CONSOLIDATED FINANCIAL STATEMENT AS AT 31-12-2021 by Comer Industries Spa

ANNUAL REPORT CONSOLIDATED FINANCIAL REPORT 31 December 2021

COMER INDUSTRIES S.P.A. Registered and Administrative Offices: Via Magellano 27, 42046 Reggiolo (RE), Italy Reggio Emilia Business Register no. 07210440157 Approved share capital 18,487,338.60 euros entirely subscribed and paid-up Tax code 07210440157 - VAT code IT 01399270352 Art. 2497 bis of the Italian Civil Code - The company is subject to direction and coordination by Eagles Oak S.r.l., with registered office in Via del Sagittario 5, 41126 Modena (MO), Italy Share Capital of 2,000,000 euros entirely paid-up - Modena Business Register no. 03699500363

CONTENTS Letter from the President

General information

1. DIRECTORS’ REPORT

Significant events in the 2021 financial year The global macroeconomic scenario and the reference market Comments on key performance indicators Unaudited 2021 pro-forma income statement Investments Research and Development Social responsibility Environment, health and safety Intergroup relations and dealings with related parties The companies in the Group Non-financial information Significant events after the close of the year and business outlook Proposal for the allocation of profit

2. CONSOLIDATED FINANCIAL STATEMENTS

General information Scope of consolidation Accounting standards adopted Financial and non-financial risk management Corporate information and industry-related information Notes to the consolidated financial statements

3. REPORT OF THE BOARD OF STATUTORY AUDITORS

4. AUDITOR’S REPORT

101

LETTER FROM THE PRESIDENT At Comer Industries we have always defined ourselves as

We ended 2021 with a pro-forma turnover that exceeded one

"Unconventional makers" with the desire and objective of not

billion euros, an ambitious goal that we had set ourselves

stopping with just ideas but committing ourselves to making

and that we managed to achieve with great satisfaction and

them tangible and achievable.

a lot of work.

In a macroeconomic context that has seen our country

For 2022 we are aiming at new big goals.

regain stability and credibility in the eyes of the world, in 2021 we demonstrated our commitment to making an ambitious

These first months have shown a positive trend and we are

project real, pursuing a growth strategy that has allowed us

confident that – thanks to the work and passion of those

to achieve important international goals.

who dedicate themselves every day to the Comer Industries Group, creating value in the company – the next months can

The year that just ended is destined to be remembered as

also continue in this direction. As of today, the integration

the moment that saw us execute one of the most important

process has begun and will continue with the maximum

operations of acquiring a foreign company.

commitment of all and will see us at the forefront as leaders who care about the planet, the people, and the society we

The acquisition of Walterscheid Powertrain Group is the

operate in. We want to continue to improve, strong in our

ultimate expression of our industrial strategy of growth and

values and our history that has laid the foundation for a future

our firm will to be a major player in our sector at an international

of growth.

level. It was undoubtedly a complex operation, which saw our best resources at work in a context that was certainly not

The macroeconomic and geopolitical context is still

favorable. But in addition to the great satisfaction of having

unstable and sees humanity facing complex situations at an

successfully completed the project, we are also pleased to

international level, but despite this we are strong, we have a

have been able to do so without any impact on our ordinary

clear idea of the future, and we have a strategy and products

business, which has continued to grow and which today sees

that respond to market demand. Tomorrow will present us

us engaged in the market even more than before.

with new challenges and we are ready to face them with

The acquisition has also generated great attention in Italy

passion and commitment, stronger, bigger, and even more

and abroad. We proudly welcome the analyses of all those

aware of our positive impact on the world.

observers who, even at an international level, have indicated our company as an example of entrepreneurial excellence in

As is its nature, the Comer Industries Annual Report that you

the Italian economic fabric and a leader at a global level.

have in your hands describes the performance of our Group

The project fully reflected the "unconventional" approach:

and the economic and financial performance of the last

thinking big, strategically and courageously, remaining

financial year, the result of the company’s market positioning,

faithful to our solid history by looking at the world from new

and the rightness of the choices – some of them courageous

points of view, with the aim of building an industrial Group of

– made in recent years.

global stature and long-term investment prospects.

But it is above all a reflection of who we are: a solid, healthy Group, with a clear and effective strategy and a leadership

The union of Comer Industries and Walterscheid Powertrain

based on innovation and credibility. Always result-oriented:

Group – with their shared core values of commitment to

the result of today, but above all the result of tomorrow.

sustainable investment, cutting-edge technology, focus on stakeholders and strategic focus on growth – has become

Matteo Storchi

world's leading mechanical engineering company in the

President & CEO

agriculture sector. In 2021 our commitment to sustainability – social, environmental, and economic – also continued with the Our Bright Impact project. For us, the word sustainability does not only mean maximum attention to people and the planet – which we want to leave to our children better than we found it – but above all it means profitable investments that, looking to the future, meet the needs of a changing society. 6

Reggiolo, March 28, 2022

a milestone in the history of our industry and created the

ANNUAL REPORT 2021

COMER INDUSTRIES

ANNUAL REPORT 2021

GENERAL INFORMATION BOARD OF DIRECTORS

BOARD OF STATUTORY AUDITORS

Matteo Storchi

Luigi Gesaldi

President & CEO

Chairman

Cristian Storchi

Corrado Baldini

Vice President and Director

Standing Auditor

Arnaldo Camuffo

Massimiliano Fontani

Independent Director

Standing Auditor

Luca Gaiani Director

INDEPENDENT AUDITORS

Lee M. Gardner

Deloitte & Touche S.p.A.

Director Joseph P. Huffsmith Director Matteo Nobili Director Paola Pizzetti Independent Director Marco Storchi Director

COMER INDUSTRIES

DIRECTORS'

REPORT Chapter 1

SUMMARY OF THE RESULTS OF COMER INDUSTRIES GROUP 12/31/2021

12/31/2020

CHANGE IN %

SALES REVENUES

598.1

396.2

51.0%

EBITDA [adjusted]

75.4

50.1

50.4%

12.6%

78.2

48.6

% of revenues

13.1%

12.3%

Amortization, depreciation and write-downs

(21.4)

(18.2)

17.5%

EBIT

56.8

30.4

87.1%

% of revenues

9.5%

7.7%

NET PROFIT

39.4

21.8

% of revenues

6.6%

5.5%

NET PROFIT [adjusted]

41.1

25.9

% of revenues

6.9%

6.5%

COMMERCIAL WORKING CAPITAL

206.1

84.7

% of revenues

34.5%

21.4%

INVESTED CAPITAL

522.7

140.2

ROI [EBIT / INVESTED CAPITAL (%)]

10.9%

21.7%

NET FINANCIAL POSITION

(177.0)

3.2

N/A

NET FINANCIAL POSITION [adjusted]

(120.7)

26.7

N/A

Net financial position [adjusted] / EBITDA [adjusted]

(1.6)

N/A

EBITDA [adjusted] /Net financial charges

87.4

101.2

TOTAL OPERATING CASH FLOW

51.7

38.1

CASH CONVERSION RATE

66%

78%

CAPEX

18.8

11.7

% of revenues

3.1%

2.9%

SHAREHOLDERS’ EQUITY

345.6

143.4

N/A

11.9%

18.0%

EPS [adjusted] [Net profit adjusted / Number of shares]

1.43

1.27

N/A

AVERAGE PERSONNEL EMPLOYED IN THE PERIOD

3,505

1,335

N/A

(mn euros)

% of revenues EBITDA

Net financial position [adjusted] / shareholders' equity ROE [Net profit adjusted / net equity]

ANNUAL REPORT 2021

61.0%

81.2%

58.9%

N/A

61.2%

N/A

1.1

SIGNIFICANT EVENTS IN THE 2021 FINANCIAL YEAR 2021 was a year of recovery for the global economy. The

With this transaction, Comer Industries and Walterscheid

vaccination campaign initiated early in the year helped to limit

Powertrain Group sought to establish a European champion,

the pandemic, fueling expectations of a return to normal in

one of the world leaders of mechanics in the agricultural

social and economic life.

sector, with long-term development prospects.

During 2021 Comer Industries carried out the analyses and

Walterscheid Powertrain Group operates in a sector

assessments that led to the conclusion of the acquisition of

complementary to that of Comer Industries, as it also has

100% of the share capital of WPG Holdco (WPG acquisition),

significant experience in applying new solutions in the field of

parent company of Walterscheid Powertrain Group, a major

powertrain products and systems specialized for machines

player in the Off-Highway sector (components and drive

used in a number of industrial sectors, from agriculture to

systems for the agricultural, industrial, construction and

mining and energy.

mining equipment sectors), present in 75 countries, with a

In particular, Walterscheid Powertrain Group covers the entire

2021 turnover of 485 million euros.

OEM components cycle, including a broad range of after

Walterscheid Powertrain Group was founded by Jean

market services aside from manufacturing: the combination

Walterscheid in 1919 in Siegburg, North Rhine-Westphalia,

of both segments creates a particularly attractive offer for

and after more than 100 years of history it is one of the

customers.

leading players in the industry of propulsion systems and services for off-highway and industrial applications.

Walterscheid Powertrain Group enjoys a significant reputation in the market due to the high quality of its products, its

The transaction was communicated to the market on July

engineering capabilities, its strong innovative bent and its

15, 2021 and took the form of a reverse takeover pursuant

long-term customer relationships.

to Article 14 of the AIM Italia Regulation. The acquisition of

Walterscheid Powertrain Group is capable of providing a

100% of the share capital of WPG Holdco was completed

broad range of services (distribution of components, on-site

on December 1, 2021, for consideration of roughly 203

assistance, digital solutions, high value-added services) for

million euros, with a cash outlay of 40 million euros and the

machine operators, partners in workshops and construction

investment of WPG Parent B.V., currently the sole shareholder

machine retailers. Walterscheid Powertrain Group covers

of WPG Holdco controlled by the private equity fund One

all channels and segments in the aftermarket market of

Equity Partners, in Comer Industries, with 28.00% of the

powertrain services and PTO driveshafts and universal joints,

share capital.

with a strong brand positioning.

As a result of the finalization of the WPG acquisition, as of December 1, 2021 the Board of Directors of Comer Industries S.p.A. now includes Joseph Patrick Huffsmith and Lee Merle Gardner, as approved by the shareholders’ meeting on September 14, 2021. Furthermore, a shareholders' agreement was concluded between Eagles Oak S.r.l. and WPG Parent B.V., governing their relationships as shareholders of Comer Industries. Please recall that the shareholders' agreement defines the commitment of WPG Parent B.V. to maintain ownership of at least 50% of the shares held in Comer Industries S.p.A. until six months from the finalization of the transaction. The union of the two companies resulted in the formation of a group which is one of the most important global players in mechanics for the agricultural sector, present in all of the main markets worldwide with pro-forma revenue in 2021 in excess of one billion euros. COMER INDUSTRIES

1.2

THE GLOBAL MACROECONOMIC SCENARIO AND THE REFERENCE MARKET The global economy entered 2022 in a weaker position than

Global growth is estimated to be around 4.4% in 2022, down

was foreseen in the IMF’s last forecast, which dates back

0.5 percentage points from last October’s IMF forecast, 5.9%

to last October. Rising energy prices and supply difficulties

in 2021, in line with declines in the growth forecasts of the

resulted in higher and geographically broader inflation

two largest economies (See Chart on page 15). The estimate

than expected, with the United States, emerging markets,

takes into account the effects of mobility restrictions and

and developing countries being particularly affected. The

border closures that are expected to weigh on growth in the

downsizing of the Chinese real estate market and lower-

first quarter of 2022. These negative effects are expected

than-expected growth in private consumption also point to

to dissipate beginning in the second quarter. Estimates are

cautious growth prospects.

based on information available as of January 18, 2022. Historical

Projections

Source: World Economic Outlook January 2022, IMF

2020

2021

2022

2023

Global Output

-3.1

5.9

4.4

3.8

Advanced economies

-4.5

5.0

3.9

2.6

United States

-3.4

5.6

4.0

2.6

Eurozone

-6.4

5.2

3.9

2.5

Germany

-4.6

2.7

3.8

2.5

France

-8.0

6.7

3.5

1.8

Italy

-8.9

6.2

3.8

2.2

Spain

-10.8

4.9

5.8

3.8

Japan

-4.5

1.6

3.3

1.8

United Kingdom

-9.4

7.2

4.7

2.3

Canada

-5.2

4.7

4.1

2.8

Other advanced economies

-1.9

4.7

3.6

2.9

Amongst the changes in economic estimates for 2022, the

In Canada, the weaker results recorded at the end of 2021

removal of the Build Back Better fiscal policy package from

and the expectation of flatter external demand for 2022

the reference parameters, the early withdrawal of monetary

- linked to the revision of estimates for the United States -

adjustment and continuous supply chain interruptions have

led to a lowering of 0.8 percentage points. In the Eurozone,

contributed toward lowering estimates for the United States

continuing procurement difficulties and the consequences of

by 1.2 percentage points.

the pandemic, already highlighted previously, led to a revision

ANNUAL REPORT 2021

of 0.4 percentage points, driven by the 0.8 percentage point

As regards interest rates, in the United States, with the

decline in Germany, in large part due to the economy’s

increase in pressures on prices and wages, the Federal

exposure to supply chain shocks.

Reserve decided to accelerate its asset buying plan and has

In the United Kingdom, the slowdowns caused by the

signaled that it will increase rates in 2022 even more than

pandemic and procurement issues (particularly in the labor

previously forecast.

and energy markets) have translated into a downgrade in growth by 0.3 percentage points, to 4.7%.

The European Central Bank (ECB) announced that it will discontinue its net asset purchases as part of the Pandemic

The lowering of expectations for 2022 was driven by revisions

Emergency Purchase Program in March 2022, but it will

of the estimates of several large emerging markets. In China,

temporarily increase net purchases by a modest amount

interruptions in the real estate sector triggered a broader

within its longer term asset purchase program. The ECB

slowdown. This led to the downward revision of estimates

also committed to maintaining reference interest rates at

for 2022 to 4.8%, 0.8 percentage points lower than in October.

current levels until adequate progress has been made toward

Forecasts were also weaker in Brazil, where the fight against

stabilizing medium-term inflation.

inflation required a strong response in terms of monetary policy, which will negatively influence domestic demand.

AGRICULTURAL SECTOR The CEMA business climate index published in January 2022

Supply chain interruptions, energy price volatility and

has further stabilized at high levels after several months of

wage pressures in certain geographical areas could boost

slight downward correction, which began after the record

uncertainty with respect to inflation. The increase in reference

peak reached in May and June, when it marked its highest

rates by more advanced economies could result in financial

level since 2008. In January 2022, the index rose slightly to

stability risks in emerging countries as well as in developing

56 points, on a scale from -100 to +100.

economies. Other global risks could also materialize should

In the first nine months of the year, sales of industrial units

geopolitical tensions remain high.

at global level increased across all key regions, albeit with

The situation in Ukraine is developing rapidly, after Russia

uneven results by geographical area and product. In North

recognized two separatist republics in the Donbas region. The

America, sales in the market of tractors and combine

has West condemned the decision and imposed sanctions

harvesters increased by 49% and 10%, respectively, and in

against Russia. The risk of an escalation could impact

the European markets by 31% and 13%. In South America

European energy supplies from Russia, thus increasing

and the rest of the world, increases in demand for combine

inflation.

harvesters and tractors reached 38% and 12%, respectively.

CONSUMER INFLATION

OFFICIAL AND MONETARY

(monthly data; percentage changes over 12 months)

(daily data; percentage changes)

2.0

IN THE MAIN ADVANCED ECONOMIES

MARKET INTEREST RATES IN THE EURO AREA

1.6 6 1.2 4

0.8

0.4

0 0 -0.4

-2

2017 Eurozone

2018 Japan

2019 United Kingdom

2020

2021 United States

-0.8

2014 overnight

2015 Eonia

2016

2017

Euribor

2018 Fixed rate

2019

2020

marginal ref

2021 €STR

COMER INDUSTRIES

BUSINESS CLIMATE INDEX DEVELOPMENT

CEMA Business Climate Index (CBI) – Total 80

-20

-40

-60

-80

CBI = geometric mean of 1) evaluation of the current business situation and 2) turnover expectation; Index scale from −100 to +100; positive index for 1) = majority of respondents evaluates the current situation as favourable and vice versa; positive index for 2) = majority of respondents expects for the next six months an increasing turnover and vice versa (respectively compared to the previous year’s level)

Source: CEMA Business Barometer

CBI

Present situation

Future expectation

In the fourth quarter, growth remained above 10% in all

Comparing these results with the final months of 2019, it can

countries, although with lower results than in the earlier

be seen that machine production has already surpassed pre-

months of the year.

pandemic levels.

In the fourth quarter of 2021, on the other hand, there was a less decisive market recovery than in the initial months of

As regards the wind sector, on the basis of what has been

the year. Demand continues to increase in most geographical

reported by the main wind tower manufacturers, 2021 saw a

areas. In North and South America, tractor demand increased

net increase in the commitments of more than 50 countries

10% for tractors under 140 Hp and 23% for tractors over 140

to combat climate change. These commitments, which in

Hp. In Europe, the tractors and combine harvesters market

certain cases are linked to specific wind energy installation

increased respectively by 16% and 17%.

targets, constitute strong potential for the wind energy industry and are reflected in the continuous improvement of

INDUSTRIAL SECTOR AND WIND POWER

medium- and long-term demand outlooks.

As reported in the economic bulletins of VDMA (the main

As far as the near future is concerned, forecasts therefore

German association of leading players in the mechanical

speak of a positive outlook for 2022, especially in Latin

industry), the investment incentive programs promoted by

America and Asia.

the governments of the main industrialized countries and the fiscal policy measures implemented, in conjunction with the improved economic context, have led to a sharp recovery from the lows reached in the wake of the pandemic. In the first nine months of the year, global demand for earthmoving machines remained stable with respect to the third quarter of 2020, recording an increase in North America and Europe of 10% and in South America of 86%, alongside a decline of 13% in the rest of the world. In the fourth quarter of 2021, the recovery was stronger, global demand for construction equipment increased in all sub-segments, with compact and service machinery growing by 13% and construction machinery increasing by 16%. The greatest growth was confirmed especially in South America (+87%) and North America (+23%), while in Europe and the rest of the world, it came to 19% and 6%, respectively. 16

ANNUAL REPORT 2021

COMER INDUSTRIES

1.3

COMMENTS ON KEY PERFORMANCE INDICATORS The Group monitors its performance using various indicators

results on the basis of standardized performance factors,

that may not be comparable to similar measurements

facilitating the identification of operating trends and allowing

adopted by other groups. Group Management considers that

management to take action also during the year with swift

these indicators provide a comparable measurement of the

corrective actions whenever necessary.

1.3.1

DEFINITION OF THE INDICATORS

The performance indicators used by the Group and disclosed

adjusted by the amount of the following entries:

in this report are based on the following definitions:

(+)

Amortization,

Depreciation

and

Write-Downs

Receivables and other provisions for risks and charges, in “Capex”: indicates, for each Reference Period, the increase

particular:

occurring in investments in tangible and intangible fixed

• amortization of intangible fixed assets;

assets (net of revaluations, capital grants and the effects

• depreciation of tangible fixed assets;

of currency conversion) which, following International

• other write-downs of fixed assets;

Accounting Standards, are recorded in the corresponding

• write-downs of receivables included in current assets and

heading in equity, reduced by disinvestments and excluding the equity effects (i) of internal capitalizations of costs for

of cash equivalents; • provisions for contingent liabilities.

internally generated development activities, (ii) the impacts related to the application of IFRS 16.

“EBITDA [adjusted]”: represents EBITDA as previously defined, adjusted for impacts traceable to the accounting treatment

“Commercial Working Capital”: indicates, at a consolidated

prescribed by the IFRS 2 standard in relation to stock option

level, the algebraic sum of the following items:

and/or stock grant plans, listing and/or collection costs, and

(+) non-current and current assets:

the IFRS 16 standard in relation to lease contracts.

Inventories; Trade Receivables;

“EBIT”: is the Operating Profit in the consolidated income

(-) Non-current and current liabilities:

statement.

Trade payables. “EPS (Earning per share) adjusted”: Net profit [adjusted], as “Invested Capital”: indicates, at a consolidated level, the

defined below, on total number of shares outstanding at the

algebraic sum of the following items:

date of approval of the financial statements.

(+) Commercial working capital; (+) Tangible (including Rights of use), intangible and financial

“Total cash flow from operations”: Cash flow from operating

fixed assets;

activities - Net cash flow from investing activities (excluding

(+) Tax and deferred tax assets, current tax assets;

IFRS 16 impacts).

(+) Other short and long-term receivables, of a non-financial nature;

"Net Financial Position": indicates the net financial position

(-) Other short and long-term payables, of a non-financial

calculate as the difference between cash and cash equivalents

nature;

and debt of a financial nature as follows:

(+) Current and deferred tax liabilities;

(+) non-current and current assets (A):

(-) Severance Indemnity Fund (TFR) and provisions for

• Other short-term financial receivables;

liabilities and charges.

• Marketable securities at fair value; • Cash and cash equivalents;

"Cash Conversion rate: is the ratio of operating cash flow to

(-) non-current and current liabilities (B):

EBITDA [adjusted].

• Long-term loans; • Long-term derivative financial instruments;

“EBITDA”: represents the value of Operating Profit (EBIT) 18

ANNUAL REPORT 2021

• Short-term loans;

• Short-term derivative financial instruments;

(+) financial costs relating to the IFRS 16 accounting

• Other short- and long-term financial payables (including

treatment of leasing contracts;

payables relating to lease contracts recognized in

(+/-) financial costs from differences in fair value according

accordance with IFRS 16);

to the IFRS 2 treatment of listing processes with financial

• Non-current trade payables.

markets or multilateral trading systems, regardless of how the listing took place.

A + B: Net Financial Position. The above net financial position, as represented, achieved the

“Equity”: indicates the algebraic sum of share capital,

same results that would have been obtained according with

statutory reserves, profits/losses and other similar reserves

recommendation reported in the Consob Communication

corresponding to the total of the “Share capital and reserves”

DEM/6064293 as at July 28, 2006 and in the Recommendation

heading.

ESMA 32-382-1138 as at March 4, 2021. “Average staff in the year”: simple average on the basis of "Net Financial Position [adjusted]": this represents the net

the workforce employed by the Group, including temporary

financial position as defined above, adjusted to neutralize

workers.

the impact of the accounting treatment of lease contracts provided by IFRS 16.

“ROE (Return on equity)”: Net profit [adjusted], as defined below, divided by Equity.

“Net financial charges”: indicates the value of the heading “Net financial income and charges” adjusted by the following

“ROI (Return on investment)”: EBIT divided by Invested Capital

algebraic sum:

as defined above.

(+) losses on exchange deriving from financial debt expressed in currencies other than the euro or from other transactions

"Net profit": indicates the result of the consolidated income

carried out to hedge exchange risks (if not accounted for in

statement.

the reserve for cash flow hedging in accordance with IFRS 9), costs and losses deriving from transactions carried out

“Net Profit [adjusted]”: represents net profit as previously

to hedge the risk of changes in interest rates, bank costs

defined, adjusted for impacts traceable to the accounting

and charges not capitalized and not already included in

treatment prescribed by IFRS 2 standards relating to stock

consolidated EBITDA;

option and/or stock grant plans, listing and/or collection

(-) gains on exchange deriving from financial debt expressed

costs net of their relative tax effect.

in currencies other than the euro or from other transactions carried out to hedge exchange risks, revenues and proceeds

The Group prepares the income statement according to the

deriving from transactions carried out to hedge the risk of

nature of costs and the cash flow statement with the indirect

changes in interest rates;

method.

1.3.2

COMMENTS ON THE INDICATORS

Comer Industries Group achieved consolidated revenues of

in particular the US dollar, the Chinese yuan, the Indian rupee

598.1 million euros (+51% compared to the previous year),

and the Brazilian real, had a positive impact of over 0.8 million

which include the results of the Comer Industries brands,

euros. The amount of revenues at the same exchange rates

amounting to 563.4 million euros (+42.20% compared to

as the previous period showed an amount of 562.5 million

December 31, 2020) and revenues from the Walterscheid

euros (+42% compared to the previous year).

brands (consolidated for the month of December only) amounting to 34.7 million euros.

The agricultural sector, which had seen a contraction in 2020, experienced a strong recovery, entailing a 55% increase in

This result was achieved due to the WPG acquisition and the

turnover. Nonetheless, the industrial sector, in continuous

effect of continued strong demand and better prices in the

growth, closed the year with +47% compared to the previous

markets the Group operates in.

year, driven by the Asia Pacific market and the development

Revenues generated abroad represent 90% of the total.

of new products and ranges.

The revaluation in the second half of the year in relation to the

At a geographical level the greatest growth occurred in the

main reference currencies used by Comer Industries alone,

emerging markets, particularly in Asia and South America. COMER INDUSTRIES

On the basis of product type it is worth noting a growth linked

with the previous year due to the business combination

to planetary gearboxes and wheel drives for the industrial

transaction mentioned in the previous paragraph. The balance

construction market.

as of December 31, 2021 includes 63.7 million euros of cash,

The Group has, therefore, proven in this half-year its ability

gross of loans for 184.4 million euros and 56.3 million euros

to fully exploit market opportunities, besides benefiting from

of financial payables arising from the accounting treatment

the full effects of the rationalization projects introduced in

of leases in accordance with IFRS 16. The Group was able to

the past aimed at controlling overhead. Capitalizing on the

generate cash from operating activities for 51.7 million euros

efficiency gains achieved through continuous improvements

(net of investments for the period) and distributed dividends

in business processes, in the first half of the year the Group

for 10.2 million euros.

was able to achieve operating profitability, as a percentage of turnover, higher than that achieved in 2020 and up 50.4% on

Net profit reached 39.4 million euros, corresponding to

the first half of last year.

6.6% of turnover compared to 21.8 million in the previous year (5.5% of turnover). The [adjusted] net profit, which for

EBITDA [adjusted] amounted to 75.4 million euros, equal to

2021 excludes the impact of the treatment of stock grants in

12.6% of sales, compared to 50.1 million euros in the previous

accordance with IFRS 2, amounted to 41.1 million euros (25.9

year, an improvement of 50.4%. Operating profitability both in

million euros in 2020), corresponding to 6.9% of turnover.

absolute terms and as a percentage of revenues has been growing steadily for five consecutive years.

ROE, calculated on [adjusted] net profit, stands at 11.9%

The [adjusted] net financial position showed a negative

compared to 18% in the previous year and benefited from

balance of 120.7 million euros, while the net financial position

the growth in operating income. Earnings per share [adjusted]

was negative by 177 million euros, a worsening compared

stand at 1.43 euros per share (1.27 per share in 2020).

1.4

UNAUDITED 2021 PRO-FORMA INCOME STATEMENT Below is the Group's unaudited pro-forma income statement

The unaudited 2021 pro-forma income statement was

for fiscal year 2021, which is intended to retroactively

prepared solely for illustrative purposes by making appropriate

represent the WPG acquisition as if it had occurred on

pro-forma adjustments to the historical data described

January 1, 2021.

above to retroactively reflect the significant effects of the acquisition. In order to properly interpret the unaudited 2021

The 2021 pro-forma income statement was prepared based

pro forma income statement, consider the following issues:

on the following historical data:

• Given that these are historical and virtual accounting

• Consolidated

income

statement

included

the

representations based on assumptions, if the WPG

Consolidated financial statements for the year ended

acquisition had actually been carried out on the date taken

December 31, 2021 of the Comer Industries Group,

as reference for the preparation of the 2021 pro-forma

prepared in accordance with International Financial

income statement, rather than on the effective date, the

Reporting Standards as adopted by the European

historical data would not necessarily have been the same

Union, which includes WPG's revenues for the month of

as those reflected in the pro-forma income statement;

December; • Income statement as of January 1 - November 30, 2021

• The accounting treatment of the business combination was

framed

within

the

international

accounting

of the WPG Group, prepared according to the International

standard IFRS 3 "Business Combinations" and recorded

Financial Reporting Standards adopted by the European

on a provisional basis, since it is not yet possible to

Union. The WPG Group's consolidated income statement

complete the process of determining the fair value of

of January 1 - November 30, 2021 was prepared for

the net assets to be acquired under the transaction, as

internal purposes since there is no legal obligation in this

no valuations, appraisals, or other specific information

regard, and has not been audited.

relating to these assets and useful for valuation purposes

The unaudited 2021 pro-forma income statement was not

is yet available. Accordingly, any economic effects that

examined by the independent auditors Deloitte & Touche

could result from establishing the fair values of the

S.p.A., as there is no requirement to do so.

net assets acquired are not reflected in the unaudited

ANNUAL REPORT 2021

2021

pro-forma

consolidated

income

statement.

due to changes in the policies of the Comer Industries

Any adjustments deriving from the definition of the

Group management, which have a high component of

purchase price allocation will be included in the

discretionary power, and operational decisions resulting

consolidated financial statements of the Comer Industries

from the outcome of the WPG acquisition.

Group within the term envisaged by IFRS 3 (within 12 months of the date of the transaction);

The accounting standards adopted for the preparation of the

• The data of the 2021 pro-forma income statement do not

unaudited 2021 pro-forma income statement are the same

in any way intend to represent a forecast of future results

as those used for the preparation of the Comer Industries

and therefore should not be used in this sense. The pro-

Group's 2021 consolidated financial statements, specifically

forma data do not reflect the prospective data as they are

the International Financial Reporting Standards adopted by

prepared in such a way as to represent only the effects

the European Union, it being understood that this income

of the transaction that can be isolated and objectively

statement does not represent a "complete set of financial

measured, without taking into account the potential effects

statements" under IAS 1.

UNAUDITED CONSOLIDATED INCOME STATEMENT (thousand euros) Revenue from contracts with customers

PRO-FORMA 12/31/2021 1,048,486

Other operating revenues

7,623

Change in inventories of semi-finished and finished goods and WIP

72,009

Purchase costs

(664,486)

Personnel costs

(227,463)

Other operating costs

(105,132)

Write-downs of receivables and high risk provisions

(818)

Depreciation/amortization

(43,247)

EBIT

86,972

Net financial income / (charges)

(8,655)

Profit before Tax

78,318

Income taxes

(23,982)

Net profit

54,335

It should be noted that the costs associated with the WPG acquisition, including one-off effects related to the transaction, have not been recognized in the unaudited 2021 pro-forma income statement as they are one-off in nature. Some of the indicators recalculated considering the pro-forma 2021 economic data are summarized below:

COMER INDUSTRIES

(mn euros)

12/31/2021

EBITDA [adjusted]

128.2

% of revenues

12.2%

EBITDA

131.0

% of revenues

12.5%

Amortization, depreciation and write-downs

(44)

EBIT

87.0

% of revenues

8.3%

NET PROFIT

54.3

% of revenues

5.2%

NET PROFIT [adjusted]

56.0

% of revenues

5.3%

INVESTED CAPITAL

522.7

ROI [EBIT / INVESTED CAPITAL (%)]

25.1%

NET FINANCIAL POSITION

(177.0)

NET FINANCIAL POSITION [adjusted] (*)

(120.7)

NET FINANCIAL DEBT [adjusted] / EBITDA [adjusted]

(0.9)

EBITDA [adjusted] /NET FINANCIAL CHARGES

(14.8)

ROE [Net profit adjusted / net equity]

16.2%

The calculation of adjusted EBITDA as previously defined also excludes the costs (net of the related releases made to provisions for risks and charges in previous years) of a structural reorganization of the acquired Group that was approved and completed before closing.

1.5

INVESTMENTS 22

During the year, the Group invested 18.8 million euros in

foreign production subsidiaries, amounting to around 5.9

tangible and intangible fixed assets acquired from third parties,

million euros. Assets in Italy include the commissioning of a

net of internal capitalizations and excluding the impact of the

robotized cell with a Gleason Phoenix 280 CX bevel grinding

IFRS 16 accounting standard. The main investments were

machine and anthropomorphic robot and a Gleason 475 GMS

made in Italy for around 12.9 million euros and in the Group's

gear metrology system for the processing flow of gears fully

ANNUAL REPORT 2021

interconnected to factory logistics systems in a closed loop

lines designed with cyber-physical system concepts to

in view of industry 4.0. Note also that the new gear cutting

combine productivity and high quality standards.

machines do not use lubricants when cutting, confirming

Also of note is the project to expand the Reggiolo production

the choice of environmentally friendly technologies when

site with the construction of the new logistics hub adjacent

working steel.

to the production unit, which has resulted in an industrial hub

Two Mazak HCN 6800 and HCN 10800 horizontal machining

of over 40,000 m2 indoors.

centers were also purchased for machining gearboxes.

As part of this important project, it is worth mentioning

These new work centers will go live in Q1 2022 and will be

the investments in general plant engineering and masonry

interconnected to factory logistics systems as per industry

works for the new hub and the investments in new intensive

4.0.

warehouses, automatic warehouses, latest generation

It is also necessary to note the entry into operation of the new

loading/unloading systems, and dedicated software.

industrial painting system equipped with mixing systems

It is also worth mentioning the investments aimed at

and a latest generation application robot. The plant is fully

improving the road network inside and outside the production

interconnected with the factory's logistics systems and is

center and the investments related to the construction of

equipped with the most advanced systems for the control

new offices adjacent to the logistics areas served by a 225

and reduction of energy consumption. The technical and

kW photovoltaic system.

plant engineering choices and the adoption of water-based

At the plant of Comer Industries (Jiaxing) Co. Ltd. in China,

coating products ensure that the coating plant complies with

investments were made in masonry works and general plant

the environmental-friendly approach adopted. In addition to

engineering linked to the planned industrial expansion and

the assets described above, we would like to highlight the

the purchase of new semi-automatic assembly lines for the

purchase of new latest-generation semi-automatic assembly

production of axles and gearboxes.

1.6

RESEARCH AND DEVELOPMENT In 2021 Comer Industries continued its innovation on all

The Comer Industries cutting-edge systems are conceived

product lines. Specifically, for the agricultural market, among

inside the design department before being validated in the

others, a gearbox for driving auxiliary services ("pump

Mechatronics Research Center in Reggiolo (RE) in a 2,100 sq

drive") for sugar cane harvesting machinery was introduced,

m facility dedicated to product development activities such

and validation of the first axle for agricultural tractors was

as type-approval and operating tests, static tests, component

completed.

and devices characterization tests, endurance and fatigue

In the industrial sector, on the other hand, it is worth mentioning

tests, crash tests and structural tests.

the completion of the validation of a new-concept gearbox for earthmoving machines ("motorgrader"), the construction

All the cutting-edge engineering solutions and systems

of prototypes of motor-wheels for 20-ton excavators with

previewed at major trade-fair events are designed and

integrated hydraulic motor with the partner NABTESCO, and

produced to maximize machine efficiency in the business

finally the launch of a new size of axle for aerial platforms

sectors where the Group operates.

from 18 to 23 meters (17 tons).

1.7

SOCIAL RESPONSIBILITY Comer Industries has always adopted a people-centric

plan, but also in favor of local development, bearing witness

approach, placing all its stakeholders at the center of its

to the attention that the company pays to social matters. In

corporate values whether they are employees, investors,

fact, for Comer Industries the surrounding region and nearby

suppliers, or the local communities where the company

communities are resources to be preserved, improved and

operates. Indeed, during the year a number of initiatives were

valued in terms of economic, social, and cultural development.

carried out not only regarding personnel training, considered

It is certainly worth noting the project for renovating Palazzo

a strategic competitive factor within the broader business

Sartoretti and the surrounding park, cultural symbols in COMER INDUSTRIES

Reggiolo (RE), which have been fully restored after the 2012

volunteer organization thanks to which the company provides

earthquake, also thanks to the financial contribution of

concrete support to the community of Bangalore, India,

Comer Industries.

providing 10 deserving female students with the resources they need to cultivate their talents and become nurses.

The project reflects both the strong desire on the part of the company to preserve historical roots while also looking to the

Comer Industries's commitment to sustainability can also

future, and its attention to the surrounding area. But that’s

be seen in its support of its stakeholders and the funding

not all.

of projects dedicated to innovation and new technologies. Participation in the Le Village by Crédit Agricole project in

Palazzo Sartoretti has also been the subject of a

Parma and in the development of the DeepTier platform in

redevelopment project thanks to a partnership between

partnership with Iungo and Gellify go in this direction. Le

Comer Industries, the Municipality of Reggiolo, and the

Village is an incubator that fosters knowledge and interaction

Reggio Children's Foundation, which has given rise to a

between start-ups and financial and industrial businesses of

360-degree educational program, with the goal of studying

the region, and offers opportunities for mutual development

the phenomena of mechanics and gears and explaining them

and exchange.

with different languages (graphic, digital, etc.).

DeepTier is a model of a fintech platform that offers support

The project is intended to create veritable workshops and

to the entire supply chain, from supply chain managers to

laboratories that embrace many areas and aspects of

sub-suppliers, both local and foreign, allowing all players in

education, using the technical specialization and expertise in

the chain to access different forms of advances and financing

the mechanical sector that the Company has developed from

from financial institutions quickly and at advantageous

its inception to today.

conditions.

The local projects in which the company believes go beyond

Programs, initiatives and support activities and partnerships

the places in which Comer Industries is rooted, as can be

involving the arts and the landscape, supporting innovation,

seen from its now long-term collaborations with FAI (National

education, environmental sustainability, and more generally

Trust for Italy) in favor of the protection of artistic and cultural

the creation of value for ourselves and for future generations,

assets throughout Italy and with the “Namaste, Onore a te”

have been part of the DNA of Comer Industries for years now.

1.8

ENVIRONMENT, HEALTH AND SAFETY In continuity with the process already initiated in prior years,

of surgical masks, cleaning and sanitizing procedures, and

Comer Industries has extended the Occupational Health

the use of teleworking.

and Safety Management System according to the ISO

Thanks to the measures introduced, the control tools in place

45001:2018 standard to all Group locations, guaranteeing

within the Integrated System, and the collective responsibility

uniform management of all aspects linked to health and

of the Group's people, there were no outbreaks reported in

safety.

2021. On the Environment front, the results achieved in 2021

During 2021 a total of 36 injuries were recorded with a

highlight the additional steps taken in processes of boosting

frequency indicator value of 2.5 against more than 2,900,000

efficiency and transitioning towards the use of green energy.

hours worked. Of note is the result of zero injuries achieved

Projects to optimize production processes and the use of

by the Bangalore plant.

monitoring systems, including digital, in all production sites

Faced with the persistence of an uncertain global health

have enabled an overall reduction in energy consumption

situation and the constant evolution of national regulations,

(-10%). Furthermore, in the course of 2021, Comer Industries

Comer Industries continued to guarantee a work environment

significantly increased the percentage of clean energy used

safe for everyone's health through an in-depth review and

to fuel its processes: the final value of 32% out of total

application, also on the basis of government provisions, of

consumption (against 9% at the end of 2020) was reached

its corporate protocol in synergy with local health authorities.

thanks to progressive plan for the procurement of electricity

Several actions were taken to ensure the proper application

from certified renewable sources and the expansion of

of preventive measures, including the installation of thermo

photovoltaic systems, with an overall installed power of

facial scanners for temperature detection, daily distribution

more than 2,100 kWp. The joint effect of these interventions

ANNUAL REPORT 2021

translated into an overall reduction of more than 20% in CO2

the company such as, for example, the impact linked to

equivalent emissions linked to internal processes. Note that

home-work commuting.

in 2021 Comer Industries gave further impetus to its carbon

No critical issues have emerged during the year with relation

footprint reduction strategy, also thanks to activities outside

to the environment.

1.9

INTERGROUP RELATIONS AND DEALINGS WITH RELATED PARTIES The Group has dealings with subsidiaries and other related parties at market conditions considered as normal in the respective reference market, taking account of the characteristics of the assets and the services provided.

• Loan to Comer Industries S.p.A. from Comer Industries (Jiaxing) Co. Ltd. for 8 million euros. • Loan to WPG German Holdco Gmbh by Comer Industries S.p.A. for 80.7 million euros. • Loan to WPG US Holdco LLC. by Comer Industries S.p.A.

Transactions between Comer Industries S.p.A. and its

for 90.9 million euros.

consolidated subsidiaries, which are entities related to the Company, are eliminated in the consolidated financial

DEALINGS WITH PARENT COMPANIES

statements, and in compliance with IAS 24. Below is a

The Group does not have commercial dealings with the

summary.

majority shareholder, Eagles Oak S.r.l.

The “Financial income” heading refers mainly to interest

DEALINGS WITH OTHER RELATED PARTIES

accruing in the period on intercompany loans. As of December

It is disclosed that the “Other operating costs” heading includes

31, 2021, the following intercompany loans are outstanding:

professional consultancy provided by three Directors of the

• Loan to Comer Industries (Jiaxing) Co. Ltd. by Comer

parent company Comer Industries S.p.A. for non-significant

Industries (Shoaxing) Co. Ltd. for 1.9 million euros.

amounts. COMER INDUSTRIES

Revenues from contracts with customers

Purchase and other operating costs

Financial income

Financial charges

Royalties

Dividends

Comer Industries S.p.A.

80,650

95,160

387

104

7,457

Comer Industries Components S.r.l.

83,522

10,767

1,000

Comer Industries INC

(233)

86,413

1,273

Comer Industries (Shaoxing) Co. Ltd.

7,527

Comer Industries (JiaXing) Co. Ltd.

38,616

5,922

104

(6,625)

Comer Industries UK Ltd

234

2,504

Comer Industries GmbH

212

350

1,599

1,617

(832)

Comer Industries do Brasil EIRELI

9,786

WPG German Holdco GmbH

174

WPG UK Holdco Ltd.

WPG US Holdco LLC.

212

Off-Highway Powertrain Services Germany GmbH

566

1,394

184

Walterscheid GmbH

122

468

410

2,460

422

(175)

6,174

Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.

496

268

(31)

Walterscheid Powertrain (China) Co. Ltd.

293

(44)

Walterscheid A/S

Powertrain Services France SAS

136

395

(182)

Walterscheid Monguelfo S.p.A.

293

267

Walterscheid Russia LLC

Powertrain Services UK Limited

Powertrain Services (UK Newco) Ltd.

Walterscheid Inc. Woodridge

448

827

(98)

Powertrain Rockford Inc.

384

986

(176)

GKN Ohio Inc.

Walterscheid Cardan GmbH

217,129

712

9,207

COMPANY (thousand euros)

Comer Industries India Pvt Ltd

Walterscheid Getriebe GmbH

TOTAL

ANNUAL REPORT 2021

Trade receivables

Trade payables

Other receivables

Other payables

Financial receivables

Financial payables

Comer Industries S.p.A.

20,379

31,682

171,908

8,138

Comer Industries Components S.r.l.

15,976

7,001

14,772

Comer Industries (Shaoxing) Co. Ltd.

3,135

1,946

Comer Industries (JiaXing) Co. Ltd.

22,625

4,518

8,138

1,946

Comer Industries UK Ltd

634

Comer Industries GmbH

100

Comer Industries India Pvt Ltd

666

1,387

2,981

WPG German Holdco GmbH

24,066

60,123

80,855

WPG UK Holdco Ltd.

19,054

WPG US Holdco LLC.

19,981

91,053

Off-Highway Powertrain Services Germany GmbH

7,490

20,259

Walterscheid GmbH

71,038

9,327

498

Walterscheid Getriebe GmbH

159

8,667

295

Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.

486

8,119

Walterscheid Powertrain (China) Co. Ltd.

281

983

Powertrain Services France SAS

8,345

2,854

Walterscheid Monguelfo S.p.A.

1,576

260

307

7,852

26,077

1,609

Walterscheid Inc. Woodridge

4,430

3,710

203

Powertrain Rockford Inc.

25,520

5,662

GKN Ohio Inc.

Walterscheid Cardan GmbH

2,424

233,337

498

181,992

COMPANY (thousand euros)

Comer Industries INC

Comer Industries do Brasil EIRELI

Walterscheid A/S

Walterscheid Russia LLC Powertrain Services UK Limited Powertrain Services (UK Newco) Ltd.

TOTAL

COMER INDUSTRIES

1.10

THE COMPANIES IN THE GROUP At December 31, 2021, the Comer Industries Group is

consolidation.

organized in a structure with Comer Industries S.p.A. at

The key figures of the consolidated subsidiary companies are

the top, possessing directly or indirectly 100% of 26 Italian

summarized in the table below:

and foreign subsidiaries that constitute the scope of

COMPANY

% control

Comer Industries SpA

Parent company

Main activity Design, production and sales agricultural and industrial sector

Comer GMBH

100%

Agency and trade agricultural and industrial sector

Comer Industries INC

100%

Sales with logistics service agricultural and industrial sector

Comer Industries do Brasil EIRELI

100%

Sales with logistics service agricultural sector

Comer Industries UK Ltd

100%

Sales with logistics service agricultural and industrial sector

Comer Industries Components Srl

100%

Production and sales agricultural and industrial sector

Comer Industries (ShaoXing) Co Ltd

100%

Design, production and sales agricultural and industrial sector

Comer Industries India Pvt Ltd

100%

Production and sales industrial sector

Comer Industries (Jiaxing) Co Ltd

100%

Production and sales agricultural and industrial sector

WPG German Holdco GmbH

100%

Holding company

WPG UK Holdco Ltd.

100%

Holding company

WPG US Holdco LLC.

100%

Holding company

Off-Highway Powertrain Services Germany GmbH

100%

Aftersales and Sales in the agricultural and industrial sector

Walterscheid GmbH

100%

Design, Production and Sales in the agricultural sector

Walterscheid Getriebe GmbH

100%

Design, Production and Sales in the agricultural and industrial sector

Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.

100%

Design, Production and Sales in the agricultural sector

Walterscheid Powertrain (China) Co. Ltd.

100%

Design, Production and Sales in the agricultural and industrial sector

Walterscheid A/S

100%

Aftersales and Sales in the agricultural and industrial sector

Powertrain Services France SAS

100%

Aftersales and Sales in the agricultural and industrial sector

Walterscheid Monguelfo S.p.A.

100%

Design, Production and Sales in the agricultural and industrial sector

Walterscheid Russia LLC

100%

Aftersales and Sales in the agricultural and industrial sector

Powertrain Services UK Limited

100%

Holding company

Powertrain Services (UK Newco) Ltd.

100%

Holding company

Walterscheid Inc. Woodridge

100%

Design, Production and Sales in the agricultural sector

Powertrain Rockford Inc.

100%

Design, Production, Aftersales and Sales in the agricultural and industrial sector

GKN Ohio Inc.

100%

Dormant company

Walterscheid Cardan GmbH

100%

Design, Production and Sales in the industrial sector

ANNUAL REPORT 2021

Share capital at 12/31/21

Of which paid 12/31/21

Revenues 12/31/2021 euro/Mn*

Net profit 12/31/2021 euros/Mn*

Net equity 12/31/2021 euros/Mn*

Headcount 12/31/2021

€ 18,487,338.6

354.94

15.8838

276.91

877

€ 205,000

n.a

0.09

0.35

USD 13,281,000.0

94.82

3.56

23.18

6,112,000.0 BRL

13.85

2.05

4.45

£ 265,000

2.98

0.21

0.92

€ 7,125,000.0

82.72

2.07

15.56

286

€ 6,720,000.0

7.53

0.20

11.09

145,090,000.0 INR

18.30

1.74

7.44

€ 11,700,000.0

198.25

20.49

48.69

278

€ 10,495

0.5

-18.4

£ 3,450

0.0

3.2

USD 51,446

-0.2

24.6

€ 2,050

5,841

-0.7

14.0

357

€ 17,895

9,184

-0.2

51.7

733

€ 26

2,644

-0.4

7.2

221

1,933 BRL

630

-0.1

0.6

20,799

1,452

0.2

12.5

106

2,367 DKK

0.0

1.3

€ 2,139

1,350

0.1

7.7

€ 2,580

3,496

0.3

17.1

206

355

0.1

2.0

£ 16,039

0.3

14.4

£–

0.0

-0.1

USD 1,757

3,188

0.3

19.1

166

USD 1

6,081

0.3

46.6

157

USD –

0.0

€ 25

487

0.0

-0.1

COMER INDUSTRIES

1.11

NON-FINANCIAL INFORMATION In 2021 Comer Industries established its strategy regarding

With regards to the 2021 financial year, consistent with

sustainability and social responsibility, following the

this approach, Comer Industries is preparing to publish its

presentation in 2019 of the “Our Bright Impact” project.

Non-Financial Statement (NFS) pursuant to Leg. Decree 254/2016. In line with its support of the UN 2030 Agenda and

The Sustainability Report referring to 2020 was published

commitment to Sustainable Development Objectives, Comer

during the year with the objective of communicating in a

Industries is implementing a concrete action plan aimed

transparent and comprehensive way the Group’s strategies,

at contributing to the achievement of said objectives and

initiatives and performance with an economic, social and

a progressive integration of sustainability into its business

environmental impact.

model.

1.12

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE YEAR AND BUSINESS OUTLOOK On February 21, 2022, the Comer Industries Board of Directors

is reasonable to expect that the events currently underway,

reviewed and approved the plan for the cross-border merger

which are extraordinary in terms of their nature and extent, will

by incorporation into Comer Industries of the subsidiary WPG

have direct and indirect repercussions on the economy, the

Holdco B.V. (non-operating parent company of the newly

potential effects of which on supply chains – especially with

acquired Walterscheid Group).

regard to the supply and prices of raw materials and energy,

This transaction is intended to help achieve the best

the development of demand on international markets and

operational efficiency, simplification and a shortening of the

trends in inflation and interest rates – cannot be predicted.

Comer Industries chain of control.

The Group points out that aggregate revenues from the three

This transaction will not have any accounting impact on the

nations involved in conflicts correspond to just over 2% of

consolidated financial statements. The strong geopolitical

2021 pro-forma revenues and that there are no significant

tensions concerning Russia, Belarus and Ukraine may lead

credit positions and that there are no significant impacts

to situations of international, humanitarian and social crisis

on the supply chain. No other specific significant events

of significant dimensions with consequent strongly negative

occurred after the close of the year.

impacts on the populations of these countries. However, it

1.13

PROPOSAL FOR THE ALLOCATION OF PROFIT The Board of Directors proposes the Shareholder’s Meeting to

in the amount of 794,189 euros, as envisaged by article 2430

approve, in conjunction with the first coupon, the distribution

of the Italian Civil Code, and the remainder to the extraordinary

of a dividend of 0,5 euros for each share held at the date

reserve.

of approval. The dividend shall be payable on May 4, 2022 (the so-called payment date) with distribution date May 2,

Reggiolo, March 28, 2022

2022 (the so-called ex-date). In this case, all those registered as Comer Industries S.p.A. shareholders at the end of the accounting day of May 3, 2022 (the so-called record date) will be entitled to the dividend. The remainder of the profit for the year of the parent company Comer Industries S.p.A. will be allocated to the Legal Reserve 30

ANNUAL REPORT 2021

For the Board of Directors Matteo Storchi (President & CEO)

COMER INDUSTRIES

CONSOLIDATED

FINANCIAL STATEMENTS

Chapter 2

CONSOLIDATED BALANCE SHEET NOTES

12/31/2021

12/31/2020

Tangible fixed assets

2.6.1

204,735

76,481

Intangible fixed assets

2.6.2

328,058

3,605

ASSETS (thousand euros) Non-current assets

Joint venture real estate investments Investments Deferred tax assets

2.6.3

Other long-term receivables

2.6.4

Total

1,279

41,311

8,414

829

284

576,212

88,784

Non-current assets available for sale Assets available for sale Current assets Inventories

2.6.5

228,628

83,254

Trade receivables

2.6.6

196,130

85,701

Other short-term receivables

2.6.6

8,896

1,428

Current tax assets

2.6.7

17,264

7,903

202

Other short-term financial receivables Short-term derivative financial instruments

2.6.8

601

1,214

Cash and cash equivalents

2.6.8

85,744

38,177

Total

537,464

217,677

1,113,676

306,461

12/31/2021

12/31/2020

Issued capital

18,487

13,109

Share premium reserve

187,881

27,944

Other reserves

32,071

24,109

Accumulated profit (loss)

107,173

78,213

– Retained earnings

67,744

56,448

– Net profit

39,429

21,765

2.6.9

345,612

143,375

2.6.9

345,612

143,375

Long-term loans

2.6.8

177,743

-290

Other long-term financial payables

2.6.8

47,592

19,771

Deferred tax liabilities

2.6.10

20,692

1,270

Post-employment benefits

2.6.11

157,800

9,228

Other long-term payables

2.6.13

9,768

213

Long-term provisions

2.6.12

9,845

3,332

423,440

33,524

TOTAL ASSETS NET EQUITY AND LIABILITIES (thousand euros)

NOTES

Share capital and reserves

Total Portion pertaining to minority interests Total equity Non-current liabilities

Total Current liabilities Trade payables

2.6.13

218,611

84,209

Other short-term payables

2.6.13

40,375

16,349

Tax liabilities

2.6.14

21,816

3,991

Short-term loans

2.6.8

29,203

12,358 255

Short-term derivative financial instruments

2.6.8

114

Post-employment benefits short term

2.6.11

7,379

Other short-term financial payables

2.6.8

8,739

Short-term provisions

2.6.12

Total TOTAL LIABILITIES 34

ANNUAL REPORT 2021

3,691

18,387

8,709

344,624

129,562

1,113,676

306,461

CONSOLIDATED INCOME STATEMENT CONSOLIDATED INCOME STATEMENT (thousand euros)

NOTES

12/31/2021

12/31/2020

Revenue from contracts with customers

2.6.16

598,110

396,207

Other operating revenues

2.6.17

5,778

2,733

45,090

(2,244)

(424,237)

(246,035)

Change in inventories of semi-finished and finished goods and WIP Purchase costs Personnel costs

2.6.18

(86,810)

(67,112)

Other operating costs

2.6.20

(59,710)

(34,967)

(627)

(461)

2.6.1-2.6.2

(20,764)

(17,743)

EBIT

2.6.21

56,831

30,378

Net financial income / (charges)

2.6.22

(1,996)

(980)

54,835

29,398

(15,406)

(7,632)

39,429

21,765

–

39,429

21,765

Write-downs of receivables and high risk provisions Depreciation/amortization

Profit before Tax Income taxes

2.6.23

NET PROFIT of which pertaining to minority interests of which pertaining to the Group Basic earnings/(loss) per share (in euros)

2.6.24

1.37

1.07

Diluted earnings/(loss) per share (in euros)

2.6.24

1.37

1.07

12/31/2021

12/31/2020

39,429

21,765

(743)

1,367

178

(328)

Translation differences on foreign financial statements

6,333

(4,112)

Total other components of the comprehensive income/(loss) statement that may be reclassified to the profit / (loss) in subsequent periods, net of taxes

5,768

(3,074)

(316)

(113)

(265)

(93)

44,932

18,598

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT (thousand euros) Net profit Other components of the comprehensive income/(loss) statement that may be reclassified to the profit / (loss) in subsequent periods: (net of taxes) Net (loss)/gain on cash flow hedges of which fiscal effect

Other components of the comprehensive income/(loss) statement that may be reclassified to the profit / (loss) in subsequent periods: (net of taxes) (Loss)/gain on revaluation of defined benefit plans of which fiscal effect Total other components of the comprehensive income/(loss) statement that will not be reclassified to the profit / (loss) in subsequent periods, net of taxes Total comprehensive profit/(loss) net of taxes

COMER INDUSTRIES

CASH FLOW STATEMENT (thousand euros)

NOTES

12/31/2021

12/31/2020

Profit for the period

39,429

21,765

Reconciliation of net income to operating cash flows: Depr/Amort of tangible and intangible assets and real estate investments net of IFRS 16 impacts Other non-monetary impacts IFRS 2 gross of deferred taxation

16,215

14,014

2,194

5,389

(84)

263

A – Operating activities

Provision for doubtful debts net of uses Provision for employee benefit plans net of uses

2,774

2,654

Provision for risks and charges, net of uses

8,649

4,692

(3,007)

6,568

(3,928)

Net change in deferred taxes Conversion effect on foreign currency items deriving from operating activities Changes in working capital Inventories

2.6.5

(45,090)

2,244

Trade receivables

2.6.6

(33,099)

(8,708)

(1,345)

6,318

Tax assets and liabilities Other receivables

7,362

(421)

Trade payables

75,528

6,543

Other liabilities

(641)

1,554

(2,789)

(2,726)

72,664

49,692

Changes in employee severance indemnities net of provisions Change in provisions for risks and charges net of write-downs

A – Cash flow from operating activities B - Investment activities Net investments in tangible fixed assets

2.6.1

(18,036)

(11,894)

Net investments in intangible fixed assets

2.6.2

(1,600)

(1,240)

Disinvestments in tangible fixed assets

2.6.1

823

1,080

Disinvestments in intangible fixed assets

2.6.2

131

(1,949)

338

Conversion effect on fixed assets Investments in financial assets

(198)

(20,939)

(11,586)

2.6.1

(5,694)

(833)

2.6.1

4,549

3,729

1,133

(2,754)

B – Net cash flow provided by investment/disinvestment activities C – Investment activities subject to IFRS 16 treatment Increases (net of decreases) Impairment assets IFRS 16 Depr./Amort. of tangible and intangible assets IFRS 16 IFRS 16 financial effects Conversion effect on fixed assets IFRS 16

(103)

C – Cash flow from IFRS 16 impacts

(115)

193

D – Business combinations Net increases from business acquisition net of cash acquired

(190,514)

Repayments of short-term loans net of upfront commissions

(7,962)

(8,254)

Repayments of long-term loans net of upfront commissions

(1,569)

(4,694)

New short-term loan disbursements

24,807

7,000

New long-term loan disbursements

179,602

472

(1,348)

5,503

(3,164)

D – Business combinations

2.5.1

E – Financing activities

Chg. Fair value of derivatives from financial contracts. Change in equity for translation reserve and other impacts IFRS 2 impact and listing costs Foreign exchange impacts on balance sheet items Change in capital and reserves due to exercise of warrants

(2,583) (6,568)

3,928

2,389

Dividends paid during the period

(10,205)

(7,143)

E – Net cash flow from financing activities

186,470

(16,259)

CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C+D+E)

47,567

22,041

Opening cash and cash equivalents

38,177

16,136

Increase (decrease) in cash and cash equivalents

47,567

22,041

Closing cash and cash equivalents

85,744

38,177

ANNUAL REPORT 2021

COMER INDUSTRIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(thousand euros)

Share Capital

Share Premium Reserve

Stock Grant Reserve

Legal Reserve

Net equity at 1/1/2020

13,109

27,944

3,181

2,000

Profit/(Loss) for the period Components of the comprehensive profit/(loss): IAS 19.93A - Actuarial gains Components of the comprehensive profit/(loss): Changes in conversion reserve Components of the comprehensive profit/(loss): Change in CFH reserve Subtotal: Res of comprehensive income/(loss) statement Distribution of dividends Allocation of 2019 profit

622

Notional stock grant cost Net equity at 12/31/2020

2,807 13,109

27,944

5,987

2,622

239

Share premium reserves from exercise of warrants Effects of the acquisition: capital increase

2,151 5,139

Share premium reserves arising from the acquisition

157,787

Notional stock grant cost Net equity at 12/31/2021

ANNUAL REPORT 2021

2,194 18,487

187,881

8,181

2,622

OTHER RESERVES

Extraord. reserve

Translation reserve

F.T.A. reserve

C.F.H. reserve

Consolidation reserve

Retained earnings

Profit/loss for the year

Total net equity

10,702

1,857

(5,923)

(129)

3,543

54,329

18,501

129,114

21,765

(93)

(4,112)

(4,112) 1,039

(4,112)

1,039

(93)

21,765

(7,143) 8,523

9,356

18,598 (7,143)

(18,501) 2,807

19,225

(2,256)

(5,923)

910

3,543

56,448

21,765

143,375

39,429

(265)

6,333

6,333 (565)

6,333

(565)

(265)

39,429

(10,205) 21,765

44,932 (10,205)

(21,765) 239 2,151 5,139 157,787 2,194

19,225

4,078

(5,923)

345

3,543

67,744

39,429

345,612

COMER INDUSTRIES

2.1

GENERAL INFORMATION Comer Industries S.p.A. is an Italian company, with

Bolzano, as well as in Bangalore, India, Jiaxing and Taican,

administrative and registered offices in Via Magellano

China, Lohmar and Sohland, Germany, Cachoeirinha, Brazil,

27 in Reggiolo (RE), Tax Code and Company Register no.

Woodbridge and Rockford, Illinois, USA. Key international

07210440157 with approved Share Capital of 18,487,338.60

markets are managed through owned subsidiaries in Brazil,

fully subscribed and paid up as of 31 December 2021, divided

China, Germany, Great Britain, India and United States.

into 28,678,090 shares. Pursuant to art. 2497 bis of the Italian Civil Code, note Comer Industries is the leading global player in the design

that Comer Industries S.p.A. is subject to direction and

and manufacture of advanced engineering systems and

coordination by Eagles Oak S.r.l., with registered office in

mechatronics solutions for power transmissions. It operates

Modena, Viale del Sagittario 5, Share Capital of 2,000,000

in the agricultural machinery, construction and forestry

euros entirely paid-up, Tax Code and Company Register no.

equipment, energy and industrial sectors.

03699500363, which has control over it, as holder of the absolute majority of its shares.

The Group is structured into 11 operating units specialized

The consolidated financial statements as of December 31,

by product families spread over thirteen production sites in

2021 were approved by the Board of Directors on March 28,

the Italian provinces of Reggio Emilia, Mantua, Matera and

2022.

2.2

SCOPE OF CONSOLIDATION The scope of consolidation as of December 31, 2021

At the reference date of these consolidated financial

changed radically as a result of the transaction completed in

statements the parent company Comer Industries S.p.A. is

December 2021, incorporating 18 foreign companies that are

held by Eagles OAK S.r.l.

part of the Walterscheid Group.

See section 2.5.1 for further details on the WPG acquisition.

With regards to the summary of economic-asset/liability

Moreover, the liquidation of the French subsidiary Comer

relations with related parties of the Group, reference should

Industries Sarl was completed in the fourth quarter.

be made to the details in the Management Report.

ANNUAL REPORT 2021

ENTITY NAME Comer Industries Spa Comer GmbH Comer Industries Inc. Comer Industries U.K. Ltd. Comer Industries Components Srl Comer Industries (Shaoxing) Co. Ltd. Comer Industries do Brasil EIRELI Comer Industries India Pvt Ltd.

Comer Industries (Jiaxing) Co. Ltd.

Registered Office

Currency

Share capital approved

Reggiolo (RE) – Italy

KEUR

18,487

% control

Parent company

Pfullendorf – Germany

KEUR

205

Holding company 100

Charlotte, N.C. – USA Leicester – United Kingdom Matera – Italy

KUSD

13,281

100

Comer Industries Spa

KGBP

265

100

Comer Industries Spa

KEUR

7,125

100

Comer Industries Spa

Shaoxing – P.R.C.

KEUR

6,720

100

Comer Industries Spa

Limeira (SP) – Brazil

KBRL

6,112

100

Comer Industries Spa

Comer Ind. Com. Srl

65.8

Comer Industries (Shaoxing) Co. Ltd.

34.2

Comer Industries Spa

Bangalore – India

KINR

145,090

Jiaxing – P.R.C.

KEUR

11,700

Eagles Oak Srl Comer Industries Spa

Lohmar, Germany

KEUR

10,495

100

Walterscheid Powertrain Holdco B.V.

WPG UK Holdco Ltd.

Leek, United Kingdom

KGBP

3,093

100

Walterscheid Powertrain Holdco B.V.

WPG US Holdco LLC.

Rockford, IL, USA

KUSD

58,546

100

Walterscheid Powertrain Holdco B.V.

Off-Highway Powertrain Services Germany GmbH

89.9

Walterscheid GmbH

Lohmar, Germany

KEUR

2,050

10.1

WPG German Holdco GmbH

Walterscheid GmbH

Lohmar, Germany

KEUR

17,895

100

Walterscheid Powertrain Holdco B.V.

89.84

Walterscheid GmbH

10.16

WPG German Holdco GmbH

99.99

Powertrain Services UK Limited

0.01

Powertrain Services (UK Newco) Ltd.

WPG German Holdco GmbH

Walterscheid Getriebe GmbH

Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.

Sohland, Germany

Cachoeirinha, Brazil

KEUR

KBRL

8,410

Walterscheid Powertrain (China) Co. Ltd.

Jiangsu, China

KCNY

162,618

100

WPG UK Holdco Ltd.

Walterscheid A/S

Ishøj, Denmark

KDKK

25,111

100

Powertrain Services UK Limited

Chanteloup-les-Vignes, France

KEUR

2,139

100

Off-Highway Powertrain Services Germany GmbH

Monguelfo – Tesido, Italy

KEUR

2,580

100

Powertrain Services UK Limited

Moscow, Russian Federation

WPG UK Holdco Ltd.

KRUB

Powertrain Services UK Limited

Leek, United Kingdom

KGBP

14,231

100

WPG UK Holdco Ltd.

Powertrain Services (UK Newco) Ltd.

Leek, United Kingdom

KGBP

–

100

Powertrain Services UK Limited

Woodridge, IL, USA

KUSD

2,000

100

WPG US Holdco LLC.

Rockford, IL, USA

KUSD

100

WPG US Holdco LLC.

Woodridge, IL, USA

KUSD

–

100

Walterscheid Inc. Woodridge

Hohe Börde OT Irxleben, Germany

KEUR

100

Walterscheid GmbH

Koga, Japan

KJPY

Walterscheid GmbH

Powertrain Services France SAS Walterscheid Monguelfo S.p.A.

Walterscheid Russia LLC

Walterscheid Inc. Woodridge Powertrain Rockford Inc. GKN Ohio Inc. Walterscheid Cardan GmbH Matsui Walterscheid Ltd.

COMER INDUSTRIES

2.3

ACCOUNTING STANDARDS ADOPTED 2.3.1

DECLARATION OF COMPLIANCE WITH IFRS

The consolidated financial statements of Comer Industries

15519 and 15520) of July 27, 2006 and the DEM/6064293

S.p.A. have been drawn up in compliance with the International

communication of July 28, 2006, pursuant to art. 78 of the

Financial Reporting Standards (IFRS), issued by the International

Issuers’ Regulations, the EC document of November 2003 and,

Accounting Standards Board (“IASB”) and approved by the

where applicable, the Italian Civil Code. The acronym "IFRS"

European Union and in force at the balance sheet date.

also means the International Accounting Standards ("IAS") still in force, as well as all the interpretative documents issued

The notes to the consolidated financial statements have been

by the IFRS Interpretation Committee, previously called the

integrated, on a voluntary basis, with the additional information

International Financial Reporting Interpretations Committee

required by Consob and by the provisions issued by it in

("IFRIC") and even before the Standing Interpretations

implementation of art. 9 of Italian Leg. Dec. 38/2005 (resolutions

Committee (“SIC”).

2.3.2

CONTENTS AND FORM OF THE CONSOLIDATED FINANCIAL STATEMENTS

The unit of currency used is the euro, and all values are expressed in thousands of euro unless otherwise indicated.

and deferred tax liabilities; • current liabilities include payables falling due within 1 year,

The presentation layout for the consolidated balance sheet

including the short-term portion of medium-long-term

makes a distinction between current and non-current assets

loans and of provisions for liabilities and charges and

and liabilities, in which:

liabilities for employee benefits.

• non-current assets include balances of assets realizable after more than one year and include intangible, tangible

The consolidated income statement is presented according

and financial assets and deferred tax assets;

to a “costs by nature” classification.

• current assets include the balances of assets realizable within 1 year; • non-current liabilities include payables falling due after more than 1 year, including financial debts, provisions for

The cash flow statement has been drawn up on the basis of the indirect method and is presented in compliance with IAS 7, classifying cash flows between operating, investment and financing activities.

liabilities and charges and liabilities for employee benefits

2.3.3

RELEVANT ACCOUNTING STANDARDS

The Comer Industries S.p.A. Group adopted International

The financial statements are prepared on a cost basis, except

Accounting Standards and International Financial Reporting

for financial instruments that are measured at fair value.

Standards as of 2007, with the transition date to IFRS effective

The preparation of the financial statements in accordance with

January 1, 2006.

IFRS (International Financial Reporting Standards) requires

Continuing these principles, the consolidated financial

judgments, estimates and assumptions that have an effect on

statements as of December 31, 2021, were therefore drawn

the assets, liabilities, income and expenses. The actual results

up according to the IAS / IFRS adopted by the European Union.

may differ from the results obtained using these estimates.

The consolidated financial statements are presented in

The accounting policies have been applied consistently in all

thousands of euros.

Group companies and for all periods presented.

2.3.4

PRINCIPLES OF CONSOLIDATION

(I) SUBSIDIARIES Companies are defined subsidiaries when the parent company has the authority, directly or indirectly, to conduct business so 42

ANNUAL REPORT 2021

as to obtain benefits from such activities. In defining control,

(II) ASSOCIATES

consideration is also given to potential voting rights that can

Related companies are those companies over which the

currently be freely exercised or converted. These potential

Group has considerable influence but in which it does not

voting rights are not taken into account for the purposes

exercise any control over the management. The consolidated

of the consolidation process upon allocation to minority

financial statements include the accrued share of the profits

shareholders of the results of operations and the share of

and losses of related companies, measured using the equity

capital and reserves they are entitled to.

method from the date on which any such significant influence

The financial statements of subsidiaries are consolidated

on operation started until its termination.

from the date on which the Group gains control and deconsolidated from the date that this controlling interest

Similar to that described above for the subsidiaries, the

ceases. The global integration method is adopted for the

acquisition of related companies is also recorded under the

consolidation of subsidiaries, involving undertaking the total

purchase method; in this case, any acquisition cost in excess

amount of assets and liabilities and all costs and revenues,

of the Group's share of the fair value of net assets acquired is

irrespective of the extent of the Group's interest. The book

included in the value of the equity investment.

value of consolidated equity investments is therefore offset against any relative capital and reserves. The shares of capital

(III) TRANSACTIONS ELIMINATED IN THE CONSOLIDATION

and reserves and profits pertaining to minority shareholders

PROCESS

are shown separately under a specific capital and reserve

Intercompany balances and profits and losses resulting from

item and on a separate line of the consolidated income

intercompany transactions are eliminated in the consolidated

statement. Intercompany dividends distributed by foreign

financial statements. Profits arising from intercompany

subsidiaries are eliminated in the consolidation process using

transactions with associated companies are eliminated as

the proportionate approach provided for by IAS 21, since,

part of the valuation of the equity investment using the equity

even in the case of distribution of profit reserves generated

method.

in previous years, the investor’s percentage equity ownership

Intercompany losses are eliminated only if there is evidence

is not considered to be affected.

that these were realized in detriment to third parties.

2.3.5

INDUSTRY-RELATED INFORMATION

Industry-related information is given with reference to sectors

driveshafts, wheel drives and axles for agricultural use,

of activity. The information includes both costs directly

especially manufacturers of combine harvesters and

attributable and costs allocated according to reasonable

tractors, haymaking, harvesting, irrigation and mixing, and

assumptions. General and administrative costs, ICT and HR

land preparation and working machines.

services, fees for directors, statutory auditors and Group

• Industrial sector. This includes products such as modular

management departments, as well as costs relating to the

planetary drives, travel and hoist drives, slew drives and

global sourcing area (organized according to purchasing

rigid and steering axles for construction and forestry

group of product category) have been allocated to sectors

machinery manufacturers, from the shipbuilding to the

on the basis of turnover.

airport building and mining industries. Components for municipalities, for the extraction industry and material

The Group operates in the following sectors:

handling sectors. Products for the wind power and

• Agricultural sector. This mainly consists of speed

renewable energy sector as well as for driving the augers

increasers, speed reducers, bevel gearboxes, PTO

2.3.6

of biogas machines.

TREATMENT OF FOREIGN CURRENCY TRANSACTIONS

(I) FOREIGN CURRENCY TRANSACTIONS

Any exchange rate differences arising out of conversion are

The functional currency and reporting currency adopted by

recognized in the income statement. Non-monetary assets

Comer Industries Group is the Euro.

and liabilities measured at historical cost are converted at the

Transactions in foreign currencies are converted into euro on

exchange rate at the transaction date.

the basis of the exchange rate at the transaction date.

The monetary assets and liabilities measured under fair value

The monetary assets and liabilities are converted at the

are converted into euro at the exchange rate on the date the

exchange rate on the balance sheet date.

fair value was determined. COMER INDUSTRIES

(II) CONVERSION OF FINANCIAL STATEMENTS DRAWN UP

Revenues and costs of these companies are converted at the

IN FOREIGN CURRENCIES

average exchange rate for the period, closest to the exchange

The assets and liabilities of companies based in non-

rates on the dates on which the individual transactions

EU countries, including adjustments arising from the

took place. Foreign exchange differences arising from the

consolidation process, relating to goodwill and fair value

conversion process are recorded directly in a special provision

adjustments arising from the acquisition of a non-EU

under capital and reserve called the conversion reserve.

company, are converted at the exchange rate prevailing on

Below is the table with the exchange rates applied for the

the closing date of the balance sheet.

conversion of financial statements: Spot exchange rates

2.3.7

Average annual exchange rates

12/31/2021

12/31/2020

2021

2020

€/GBP

0.840

0.899

0.860

0.890

€/USD

1.133

1.227

1.183

1.142

€/CNY

7.195

8.023

7.628

7.875

€/BRL

6.310

6.374

6.378

5.894

€/INR

84.229

89.661

87.439

84.639

€/CHF

1.033

1.080

1.081

1.071

€/CZK

24.858

26.242

25.640

26.455

€/DKK

7.436

7.441

7.437

7.454

€/JPY

130.380

126.490

129.877

121.846

€/NOK

9.989

10.470

10.163

10.723

€/RUB

85.300

91.467

87.153

82.725

€/SEK

10.250

10.034

10.147

10.485

€/HUF

369.190

363.890

358.516

351.249

€/PLN

4.597

4.560

4.565

4.443

ACQUISITIONS

Business combinations are recognized according to the

value of shareholders' equity pertaining to minority interests,

acquisition method.

and the fair value of any equity investment previously held in

According to this method, the consideration transferred in a

the acquired company over the fair value of the net assets

business combination is measured at fair value, calculated

acquired and liabilities assumed at the acquisition date. If

as the sum of the fair values of the assets transferred and the

the value of the net assets acquired and liabilities assumed at

liabilities assumed by the Group at the acquisition date. Any

the date of acquisition exceeds the sum of the consideration

transaction costs are recognized in the income statement at

transferred, the value of shareholders' equity pertaining to

they time they are incurred.

minority interests, and the fair value of any equity investment

Goodwill is determined as the excess of the sum of the

previously held in the acquired company, this excess is

consideration transferred in the business combination, the

immediately recognized in the income statement as income

ANNUAL REPORT 2021

from the transaction concluded. The portions of shareholders'

the business combination occurred on, in its consolidated

equity of non-controlling interests at the date of acquisition

financial statements the Group reports the provisional values

may be measured at fair value or at the pro-rata value of the

of the items for which recognition cannot be completed.

net assets recognized for the acquired company.

These

provisional

values

are

adjusted

during

the

measurement period to reflect new information gathered The choice of valuation method is made on a transaction-

about facts and circumstances existing at the acquisition

by-transaction basis. If the initial values of a business

date which, if known, would have affected the value of the

combination are incomplete at the balance sheet date that

assets and liabilities recognized at that date.

2.3.8

PROPERTY, PLANT AND EQUIPMENT

(I) OWNED FIXED ASSETS

(II) LEASED ASSETS

Property, plant and equipment are measured at historical

Assets held by the Group under leasing contracts, including

cost and are reported net of depreciation (see next point (IV))

operating leases, in accordance with the IFRS 16 standard in

and impairment losses (see para. 2.3.9).

force since January 1, 2019, are recognized as assets with a balancing entry in financial payables. In particular, assets

The cost of fixed assets manufactured internally includes

are recognized at a value equal to the current value of future

materials, direct labor and a share of indirect manufacturing

payments at the date of signing the contract, discounted

costs. The cost of fixed assets, whether purchased externally

using the applicable incremental borrowing rate for each

or manufactured internally, includes incidental costs directly

contract.

chargeable and necessary to operate the asset and, when relevant and subject to contractual obligations, the current

(III) SUBSEQUENT COSTS

value of the estimated cost for the dismantling and removal

The costs of replacing certain parts of the fixed assets are

of fixed assets.

capitalized when it is probable that these costs will result in future economic benefits and can be reliably measured. All

Financial charges relating to specific loans used for the

other costs, including the costs of maintenance and repairs,

acquisition of tangible fixed assets are charged to the income

are attributed to the income statement as incurred.

statement on an accruals basis. According to the provisions of IAS 20, any capital grants obtained as a result of investment

(IV) DEPRECIATION

incentives granted by the public administration are deducted

Depreciation is charged to the income statement on a straight-

from the historical cost of any related capitalized fixed assets,

line basis and on the estimated useful life of fixed assets

when put into operation.

and their residual possible use. Land is not depreciated. The

No fixed assets are available for sale.

estimated useful life results in the following depreciation rates by homogeneous category:

Buildings Light construction, general and specific equipment Equipment, models and molds Furniture and furnishings

2.5-3% 10-15.5% 20-25% 12%

Electronic office equipment

18-20%

Motor vehicles and internal transport

20-25%

The estimated useful life of assets is revised annually and any changes in rates, where necessary, are made prospectively. For assets purchased and/or that became operational during the year, depreciation is calculated using the rates set out above, but adapted pro-rata temporis to any such set-up date.

COMER INDUSTRIES

2.3.9

OTHER INTANGIBLE FIXED ASSETS

(I) RESEARCH AND DEVELOPMENT COSTS

(II) OTHER INTANGIBLE FIXED ASSETS

The costs of research with the aim of acquiring new technical

Other intangible fixed assets, which all have finite useful lives,

knowledge are charged in the income statement when

are measured at cost and are recorded net of accumulated

incurred.

amortization, (see next point (V)) and impairment losses (see para. 2.3.9).

The development costs incurred for the creation of new

The use of software licenses is amortized over their period

products, versions, accessories or new production processes

of use (3-5 years).

are capitalized when:

The costs incurred internally for the creation of trademarks or

• these costs can be reliably determined;

goodwill are charged to the income statement when incurred.

• these products, versions or processes are technically and commercially feasible;

(III) SUBSEQUENT COSTS

• the expected volumes and realization values indicate that

Subsequent costs incurred for intangible fixed assets are

the costs incurred for development will generate future

capitalized only if they increase the future financial benefits

economic benefits;

of the specific capitalized fixed asset, otherwise they are

• the resources to complete the development project exist.

charged in the income statement as incurred. Incidental financing costs.

The capitalized cost includes the materials and the mere cost of direct labor. Other development costs are charged to the

(IV) AMORTIZATION

income statement when incurred.

Amortization is charged to the income statement on a straight-line basis based on the estimated useful life of the

The capitalized development costs are measured at cost,

capitalized fixed assets. The estimated useful lives are as

net of accumulated amortization, (see next point (V)) and

follows:

impairment losses (see para. 2.3.9). Patents and trademarks Development costs Licensing of software

The useful life is reviewed annually and any changes in rates, where necessary, are made prospectively. 46

ANNUAL REPORT 2021

5 years 3-5 years 5 years

2.3.10 IMPAIRMENT OF ASSETS The book values of the assets, except for stocks, financial

The value in use is the current value of future financial flows

assets regulated by IFRS 9 and deferred tax assets, are subject

that are expected to be generated by the asset or by the cash

to review at the balance sheet date, in order to determine if

generating unit to which the asset belongs. Expected cash

any impairment indicators exist. If the assessment reveals

flows are discounted using a pre-tax discount that reflects

the presence of such indicators, the estimated realizable

the current market estimate of the cost of money reported at

value of the asset is calculated in the manner indicated

the time and risks specific to the asset. If the book value is

below. Please note that the estimated realizable value of

higher that the realizable value, the assets or cash-generating

goodwill and intangible fixed assets not yet used is estimated

unit to which they belong are written down to reflect the

at least once per year, or more frequently if events indicate

realizable value. These impairment losses are recognized in

the possibility of a loss of value.

the income statement.

A tangible or intangible asset, including rights of use (as

If the conditions that led to the impairment cease to exist, the

defined by IFRS 16), suffers an impairment if it is not able

assets previously written down are proportionally reversed

to recover the book value at which the asset is recorded in

until reaching at most the value that the assets would

the financial statements through the use or sale thereof.

have had in the absence of previous impairments, net of

The purpose of the verification (impairment test) provided

amortization calculated on the historical cost.

by IAS 36, is to ensure that tangible and intangible fixed

Restorations of value are recognized in the income statement.

assets are not carried at a value higher than their realizable

The goodwill value previously written down can never be

value, consisting of the net realizable value or value in use,

reinstated.

whichever is higher.

2.3.11 EQUITY INVESTMENTS Equity investments in associates are measured using the equity method, as required by IAS 28. If impairment with respect to the amount determined using the above method is detected, the equity investment is written down accordingly.

2.3.12 CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, bank and postal deposits and securities with an original maturity of less than three months.

2.3.13 CURRENT FINANCIAL ASSETS, RECEIVABLES AND OTHER ASSETS Financial assets, as provided for by the new IFRS 9 –

("FVOCI"): financial assets whose contractual cash flows

“Financial Instruments: recognition and measurement” (as

are represented exclusively by the payment of principal

revised in July 2014) which replaces IAS 39 - "Financial

and interest and which are held in order to collect the

Instruments: Recognition and Measurement", are classified,

contractual cash flows as well as the flows deriving from

on the basis of the Group's management methods and the

the sale of the same are classified in the FVOCI category.

related contractual cash flow characteristics, in the following

They are measured at fair value. Interest income, exchange

categories:

rate gains/losses, impairment losses (and related write-

• Amortized cost: financial assets held exclusively for the

backs) of financial assets classified in the category FVOCI,

purpose of collecting the contractual cash flows are

are recorded in the income statement; other changes in

classified in the Amortized cost category. They are valued

the fair value of assets are recorded among the other

using the amortized cost method, recording the income

components of OCI. When these financial assets are sold

in the income statement using the effective interest rate

or reclassified to other categories, due to a change in the

method;

business model, the cumulative gains or losses recognized

• Fair

value

through

other

comprehensive

income

in OCI are reclassified to the income statement; COMER INDUSTRIES

• Fair value through profit or loss ("FVTPL"): the FVTPL

in the OCI and not to be reversed to the income

category is residual in nature by collecting financial

statement either on sale or on impairment of the same.

assets that do not fall under the Amortized cost and

Only

FVOCI categories, such as financial assets purchased for

recognized in the income statement. The fair value of

trading or derivatives, or assets designated as FVTPL by

financial assets is determined on the basis of quoted

management at the date of initial recognition. They are

bid prices or through the use of financial models.

measured at fair value. Gains or losses resulting from this

The fair value of unlisted financial assets is estimated

measurement are recognized in the income statement;

using specific valuation techniques adapted to the

• FVOCI for equity instruments: financial assets represented

specific situation. Valuations are regularly carried out in

by equity instruments of other entities (i.e. investments

order to verify whether there is objective evidence that

in companies other than subsidiaries, associates and

a financial asset or group of assets may be impaired.

joint ventures), not held for trading purposes, can be

If there is objective evidence, the impairment loss is

classified in the FVOCI category. This choice can be

recognized as a cost in the income statement for the

made instrument by instrument and requires changes

period.

dividends

from

these

instruments

will

in the fair value of these instruments to be recognized

2.3.14 DERIVATIVE FINANCIAL INSTRUMENTS The Group holds derivative financial instruments subscribed

portion or overhedging, portion is immediately allocated to

for hedging purposes; however, in cases in which the

the income statement as financial charges and/or income.

derivative financial instruments do not meet all the conditions applicable to hedge accounting as per IFRS 9, the changes

When a hedging instrument reaches maturity, is sold or

in fair value of these instruments are recorded in the income

exercised, or the company changes the relationship with

statement as financial charges and/or income.

the underlying hedged item, and the forecast transaction,

Therefore, the derivative financial instruments are recorded

though it has yet to take place, is still considered likely, the

in compliance with the hedge accounting regulations when:

resulting profits or losses originating from the adjustment

• the hedge ratio is formally designated and documented at

of the financial instrument to the fair value remain under

the beginning of the hedge;

capital and reserves and are charged to income statement

• it is presumed that the hedge is highly effective;

when the transaction takes place as described above. If

• the effectiveness can be reliably measured and the hedge

the probability of the underlying transaction occurring is no

itself is highly effective during the designated periods.

longer likely, the related profits or losses from the derivative contract, originally recorded under capital and reserves, are

The fair value of derivative financial instruments against

immediately charged to the income statement.

exchange risks (forward) is their market value on the balance sheet date, which coincides with the discounted market value

(II) HEDGES OF MONETARY ASSETS AND LIABILITIES

of the forward.

(FAIR VALUE HEDGES)

The accounting method for derivative financial instruments

Where a derivative financial instrument is used to hedge

varies depending on whether or not the conditions and

changes in value of monetary assets or liabilities already

requirements of IAS 9 are met. Specifically:

recorded in the financial statements that could affect the income statement, profits and losses related to changes

(I) CASH FLOW HEDGES

in fair value of the derivative financial instruments are

In the case of a derivative financial instrument for which the

immediately recorded in the income statement. Likewise,

hedging ratio to variations in cash flows generated by an

the profits and losses relating to the hedged item modify the

asset or liability or a future transaction (underlying hedged

carrying amount of any such item and are recorded in the

item) believed to be highly probable and that could affect

profit and loss account.

the income statement is formally documented, the effective portion, originating from the adjustment of the derivative financial instrument to the fair value, is charged directly to a reserve under capital and reserves. When the underlying hedged cash flow occurs, any such reserve is removed from capital and reserves and assigned to the income statement as operating charges and revenues, while any non-effective 48

ANNUAL REPORT 2021

2.3.15 INVENTORIES Stocks are recorded, in each homogeneous category, at the

(raw materials, consumables, energy utilities, direct labor),

purchase cost, including incidental and production costs and

and the cost of manufacturing (indirect labor, depreciation,

the corresponding net realizable or market value at year-end,

etc.) in the amount reasonably attributable to the products.

whichever is lowest. The cost is determined according to the

Any stock impairment risks are hedged by the relevant stock

weighted average cost method.

depreciation allowance recorded as an adjustment to the corresponding assets item. Amounts thus obtained do not

As far as goods manufactured by the Company (semi-

differ significantly from current costs on the closing date of

finished, work in progress and finished goods) are concerned,

accounts.

the cost of production includes all directly chargeable costs

2.3.16 INTEREST-BEARING FINANCIAL PAYABLES All interest-bearing financial liabilities are valued as per the amortized cost method; the difference between this value and the settlement value is charged to the income statement during the term of the loan.

2.3.17 LIABILITIES FOR EMPLOYEE BENEFITS (I) DEFINED CONTRIBUTION PLANS

classified under personnel costs in the income statement

The Group participates in public or privately defined

while the implicit financial charges are reclassified in the

contribution pension schemes on a mandatory, contractual

applicable financial section.

or voluntary basis. The payment of contributions fulfills the Group's obligation towards its employees. The contributions

(III) EMPLOYEE DEFINED BENEFIT PLANS FOR GERMAN

are costs recognized in the period in which they are due.

AND AMERICAN SUBSIDIARIES Certain group companies offer defined benefit, post-

(II) DEFINED BENEFIT PLANS FOR EMPLOYEES FOR

employment, and other long-term pension plans. The cost

ITALIAN COMPANIES

of providing benefits under the plan is determined using the

The defined benefit plans for employees are payable on or

projected unit credit method. The companies' net obligation is

after the termination of the period of employment in the

calculated separately for each plan by estimating the amount

Group. These mainly include the severance indemnities

of future benefit that employees have accrued in the current

which are calculated separately for each plan using actuarial

and prior periods, discounting that amount and deducting the

methods to estimate the amount of future benefit accrued to

fair value of any plan assets.

employees during the year and in previous years. The resulting benefit is discounted and recorded net of the fair value of any

Measurements, including actuarial gains and losses and the

related assets. The interest rate used to calculate the present

return on plan assets (excluding interest), are recognized

value of the obligation was determined in accordance with

immediately in the balance sheet, with a corresponding

para. 78 IAS 19, of the Iboxx Corporate A index with duration

debit or credit to retained earnings, through comprehensive

7-10 determined at the date of valuation. The yield with a

income for the period they occur in.

comparable duration to that of the collective body of workers

Remeasurements are not reclassified to earnings in

being valued was chosen for this purpose.

subsequent periods. Costs for past services are recognized in earnings on the date

In the case of increases in plan benefits, the portion of the

of the plan amendment or reduction. Interest is calculated by

increase relating to the previous employment period is

applying the discount rate to the defined benefit liability.

charged to the income statement on a straight line basis over the period in which the related rights will be acquired. If the

The companies' obligation with respect to other long-

rights are acquired immediately, the increase is immediately

term employee benefits is equal to the future benefit that

recorded in the income statement. The expected present

employees have received in exchange for their current work

value of benefits payable in the future related to the length

and in prior periods. This benefit is discounted to determine

of employment in the current period, conceptually similar to

its present value.

the accrued share of the employee severance indemnity, is COMER INDUSTRIES

2.3.18 INCOME TAXES Income taxes recognized in the income statement include

statements and the corresponding values recognized for tax

current and deferred taxes. Income taxes are generally

purposes.

charged to the income statement, unless they relate to items recognized directly under capital and reserves. In this case,

Deferred taxes are calculated according to the designated

the income taxes are also charged directly to capital and

method of reversal of timing differences, on the basis of

reserves, as a variation to the amount recorded.

realistic estimates of financial charges resulting from the

Current taxes are taxes calculated by applying the tax rate

application of the tax legislation in force at the date in which

in effect on the balance sheet date and adjustments to prior

the financial statements were prepared. Deferred tax assets

year taxes to taxable income.

are recognized only if it is probable that sufficient taxable

Deferred taxes are calculated using the so-called liability

income will be generated in future years to realize these

method on timing differences between the amount of

deferred taxes.

assets and liabilities recorded in the consolidated financial

2.3.19 PROVISIONS FOR RISKS AND CHARGES Provisions for risks and charges relate to costs and charges

Company formally defines the plan and the interested parties

of a specific nature and certain or likely existence, the amount

have a valid expectation that the restructuring will happen.

and date of occurrence of which are not known at the close

The provisions are periodically updated to reflect any

of the period.

variations in estimates of costs and realization times. Revisions of the provision estimates are charged in the same

Provisions are recognized when:

income statement item that had previously held the provision.

• the existence of a pending liability arising from a past event is probable;

The notes to the consolidated financial statements illustrate

• it is likely that the obligation will be burdensome;

the contingent liabilities consisting of:

• the amount of the obligation can be estimated reliably.

• possible, but not probable, obligations arising from past events, the existence of which will be confirmed only by the

Provisions are recorded at the value reflecting the best

occurrence or non-occurrence of one or more uncertain

estimate of the amount the company would reasonably pay

future events not wholly under the control of the company;

to settle the obligation or transfer it to third parties at the end

• present obligations arising from past events the amount

of the period.

of which cannot be reasonably estimated or the fulfillment

The costs that the Group expects to incur to carry out

of which will probably not be burdensome.

restructuring plans are recorded in the financial year the

2.3.20 CURRENT FINANCIAL LIABILITIES, TRADE PAYABLES AND OTHER

PAYABLES

Trade payables and other payables, which mature within

other financial liabilities. Financial liabilities are measured at

the normal commercial terms, are not discounted and are

amortized cost by recording charges in the income statement

recognized at cost (identified by nominal value) reflecting

using the effective interest rate method, with the exception

their settlement value.

of financial liabilities purchased for trading purposes or derivatives, or those designated as FVTPL by management

Current financial liabilities include the short-term portion

at the date of initial recognition, which are measured at fair

of borrowings, including payables for cash advances and

value through profit or loss (see para. Financial Derivatives).

ANNUAL REPORT 2021

2.3.21 DE-RECOGNITION OF FINANCIAL ASSETS AND LIABILITIES FINANCIAL ASSETS

(including options settled in cash or similar), the extent of

A financial asset is derecognized when:

the Group's involvement corresponds to the amount of the

• the rights to receive cash flows from the asset are

transferred asset that the Group may repurchase; however,

extinguished;

in the case of a put option issued on an asset measured at

• the Group retains the right to receive cash flows from the

fair value (including options settled in cash or similar), the

asset, but has assumed the contractual obligation to pay

extent of the Group's residual involvement is limited to the

them in full and without delay to a third party;

lower of the fair value of the transferred asset and the option

• the Group has transferred the right to receive cash flows

exercise price.

from the asset and has transferred substantially all risks and rewards of ownership of the financial asset or has

FINANCIAL LIABILITIES

neither transferred nor retained all risks and rewards of

A financial liability is derecognized when the obligation

ownership of the asset, but has transferred control of the

underlying the liability is extinguished, canceled or discharged.

asset.

In cases where an existing financial liability is replaced by another from the same lender, under substantially different

In cases where the Group has transferred the rights to receive

conditions, or the conditions of an existing liability are

cash flows from an asset and has neither transferred nor

substantially changed, this exchange or change is treated as

retained all the risks and benefits or has not lost control over

a de-recognition of the original liability and the recognition

it, the asset is recognized in the balance sheet to the extent of

of a new liability, with any differences between the carrying

its residual involvement in the asset. The residual involvement

amounts recognized in the income statement.

that takes the form of a guarantee on the transferred asset

In the case of changes to financial liabilities defined as non-

is valued at the lower of the initial book value of the asset

substantial, the financial liability is not derecognized and the

and the maximum amount that the Group could be required

value of the debt is recalculated keeping the original effective

to pay.

interest rate unchanged, discounting the modified cash flows,

In cases where the residual involvement takes the form of

thus generating a positive or negative effect on the income

an option issued and/or purchased on the transferred asset

statement.

2.3.22 REVENUE (I) REVENUES FROM CONTRACTS WITH CUSTOMERS

defined payment terms and excluding taxes and duties.

Revenues are recognized to the extent in which it is probable

Revenue from the sale of goods is recognized when the

that the economic benefits will be achieved by the Group and

Company has transferred control of the goods to the

the related amount can be reliably determined, regardless of

purchaser. Revenue is measured at the fair value of the

the date of payment.

consideration received or to be received, net of returns and

Revenues are measured at the fair value of the amount

rebates, commercial discounts and volume reductions.

received or to be received, taking into account the contractually

2.3.23 COSTS Costs are recognized when they relate to goods and services purchased and/or received during the period or by systematic allocation of an expense from which future benefits are spread over time.

2.3.24 FINANCIAL INCOME AND EXPENSES The financial income and charges are reported on an accrual

instruments that must be recognized in the income statement

basis based on the interest accrued to the net value of the

if they fail to meet the requirements to be considered hedging

related financial assets and liabilities by applying the effective

(see para.2.3.13 and following).

interest rate. The financial income and charges include gains and losses on exchange and gains and losses on derivative COMER INDUSTRIES

2.3.25 SHARE-BASED PAYMENTS - EQUITY-SETTLED PAYMENT TRANSACTIONS The incentive plan based on the Parent Company's ordinary

obligation, is not considered as a maturity condition.

shares (Stock Grant Plan), reserved for CEO of Comer Industries S.p.A., was terminated.

Non-accruing conditions are reflected in the fair value of the

The cost of transactions settled with capital instruments

plan and imply the immediate recognition of the cost of the

is determined by the fair value on the date on which the

plan, unless there are also service or performance conditions.

assignment is made, using an appropriate valuation method.

No cost is recognized for rights that do not accrue because the

Such cost, corresponding to the increase in shareholders'

performance and/or service conditions are not met. When the

equity, is recorded under personnel costs over the period in

rights include a market condition or a non-vesting condition,

which the conditions relating to the achievement of objectives

they are treated as if they had accrued regardless of whether

and/or the provision of the service are met.

or not the market conditions or other non-vesting conditions

The cumulative costs recognized for these transactions

to which they are subject are met, it being understood that all

at the end of each financial year up to the vesting date are

other performance and/or service conditions must be met.

commensurate with the expiry of the vesting period and the

If the conditions of the plan are modified, the minimum

best estimate of the number of equity instruments that will

cost to be recognized is the fair value at the grant date in

actually accrue.

the absence of the modification, assuming that the original conditions of the plan are satisfied. In addition, a cost is

The service or performance conditions are not considered

recognized for each change that results in an increase in the

when the fair value for the plan is defined at the assignment

total fair value of the payment plan, or is otherwise favorable

date. However, the likelihood that these conditions are met in

to employees; this cost is measured with reference to the

defining the best estimate of the number of equity instruments

date of the change. When a plan is derecognized by the entity

that will be accrued is considered. Market conditions are

or the counterparty, any remaining element of the plan's fair

reflected in the fair value at the assignment date. Any other

value is immediately expensed to the income statement.

condition linked to the plan, which does not involve a service

2.3.26 USE OF ESTIMATES The preparation of the consolidated financial statements

assumptions and the conditions on which the estimates are

requires that the Directors apply accounting standards

based.

and methods that, in certain circumstances, are based on

Estimates and assumptions are reviewed periodically and

difficult and subjective valuations and estimates based on

the effects of each variation recognized in the period in which

past experience and assumptions which are from time to

the estimate is revised if the revision affects only the current

time considered reasonable and realistic depending on the

period, or even in subsequent periods if the revision affects the

relative circumstances.

current period and those in the future. The financial statement

The application of these estimates and assumptions affect

items which, more than others, require a greater degree of

the amounts reported in the schedules forming the financial

discretion by the directors when making estimates and for

statements, such as the statement of financial position, the

which a change underlying the assumptions used could

income statement, the statement of comprehensive income,

have a significant impact on the financial statements are:

the cash flow statement and the statement of changes in

deferred taxes, allowance for doubtful accounts, provisions

shareholders' equity, as well as the information provided. The

for product warranty risks, other provisions for legal risks, the

final values of the accounting items for which these estimates

inventory write-down provision for semi-finished and finished

and assumptions were used may differ from those reported

products and transactions with payment settled with equity

in the financial statements due to uncertainties regarding the

instruments.

2.3.27 PUBLIC GRANTS

Public grants are recognized when there is reasonable

revenues, but are systematically spread over a number of

certainty that they will be received and that all the conditions

financial periods so as to match the recognition of the costs

referring to them have been satisfied.

they are intended to offset. A grant relating to an asset is

Grants relating to components of cost are recognized as

recognized as a revenue in constant amounts along the

ANNUAL REPORT 2021

expected useful life of the asset in question.

measures aimed at all companies have not been included (by

In the event the Group receives a non-monetary grant, the

way of example but not limited to tax facilitating measures

asset and the relative grant are recognized at nominal value

such as hyper-amortization, super-amortization, tax credit

and released in the income statement in constant amounts

for research and development and facilitating measures

along the expected useful life of the asset in question.

such as the Wages Guarantee Fund) as these advantages

Law 124 of 2017 provides for compulsory disclosure of

are not aimed at a specific company.

subsidies, grants, appointments or economic advantages

During the year, the Group Italian companies only received

received from the Public Administration or, in any case,

State Aid that targeted all companies, and therefore for any

involving public resources.

details reference should be made to the National Register of

From a systematic reading of the regulation, the facilitating

State Aid.

2.3.28 ACCOUNTING STANDARDS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS EFFECTIVE FROM JANUARY 1, 2021 ADOPTED BY THE GROUP

The adoption of this amendment has not had any effect on the Group’s consolidated financial statements.

period of application of the amendment issued in 2020 which

NEW ACCOUNTING STANDARDS AND AMENDMENTS NOT YET APPLICABLE AND NOT EARLY ADOPTED BY THE GROUP ON DECEMBER 31, 2021

enabled lessees to account for rent reductions connected to

On May 14, 2020, the IASB published the following

Covid-19 without having to analyze the contracts to evaluate

amendments:

whether the definition of lease modification under IFRS 16

• Amendments to IFRS 3 Business Combinations: the

was met. Therefore, lessees applying this option in 2020

amendments are intended to update the reference in IFRS

accounted for the effects of rent reductions directly in the

3 to the Conceptual Framework in the revised version,

income statement on the effective date of the reduction. The

without resulting in any changes to the provisions of the

On March 31, 2021, the IASB published an amendment called “Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)” by which it extends by one year the

2021 amendment, available only for entities that adopted the 2020 amendment, applies as of April 1, 2021 and early

standard. • Amendments to IAS 16 Property, Plant and Equipment:

adoption is permitted.

the purpose of the amendments is not to allow the

The adoption of these amendments has not had any effect

deduction from the cost of property, plant and equipment

on the Group’s consolidated financial statements.

of the amount received from the sale of goods produced during the testing phase of the asset itself. These sales

On June 25, 2020, the IASB published an amendment called

revenues and related costs will therefore be recognized in

"Extension of the Temporary Exemption from Applying IFRS

the income statement.

9 (Amendments to IFRS 4)". The amendments allow the

• Amendments

IAS

Provisions,

Contingent

extension of the temporary exemption from applying IFRS 9

Liabilities and Contingent Assets: the amendment

until January 1, 2023 for insurance companies. The adoption

clarifies that all ‘costs that relate directly to the contract’

of this amendment has not had any effect on the Group’s

must be considered when estimating whether a contract

consolidated financial statements.

is onerous. Accordingly, the assessment of whether a contract is onerous includes not only incremental costs

On August 27, 2020, the IASB, following the reform on

(such as the cost of direct material used in the work), but

interbank interest rates such as IBOR, published the document

also all costs that the company cannot avoid because it

"Interest Rate Benchmark Reform - Phase 2" which contains

has entered into the contract (such as the portion of the

amendments to the following standards:

depreciation of machinery used to fulfill the contract).

• IFRS 9 Financial Instruments • IAS

Financial

Instruments

• Annual Improvements 2018-2020: the amendments Recognition

Measurement

and

were made to IFRS 1 First-time Adoption of International Financial

Reporting

Standards,

IFRS

Financial

• IFRS 7 Financial Instruments Disclosures

Instruments, IAS 41 Agriculture and the Illustrative

• IFRS 4 Insurance Contracts;

Examples of IFRS 16 Leases.

• IFRS 16 Leases All amendments are effective on January 1, 2022. All amendments are effective from January 1, 2021.

The Directors do not expect a significant effect in the COMER INDUSTRIES

consolidated financial statements of the Group from the

The standard applies from January 1, 2023 but early

adoption of these amendments.

application is permitted only for entities that apply IFRS 9 Financial Instruments and IFRS 15 - Revenue from Contracts

On May 18, 2017, the IASB published IFRS 17 – Insurance

with Customers.

Contracts, which is intended to replace IFRS 4 - Insurance

The Directors do not expect a significant effect in the Group’s

Contracts.

consolidated financial statements from the adoption of this

The objective of the new standard is to ensure that an entity

standard.

provides relevant information that faithfully represents the

policies by providing a single principle-based framework

NEW ACCOUNTING STANDARDS AND AMENDMENTS AND INTERPRETATIONS NOT YET APPROVED BY THE EUROPEAN UNION AS OF DECEMBER 31, 2021

for all types of insurance contracts, including reinsurance

On January 23, 2020, the IASB published an amendment

contracts that an insurer holds.

called “Amendments to IAS 1 Presentation of Financial

The new standard also includes presentation and disclosure

Statements: Classification of Liabilities as Current or Non-

requirements to improve comparability between entities in

current". The purpose of the document is to clarify how to

this segment.

classify debt and other short-term or long-term liabilities.

The new standard measures an insurance contract on the

The modification applies from January 1, 2023, however

basis of a General Model or a simplified version of it, called

early application is permitted. The Directors do not expect a

the Premium Allocation Approach ("PAA").

significant effect in the consolidated financial statements of

The main features of the General Model are:

the Group from the adoption of this amendment.

rights and obligations arising from insurance contracts issued. The IASB has developed the standard to eliminate inconsistencies and weaknesses in existing accounting

• the estimates and assumptions of future cash flows are always current;

On February 12, 2021, the IASB published two amendments

• the measurement reflects the time value of money;

called “Disclosure of Accounting Policies—Amendments

• the estimates make extensive use of information

to IAS 1 and IFRS Practice Statement 2” and “Definition

observable on the market;

of Accounting Estimates—Amendments to IAS 8”. The

• there is a current and explicit measurement of risk;

amendments are intended to improve disclosure about

• the expected profit is deferred and aggregated into groups

accounting policies so as to provide more useful information

of insurance contracts at the time of initial recognition;

to investors and other primary users of financial statements

• the expected profit is recognized in the contractual hedging

as well as to help companies distinguish changes in

period taking into account the adjustments resulting from

accounting estimates from changes in accounting policy. The

changes in the cash flow assumptions relating to each

modification will be applied from January 1, 2023, however,

group of contracts.

early application is permitted. The Directors do not expect a significant effect in the consolidated financial statements of

The PAA (Premium Allocation Approach) method involves

the Group from the adoption of these amendments.

measuring the liability for the residual coverage of a group

On May 7, 2021, the IASB published an amendment called

of insurance contracts provided that, at the time of initial

“Amendments to IAS 12 Income Taxes: Deferred Tax related

recognition, the entity expects the liability to reasonably

to Assets and Liabilities arising from a Single Transaction”.

represent an approximation of the General Model. Contracts

The document clarifies how deferred tax liabilities need to

with a coverage period of one year or less are automatically

be recognized on certain transactions that may generate

eligible for the PAA method. The simplifications arising

assets and liabilities of equal amounts, such as leases

from the application of the PAA method do not apply to the

and decommissioning obligations. The modification will be

measurement of liabilities for outstanding claims, which

applied from January 1, 2023, however, early application is

are measured using the General Model. However, it is not

permitted. The Directors do not expect a significant effect in

necessary to discount those cash flows if it is expected that

the consolidated financial statements of the Group from the

the balance to be paid or collected will occur within one year

adoption of this amendment.

of the date on which the claim occurred. On December 9, 2021, the IASB published an amendment An entity shall apply the new standard to insurance contracts

called “Amendments to IFRS 17 Insurance contracts: Initial

issued, including reinsurance contracts issued, reinsurance

Application of IFRS 17 and IFRS 9 – Comparative Information.”

contracts held and also investment contracts with a

The amendment is a transition option relating to comparative

discretionary participation feature (DPF).

information on financial assets presented at the date of initial application of IFRS 17. The amendment aims to avoid

ANNUAL REPORT 2021

temporary accounting misalignments between financial

applied from January 1, 2023 along with the application of

assets and insurance contract liabilities, and therefore to

IFRS 17. The directors do not expect a significant effect in

improve the usefulness of comparative information for

the consolidated financial statements of the Group from the

readers of financial statements. The modifications will be

adoption of this amendment.

2.4

FINANCIAL AND NON-FINANCIAL RISK MANAGEMENT The Group's business is exposed to various financial risks:

(II) INTEREST RATE RISK

market risk (including the exchange rate risk and interest rate

Interest rate risk is derived from medium-long term loans at

risk), credit risk, liquidity risk, price and cash flow risk and

variable rates. The Group's current policy is to use floating

other non-financial risks such as the risk related to climate

rate loans, monitoring the curve of interest rates.

change and cybersecurity. The risk management program is based on the unpredictability of financial markets and aims to

CREDIT RISK

minimize any negative impact on the financial performance

The Group's policy is to sell to customers after an evaluation

of the Group. Comer Industries uses derivative financial

of their credit capacity and therefore within pre-set credit

instruments to hedge exposure to currency risk. The Group

limits. Historically, the Group has not suffered significant

does not use financial derivatives for speculative purposes.

losses on receivables.

Under this procedure the financial risk hedging is planned by a central function of the parent company which coordinates

LIQUIDITY RISK

all the operating companies, reporting directly to the Chief

Prudent management of liquidity risk implies maintaining

Executive Officer.

sufficient available cash and cash equivalents and sufficient credit lines from which to draw. Due to the dynamic nature of

MARKET RISK

the business, the Group's policy is to have revolving standby

(I) EXCHANGE RATE RISK

credit facilities that can be utilized at short notice.

The Group operates internationally and is exposed to exchange rate risk due to exposure mainly to the US dollar, but

PRICE AND CASH FLOW RISK

also the Brazilian real, British Pound and the Chinese Yuan.

The Group is subject to the risk of fluctuations in metal prices,

The exchange rate risks are generated by forecasts of future

in particular, aluminum, copper and steel. The Group's policy is

commercial transactions and recognized assets or liabilities.

to cover the risk where possible, through commitments from

In order to manage the exchange rate risk generated by

suppliers in the medium term, with stockpiling policies when

forecasts of future commercial transactions and recognized

prices are at their lowest and agreements with customers.

assets or liabilities denominated in a currency other than

Furthermore, the Group has no significant interest-generating

the functional currency of the Group (euro), the Group

activities towards third parties and the revenues and the

companies use repurchase agreements (forward), under the

related cash inflows are, therefore, independent of changes

coordination of the central function.

in interest rates.

In particular, the Group is exposed in dollars for sales and

For the operational management of the above risks, please

purchases made with third parties primarily in the US

refer to paragraph 2.6.15.

currency; Group policy is to cover from 70 to 90 percent of future transactions that are expected to be realized within

CLIMATE CHANGE RISK

12 months in foreign currencies. Where necessary, derivative

The Group manages the risks associated with climate

contracts previously stipulated are renewed at maturity in

change, as well as the increase in regulatory constraints

relation to the evolution of the business.

in relation to the reduction of greenhouse gas emissions,

The Group is exposed to the conversion risk of net assets

and more generally the growing trend among civil society

of subsidiaries in North America, Great Britain, China, India

and end consumers towards the development of products

and Brazil. Considering the strategic importance of the

and industrial processes with a lower impact on the

subsidiaries for which the implementation of this activity is

environment. At present, the Group does not see a high risk

foreseen in the short term, the Group did not consider the

related to climate change. The Directors do not expect the

signing of hedging contracts necessary for this purpose.

progressive approach towards a low-carbon economy to COMER INDUSTRIES

have a significant impact on the business, and the possible

network connectivity, data availability, and data security, while

ensuing technological change is not currently expected to

at the same time guaranteeing the processing of personal

have significant effects on the reference market.

data in compliance with the European GDPR regulation and the national regulations applicable in individual EU member

INFORMATION TECHNOLOGY RISK

states. To this end, it has implemented and continues to

The Group considers the operational continuity of its IT

optimize an Information Security Management System

systems to be of great importance and has implemented

(ISMS).

risk mitigation measures in this regard aimed at ensuring

ANNUAL REPORT 2021

2.5

CORPORATE INFORMATION AND INDUSTRY-RELATED INFORMATION 2.5.1

CORPORATE INFORMATION

At the end of 2021, the scope of consolidation changed

(components and drive systems for the agricultural, industrial,

radically as a result of the transaction concluded in December

construction, and mining equipment sectors).

2021 and detailed in the Directors’ Report, incorporating

In the last month of the year, the Walterscheid Powertrain

within it 18 foreign companies belonging to the Walterscheid

brand generated revenues of 34.7 million euros (485 million

Group. Moreover, the liquidation of the French subsidiary

euros for the full year 2021) and EBITDA of 1.7 million euros

Comer Industries Sarl was completed in the fourth quarter.

(50.2 million euros for the full year 2021).

ACQUISITION OF WALTERSCHEID POWERTRAIN GROUP

TRANSFER CONSIDERATION

On December 1, 2021, Comer Industries S.p.A. acquired

components of the consideration transferred at the

100% of WPG HoldCo B.V., parent company of Walterscheid

acquisition date:

The following table summarizes the fair value of the

Powertrain Group, a leader in the Off-Highway sector TRANSFER CONSIDERATION (in euros) Cash and cash equivalents

40,000,000

Equity instruments (8,029,865 ordinary shares)

162,925,961

Total consideration transferred

202,925,961

The fair value of the common shares issued is based on the

TOTAL

price of 20.29 euros per share as defined in the agreement

ALLOCATION

signed on July 15, 2021.

The following summarizes the amounts related to the

VALUES

DEFINED

PROVISIONAL

PRICE

allocation of the excess price calculated as the difference The cash outlay for the WPG acquisition is 190.5 million

between the total consideration transferred and the book

euros net of cash acquired.

equity acquired as of December 1, 2021. TOTAL VALUES DEFINED BY PROVISIONAL PRICE ALLOCATION (in euros)

Total consideration transferred

202,925,961

Net equity acquired

(46,642,137)

Excess price

156,283,824

Step up inventory Adjustment of the inventory obsolescence provision Payables for deferred taxes

3,004,470 (1,191,711) (495,789)

Increase in Goodwill

154,966,855

Purchase Price Allocation

156,283,824

COMER INDUSTRIES

The following details the amount of net equity acquired and the amount resulting from the provisional Purchase Price Allocation. (euros)

Net equity acquired

Purchase Price Allocation

Total consideration transferred

Goodwill

108,785,873

154,966,855

263,752,728

Other intangible fixed assets

61,285,249

Tangible fixed assets

121,679,554

Commercial working capital

116,950,041

Net financial debt Deffered tax assets and liabilites Other current and non-current assets/liabilities Total

1,812,758

(182,314,432) 10,766,000

(182,314,432) (495,789)

(190,510,148) 46,642,137

118,762,799

10,270,211 (190,510,148)

156,283,824

202,925,961

Following the provisional Purchase Price Allocation,

Accordingly, any economic effects that could result from

identifiable net assets amounting to 1.3 million euros were

establishing the fair values of the net assets acquired are not

combined with goodwill of 155 million euros, calculated as

reflected in the 2021 consolidated data.

the residual value, thus bringing the amount of the item to 263.8 million euros.

Any adjustments deriving from the definition of the purchase price allocation will be included in the consolidated financial

Note that the Purchase Price Allocation commented on so

statements of the Comer Industries Group within the term

far was determined on a provisional basis as of December

envisaged by IFRS 3 (within 12 months of the date of the

31, 2021, as no valuations and appraisals useful for valuation

WPG acquisition).

purposes are yet available.

ANNUAL REPORT 2021

2.5.2

INDUSTRY-RELATED INFORMATION

Industry-related information is given with reference to sectors

driveshafts, wheel drives and axles for agricultural use,

of activity. The information includes both costs directly

especially manufacturers of combine harvesters and

attributable and costs allocated according to reasonable

tractors, haymaking, harvesting, irrigation and mixing, and

assumptions. General and administrative costs, ICT and HR

land preparation and working machines.

services, fees for directors, Statutory Auditors and Group

• Industrial Sector. This includes products such as modular

management departments, as well as costs relating to the

planetary drives, travel and hoist drives, slew drives and

global sourcing area (organized according to purchasing

rigid and steering axles for construction and forestry

group of product category) have been allocated to sectors

machinery manufacturers, from the shipbuilding to the

proportionally to the turnover.

airport building and mining industries. Components for municipalities, for the extraction industry and material

The Group operates in the following sectors:

handling sectors. Products for the wind power and

• Agricultural Sector. Products mainly consists of speed

renewable energy sector as well as for driving the augers

increasers, speed reducers, bevel gearboxes, PTO

of biogas machines.

AGRICULTURAL SECTOR SECTOR INDICATORS (thousand euros)

12/31/2021

INDUSTRIAL SECTOR

12/31/2020 DEV. % 12/31/2021

Revenue from contracts with customers

307,708

198,201

EBITDA [adjusted]a

37,729

EBITDA [adjusted] on revenues (%)

12/31/2020 DEV. % 12/31/2021

290,402

198,005

25,862

37,654

12.3%

13.0%

EBITDA

39,189

EBITDA on revenues (%)

396,207

24,248

75,383

50,110

13.0%

12.2%

12.6%

25,097

39,032

23,484

78,222

48,582

12.7%

13.4%

11.9%

13.1%

12.3%

Amortization, depreciation and write-downs

(12,590)

(10,070)

(8,801)

(8,134)

(21,391)

(18,204)

EBIT

27,265

14,684

29,565

15,693

56,831

30,377

8.9%

7.4%

10.2%

7.9%

9.5%

7.7%

Net financial income / (charges)

(1,027)

(490)

(969)

(490)

(1,996)

(980)

Income taxes

(7,374)

(3,685)

(8,032)

(3,947)

(15,406)

(7,632)

NET PROFIT

18,865

10,509

20,564

11,256

39,429

21,765

6.1%

5.3%

7.1%

5.7%

6.6%

5.5%

profitability

(EBITDA

Net profit on revenues (%)

86%

80%

47%

12/31/2020

598,110

EBIT on revenues (%)

55%

TOTAL

88%

83%

(a) Operating income before amortization, depreciation, impairment of receivables and IFRS 16 and 2 - as previously defined.

The agricultural sector, which today accounts for 51% of

(+47%),

turnover (50% in 2020), during the year saw an increase in

[adjusted]), bringing it to levels very close to the sector

turnover of 55%, with a slight drop in profitability due to the

standard.

improved

its

operating

consolidation of the month of December alone relating to the German group acquired. The performance of the industrial segment was positive (especially in Asia), which, following the growth in volumes COMER INDUSTRIES

2.6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.6.1

TANGIBLE FIXED ASSETS

The movements in technical fixed assets and the related

indication of grants received in the capital account, as a

accumulated depreciation during 2021 are described in the

reduction of the investment value:

following tables, which show the values with a separate Land and buildings

Plant and machinery

Industrial and commercial equipment

Other Assets

Tangible fixed assets in progress

Rights of use

Total

1/1/2020

8,913

29,356

11,824

3,106

2,757

25,530

81,486

Increases

493

3,347

5,125

2,663

266

894

12,789

Decreases

(6)

(991)

(83)

(62)

(1,142)

(591)

(5,537)

(5,666)

(756)

(3,729)

(16,278)

694

1,407

439

(1,769)

(770)

Translation reserve

(258)

(21)

(72)

(51)

(374)

12/31/2020

9,251

28,594

10,711

3,089

22,583

76,481

Balance from acquisition

34,021

54,581

30,132

121,680

Increases

568

7,361

5,561

2,327

6,175

24,211

Decreases

(296)

(251)

(16)

(260)

(482)

(1,304)

Depreciation

(829)

(6,664)

(5,419)

(910)

(4,549)

(18,372)

Reclassifications

184

2,102

(196)

(253)

Translation reserve

343

1,396

180

43,241

87,118

10,659

7,119

DESCRIPTION (thousand euros)

Depreciation Reclassifications

12/31/2021

2,946 2,219

(1,836)

2,636

(0) 103

2,040

53,963

204,735

Excluding the increase due to the acquisition of the

of revenues) were invested in tangible fixed assets, net of

Walterscheid Group, which as shown in the table involved a

decreases and "Rights of use".

change in the basis of consolidation of 121.7 million euros,

Changes during the period are shown below:

during the year approximately 17.2 million euros (2.9%

2,252

ANNUAL REPORT 2021

Land and buildings

Other Assets

Total

1/1/2020

24,078

1,452

25,530

Increases

465

429

894

Decreases

(62)

(3,060)

(669)

(3,729)

(50)

(1)

(51)

12/31/2020

21,371

1,212

22,583

Balance from acquisition

27,302

2,832

30,134

Increases

5,892

726

6,618

Decreases

(934)

(75)

(1,009)

(3,774)

(691)

(4,465)

101

103

49,959

4,005

53,964

DESCRIPTION (thousand euros)

Depreciation Translation reserve

Depreciation Translation reserve 12/31/2021

Among the most significant assets developed in Italy are

industrial painting plant equipped with the latest generation

various machines for gear machining, new gear cutting

of mixing systems and robots, fully integrated into the

machines that do not use lubricants for cutting, and a new

company's management system as per Industry 4.0.

2.6.2

INTANGIBLE FIXED ASSETS

The changes in intangible assets are shown below, indicating values net of government capital grants and whose increase mainly reflects the acquisition of the Walterscheid group:

DESCRIPTION (thousand euros)

Goodwill

1/1/2020

Development and approval costs

Trademarks and know-how

Concessions, licenses and trademarks

Other intangible assets

Intangible assets in progress

Total

1,098

2,560

256

3,976

Increases

900

340

1,240

Decreases

(43)

(88)

(131)

Amortization

(446)

(13)

(1,006)

Reclassifications

Translation reserve

(13)

662

12/31/2020

(1,466)

(116)

105

(1)

(14)

2,281

614

3,605

59,337

Balance from acquisition

108,786

1,948

Increases

155,182

891

Decreases Amortization

(362)

Reclassifications Translation reserve 12/31/2021

(13)

122

(1,365)

170,071 709

156,782

(21)

(650)

421

(2,390) (543)

(1)

263,968

422

4,189

58,689

758

328,058

COMER INDUSTRIES

The item breaks down as follows:

• 155 million euros from the provisional allocation of the price paid by Comer Industries S.p.A. for the acquisition,

(I) GOODWILL

as described in greater detail in paragraph 2.5.1.

Goodwill arises from business combinations in accordance with IFRS 3 and represents the excess of the cost of the

Therefore, the entire value of goodwill, amounting to 263.9

acquisition over the Group's stake in the fair value of the

million euros, arises from the provisional allocation of the

acquirer's identifiable assets, liabilities and contingent

price paid for the WPG acquisition.

liabilities existing at the time of the acquisition. For further details see paragraph 2.6.2 and following of this document. (II)

DEVELOPMENT

AND

APPROVAL

COSTS

AND

IMPAIRMENT LOSSES ON INTANGIBLE FIXED ASSETS WITH AN INDEFINITE USEFUL LIFE AND GOODWILL

INTANGIBLE FIXED ASSETS IN PROGRESS

Goodwill, amounting to 263.9 million euros, was not amortized

These capitalizations are mainly related to internal orders

in accordance with IAS 36, but was subject to impairment

associated with the development of new products. During

testing by management. The impairment test, the criteria for

the period intangible fixed assets in progress have been

which were approved by the Board of Directors on February

capitalized development costs of 709 thousand euros; 21

14, 2022, was carried out using the Discounted Cash Flow

thousand euros however represent the decreases for waived

(DCF) method net of tax, provisionally assuming that the

projects.

entire goodwill would be allocated to the Walterscheid Group.

These projects meet the requirements of paragraph 57 of IAS

The expected cash flows used in the calculation of the DCF

38, as the Group analyzed the technical feasibility of the same,

were determined on the basis of a 5-year business plan that

as well as the intention to complete the project, to introduce

takes account of various scenarios and expectations for

new products on the market and the availability of technical

development in the various markets. Based on information

and financial resources, as well as a reliable identification

available at the end of 2021.

of own costs and their ability to produce future economic benefits. These expenses are amortized on the basis of the

These flows were reduced by a discount factor in order to

probable useful life generally estimated to be 3 to 5 years,

consider the risk of unrealizability of projected future plans.

depending on the sector they are intended for.

Specifically, the discount rate was calculated using the Weighted Average Cost of Capital ("WACC"), i.e., by weighting

(III) CONCESSIONS, LICENSES AND PATENTS

the expected rate of return on invested capital net of the costs

The increases in the period relate to the capitalization of

of hedging for a sample of companies in the same industry.

external costs for the realization of projects already described

The average cost of capital (WACC) was calculated as 8.05%

in the report on operations or to software licenses and

and the estimated g rate was conservatively set at a value

applications for the logistics and research and development

lower than the expected long-term inflation rate.

area.

The performance of the impairment test did not indicate the need to recognize any impairment of goodwill as of December 31, 2021.

(IV) OTHER INTANGIBLE FIXED ASSETS customer

In confirmation of this, the sensitivity analysis – carried out

relationships, software and other fixed assets with finite

by increasing the cost of capital used to discount expected

useful lives resulting from the acquisition of the German

cash flows by 100 basis points – did not reveal any need

group. These fixed assets are amortized on a straight-line

to write down the item, nor a variation of ±10% in expected

basis over a period defined by the following amortization

cash flows.

The

item

includes

developed

technology,

rates: • Brand: 9 years;

Moreover, as a further element supporting the recoverability

• Technology developed: 8 years;

of goodwill, Comer Industries' market capitalization is well in

• Relationships with customers: 12 years.

excess of the Group's shareholders' equity.

GOODWILL This item as of December 31, 2021 is broken down as follows: • 108.8 million euros deriving from the acquisition of the balances of the newly acquired German group; • 0.2 million euros from the allocation of the price paid by WPG German Holdco Gmbh for the acquisition of Walterscheid Cardan Gmbh concluded in December 2021; 62

ANNUAL REPORT 2021

2.6.3

DEFERRED TAX ASSETS

The details are as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Deferred tax assets

41,311

8,414

Subtotal deferred tax assets

41,311

8,414

Deferred tax assets

41,311

8,414

The balance of deferred tax assets rose by 32,898 thousand

made during the year.

euros, of which 30,357 thousand euros derived from the

For the detailed breakdown of this item please refer to the

consolidation of balances in the acquisition of the German

table below:

group and 2,542 thousand euros from increased provisions 12/31/2021

12/31/2020

2,021

Total Prepaid. Taxes

Total Prepaid Taxes

Used (allocated)

From acquisition balances

Inventory write-down provision

5,846

1,803

304

3,739

Provision for product warranty/contract risks

8,394

2,435

2,592

3,367

Temporary differences Italian companies

2,436

2,492

(56)

Temporary differences foreign subsidiaries

23,750

492

23,251

Total prepaid taxes company

40,427

7,222

2,849

30,357

885

1,192

(307)

41,311

8,414

2,542

PREPAID TAXES BY COMPANY (thousand euros)

Total prepaid taxes consolidation Total prepaid taxes in the financial statements

30,357

The balance of temporary differences for foreign subsidiaries is mainly attributable to the pension fund of the German WPG group acquired.

2.6.4

OTHER LONG-TERM RECEIVABLES

The details are as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Security deposits for foreign rentals

177

164

Other minor items including security deposits Italy

Other long-term receivables

619

Other long-term receivables

829

284

Receivables due from Fondiaria Assicurazioni

The item refers to guarantee deposits primarily for real

credits for investments in new capital goods, of which 435

estate in rental agreements and consumption. The balance

thousand euros relates to Industry 4.0.

increased during the year due to the long-term portion of tax COMER INDUSTRIES

2.6.5

INVENTORIES

The changes are as follows: 12/31/2020

Net change/ increase

Acquisition balances

Translation reserve

12/31/2021

23,350

16,070

40,159

1,158

80,736

(487)

115

(5,772)

(87)

(6,231)

Raw and ancillary materials and packaging

22,863

16,185

34,387

1,071

74,505

Semi-finished products purchased and produced

44,763

19,812

32,057

96,719

Provision for write-down of semi-finished products purchased and produced

(2,720)

(187)

(2,661)

(5,568)

Work in progress

42,043

19,624

29,396

91,151

Finished products and goods

21,831

7,160

41,741

1,690

72,422

Provision for write-down of finished products

(3,483)

(652)

(5,239)

(76)

(9,450)

Finished products

18,348

6,508

36,501

1,614

62,971

Inventories

83,254

42,318

100,284

2,772

228,628

DESCRIPTION (thousand euros) Raw materials and packaging Provision for write-down of raw materials and consumables

The increase in inventories, net of the acquisition of balances

for a total amount of approximately 21.2 million euros, an

of the German group, of around 46.9 million euros compared

increase compared to December 31, 2021 by 2.0 million

to December 31, 2021 is strictly related to the increase in

euros net of the use for scrapping and the effects of the WPG

revenue volumes achieved in the year and the production

acquisition.

outlook for the three months following December 31, 2021.

As of December 31, 2021, the value of intercompany profits

In particular, an increase in raw materials is recorded as an

not yet realized with third parties amounted to a total of

effect of the stock procurement campaign as a consequence

4,773 thousand euros (against 4,094 thousand euros on

of the general tension in the first half of the year in relation

December 31, 2020) before tax estimated at a total of 1,313

to the production capacity of the supply chain. However, the

thousand euros (1,127 thousand euros as of December 31,

stock rotation index continues to improve as a result of the

2020) recorded under deferred tax assets. The increase in

ongoing efficiency drive to localize the supply chain with

this adjustment compared to the previous year is mainly

respect to the positioning of the production plants.

due to the increase in intercompany stock at the American

Inventories are shown net of a provision for obsolescence

subsidiary.

2.6.6

TRADE RECEIVABLES AND OTHER SHORT-TERM RECEIVABLES

The changes are as follows: 12/31/2020

Net change

Balance from acquisition

Translation reserve

12/31/2021

Short-term trade receivables

88,813

28,260

79,732

4,923

201,726

Provision for bad debts

(3,112)

(53)

(2,381)

(51)

(5,597)

Trade receivables

85,701

28,207

77,350

4,871

196,130

Advances to suppliers

103

1,239

1,112

Receivables from Social Security Inst.

213

(178)

Accrued income and prepaid expenses

790

(336)

454

Trade receivables from suppliers

(49)

Other short-term receivables

246

3,506

2,175

Other short-term receivables

1,428

4,181

3,287

DESCRIPTION (thousand euros)

ANNUAL REPORT 2021

2,454

5,927 –

8,896

The balance of trade receivables is influenced by the trend

During the year, the Group did not record any significant

in turnover, especially in relation to the last few months of

losses on receivables or release provisions set aside in

the year. Average collection days calculated on aggregate

previous years.

revenues for the last quarter stood at 66 days, an improvement versus the previous year (69 days).

Note that there are no trade receivables due after the year.

The increase in the allowance for doubtful accounts mainly

With regard to other short-term receivables, the increase in

reflects the generic write-down calculated in accordance with

the period is due to receivables from INAIL (National Institute

IFRS 9, influenced this year by indicators representing greater

for Insurance against Labor Accidents) for higher advances

macroeconomic risk due to the economic situation.

paid on an historical basis and sundry prepaid expenses on rents.

2.6.7

CURRENT TAX ASSETS

The changes are as follows: DESCRIPTION (thousand euros)

12/31/2020

Net change

12/31/2021

Italian and foreign VAT

6,054

6,777

12,831

Current taxes

1,816

2,616

4,433

(33)

7,903

9,360

17,263

Refund of export duty and other minor items Current tax assets

The current VAT credit of around 12.8 million euros is

the excess of advances paid with respect to current taxes

attributable to the parent company Comer Industries S.p.A.

calculated on the profit generated during the year by some

for 3.8 million euros (it was 1.2 million euros on December 31,

companies of the German group. The balance includes a tax

2020) and to the subsidiary Comer Industries Components

credit relating to the parent company Comer Industries S.p.A.

S.r.l. for 6.0 million euros (it was 3.7 million euros on

for investments in new capital goods amounting to 1.1 million

December 31, 2020). The remaining part relates to foreign

euros, of which 0.9 million euros relating to industry 4.0.

companies and in particular to the GST credit held by the Indian subsidiary for around 2.4 million euros.

In relation to the above mentioned subsidiaries, it should be noted that the tax system provides for the payment of

During the year, the VAT credit of Comer Industries Component

advance payments for income taxes already withheld on

S.r.l. amounting to around 2.1 million euros outstanding at

commercial transactions, thus unavoidably generating tax

December 31, 2020 was partially collected.

credits during the financial period.

The tax credit for 4,433 thousand euros mainly represents

2.6.8

FINANCIAL ASSETS AND LIABILITIES, GUARANTEES

The net financial position has a negative balance of 177

payables arising from the accounting treatment of leases

million euros, down by approximately 180 million euros

in accordance with IFRS 16, so the [adjusted] net financial

compared to December 31, 2020 following the signing of

position stands at 120.7 million euros.

the medium/long-term loan in the second half of the year for the WPG acquisition. The balance as of December 31,

The breakdown and movements compared to the previous

2021 includes approximately 86.2 million euros in cash and

year are shown below:

cash equivalents, 206.9 million euros in financial payables for loans, and approximately 56.3 million euros in financial COMER INDUSTRIES

DESCRIPTION (thousand euros) Cash and cash equivalents

12/31/2020

Acquisition balances

Increases

Decreases

12/31/2021

(38,177)

(26,481)

(21,086)

(85,744)

12,470

24,807

(7,311)

29,966

179,602

183,323

(7,311)

123,824

(601)

1,214

(601)

(141)

114

182,722

(6,238)

123,337

(112)

(763)

112

(763)

(290)

(1,859)

290

(1,859)

Short-term loans Medium/long-term loans Total net current financial debt to banks

(25,707)

Assets for short-term derivative financial instruments MTM Liabilities for short-term derivative financial instruments MTM

(26,481)

(1,214) 255

Total debt including financial instruments

(26,666)

Up-front commissions for structured loans (current portion) Up-front commissions for structured loans (M/LT portion) Total net financial position [adjusted]

(26,481)

(27,068)

(26,481)

180,100

(5,836)

120,715

Other short-term financial payables IFRS 16

3,691

5,042

175

(168)

8,739

Other long-term financial payables IFRS 16

19,771

26,695

5,233

(4,107)

47,592

Total net financial position

(3,607)

5,256

185,508

(10,111)

177,046

The financial treatment of assets and liabilities broken down by the categories identified by IFRS 9, is summarized in the following table: At fair value recorded in the Income Statement

At fair value through CFH Reserve

At nominal value

Total book value

Fair value

196,130

Other short-term receivables

8,896

Current tax assets

17,264

601

85,744

308,236

308,837

(179,602)

(177,743)

Trade payables

(218,611)

Other short-term payables

(40,375)

Current tax liabilities

(21,816)

(114)

(29,966)

(29,203)

Other short-term financial payables

(8,739)

Other long-term financial payables

(47,592)

Post-employment benefits short-term

(7,379)

DESCRIPTION (thousand euros)

At amortized cost

Assets as at 12/31/2021 Trade receivables

Short-term derivative financial instruments

601

Cash and cash equivalents Total assets

601

Liabilities at 12/31/2021 Long-term loans

Short-term derivative financial instruments

1,859

142

(256)

Short-term loans

763

Total liabilities

142

(256)

2,622

(554,080)

(551,572)

Total

142

345

2,622

(245,844)

(242,735)

ANNUAL REPORT 2021

SHORT-TERM DERIVATIVE FINANCIAL INSTRUMENTS The detailed breakdown of the item short-term derivative financial instruments is shown below: Nominal value in currency 12/31/2021

Notional value in euros 12/31/2021

Fair Value 12/31/2021

15,000 USD

13,244

601

15,000 USD

13,244

601

Short-term derivative financial instruments on interest rates with negative fair value

€ 10,500

10,500

(114)

Total related to interest rate hedging

€ 10,500

10,500

(114)

25,500

19,816

487

DESCRIPTION (thousand euros) Short-term derivative financial instruments on exchange rates with positive fair value Short-term derivative financial instruments on exchange rates with negative fair value Net value of financial instruments

Net value of financial instruments

With regard to the management of exchange risk, the Group

With regards to derivatives on interest rates, it should be

has implemented hedging strategies on the main currencies,

noted that an IRS contract is still in force to hedge a medium/

CNY and USD. In particular, on December 31, 2021 expected

long-term loan taken out in June 2017 that has now been

cash flows for intercompany sales of manufactured products

extinguished early thanks to the generation of cash in the

by Chinese subsidiaries totaling USD 15 million were covered

period. On December 31, 2021, it showed a negative fair

(with a positive fair value of 0.6 million euros recognized in

value of a total of 114 thousand euros, recorded at fair value

the CFH reserve).

through profit and loss due to the loss of the underlying asset. Reference should be made to para. 2.6.15 for more

For more information, reference should be made to para.

information.

2.6.15 regarding the management of exchange risks.

COMER INDUSTRIES

CASH AND CASH EQUIVALENTS

Liquidity is well distributed in all subsidiaries worldwide

The value of 85,744 thousand euros compares with 38,177

to meet the financing of core business and investments.

thousand euros in the previous year. The difference is partly

The values stated can be readily converted into cash and

linked to the time flow of collections and payments and should

are subject to an insignificant risk of change in value. It is

be analyzed by combining the cash and cash equivalents of

believed that the carrying value of Cash and cash equivalents

some companies with the bank payables of others, and partly

approximates their fair value at the balance sheet date.

due to the liquidity acquired through the consolidation of the

Further information can be found in the cash flow statement

German group.

and in the table below.

Currency of origin

Value 12/31/2020

Acquisition balances

Change

Value 12/31/2021

Nom. val. 12/31/2021 (LC/000)

Cash and cash equivalents

USD

12,900

11,055

6,306

30,262

34,274

Cash and cash equivalents

EUR

14,735

9,563

7,778

32,075

Cash and cash equivalents

GBP

476

432

(116)

792

471

Cash and cash equivalents

309

2,747

(152)

2,903

12,092

Cash and cash equivalents

INR

1,128

(85)

1,063

89,455

Cash and cash equivalents

CNY

8,629

107

4,637

13,373

95,528

Cash and cash equivalents

CZK

514

541

13,433

Cash and cash equivalents

DKK

343

(61)

282

2,101

Cash and cash equivalents

HUF

4,806

Cash and cash equivalents

NOK

375

2,336

2,711

27,078

Cash and cash equivalents

PLN

Cash and cash equivalents

RUB

1,017

456

1,473

125,641

Cash and cash equivalents

SEK

285

(42)

243

2,489

38,177

26,481

21,086

85,744

DESCRIPTION (thousand euros)

Total cash and cash equivalents

SHORT-TERM LOANS AND CURRENT PORTION OF MEDIUM/LONG TERM LOANS

The current account debt at December 31, 2021 of Comer

The item includes interest-bearing bank loans.

relates to the balance of cash in transit linked to the payment

The value of 29,203 is made up of 29,966 thousand euros of

of bills payable and direct remittances on December 31 and

short-term bank loans, shown net of the short-term portion

to lines not used.

of transaction costs treated according to the amortized cost method (IFRS 9) equal to 763 thousand euros. The increase over the previous year of approximately 16.8 million euros is mainly due to the stipulation of a loan by Comer Industries S.p.A. with Unicredit in the amount of 10.5 million euros and the short-term portion of the loan from Crèdit Agricole. 68

ANNUAL REPORT 2021

Industries S.p.A. and Comer Industries Components S.r.l.

Currency

Indexing

Value 12/31/2020

Change

Value 12/31/2021

Nom. val. 12/31/2021 (LC/000)

Bank accounts payable and advances Comer Ind S.p.A.

EUR

0.00%

3,154

4,624

7,779

Bank accounts payable and advances Comer Comp. S.r.l.

EUR

0.00%

2,005

5,282

7,287

Loan Unicredit Comer Ind. S.p.A.

EUR

0.00%

7,000

3,500

10,500

Loan Mediocredito It. (C.Comt.)

EUR

Eur1 +0.45%

311

(311)

Loan Crédit Agricole M/L current portion

EUR

Eur6+Var Spread

Loan Crédit Agricole M/L current portion

USD

Libor6+Var Spread

4,400

5,000

12,470

17,495

29,966

(112)

(651)

(763)

12,358

16,844

29,203

DESCRIPTION (thousand euros)

Total gross short-term loans Up-front commissions for short-term structured loans

EUR

Amortized cost

Total net short-term loans

LONG-TERM LOANS

(763)

as set forth in the utilization request, with a maximum

This item includes the long-term portions of the loan taken

duration of 5 years;

out in the second half of the year with Crédit Agricole.

2. Medium/long-term loan in the amount of 50 million dollars,

The signed Financing Agreement breaks down as follows:

This loan provides for compliance with consolidated

1. Medium/long-term loan for a maximum principal amount

operating covenants such as net financial indebtedness

maturing on March 31, 2027.

of 170 million euros, broken down as follows:

[adjusted] ratio to EBITDA [adjusted] of less than 3.00 and

• 140 million euros used for cash maturing on March 31,

EBITDA [adjusted] to net financial charges greater than 5.00,

2027;

which were satisfied in December 2021.

• 30 million euros, usable in cash and intended to support general revolving financial requirements, to be repaid in

Further information can be obtained from the specific tables provided below.

a lump-sum at the end of the relative interest period

Currency

Indexing

Value 12/31/2020

Change

Value 12/31/2021

Nom. val. 12/31/2021 (LC/000)

Loan Crédit Agricole M/L long-term portion

EUR

Eur6+Var Spread

140,000

Loan Crédit Agricole M/L long-term portion

USD

Libor6+Var Spread

39,602

45,000

179,602

(290)

(1,569)

(1,859)

(290)

178,033

177,743

DESCRIPTION (thousand euros)

Total gross long-term borrowings Up-front commissions for M/LT structured loans Total long-term borrowings

Amortized cost

(1,859)

Reported below is the breakdown of bank loans by nature, short and medium/long-term existing on December 31, 2021:

COMER INDUSTRIES

DESCRIPTION (thousand euros)

Company

Loan Mediocredito Italiano

Comer Ind. Compt. S.r.l.

311

Loan Unicredit

Comer Ind. S.p.A.

Loan Unicredit

Comer Ind. S.p.A.

Cacib Line A1

Balance as at New Balance as at Repayments 12/31/2020 disbursement 12/31/2021

< 1 year

> 1 year

of which > 5 years

Expiry

(311)

6/15/2021

10,500

7/31/2022

7,000

(7,000)

10/31/2021

Comer Ind. S.p.A.

20,000

4,000

3/31/2027

Cacib Line A2

Comer Ind. S.p.A.

120,000

24,000

3/31/2027

Cacib Line A3 $

Comer Ind. S.p.A.

44,002

4,400

39,602

4,400

3/31/2027

7,311

194,502

(7,311)

194,502

14,900

179,602

32,400

Total

OTHER SHORT AND MEDIUM/LONG-TERM FINANCIAL PAYABLES The heading refers to payables deriving from the application of the international accounting standard IFRS 16. The detail for the breakdown of the item payables on December 31, 2021 and its variation is provided below:

Foreign exchange impact

12/31/2020

Acquisition balances

Increases

Decreases

Short-term payables IFRS 16

3,691

5,042

175

(168)

Long-term payables IFRS 16

19,771

26,695

5,233

(4,239)

132

47,592

Total

23,461

31,737

5,408

(4,407)

132

56,331

DESCRIPTION (thousand euros)

12/31/2021 8,739

COMMITMENTS AND GUARANTEES

facilities in favor of subsidiaries.

Guarantees given amount to 38,916 thousand euros (24,353

The following are complete details of the system of

thousand euros in 2020) and consist of commitments

commitments and risks for the Group.

of Comer Industries S.p.A. in the total amount of 29,811

The Group has no commitments to finance leasing

thousand euros, all relating to the granting of local credit

companies.

ANNUAL REPORT 2021

DESCRIPTION (thousand euros)

Expiry

12/31/2021 Amount

12/31/2020 Amount

221

2,500

4,000

311

1,496

1,417

837

828

8,800

Guarantees given by Comer Industries S.p.A. Guarantee to the Revenue Agency for Comer Industries S.p.A. Banco BPM for Comer Industries Components S.r.l. credit line Credem for Comer Industries Components S.r.l. credit line Guarantee to Mediocredito for Comer Components Banca Nazionale del Lavoro for Comer India credit line Banca Nazionale del Lavoro for Comer do Brazil credit line Banca Nazionale del Lavoro for Comer Ind (Jiaxing ) Co Ltd. credit line Crédit Agricole for Comer do Brazil credit line

6/30/2021 nonrevolving nonrevolving 6/15/2021 nonrevolving nonrevolving nonrevolving 11/30/2022 nonrevolving

475

471

11,703

9,800

nonrevolving

7,000

3/25/2025

450

200

12/31/2029

Stand-by Letter of Credit to Western Surety Company for US Customs on behalf of Powertrain Rockford Inc. and Walterscheid Inc. Woodridge

nonrevolving

221

Stand-by Letter of Credit to Zurich American Insurance Company on behalf of Powertrain Rockford Inc. and Walterscheid Inc. Woodridge

nonrevolving

177

6/30/2028

Letter of Comfort to Hofin GmbH on behalf of Walterscheid Monguelfo S.p.A.

12/31/2032

634

Warranty Bond to DS Smith Paper Deutschland GmbH on behalf of Off-Highway Powertrain Services Germany GmbH

7/22/2026

12/31/2022

205

38,916

24,353

Crédit Agricole for Comer Ind (Jiaxing) Co Ltd. credit line Guarantees provided by Comer Industries Components S.r.l. Guarantee to Basilicata Region for Comer Industries Components S.r.l. Mortgage on the property at Via E. Ferrari Matera (town of La Martella) on loan Med. It

nonrevolving 6/15/2021

Guarantees provided by WPG German Holdco GmbH via ABN AMRO Bank N.V. Corporate Guarantee to ABN AMRO BANK N.V. – Frankfurt Branch for Cash Pool Intraday Facility Indemnity Letter to Banque Neuflize OBC for Cash Pool Intraday Facility Risk allocation Letter to ABN AMRO BANK N.V. – Belgium Branch for Cash Pool Intraday Facility Customs Bond to Hauptzollamt Köln (Customs) on behalf of Walterscheid GmbH Customs Bond to Hauptzollamt Köln (Customs) on behalf of Off-Highway Powertrain Services Germany GmbH Rental Guarantee to vanderToorn Vastgoed B.V. on behalf of Off-Highway Powertrain Services Germany GmbH – NL Branch

nonrevolving nonrevolving nonrevolving

Guarantees provided by WPG US Holdco LLC via ABN AMRO Bank N.V.

Guarantees provided by Off-Highway Powertrain Services Germany GmbH - AT Branch via Erste Bank AG Rental Guarantee to Allegro Leasing Gesellschaft mbH Guarantees provided by Walterscheid GmbH

Guarantees provided by Off-Highway Powertrain Services Germany GmbH Rental Guarantee to AB Ernst Norrthon on behalf of Off-Highway Powertrain Services Germany GmbH – SE Branch Total guarantees to third parties Guarantees received from third parties Comer Industries S.p.A. from GLEASON

12/5/2021

Comer Industries S.p.A. from GLEASON

12/9/2021

Comer Industries S.p.A. from CMV Srl

2/28/2021

218

Comer Industries S.p.A. from GLEASON $

8/2/2021

145

Comer Industries S.p.A. from GLEASON $

8/2/2021

Comer Industries S.p.A. from GLEASON $

10/19/2022

Comer Industries S.p.A. from GLEASON $

6/30/2022

Comer Industries Components S.r.l. from PROJECT GROUP

11/28/2022

Walterscheid Getriebe GmbH from Starrag GmbH

11/23/2022

131

Total guarantees received from third parties

231

542 COMER INDUSTRIES

ANNUAL REPORT 2021

2.6.9

NET EQUITY

The Parent Company's share capital as of December 31, 2021

The stock grant reserve refers exclusively to the Comer

consists of 28,678,090 shares without nominal value and is

Industries 2019 Stock Grant Plan. In the period it increased by

entirely subscribed and paid-up for 18,487,338.60 euros.

2,194 thousand euros in relation to the accounting treatment

The capital increase in the year is attributable for 5,139

of the cost of the service in accordance with IFRS 2, as the

thousand euros to the acquisition of Walterscheid, which

last tranche of this plan.

also generated a share premium reserve of 157,787 thousand

On April 28, 2021 dividends of 0.5 euros per share relating to

euros.

the result for the 2020 financial year were paid for a total of

The additional capital increase of 239 thousand euros relates

10.2 million euros.

to the exercise of 238,945 warrants in July 2021.

Other reserves include:

OTHER RESERVES (thousand euros)

12/31/2021

12/31/2020

Legal reserve

2,622

Extraordinary reserves available

19,225

Stock grant reserve

8,181

5,987

Consolidation reserve

3,543

(5,923)

4,078

(2,256)

345

910

32,071

24,109

FTA reserve (IAS/IFRS first time adoption) Translation reserve CFH reserve (Cash Flow Hedge) Total other reserves

Information regarding the distributability of the reserves

IFRS 9. The value is shown net of deferred taxation.

can be found in the notes to the financial statements of the Parent Company Comer Industries S.p.A.

Reconciliation between the amount of capital and reserves

The increase in the translation reserve of about 6.3 million

and the result of operations shown in the financial statements

euros is mainly attributable to the revaluation of all the main

of the Parent Company Comer Industries S.p.A. drawn up

currencies used by the Group, particularly the US dollar and

in compliance with the IAS/IFRS international accounting

the Chinese yuan against the euro.

standards on December 31, 2021, and the amounts reported

The cash flow hedge reserve contains the amount, at fair

in the consolidated financial statements, drawn up in

value, of the portion of hedges made on cash flows in foreign

compliance with international standards, on the same date

currency, considered effective according to the provisions of

is as follows:

COMER INDUSTRIES

12/31/2021 DESCRIPTION (thousand euros)

Impact of net income for the year on Parent Company shareholders' equity

12/31/2020

Net equity

Net profit/loss for the year

Net equity

Net profit/loss for the year

119,735

15,884

108,200

14,399

Other changes Share capital increase

5,378

Increase in share premium reserve

159,937

Change in other reserves Net increase in stock grant reserve

2,194

2,807

Effects IAS 19 rev. Actuarial losses net of tax effect

(126)

(42)

(10,205)

(7,143)

Dividends approved Change in the Cash Flow Hedge Reserve IAS 38

FTA reserve arising from the application of IFRS 9 Statutory net equity of Comer Industries Spa IAS/IFRS

276,913

15,884

103,851

14,399

Differences between the adjusted net equity of consolidated equity investments and their value in the financial statements of the Parent Company

166,873

30,337

136,536

14,791

Reversal of intercompany dividends

(94,355)

(2,748)

(91,606)

(8,136)

Change in the Cash Flow Hedge Reserve IAS 38 Comer Industries Jiaxing

345

910

Elimination of exchange rate differences from translation reserve calculation

4,078

(2,255)

Effects IAS 19 rev. Actuarial losses net of tax effect Comer Industries Comt. S.r.l.

(491)

(398)

Equity contribution of subsidiaries to the Parent Company

76,451

27,589

43,186

6,655

Effects deriving from consolidation entries

(7,752)

(4,044)

(3,662)

711

Net equity attributable to minority interests

–

345,612

39,429

143,375

21,765

Total net equity IAS/IFRS

It should be noted that during the year dividends were

Actuarial earnings from recalculating the employee severance

distributed in favor of the holding company Comer Industries

indemnity for the year 2021 have been reported after changes

S.p.A., relating to profits for the year and available reserves

in the reserves for retained earnings (as required by the

of some subsidiaries, mainly by Comer Industries INC. and

revised IAS 19.93A) and amounted to 265 thousand euros,

Comer Industries Component Srl for an equivalent of 2.7

gross of the tax effect.

million euros.

All the effects of the above are shown net of the related taxes.

ANNUAL REPORT 2021

2.6.10 DEFERRED TAX LIABILITIES The deferred taxes are related to the tax effect of timing

taxable income.

differences between the profit and loss for the year for

The amounts so defined are detailed in the following table:

statutory purposes of each company, and any associated 12/31/2021

12/31/2020

2,021

Total Deferred taxes

Tot. Deferred taxes

(used) allocated

175

128

Temporary differences foreign subsidiaries

19,896

522

(216)

19,591

Total deferred taxes

20,071

650

(170)

19,591

620

20,692

1,270

(170)

DESCRIPTION (thousand euros)

Temporary differences Italian companies

Total deferred taxes consolidation Total deferred taxes in the financial statements

from acquisition balances

19,591

The balance of temporary differences between foreign subsidiaries is mainly due to different amortization rates.

2.6.11 POST-EMPLOYMENT BENEFITS Variations in the provision were as follows: CHANGES (thousand euros) Opening balance Acquisition balances Use for discharges and advances Settlements of complementary pensions and treasury funds Allocation for the year Effects of IAS 19 recalculation period (gross of taxes) Closing balance Short term

12/31/2021

12/31/2020

9,228

9,300

155,996 (619)

(547)

(1,942)

(2,294)

2,473

2,654

115

165,179

9,228

7,379

Medium/long term

157,800

9,228

Total

165,179

9,228

The economic and equity effects of the period, compared with the previous year, are summarized in the following:

COMER INDUSTRIES

DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

(409)

(70)

Actuarial losses/(gains)

315

113

Financial expenses

195

Tax effect on income statement

(1)

(117)

(31)

Current service cost

Equity tax effect Overall effect

This item refers to:

social security schemes as well as the option for the

• Employee benefits governed by the rules and regulations

treasury fund of the National Security Institution (INPS).

in force in Italy and recorded in the financial statements of

The accounting treatment is therefore the same as that in

Italian companies;

place for other types of contribution payments;

• Benefit plans defined after employment calculated on

• Employee severance indemnity provision as at December

the basis of the final salary for all employees of its WPG

31, 2006: remains a "defined benefit plan" for which

subsidiaries in Germany and the USA.

actuarial calculations must be made, although, compared

With regard to the Italian branches, the total value of which

to the calculations made to date (and reflected in the

amounts to 9.1 million euros, based on the actuarial valuation

financial statements for the year ending December 31,

and interpretations available at the date of preparation of

2006), excludes the component relating to future salary

the financial statements, the Group has made the following

increases.

distinction:

Liabilities for defined benefit plans have been determined on

• Employee severance indemnity installments accruing as

the basis of the following Group actuarial assumptions with

from January 1, 2007: considered a "defined contribution

value scales from 2020 to 2023:

plan" in the case of both the option for complementary ITALIAN ACTUARIAL ASSUMPTIONS

Measuring unit

12/31/2021

12/31/2020

Discount rate

0.73

0.22

Expected rate of wage growth

0.50

Expected % of employees who will resign before pension (turnover)

5.0

Annual cost of living increase rate

1.8

0.8

Annual rate of TFR increase

2.8

2.1

In accordance with new regulations of IAS 19, the values of the employee severance indemnity provision that would have been obtained by changing the above actuarial assumptions are as follows: CHANGES (thousand euros)

DISCOUNTED SEVERANCE INDEMNITY PROVISION

Turnover rate +1.0%

9,099

Turnover rate -1.0%

9,272

Annual cost of living increase rate +0.25%

9,328

Annual cost of living increase rate -0.25%

9,036

Discount rate + 0.25%

8,970

Discount rate -0.25%

9,238

ANNUAL REPORT 2021

The negative effect of the period amounting to 255 thousand

and the trend in the spread on Italian government securities.

euros, gross of the tax impact, is reflected primarily in the

With regard to the German and American companies

actuarial loss accrued as a result of the change in the discount

belonging to the WPG Group, the composition of the fund is

rate, from 0.22% to 0.73%, influenced by the decrease in rates

shown below:

DESCRIPTION (thousand euros)

12/31/2021

Short term

148,618

Medium/long term

7,379

Closing balance

155,997

Subsequent benefits from fixed assets

(23,108)

Liabilities for subsequent benefits

179,105

Closing balance

155,997

The companies maintain defined benefit plans in the balance

With respect to the US subsidiaries, the entire value of the

sheet at the end of the employment relationship calculated

plans is fully funded by assets.

with the last salary. Employees generally receive a fixed pension for each year they work.

Liabilities for defined benefit plans have been determined

Benefits vary based on date of entry, length of employment,

using the following actuarial assumptions:

and worker's compensation. ACTUARIAL ASSUMPTIONS

Measuring unit

12/31/2021

Discount rate

Expected rate of wage growth

Annual rate of TFR increase

1.75

The interest rate used for discounting is based on yields on

• If the projected future salary grows (decreases) by 0.5%,

high-grade corporate bonds with an average rating of AA

the defined benefit obligation would increase by 1.8 million

which, as of the December 31, 2021 reporting date, has not

euros (1.9 million euros in 2020).

changed from the prior year. The composition of personnel by category, based on average Assumptions about future longevity are based on published

data, is as follows:

statistics. As of December 31, 2021, the weighted average life of the bond was 15.1 years (15.2 years in 2020). The significant actuarial assumptions in determining the defined benefit obligations are discount rate and future salary growth. The sensitivity analysis was determined based on reasonable possible changes in the respective assumptions occurring at the end of the reporting period, holding all other assumptions constant: • If the discount rate is 0.5% higher (lower), the defined benefit obligation will decrease by 12.7 million euros (12.8 million euros in 2020); COMER INDUSTRIES

CONTRACT CATEGORY

AVERAGE NUMBER 2021

AVERAGE NUMBER 2020

White Collar and Managers

1,081

408

Blue Collar and Outsourced workers

2,375

901

Total

3,505

1,335

Senior executives

On December 31, 2021 the Group headcount was 3,610 with an increase of 2,200 compared to the figure on December 31, 2020, including 2,059 belonging to the companies of the acquired German group.

2.6.12 SHORT AND LONG-TERM PROVISIONS The provisions include: PROVISIONS FOR RISKS AND CHARGES (thousand euros)

12/31/2021

12/31/2020

Provision for product warranty risks

17,051

7,105

Other provisions for risks

1,165

1,447

172

156

18,388

8,709

428

Other provisions for risks and legal charges

2,235

450

Provision for long-term product warranties

6,217

1,874

958

566

9,845

3,332

Contingent liabilities for tax risks Short-term provisions Contingent liabilities for tax risks Agents provision

Other provisions for risks Long-term provisions

The product warranty provision includes the estimation of

The Supplementary Agents Indemnity Fund includes

specific risks reported before preparation of the financial

provisions for reimbursements recognized in the event of

statements and relating to past productions. It also refers to

termination of the agency relationship, quantified according

coverage of general risks (the result of a calculation based

to the methods indicated in the collective economic

on historical data) for repairs or replacement of products that

agreement of March 20, 2002 for the regulation of agency

did not conform to expectations. The balance at the end of

relations and commercial representation in the industrial

the year is due to the best estimate of these risks in relation

sectors and cooperation.

to open claims, not yet settled at year end.

The provision for contingent tax liabilities refers to potential

The provision for contingent liabilities and legal expenses

liabilities relating to audits in progress not yet concluded

represents the reasonable risk calculated in relation to

abroad.

litigation or potential liabilities still pending in court.

ANNUAL REPORT 2021

Lastly, the other short-term and long-term provisions for risks and charges cover the estimate of contingent liabilities mainly related to the reorganization of some of the Group.

2.6.13 TRADE PAYABLES AND OTHER LONG AND SHORT-TERM PAYABLES (I) TRADE PAYABLES

expired for more than 12 months.

The balance of 218,611 thousand euros shows an increase of approximately 134 million euros compared with the previous

(II) OTHER LONG AND SHORT-TERM PAYABLES

year, due in part to the increase in business volumes and in

The short-term balance amounting to 40,375 thousand euros

part to the acquisition described in the Directors' Report.

includes amounts due to employees for services accrued

The average payment days as of December 31, 2021

and not paid as of the year-end closing. The increase in the

(calculated on the cost of the last quarter's came) amounted

period is mainly due to the values attributable to the German

to 113 days compared to 100 days in the previous year.

and American companies of the German group acquired

There are no payables expiring after more than one year or

during the year.

2.6.14 CURRENT TAX LIABILITIES The details are as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Tax authority balance for current taxes

15,009

2,120

Tax authority for IRPEF withholdings

1,703

1,871

Other amounts due to tax authorities for withholding tax and VAT owed by foreign companies

5,105

Current tax liabilities

21,816

3,991

At the end of the year there were liabilities with tax authorities

The amount owed to the tax authorities for unpaid Irpef

for current taxes calculated on income for the period.

(personal income tax) is in line with the previous year.

The figure is up on the previous year mainly due to the consolidation of the German group.

2.6.15 INFORMATION ON FINANCIAL ASSETS AND LIABILITIES MANAGEMENT OF LIQUIDITY RISK Liquidity risk is related to the difficulty in raising funds to meet

the case of sudden revocation of uncommitted credit lines or

commitments.

of the possibility that the Company must honor its financial

The control and implementation of appropriate policies for the

liabilities before their natural expiry.

management of liquidity risk in the presence of contingency

As previously commented, the treasury activities of the Group

guarantee the Company's survival and minimize the cost of

are substantially centralized at the parent company.

funding.

The management of liquidity risk implies: • Maintaining credit lines defined as primary risk within a

This particular risk, unlike the others, manifests its effects

total of more than 80% of total credit lines and a substantial

in a very short time, with devastating consequences for

balance between the short and medium/long-term lines.

companies.

This is necessary in order to avoid liquidity strains in

It can result from insufficient resources available to meet

the case of requests for reimbursement by the relevant

financial obligations under the terms and deadlines set in

financial partners; COMER INDUSTRIES

• Maintaining the average financial exposure for the year

based on assumptions that may actually occur and then

within an amount substantially equivalent to 80% of the

assessing the impact of the latter on the maturity ladder, or

total amount committed by the banking system;

the occurrence of certain events that may affect the liquidity

• Maintaining adequate liquidity derived from the cash

of the Company.

flow generated by economic, characteristic and current

The Group analyzes monthly the information obtained

operations.

from the formulated scenarios regarding the trend of the net financial position together with the management of all

It should be added that in managing this type of risk, the

conditions / positions of bank credit.

Group always tries to finance its investments with medium-

This analysis is carried out monitoring the quality of banking

to long-term unsecured claims (in addition to equity) in the

services and the corresponding costs on a regular basis.

breakdown of net debt, while covering current expenses

All Cash Management activities are organized so as to

using the short-term credit lines above.

reap the greatest benefit from banking products and the

To this end, the Group has long used appropriate tools

liquidity and funding are effectively managed under the best

to provide reliable predictions on the future trends in the

conditions, while limiting exposure to liquidity risk.

net financial position (difference between income and

Note that during the year the average use of lines of credit

expenditure in a given period) and implemented a maturity

by our Group was around 65%, a figure that was affected by

ladder, which enables the constant evaluation of expected

the taking out of the medium/long-term loan. Management

cash flows, through the juxtaposition of cash inflows from

believes that the funds and credit lines currently available will

operations, with outflows (repayment of loans, payment of

enable the Group to satisfy its requirements arising from its

operating costs, investments, etc.) within each time band. It

investment, repayment of debts at their natural expiration

is also pointed out that in the calculation of the net financial

and management of working capital.

position, the counter-balancing effect from the nominal

Total credit lines amount to 428.3 million euros, of which

value of all those assets that are readily convertible into

310.7 million euros related to potential short (96.4 million

cash is added to incoming cash flow items generated by

euros) and long term (214.1 million euros) cash requirements

the operational management. In fact, in the latter case, the

that the Group can use for investments and/or working

cash generated from the sale of these assets may be used

capital management.

immediately to meet the imminent financial commitments.

The following tables summarize the movements of credit

The actual quantification of the Group's exposure to liquidity

and bank uses divided by type and by type of risk.

risk is made possible by simulating different scenarios, ANALYSIS OF BANK AND PARA-BANKING CREDIT LINES (excluding credit lines for exchange and interest rate hedges) (thousand euros)

12/31/2020

DECR.

INCR.

12/31/2021

Total bank facilities for cash

165,661

(4,311)

149,350

310,700

Total bank facilities for guarantees

15,888

(11,917)

27,690

31,661

Total loans for insured receivables

75,971

9,976

85,947

257,520

(16,228)

187,016

428,308

Total bank uses for cash and cash equivalents

7,751

(751)

191,937

202,937

Total bank uses for guarantees

11,742

(221)

11,795

23,316

Total uses of insured receivables

29,393

10,296

39,689

Total uses

48,886

(972)

214,028

265,942

Total loans

% use of bank credit lines for cash and cash equivalents

65%

% use of total credit lines

19%

62%

ANNUAL REPORT 2021

The term “primary risk” refers to the total of all the credit

to collection, forfaiting of commercial invoices, leasing, etc.).

lines of ready cash and the financial sources not subject to any guarantee (overdraft, cash advances and medium/

The detail for the breakdown of the credit lines by risk is

long-term unsecured loans), while the term “secondary risk”

provided below.

groups together all other forms of loans (credit line subject CONTRACTS BROKEN DOWN BY LEVEL OF RISK (thousand euros)

12/31/2020

DECR.

INCR.

12/31/2021

Loans broken down by degree of risk

1st risk

Total bank credit lines cash 1st risk

151,011

(4,311)

149,350

296,050

Total bank credit lines for guarantees 1st risk

15,888

(11,917)

27,690

31,661

Total loans insured receivables 1st risk

75,971

9,976

85,947

242,870

(16,228)

187,016

413,658

Total bank credit lines cash 2nd risk

14,650

Total credit lines 2nd risk

14,650

Total credit lines 1st risk

% 1st risk loans of total

94%

97%

% 2nd risk loans of total

MANAGEMENT OF INTEREST RATE RISK

Counterparties in these operations are the banks with which

The Group is exposed to interest rate risk associated with

the Group normally operates.

outstanding financial assets and liabilities.

The currencies involved are the USD and USD/CNY, and

The objective of interest rate risk management is to limit

any such transactions carried out to hedge cash inflows

and stabilize the negative effects on cash flows subject

connected with budgeted sales transactions, scheduled on

to changes in interest rates. As of December 31, 2021, the

a monthly basis, may well fall within those defined as “highly

Group has the following risks:

effective” on “highly probable” future transactions, and their

• The risk attributable to interest rate trends concerns the

economic effect is recorded on an accrual basis.

future value, compared with the MTM assessment of December 31, 2021, of the IRS contracts (nominal value

The efficacy assessment is aimed at proving the high

of 10.5 million euros) still outstanding, the underlying of

correlation

which was repaid early in 2020. They are accounted for

characteristics of the risk being hedged (maturity, amount,

using the fair value through profit and loss method;

etc.) and those of the hedging instrument, by carrying out

• The risk related to financial instruments on which interest accrues that are at a variable rate and which are not

existing

between

the

technical-financial

specific retrospective and prospective tests using the US dollar offset method.

hedged through other financial instruments, for which reference should be made to paragraph 2.6.15 in relation

The types of derivative contracts most used are forward sales.

to the sensitivity analysis.

The fair value of currency forward contracts is calculated by discounting back the difference between the notional amount

MANAGEMENT OF EXCHANGE RATE RISK

determined at the contractual forward exchange rate and the

In addition to that already written in the previous paragraph

notional amount determined at the forward exchange rate

2.3.12, it should be noted that the Group has significant

calculated on the closing date of accounts. Instead, the fair

transactions in the currency of non-EU countries (mainly

value of exchange rate options is calculated by using the

USD/CNY, CAD and USD).

Black & Scholes formula.

The exchange rate risk is hedged through purchase and

The fair value is correctly calculated by credit institutions, the

sale of foreign currencies contracts (hedging contracts or

counterparties to these transactions, and confirmed by the

synthetic forwards agreements).

latter in the specific documentation thereon. COMER INDUSTRIES

The hedging transactions were mainly concluded by BNP

regulated markets is calculated using valuation models that

Paribas in the Asian area. Intercompany transactions in US

are appropriate for each category of financial instrument,

dollars with the Brazilian subsidiary (USD/BRL exchange

with market data related to the balance sheet date (such

rate risk) and in Euros with the Indian subsidiary (EUR/INR

as interest rates, exchange rates, and volatility), discounting

exchange rate risk) are not subject to the hedging policy,

the expected cash flows based on interest rate curves and

as they are represented by minor annual trade amounts

converting amounts in other currencies to the euro through

representing around 2.5% of total company flows.

exchange rates provided by the European Central Bank.

For the purpose of assessing the impact of any exchange changes in the budget, the sensitivity analysis shown in the

Additional information, along with the sensitivity analysis,

summary table in paragraph 2.6.15 is performed by using the

was provided in the relevant parts of the notes to the financial

exchange rates at year end adjusted for the minimum and

statements, in accordance with IFRS 7, to which reference

maximum values recorded during 2021.

should be made. It provides details on the amounts of the outstanding

The fair value of a derivative contract is calculated using

derivative transactions on December 31, 2021, specifying

the official listing prices for instruments traded in regulated

the fair value and notional value in euros for each instrument

markets. The fair value of instruments that are not listed on

class. Nominal value

Notional value

Fair Value

Amounts in foreign currency

Amounts in euros

15,000 USD

13,244

601

Total overall residual 2021 hedges

13,244

601

Short-term derivative financial instruments

13,244

601

RESIDUAL HEDGES 2021 (thousand euros)

Currency

Hedges deemed effective Synthetic term/forward hedging

USD/CNY

SENSITIVITY ANALYSIS

2021, the volatility index of the main currencies used by the

The following analysis has been prepared in order to better

Group.

identify the economic risks and changes in equity arising

The aim of the simulation is to show the impacts on the

from possible changes in exchange rates.

Group’s net profit and equity deriving from the translation of

The analysis is performed on year-end and average exchange

the financial statements of subsidiaries into the currency of

rates for the period adjusted with the maximum and minimum

the consolidated financial statements according to potential

values recorded over an observation period of 52 weeks in

maximum fluctuations predicted by the analysis.

Local currency

Range last 52 weeks 2021

IMPACT NET PROFIT (thousand euros) Range last 52 weeks 2021

Net equity

Net Profit

min

max

Spot 12.31.2021

min

max

2021 Avg 365 days

min

max

US dollar

128,552

4,333

1.121

1.234

1.133

1,215

(9,310)

1.183

203.0

(151.7)

British pound

15,579

507

0.839

0.906

0.840

(1,352)

0.860

14.3

(30.5)

Chinese renmimbi

460,652

158,747

7.160

7.965

7.195

310

(6,194)

7.628

1,360.8

(880.7)

Indian rupee

626,992

152,386

83.439

90.596

84.229

(523)

87.439

83.6

(60.7)

Brazilian real

31,854

12,453

5.864

6.955

6.310

384

(468)

6.378

171.3

(162.1)

Russian ruble

187,319

10,243

80.642

92.384

91.467

275

(20)

87.153

9.5

(6.7)

Source UIC

IMPACT NET EQUITY (thousand euros) Range last 52 weeks 2021

ANNUAL REPORT 2021

The Group considers that it is not subject to significant

change in interest rates of ±50 basis points with respect to the

economic and equity impacts deriving from the management

spot interest rates at December 31, 2021 were considered, all

of transactions of the single legal entities forming part of the

other variables remaining constant.

scope of consolidation in foreign currency. With regard to interest rates, the risk of which derives from

Potential impacts were calculated on floating rate financial

financial instruments with interest accruing at a floating

liabilities as of December 31, 2021. The aforementioned

rate that are not hedged via other financial instruments, a

change in interest rates would result in a higher (or lower)

sensitivity analysis was performed in which the effects of a

net pre-tax charge, as discussed below:

min val (-50bps) LOAN

Index

max val (+50 bps)

Rate applied as of 12/31

Principal

Rate

Economic effect

Rate

Economic effect

Loan Crédit Agricole euro

Euribor 6 months

-0.537

1.75%

€ 140,000

1.75%

€–

1.75%

€–

Loan Crédit Agricole US dollars

Libor 6 months

0.19918

2.099%

$ 50,000

1.900%

$ -8,576

2.599%

$ 21,528

MANAGEMENT OF CREDIT RISK

Historically, the Group has not suffered significant losses on

The Group's policy is to sell to customers after an evaluation

receivables.

of their credit capacity and therefore within pre-set credit limits.

The maximum theoretical exposure to credit risk for the

Note that the subsidiary Comer Industries (Jiaxing) Co. Ltd.,

Group as of December 31, 2021 is represented by the book

as is customary in the reference market, can receive payment

value of financial assets in the financial statements.

from its customers or pay their suppliers with instruments

With reference to the changed economic conditions that

commonly known as Bank Acceptance Bills ("BAB"), governed

marked the year 2021, it is believed that the risk connected

by the Negotiable Instruments Law of the PRC of August 28,

to the reference value is higher. Consequently, the Group has

2004.

strengthened its procedures for the selection of customers,

These instruments, which may also be in electronic form,

monitoring of recoveries of credit and has set up a specific

typically have maturities from 6 to 12 months, as they are

insurance coverage for 95% of receivables generated by the

counter-guaranteed by banks of the highest credit standing

Holding company, in respect of the credit lines assigned.

(“guarantor banks"), can be held to maturity but also used

The risk of insolvency has been adequately reflected in the

as means of payment for the provision of other goods

accounts by the allocation of the specific allowance for

or services, or presented to other credit institutions at a

doubtful accounts.

discount ("transferee banks"). Typically, on such transactions,

As of December 31, 2021, the presentation of trade receivables

the liquidity is recognized with an offsetting decrease in trade

(net of the related allowance for doubtful accounts) by

receivables, as the Directors believe that the transaction

maturity bracket is shown in the following table.

meets the requirements for de-recognition of these assets set out in IFRS 9. Please note that the transferee banks, in the

The present values are influenced by the acquisition of the

event of insolvency of the original debtor and the guarantor

German group, which led to an increase in the item of 67.9

banks, may make claims against the Group.

million euros, net of an allowance for doubtful accounts of

However, given the high credit standing of the guarantor

2.7 million euros.

banks, indicating an irrelevant credit risk, and in conjunction with the complete transfer of liquidity risk and interest rate risk, a substantial transfer of risks and benefits linked to the assigned credit can be assumed. Finally, it should be noted that at the date of preparation of the financial statements the Chinese subsidiary does not hold any active BABs maturing beyond December 31, 2021, while it issued BABs payable to the supply chain for 90.5 million yuan expiring in the first half of 2022. COMER INDUSTRIES

DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

190,187

85,443

30-60 days past due

3,107

1,023

60-90 days past due

2,876

225

More than 90 days past due

5,557

2,123

(5,597)

(3,112)

196,130

85,701

Not overdue

Allowance for doubtful accounts Trade receivables

MANAGEMENT OF PRICE RISK

of the products annually, transferring to customers increases

The Group is subject to the risk of fluctuation in the price

in purchase costs in percentage terms compared to forecast

of raw materials, particularly that of: aluminum, cast iron,

indices, on the basis of specific trade indexing agreements.

copper and steel. Group companies review the sales prices

ANNUAL REPORT 2021

2.6.16 REVENUE FROM CONTRACTS WITH CUSTOMERS The breakdown of revenues by geographic region is as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

CHANGE %

Asia Pacific

190,128

111,708

70.2%

EMEA

248,526

180,366

37.8%

Latin America

29,604

17,397

70.2%

North America

129,851

86,737

49.7%

Total turnover by geographical area

598,110

396,207

51.0%

Comer Industries closed fiscal year 2021 with a 51% increase

On a geographical level, of particular note are the growth of

in revenues. The turnover generated outside national borders

the Asia Pacific market, driven by the industrial sector, and of

reached 90% of the total, a figure that is in line with market

the Latin American market thanks to the agricultural sector.

trends.

2.6.17 OTHER OPERATING REVENUES The breakdown of other operating revenues is as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

1,534

1,376

Scrap sales

707

314

Capital gains, photovoltaic refund

172

Capitalized costs

403

340

Income from damage insurance

475

Other revenues and income including out-of-period income

2,486

663

Total other revenues and income

5,778

2,733

Recovery of manufacturing, repair, service and transportation expenses

The recovery of production, repairs, services and transport

Costs capitalized during the year for industrial product

costs heading includes, among other things, bonuses and

development projects amount to 403 thousand euros. Other

volume awards on supplies, charges for design and endurance

income and revenues increased in 2021 compared to the

test expenses, and the recovery of logistical and repair costs.

previous year also due to the amounts attributable to the

The latter and waste material sales are up from 2020 but in

German WPG Group.

line with the increase in sales volumes and production.

2.6.18 PERSONNEL COSTS Personnel costs in absolute terms increased by 29.4% compared to the previous period, resulting in a 14.9% increase in the weighted average per capita cost compared to 2020 values. This trend was influenced in part by the use of social shock COMER INDUSTRIES

absorbers during the lockdown months that occurred in 2020

provision of the variable salary in all the subsidiaries in the

and by volume trends in Western countries where labor costs

world, as the Group managed to meet the profitability targets

are higher.

established for 2021.

The heading also contains the annual production bonus and

2.6.19 REMUNERATION OF DIRECTORS AND STATUTORY AUDITORS The fees of the Directors and Statutory Auditors of Comer Industries S.p.A. for the performance of their offices in the Parent Company and in the other enterprises included in the consolidation are as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Directors

1,211

861

Chief Executive Officer (service cost value share-based payment stock grant plan)

2,194

5,389

3,455

6,303

Statutory Auditors Total compensation

The amounts include fees payable for the period resolved by

With reference to the incentive plan based on ordinary shares

the Shareholders’ Meeting and the remunerations established

of Comer Industries S.p.A. called "Comer Industries 2019

by the Board of Directors for Directors attributed particular

Stock Grant Plan" approved on May 29, 2019, we point out the

responsibilities, including bonuses. The values do not include

achievement of the performance targets and the confirmation

social security and insurance contributions.

of the accounting treatment according to IFRS 2.

The Group does not have any stock grant and/or stock option plans in place as of today.

2.6.20 OTHER OPERATING COSTS AND WRITE-DOWNS The item other operating costs includes indirect charges

published in the Official Gazette no. 111 of May 15, 2007 (SO

associated with turnover, production and the corporate

115), the remuneration for the year 2021 for services provided

organizational structure such as rentals, utilities, leases

by the independent auditors Deloitte & Touche S.p.A. relating

and maintenance, insurance expenses, sales commissions,

to the certification of the 2020 financial statements are as

expenses related to product quality as well as losses in value

follows:

related to impairment tests on rights of use relating to leased

• annual and infra-annual audit engagements on Italian

properties. Write-downs include provisions for bad debts and warranty for the year, before any uses.

companies for 92 thousand euros; • annual and infra-annual engagements for the audit of subsidiary companies for around 109 thousand euros;

As required by Article 149-duodecies of the Issuer Regulation

All the above-described fees are included in the “other

amended by Consob Resolution no. 15915 of May 3, 2007

operating costs” heading.

2.6.21 OPERATING RESULT The operating result achieved, in absolute terms, is equivalent

production sites around the world.

to 56,831 thousand euros, corresponding to 9.5% of the

Further information can be found in the Directors’ Report on

consolidated turnover, increasing compared to 7.7% of the

operations.

previous year. This result is due to the combined effect of continuous process improvements and efficiency projects at 86

ANNUAL REPORT 2021

2.6.22 NET FINANCIAL INCOME / (CHARGES) The details are as follows: DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Exchange gain (loss)

(731)

(153)

Exchange gains and losses

(731)

(153)

Bank interest receivable

189

Other interest income

Total financial income from cash management

199

Interest on advances, loans and other short-term bank borrowings

(12)

(97)

Interest on medium/long-term loans

(382)

(185)

Interest on loans amortized cost

(486)

(197)

Interest expense on discounted employee severance indemnities

(195)

(73)

(4)

(1,062)

(556)

(403)

(331)

Interest and other net financial charges

(1,265)

(826)

Financial income balance

(1,996)

(980)

Economic result of interest rate hedging transactions fair value as at 12/31 Total financial costs from cash management Interest resulting from the application of IFRS 16

EXCHANGE GAIN (LOSS)

and, in particular, to the devaluation of the Brazilian real and

This item includes both realized differences between the

of the Chinese yuan against the euro.

historical exchange rates of the relevant transactions and the reference exchange rates of receipts and payments in foreign

INTEREST AND OTHER NET FINANCIAL CHARGES

currency, and unrealized differences due to the translation of

The interest burden and amortized cost on mortgages and

monetary items at the spot exchange rate at the end of the

loans inevitably increased due to the medium/long-term loan

financial year.

agreement signed in 2021.

The loss for the period is mainly attributable to the latter case

COMER INDUSTRIES

2.6.23 INCOME TAXES The total tax charge of 15,406 thousand euros includes current

This worsening was mainly due to the non-deductibility of the

income taxes of 18,250 thousand euros (7,784 thousand

costs of the transaction, posted to the income statement in

euros in 2020), a positive change in deferred tax assets of

the consolidated financial statements as envisaged by IFRS

2,528 thousand euros, lower deferred tax liabilities of 185

3, and to the different taxation in the countries the Group

thousand euros, a benefit from research and development

operates in. In order to better understand the reconciliation

credit Leg. Decree no. 145/2013 amounting to 191 thousand

between the tax burden recognized in the financial statements

euros and withholding taxes on dividends amounting to 60

and the theoretical tax burden, the following explanatory table

thousand euros.

is provided wherein the IRAP is not considered as this, being a tax with a tax base different from income before taxes,

The consolidated tax charge calculated net of withholding

would generate distortions between one year and another.

tax on dividends from subsidiaries and tax credits, stands on

The reconciliation was therefore determined with reference

December 31, 2021 at around 33.1% against 26.5% calculated

to the single IRES tax rate in force in Italy, equal to 24%.

correspondingly on the 2020 period. DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Consolidated profit before taxes

54,835

29,398

24%

13,160

7,055

Tax effect permanent differences Italian companies

780

273

Effect of foreign tax rates different from the theoretical Italian tax rates

813

623

Tax effect of taxation of dividends from consolidated companies

142

100

Bonus tax credit Legislative Decree 91/2014

(25)

Tax effect of tax relief for Italian companies ACE

(84)

(149)

Tax effect R&D credit Law 190/2014 art.1, para. 35

(191)

(526)

Tax effect super-amort/depr (Law 208/2015) and hyper-amort/depr (Law 232/2016)

(590)

(582)

Prior-year taxes and provisions

(61)

(97)

Tax effect of actuarial gain (loss) IAS 19

Deferred tax effect Withholding tax

Tax impact of deferred tax assets release of conversion reserve IAS 21

Tax impact on consolidation entries and IRAP impact on deferred taxes

(261)

119

Income taxes recorded in the financial statements, excluding IRAP

13,683

6,792

Current IRAP

1,723

840

Income taxes posted to the financial statements (current, deferred)

15,406

7,632

Parent Company theoretical tax rate Theoretical income taxes

ANNUAL REPORT 2021

2.6.24 EARNINGS PER SHARE At the bottom of the income statement, the earnings/(loss) per share is reported, determined according to that manner provided in IAS 33, as summarized below. DESCRIPTION (thousand euros)

12/31/2021

12/31/2020

Consolidated net income for the period attributable to Parent Company shareholders

39,428,960

21,765,459

Average number of shares in circulation

28,678,090

20,409,280

1.37

1.07

28,678,090

20,409,280

1.37

1.07

Basic earnings per share (€) Average number of shares (diluted) Diluted earnings per share (€)

The means of calculation of diluted earnings (loss) per

average weighted ordinary shares in circulation during the

share are defined by IAS 33 – Earnings per share. The basic

financial period (28,678,090).

earnings (loss) per share is defined as the ratio between the

The diluted earnings per share corresponds to the basis as

economic result or the results of continuing operations of the

there are no anti-dilution effects.

Group attributable to the holders of ordinary shares and the

2.6.25 ECONOMIC AND BALANCE SHEET DATA OF THE COMPANY EXERCISING

DIRECTION AND COORDINATION OF THE COMPANY

In compliance with the provisions of art. 2497 bis of the Italian

As mentioned in the introduction, this company has exercised

Civil Code, Comer Industries S.p.A. presents in this section

management and coordination activities over the parent

the schedule of the essential data of the parent company

company, Comer Industries S.p.A. The last approved financial

Eagles Oak S.r.l.

statements of Eagles OAK S.r.l. date back to December 31, 2020, already set out in the previous financial statements.

COMER INDUSTRIES

BALANCE SHEET ASSETS

12/31/2020

12/31/2019

I – Intangible assets

1,188

III – Financial assets

31,916,782

35,064,557

31,916,782

35,065,745

81,382

Total receivables

81,382

IV – Cash and cash equivalents

638,470

1,125,371

719,852

1,125,371

1,112

TOTAL ASSETS

32,636,634

36,192,228

LIABILITIES

12/31/2020

12/31/2019

2,000,000

III – Revaluation reserves

72,462

IV – Legal reserve

400,000

174,384

VI – Other reserves

18,732,125

13,164,742

IX – Profit/(loss) for the year

1,653,389

8,793,000

22,857,976

24,204,588

due within the next year

3,838,658

6,046,436

due after the next year

5,940,000

9,778,658

11,986,436

1,204

32,636,634

36,192,228

B) FIXED ASSETS

Total fixed assets (B) C) CURRENT ASSETS II – Receivables due within the next year

Total current assets (C) D) ACCRUALS AND DEFERRALS

A) NET EQUITY I – Capital

Total net equity D) PAYABLES

Total payables E) ACCRUALS AND DEFERRALS TOTAL LIABILITIES

ANNUAL REPORT 2021

INCOME STATEMENT 12/31/2020

12/31/2019

44,188

39,669

a), b), c) depreciation and amortization of tangible and intangible assets, other write-downs of fixed assets

1,188

a) amortization of intangible assets

1,188

Total depreciation, amortization and write-downs

1,188

14) other operating costs

1,144

853

Total costs of production

46,520

41,710

Difference between value and costs of production (A - B)

(46,520)

(41,710)

5,124,031

9,180,000

5,124,031

9,180,000

others

204

186

Total income other than the above

204

186

204

186

3,147,775

276,651

288,598

3,424,426

288,598

Total financial income and expenses (15 + 16 - 17 + - 17-bis)

1,699,809

8,891,588

Pre-tax result (A - B + - C + - D)

1,653,289

8,849,878

77,085

(100)

(20,207)

(100)

56,878

1,653,389

8,793,000

B) COSTS OF PRODUCTION 7) for services 10) depreciation, amortization and write-downs

C) FINANCIAL INCOME AND EXPENSES 15) income from investments from subsidiaries Total income from investments 16) other financial income d) income other than the above

Total other financial income 17) interest and other borrowing costs to subsidiaries others Total interest and other borrowing costs

20) INCOME TAXES FOR THE PERIOD, CURRENT AND DEFERRED TAXES current taxes taxes relating to previous years Total income taxes for the period, current and deferred taxes 21) PROFIT/(LOSS) FOR THE YEAR

These financial statements give a true and fair view and correspond to the accounting records. Reggiolo, March 28, 2022 For the Board of Directors Matteo Storchi (President & CEO) COMER INDUSTRIES

ANNUAL REPORT 2021

COMER INDUSTRIES

REPORT

OF THE BOARD OF

STATUTORY AUDITORS Chapter 3

ANNUAL REPORT 2021

COMER INDUSTRIES

ANNUAL REPORT 2021

COMER INDUSTRIES

AUDITOR’S

REPORT Chapter 4

Deloitte & Touche S.p.A. Piazza Malpighi, 4/2 40123 Bologna Italia Tel: +39 051 65811 Fax: +39 051 230874 www.deloitte.it

INDEPENDENT AUDITORS’ REPORT PURSUANT TO ARTICLE 14 AND 19-BIS OF LEGISLATIVE DECREE No. 39 OF JANUARY 27, 2010

To the Shareholders of Comer Industries S.p.A. REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Opinion We have audited the consolidated financial statements of Comer Industries S.p.A. and its subsidiaries (the “Comer Group”), which comprise the consolidated statement of financial position as at December 31, 2021, and the consolidated comprehensive income statement, consolidated statement of changes in equity and consolidated cash flows statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Comer Group as at December 31, 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of Comer Industries S.p.A. in accordance with the ethical requirements applicable under Italian law to the audit of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Directors and the Board of Statutory Auditors for the Consolidated Financial Statements The Directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and, within the terms established by law, for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Ancona Bari Bergamo Bologna Brescia Cagliari Firenze Genova Milano Napoli Padova Parma Roma Torino Treviso Udine Verona Sede Legale: Via Tortona, 25 - 20144 Milano | Capitale Sociale: Euro 10.328.220,00 i.v. Codice Fiscale/Registro delle Imprese di Milano Monza Brianza Lodi n. 03049560166 - R.E.A. n. MI-1720239 | Partita IVA: IT 03049560166 Il nome Deloitte si riferisce a una o più delle seguenti entità: Deloitte Touche Tohmatsu Limited, una società inglese a responsabilità limitata (“DTTL”), le member firm aderenti al suo network e le entità a esse correlate. DTTL e ciascuna delle sue member firm sono entità giuridicamente separate e indipendenti tra loro. DTTL (denominata anche “Deloitte Global”) non fornisce servizi ai clienti. Si invita a leggere l’informativa completa relativa alla descrizione della struttura legale di Deloitte Touche Tohmatsu Limited e delle sue member firm all’indirizzo www.deloitte.com/about. © Deloitte & Touche S.p.A.

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ANNUAL REPORT 2021

In preparing the consolidated financial statements, the Directors are responsible for assessing the Comer Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they have identified the existence of the conditions for the liquidation of the Company or the termination of the business or have no realistic alternatives to such choices. The Board of Statutory Auditors is responsible for overseeing, within the terms established by law, the Comer Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Comer Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Comer Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Comer Group to cease to continue as a going concern.

COMER INDUSTRIES

103

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Comer Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Opinion pursuant to art. 14 paragraph 2 (e) of Legislative Decree 39/10 The Directors of Comer Industries S.p.A. are responsible for the preparation of the Directors’ Report of the Comer Group as at December 31, 2021, including its consistency with the related consolidated financial statements and its compliance with the law. We have carried out the procedures set forth in the Auditing Standard (SA Italia) n. 720B in order to express an opinion on the consistency of the Directors’ Report , with the consolidated financial statements of the Comer Group as at December 31, 2021 and on its compliance with the law, as well as to make a statement about any material misstatement. In our opinion, the above-mentioned Directors’ Report is consistent with the consolidated financial statements of the Comer Group as at December 31, 2021 and is prepared in accordance with the law. With reference to the statement referred to in art. 14, paragraph 2 (e), of Legislative Decree 39/10, made on the basis of the knowledge and understanding of the Comer Group and of the related context acquired during the audit, we have nothing to report. Statement pursuant to art. 4 of the Consob Regulation for the implementation of Legislative Decree 30 December 2016, no. 254 The Directors of Comer Industries S.p.A. are responsible for the preparation, on voluntary basis, of the non-financial statement pursuant to Legislative Decree 30 December 2016, no. 254. We verified the approval by the Directors of the non-financial statement.

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ANNUAL REPORT 2021

Pursuant to art. 3, paragraph 10 of Legislative Decree 30 December 2016, no. 254, this statement is subject of a separate attestation issued by us. DELOITTE & TOUCHE S.p.A. Signed by Stefano Montanari Partner Bologna, Italy April 1, 2022

This report has been translated into the English language solely for the convenience of international readers.

COMER INDUSTRIES

105