement, the company takes into account the specific characteristics of the asset or the liability, in particular, for the non-financial assets, the capacity of a market operator to generate economic benefits utilising the asset to its maximum and best use or by selling to another market operator that would utilise the asset to its maximum or best use. The fair value measurement of assets and liabilities utilises appropriate techniques for the circumstances and for which sufficient data is available, maximising the use of observable inputs.
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IFRS 13 identifies the following fair value hierarchy which reflect the importance of the inputs used in the relative measurement:
• level 1 Quoted Price (active market): data used in valuations are represented by prices quoted on markets in which identical assets and liabilities are traded with those being valued;
• level 2 Use of Observable Market Parameters (for example, for derivatives, the exchange rates recorded by the Bank of Italy, market interest rate curves, volatility provided by qualified providers, credit spreads calculated on the basis of CDS’, etc.) other than level 1 quoted prices;
• level 3 Use of Non-Observable Market Parameters (internal assumptions, for example, financial flows, risk-adjusted spreads, etc.).
Warrants
The company has issued warrants, that is, financial instruments that give the holder the right to purchase (call warrants) a determined quantity of ordinary shares (underlying) at a predefined price (strike-price) within a set deadline. Two types of warrants are issued: "Market Warrants" which were also listed, and non-listed "Sponsor Warrants". Listed "Market warrants" were cancelled in the year as having expired.
These financial instruments can have different terms and characteristics and, on the basis of these, can be alternatively considered as: (i) a financial liability that must therefore be measured at fair value at the time of issue and any subsequent variation recorded directly in the income statement, or as (ii) an equity instrument and therefore classified in a specific equity reserve from which they will be released only at the time they are exercised or on their maturity as indicated by IAS 32.
Warrants issued by the company have the characteristics to be considered as equity instruments since both instruments contain a pre-set execution value (defined as the "fixed for fixed criteria").
Specifically for the Sponsor warrants, an exchange between equity instruments and cash at an already pre-determined value is provided in case of execution. Information on these instruments is available in the paragraph on shareholders’ equity.
Provisions for risks and charges
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Provisions for risks and charges relate to costs and charges of a defined nature and of certain or probable existence whose amount or date of occurrence are uncertain at the reporting date. Accruals to provisions are recorded when:
• the existence of a present obligation, legal or implicit, deriving from a past event is probable;
• it is probable that compliance with the obligation will result in a charge;
• the amount of the obligation can be estimated reliably.
Provisions are recorded at the value representing the best estimate of the amount that the entity would reasonably pay to discharge the obligation or to transfer it to a third party at the reporting date. When the financial effect of the passing of time is significant and the payment dates of the obligations can be reliably estimated, the provision is determined by discounting the expected cash flows taking into account the risks associated with the obligation; the increase of the provision due to the passing of time is recorded in the income statement in the account “Financial charges”.
The provisions are periodically updated to reflect the changes in the estimate of the costs, of the time period and of the discounting rate; the revision of estimates is recorded in the same income statement accounts in which the provision was recorded.
Revenues and costs
Revenues from the sale of goods and services as well as the purchase costs of goods and services are recognised on the transfer of the risks and rewards connected to the ownership or completion of the service.
Revenues are shown net of discounts, allowances and returns; they are recorded at fair value to the extent in which it is possible to reliably determine such value and the likelihood that the relative economic benefits will be enjoyed.
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Revenues are recognised in accordance with IFRS 15 and therefore as per the following 5 steps:
6) identification of the contract with the customer. The standard contains specific provisions to assess whether two or more contracts should be combined and to identify the accounting implications of any contractual amendments;
7) identification of the contractual obligations contained in the contract;
8) calculation of the transaction price, which should be made taking into consideration, among others, the following elements: any amounts paid on behalf of third parties, which must be excluded from the consideration, variable price components (such as performance bonuses, penalties, discounts, reimbursements, incentives, etc...) and any financial component, present where the payment terms granted to the customer contain a significant extension period;
9) allocation of the transaction price to the contractual obligations, on the basis of the stand-alone sales price of each good or service; separately;
10) recognition of the revenue, when (or if) each contractual obligation is satisfied through the transfer of the goods or service, which occurs when the customer obtains the control and therefore has the capacity to decide upon and/or control its use and substantially obtain all the benefits. Control may be transferred at a specific point in time or over time.
The analysis undertaken indicated that the obligations arising for the Parent Company to its clients mainly concern the production and supply of finished products according to the terms and conditions requested, and in particular:
• payment deadlines are on average between in line with generally applied market averages. “Cash discounts” are contractually granted in the case of early settlement and were recognised as a direct reduction in revenues. No payment deferments are granted which could be considered as qualifying as a loan;
• the finished product is sold without the granting of warranty periods and/or without return and/or suspension of ownership clauses. Any returns and reimbursements are agreed among the parties on a case by case basis following critical analysis of the reasons which may have resulted in any non-compliance issues.
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It is therefore considered that:
(iv) the moment of transfer of control to clients of their products coincides with the transfer of the associated risks and benefits, as contractually defined by the delivery terms applied and which are in line with those generally accepted within the sector;
(v) the consideration does not include any financial component, with the exception of the cash discounts which are recognised as a reduction in revenues, while the component of the transport service and insurance (applicable only with specific delivery terms) is however completed in the same period as the transfer of control of the goods and therefore accrues to the same period;
(vi) no contractual obligations are in place which suspend the transfer of control of the goods and therefore only the returns/reimbursements that may be agreed (concerning the goods sold in the year) may be recognised as a reduction of the relative revenues.
Financial income and charges
Financial income and charges are recognized in the income statement in the period in which they are earned or incurred according to IFRS 9.
Dividends
Dividends received are recognised when (i) shareholders become entitled to receive the payment, which coincides with the date of the investee company’s shareholders’ meeting approving distribution, (ii) it is probable that the economic benefits associated with the dividend will flow to the entity and (iii) the amount of the dividend can be measured reliably.
The distribution of dividends to Aquafil S.p.A.’s shareholders is represented as a movement of shareholders’ equity and recorded as a liability in the financial year in which this distribution is approved by the Shareholders’ Meeting.
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Income taxes
Current taxes are determined on the basis of estimated taxable income, in compliance with tax regulations applicable to companies and are recorded in the income statement under the item "Income taxes for the year", with the exception of those relating to items directly debited or credited to a shareholders’ equity reserve; in such cases, the relative tax effect is directly recognised in the respective shareholders’ equity reserves. The income statement shows the amount of income taxes for each item included in the "other components of the consolidated comprehensive income statement".
Deferred tax assets and liabilities are calculated in accordance with the balance sheet liability method. Deferred taxes are calculated on temporary differences between the values recorded in the financial statements and the corresponding values recognised for tax purposes. The deferred tax assets, including those relating to any tax losses carried forward, are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. Tax assets and liabilities are offset, separately for current taxes and for deferred taxes, when the income tax is applied by the same fiscal authority, there is a legal right of compensation and the payment of the net balance is expected. Deferred tax assets and liabilities are calculated utilising the tax rates which are expected to be applied in the years when the temporary differences will be realised or settled, taking into account current tax regulations or substantially in force at the reporting date. Other taxes not related to income, such as indirect taxes and duties are included under “Other operating costs and charges”.
From the year 2018 Aquafil S.p.A. was included in the tax consolidation regime with the parent company Aquafin Holding S.p.A., interrupted in 2017 due to the merger by incorporation of Aquafil S.p.A. into Space 3 S.p.A.. The tax consolidation regime is also confirmed for the year 2022.
In addition, it should be noted that Article 12 of Legislative Decree No. 142 of 29/11/2018 defined the concept of "non-financial holding companies” ("Industrial Holdings"), for which, "the prevalent exercise of acquiring investments in parties other than financial intermediaries exists when, based on the figures of the last approved year-end financial statements, the total amount of investments in these parties and other equity elements undertaken between them, considered as a whole, is higher than 50 per cent of the total assets on the balance sheet", with effect from the year 2018.
Due to this amendment by Legislative Decree 142/2018, therefore, as of the year 2018, previously excluded companies fall under “Industrial Holding" and particularly those which have holdings but whose financial income predominantly comprises revenues from industrial activity.
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The company which qualifies as an "Industrial Holding" must calculate the Irap taxable base in accordance with Article 6, paragraph 9 of the Irap Decree, that is, by adding to the normally determinable taxable base, 100% of the interest income and other financial income and subtracting 96% of the interest expense and similar charges; in addition, the increased rate envisaged for banks and other financial institutions must be applied to the value of production relevant for IRAP purposes. It should be noted that also for 2022, the IRAP rate for the industrial holding companies in the province of Trento, applicable to non-financial holding companies and similar entities pursuant to paragraph 9 of Article 6 of Legislative Decree No. 446/97 is 4.65%, and the benefits normally granted to industrial companies are not applied.
Assets and liabilities available for sale and discontinued operations
Non-current assets and current assets and non-current assets of discontinued operations are classified as held-for-sale where their book value will principally be recovered through sale. This condition exists when the sale is highly probable and the asset or discontinued operation is available for an immediate sale in its current conditions. Non-current assets held-for-sale, current assets and non-current assets of discontinued operations and the liabilities directly related to them are recorded separately to company assets and liabilities in the balance sheet.
Non-current assets held-for-sale are not depreciated and are valued at the lower of the subscription value and their fair value, less selling costs.
Any difference between the book value and the Fair Value less selling costs is recorded in the income statement as a write-down; any subsequent recoveries in value are recognised for the amount of the write- downs previously recorded, including those recognised before the definition of the asset as held-for-sale.
Non-current assets and current and non-current assets of disposal groups classified as held-for-sale constitute discontinued operations if, alternatively:
• they represent a significant autonomous branch of activity or a significant geographical area of activity; or
• is part of a disposal programme of an important independent activity or geographical area of activity;
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• are a subsidiary acquired exclusively for the purpose of sale.
The results of discontinued operations, as well as any capital gain/loss realised following disposal, are shown separately in the income statement under a specific account, net of the related tax effects; the income statement values of discontinued operations are also presented for the comparative years.
If there is a plan to sell a subsidiary that results in the loss of control, all the assets and liabilities of that subsidiary are classified as held-for-sale.
At December 31, 2022, Aquafil SpA did not have any assets or liabilities held for sale or discontinued operations.
Use of accounting estimates
The preparation of the financial statements requires the directors to apply accounting principles and methods that, in some circumstances, are founded on difficult and subjective valuations and estimates, based on historical experience and assumptions which are from time to time considered reasonable and realistic under the relative circumstances. The application of these estimates and assumptions impact upon the amounts reported in the financial statements, the balance sheet, the income statement, the comprehensive income statement, the cash flow statement, the statement of changes to shareholders’ equity and the notes to the accounts. The final outcome of the accounts in the financial statements which use the above-mentioned estimates and assumptions may differ, even significantly from those reported in the financial statements due to the uncertainty which characterises the assumptions and the conditions upon which the estimates are based.
Numerous items in the financial statements are subject to estimates and while not all of these accounts are individually significant, they are significant on an overall basis.
The accounting policies which require greater subjectivity by the directors in the preparation of the estimates and for which a change in the underlying conditions or the assumptions may have a significant impact on the financial results of the Company are briefly described below.
Impairments
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The tangible and intangible assets with definite useful lives are verified to ascertain if there has been a loss in value, which is recorded by means of a write-down, when it is considered there will be difficulties in the recovery of the relative net book value through use. The verification of such difficulties requires the directors to make valuations based on the information available within the company and on the market, as well as from historical experience. In addition, when it is determined that there may be a potential reduction in value, the company determines this through using the most appropriate technical valuation methods available. The correct identification of the indicators of a potential reduction in value of tangible and intangible assets, as well as the estimates for their determination depends on factors which may vary over time, impacting upon the valuations and estimates made by the directors.
Amortisation & Depreciation
The cost of property, plant and equipment and intangible assets is depreciated or amortised on a straight- line basis over the estimated useful life of the asset. The useful life of these assets is determined by the directors when the assets are purchased. This is based on the historical experience for similar assets, market conditions and considerations relating to future events which could have an impact on the useful life, such as changes in technology. Therefore, the effective useful life may differ from the estimated useful life.
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Inventories
Inventories of products which are obsolescence or slow moving are periodically subject to valuation tests and written down when the recoverable value is lower than the carrying amount. The write-downs are made based on assumptions and estimates of management deriving from experience and historic results.
Doubtful debt provision
the recoverability of receivables is valued taking account of the non-payment risk, of aging of receivables and of the losses recorded in the past on similar receivables.
Provisions for risks and charges
Provisions for risks and charges are recorded to cover known or likely losses or liabilities, the timing and extent of which are not known with certainty at the reporting date.
They are recorded only where a present obligation exists (legal or implicit) for a future payment resulting from past events and it is probable that the obligation will be settled. This amount represents the best estimate of the costs required to settle the obligation. The rate used in the determination of the present value of the liability reflects the current market values and the specific risk associated to each liability.
If the financial effect of the period is significant and the payment dates of the obligations can be reliably estimated, the provisions are valued at the present value of the expected payment, utilising a rate which reflects market conditions, the change in the cost of money in the period and the specific risk related to the obligation. The increase in the value of the provision from changes in the cost of money in the period is recognised as a financial charges.
Possible risks that may result in a liability are disclosed in the notes on potential liabilities without any provision.
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Deferred tax assets
Deferred tax assets are recognized with respect to deductible temporary differences between the values of assets and liabilities expressed in the financial statements compared to the corresponding tax value and tax losses that can be carried forward, to the extent that the existence of adequate future taxable profit is likely, with respect to which these losses may be used. A discretionary assessment is required of the directors to determine the amount of deferred tax assets that can be accounted for, which depends on the estimate of probable timing and the amount of future taxable profits.
2.4 Accounting standards not yet applicable
The developments in the IFRS and the relative interpretations (IFRIC) applicable from periods subsequent to December 31, 2022 are outlined below.
Document title
Issue date
Effective entry date
Date approved
EU Regulation and publication date
IFRS 17 - Insurance contracts (including amendments published in June 2020)
May 2017 June 2020
January 1, 2023
November 19, 2021
(EC) 2021/2036 November 23, 2021
Definition of accounting estimates (Amendments to IAS 8)
February 2021
January 1, 2023
March 2, 2022
(EU) 2022/357
March 3, 2022
Information on accounting standards (Amendments to 1 )
February 2021
January 1, 2023
March 2, 2022
(EU) 2022/357
March 3, 2022
Deferred taxes related to assets and liabilities arising from a
May 2021
January 1, 2023
August 11, 2022
(EU) 2022/1392
August 12, 2022
1 The document published by the IASB includes amendments to 'IFRS Practice Statements 2 - Making Materiality Judgements' which was not subject to EU endorsement as it is not an accounting standard or interpretation.
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single transaction (Amendments to IAS 12)
First-time application of IFRS 17 and IFRS 9 - Comparative information (Amendments to IFRS 17)
December 2021
January 1, 2023
September 8, 2022
(EU) 2022/1491
September 9, 2022
At the reporting date, the European Union had not yet completed its endorsement process for the adoption of the following standards and amendments:
Document title
Issue date by IASB
Effective entry date of the IASB document
Expected endorsement date
by EU
Standards
IFRS 14 Regulatory Deferral Accounts
January 2014
January 1, 2016
The approval process suspended pending the new accounting standard on "rate-regulated activities".
Amendments
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
September 2014
Deferred until the completion of the IASB project on the equity method
Endorsement process suspended pending the conclusion of the IASB project on the equity method
Classification of liabilities as current or non-current (Amendments to IAS 1) and Non-current liabilities with covenants (Amendments to IAS 1)
January 2020
July 2020
October 2022
January 1, 2024
TBD
Lease liability in a sale and leaseback (Amendments to IFRS 16)
September 2022
January 1, 2024
TBD
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3. FINANCIAL RISK MANAGEMENT
The principal business risks identified, monitored and, as illustrated below, actively managed by the Company are as follows:
• market risk, deriving from fluctuations in exchange rates between the euro and the other currencies in which the Company operates, the interest rate and raw material prices;
• credit risk, deriving from the possibility of default by a counterparty;
• liquidity risk, deriving from insufficient financial resources to meet financial commitments.
The Company’s objective is to maintain a balanced management of its financial exposure over time to ensure a liability structure that is in equilibrium with the composition of assets and capable of ensuring the necessary operational flexibility through the use of liquidity generated by current operating activities and recourse to bank financing.
The ability to generate liquidity from ordinary operations and debt capacity allow the Company to adequately meet its operational requirements, the financing of operating working capital and investment capital, and to meet its financial obligations.
The Company’s financial policy and management of the relative financial risks are guided and monitored at central level. In particular, the central finance function is tasked with evaluating and approving forecast financial needs, monitoring the trend and, where necessary, implementing suitable corrective actions.
The following section provides qualitative and quantitative information on the impact of these risks on the company.
3.1 Market risk
Currency risk
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Exposure to the risk of exchange rate variations arises from the Company’s commercial activities which are also carried out in currencies other than the euro. Revenues and costs denominated in foreign currencies may be influenced by exchange rate fluctuations with an impact on trade margins (economic risk), just as trade and financial payables and receivables denominated in foreign currency may be affected by the conversion rates used, with an effect on the economic result (transaction risk).
The principal exchange rates the Company is exposed to are:
• EUR/USD, in relation to transactions carried out in US Dollars;
• EUR/GBP, in relation to transactions carried out in UK sterling.
The Company does not adopt specific policies to hedge exchange rate fluctuations, with the exception of contracts occasionally entered into due to the contingent requirements of its commercial activities. It should be noted that there is periodic massive offsetting between the values of purchase components in foreign currencies, mainly US dollars, and the values of sales in the same currency, which significantly mitigates the currency risk. The company is however exposed to a contained level of exchange rate risk stemming from operations as a portion of cash flows, sales and also purchases are denominated in the same currency (natural hedging).
Analysis of sensitivity of exchange rate risk
For the purposes of an exchange rate sensitivity analysis, balance sheet items as at December 31, 2022 (financial assets and liabilities), denominated in a currency other than the functional currency of the Company were identified. In assessing the potential effects arising from changes in exchange rates, inter- company payables and receivables in currencies other than the account currency were also taken into consideration.
Two scenarios were considered for the purposes of the analysis which respectively reflect a 10% appreciation and depreciation of the nominal exchange rate between the currency in which the balance sheet item is denominated and the accounting currency.
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The table below highlights the results of the analysis:
+10%
-10%
(Euro thousands)
Book value
Exposition to currency risk
Gains/(Losses)
Gains/(Losses)
Financial assets
Cash and cash equivalents
52,713
7,473
(747)
747
Trade receivables (net credit notes)
115,825
23,091
(2,309)
2,309
of which related parties
115,597
24,840
(2,484)
2,484
Tax effect
734
(734)
Total financial assets
(2,323)
2,323
Financial liabilities
Trade payables
(146,840)
(16,224)
1,622
(1,622)
of which related parties
(70,824)
(12,823)
1,282
(1,282)
Tax effect
(389)
389
Total financial liabilities
1,233
(1,233)
Total
(1,090)
1,090
Note: the plus sign indicates a higher profit and an increase in shareholders’ equity; the minus sign indicates a lower profit and a decrease in shareholders’ equity.
Interest rate risk
The Company uses external funding and utilises on-demand liquidity from market instruments. Changes in the interest rates impact on the cost and return of the various forms of loans and uses, with an effect therefore on the financial charges. The Company policy seeks to limit interest rate fluctuation risk through undertaking fixed or variable rate medium/long-term loans; hedging is carried out through the trading of derivative instruments (e.g. IRS - Interest Rate Swaps), utilised only for hedging purposes and not for speculative purposes. These contracts, although subscribed for hedging purposes relating to the financial exposure of the Company, were not treated as hedges for accounting purposes, given the technical complexity of the accounting demonstration of the hedging relationship and the relative effectiveness, and therefore with end-of-period Mark to Market (MTM) adjustment effects recognised directly in the income statement.
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The following tables summarise the main information concerning hedging derivatives on interest rates as at December 31, 2022:
(Euro thousands)
Contract opening date
Contract maturity date
Notional value at signing date in foreign currency
Notional currency
Fair value at
December 31, 2022
IRS Intesa San Paolo
28/12/2021
31/12/2027
30,000
Euro
2,514
IRS Credit Agricole
29/05/2017
28/06/2024
10,000
Euro
68
IRS Intesa San Paolo
19/06/2018
31/01/2024
15,000
Euro
77
IRS Banca Popolare Milano
20/06/2018
30/06/2025
25,000
Euro
434
IRS Banca Popolare Milano
06/06/2019
30/06/2025
15,000
Euro
322
IRS Credit Agricole
09/08/2019
28/12/2025
10,000
Euro
323
IRS Intesa San Paolo
25/09/2019
31/12/2024
20,000
Euro
325
Total
125,000
4,063
Sensitivity analysis related to interest rate risk
With reference to interest rate risk, a sensitivity analysis was carried out to determine the effect on the income statement and shareholders’ equity resulting from a hypothetical positive and negative change of 100 bps in interest rates compared to those actually recorded in each period.
The analysis was carried out by primarily focusing on the following items:
• cash and cash equivalents;
• short and medium/long-term financial liabilities.
With reference to cash and cash equivalents, reference was made to the average funds held and the average rate of return for the period. For short and medium/long-term financial liabilities, the impact was calculated on an actual basis. Financial payables settled at a fixed rate and those hedged through derivative instruments were not included in this analysis.
The table below highlights the results of the analysis:
(Euro thousands)
Impact on Net Profit
Effect on Net Equity
Change
+ 100 bps
- 100 bps
+ 100 bps
- 100 bps
FY 2022
(626)
626
(626)
626
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Note: the plus sign indicates a higher profit and an increase in shareholders’ equity; the minus sign indicates a lower profit and a decrease in shareholders’ equity.
Raw material price risk
The Company’s production costs are influenced by the price trends of the main raw materials used. The price of these materials varies depending on a wide range of factors, to a large extent uncontrollable by the company and difficult to predict.
Specifically, the company implements a strategy to offset the price volatility risk of the commodities used through contractual hedging which are limited to price changes for raw materials, energy sources and partly, selling prices.
3.2 Credit risk
The Company’s exposure to credit risk relates to the possibility of insolvency (default) and/or in the deterioration of the credit rating of a counterparty and is managed through adequate valuation instruments of all counterparties by a dedicated department, utilising the appropriate instruments to carry out constant monitoring, on a daily basis, of the behaviour and credit rating of clients.
The company hedges its credit risk through insurance policies on the client exposure, undertaken with primary debt insurance companies. External companies providing corporate information are utilised both to initially evaluate the reliability and for on-going monitoring of the economic and financial situation of clients.
The following table provides a breakdown of trade receivables from third parties at December 31, 2022, grouped by due date and net of the doubtful debt provision:
(Euro thousands)
At December 31, 2022
Not yet due
Overdue within 30 days
Overdue between 31 and 90 days
Overdue between 91 and 120 days
Overdue beyond 120 days
Guaranteed trade receivables (a)
4,509
2,441
796
935
43
294
Credit Notes to Customers
(3,686)
(3,686)
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Non-guaranteed trade receivables (b)
443
56
75
111
35
166
Non-guaranteed trade receivables impaired (c)
199
199
Trade receivables before doubtful debt provision [(a)+(b)+(c)]
1,466
(1,189)
871
1,046
78
660
Doubtful debt provision
(1,210)
0
(466)
(547)
(25)
(172)
Trade receivables
256
(1,189)
405
499
53
488
3.3 Liquidity risk
Liquidity risk relates to the risk of the company being unable to meet its payment obligations due to the inability to source new funds or liquidate assets on the market. This results in a negative impact on economic performance if it is obliged to incur additional costs to meet its commitments or insolvency.
The liquidity risk to which the company is exposed relates to the inability to source sufficient funding for operations, in addition to industrial and commercial operations. The principal factors which determine the liquidity situation are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the maturity dates and the renewal of the payable or liquidity of the financial commitments and also market conditions.
The company can avail of on-demand liquidity and has a significant availability of credit lines granted by a number of leading Italian and international banks. The company considers that the funds and credit lines currently available, in addition to those that will be generated from operating and financial activities, will permit the satisfaction of its requirements deriving from investment activities, working capital management and the repayment of debt in accordance with their maturities.
The table below shows an analysis of amounts due, based on contractual repayment obligations, relating to financial liabilities, trade payables and other current and non-current liabilities as at December 31, 2022:
(Euro thousands)
December 31, 2022
Within 1 year
Between 1 and 5 years
Beyond 5 years
Bond loan
83,409
13,108
51,729
18,571
Other current and non-current financial liabilities
261,814
61,203
193,837
6,774
Liabilities for intercompany RoU
3,003
814
2,189
0
Loans from subsidiaries
8,438
0
8,438
0
Trade payables
76,016
76,016
0
0
Intercompany trade payables
70,824
70,824
0
0
Other current and non-current liabilities
19,006
12,974
6,033
0
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Other current and non-current intercompany liabilities
2,830
2,830
0
0
All the amounts in the table above refer to the nominal amounts not discounted, stated with regards to the residual contractual maturities, both in terms of the capital and interest portions. The company expects to meet these commitments through cash flows generated from operating activities and where necessary, through medium-term financing operations.
In this risk analysis, we add the more detailed conclusions of the Directors’ Report on the impact of the spread of COVID-19 (coronavirus) and the conflict between Russia and Ukraine. In particular, it can be stated that - overall and in view of the information currently available and the health emergency in progress - no impact and/or effect is seen (i) on the value of the assets shown in the financial statements (ii) on the recoverability of trade receivables (iii) on the net realisable value of inventories. As mentioned previously, the impact on the business thus far has remained, on the whole, limited. Therefore, no specific risks have been identified in terms of the ability of the Group and of Aquafil S.p.A. to meet its future commitments (including compliance with the "covenants" set out in certain loan agreements) and/or which may impact the Group's ability to continue as a going concern.
With regards to the conflict between Russia and Ukraine, it is confirmed that this situation does not have direct impacts on the company, as currently not having (i) any investment in either of the countries, nor (ii) financial instruments or liquidity in Rubles.
3.4 Climate change risks
The Company and the Aquafil Group is passionate about its environmental, social and governance policies and plays an active role in the community.
The Group’s organisational structure for many years has considered the environmental impact of its processes and products and continuously assesses possible improvement actions, with an approach firmly focused on sustainability and circularity.
This structure particularly considers the consequences for its activities, processes and local organisations from climate change, whose risk is consistently monitored and assessed. It may be stated that no
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significant impacts are currently expected on the operating activities carried out in the various regions in which the Company and Group operates.
4. MANAGEMENT OF CAPITAL
The Company’s capital management is aimed at ensuring a solid credit rating and adequate levels of capital indicators to support investment plans, in accordance with contractual obligations entered into with lenders.
The Company acquires the necessary capital to finance the needs for business development and operations; financing sources are divided into a balanced mix of risk capital and debt capital to ensure a balanced financial structure and the minimisation of the total cost of capital, for the consequent benefit of all stakeholders.
The remuneration of risk capital is monitored on the basis of the market trend and business performance, once all other obligations have been met, including the debt service; therefore, in order to ensure an adequate remuneration of capital, the safeguarding of business continuity and business development, the Company constantly monitors the development of the debt level in relation to shareholders’ equity, business performance and forecasts of expected cash flows in the short and medium/long-term.
5. CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
The tables below illustrate the breakdown of financial assets and liabilities of the company required by IFRS 7, as per the categories identified by IAS 39, at December 31, 2022:
Pag. 169 di 224
Financial assets and liabilities measured at fair value through P&L
Loans and receivables
AFS financial assets
Financial liabilities at amortised cost
Total
Current and non-current financial assets
4,063
4,063
Current and non-current intercompany financial assets
0
0
Equity investments in group companies
307,915
0
307,915
Investments in other companies
14
14
Financial receivables from third parties
102
102
Current and non-current financial receivables from group companies
41,034
41,034
Other current financial assets
0
0
Trade receivables - third parties
227
227
Trade receivables from group companies
115,597
115,597
Non-current tax receivables
2
2
Other current and non-current receivables and assets
7,418
7,418
Other intercompany current and non-current receivables and assets
0
0
Intercompany tax receivables
247
247
Cash and cash equivalents
52,713
0
52,713
Total
56,775
472,556
0
0
529,332
Current and non-current financial liabilities
0
345,223
345,223
Current and non-current intercompany RoU payables
3,003
3,003
Current and non-current intercompany financial liabilities
8,438
8,438
Trade payables
76,016
76,016
Intercompany trade payables
70,824
70,824
Other current and non-current liabilities
19,006
19,006
Other current and non-current intercompany liabilities
2,830
2,830
Total
0
0
0
525,340
525,340
The other financial assets and liabilities are short-term and regulated at market interest rates and therefore the book value is considered to reasonably approximate fair value.
5.1 Measurement of the fair value
In relation to financial instruments measured at fair value, the table below reports information on the method chosen to measure the fair value. The methods applied are broken down into the following levels, based on the information available, as follows:
• Level 1: fair value determined with reference to listed prices (not adjusted), on active markets for identical financial instruments;
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• Level 2: fair value determined with valuation techniques with reference to observable variables on active markets;
• Level 3: fair value determined with valuation techniques with reference to non-observable variables on markets;
The fair value calculation is determined in accordance with the methods classified in Level 2 and the general criterion utilised for this calculation is the present value of the expected future cash flows of the instrument subject to measurement - a method commonly applied in financial practice. There were no transfers between hierarchical levels of the fair value in the periods considered.
The table below summarises the assets and liabilities measured at fair value at December 31, 2022, on the basis of the level which reflects the inputs utilised in the determination of the fair value.
(Euro thousands)
December 2022
December 2021
Derivative financial instruments - Assets
4,063
25
Derivative financial instruments – Liabilities
0
(468)
Total
4,063
(443)
6. DISCLOSURE BY OPERATING SEGMENT
For the purposes of IFRS 8 – Operating Segments, company activity is identifiable in a single operating segment.
In fact, the Company structure identifies a strategic and singular vision of the business and this representation is consistent with the manner in which management takes its decisions, allocates resources and defines the communication strategy. Dividing the business into separate divisions is therefore currently viewed as detrimental to its economic interests.
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7 NOTES TO THE BALANCE SHEET
7.1. Intangible assets
The breakdown in the account and changes in the period were as follows:
(Euro thousands)
Patents & property rights - Know-how
Trademarks, concessions, licenses and similar
other intangible assets
Intangible assets in progress
Total
Balance at 31.12.2020
0
97
2,818
12,422
15,338
Historic cost
203
4,376
15,382
12,422
32,383
Acc. amort.
(203)
(4,279)
(12,564)
(17,046)
Increase
979
1,429
2,407
Reclassifications
1,906
(1,906)
0
Write-downs
(1,650)
(1,650)
Decrease
(14)
0
(14)
Amortization
(21)
(1,790)
(1,811)
Balance at 31.12.2021
0
76
3,899
10,295
14,270
Historic cost
203
4,376
18,230
10,295
33,104
Acc. amort.
(203)
(4,300)
(14,331)
(18,834)
Increase
56
1,137
991
2,183
Reclassifications
3
9,805
(9,798)
9
Write-downs
0
0
Decrease
(132)
(132)
Amortization
(40)
(3,584)
(3,624)
Balance at 31.12.2022
0
95
11,256
1,355
12,705
Historic cost
203
4,434
29,172
1,355
35,164
Acc. amort.
(203)
(4,339)
(17,916)
(22,458)
The increases in the year, overall amounting to Euro 2,183 thousand, principally relate to:
- for Euro 968 thousand to the Information and Communication Technology activities represented by the costs of developing specific software implementation projects;
- for Euro 315 thousand relating to the development of a bio-caprolactam production process;
- for Euro 620 thousand relating to the non-competition agreement with a previous manager.
Pag. 172 di 224
Intangible assets in progress mainly include the Company’s investments in the development of new products and processes, including the "Effective" project coordinated by Aquafil and funded by the Bio- Based Industries Joint Undertaking (BBI JU) as part of the European Horizon 2020 research programme and focused on the production of bio-caprolactam. Considering that the bio-caprolactam production process began at a pilot level, we report that in the first half of the year, the investments in the project of Euro 9,015 thousand were reclassified from assets in progress to other intangible assets, and consequently amortisation over a 5-year time period began (impact of Euro 1,821 thousand in the year).
7.2. Property, plant & equipment
The breakdown in the account and changes in the period were as follows:
(Euro thousands)
Land and Buildings
Plant & Equipment
Equipment
Other assets
Assets in progress and advances
Total before RoU
Right-of- Use
Total
Balance as at 31.12.2020
13,689
17,342
188
69
2,781
34,070
4,329
38,398
Historic cost
32,113
135,437
4,989
1,739
2,781
177,059
6,189
183,248
Acc. deprec.
(18,424)
(118,095)
(4,800)
(1,670)
0
(142,989)
(1,861)
(144,850)
Increase
8
1,376
61
26
3,537
5,008
1,885
6,893
Reclassifications
129
1,506
11
8
(1,653)
0
0
Write-downs
0
0
Decrease
0
(164)
0
0
(428)
(592)
(234)
(826)
Depreciation
(2,068)
(3,722)
(48)
(23)
(5,862)
(1,474)
(7,337)
Balance at 31.12.2021
11,758
16,337
213
80
4,237
32,624
4,505
37,129
Historical cost
32,250
137,880
5,028
1,762
4,237
181,156
7,117
188,273
Acc. deprec.
(20,492)
(121,543)
(4,815)
(1,682)
0
(148,532)
(2,612)
(151,144)
Increase
165
959
27
16
5,644
6,811
1,536
8,347
Reclassifications
1,477
1,451
6
15
(2,958)
(9)
(9)
Write-downs
0
0
Decrease
(181)
0
0
(263)
(444)
(313)
(756)
Depreciation
(1,892)
(3,640)
(52)
(24)
(5,609)
(1,478)
(7,087)
Balance at 31.12.2022
11,508
14,925
194
86
6,660
33,374
4,250
37,624
Historic cost
33,892
138,679
5,046
1,737
6,660
186,014
7,022
193,036
Acc. deprec.
(22,384)
(123,754)
(4,852)
(1,651)
0
(152,641)
(2,772)
(155,412)
Pag. 173 di 224
The increases in the year, overall amounting to Euro 8,347 thousand, principally relate to:
- for Euro 1,536 thousand the application of IFRS 16, of which Euro 632 thousand concerning the renewal of the contract, for a duration of 6 years, for the lease of the building located in via del Garda – Rovereto;
- for approx. Euro 5,760 thousand the technological improvement and upgrading of existing plant and equipment (mainly in progress);
- for approx. Euro 1,450 thousand for projects to improve production and industrial efficiency.
The table below, in accordance with IFRS 16, presents the right-of-use of the non-current asset subject to the leasing contract. In particular this refers to buildings, equipment and transport and motor vehicles as illustrated in the table below:
(Euro thousands)
Right-of-use buildings
Right- of-use equipment and transport vehicles
Right-of-use motor vehicles
Total
Balance at January 01, 2021
3,434
434
461
4,329
Historical cost
4,538
978
673
6,189
Acc. deprec.
(1,104)
(544)
(213)
(1,861)
Increase
1,372
133
379
1,885
Decreases
(107)
(10)
(117)
(235)
Depreciation
(978)
(278)
(217)
(1,474)
Exchange rate differences
0
Balance at December 31, 2021
3,721
279
505
4,505
Historic cost
5,615
631
870
7,117
Acc. deprec.
(1,895)
(352)
(365)
(2,612)
Increases
915
361
260
1,536
Decreases
(75)
(210)
(28)
(313)
Depreciation
(988)
(244)
(246)
(1,478)
Exchange rate differences
0
Balance at December 31, 2022
3,573
185
492
4,250
Historic cost
5,741
330
951
7,022
Acc. deprec.
(2,167)
(146)
(459)
(2,772)
At December 31, 2022, the company did not identify any impairment indicators relating to property, plant and equipment.
Pag. 174 di 224
7.3 Current and non-current financial assets
The breakdown of the account is shown below (including current and non-current):
(Euro thousands)
December 2022
December 2021
Equity investments in group companies
307,915
307,865
Investments in other companies
14
14
Non-current financial receivables parent companies
234
234
Escrow bank deposits and guarantee deposits
102
112
Non-current financial receivables from associates
29
29
Non-current financial receivables from subsidiaries
39,821
3,550
Current financial receivables from subsidiaries
950
6,200
Derivative financial instruments
4,063
25
Total
353,127
318,029
of which current
5,013
6,200
of which non-current
348,114
311,829
The breakdown of investments in subsidiaries and associates is illustrated below:
Company
Registered office
Holding
Opening balance
Increases
Write-downs
Total
Tessilquattro S.p.A.
Arco (IT)
100.00%
22,545
22,545
Aquafil USA Inc.
Cartersville (USA)
100.00%
124,298
124,298
Aquafil SLO d.o.o.
Ljubjiana (SLO)
100.00%
73,343
73,343
Aquafil Jiaxing Co. Ltd
Jiaxing (CHN)
100.00%
53,523
53,523
Aquafil CRO d.o.o.
Oroslavje (CRO)
100.00%
11,730
11,730
Aquafil UK Ltd
Ayrshire (UK)
100.00%
0
0
Aquafil Asia Pacific Co. Ltd
Rayoung (THA)
99.99%
8,608
8,608
Aqualeuna G.m.b.H.
Leuna (GER)
100.00%
10,964
10,964
Aquafil Tekstil Sanayi Ve Ticaret A.S.
Istanbul (TUR)
99.99%
557
557
Aquafil Benelux France B.V.B.A.
Harelbake (BEL)
99.90%
99
99
Cenon S.r.o.
Zilina (SLO)
100.00%
0
1,695
(1,695)
0
Aquafil India Private Ltd
New Delhi (IND)
99.97%
6
6
Aquafil Oceania
Melbourne (AUS)
100.00%
32
32
Aquafil Japan Corp
Tokyo (JPN)
100.00%
1,142
1,142
Bluloop S.r.l. Benefit Company
Arco (IT)
100.00%
0
50
50
Nofir
Bodo (NO)
31.66%
1,018
1,018
Total
307,865
1,745
(1,695)
307,915
On June 22, Bluloop S.r.l. was incorporated as a benefit company, a wholly-owned subsidiary of Aquafil S.p.A., whose main corporate scope is to sell products made with ECONYL® polyamide to the end
Pag. 175 di 224
consumer on the e-commerce channels; the company also has communication, training and intervention objectives in the areas in which the Aquafil Group operates in terms of environmental and social sustainability issues;
The write-down recorded in the year derives from the application of the impairment test on the investees where there were indicators of loss in value as described in paragraph 12 of international accounting standard IAS 36.
The Slovak company Cenon S.r.o. (Slovakia) no longer carries out production activities, and on November 30, 2022, following Aquafil S.p.A.'s waiver of its loan receivable, it was recapitalised by Euro 1,695 thousand in order to have adequate financial resources to proceed with voluntary liquidation. Consequently, the investment was, for the same amount, fully written-down.
Investments in other companies
Investments in other companies mainly refer to the investment in Banca di Verona for Euro 11 thousand and the investment in the company Trentino Export S.c.a.r.l. for Euro 3 thousand.
Escrow bank deposits and guarantee deposits
The escrow bank deposits and guarantee deposits refer to guarantees provided to suppliers for various services.
Financial receivables from subsidiaries, associates and parent companies
The breakdown of current and non-current receivables parent companies, subsidiaries and associates is illustrated below:
Pag. 176 di 224
in thousands of Euro
December 2022
of which current
December 2021
of which current
AQUAFILSLO d.o.o.
35,200
0
6,200
6,200
AQUALEUNA G.m.b.H.
950
950
3,550
0
AQUASPACE S.p.A
29
29
AQUAFIN HOLDING S.p.A
234
234
AQUAFIL JAPAN
4,621
0
AQUAFIL UK Ltd
0
0
CENON
0
0
0
0
Total
41,034
950
10,013
6,200
• Aquafil SLO d.o.o.
Receivables from the subsidiary consist of four loans:
• one granted in October 2015 for an original amount of Euro 14,000 thousand with maturity in December 2024, whose residual payable is Euro 1,000 thousand;
• a second granted in March 2018 for an original amount of Euro 8,000 thousand with maturity in December 2024, whose residual payable is Euro 4,200 thousand;
• a third granted in February 2022 for Euro 10,000 thousand with maturity in February 2025, whose residual payable is Euro 10,000 thousand;
• a final loan granted in August 2022 for Euro 20,000 thousand with maturity in July 2027, whose residual payable is Euro 20,000 thousand;
These loans were provided in order to support the subsidiary's production capacity expansion.
• Aqualeuna G.m.b.H.
The receivable from the subsidiary was partially repaid in the year. The residual balance at December 31, 2022 was Euro 950 thousand.
• Aquafil UK Ltd
The receivable from the subsidiary, totalling Euro 2,819 thousand, incudes a loan granted in June 2021 and one granted in December 2022.
Given the loss reported by the subsidiary, the financial receivable was completely written down.
Pag. 177 di 224
• Cenon S.r.o.
The receivable from the subsidiary, amounting to Euro 1,695 thousand, was cancelled during the year following the transfer of the full amount of the loan to equity. It is confirmed therefore that no loan receivables from the subsidiary exist at December 31, 2022.
• Aquaspace
The receivable from other related parties relates to guarantee deposits of Euro 29 thousand paid by the Company over a multi-year lease for the property located in Via del Garda 40 - Rovereto.
• Aquafin Holding
The receivable from the parent company relates to the guarantee deposit of Euro 234 thousand paid by the Company over the multi-year lease for the property owned by Aquafin Holding located in San Martino Buon Albergo, Verona.
• Aquafil Japan
The loan to the subsidiary was provided during the year in order to support its development phase, as the company was established in 2021.
Derivative financial instruments
The fair value of derivative financial instruments (IRS) reports an increase of Euro 4 million substantially due to the change in the market interest rate curve. As previously illustrated, “hedge accounting” was not applied to these derivatives as, although entered into for hedging purposes, have been considered for accounting purposes and consistently with the past, as non-hedging instruments (and therefore the
Pag. 178 di 224
relative fair value is recognised in the income statement), as it is very complex to prepare the mandatory hedging relationship.
7.4. Other non-current assets
The account concerns, for Euro 304 thousand, the receivable from the EU for the “Effective” research project co-ordinated by Aquafil and funded by Bio-Based Industries Joint Undertaking (BBI JU) as part of the European Horizon 2020 research programme, with the entire chain (from raw material manufacturers to brands) involved in validating the use of bio Nylon 6 and other bio-polymer consumer market products; reference should be made also to the Directors' Report for more details on the project.
In particular, with the signing of the agreement between the partners and other lenders, an overall amount of Euro 1.7 million was stipulated, with deferred income recognised under Other liabilities (Note 7.16) which was equal to Euro 897 thousand at December 31, 2022. The receivable is reduced for the amounts effectively paid by the European Union, substantially recognised on the basis of the convention rules which provides for payment based on the state of advancement. At December 31, 2022, the residual receivable amounted to Euro 304 thousand.
7.5 Deferred tax assets and liabilities
The breakdown of the items "Deferred tax assets” and “Deferred tax liabilities" is shown below:
(Euro thousands)
December 2022
December 2021
Deferred tax assets
2,172
2,059
Deferred tax liabilities
(13)
(929)
Total
2,159
1,130
Pag. 179 di 224
The relative movement is comprised of:
(Euro thousands)
At January 1, 2022
Provisions / releases to net equity
Provisions / releases to income P&L
Provisions / Reclassifications
At December 31, 2022
Deferred tax assets
Provision for risks and charges
133
72
205
Doubtful debt provision
194
194
Measurement of employee benefits as per IAS 19
61
(55)
(29)
(23)
Intangible and tangible fixed assets
584
(115)
470
Tax losses
1,025
(29)
996
Inventories
0
Other provisions
95
(22)
73
Application of the amortised cost method
0
0
Derivative financial instruments
0
0
0
Ace
0
0
0
Exchange rate differences
(33)
291
257
Total deferred tax assets
2,059
(55)
197
(29)
2,172
Deferred tax liabilities
Financial liabilities
Intangible and tangible fixed assets
(929)
916
(13)
Other
Total deferred tax liabilities
(929)
0
916
(13)
Total net deferred tax assets
1,130
(55)
1,113
(29)
2,159
Tax result vs Parent company
(3,452)
Total deferred tax assets and liabilities recognised to the income statement
(2,339)
With regard to deferred tax assets:
• Deferred tax assets on the intangible and tangible fixed assets refer to the reversal of intangible fixed assets following the adoption of IAS accounting standards;
• deferred tax assets on tax losses of Euro 996 thousand refer to the mutual agreement procedure under Article 6 of the Convention for the elimination of double taxation in the case of the adjustment of profits of associated companies of July 23, 1990 No. 90/436/EEC - relating to the acceptance of the agreement by the competent financial administrations in Italy and Germany in relation to the tax year 2017.
Pag. 180 di 224
The Company filed an evidential request concerning the non-application of the anti-evasion provisions of Article 10, paragraph 2 and paragraph 3, letters a) and c), of the new economic-development decree on the basis that amounts paid out by the Company, during the period 2011-2021, to non-resident companies of the Group and subject to the non-application request could not, directly or indirectly, be considered transfers to resident companies of the Group and, consequently, a duplication of the economic-development (ACE) benefit. On October 24, 2022, the Italian Tax Office issued a favourable opinion on the non-applicability of the anti-evasion provisions of Article 10, paragraph 2 and paragraph 3, letters a) and c), of the new “ACE” decree.
In relation to “Deferred tax liabilities”, the account “Intangible and tangible fixed assets” refers for Euro 13 thousand to the reversal of intangible assets following the adoption of IAS accounting standards. The decrease of Euro 916 thousand refers to the accounting of leases according to the finance method required by IFRS 16. This amount was fully released following the leaseback of the leased property,
7.6 Inventories
The changes in the account were as follows:
(Euro thousands)
December 2022
December 2021
Raw materials, ancillary and consumables
21,497
18,924
Inventories of work-in-progress and semi-finished products
0
0
Inventories of finished products and goods
43,907
34,721
Advances to suppliers
0
0
Total
65,404
53,645
Inventories are recorded net of the obsolescence provision amounting to Euro 255 thousand and relates to slow moving prior stock.
Pag. 181 di 224
The significant increase is due to the higher prices for raw materials and industrial cost components and the increase in volumes in stock at year-end, particularly of raw materials.
7.7 Trade receivables
The changes in the account were as follows:
(Euro thousands)
December 2022
December 2021
Trade receivables
1,438
6,221
Parent, associates and other related parties
115,597
79,120
Doubtful debt provision
(1,210)
(1,218)
Total
115,825
84,123
Increase in receivables is closely connected with the higher revenues, prices and the altered payment deadlines with the Group companies.
The following table shows the movement of the doubtful debt provision:
(Euro thousands)
December 2022
Balance at January 1 st 2022
(1,218)
Provisions net of releases
0
Utilisations
8
Other changes
0
Balance at December 31, 2022
(1,210)
The utilisation of the doubtful debt provision relates to the closure of certain receivables arising in previous years deemed uncollectible.
Reference should be made to the previous paragraph 3.2 for details on the credit risk management policy.
Pag. 182 di 224
Receivables from subsidiaries, parent and related parties
The account includes current trade receivables as follows:
(in Euro thousands)
December 2022
December 2021
AQUAFIL ASIA PACIFIC CO.
163
359
AQUAFIL ENGINEERING GMBH
2
0
AQUAFIL UK LIMITED
1,233
706
AQUAFILSLO d.o.o.
57,740
31,728
AQUALEUNA G.m.b.H.
303
239
AQUAFIL CARPET RECYCLING
7
78
AQUAFIL CARPET Rec.#2
4
0
AQUASPACE S.p.A
34
35
TESSILQUATTRO
29,114
23,605
AQUAFIL USA Inc.
23,501
12,791
AQUAFIN HOLDING S.p.A
305
0
AQUAFIL TEXTIL SANAYI
1,003
958
AQUAFIL China
1,940
4,631
AQUAFIL O'MARA
93
0
AQUAFIL JAPAN
33
3,990
BLULOOP
121
0
TOTAL
115,597
79,120
The increase in trade receivables from subsidiaries, parent companies and related parties was mainly due to the increase in the receivables from the subsidiaries Aquafil USA and Aquafil SLO, as a result of the Group’s increased sales.
7.8 - Income tax receivables
Current tax receivables refer to IRES (company income taxes) to be carried forward for Euro 3 thousand.
7.9. Other current assets
Pag. 183 di 224
The changes in the account were as follows:
(Euro thousands)
December 2022
December 2021
Tax receivables
4,339
625
Supplier advances
399
56
Pension and social security institutions
162
51
Employee receivables
272
284
Tax receivables from parent
247
3,152
Tax receivables subsidiaries
0
0
Other receivables
246
1,090
Prepayments and accrued income
1,697
1,454
Total
7,361
6,713
The following is specified in relation to the above items:
• “Tax receivables”: principally refer to:
o energy credits for Euro 2,677 thousand related to the contribution under Decree Law No. 4 of 27/01/2022 and subsequent, disbursed during the year for companies who qualify as energy and natural gas intensive businesses, with a total of Euro 6,306 thousand recognised, of which Euro 3,629 thousand already offset by the Company with other tax liabilities;
o for Euro 923 thousand receivables for Value Added Tax (VAT), of which Euro 136 thousand for the recovery of VAT from insolvency procedures;
o Euro 385 thousand in tax credits determined pursuant to Article 1, paragraph 35, of Law No. 190 of 23/12/2014 and subsequent amendments, and determined as follows: 1. for fundamental research, industrial research and experimental development in science and technology, the tax credit is recognised at 20% of the eligible expenses; 2. for technological innovation for the creation of new or substantially improved products or production processes, the tax credit is recognised at 10% of the eligible expenses; 3. the tax credit is recognised at 15% of the eligible expenses for technological innovation aimed at achieving an objective of digital innovation 4.0.
Pag. 184 di 224
• “Supplier advances”: these refer mainly to Euro 400 thousand in advances for services yet to be provided.
• “Tax receivables from parents”: for Euro 247 thousand these refer to tax receivables from Aquafin Holding S.p.A. generated by the transfer of the tax losses of Tessilquattro S.p.A. to the tax consolidation, with Aquafin Holding S.p.A. as the consolidating entity, but through Aquafil S.p.A., which per the tax consolidation agreement remains responsible for netting in the calculation of tax receivables and payables relating to IRES (company income tax) as per Article 228 et seq. of the Income Tax Law. The sharp decrease stems from the increase in Aquafil S.p.A.'s current taxes, as a result of the profit reported for the year, which in the context of the tax consolidation reduces the receivable from the consolidated Aquafil Holding S.p.A..
• “Other receivables”: the significant decrease is due for Euro 781 thousand to the collection of the receivable from the company Domo Chemicals Italy S.p.A. for the financial support provided within the fiscal dispute relating to the sale of shares of Domo Engineering Plastics S.p.A. on May 31, 2013. The balance refers for Euro 246 thousand to the European CISUFLO project within the scope of the Ecodesign activities: CIrcularSUstainableFLOorcovering with 17 consortium members in which Aquafil participates as PA6 producer & recycler with the specific role of verifying in pilot and industrial tests the recyclability of the carpets developed with the new design criteria; the project kick-off meeting between all consortium members took place on June 16, 2021, for a total development of approx. 4 years;
• “Prepayments and accrued income”: these mainly refer to prepayments for insurance premiums for Euro 154 thousand, information and communication technology consultancy fees invoiced in advance of completion of service for Euro 369 thousand, prepayments for purchases of maintenance materials for Euro 207 thousand, photovoltaic grants for Euro 398 thousand, personnel training grants for Euro 124 thousand, and for Euro 200 thousand long- term costs concerning the supply agreement with Domo Engineering Plastics.
7.10 Cash and cash equivalents
The account is comprised of:
Pag. 185 di 224
(Euro thousands)
December 2022
December 2021
Cash and equivalents
10
9
Bank and postal deposits
52,702
79,689
Total
52,713
79,698
The account refers to the company’s current account balances.
The breakdown of cash and cash equivalents by currencies is illustrated in the table below:
(Euro thousands)
December 2022
EUR
45,229
USD
6,535
GBP
2
JPY
936
Total
52,702
The Company has decreased available liquidity, which had significantly increased over the preceding two years, as a prudent measure in order to reduce liquidity risk so as to combat the potential impact of a continuation of the health crisis and the ongoing conflict.
For further details, reference should be made to the cash flow statement.
We highlight the following with regards to loans in the year:
(a) new medium-term, unsecured loans underwritten by the Parent Company Aquafil S.p.A. for a total of Euro 94 million. Borrowings are detailed in the Explanatory Notes;
Pag. 186 di 224
(b) repayment of loans for a total of Euro 52 million. As a result of these actions, liquidity at year-end decreased from Euro 79.7 million to Euro 52.7 million.
There were no restrictions on liquidity.
7.11 Assets held-for-sale
The account includes machinery constructed internally for installation at other companies of the Group for Euro 1,755 thousand.
7.12 Shareholders’ Equity
Share capital
At December 31, 2022, the Company authorised share capital amounted to Euro 50,522 thousand, whose subscribed and paid-up capital amounts to Euro 49,722 thousand, while the unsubscribed and unpaid portion relates to, for Euro 800 thousand, the capital increase in service of Aquafil Sponsor Warrants. The subscribed and paid-up share capital is divided into 51,218,794 shares without nominal value divided into:
• 42,902,774 ordinary shares, identified by the ISIN Code IT0005241192;
• 8,316,020 special Class B shares, identified by the ISIN Code IT0005285330 which, in compliance with any legal limits, assign 3 exercisable voting rights pursuant to Art. 127-sexies of Legislative Decree No. 58/1998 in shareholders’ meetings of the company and which may be converted into ordinary shares under specific conditions and circumstances as regulated by the By-Laws, at the rate of one ordinary share for each Class B share.
Pag. 187 di 224
Following the fulfilment of that indicated at Article 5 of the By-Laws of Aquafil S.p.A., 100% of the Class C shares (i.e. 80,000 class C shares), were automatically converted into ordinary shares, according to the conversion ratio of 1 ordinary share for each Class C share, without the expression of interest from their respective holders and without any change in the total amount of the company share capital.
It is recalled that the 80,000 special Class C shares, identified by the ISIN Code IT0005241747, were without voting rights in the ordinary and extraordinary shareholders’ meetings of the company and excluded from the right to receive profits which the company resolves to distribute as an ordinary, non- transferable dividend until April 5, 2022 and automatically converted into ordinary shares in the conversion ratio of 4.5 ordinary shares for each Class C share according to specific conditions and circumstances laid down by the By-Laws.
As a result of this share conversion, the Company’s share capital remains at Euro 49,722,417 while the number of ordinary shares increases from 42,822,774 to 42,902,774, while the class B shares remained unchanged (8,316,020 shares) and consequently the total number of shares remains unchanged (51,218,794 shares).
The breakdown of Aquafil S.p.A.’s subscribed and paid-up share capital at December 31, 2022 is shown below:
Type of shares
No. shares
% of Share Capital
Listing
Ordinary
42,902,774
83.76%
MTA, STAR Segment
Class B
8,316,020
16.24%
Non-listed
Class C
0
0.00%
Non-listed
Total
51,218,794
100%
On the basis of communications sent to the National Commission for Companies and the Stock Exchange (CONSOB), and received by the Company pursuant to Article 120 of Legislative Decree No. 58 of February 24, 1998, as well as the effect of the conversion of Market Warrants in the year, holders of a significant shareholding as at December 31, 2022 - i.e. considering Aquafil S.p.A.’s qualification as an SME pursuant to Article 1 (w-quater). 1 of the CFA, of a shareholding of greater than 5% of Aquafil S.p.A. share capital with voting rights.
Pag. 188 di 224
The declarant or subject at the top of the equity chain
Direct shareholder
Type of shares
No. shares
No. votes
GB&P S.r.l.
Aquafin Holding S.p.A.
Ordinary
21,554,705
21,554,705
Class B
8,316,020
24,948,060
Total
29,870,725
46,502,765
Holding
58.32%
68.52%
The availability and distributability of shareholders’ equity is outlined in the following table:
Description
Amount
Origin
Possibility of utilisation
Quota available
Group
49,722,417
Legal reserve
1,256,837
- of profits
B
1,256,837
Share premium reserve
19,975,348
of capital *
A,B
19,975,348
Negative reserve for treasury shares in portfolio
(8,014,531)
Non-distributable reserve for listing costs
(3,287,529)
FTA Reserve
(2,156,097)
IAS 19 reserve
(181,449)
Total capital reserves
7,592,580
Other reserves
16,438,024
- of profits
A,B,C
16,438,024
- Retained earnings
30,995,648
- of profits
A,B,C
30,995,648
Total profit reserves
47,433,672
47,433,672
Profit/(loss) for the year
15,930,426
of profits **
A,B,C
15,133,905
Total Shareholders’ Equity
120,679,096
Non-distributable reserve
1,354,568
Distributable Reserve
46,079,104
* The share premium reserve is distributable when the legal reserve reaches one-fifth of the share capital.
** 5% not distributable to cover legal reserve.
Warrants
The following were initially issued on listing:
(i) 7,499,984 Aquafil Market Warrants, listed and identified by the ISIN Code IT0005241200, which incorporate the right to the allocation of Aquafil S.p.A. shares of Conversion Market Warrants and are exercisable under the conditions set out in the relative regulation approved by the Space3 extraordinary shareholders’ meeting by resolution of December 23, 2016. Pursuant to the Aquafil
Pag. 189 di 224
S.p.A. Market Warrant Regulation (ISIN IT0005241200), December 4, 2022 was the deadline for the exercise of the Aquafil Warrants financial instruments, as 60 (sixty) months had elapsed since the date of admission to listing of Aquafil’s ordinary shares (ISIN IT0005241192);
(ii) 800,000 Aquafil Sponsor Warrants, identified by the ISIN Code IT0005241754, non-listed and exercisable within ten years from the date of December 4, 2017, payable at the unit exercise price of Euro 13.00 (on achieving a "Strike Price" of Euro 13.00), in response to the allocation of an Aquafil Share of Aquafil Conversion Sponsor Warrants for each Sponsor Warrant exercised.
As commented in the Directors' Report, it should be noted that on December 4, 2022, the exercise deadline for the Aquafil Warrants financial instruments concluded, and therefore as of December 31, 2022, 2,014,322 Aquafil Market Warrants have been converted with the allotment of 498,716 Conversion Shares. As of December 31, 2022, therefore, no other Market Warrants are outstanding, while it is noted that no Aquafil Sponsor Warrants have been converted.
Legal reserve
The legal reserve at December 31, 2022 was equal to Euro 1,257 thousand; the increase of Euro 558 thousand was approved by the Shareholders’ Meeting of April 28, 2022 which allocated to this reserve one twentieth of the profit for the year 2021.
Share premium reserve
The share premium reserve amounted to Euro 19,975 thousand at December 31, 2022 and is derived from the merger transaction between Aquafil S.p.A. and Space 3 S.p.A. on December 4, 2017.
Pag. 190 di 224
Negative reserve for treasury shares in portfolio
The negative reserve for treasury shares in portfolio totalled Euro 8,014,531 at December 31, 2022. It should be noted that, on October 20, 2021, Aquafil S.p.A. announced that the Company’s Shareholders authorised the purchase of treasury shares in accordance with Article 2357 of the Italian Civil Code. This authorisation by Shareholders has a duration of 18 months from the date of the authorising resolution. The operation is aimed at enabling the Company to purchase and/or make use of the Company’s ordinary shares for: (i) making investments and limiting anomalous changes in share prices so as to promote regular trading outside of normal fluctuations tied to market trends, while, in any event, observing applicable laws and regulations; and (ii) establishing a securities reserve for future uses in accordance with the strategies that the Company intends to pursue as payment in corporate transactions with other parties or other extraordinary uses. The Shareholders authorised the purchase, in one or more tranches, of ordinary shares up to a maximum number which, taking account of the ordinary shares which may be held in portfolio by the company and by its subsidiary, does not total more than 3% of share capital.
On December 31, 2022, following the purchases made, Aquafil held 1,181,685 treasury shares, equal to 2.3071% of share capital.
Listing costs / Share capital increase reserve
This item amounted to Euro 3,287 thousand at December 31, 2022, as a decrease in shareholders’ equity and relates to the costs incurred in 2017 for the listing and thereafter the share capital increase.
“First Time Adoption” Reserve (FTA)
The FTA reserve amounts to Euro 2,156 thousand, as a reduction of net equity, and represents the conversion effects from Italian GAAP to IFRS.
Pag. 191 di 224
IAS 19 reserve
At December 31, 2022, the IAS 19 reserve was equal to a Euro 181 thousand reduction in shareholders’ equity and includes the actuarial effects at that date of severance indemnities and all the other benefits for employees of Group companies.
Retained earnings
At December 31, 2022, they amount to Euro 30,996 thousand.
Dividends
The Shareholders ‘Meeting of April 28, 2022 approved the distribution of dividends, with the payment to shareholders of a dividend of Euro 0.12 per share, for a total of Euro 6 million.
7.13 Employee benefits
The account is comprised of:
(Euro thousands)
December 2022
Balance at December 31, 2021
2,176
Financial charges
29
Advances and settlements
(172)
Actuarial (gain) / loss
(228)
Balance at December 31, 2022
1,805
Pag. 192 di 224
The post-employment benefits provision includes the effects of discounting as required by the IAS 19 accounting standard.
The following is a breakdown of the main economic and demographic assumptions used for actuarial valuations:
Financial assumptions
December 31, 2022
Discount rate
3.57%
Inflation rate
2.30%
Annual increase in employee leaving indemnity
3.23%
Demographic assumptions
Death
The RG48 mortality tables published by the General State Controller
Disability
INPS tables by age and gender
Retirement
100% on satisfying AGO requirements
Annual frequency of Turnover and leaving indemnity advances
Frequency advances
4.50%
Frequency turnover
2.50%
It should be noted that the bond’s financial average duration at December 31, 2022 is approximately 7 years.
7.14 Current and non-current financial liabilities
The account is comprised of:
(Euro thousands)
December 2022
of which current portion
December 2021
of which current portion
Medium/long term bank loans
259,688
59,911
210,861
47,695
Accrued interest and charges on medium/long-term bank loans
(379)
(379)
(527)
(527)
Total medium/long-term loans
259,310
59,533
210,334
47,168
Bond loans
83,158
12,857
90,353
7,143
Accrued interest and charges on bonds
251
251
316
316
Total bond loan
83,409
13,108
90,670
7,459
Pag. 193 di 224
Current and non-current RoU liabilities
4,401
1,379
11,614
8,048
Financing payables to Finest S.p.A.
0
0
0
0
Liabilities for derivative financial instruments
0
0
468
0
Other lenders and banks – short term
1,106
1,106
155
155
Loans intercompany
8,438
0
7,946
0
Parent company loans
0
0
0
Total
356,664
75,126
321,187
62,830
Medium/long term bank loans
This account refers to payables relating to financing agreements obtained from major credit institutions. These agreements mainly envisage the payment of interest at a fixed rate or, alternatively, at a variable rate typically linked to the Euribor rate for the period plus a spread.
At year-end all the Group’s loans had been contracted by Aquafil S.p.A., in view of its positive rating and the favourable situation within the Italian financial market. During the year, Aquafil S.p.A. thus provided financial support, through loans and share capital increases, to the investment activities of subsidiaries, particularly in Slovenia.
It should also be noted that, in 2022, Aquafil S.p.A. worked to reduce financial availability, which significantly increased in the previous two years, also with a view to maintaining enough liquidity to handle the impact of the pandemic. During 2022, loans were repaid on schedule and new medium/long term loans totalling Euro 94 million were entered into with leading banking institutions.
The funds raised were used to maintain liquidity.
(Euro thousands)
Origina l amount
Granting date
Maturity date
Loan repayments
Rate applied
At December 31, 2022
of which current portion
Medium/long term bank loans - fixed rate
Cassa Centrale Banca – Credito Cooperativo del Nord Est (ex Casse rurali trentine) (*)
15,000
2019
2026
quarterly from 30/09/2021
1.25% fixed from July 1, 2024, 3 mo. Euribor +1%
10,598
2,981
Cassa Centrale Banca (*)
11,000
2022
2029
22 quarterly instalments
1.20% fixed for the first 4 years
11,000
484
Credito Valtellinese (*)
15,000
2018
2024
quarterly from 05/10/2018
1 fixed %
7,566
4,307
Mediocredito Trentino Alto Adige
3,000
2022
2026
half-yearly from 15/10/2023
0.85% fixed until 10/15/2022 - Euribor 3 months +1%
3,000
247
Cassa Depositi e Prestiti (*)
20,000
2020
2027
half-yearly from 20/06/2023
1.48% fixed
20,000
4,000
Total Medium/long term bank loans - fixed rate
52,164
12,019
Medium/long term bank loans - variable rate
Deutsche Bank (*)
5,000
2018
2024
quarterly from 15/01/2019
Euribor 3 months + 1.20%
2,188
1,250
Deutsche Bank (*)
20,000
2022
2028
20 quarterly from 1/10/2023
Euribor 3 months + 1.20%
20,000
2,000
Pag. 194 di 224
Cassa Risparmio di Bolzano (*)
20,000
2018
2025
quarterly from 31/03/2020
Euribor 3 months + 0.85%
12,102
4,000
Cassa Risparmio di Bolzano (*)
10,000
2022
2028
16 quarterly from 1/10/2023
Euribor 3 months + 1.05%
10,000
0
Banca intesa (*)(**)
15,000
2018
2024
half-yearly from 31/7/2019
Euribor at 6 months + 0.95%
5,143
2,571
Banca intesa (*)(**)
30,000
2021
2027
half-yearly from 30/06/2023
Euribor at 6 months + 1.10%
30,000
6,000
Banca di Verona
3,500
2016
2023
quarterly from 30/06/2017
Euribor 3 months + 1.80%
333
333
Banca di Verona
15,000
2017
2024
quarterly from 30/06/2017
Euribor 3 months + 2%
5,836
3,210
Banca di Verona
3,000
2019
2024
quarterly from 06/08/2021
Euribor 3 months + 1.30%
1,909
727
Banca di Verona
5,000
2022
2027
quarterly from 27/4/2024
Euribor 6 months + 1.20%
5,000
0
Credito Valtellinese
3,000
2017
2023
quarterly from 05/07/2017
Euribor 3 months + 0.90%
459
459
Cassa Rurale Raiffeisen Alto Adige
3,000
2017
2023
quarterly from 30/06/2018
Euribor 3 months + 0.90%
191
191
Banca Popolare di Milano (*) (**)
25,000
2018
2025
quarterly from 31/03/2020
Euribor 3 months + 0.90%
16,011
4,394
Banca Popolare di Milano (*) (**)
15,000
2019
2025
quarterly from 30/09/2020
Euribor 3 months + 1.05%
9,070
2,926
Banca Popolare Emilia Romagna (*) (**)
10,000
2019
2025
monthly from 26/09/2020
Euribor 3 months + 0.75%
6,700
2,497
Banca Nazionale del Lavoro (*)
7,500
2018
2025
half-yearly from 31/12/2019
Euribor 6 months + +1.40%
4,091
2,045
Banca Nazionale del Lavoro (*)
12,500
2018
2025
half-yearly from 31/12/2019
Euribor 6 months +1.25%
6,818
3,409
Banca Nazionale del Lavoro (*)
20,000
2022
2027
quarterly from 08/12/2023
Euribor 3 months + 1.40%
20,000
1,250
Banca Popolare di Sondrio
5,000
2017
2023
monthly from 31/08/2018
Euribor 1 month + 0.80%
739
739
Credit Agricole Friuladria (ex Banca Popolare Friuladria) (*) (**)
10,000
2017
2025
quarterly from 31/03/2019
Euribor 3 months + 1.30%
4,607
1,800
Credit Agricole Friuladria (ex Banca Popolare Friuladria) (*) (**)
10,000
2019
2025
half-yearly from 28/12/2020
Euribor 6 months + 1.05%
5,455
1,818
Monte dei Paschi (*)
15,000
2018
2025
half-yearly from 31/12/2019
Euribor 6 months + 0.80%
9,375
3,750
Crediti Emiliano
5,000
2022
2027
quarterly from 16/9/2023
Euribor 3 month + 0.90%
5,000
522
Banca del Mezzogiorno (*) (**)
10,000
2019
2026
quarterly from 09/11/2020
Euribor 1 month + 1.20%
6,500
2,000
Cassa Depositi e Prestiti (*)
20,000
2022
2027
half-yearly from 30/6/2024
Euribor 6 months + 1.55%
20,000
0
Total Medium/long term bank loans - variable rate
207,527
47,891
Accrued interest on medium/long term bank loans
(379)
(379)
Medium/long term bank loans - fixed and variable rate
259,312
59,531
* Loans that provide for compliance with financial covenants.
** Loan to which an interest rate swap contract is linked under which interest to be paid to the bank is fixed and equal to the value shown in the table.
Certain loan agreements provide for compliance with financial and equity covenants (expressed at consolidated Group level), as summarised below:
Loan
Period
Parameter
Reference
Limit
Banca Friuladria
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA net of lease costs
≤ 3.75
Banca Intesa
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Cassa di risparmio di Bolzano
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Banca Nazionale del Lavoro
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Pag. 195 di 224
Banca Popolare di Milano
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Credito Valtellinese
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Deutsche Bank
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Monte dei paschi
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Casse Centrali C.R. Trentine
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
Banca Pop. Emilia Romagna
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
MCC/Banca del Mezzogiorno
annually
Net Debt / Net Equity
Group
< 2.50
annually
Net Debt / EBITDA
< 3.75
Cassa Depositi e Prestiti
annually
Net Debt / Net Equity
Group
≤ 2.50
annually
Net Debt / EBITDA
≤ 3.75
For the bank loans with covenants, at December 31, 2022, all had been complied with.
With reference to the loans granted, there are no mortgages or guarantees registered on company assets.
Bond loans
The Company had issued two fixed-rate bond loans for an original total value of Euro 90 million:
1. a first bond loan (“A”), initially issued on June 23, 2015 and subscribed by companies belonging to the US Group Prudential Financial Inc., with a value equal to Euro 50 million, to be repaid in 7 equal instalments of Euro 7.1 million, of which the first with maturity on September 20, 2022 and the last on September 20, 2028, subject to a fixed interest rate of 3.70% with the application of a "margin ratchet" condition which provides for a gradual increase in the rate up to a maximum of 1% on the fluctuation of the NFP/EBITDA ratio of the Group. With effect from September 20, 2019, as a result of the variation in the NFP/EBITDA ratio in the first half of 2019, the interest rate increased to 4.70%. Application of this interest rate was confirmed until September 30, 2021. The NFP/EBITDA ratio resulting from approval of the financial statements at June 30, 2021 led to a reduction in the interest rate applicable for the period September 2021 to March 2022 to 4.20%. With the ratio reported at December 31, 2021, the margin ratchet has been brought to zero, bringing the interest rate for the six months subsequent to March 2022 to 3.70%. Due to the NFP/EBITDA ratio resulting from the approval of the 2022 half-yearly consolidated financial statements, the application of the interest rate at 3.70% is confirmed until March 2023.
Pag. 196 di 224
It is noted that the first instalment of Euro 7.1 million was repaid on September 20, 2022.
2. in addition to the line of credit used for the "A" bond loan, the Prudential Group has granted the company a so-called "Shelf Facility" available on request and usable up to a maximum amount of approx. USD 90 million. This line was partially used to cover the issuance of the second bond ("B") and remains available at current market conditions for approx. USD 50 million. Bond B was issued on May 24, 2019 to finance the business combination of Aquafil O’Mara Inc., and subscribed by companies belonging to the US Group Prudential Financial Inc. for a total of Euro 40 million; the terms provide for repayment in 7 annual instalments from May 24, 2023, a fixed interest rate equal to 1.87%, with the application of the same margin ratchet condition as for bond A, which brought the rate to 2.87% until November 24, 2021, whereas, from November 25, 2021, to May 24, 2022, following changes in the NFP/EBITDA ratio, the rate will be 2.37%. With the ratio reported at December 31, 2021, the margin ratchet has been brought to zero, bringing the interest rate for the six months subsequent to May 2022 to 1.87%. Due to the NFP/EBITDA ratio resulting from the approval of the 2022 half-yearly consolidated financial statements, the application of the interest rate at 1.87% is confirmed until May 2023.
The following table summarises the main characteristics of the aforementioned bond loans:
Bond loan
Total Nominal Value
Issue date
Maturity date
Capital portion repayment plan
Interest rate applied
Bond loan A
50,000,000
23/06/2015
20/09/2028
7 annual instalments from 20/09/2022
3.70%
Bond loan B
40,000,000
24/05/2019
24/05/2029
7 annual instalments from 24/05/2023
1.87%
Bond loans envisage compliance with the following financial covenants, as contractually defined, to be calculated on the basis of the Group’s consolidated financial statements:
Bond loan A-B
Financial parameters
Parameter
Covenant limit
Interest Coverage Ratio
EBITDA / Net financial charges
> 3.5
Leverage Ratio (*)
Net Debt / EBITDA
< 3.75
Net Debt Ratio
Net Debt / Net Equity
Minimum Net Equity threshold levels
Pag. 197 di 224
* This indicator must be calculated with reference to the 12-month period which terminates on December 31 and June 30 for all years applicable.
Non-compliance with just one of the above financial parameters, where not resolved within the contractual deadlines provided, would constitute a circumstance for the bond loan’s compulsory early repayment.
The terms and conditions of the above bond loans also envisage, as is customary for financial transactions of this type, a structured series of commitments to be borne by the Company and Group companies ("Affirmative Covenants") and a series of limitations on the possibility of carrying out certain transactions, if not in compliance with certain financial parameters or specific exceptions provided for by the agreement with the bondholders ("Negative Covenants"). Specifically, there are in fact certain limitations on the assumption of financial debt, on carrying out certain investments and on acts of disposal of corporate assets. To ensure the timely and correct fulfilment of obligations arising on account of the Parent Company from the issue of securities, the companies Aquafil Usa Inc. and Aquafil SLO d.o.o. have issued joint corporate guarantees in favour of underwriters:
As specified previously, the covenants at December 31, 2022 have been met for bond loans also. It should also be noted that on the basis of the forecasts set out in the business plan to date there are no elements to consider compliance with the above covenants to be at risk in the near future.
Lease liability
The lease liability, which amounts to Euro 4,401 thousand, refers to the effects of the application of IFRS 16.
In addition, during 2022, Aquafil S.p.A.'s Arco (TN) property was redeemed with Trentino Sviluppo S.p.A. The contract in question was entered into in December 2007, with maturity in November 2022 and with Euro 5.5 million paid for the redemption, which is the main reason for the decrease of the balance.
Pag. 198 di 224
Loans intercompany
The loan granted to the subsidiary Aquafil Jiaxing Co. Ltd. for USD 9,000 thousand (equating to Euro 8,438 thousand) was confirmed as outstanding at December 31, 2022.
7.15 Provisions for risks and charges
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Other provisions for risks and charges
0
91
Agents’ supplementary indemnity provision
1,083
728
Total
1,083
819
The amount recognised in 2021 to “Other provisions for risks and charges” referred to the dispute with the Tax Agency regarding FY 2015, released in the year following the reaching of an agreed settlement. Therefore, the assessment notices for FY 2015 have been fully settled.
The changes in the “Agents’ supplementary indemnity provision” were as follows:
(Euro thousands)
December 2022
Balance at January 1, 2022
728
Increases
360
Decreases
(5)
Balance at December 31, 2022
1,083
The main impact of the increase of the provision concerns an agency relationship being concluded.
Pag. 199 di 224
7.16 Other current and non-current liabilities
(Euro thousands)
December 2022
of which current portion
December 2021
of which current portion
Tax payables
1,419
1,419
1,394
1,394
Employee payables
7,083
7,083
7,228
7,228
Payables to social security institutions
1,765
1,765
1,726
1,726
Tax payables to subsidiaries
2,830
2,830
1,290
1,290
Other current and non-current liabilities
8,739
2,706
11,544
2,317
Total
21,836
15,804
23,181
13,954
The account is comprised of:
• "Tax payables" mainly include withholding taxes and other tax payables.
• “Employee payables” mainly decreased due to a reduction in hours worked in the year;
• “Social security payables” which mainly includes the amount owed at year-end by the Company and its employees to social security institutions;
• “Subsidiaries for taxes” which entirely refers to payables to Tessilquattro S.p.A. accrued as a result of the transfer of the latter’s tax losses to Aquafin Holding S.p.A. in its role as tax consolidation entity. Specifically, in accordance with the consolidation agreement, Aquafil S.p.A. is responsible for netting between group companies and the tax consolidation entity Aquafin Holding S.p.A. In fact, an identical opposite amount has been recognised under “Tax receivables from parents” as described above.
• “Accrued liabilities and deferred income” mainly comprise:
- the commercial contract with the US group Interface, involving a worldwide collaboration for supply and product development. In particular, Aquafil S.p.A. undertook an obligation until 2026 to guarantee Interface conditions of supply, against which the client, in addition to committing to annual minimum volumes, paid to Aquafil USD 24 million in advance. At December 31, 2022, this deferred revenue (recognised to deferred income) amounts to Euro 7,375 thousand;
Pag. 200 di 224
- the deferral of the portion pertaining to future years of the contribution obtained from the European Union for the "EFFECTIVE” research project, described in the Directors’ Report and also commented on in the notes above. The original deferred income recognised for Euro 1.7 million which concerns the overall contribution recorded at the signing date of the agreement with lending banks (with counter-entry to Other non-current assets), amounts to Euro 897 thousand at December 31, 2022. It should be noted that from 2019 onwards, costs relating to the EFFECTIVE project have been capitalised under intangible assets in progress for the portion eligible under IAS 38. The residual contribution concerning the capitalised portion is recognised to the income statement from the present year, as the asset is capitalised and therefore amortised.
7.17 Trade payables
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Trade payables - suppliers
76,016
80,789
Trade payables intercompany
70,824
52,267
Advances and other payables
0
21
Total
146,840
133,077
At December 31, there were no debts falling due over five years in the balance sheet.
Intercompany trade payables refer to payables deriving from purchases related to the production cycle and are as follows:
(Euro thousands)
December 2022
December 2021
AQUAFIL UK LIMITED
1,831
1,257
AQUAFILSLO d.o.o.
37,230
22,457
AQUALEUNA G.m.b.H.
0
13
AQUAFIL OCEANIA Pty Ltd
101
145
AQUAFILCRO d.o.o.
4,399
4,272
AQUASPACE S.p.A
54
47
TESSILQUATTRO
14,600
17,840
Pag. 201 di 224
AQUAFIL Usa Inc.
42
40
AQUAFIL TEXTIL SANAYI
12
71
AQUAFIL China
12,454
6,045
AQUAFIL BENELUX FRANCE BVBA
84
80
LA TORRE SOCIETA' AGRICOLA
16
21
TOTAL
70,824
52,289
The increase in trade payables derives from higher purchases for production as revenues increased and to an increase in prices (particularly for raw materials and energy).
7.18 Current tax payables
Current tax payables of Euro 73 thousand relate to IRAP.
For the year under review, Aquafil S.p.A. calculated IRAP by the method established for financial companies, in light of the new legislation on financial holding companies, at the increased rate of 4.65%. For further information, reference should be made to Note 8.14 below.
8. NOTES TO THE INCOME STATEMENT
8.1 Revenues
The breakdown of revenues is shown below:
(Euro thousands)
2022
2021
Pag. 202 di 224
EMEA
554,130
484,320
North America
82,209
30,518
Asia and Oceania
57,975
54,084
Rest of the world
29
912
Total
694,343
569,835
In accordance with IFRS 15, revenues include, as a direct reduction in their amount, cash discounts, which amount to Euro 3,363 thousand in 2022.
This increase was due both to higher sales prices, which recovered the cost increases for raw materials and most goods and services, in addition to a better sales mix which more than offset the drop in volumes, entirely concerning the polymers product line and which in 2021 reported an exceptional performance.
8.2 Other revenues and income
“Other revenues and income" amount to Euro 7,099 thousand and refers mainly to:
- Euro 6,426 thousand for the energy and gas tax credit subsidy granted during the year for electricity- intensive and natural gas-intensive companies that have met the requirements under the regulations (Decree Law No. 4 of 01/27/2022);
- Euro 273 thousand regarding the portion in the year of the grant recognised by the EU for the "Effective" research project;
- Euro 227 thousand related to state aid under the Energy Transition Fund in the industrial sector to partially offset indirect costs incurred for CO2 emissions, calculated in accordance with Article 6 of Ministerial Decree of November 12, 2021;
- Euro 185 thousand related to the tax credit accrued on the research and development expenses incurred in 2022 and determined as per Article 1, paragraph 35 of Law No. 190 of December 23, 2014;
- Euro 48 thousand for the tax credit on the purchase of capital goods and for the contribution recognised by the EU for the "Cisuflo" project.
Pag. 203 di 224
8.3 Raw material costs
The account includes raw materials and consumables costs, in addition to changes in inventories. This increase reflects the rise in the price of oil and of its derivatives, in addition to the cost of utilities and increased prices for caprolactam processes and for polymer purchases. The account is comprised of:
(Euro thousands)
December 2022
December 2021
Raw material purchases
410,236
342,561
Ancillaries and consumables
6,910
5,880
Purchases of other materials
148,961
122,379
Other charges
645
89
Change in inventories
(11,759)
(8,110)
Total
554,993
462,799
The raw material costs incurred in the year include costs from the following subsidiaries and associates:
(Euro thousands)
December 2022
December 2021
Aquafil Asia Pacific Co. Ltd
0
26
Aquafil UK Ltd
6,725
4,387
Aquafil SLO d.o.o.
198,486
153,059
Aqualeuna G.m.b.H.
45,664
0
Aquafilcro d.o.o.
83,457
34,340
Tessilquattro S.p.A.
0
72,006
Aquafil USA Inc.
36,148
16
Aquafil Synthetic Fibres
0
26,960
Total
370,480
290,793
8.4 Service costs
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Transport, shipping & customs
16,802
9,209
Electricity, propulsive energy, water and gas
30,855
11,184
Maintenance
2,183
1,651
Pag. 204 di 224
Services for personnel
2,365
1,375
Technical, ICT, commercial, legal & administrative consultancy
7,271
6,556
Insurance
1,603
1,152
Marketing and advertising
4,654
4,218
Cleaning, security and waste disposal
481
540
Warehousing and external storage
2,554
2,520
External processing
4,394
4,593
Statutory auditors fees
147
141
Other service costs
1,351
1,253
Rentals and hire
528
517
Total
75,190
44,908
Service costs from related parties amount to Euro 2,401 thousand and mainly relate to processing costs undertaken by Aquafil SLO d.o.o for Euro 1,453 and to commissions from Aquafil Benelux France B.V.B.A. for Euro 694 thousand, from Aquafil Oceania for Euro 137 thousand and from Aquafil Tekstil Sanayi Ve Ticaret A.S. for Euro 108 thousand.
The significant increase is highlighted, as a result of the highly unstable political and economic situation for Europe, in the costs of utilities in view of the market developments for these production factors and for transport.
The general increase in service costs is based on the rise in other purchase costs, which significantly rose in the year.
8.5 Labour costs
These costs are broken down as follows:
(Euro thousands)
December 2022
December 2021
Salaries and wages
23,899
25,652
Social security contributions
8,175
7,891
Post-employment benefits
1,519
1,511
Other personnel costs
179
393
Director fees
3,960
2,638
Total
37,733
38,086
Pag. 205 di 224
Senior management bonuses were recognised as the operating objectives were achieved. The decrease in wages and salaries is also due to the lower hours worked in 2022.
The number of employees, broken down by category, is as follows:
2022
2021
Average 2022
Average 2021
Executives
25
27
26
26
Managers
50
48
48
46
White-collar
151
145
149
146
Blue-collar
286
322
301
334
Total
512
542
524
552
8.6 Other operating costs and charges
These costs are broken down as follows:
(Euro thousands)
December 2022
December 2021
Taxes, duties & sanctions
259
243
Losses on asset sales
8
0
Other operating charges
616
496
Total
884
739
The item "Taxes, levies and penalties" mainly includes the costs for local taxes and taxes not on income.
“Other operating charges” mainly include the share related to the provisioning agreement with Domo Engineering Plastics and costs related to previous years.
8.7 Amortisation, depreciation and write-downs of tangible and intangible assets
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Pag. 206 di 224
Amortisation of intangible assets
3,624
1,811
Depreciation of property, plant & equipment
5,609
5,862
RoU depreciation
1,478
1,474
Write-down of intangible assets
0
1,650
Total
10,711
10,798
The intangible asset relating to the development of the “Effective” bio-caprolactam production process and consequently bio-nylon 6 from renewable raw materials was capitalised in the year, generating amortisation of Euro 1,821 thousand.
8.8 Provisions and write-downs
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Doubtful debt provision
0
0
Provisions for risks and charges
(360)
(147)
Total
(360)
(147)
“Other provisions for risks and charges” principally include the accrual for agents’ supplementary indemnities.
Provisions are reported net of the relative release of funds.
8.9 Costs for internal work capitalised
For the year 2022 this item amounting to Euro 1,412 thousand mainly refers to the capitalisations made in relation to the following projects:
- Euro 1,156 thousand for the improvement and technological upgrading of existing plant and equipment;
Pag. 207 di 224
- Euro 256 thousand for the Effective research project described in the Directors' Report.
8.10 Investment income (charges)
This account mainly includes dividends received.
8.11 Financial income
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Financial income receiv. from Group companies
633
449
Other interest
64
0
Interest income current accts.
17
8
Derivative financial instruments
4,506
599
Total
5,219
1,057
”Derivative financial instruments” amount to Euro 4,506 thousand, increasing approx. Euro 3,907 thousand on December 31, 2021. The increase is substantially due to the higher fair value (Mark to Market valuation) of derivatives, due to interest rate curve movements.
Interest income on loans from subsidiaries, parent companies, related companies are as follows:
(Euro thousands)
December 2022
December 2021
Aquafil UK Ltd
33
27
Aquafil SLO d.o.o.
445
93
Aqualeuna G.m.b.H.
64
112
Aquafil USA Inc.
0
180
Cenon S.r.o.
58
37
Aquafil Synthetic Fibres
33
0
Pag. 208 di 224
Total
633
449
8.12 Financial charges
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Interest on mortgage loans
3,145
2,444
Interest on bonds
2,705
3,454
Interest on current accounts
1
0
Bank expenses and commissions
263
399
Write-downs of derivatives and financial instruments
0
0
Interest on factoring transactions
557
215
Interest on commercial transactions
497
22
Interest to leasing companies
51
77
Interest from Group companies
41
0
Other charges
29
38
Financial charges
56
48
Financial charges to group companies
101
98
Interest expenses to Group companies
431
15
Write-downs of fixed assets – group companies
1,435
3,172
Total
9,312
9,983
The item "Write-downs of fixed assets - Group companies" includes the write-downs of the loans outstanding for Euro 1,127 thousand from the subsidiary Aquafil UK Ltd and for Euro 308 thousand from the subsidiary Cenon S.r.o..
8.13 Exchange gains and losses
The breakdown of the account is as follows:
Pag. 209 di 224
(Euro thousands)
December 2022
December 2021
Total exchange gains
9,280
3,332
Total exchange losses
(8,799)
(2,931)
Total exchange differences
481
401
The amount, equal to a gain of Euro 481 thousand for the year 2022, is the net balance between exchange rate gains (realised and unrealised) and exchange rate losses (realised and unrealised).
8.14 Income taxes
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Current income taxes
(1,286)
(593)
Deferred tax charges
(2,339)
(901)
Total
(3,625)
(1,495)
From the year 2018 Aquafil S.p.A. was included in the tax consolidation regime with the parent company Aquafin Holding S.p.A., which regime was interrupted in 2017 due to the merger by incorporation of Aquafil S.p.A. into Space 3 S.p.A.
“Deferred taxes” include the following amounts:
- positive effect from the increase in net deferred tax assets for Euro 1,113 thousand;
- tax consolidation charge (transfer of the tax position deriving from the “tax consolidation” from the holding company) for Euro 3,452 thousand, due to the transfer of a taxable loss to the consolidated level.
The most significant effect for the year is related to the reabsorption of deferred taxes related to the amount recorded in previous years as a result of the redemption of Aquafil S.p.A.'s Arco (TN) property with Trentino Sviluppo S.p.A., with a positive impact of approx. Euro 916 thousand. The contract in question was entered into in December 2007 and expired in November 2022, with Euro 5.5 million paid
Pag. 210 di 224
for the redemption. It should also be noted that energy subsidies, as specified in paragraph 8.2 Other Revenues and Income, do not contribute to the IRES and IRAP tax base.
Current taxes mainly refer to IRAP for the year amounting to Euro 639 thousand and to prior year taxes following the agreed settlement of the assessment notices for the years (as further detailed in the "Contingent liabilities” section):
- 2015 for Euro 431 thousand, and
- 2016 for Euro 279 thousand,
net of the use of the risk provision previously recognised for Euro 91 thousand. For the current financial year, it should be noted that Aquafil S.p.A. has calculated IRAP tax, for the purpose of deferred taxes, in accordance with the new rules envisaged for non-financial holding companies (“industrial holdings”) as defined by Article 162-bis, paragraph 1, letter c.1) of Presidential Decree 917/86 ("Income Tax Law") and as set out in Article 6 of Presidential Decree 446/1997 and by Provincial Law 21/2015, Article 16, paragraph 1-bis, letter b), Legislative Decree 446/97, Article 1, paragraph 11-bis, for which an increased rate of 4.65% is envisaged.
The table below shows the reconciliation of the theoretical rate of income tax with the actual impact on the result:
(Euro thousands)
At December 31, 2022
%
At December 31, 2021
%
Profit before taxes
19,556
12,648
Tax calculated on applicable rate
4,693
24.0%
3,035
24.0%
Prior year taxes
647
0
Effect use / remuneration of tax losses
(3,452)
(2,367)
Tax effect other changes
(1,241)
(668)
Other income taxes (IRAP) and other minor effects
639
593
Total current income taxes
1,286
593
Deferred tax assets
0
0
Deferred tax charges
2,339
901
Total deferred tax liabilities
2,339
901
Total income taxes
3,625
1,495
Pag. 211 di 224
9. Non-recurring items
The account is comprised of:
(Euro thousands)
December 2022
December 2021
Expansion costs of the Aquafil Group
(406)
(168)
Tax, administrative and extraordinary technical consultancy
(122)
(276)
Bonuses and incentives
(179)
(320)
Other taxes - extraordinary
0
0
Other charges - extraordinary
(255)
(270)
Total non-recurring costs
(961)
(1,034)
Other extraordinary income
39
29
Non-operating income and charges
(922)
(1,005)
"Expansion costs of the Aquafil Group" refer to costs incurred for the activities and projects related to the expansion of the Group, in particular in India and the listing on the US OTC Markets.
“Tax, administrative and extraordinary technical consultancy” refers to costs for fiscal consulting incurred in relation to the joint audit consequent to the position paper received by Aqualeuna G.m.b.H. on the tax audit by the “Bundeszentralamt fur Steuern” office responsible for intercompany transactions in the region for the years 2016 and 2017.
“Other extraordinary charges “refer to costs related to previous years.
“Bonuses and incentives” mainly concerns redundancy incentives.
The percentage of the non-recurring items of the result, of cash flows, of the equity position, and of the net debt, are reported below.
(Euro thousands)
of which non- recurring
Percentage
Net profit/(loss)
15,930
(922)
(5.79)%
Net cash flow in the year
(26,985)
(922)
3.42%
(*)
Total assets
648,993
0
0.00%
(**)
Net financial debt
(298,938)
(922)
0.31%
(*)
* Amount paid in the year of non-recurring income statement items.
Pag. 212 di 224
** Amount of non-recurring income statement items yet to be paid at year-end.
10. Net financial debt
Below is the breakdown of the net financial debt as at December 31, 2022, determined in accordance with ESMA/2013/319 Recommendations:
NET FINANCIAL DEBT
(Euro thousands)
At December 31, 2022
At December 31, 2021
A. Cash
52,713
79,698
B. Cash and cash equivalents
C. Other current financial assets
5,013
6,200
D. Liquidity (A) + (B) + (C)
57,725
85,898
E. Current financial debt (including debt instruments but excluding the current portion of non-current financial debt)
(1,106)
(155)
F. Current portion of non-current financial debt
(74,019)
(62,675)
G. Current financial debt (E + F)
(75,126)
(62,830)
H. Net current financial debt (G - D)
(17,400)
23,067
I. Non-current financial debt (excluding current portion and debt instruments)
(211,237)
(175,121)
J. Debt instruments
(70,301)
(83,210)
K. Trade payables and other non-current payables
L. Net current financial debt (I+J+K)
(281,538)
(258,332)
M. Total financial debt (H+L)
(298,938)
(235,264)
The following table presents the items included in the net debt regarding related parties:
(Euro thousands)
December 2022
December 2021
E. Current financial receivables
950
6,200
M. Other non-current financial payables
(8,438)
(7,946)
O. Net financial debt with related parties
(7,488)
(1,746)
The net financial reconciliation between the beginning and end of the year is presented below. The effects indicated include the currency effects.
(Euro thousands)
current portion
non-current portion
Net Debt at December 31, 2021
(235,264)
30,362
(265,527)
Net cash flow in the year
(26,985)
(26,985)
Contracting/reclassification of current financial receivables
(5,250)
(5,250)
New bank loans and borrowings
(94,000)
(4,503)
(89,497)
Repayment / reclass. bank loans and borrowings
52,285
52,285
0
Leasing New Funding
1,536
523
1,013
Repayment / reclass. lease liability
5,677
6,669
(992)
Pag. 213 di 224
Change in fair value derivatives
4,506
4,506
Repayments/drawdown loans to subsidiaries
(492)
(492)
Other changes
(951)
(951)
0
Net Debt at December 31, 2022
(298,938)
52,150
(350,989)
11. RELATED PARTY TRANSACTIONS
Transactions and balances with related parties are illustrated in the tables below
.
(Euro thousands)
Parent companies
Subsidiaries
Related parties
Total
Total book value
% on total account items
Non-current financial assets
December 2022
234
39,821
29
40,084
348,114
11.51%
December 2021
234
3,550
29
3,813
311,829
1.22%
Trade receivables
December 2022
305
115,258
34
115,597
115,825
99.80%
December 2021
79,085
35
79,120
84,123
94.05%
Current financial assets
December 2022
950
950
5,013
18.95%
December 2021
6,200
6,200
6,200
100.00%
Other current assets
December 2022
247
247
7,361
3.36%
December 2021
3,152
3,152
6,713
46.96%
Current financial liabilities
December 2022
(536)
0
(278)
(814)
(75,126)
1.08%
December 2021
(525)
0
(149)
(673)
(62,830)
1.07%
Non-current financial liabilities
December 2022
(830)
(8,439)
(1,358)
(10,627)
(281,538)
3.77%
December 2021
(1,370)
(7,946)
(1,206)
(10,523)
(258,357)
4.07%
Trade payables
December 2022
0
(70,753)
(71)
(70,824)
(146,840)
48.23%
December 2021
0
(52,221)
(68)
(52,289)
(133,077)
39.29%
Other current liabilities
December 2022
0
(2,830)
0
(2,830)
(15,804)
17.91%
December 2021
0
(1,290)
0
(1,290)
(13,954)
9.24%
Pag. 214 di 224
The transactions of the Company with related parties are illustrated in the table below:
(Euro thousands)
Parent companies
Subsidiaries
Related parties
Associates
Total
Total book value
% on total account items
Revenues
December 2022
250
331,756
79
332,085
694,343
47.83%
December 2021
238,451
29
238,480
569,835
41.85%
Raw material costs
December 2022
(370,480)
(370,480)
(554,993)
66.75%
December 2021
(290,793)
(290,793)
(462,799)
62.83%
Service costs and rent, lease and similar costs
December 2022
(2,348)
(53)
(2,401)
(75,190)
3.19%
December 2021
(3,130)
(41)
(3,171)
(44,908)
7.06%
Labour costs
December 2022
(153)
(153)
(37,733)
0.41%
December 2021
(173)
(173)
(38,086)
0.45%
Other operating costs and charges
December 2022
(26)
(26)
(884)
2.94%
December 2021
(26)
(26)
(739)
3.52%
Financial income (charges) from investments
December 2022
183
183
183
100.00%
December 2021
6,794
6,794
6,794
100.00%
Financial income
December 2022
633
633
5,219
12.13%
December 2021
449
449
1,057
42.49%
Financial charges
December 2022
(32)
(1,967)
(9)
(2,008)
(9,312)
21.56%
December 2021
(43)
(3,284)
(5)
(3,331)
(9,983)
33.37%
The following table summarises cash flows with related parties and their percentage out of the cash flow indicated in the cash flow statement:
(Euro thousands)
Total cash flow statement account
of which related parties
% on total account items
Profit for the year
15,930
(41,863)
(263)%
Pag. 215 di 224
Investment income/charges
183
183
100%
Financial income
5,219
633
12%
Financial charges
(9,312)
(2,009)
22%
Increase/(Decrease) in trade payables
13,763
18,535
135%
Decrease / (Increase) in trade receivables
(62,411)
(67,186)
108%
Changes in other assets and liabilities
(5,189)
4,567
(88)%
Net changes in current and non-current financial assets and liabilities
(6,072)
(67)
1%
Distribution of dividends
(6,046)
(3,576)
59%
12. REMUNERATION AND BENEFITS OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT
The remuneration and benefits in favour of members of the Board of Directors and Senior Executives and the compensations due to the members of the Board of Statutory Auditors are presented below:
Director and Statutory Auditor fees (in Euro thousands)
2022
Short-term benefits
4,677
Other long-term employee benefits
50
Total
4,727
Senior Executive fees (in Euro thousands)
2022
Short-term benefits
2,198
Other long-term employee benefits
94
Total
2,292
13. OTHER INFORMATION
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13.1 Commitments and risks
Other commitments
At December 31, 2022, the parent company Aquafil S.p.A. provided sureties in favour of credit institutions in the interest of subsidiaries, companies subject to the control of the parent company and third parties for a total of Euro 22,589 thousand.
Contingent liabilities
Provided below is a list of fiscal positions and disputed defined and pending as at the balance sheet date that concern the Parent Company, Aquafil S.p.A. We are not aware of the existence of further disputes or proceedings that are likely to have significant repercussions on the Group’s economic and financial situation.
7) Tax audit Aqualeuna G.m.b.H.
The company Aqualeuna G.m.b.H. was involved in a tax audit by the competent German federal tax office in Leuna concerning inter-company transactions. On July 15, 2021, the company was notified by the German tax administration’s audits unit in Halle of the conclusion of the tax audits for fiscal years 2013-2017. The upward adjustment to Aqualeuna's assessable income concerned:
(a) for the period 2013-2015, not subject to international cooperation with the Italian administration, for Euro 735 thousand, offset by the equal utilisation of the company's prior year losses;
(b) for the period 2016, subject to joint audit by the two administrations, upward adjustment for Aqualeuna of Euro 1.4 million, with corresponding equal adjustment to the benefit of Aquafil in Italy, for which during the first half of 2022 the corresponding adjustment was made official by the Trento Provincial Office. In fact, on July 26, 2022, the Office recognised the amount of Euro 410 thousand upon closure of the reimbursement file and therefore without impact on the consolidated results;
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(c) for the 2017 period, not subject to joint audit by the two administrations, upward adjustment for Aqualeuna of Euro 3.7 million and the submission of a request to recognise a decrease in IRES and IRAP assessable income, filed by Aquafil on January 21, 2022. Given the use of past losses of Aqualeuna, the increased taxes for the company for 2013-2017 came to Euro 207 thousand. Aquafil, on January 21, 2022, forwarded to the International Dispute Resolution and Prevention Office of the Large Taxpayers Central Directorate in Rome of the Tax Agency a special Application pursuant to Article 31-quater, paragraph 1, letter c) of Presidential Decree September 29, 1973, No. 600 for the unilateral recognition for IRES and IRAP purposes of the downward adjustment of income against the upward adjustment amounting to Euro 3,733 thousand made in Germany for the stated tax period; the initiation of the procedures provided for in Arbitration Convention No. 90/436/EEC of July 23, 1990, on the elimination of double taxation in the case of adjustments to profits of associated companies. On December 22, 2022, the aforementioned International Dispute Resolution and Prevention Office notified the Company that the mutual agreement procedure pursuant to Article 6 of Arbitration Convention No. 90/436/EEC resulted in an agreement being reached between the competent Italian and German Authorities on the basis of which it was agreed to confirm the adjustments made by the German tax authorities in the amount of Euro 3,733 thousand and to recognise Aquafil the same amount as a corresponding adjustment by the Italian tax authorities.
The German competent authority sent a similar notice to Aqualeuna.
Both companies have sent acceptance of the agreement in relation to the year 2017 to their respective competent authorities.
Similarly to 2016, on February 15, 2023 the Company submitted, pursuant to Article 3, paragraph 1, of Law No. 99 of March 22, 1993, a refund application for IRES and IRAP purposes to the Provincial Directorate of Trento for Euro 997 thousand (Euro 896 thousand for IRES, Euro 101 thousand for IRAP) and thus awaits the refund authorisation measure.
For fiscal years 2018 and 2019, not the subject of the aforementioned audits and during which Aqualeuna recognised further tax losses, the German tax administration began another audit in September 2021, requesting that the Italian tax administration launch a joint audit similar to the one conducted for 2016. For these years, too, in the event of either a joint audit or the start of out-of- court settlement followed by arbitration, any increases demanded in Germany are expected to be adjusted in Italy. Therefore, given all of the above, and as supported by the opinion of tax consultants, this potential liability is not deemed to be measurable and is, in any event, not probable. For this reason, no allocation to provisions for risks has been recognised. The German Tax Administration Finanzamt Halle, after analysing the documentation produced by Aqualeuna, made available audit reports No. 1 dated 9/11/2022 and No. 2 dated 16/11/2022. It can be inferred from the reports that
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Finanzamt Halle intends to: (i) disallow the deductibility for Aqualeuna of the plant renovation and closure expenses incurred by the company in 2018 (approx. Euro 2,301 thousand) and 2019 (approx. Euro 4,000 thousand); (ii) in continuity with the previous audit, apply the mark-up of 1.4% to the total production costs of semi-finished products produced by Aqualeuna for the Company (the correction/recovery would be approx. Euro 162 thousand and approx. Euro 1,077 thousand for 2018 and 2019, respectively).
Since it has not yet been concluded (Aqualeuna, in its memorandum submitted on 1/25/2023, has in any case strongly contested these possible findings), it is not possible at this stage to provide an opinion on the outcome of the audits for the 2018 and 2019 tax periods. Moreover, and consistent with that previously expressed in relation to the previous audit, it shall in any case be possible also with reference to these years that Aquafil will initiate, as it did for the 2017 tax period, the procedure set out in Article 31-quater, lett. c) of Presidential Decree No. 600/1973, with the consequence that it will in any case be reasonably certain that, upon the outcome of the relevant procedures, the competent authorities of the two States will take pursuant to Directive 2017/1852 (implemented in Italy by Legislative Decree No. 49 of June 10, 2020) a decision by mutual agreement (guaranteed outcome) aimed at eliminating the double taxation that might arise at Group level. Any upward adjustment in taxable income imposed in Germany by Aqualeuna for its transactions with Aquafil can thus be neutralized by a corresponding opposing adjustment granted to the latter by the Tax Agency.
8) “ACE” tax deduction appeal
On October 24, 2022, the Large Taxpayers Central Directorate responded to the ACE petition filed by the Company on July 5, 2022 with reference to the 2021 tax year, expressing a favourable opinion regarding the request for the disapplication of the anti-avoidance rules set forth in Article 10, paragraphs 2 and 3 (a) and (c) of the new ACE Decree.
The application was submitted in continuity with previous tax periods (2019 and 2020), in relation to which the Central Directorate issued a favourable opinion.
9) Settlement notice for registry tax on sale of Aquafil EP S.p.A.
On December 21, 2017, the Trento provincial office of the Italian tax administration issued Aquafil S.p.A. and Domo Chemicals Italy S.r.l. a settlement notice for registration tax, demanding a proportionate tax of 3% on the sale of the share package of Aquafil EP S.p.A. (later becoming Domo Engineering Plastic S.p.A.) on May 31, 2013, in the amount of Euro 1.3 million plus interest of Euro 210 thousand. Domo Chemicals Italy S.r.l. has provided for the payment of 100% of the tax plus interest, to which Aquafil contributed half of the total sum. On September 27, 2021, prior to the
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hearing, the Trento office notified the companies of the self-protection nullification of the notice and of the decision to refund the amount paid. On January 11, 2022, the Trento Provincial Commission issued notice that the matter was declared closed. The relevant office of the Tax Agency, in May and June 2022, fully reimbursed Aquafil S.p.A. and Domo Chemicals Italy S.r.l. the registration tax of Euro 1,562 thousand, divided equally, plus statutory interest. This tax had been paid by Domo Chemicals Italy S.r.l. on February 16. The tax and interest credit received by Aquafil S.p.A. amounted to Euro 840 thousand.
10) Audit of income tax and IRAP for 2015
In February 2019, the Trento Office of the Italian tax authority launched a general audit of the 2015 tax period for Aquafil S.p.A., which concluded with the notification, on June 14, 2019, of a tax assessment, funnelled into the assessments notified on October 8, 2021, and November 16, 2021, that revealed a number of findings in relation to transfer pricing, without penalties given that the transfer pricing documentation was deemed to be sufficient.
On May 5, 2022, following the submission of an application for an agreed settlement for IRES purposes, while restating the correctness of its conduct and solely in order to avoid a lengthy and exhausting dispute, the Company agreed to settle the IRES assessment notice as follows: IRES settlement Euro 1,568 thousand, higher IRES Euro 431 thousand, sanctions Euro 3 thousand and interest Euro 18 thousand.
On May 27, 2022, following the agreed settlement of higher ICT service revenues also relevant for IRAP purposes, the Company signed the mediation agreement drawn up by the Trento Office based on the same amounts defined for the IRES settlement. The amount settled in mediation was total IRAP recoveries of Euro 954 thousand, higher IRAP Euro 18 thousand, penalties Euro 2 thousand and interest of Euro 4 thousand.
As of the reporting date of the 2022 annual financial statements, therefore, the assessment notices for 2015 have therefore been fully settled.
11) Suspension of VAT refund – 2019 fiscal year
On June 22, 2020, the Company filed for a VAT refund in the amount of Euro 488,147 by way of the 2020 tax return (for 2019 income). The reason given was the lower excess credit not transferable for the payment of group VAT (as per Articles 33 and 73 of Italian Presidential Decree 633/1972). On June 17, 2022, the Tax Office, after lengthy investigative and documentary verification activities, notified the Company of the recognition of the 2019 annual VAT credit requested for reimbursement
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in the amount of Euro 488 thousand, and also in June settled the entire amount, including interest, as required by law.
12) Initiation of audit for direct taxes on 2016, 2017, 2018 and 2019 tax years
On May 11, 2022, the Trento Tax Agency notified the Company of four notices of the initiation of an audit on the 2016, 2017, 2018 and 2019 tax years, with reference to the transfer prices charged by Aquafil to overseas subsidiaries for IT services, in addition to the interest rates applied on loan agreements.
On June 7, 2022, the Company delivered to the Tax Office all the required documentation under the citations.
On August 26, 2022 and August 30, 2022, the Trento Office notified the Company of two citations (IRES and IRAP) issued pursuant to Article 5- ter of Legislative Decree No. 218/1997 for the establishment of a ruling with reference to the 2016 tax period, which includes a potential tax recovery of a total of Euro 1,287 thousand:
On September 15, 2022, the case involving both invited parties began, in which the many aspects that were not agreeable, both in the “an et quantum” (“if and how much”) were highlighted, agreeing to the drafting of a brief filed on October 3, 2022.
On November 22, 2022, while reaffirming the legitimacy of its conduct, and solely in order to avoid long and exhausting litigation, the Company reached an agreed settlement, after submission of the IPEC Application by the consolidating company Aquafin Holding, paying the amount of Euro 16 thousand (IRAP and interest).
Total IRES and IRAP recoveries settled amounted to Euro 1,016 thousand, resulting in higher IRES of Euro 279 thousand, higher IRAP of Euro 13 thousand and interest of Euro 3 thousand.
To date, with respect to the 2017, 2018 and 2019 tax periods, no findings of the Tax Office have been moved in relation to these audits. At present, therefore, any quantification of contingent liabilities is
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considered premature, as it is necessary to await the development of the Tax Office's investigative activities for the proper estimation of the findings.
13.2 Significant events after December 31, 2022
1. With regard to the purchase of treasury shares as approved by the Aquafil S.p.A. shareholders on October 20, 2021, which brought total treasury shares purchased to Euro 8,014,530.59, as detailed above, it should be noted that, in January 2023, Aquafil continued to purchase shares up to a total of 1,278,450 treasury shares held, equal to 2.4961% of the share capital for a total value of Euro 8,612,054. The authorisation by shareholders has a validity of 18 months from the date of the related resolution and authorises the purchase, in one or more tranches, of ordinary shares up to a maximum number which, taking account of the ordinary shares which may be held in portfolio by the company and by its subsidiary, does not total more than 3% of share capital. The operation is aimed at enabling the Company to purchase and/or make use of the Company’s ordinary shares for: (i) making investments and limiting anomalous changes in share prices so as to promote regular trading outside of normal fluctuations tied to market trends, while, in any event, observing applicable laws and regulations; and (ii) establishing a securities reserve for future uses in accordance with the strategies that the Company intends to pursue as payment in corporate transactions with other parties or other extraordinary uses.
2. On January 6, 2023, a new inter-company loan of USD 1.5 million from the subsidiary Aquafil Jiaxing Co. Ltd . was agreed for a period five years.
3. On February 17, 2023, a new intercompany loan of Euro 5 million from the subsidiary Aquafil SLO d.o.o. was agreed for a period five years.
These loans were taken out as part of overall Group-wide liquidity management.
13.3 Disclosure as per Article 1, paragraph 125 of Law No. 124 of August 4, 2017
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With regards to that required by Article 1, paragraph 125 of Law 124/17, the Company recorded the following in 2022:
i) Euro 94 thousand relating to the sale of the external electricity distribution network produced by the photovoltaic plants;
ii) Euro 93 relating to training grants for Aquafil S.p.A.;
iii) Euro 13 thousand relating to De Minimis grants on leases;
in) Euro 6,426 thousand for the energy and gas tax credit subsidy granted during the year for electricity- intensive and natural gas-intensive companies that have met the requirements under the regulations (Decree Law No. 4 of 01/27/2022);
v) Euro 273 thousand related to the grant recognised by the EU for the "Effective" research project (portion in the year of the grant);
vi) Euro 185 thousand accrued on the research and development expenses incurred in 2022 and determined as per Article 1, paragraph 35 of Law No. 190 of December 23, 2014 and subsequent amendments;
(vii) Euro 227 thousand relating to state aid under the Industrial Sector Energy Transition Fund to partially compensate for indirect costs incurred for the emission of CO2 indicated in the same application, calculated pursuant to Article 6 of Ministerial Decree November 12, 2021;
viii) Euro 48 thousand for the tax credit related to the purchase of capital goods and for the contribution recognized by the EU for the "Cisuflo" project (portion in the year of the grant).
With regards to any subventions, contributions or other financial benefits received by the Company in 2022 from the Tax Agency, reference should be made to the preceding paragraphs covering the tax items.
Proposal to allocate profits or for the coverage of losses
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Considering the financial and equity position of the Company, we propose the allocation of the net profit of Euro 15,930,426 as follows:
• one-twentieth, or Euro 796,521, to the legal reserve;
• Extraordinary reserve Euro 15,133,905.
Attachment 1 - Disclosure pursuant to Article 149 of the Consob Issuer’s Regulation
The following table, drawn up pursuant to Art. 149-duodecies of the Consob Issuers’ Regulation, highlights the fees charged in the year 2022 for auditing and non-auditing services rendered by this appointed independent audit firm and by the companies in its network to the company Aquafil S.p.A.
Company providing service
Recipient of service
Type of services
Fees 2022
PwC S.p.A.
Aquafil S.p.A.
Audit separate financial statements
139,028
Total Audit services provided in 2022 to Aquafil S.p.A. by audit firm
139,028
PwC S.p.A.
Aquafil S.p.A.
Audit of the statement of the 2021 research and development costs for the purposes of the tax credit Law 145/18
4,800
PwC SpA
Aquafil SpA
Agreed audit procedures required by the EFFECTIVE EU project
7,500
Total other audit services provided in 2022 to Aquafil S.p.A. by audit firm
12,300
Total services provided in 2022 to Aquafil S.p.A.
151,328
Arco, March 16, 2023
The Chairperson of the Board of Directors The Executive Officer
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Mr. Giulio Bonazzi Sergio Calliari