ELICA GROUP 1
ANNUAL REPORT TWO THOUSAND AND NINE ELICA GROUP
ANNUAL REPORT 2009
ELICA GROUP 3
ANNUAL REPORT TWO THOUSAND AND NINE ELICA GROUP
Letter to the Shareholders
03
Chief Executive Officer’s view
05
Financial Highlights
07
01 WHO, WHAT, WERE
- Elica is
11
- Values and commandments
19
- The people
21
- Corporate Governance
25
02 WHAT WE DO
- Our philosophy
29
- Cooker hoods
31
* Own brand production * Third party brand production
- Electric motors
39
- Air purifiers
41
- Research and development
43
- Innovation
47
- Design
49
- Communications and promotions
51
03 CORPORATE SOCIAL RESPONSIBILITY - Internally addressed initiatives
58
65
- External initiatives
04 CONSOLIDATED FINANCIAL STATEMENTS
- Directors’ report
70
- Consolidated Financial Statements
83
ANNUAL REPORT 2009
ELICA GROUP 5
LETTER TO THE SHAREHOLDERS FRANCESCO CASOLI
Dear Shareholder, 2009 was a memorable year across the globe. Although difficult, it also was a constructive year as it laid bare our true fundamentals. I have always believed that a turbulent environment creates energy which can be harnessed and used as an opportunity for growth. In the first part of the year we were severely affected by the economic problems which took hold at the end of 2008 however, the manner in which we performed in 2009 saw our Group react in the proper manner, consolidating our position as leader. The crisis was confronted with the great commitment of all and through many sacrifices - a fact which will not be forgotten by an enterprise of people in which it is the people that make the difference. Thanks to their capacity to draw up and implement significant efficiency programmes, we have been able to recover margins close to pre-crisis levels. The reorganisation operations have allowed us to align the Group’s industrial footprint to the demand, ensuring that our structure is ready for the upturn in growth. One of our major strategic strengths is the focus that we have placed on our investments: we have maintained the same levels of research and development, we have supported the growth of our own brand products – with the objective to create a unique brand – and we have continued to place great emphasis on training. Our choices are made in line with the essentials of Italian manufacturing, with Elica Group being a true expression of such. A commitment to quality manufacturing is what sets us apart and drives us in our everyday work. The awards which we have received again this year are an encouraging confirmation that we are moving in the right direction. For the past three years the Elica Group has been recognised as having the best workplace environment in Italy within the Great Place to Work Institute awards; Elica Group is also among the Italian leaders for innovation, as attested by the Imprese per l’Innovazione Award, which was awarded by Confindustria in the presence of the President of the Republic Giorgio Napolitano. These awards have been achieved from an understanding that the markets and the world in general always reward true quality in products, in organisation and in behaviour. In 2009, we have been inspired by this knowledge and recognised under the CECED Conduct Code, the national association for manufacturers of domestic and professional equipment, for behaviour in line with its ethics principles. The market rewards our reputation, which we have built for 40 years day after day and upon which our future projects are founded. Transparency, simplification and soundness are the principles which guide us: we give real value to that which is essential.
Francesco Casoli Executive Chairman Francesco Casoli
ANNUAL REPORT 2009
ELICA GROUP 7
CHIEF EXECUTIVE OFFICER’S VIEW ANDREA SASSO
2009 was a year which moved in two separate directions precisely the opposite of the events in 2008: the first part characterised by a contraction in the market of up to 30% and the second part still in contraction, but improving. In summary, in the years 2008 and 2009, approximately a quarter of the range hood market disappeared. In this situation, the Elica Group has continued with even greater commitment the action plan aimed not only at effectively responding to changed conditions in the sector but specifically at consolidating levers for growth and future profitability:
• • •
investments in research, development and innovation in our products of 3.5% of revenues, with the launch of 81 new products in the year, of which 6 own brand and 75 third party brands; continued acquisition of market share of our brands in Europe, and particularly own brand revenues increased by 9.7% on 2008, following the full integration of Gutmann; reduction of industrial costs, due also to the increase in the production in range hoods in Low Cost Countries from 19% to 30%.
The above actions on the one hand allowed us to strengthen our global leadership in terms of market share and on the other - in a year in which we are focused more on the Balance Sheet rather than results - has allowed us to achieve in the second part of the year an EBITDA margin before restructuring charges of 8%, nearly at pre-crisis levels. The emphasis placed on working capital has allowed us to achieve an operating cash flow of Euro 30.8 million, with a reduction in the debt of Euro 12 million on the previous year, achieving a DEBT/EBITDA ratio of 1.1. In 2009 we continued to invest in innovation, research and development, brands and human resources at pre-crisis levels and this commitment has once again been rewarded:
• • •
the Imprese per l’Innovazione Award from Confindustria in the category for over 1,500 employees; Top Employers in Italy for best business practices, from the CRF Institute; for the third year running, we are considered as the best company in Italy to work for, as decided by the Great Place to Work Institute.
In the coming years we see the market growing gradually, although not recovering quickly enough to recover the losses in the last two years. However, the Elica Group will strengthen and consolidate its leadership, taking advantage of all opportunities presented, and increasingly becoming a global company.
Andrea Sasso Chief Executive Officer Andrea Sasso
ANNUAL REPORT 2009
ELICA GROUP 9
FINANCIAL HIGHLIGHTS Discontinued amounts of the “ACEM” business units
CONSOLIDATED REVENUES
500 400 300 200 100 0 Euro Million
2005
2006
2007
2008
2009
344.2
398.8
426.8
385.4
335.1
RANGE HOOD REVENUES 400
80
300
60
200
40
100
20
0 Euro Million
2005
2006
2007
2008
2009
287.1
330.7
359.2
319.7
287.9
EBITDA
50
Euro Million
30
15
20
10
10
5 2005
2006
2007
2008
2009
38.4
39.8
38.5
22.7
20.1
0 Euro Million
15
9
0
6
-15
3
-30 2005
2006
2007
2008
2009
10.1
8.3
9.2
3.6
0.2
EPS * 16 12 8 4 0 Euro/cents * Earning per Share
2007
2008
2009
68.1
67.6
65.7
47.2
EBIT
2005
2006
2007
2008
2009
23.8
23.9
22.1
2.6
0.7
CASH/(NET DEBT)
12
Euro Million
2006
57.1
GROUP NET PROFIT
15
0
2005
25 20
Euro Million
Feel, Elica
0
40
0
ELECTRIC MOTOR REVENUES
100
2005
2006
2007
2008
2009
20.0
15.1
16.2
6.2
0.4
-45 Euro Million
12% 10% 8% 6% 4% 2% 0% Ratio
2005
2006
2007
2008
2009
(27.8)
(2.3)
3.2
(34.9)
(22.9)
ROCE *
2005
2006
2007
2008
2009
11.8%
8.3%
8.9%
2.4%
1.7%
* Return On Capital Employed
WHO, WHAT, WHERE
ANNUAL REPORT 2009
ELICA GROUP 11
ELICA IS / VALUES AND COMMANDMENTS THE PEOPLE / CORPORATE GOVERNANCE
01
ANNUAL REPORT 2009
ELICA GROUP 13
ELICA IS “ In my briefcase I have the invention of the century” Ermanno Casoli, founder of the Elica Group
When a dream is not left in the closet but put in a briefcase and carried around the world then that dream can come true. Ermanno Casoli, founder of the Elica Group, did that back in 1970 when he set off for Paris to present his invention to Philips: the first air suction fan, the forerunner to the suction hood. Casoli dreamed of a technology that was within reach of every kitchen, which removed the smells and steam and made the air cleaner, ensuring that everybody had improved quality of living. After forty years, that dream in the briefcase has become a leading industrial Group in the design, production and distribution of household cooker hoods and electric motors. The genes of the founder have remained and, still today, are the distinguishing traits of the Group: Intelligence, Determination, Intuition and Innovative Spirit to serve improved wellbeing for all. Over the years as the world around was changing the Group has always known how to innovate and renew itself. It was the first company in the field to conceive a new role for the kitchen hood becoming more than an appliance that was hidden inside a wall unit, an approved part of the rest of the kitchen and with just one purpose. The hood became a distinguishing feature of the kitchen, denoting a style and obliging whatever surrounded it to adapt to its image. With the highly refined materials, scrupulous aesthetics and design attention, the Elica Group has now added a new idea to the concept of a hood: introducing its own sustainable model that is fully supported with great conviction in all phases of company life.
A commitment that was fully sanctioned by the Supplementary Agreement that was signed in 2008, which established a company welfare system that was the first of its kind in Italy. The motivations for the Etica e Impresa Award for Social Responsibility that the Elica Group received for its second level contract, sums up the value of this agreement: For having managed to make the fundamental principles of the Corporate Social Responsibility effective in an innovative and tangible manner, effectively combining participation method and award system. This company philosophy also gained the Elica Group the acknowledgement as Best Workplaces for the third year running, which was awarded by the Great Place to Work Institute research and business consultancy company. Sustainability for the Elica Group means always keeping each single factor and each player that is involved in mind. Suppliers, employees, customers and, generally, all those who live on our planet, enjoying all the rights to this quality of life and this wellbeing that have been the basis of the Group’s philosophy ever since it was founded.
Air, the element the work of the Elica Group is founded on, becomes a source of inspiration for its work. Transparency, purity, limpidity are intrinsic features of air that the Group has made its own, translating them into a new standard of company management and production with great focus on the impact of all the actions on the surrounding environment. The workplace and climate in the 8 factories in the world, the relations with the 2,300 employees and company training, research and innovation, planning and design, production and communications all likewise reveal what acting sustainably means for the Elica Group.
Kitchen Hood Elica, 1970
WHO, WHAT, WHERE
1970 1972 1990 2000 2002 2003
Ermanno Casoli founded Elica S.p.A.
Acquisition of the contract with Philips
Francesco Casoli became Chief Executive Officer
Acquisition of 60% of JetAir and 20% of Airforce
Incorporation of joint venture ARIAFINA between Elica S.p.A. and Fuji Industrial
Acquisition of 100% of Fox and of another 25% of Airforce
THE GROWTH
ANNUAL REPORT 2009
2005 2006 2007 2008 2009
Foundation of FIME Polska
Foundation of ELICAMEX; Acquisition of Jet Air; Elica S.p.A. increases ARIAFINA holding to 51%
Merger by incorporation of Jet Air, Turbo Air, Fox Design and acquisition up to 60% of Airforce
Sale of ACEM business division; Acquisition of Gutmann; Elica S.p.A. and Artemide agreement
Merger by incorporation of FIME S.p.A.
ELICA GROUP 15
WHO, WHAT, WHERE
ANNUAL REPORT 2009
ELICA GROUP 17
BUSINESS UNITS
COOKER HOODS
The Business Unit designs, produces and distributes household kitchen hoods under its own brand and under the brands of other leading household appliance manufacturers. The Elica Group hoods are universally recognised as unique for their unusual forms and innovative technology. The experience that has been built up in forty years of business and the highly refined materials that are used guarantee top product quality. Today the Group holds the world leading position for kitchen hoods with a 17% volume share of the market. Own brand product sales account for 33% of revenue, while the hoods produced for leading international household appliance manufacturers account for the remaining 67% of revenue. For years prestigious brands like Whirlpool, Electrolux, Indesit, Fagor, Bosch-Siemens, General Electric and Mabe have been renewing their trust in the Group certain of finding cutting edge technology, customisation and high-level expertise.
MOTORS
The FIME brand that the Elica Group uses for the design, production and distribution of electric motors for household appliances, hoods and household boilers holds the leading position in the European market. In the traditional boiler sector FIME motors hold 65% of the market share and 12% in the condensation boiler sector. Thanks to its experience and expertise the Elica Group is able to offer its customers the electromechanical design for the electric motors, fluid dynamics and electronics design, constructing integrated systems for air movement and purification. Recently the Group entered the commercial refrigeration sector offering energy saving innovative technology ventilation systems. In line with Group philosophy the Motor Business Unit addresses its production to physical and environmental wellbeing. The FIME brand ventilation systems respond increasingly to sustainability and energy saving standards. The Motor Business Unit has some of the leading manufacturers among its customers: Indesit Company, Whirlpool, Electrolux, General Electric, Bosch, Vaillant, Riello, Ariston Thermo Group and Viessmann.
Om Special Edition, Elica
WHO, WHAT, WHERE
PRODUCTION SITES
DISTRIBUTION NETWORK
Production Sites and Distribution Network
ANNUAL REPORT 2009
ELICA GROUP 19
PRODUCTION SITES
The Elica Group has a total of 8 factories around the world, 5 in Italy and 3 abroad. Global expansion was a natural step to becoming a great group on international scale. The logic of vicinity to the customers enables rapid response to their requests and helps the Group gain increasing market share. Always true to its roots however, the Elica Group maintains its corporate offices in the historic headquarters in Fabriano and 70% of total production still takes place in Italy.
DISTRIBUTION NETWORK
Own brand products are sold through various distribution channels: • kitchen manufacturers, some examples in Italy are Boffi, Valcucine, Ernestomeda, Scic and Scavolini, and abroad the Nobia Group, Nobilia and the Alno Group; • distributors who have furniture stores, kitchen studios and contract designers among their customers; • medium-high range retail stores such as Darty, Brico Depot and Foxtrot Group; • kitchen studios, specialised kitchen interior designers which are served directly. The third party brand products are distributed through the Original Equipment Manufacturer (OEM) business agreements with the customer. The Elica Group is present in the markets in all the strategic geographic areas: Europe, CIS1, Asia and the Americas. This action plan is based on dedicated structures in the different countries and enables the dual result of being more efficient in distribution and guaranteeing better market control.
EUROPE
The Group holds 41% of the overall volume share in the Europe reference market, and Italy is where it has its strongest hold. Through precise strategic choices brand presence in the continent has grown further and there are two fundamental actions in this plan. On one hand the supply agreement to the Swedish group Nobia Ab, which manufactures and sells kitchens, of unbranded and private label hoods and Elica Collection and Elica brand hoods, and on the
other hand the takeover of Gutmann, leader in Germany for highend kitchen hoods, which has further strengthened the Group’s position in the high-end bracket.
CIS
Given the distribution ramification in the CIS, the Elica Group decided to set up its own representative office in Moscow. The Russian market is very different from the European one, and thanks to being directly present through the logic of proximity to the customer, the Group is able to guarantee rapid responses to the customer requests from this particular bracket.
ASIA
ARIAFINA was born from the joint venture that was signed in 2002 with Fuji Industrial, the Japanese leader in the production of suction hoods, and it has become the landmark brand for the Japanese market of high-end hoods. ARIAFINA designs and distributes household appliances that are produced specifically for the Japanese market and has a showroom in the top fashion district of Osaka. The Asian market is very keen on everything that is Made in Italy and thanks to this joint venture, the special care paid to aesthetics that is a synonym of Italian design is combined with technological innovation.
THE AMERICAS
The American market accounts for more than 15% of the world market for hoods in volume, and the Elica Group decided to grasp the great potential offered by this area. Opening the ELICAMEX factory in Mexico guaranteed production as well as sales control. The Group holds a 9% volume share of the market in the Americas, mainly coming from the OEM (Original Equipment Manufacturer) business with important customers like Mabe, General Electric, Whirlpool, Electrolux and BSH. The Elica Inc. trading company in Chicago has the mission to control the North American market, placing the Elica and Elica Collection brands in the medium-high market brackets.
1. Commonwealth of Independent States
WHO, WHAT, WHERE
ANNUAL REPORT 2009
ELICA GROUP 21
VALUES AND COMMANDMENTS
VALUES
COMMANDMENTS
The reference point for all the activities of the Elica Group
The inspiring principals for Elica Group’s work
- Love your customers, put passion into working for them
1. Manage people so that they can manage their work
- Use innovative thinking
2. Delegate, delegate, delegate
- Make it easy for everyone to be involved in their own work
3. Work towards objectives
- Employ and communicate total energy
4. Persevere, persevere, persevere
- Identify new objectives and achieve them
5. Reward the acceptance of risk and responsibility
- Stay curious and never stop learning
6. Establish self-managing teams to solve problems
- Want to win
7. Try to achieve the impossible
- See change as an opportunity
8. Don’t get tangled up in a bureaucratic mentality
- Fight to reduce costs and simplify your work
9. Communicate, communicate, communicate 10. Don’t make the company too complicated
Elica Group Headquarters, Patio
WHO, WHAT, WHERE
11
9
A. FAGOTTI
F. F. CASOLI CASOLI Presidente Executive Chairman
R. OLIVIERI
10 8
7 A. SASSO
A. CIABATTI
G. CERULLO
3
2
5 M. BONFIGLI
V. MARAGLIANO
6
4 M. LO CAMPO
M. SCIPPA
R. DI FIORE
1
S. GATTUSO ANNUAL REPORT 2009
ELICA GROUP 23
THE PEOPLE CORPORATE BOARD Members of the Board of Directors Francesco Casoli Executive Chairman born in Senigallia (AN) on 06/05/1961 appointed by resolution dated 04/27/2009
Stefano Romiti Independent Director and Lead Independent Director born in Rome on 11/17/1957 appointed by resolution dated 04/27/2009
Andrea Sasso Chief Executive Officer born in Rome on 08/24/1965 appointed by resolution dated 04/27/2009
Fiorenzo Busso Independent Director born in Milan (MI) on 09/11/1942 appointed by resolution dated 04/27/2009
Gianna Pieralisi Executive Director born in Monsano (AN) on 12/12/1934 appointed by resolution dated 04/27/2009
Giovanni Frezzotti Independent Director born in Jesi (AN) on 02/22/1944 appointed by resolution dated 04/27/2009
Gennaro Pieralisi Director born in Monsano (AN) on 02/14/1938 appointed by resolution dated 04/27/2009
Members of the Board of Statutory Auditors Corrado Mariotti Chairman born in Numana (AN) on 02/29/1944 appointed by resolution dated 04/27/2009
Franco Borioni Alternate Auditor born in Jesi (AN) on 06/23/1945 appointed by resolution dated 04/27/2009
Stefano Marasca Statutory Auditor born in Osimo (AN) on 08/09/1960 appointed by resolution dated 04/27/2009
Daniele Capecci Alternate Auditor born in Jesi (AN) on 04/03/1972 appointed by resolution dated 04/27/2009
Gilberto Casali Statutory Auditor born in Jesi (AN) on 01/14/1954 appointed by resolution dated 04/27/2009
Internal Control Committee
Remuneration Committee
Stefano Romiti Gennaro Pieralisi Giovanni Frezzotti
Stefano Romiti Gennaro Pieralisi Giovanni Frezzotti
Independent Auditors Deloitte & Touche S.p.A.
Registered office and Company Data Elica S.p.A. Registered office: Via Dante, 288 – 60044 Fabriano (AN) Share capital: Euro 12,664,560.00 Tax Code and Companies’ Register Number: 00096570429 Ancona REA No. 63006 VAT Number 00096570429
Investor Relations Manager Laura Giovanetti e-mail: l.giovanetti@elica.com Telephone +39 0732 610727 Top Management Team
Top Management Team Marco Gianguido Alessandro Roberto Alessandra Sandro Massimo W. Vincenzo Roberto Andrea Marco
Bonfigli Cerullo Ciabatti Di Fiore Fagotti Gattuso Lo Campo Maragliano Olivieri Sasso Scippa
Americas General Director Chief of Product Development Marketing & Innovation Director Chief of Industrial Area B2C Sales Director Chief of Supply Chain Chief Integration Officer Chief Financial Officer B2B Sales Director Chief Executive Officer Chief of Human Resources
WHO, WHAT, WHERE
ANNUAL REPORT 2009
ELICA GROUP 25
HUMAN RESOURCES
OYEES IN ITALY L P M 00 E 6 , 1
AVERAGE AGE OF ITALIAN EMPLOYEES 40 YEARS
ACADEMIC QUALIFICATION
40%
women
10% degree holders
14% women
on the Board of Directors
10% women in Top Management
40%
diploma holders
TOTAL ELICA GROUP EMPLOYEES IN THE WORLD 2,300 E-Straordinario#3 “Ricordare è conoscere”
WHO, WHAT, WHERE
ANNUAL REPORT 2009
ELICA GROUP 27
CORPORATE GOVERNANCE
The Elica Group is fully committed to its Internal Control and Governance System. The aim is to uniform and apply the guidelines and internationally recognised best practices to guarantee the Group a constant and harmonious development. The Elica Group Corporate Governance system complies with the recommendations of the Code of Conduct organised by the Italian Stock Exchange and approved in March 2006 by the Committee on Corporate Governance. The Code of Conduct can be found in the Borsa Italiana S.p.A. website: www.borsaitaliana.it. The Yearly Corporate Governance Report for 2009 has been filed with the Italian Stock Exchange and CONSOB2 and can be freely consulted in the Group’s website www.elicagroup.com.
Activities addressed to structural and substantial aspects
Main activities during 2009
In consideration of the complex economic scenario that involved the electrical appliance sector, the company Managing Director and the Management, comprising directors and managers from all company departments and levels, decided to waive their Management by Objectives (MBO) for 2009, which provides a variable yearly bonus for managers who achieve their individual objectives. For the same reasons, the Chairman of the Board of Directors also felt it correct to reduce his own remuneration.
The activities can be grouped in two macro-areas: organisational and formal aspects on one side and the structural and substantial aspects on the other.
Activities addressed to organisational and formal aspects
On April 27, 2009 the Board of Directors of Elica S.p.A.: • reconfirmed the figure of Lead Independent Director, a reference and coordination figure for the requests and contributions from non-executive directors and independent directors, guaranteeing them full autonomy of judgement with respect to the Management and the completeness and regularity of the data flows to them; • confirmed Managing Director in the position of superintendent of the Internal Control System in compliance with the Code of Conduct, who identified the main company risks and submitted them to the Board, agreeing directives and any needs to upgrade the Internal Control System; • appointed the Internal Control Manager, who is also the Internal Audit Manager, responsible for providing support in developing the Internal Control System. During the year the Internal Control Manager assisted the Internal Control Committee in investigating the efficiency and effectiveness of the Internal Control and Company Risks Management Systems, offering support to the Board of Directors; • delegated suitable powers to the executive directors, who periodically report back relative to the activities they have carried out in enforcing their mandates, to guarantee improved management efficiency in compliance with the Code of Conduct.
Elica Group Headquarters, Sala Consiglio
Thanks to the work of the Supervision Committee, during 2009 training courses were organised for Group personnel and the contents of the Group Organisational Model were explained to them, with special focus on the Code of Ethics. Further to numerous meetings with Management, the Committee proposed an update of the model to the Board of Directors, further to analysing the risks of crimes related to the Group’s business and in line with the national best practices. The Organisational Model with the main foreseeable crimes, the Corporation Governance system and the Code of Ethics are available in the company website www.elicagroup.com.
2. Commissione Nazionale per le Società e la Borsa
WHO, WHAT, WHERE
WHAT WE DO
ANNUAL REPORT 2009
ELICA GROUP 29
OUR PHILOSOPHY / COOKER HOODS ELECTRIC MOTORS / AIR PURIFIERS /RESEARCH AND DEVELOPMENT INNOVATION / DESIGN / COMMUNICATIONS AND PROMOTIONS
02
ANNUAL REPORT 2009
ELICA GROUP 31
OUR PHILOSOPHY “ In the Elica Group innovation is a state of mind, a culture that should be spread” Francesco Casoli, Executive Chairman, Elica Group
“Who innovates, grows” was the title of the Research Day celebrated on November 6, 2009 in the national headquarters of Confindustria, with the President of the Republic of Italy, Giorgio Napolitano, present, where the Elica Group received the Imprese per l’Innovazione Award for its excellence in this field.
with the product and its quality and also with the Group and its enterprise culture. The Elica Group today is a Brand Identity.
The seed of innovation has been cultivated between the walls of the Elica Group since it was founded, translating it into an approach that distinguishes the Group: result orientated, open and full of proposals towards change, researching solutions that guarantee wellbeing for everybody. The ultimate aim of this philosophy is to ensure that man is always at the centre of the project. Man as a worker, in terms of internal organisation and company life. Quality of life in the workplace for the employees and suppliers is given, first and foremost, by the company atmosphere, mutual respect, simplified procedures and streamlined processes. Man as a user and installer, in terms of product design. Ease of use, ergonomics, simple installation are the basic requirements for each new project. This is followed by the research for solutions that allow reducing the amount and volume of materials used, both in terms of logistics savings and waste disposal. Man intended in the broadest sense, as an active inhabitant in the territory and as a living person who should have the right to a healthy atmosphere being preserved. Given these bases, the Elica Group has decided to organise its production by reducing environmental impact and avoiding the waste of natural resources as far as possible. The work conceived in this way respects the sustainability model that the Group has imposed. Thinking beyond the final result of its work and carefully controlling all the actions that are involved to achieve it. Implement a correct overall industrial system, because it is the right approach to guarantee a good product. Be the whole tree and not just the fruit. Reduce everything that is superfluous, avoid waste. Effectively simplify the process organisation, communications and behaviour to pursue excellence. Investment in innovation has raised the product quality level and strengthened the brand perception, which is universally identified
Pescecappa - Gaetano Pesce, 2009
WHAT WE DO
ANNUAL REPORT 2009
ELICA GROUP 33
COOKER HOODS OWN BRAND PRODUCTION
Gutmann is the “tailoring department” of the Elica Group. In the Mühlacker factory the 93 employees work for the customer to produce hoods to their specific sizes, shapes and materials. Gutmann manufacturing has turned its back on mass production in favour of special one-off productions and limited runs. The manufacturing process is primarily manual, with each hood a unique example of its kind. These factors, combined with the expertise and design of the Elica Group, create unique products. The dedication of the employees, their know-how, creativity and high degree of motivation have a great deal to do with the leading market position of Gutmann in the cooker hood field, consolidating also the Group’s presence in Germany and other European areas. This brand governs the high-end market bracket of top of range hoods, with products that feature a strongly defined look, high quality materials and innovative technology.
Downdraft Futura, Gutmann
WHAT WE DO
ANNUAL REPORT 2009
ELICA GROUP 35
COOKER HOODS OWN BRAND PRODUCTION
Elica Collection is the brand which so far has expressed product excellence. Models that have introduced design and technology into this field and dictate the trends. True pieces of furniture that are amazingly innovative and fascinating making the hood the protagonist in the kitchen. The specific features of this brand are representative of the Group overall. Elica is the medium-high end bracket range. Synonym of design and top quality production, together with the Elica Collection, this brand is the best example of the quality and style of Made in Italy. It is the brand that best summarises the Elica Group tradition, which is always up to date and constantly renewed.
Skin, Elica
WHAT WE DO
ANNUAL REPORT 2009
ELICA GROUP 37
COOKER HOODS OWN BRAND PRODUCTION
Turbo Air is the Elica Group brand in the medium-range bracket of the CIS, Asian and Far East markets. Turbo Air hoods are the result of long term experience in working with steel. This brand identifies traditional, solid products that win the quality-price challenge. ARIAFINA is the outcome of the joint-venture with Fuji Industrial in Japan, and is the brand for the hoods marketed in Japan. They are high-end products that revolutionise the normal concept of an extraction hood, introducing Italian style, with the concepts of design, taste and refinement in all the features of the home. Arietta, the brand for the North American market with competitive products in terms of price, with excellent quality standards and the typical design of the Elica Group. Jet Air expertly combines technology and design and with these features perfectly incorporates everything of the Made in Italy concept that is much loved in the Russian market where this brand is sold.
Image courtesy of GinkgoMaps project
WHAT WE DO
ANNUAL REPORT 2009
ELICA GROUP 39
COOKER HOODS THIRD PARTY BRAND PRODUCTION
Since 1970 the Elica Group has constantly pursued improvement of its standards, and its commitment and expertise that have been acquired over the years have created an industrial group that is a landmark for the leading household appliance manufacturers. Third party brand production by the Elica Group is based on solid foundations, beginning with the close cooperation with the customer which enables designing an exclusive appliance from their initial concept or idea. Secondly, perfect process integration of research, design and production between the Elica Group and the Original Equipment Manufacturer (OEM) enables adapting to the specific needs of each one promptly and efficiently. Third party brand production accounts for a considerable part of the volumes and sales of the Group and gives the vital sap that is needed to drive innovation and face new challenges.
Special products production
WHAT WE DO
40
6000
35
5000
30 4000
25
20
15
2000
10 1000
0
5
0
20
40
60
80
100
DELIVERY (m3/h)
120
140
160
Overall dimensions (155) ø 83+- 0.3 73 50+- 0.1 13.8
18+- 0.1 50+- 0.1
55.2
ø 5.5 22.5° ø 8.5 1.3
(139.5) FIME
4°
2.5+- 0.1
MOD. PX 148/4021
ANNUAL REPORT 2009
26.2
92.3
2.5+- 0.1 70.5+- 0.15
ø 50.2 ø 84
66 75.2
75.4+- 0.3
73.7 55.7
° 45
MAX. 205.5
18+- 0.1
90.5
58
MAX. 188
180
0 200
EFFICIENCY (%)
STATIC PRESSURE (Pa)
3000
ELICA GROUP 41
ELECTRIC MOTORS
FIME is the expression of the Motors Business Unit, where the Elica Group holds the leadership in the European market. It is also one of the leading brands in Europe in producing “premix� motors with premixed brushless fans for condensation boilers. Motors for hoods, boilers, refrigerators and ovens bearing the FIME brand are appreciated by the leading manufacturers in this field: Whirlpool, Electrolux, Indesit Company, Gorenje, Fagor, Candy, Vaillant, Riello, Baxxi Group, Amika, Ariston Thermo Group and Viessmann. The Elica Group has created a relationship of great trust and understanding with its customers, developing performing products with an excellent quality-price ratio. The know-how that has been acquired in 35 years of work in the electrical appliance and heating fields, in electromechanical design of electric motors and fluid dynamics and electronics design, mean that integrated air movement and purification systems are offered. The brand recently entered the field of commercial refrigeration as well. FIME is subject to continuous technological innovation, currently addressed to developing motors that save energy and respect sustainability requirements. The strategic role that this brand has gained convinced the Board of Directors to incorporate FIME S.p.A. into the Elica Group from January 1, 2010.
Electric motor FIME
WHAT WE DO
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AIR PURIFIERS LUXERION
Overcome the perceived limits and explore new fields of action, was the founding factor for the birth and growth of the Elica Group and has continued ever since they invented the first recessed hood until now. The seed for success is again planted with Luxerion, the first multifunction appliance to improve wellbeing in the living area. Luxerion comes out of the kitchen wall and the extraction concept evolves, becoming an air-purification system and, at the same time, a light and furnishing feature. In agreement with Artemide, leading lighting manufacturer, the Elica Group has designed a product that purifies the air of all the toxic elements and pollen, indispensible for the bothersome effects of pollution and allergies, which is very attractive and with incorporated lighting.
Pure Ola - Luxerion, Elica
WHAT WE DO
ANNUAL REPORT 2009
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RESEARCH AND DEVELOPMENT “ Research and innovation are the elements that the future of a company depends on”
Andrea Sasso, Chief Executive Officer, Elica Group
The Elica Group kept its investments into research and develop constant, even through 2009, firmly convinced that global competition is based on the ability to innovate. 3.5% of 2009 turnover was invested in research. According to the Confindustria data, this percentage is twice the average of other Italian companies. An economic commitment addressed to pursuing important strategic goals by the Group. Achieving good results in identifying technology that help save energy is the goal number one. This choice is part of the journey towards implementing sustainable behaviour that involves the entire Elica Group, and will allow better product positioning in terms of energy labelling criteria.
Research also focuses on the thread of product ergonomics and usability. Guided by the principle of man at the centre of the project, researchers study how to make each component and part of the product simpler. The image they have impressed in their minds is that of the labourer who will have to construct it, the installer who will have to assemble it, the customer who will have to use it, and the technician who will have to maintain it. The target to achieve is excellent man-product interaction.
Research and University
Work in the eco-design field is going in the same direction, which began in close cooperation with the ProCam Department, Industrial Design Section of the Faculty of Architecture at Camerino University. A group of young designers, who graduated in the Master in Eco-design and Eco-innovation from the University, were guided by a group of academic experts and managers from the main departments in the Elica Group in the “Eco-design & Eco-innovation Project. Design with the air for new ecofriendly lifestyles”. They had to study the role of air and its uses to improve comfort in the kitchen. Furthermore, by applying the eco-design principles the researchers try to identify solutions that can reduce or even prevent the environmental impact of a product throughout its entire life cycle, from obtaining the raw materials through to final disposal. Cooperation with the universities also involves the Motors Business Unit. During 2009 FIME was adjudicated the funding provided by the Ministry for Economic Development in the “Industry 2015” programme, for two projects it is working on. The first is the Green Kitchen and is promoted by Whirlpool Europe, Cefriel, Milan Polytechnic University, Askol, Vortice and Urmet. The second project is known as EROD, Energy Reduction Oriented Design, and is led by the HSB leader of the Biesse Group, with Indesit Company, Rivacold, Spes, AEA and Marche Polytechnic University. The funds granted to the two projects are addressed to developing high energy efficient electric motors for use in both household ventilation and industrial refrigeration.
Design Le Modulour
WHAT WE DO
ANNUAL REPORT 2009
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Elica TechLab
All Group products are tested in the Elica TechLab internal laboratory and the quality controls comply with the strictest international standards. The mission of Elica TechLab is: • to give technical and metrological support to Research & Development, to the Supply Chain and to product development; • to guarantee safety, reliability and performance in all the Group products.
Organised and managed in compliance with the UNI EN ISO/IEC 17025 standards “General requisites for Test and Calibration Laboratories”, the laboratory is today the only one in the world to have received both SMT3 and CTDP4 certification for its extraction hoods from UL5 International Demko6, which are the maximum levels to guarantee product safety. The laboratory is organised in five platforms, each one with a specific mission, where thirteen technicians, engineers and physicists of the highest levels work. The Testing & Reliability platform guarantees and certifies the achievement of the performance and reliability levels of all the products, defining, implementing and assessing the qualification process for each one. It also carries out the safety tests requested by the International Certification platform. The International Certification platform guarantees the safety of each model and issues the various certificates. Each Group product is put onto the market with the compulsory EC marking and also with its voluntary certification: cULus7 for products for the USA and Canada, CB8 and Demko mark for all the others. Planning manages the planning of the various Elica TechLab projects. Quality&Patents is the platform which, besides governing all patents matters for the Elica Group (which has more than 60 patents), is responsible for the Quality System of Elica TechLab; it also manages the Group measuring and control equipment, including the calibration process for each single instrument.
Test on blower
The EMPA&Packaging platform coordinates the product qualification process for Whirlpool and also manages the packaging tests that the company’s products undergo. During 2008 a special unit was created, certified for carrying out the most critical Electromagnetic Compatibility (EMC) tests that electric appliances undergo. Since December 2008 a laboratory has been working in the Group’s Mexico factory where 2 engineers work, which supports tangibly and immediately the local manufacturing and engineering and is entirely controlled and managed directly by the Italian Laboratory.
Developing the company model
For the Elica Group research is also developing a new way of living work, the relationship with colleagues, the organisation and company management, self-perception as part of a team. In this concept, design, a distinctive trait of the Group, becomes a model that inspires the entire organisation, a way of conceiving and managing interpersonal contacts within the company. The yearly training itinerary goes in the same direction that is organised by CEFRIEL, the Research and Innovation Centre of Milan Polytechnic, which involves more than 30 employees. It is divided in three themes: Design, ICT and Management. The former offers a vision of what is meant today by design and the strategic importance of the form besides the function. The second provides a vision of the technological trends and the way they are integrated into new models of products and services. The third concentrates on a vision of the elements that mark the normal project and product managerial practices. Eight months of multi-discipline, cross-border training with architects and designers, who have won awards like the Golden Compass, and professors from the MIP, Business School of Milan Polytechnic and other important Italian and foreign Business Schools. In the classroom there are mechanical engineers, electronic engineers, planners, product managers, designers, men and women from the marketing and buying departments, who all work together to reflect on the radical change in planning culture, beginning from the original idea phase, the declination of the concepts through to product/service development and production.
3. Supervised Manufacturer Testing 4. Client Test Data Program 5. Underwriters Laboratories 6. Danish certification board for product safety 7. Canadian Underwriters Laboratories United States 8. Certification Body: certified in compliance with International Electrotechnical Commission (IEC) safety standars
WHAT WE DO
ANNUAL REPORT 2009
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INNOVATION “The centrality of the customer moves all our actions relative to the products� Alessandro Ciabatti, Marketing & Innovation Director, Elica Group
Thanks to the important work by the Marketing & Innovation Department of the Elica Group, during 2009 products were designed in the hoods and components sector, which introduce technology that represent important conquests. Man is the protagonist in the relationship with the product: based on this, the distinctive traits of innovation by the Elica Group become the concepts of energy saving, ergonomics, efficiency, sustainability. Technology to save energy and reduce noise; user friendly electronic interface that allows activating the hood according to the cooking needs; reasoned reduction of the hood volume, with shapes and sizes that help movement in the kitchen and avoid accidental impact.
World Class Manufacturing
The Elica Group subscribes to the World Class Manufacturing (WCM) programme, for a production system addressed to excellence. Developed by the FIAT Group and adopted by the most prestigious industries, this method aims at reaching high productivity standards, each one in its reference sector, improving efficiency, quality and reducing, at the same time, waste and pointless losses.
Adagio, Elica
WHAT WE DO
ANNUAL REPORT 2009
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DESIGN
After being one of the greatest innovations introduced by the Elica Group in this field, design has become an organisational model. Today it is one of the fields where they experiment most, exploring new directions where the strategic choices converge and are achieved, physically and visually.
Elica Design Center
Elica Group design stands out thanks to the commitment and work of the Elica Design Centre, an internal group that signs the most representative products in the range of home products and which also develops new projects, in cooperation with the customer, for the third party brand production. The team studies and conceives new original design forms, carrying out important research and identifying new materials for the hoods. Precious, innovative and unusual, the aim is always to create “useful, beautiful, low-environmental impact items”.
Recognitions
The intense work that has been carried out in design is universally recognised, not only for the quality but also the value it gives to the sector in which the Group works and to the reputation of Italian industry in the world. During 2009, two hoods by the Elica Group were selected for the “Farnesina Design Collection” promoted by the Foreign Minister Franco Frattini. The Minister has set up a Scientific Committee, entrusted with the task of selecting the best designers and expressions of Italian creativity, a competitive factor abroad. The exhibition in the Ministry halls in Rome was an opportunity for communicating, supporting and valorising Italian design. The Committee, led by the Senator Sergio Pininfarina, with its members from ADI, Association for Industrial design, Milan Triennial and Cosmit, the exhibition organisation board that organised the International Furniture Exhibition in Milan and many other important exhibitions, selected Pescecappa, designed by the architect Gaetano Pesce, and Gold Stream, designed by the Elica Design Centre and made in blown glass by Murano craftsmen.
Bubble, Elica
The great designers
The Elica Group plays and experiments with design, i.e. art applied to industry, with some very interesting cooperation agreements with leading Italian and international designers. In 1999 David Lewis, a historic designer for Bang&Olufsen, created the turning point in new product conception and new technology development. In fact, Lewis’s creative drive became a challenge for the Elica Group as well: designing revolutionary models with respect to the standard ones with cutting edge technology solutions. Pescecappa is another example of cooperation, this time with the designer Gaetano Pesce, who produced this prototype that will be reproduced in a limited series. Pesce, known for his transversal and experimental approach, has designed a hood prototype ideally designed for the Pescetrullo kitchen, a home designed by the architect in the Puglia countryside. Inspired by the household appliance’s ancestor, the chimney hood, Pesce has created something where vegetables, fruit, pulses, fruit of the ground, become a symbol of healthy living and respect for the environment. Another important design cooperation is with Stefano Giovannoni, famous designer for Alessi and innovative creator of kitchen items. The research that was assigned to Stefano Giovannoni is yet another demonstration of the Group’s willing to offer studied products for their ergonomics and comfort in every movement and gesture.
David Lewis Gaetano Pesce Stefano Giovannoni
WHAT WE DO
ANNUAL REPORT 2009
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COMMUNICATIONS AND PROMOTIONS
Making facts and words coincide shows coherence. Coherence and clarity are requirements for transparency in behaviour. Transparency and simplification are the concepts that the Elica Group aspires to. The same company philosophy that guides each action is found in the communications and promotions as well. The messages to the outside world help create and transmit the concept of a company formed of people where each employee on any level has the same dignity and where individual needs and wellbeing are held in highest consideration. The external messages in the various forms, are addressed to exhibiting the Elica Group in its entirely and essence.
Indoor communications The Executive Chairman of the Elica Group, Francesco Casoli, talks of a company made of people because, in the philosophy of doing business, each individual in the company is important. Everyone has his or her rights and responsibilities, and each one has to be listened to and supported, each one has to be informed and updated about the situation where he or she lives and works. To make everyday communications between employees easier, the Elica Group has adopted various tools from the most traditional to the most unusual.
Intranet
The company intranet is where the information is transmitted, and each employee is able to obtain documents and communications and it keeps thousands of people constantly in touch.
House Organ
Elica News is the house organ of the entire team, where there is space for the stories from the various Italian and foreign factories and details of their activities. An indispensible tool to spread the values, philosophy, success and news of the Elica Group inside and out.
Newsletter
The periodic newsletter is the ideal way to keep a constantly lively dialogue with all the employees and subscribers.
Piazza Elica
Internal communications, apart from the institutional official ones, also involve direct confrontation, exchange of ideas and opinions. It is fundamental for the Elica Group to create a good relationship between the employees, promoting social places where dialogue is stimulated and cultivated. In Fabriano this is offered in the large space at the centre of the building called Piazza Elica, where the bar, tables and small open air courtyard offer the chance for a pleasant moment of relaxation during the coffee break or for meetings.
Face to Face
The Face to Face day is also part of the Elica Group traditions. Every quarter the Chairman, Francesco Casoli, and the Managing Director, Andrea Sasso, promoters of the initiative, meet the workers who ask to do so. It is the occasion for a direct confrontation to clarify any doubts, answer the employees’ questions and proposals. A date that helps improve the relations between the people who work in the same company from different points of view and also helps to improve the company atmosphere.
Outdoor communications The outdoor communications from the Elica Group are likewise varied and brilliant, produced using traditional communications tools but re-interpreted and renewed and never trite.
Showroom
The Elica Group has two Showrooms to promote its products and an ideal space for events and meeting with other players in the kitchen sector. One is in Milan in the Brera zone, and the other is in Osaka in Japan in the heart of the fashion district. The Milan Showroom was the stage for the event that was organised in cooperation with Lagostina. A brand meeting held a few days after MACEF, the most important fancy goods exhibition. During the “FuoriSalone” days in Milan, the Showroom hosted the presentation of “Pescecappa x Pescetrullo”, the project by the architect Gaetano Pesce, organised by the Ermanno Casoli Foundation with the artistic director, Marcello Smarrelli, and with
Pins, Elica
WHAT WE DO
Senza quello che c’è dentro, il deSign è Solo una Scatola.
Non è solo il design che ci ha fatti diventare ciò che siamo oggi. C’è qualcosa di più. Qualcosa che nessuno vedrà mai, ammirando le nostre cappe sulle più belle riviste del mondo: noi, la gente di Elica. La parte viva di questo progetto, quella che da sempre ci crede, e lo fa vivere. Ogni giorno, in stabilimenti all’avanguardia, in laboratori di ricerca unici al mondo, le nostre straordinarie capacità fanno nascere cappe sempre più efficienti, silenziose e ricche di funzioni. Siamo noi il contenuto che dà valore ad Elica. ANNUAL REPORT 2009 Siamo noi che la rendiamo speciale. Senza di noi, il design non sarebbe nient’altro che una scatola.
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Caterina Tognon Contemporary Art. The event was an opportunity to pay tribute to the famous architect-designer, whose principles behind his work are fully shared by the Elica Group. A very popular moment, with partners present and famous faces from the world of architecture, design and show business. During “Milan Design in the city”, promoted by Design Partners, which involved the most prestigious design brands in the world, the Elica Group organised “Sogno d’aria”. The idea was to create an itinerary in the memory of the Group with a setting that told of the dream of its founder, Ermanno Casoli, which began in 1970. The Campari Soda, Kitchen Aid, Smeg, Brionvega, Knoll, Hermann Miller and Danese brands cooperated with the Elica Group to take the Showroom back forty years in time, to the fascinating atmosphere of the 70s.
In 2009 Habitat Valencia, the most important trade fair in the Iberian Peninsula, dedicated a section to kitchens in the DIC hall. The Elica Group grasped this new opportunity for visibility and presented the leading products from its collections on its stand and two new ones: Sospiria and Adagio, outcome of the ideas and passion for wellbeing and an advance preview for Eurocucina 2010.
Advertising campaign
The Milan Showroom hosted the “Champagne @ Elica” event, organised in cooperation with Oenogourmet to meet investors and customers.
The concept for the international 2008/2009 advertising campaign “The future is not what it was” revolves around the theme of the Future and was handled with great style and irony. The art Marco Turconi and the copy Elio Buccini, from the Göttsche agency, explained the campaign: On one hand the idea of the science fiction future of the 50s, with the robots with thousands of flashing lights, the androids wrapped in aluminium foil, the space explorers dressed in impossible uniforms for our ideas today. And on the other the Elica Collection, its ability to experiment new forms and materials and develop increasingly advanced technology make it one of the few brands in the world able to really be ahead of the future.
Trade Fairs
Web
The Elica Group trade fair presences in 2009 concentrated on three grand key exhibitions for the sector. At ZOW 2009 International Kitchen Components Trade Fair in Germany, the Elica Group presented the most representative items from the Elica and Elica Collection brands. In March the Group attended the SADECC trade fair in Lyons, one of the most important dates in France for interior furnishings. The Group also attended the KBIS Kitchen & Bath Industry Show in Atlanta, an important American exhibition for bathroom and kitchen products. In May, the jewels of the Elica Group flew to Turkey, to the Muder Istanbul 2009, an exhibition of the most innovative design products for bathrooms and kitchens, addressed to architects and retailers. Through the local distributor the Elica Collection was presented for the first time in the country.
The Elica Group historic site www.elica.com registers on average 40,000 visits every month and is the main destination and reference for anyone seeking online information. Once users arrive in the site they have a wide variety of information and contents available. Besides the news directly related to the Group companies, users can also find articles on architecture and design, they can leaf through the product catalogues and, even, buy hood accessories online. There is then the website www.elicagroup.com, which gives access to the Group communications, to the reserved area for investors and the descriptions of the brand, each one with a link to its own site: Elica, Elica Collection, Turbo Air, Arietta, ARIAFINA, Gutmann and FIME, that the restyling was recently completed for. To back up the corporate and product communications the www. elicaonline.com site has been created where the photos and information about the Group and its hoods can be downloaded.
Adv 2009, Elica
WHAT WE DO
CORPORATE SOCIAL RESPONSIBILITY
ANNUAL REPORT 2009
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INTERNALLY ADDRESSED INITIATIVES / EXTERNAL INITIATIVES
03
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CORPORATE SOCIAL RESPONSIBILITY “ Harmonious and balanced company development must always consider its history and bond with its territory, which become factors for the success and stability of the enterprise in the long term” Marco Scippa, Chief of Human Resources, Elica Group
Being a sustainable company for the Elica Group means a range of actions that involve the Group and the People who are part of it, the Factories and the Products they make, the Territory and the Community where it works.
THE GROUP AND THE PEOPLE
FACTORIES AND PRODUCTS
TERRITORY AND COMMUNITY
Supplementary Agreement
World Class Manufacturing
Schools and Universities
Ethic Code
IWAY
Love Design
Company training
Emission controls
A.A.A. L’arte di amare l’arte
E-straordinario Project
Eco-design Project
Solidoro
Elica Life*
Ceced Code of Conduct
Jonathan
Let’s plan Christmas
HR and Sustainability Road Show
Separate waste collection
Best up
Safety
A primary social responsibility for any enterprise is to make a profit, because when the company is healthy the surrounding economic-social fabric benefits. Corporate Social Responsibility (CSR) for the Elica Group is addressed internally and to its employees, and externally. The first direction mainly involves the training and innovative management actions, to improve and valorise the internal resources. Externally it is addressed to the numerous cooperation agreements with Schools and Universities and the specific programmes for People and the Environment, in a view of environmental sustainability and social and instructive commitment to the Community. The professional reference figure for CSR is the Employer Branding Manager in the Human Resources Department. Elica Group Headquarters, Piazza Elica
CORPORATE SOCIAL RESPONSIBILITY
INTERNALLY ADDRESSED INITIATIVES
Despite the complex global economic scenario, the Elica Group has decided to pursue the initiatives and investments addressed to the People. The Group maintains its commitment to its employees and invests in their ideas, professionalism and personality. Grasping new opportunities in hard times is the strongpoint of the Elica Group. The person at the centre of the way business is done is the binding factor that unites the Initiatives, Recognitions and Standards of Conduct that have been achieved.
GREAT PLACE TO WORK
For the third year running, the Elica Group reconfirmed its leadership, among Italian enterprises in the classification of the Great Place to Work Institute (GPTW). The award is assigned every year to those enterprises that implement the best employee policies, electing the Best Workplaces to work in around the world.
INTERVIEW WITH ANDREA SASSO, Chief Executive Officer, Elica Group
To guide a group of people you must be the first to work hard and recognise the value of your colleagues, making them feel a true part of the team and showing concern for their wellbeing even outside the workplace. Why did you decide to compete in the GPTW classification? I had just joined the Elica Group as Managing Director, just over three years ago. I knew it was a young, dynamic and innovative group, but to understand better which choices should be made I needed to analyse it in depth and take an X-ray of the company. I knew how reliable the Great Place to Work Institute was in its surveys into company atmosphere, and participating in the award would have helped me in my quest. What distinguishes the Elica Group and makes it suitable to take part in the GPTW? The enthusiasm that each single employee shows in achieving the goals and the great drive that is transmitted by the owners which has always been a distinguishing trait of this firm. I was aware of this spirit as soon as I came here. Taking part in the GPTW also helped me to understand how genuine the company was and how to maintain that same level in a constantly developing enterprise projected towards a global dimension. Since 2008, the Elica Group is the first Italian company in the classification. Is there still room for improvement, and where? There is always room for improvement. Being reconfirmed in first place among the Italian groups is an excellent result and the outcome of constant hard work. We realise how demanding it is to create an atmosphere where people are happy to work. It is impossible to please everyone of course, but we focus the utmost attention on them all and our investment in our employees is the proof, because we feel it is another important factor to help achieve the company results.
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SUPPLEMENTARY AGREEMENT
The Supplementary Agreement was stipulated in 2008 and won the Elica Group the Etica e Impresa Award in the “Social Responsibility” category, and it was taken as a model for second level negotiation. The Italian Association of Personnel Directors (AIDP) in fact involved the Chief of Human Resources, Marco Scippa, in a workshop that was held in the Group’s headquarters in Fabriano on “Welfare in supplementary negotiation: examples to follow”. Scippa illustrated the guidelines of the Agreement to representatives from the most important enterprises in the Marche region, the Marche Provincial Confindustria Associations and the regional offices of AIDP in Tuscany and Umbria.
ETHIC CODE
The Elica Group formalised its policy for interpersonal relationships within and its conduct externally, by drawing up the Group Ethic Code. The Code defines the guiding principles, directives and fundamental conduct requirements that the personnel must observe and promote, and which must be founded on principles of legality, honesty, correctness, integrity, confidentiality, transparency and mutual respect. The office managers, or their delegates, are responsible for monitoring that the Code is observed, and for providing any explanations or informing their superiors of any infringements. To inform the employees about the Code and how it should be respected, a brochure has been prepared that summarises the meaning of the Code and the places where the complete document can be consulted. The Code is available online in the company intranet, section Procedures Elica-Area Legislative Decree No. 231/2001, and in the Group’s website www.elicagroup.com, in the Corporate Governance Area. A printed version is also on the notice boards of all the Group factories, and it has been translated into Polish for the employees of Elica Group Polska Sp.zo.o.
INTERVIEW WITH MARCO SCIPPA,
Chief of Human Resources, Elica Group There are two guiding principles that led to signing the First Company Supplementary Contract: creating a salary system that awards the employees’ greater commitment to achieving company goals and, above, makes them all, men and women alike, feel proud to belong to a Group that gives all round value to its employees, close to them in their lives and appreciating them as people and not just employees. The Elica Group is a pioneer in this type of initiative. What was the aim of implementing the Agreement? The aim was to make a company style “systemic”, a value already held by the company, so that it was a conjunction between the new company course and its history. This helped create a favourable climate that acted as a “buffer” in a moment when the Group was changing drastically, reassuring the people and preparing them to welcome the change as an opportunity and not a threat. What sort of climate does it create among the employees? Cooperative and more human. This means that everyone can express their opinion without fear of compromising their potential. Which of the benefits provided by the Agreement have been most used by the employees? Definitely the Corporate Card and the Study Holidays abroad for employees’ children.
CORPORATE SOCIAL RESPONSIBILITY
WORLD CLASS MANUFACTURING
INTERVIEW WITH MARCO GOBETTO,
IWAY PROTOCOL
The World Class Manufacturing Association is a no-profit association that unites companies in different sectors that are able to put into play the reference best practices in their industrial sector. The companies that apply the WCM aspire to becoming the best in their relative fields at world level and therefore they rapidly become a model for excellent management at local level and then a worldwide benchmark to aspire to in terms of best practices.
In the constant search to improve its standard and performance, and addressed to reducing its environmental impact, the Elica Group has subscribed to World Class Manufacturing (WCM). WCM is a manufacturing management programme aimed at achieving excellence by optimising costs and reducing losses. It involves the factory organisation overall: from managing environmental and work safety aspects, to maintenance and logistics with special focus on eliminating waste.
Over recent years the Italian factories of the Elica Group have conformed to the IWAY Protocol, Way on Purchasing Home Furnishing Products, adopted by IKEA. In 2009 the Polish Factory Elica Group Polska Sp.zo.o also subscribed. This is part of the Group’s spirit to be coherent with the codes of conduct of its partners and clients, as well as its own. IWAY is founded on eight main conventions defined in the Fundamental Principles of Labour Rights (ILO Declaration, June 1998) and the Rio Declaration in 1992 on Sustainable Development, and it establishes the minimum requirements for the External Environment, the Social and Labour Conditions (including the use of juvenile labour) and Marketing Wood Products.
TRAINING
The Elica Group places special focus on personnel and developing minds. Numerous training courses were activated for employees during 2009, not only relative to the Group’s business but generally on topics to stimulate personal growth. An investment in the future convinced that these initiatives will help strengthen the awareness of the value of the person within this development policy. FEC Lectures The Ermanno Casoli Foundation (FEC) and the Elica Group cooperate in organising a cycle of conferences with representatives from the world of art, architecture, design and science. This is because they are convinced that the more knowledge that circulates and intermingles, the greater chance there is of new models of conduct being generated that improve the overall quality of our life. Seminars were held in 2009 by the architect Gaetano Pesce and the Professor in nano-biotechnology Ian J. Bruce.
ANNUAL REPORT 2009
Manufacturing Training Unit Manager and WCM Training Coordinator, FIAT Group
What are the advantages from adopting the WCM? First of all advantages in the reduction of industrial transformation costs, granting an efficient and rational use of the resources, intended as machinery, personnel, energy and generally everything that is needed in the production process. The induced benefit is represented by a new managerial approach, of total involvement and constant career growth for the personnel. These are all internal factors, but does the WCM have an external impact as well? Yes, it can have important effects on the territory and socialeconomic fabric. A more rational use of the resources by avoiding waste and reducing the environmental impact has very important ecological consequences. How many enterprises have joined the WCM so far? While it is clear that the number is not important, but the quality and standard of the companies involved, if we take all the FIAT Group sectors we can count on about thirty and if we extend the view to the factories the number increases exponentially. Several sectors are represented, from automotive to components production, from the postal services, to industrial flooring, from logistics services to kitchen hoods, with the Elica Group.
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Performance Leadership The Elica Group has begun an integrated leadership course addressed to more than 60 employees, for developing across the border attitudes in people in charge, improving their ability to lead a group or process and increase the sense of belonging. This is achieved by adopting new behaviour with respect to the traditional managerial methods. The programme was inaugurated with a speech from Major Massimo Tammaro, Captain of the Italian Elite Formation Flying Team, who spoke of his experience as leader of the team, where understanding, precision, knowing one’s limits, responsibility and perfect integration are essential to achieve the result. Team Building Company training focused on group creation and developing the team spirit with various initiatives during the year. The first used volleyball as a metaphor for the working dynamics, with two leading players visiting the company Andrea Zorzi and Roberto Masciarelli. In the Cerreto d’Esi indoor stadium, 51 employees from the Supply Chain area and their manager Sandro Gattuso performed with the aim of making an internal streamlining process easier, further to the merger and internationalisation operations. There were two other outdoor training projects, with physical tests at a height of between 10 and 16 meters. In total the three courses involved more than 100 people between directors, middle Management and office staff. E-straordinario Group training in cooperation with the Ermanno Casoli Foundation gave rise to the E-straordinario project. The aim is to bring people closer to the world of contemporary art, which is often thought of as inaccessible and distant. The two fields of art and industry meet and establish a profitable exchange of knowledge and approaches aiding the growth of them both. During 2009 the artists Cesare Pietroiusti and Francesco Arena were involved. Pietroiusti guided the Group’s employees in producing around 2000 drawings using smoke and wine to make “marks” on the paper. All the materials that were used were produced by the local companies: Fabriano paper, the candles to produce the smoke, and Conero red wine.
INTERVIEW WITH PIERO TUCCI,
founding partner of M&D Management & Development Enterprise prospers if it is able to involve the personnel and make them part of a project. A good leader is a person who, after a success, opens the window and shouts to the people “Well done, you’ve won”, because it is the organisation overall that guides the company towards its goal. What are the training aims of these activities? By using the sports metaphor and outdoor exercise, we want to stimulate the team spirit, the idea that only by everybody cooperating can the goal be reached. In volleyball for example, each individual must work with the others to score a point. Outdoor activities follow the same philosophy: climbing a rock face can be terrifying if you are alone, but in a group the fear is shared, there is mutual support and you manage to reach the top. What results have been achieved? Which changes and improvements have you noticed? The Elica Group has provided constant and precise training on these topics for several years now. Like sports training, it all helps to assume certain behaviour and the improvements can be seen. By training this way, you become a company where you can see the unconditioned reflex in the people to behave according to certain shared values and principles. What currents will company training follow in the future? First of all increasing social skills of communication, cooperation, creativity and increase participation. It is a type of training that valorises the individual making each one understand that they count and are considered.
CORPORATE SOCIAL RESPONSIBILITY
INTERVIEW WITH CESARE PIETROIUSTI, artist
Art is an exercise in freedom, where man experiments being able to think unconventionally and without preconceived ideas. Whoever repeats ways of thinking that are always the same is bound to decline.
Francesco Arena, winner of the XI edition of the Ermanno Casoli Contemporary Art Award, led the Group employees with whom he produced the winning work in four meetings where they discussed topics of personal and historic memory, the importance of the past as an iconographic source for artists from all generations, according to the educational function of the memory as an instrument for knowledge of the present. The employees were stimulated to carry their knowledge into a new field, facing the unexpected problems with alternative approaches and solutions that they had never used before. The E-straordinario # out of the company project was an idea of the Artistic Director of the Ermanno Casoli Foundation, Marcello Smarrelli, and involves cultural initiatives that take the employees out of the company context. In 2009 three visits were organised. The first to the Modern Art Museum in Bologna, a dynamic example of public collecting. The second was to the Maramotti Collection, a private collection belonging to the entrepreneur Achille Maramotti, founder of Max Mara. Finally the visit to the “Space, Time, Image” exhibition in the Italian Contemporary Art Centre in Foligno (CIAC).
E-Straorinario#2 “L’intelligenza del caso”
ANNUAL REPORT 2009
What does the workshop involve? The drawings were produced in the first phase and are hanging in the large Piazza Elica hall now, in the centre of the Fabriano headquarters. The idea is that anyone can go and take them away, freely. There is just one clause, that is written on each drawing and which is the result of the second part of the project. In fact, once the drawings were done the employees were involved in a brainstorming that created the two captions that were then printed on the drawings. What sort of approach did the workers have? Surprisingly creative. It was very interesting to choose the captions for the drawings together, for me as well, and I have been working on these topics for a long time. This is true brainstorming, where the exchange enriches everybody. In your opinion, what are the principles of art that are useful in a work and enterprise context? No artistic action generates a result that can be preset or generalised. There is an unavoidable factor of uncertainty in art, especially contemporary art. But the challenge is to pursue thinking with a new and unusual train of thought. Art requires an effort that can also help in work, in the attempt to avoid it becoming an impersonal and alien experience. It helps to construct the way of thinking.
ELICA GROUP 65
ELICA LIFE*
Attention to individual wellbeing also means remembering the person’s personal sphere. For this the Group organises various initiatives every year for its employees and their families through the Elica Life* project. Including the Member Card which gives the right to discounts in numerous shops and services, including food, clothing, perfume and furniture stores and also to the theatre, sports facilities and medical treatment. The Elica Life* project includes also the Elica for the Young programme which helps access to study and training experiences for employees’ children. The I Am project is an example, where study holidays are organised abroad to learn a new language, extend one’s horizons and grow up in this increasingly international world. In 2009 the children spent two weeks in a college in the United Kingdom, thanks as well to other supporting partners for the initiative.
“LET’S PLAN CHRISTMAS”
The symbol of Christmas is the tree, the same element that the Elica Group considers a model of company life, total harmony from its roots where it draws its vital sap from through to the fruit it produces. Christmas was also a moment to bring all the employees and their families together around the Group tree to enjoy a moment of celebration and imagination. The decorations were especially made for the trees in the Group’s five Italian factories, and the inspiring themes were creativity, social and environmental sustainability and emotions. The initiative was organised with the cooperation and support of the Ermanno Casoli Foundation, which also sponsored the creation of the “Creativity Tree”. Using obsolete or scrap production material, a few employees created their work freely inspired by the “Tree of Life” by Gustav Klimt. The message the work gave is one of hope and trust in the future: the tree loses its leaves during the winter, a few branches might break but despite that it stands up to the weather and in spring is ready to bud again.
HEALTH AND SAFETY
Wellbeing and quality of life at home and work have to be based on great attention to safety and health. The Elica Group pursues this aim through three guidelines: Organisation, Control and Communication.
Organisation follows the directives defined by Legislative Decree No. 81/2008. To guarantee the principles are respected to safeguard the environment and safety in the workplace by the employees, the Elica Group has created a specific function the Environment Health Safety (EHS), which includes the Prevention, Protection Service (PPS). The guidelines are taken from the WCM methods (World Class Manufacturing), which aim at reducing the number of accidents, developing a culture of prevention, improving individual comfort at work and specific professional skills, supervising and guaranteeing the correct management of environmental and safety aspects at work. Each time an accident occurs, it is immediately analysed to highlight the cause and implement the necessary countermeasures, to reduce or eliminate the probability of it reoccurring. Furthermore, to decrease the fatality of an accident great focus is placed on prevention, with specific training and instruction for the employees. Each individual in the company has the faculty and responsibility to report any behaviour or situations that reduce safety. Once the report has been received, the risk is identified and assessed and an intervention plan is then implemented to reduce the risk. Moreover, every month meetings are organised with special teams to analyse the trend of the implemented safety actions. To ensure that everybody in the company knows the safety regulations the communications are very carefully prepared. Besides the information manual that is given to everyone, the notices on the notice boards and specific training, employees also take part in an awareness project on the risks involved with their work.
SAFETY TRAINING DURING 2009 15 courses on various safety matters 200 total training hours 400 participants 13 hours average for each training course 4 courses attended by each employee on average 53 training hours each
CORPORATE SOCIAL RESPONSIBILITY
AIR SUSTAINABILITY
Environmental responsibility and corporate culture
ELICA GROUP 67
EXTERNAL INITIATIVES
The CSR actions of the Elica Group follow different directions for likewise categories of users. From the closest to the Group, the customer, to the Universities that are preparing the talent of the future, through to the most distant ones with social commitment and environmental respect.
CECED CODE OF CONDUCT
The Elica Group is actively involved in defining an agreement between sector companies to adopt uniform parameters in calculating the extraction and noise levels in the products. The advantage is to guarantee the end users have much greater transparency in the information and create a valid obstacle to the falsification of the technical data. To draw up the Code of Conduct, the Group cooperated with the CECED, Conseil Européen de la Construction d’Appareils Domestiques, the National Association for Manufacturers of Household and Professional Appliances. The work aimed at achieving a harmonisation for the product characteristic declarations and through this commitment the Group spreads further a new awareness of the value and effects of each single daily action.
SCHOOL AND UNIVERSITY
More than 300 students have visited the Group companies, and employees have talked about their experiences in Universities, Research Centres and Business Schools. There are now 4 solid partnerships with Marche region universities (Polytechnic University of the Marche, Macerata University, Urbino University and Camerino University) and with other prestigious Italian universities. In 2009 the Group entered the Top Employers Italy list, a trade directory by CFR Italy, Corporate Research Foundation, which identifies the leading enterprises in attracting and keeping talented personnel. From the cooperation with the universities, two projects are now taking form that are directly linked, examples of the synergy that can be created between enterprise and the Academic World. The “Eco-design & Eco-innovation Project. Design with the air for new ecofriendly lifestyles” where the Group cooperates with the School of Architecture and Design from Camerino University in Ascoli Piceno. The aim is to conceive new concepts for kitchen
INTERVIEW WITH LUCIA PIETRONI,
Scientific Manager for the “Design with the air for new ecofriendly lifestyles” and Director of the Master in Ecodesign & Eco-innovation at the School for Architecture and Design with Camerino University, in Ascoli Piceno The experience with the Elica Group is virtuous for the involvement that was shown, the exchange of skills and the collective learning. The more that the Marche and National enterprise system adopts this approach the greater and more useful the results will be. How was the collaboration born? The Elica Group told us of an idea for a new role for design, as the drive for innovation besides its purely aesthetic-formal function. The approach is to analyse the entire life cycle of a product, from obtaining the raw materials through to final casting off. Further to the initial interest of Riccardo Diotallevi, Brand Development & Communication Manager of the Group, and thanks to the dedication of Debora Carè, People & Knowledge Manager, we began the project and now it actively involves the entire organisation. What are you doing with the project? The 10 young eco-designers, coordinated by experts and senior researchers, examined what the role of the hood could be in the future. The conclusion is that the fundamental aspect is to recover and reuse the heat that is lost during cooking. By working on the hood movement, there would be more precise extraction with improved performance and lower energy used. These innovations help the individual to be more aware of the energy consumption of electric appliances and, therefore, reduce it. What results have you achieved so far? The research phase is very precise and we have already received designs for the hood functions. It is an important result for both the University and the Elica Group.
Atlante and Air
CORPORATE SOCIAL RESPONSIBILITY
hoods, which include technology improvements to save energy and, above all, stimulate the individual to have a more responsible and sustainable behaviour. In cooperation with the La Sapienza University in Rome, the Elica Group has launched the Corporate Branding project *Go for an ecofriendly trip, addressed to inventing slogans and claims about the environment. Ten students from the Communications and Marketing Course in the Psychology 2 Faculty of the La Sapienza are involved in a project, where the experience will be processed of the young designers in the Elica Group as part of the project implemented with the School of Architecture and Design in Ascoli Piceno. Beginning by observing their colleagues, the La Sapienza students try to find the keywords that become the new sustainability concept slogans. The final goal is to achieve the attention to the matters that the Elica Group is working on through its communications as well.
ROAD SHOW “HR AND SUSTAINABILITY”
The Elica Group has been involved by the Italian Association for Personnel Management (AIDP) and the SDI Group, a consultancy firm for sustainable development, in the “HR and Sustainability” Road Show. The organisers have recognised the Group’s commitment to its employees and respect for the territories where the company is located. The Group showroom in Milan hosted a meeting on “Beyond the crisis: organisational sustainability and the role of Human Resources Management”.
ENVIRONMENT
The Elica Group pays special attention to the impact of its activities on the surrounding environment. It scrupulously respects current legislation and conforms to International standards voluntarily. It was one of the forerunners in the Marche region and Italy in certifying its Environment Management System in 1999 in compliance with the UNI EN ISO 14001 standard, which defines the criteria to apply to develop an effective sustainable production management system. It monitors and records the atmospheric emissions, controlling the fume reduction plant works perfectly. The external laboratory the Group uses to analyse its emission points revealed that for 2009 they conformed to the limits established by the protocol. The Elica Group has adopted specific guidelines and procedures for
ANNUAL REPORT 2009
chemical substance management that provide preventive and informative measures (customised labels, continuous training and ad hoc operating instructions) for the safety of workers and environment alike. The internal database contains a catalogue of all the chemical substances that are used in production, indicating their type, the departments that use them and the references to the safety charts. Before being introduced into the processes, each new chemical substance is assessed by the internal Prevention and Protection Manager and the Quality & Environment Assurance Manager. Special attention is also paid to safeguarding the ozone layer and the conditioning and refrigeration plant that contain gasses that harm the ozone layer, R22 (Alon-CFC-HCFC), are gradually being replaced with last generation plant. In 2009 the Group organised the separate refuse collection in all its companies, cooperating with the refuse collection companies. Thanks to the continuous controls and process improvements for the environment and safety in the workplace, the Group factories obtained IWAY conformity. Best Up In 2009 the Elica Group entered the Best Up circuit, an association that supports sustainable living for a project that combines the culture of equity and sustainability with design, creativity, taste and lifestyles. The Elica Group decided to support the Association to work together and enrich the concept of Made in Italy design with “sustainable contents”.
SOCIAL
There were numerous social actions by the Elica Group in 2009, pursuing the long-standing commitment towards the territory, and beginning new projects and cooperation on different matters with different aims. Love Design The Elica Group adhered to LOVE DESIGN®, an initiative sponsored by the Lombardy Committee of the Italian Cancer Research Association (AIRC) and the Industrial Design Association (ADI) to collect funds for cancer research.
ELICA GROUP 69
More than 50 companies of the most prestigious International design brands offered some of their products to prepare the exhibition market held in the PAC, Contemporary Art Pavilion in Milan and which were sold to collect funds. A.A.A. L’arte di amare l’arte From an idea from the Anteros Tactile Museum for antique and modern painting in Bologna and the Institute for the Blind in Milan, the Città Italia Foundation organised a charity auction to fund the construction of a 3D version of Leonardo da Vinci’s “Last Supper”. The work was put on show in the refectory of Santa Maria delle Grazie in Milan, where Leonardo’s famous painting is conserved, and it costed around 50,000 Euros. The sum was collected by auctioning 13 design products that were made especially for the occasion by 13 internationally famous artists. The Group offered two unique hoods converted into works of art by Mario Sasso, forefather of electronic art. With computer graphics Sasso customised an OM and a Space hood. Solidoro Social Cooperative For 7 years now the Elica Group has been cooperating with the Solidoro type B Social Cooperative. The aims of the Cooperative are to introduce underprivileged people to the world of work, fighting episodes of alienation. The Cooperative provides the Elica Group with the DOC (envelopes containing the kits for assembling the hood, including the guarantee and assembly instructions) and the AC (equipment kit, being the screws and nogs in addition to the DOC). This cooperation has enabled Solidoro to employee 6 people with regular contracts whose life has been radically improved. Jonathan Project The Elica Group also participates in the Jonathan Project, recognised by the Ministry for Justice. It was founded in Caserta in 1998 from cooperation between Indesit Company and the Jonathan no-profit Association (that runs residential communities for youths who are undergoing criminal or administrative processes), and its aim is to integrate young people who run the risk of alienation or deviation into the world of work. The Group has taken some of the boys in the project into its factory in Mergo.
I petali sulla città, Mario Sasso, 2009
CORPORATE SOCIAL RESPONSIBILITY
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2009
ELICA GROUP 71
DIRECTORS’ REPORT / CONSOLIDATED FINANCIAL STATEMENTS
04
DIRECTORS’ REPORT
THE ELICA GROUP TODAY The Elica Group has been present in the cooker hood market since the 1970s and is today world leader in terms of units sold. It is also a European leader in the design, manufacture and sale of motors for central heating boilers for domestic use. With over 2,300 employees and an annual output of approx. 16 million units of kitchen hoods and motors, the Elica Group has 8 plants - of these, five are in Italy, one is in Poland, one in Mexico and one in Germany. With many years’ experience in the sector, the Elica Group has combined meticulous care in design, judicious choice of material and cutting edge technology guaranteeing maximum efficiency and reducing consumption making Elica Group the prominent market figure it is today. The company has revolutionized the traditional image of the kitchen cooker hood: it is no longer seen as simple accessory but as a design object which improves the quality of life.
ANNUAL REPORT 2009
ELICA GROUP 73
THE MACROECONOMIC ENVIRONMENT IN 2009 AND OUTLOOK 2010 The GDP1 of the Euro area in 2009 decreased by 3.9%, with contractions in the first two quarters of the year while recovering in the third and fourth quarters, thanks to the stimulus measures implemented by the national governments and the recovery of Chinese growth which encouraged exports. The drop in GDP affected all of the principal economies, in particular Germany (-5% approx.), Italy (-4.7%) and France (-2.2%). Inflation slowed significantly following the drop in raw material prices. The unemployment situation in the Euro area worsened in 2009: the unemployment rate rose to 9.8% from 7.9% in October 2008. Spain was one of the worst affected countries due to the collapse of the property market. In 2010, GDP is forecast to increase by 1.1% with strong performances from net exports and consumption. GDP is expected to increase at a greater rate in the first part of the year, while slowing in the second part of the year due to the withdrawal of government stimulus measures. In relation to inflation, prices in the year should increase in the order of 1.6% and therefore lower than the 2% target. In the United States, GDP is expected to record a 2.5% contraction in 2009 against a drop in consumer prices of 0.3%. The impact of the crisis has led to a loss of over 7 million jobs from 2008 to November 2009 (4 million in 2009), with an unemployment rate rising from 4.9% to 10% in the same period. In the real estate sector, signs of stabilisation have begun to emerge in recent months, with a tentative return to growth from July 2009 with a recovery in the average time of unsold property. For 2010, GDP forecasts are for growth of 2.3% with a possible revision lower if the stimulus plans are less effective than predicted and if the recovery in employment is lower than expectations. The second quarter is the period in which critical issues may emerge. On the prices front, an inflationary cycle may begin, however without the overheating of consumer prices with the greatest increases expected in the energy sector. Japan in 2009 emerged from the recession, however with a return to deflation which raises doubts upon the recovery in 2010. The recovery is expected to take hold globally in the next year, although deflation may impinge on recovering pre-crisis levels. This remains however at levels much lower than the previous year, as seen with a decrease of 5.1% in the third quarter. In 2010 a growth of 1.5% is forecast. Price forecasts are however a cause of concern: the BoJ2 predicts that the Cpi3 core level will remain negative until fiscal year 2011. In China, after a difficult start, 2009 saw a significant recovery in growth, thanks to the two year stimulus plan and the record increase in bank lending. In 2010 the World Bank forecasts growth of 8.7%. The emerging countries area recorded growth of 1.7% according to International Monetary Fund (IMF) estimates. In 2010, the estimates point to 5.1% growth. In the Russian Federation the IMF has estimated a contraction in 2009 of 7.5% from 5.6% in 2008. In 2010, IMF forecasts that growth will return (+2.1%). The inflation level is estimated to decrease to 12.3% in 2009 from 14.1% in 2008. The central bank has cut the interest rate seven times from 12.5% to 9.5%, in order to counteract the recession, encourage growth and stop excessive appreciation of the currency. In relation to commodities, after 2008, one of the worst years for raw materials, the first months of 2009 continued in the same vein. From March, a recovery in prices was assisted by signs of an upturn in the global economy and particularly following the depreciation of the US Dollar. Industrial and precious metals recorded very positive performances, with the agricultural and energy sectors substantially unchanged. In 2010, expectations are for a positive performance for the sector, particularly in relation to oil, the industrial sector and precious metals.
Adagio, Elica
1. Gross Domestic Poduct 2. Bank of Japan 3. Consumer Price Index
CONSOLIDATED FINANCIAL STATEMENTS
CURRENCY MARKETS In 2009, Euro average exchange rates strengthened against the Polish Zloty, the Mexican Peso and UK Sterling while weakening against the US Dollar and the Japanese Yen. Exchange rates at year-end show a strengthening of the Euro against the US Dollar.
USD GBP JPY PLN MXN
AVERAGE 09
AVERAGE 08
%
12.31.2009
12.31.2008
%
1.39 0.89 130.34 4.33 18.80
1.47 0.80 152.45 3.51 16.29
-5.1% 11.4% -14.5% 23.3% 15.4%
1.44 0.89 133.16 4.10 18.92
1.39 0.95 126.14 4.15 19.23
3.6% -6.5% 5.6% -1.1% -1.6%
IAS/IFRS The Consolidated Financial Statements of Elica S.p.A. for the year ended December 31, 2009 were prepared in accordance with IAS/IFRS issued by the International Accounting Standards Board and approved by the European Commission, and in accordance with article 9 of Legislative Decree No. 38/2005. The accounting principles utilised for the preparation of the Consolidated Financial Statements are consistent with those utilised for the preparation of the Consolidated Financial Statements for the year ended December 31, 2008. These Consolidated Financial Statements are presented in thousands of Euro and all the amounts are rounded to the nearest thousandth, unless otherwise specified.
Alba, Elica
ANNUAL REPORT 2009
ELICA GROUP 75
FINANCIAL AND OPERATING REVIEW In Euro thousands Revenues EBIT from continuing operations revenue margin Financial income/(costs) revenue margin Result from normal operations revenue margin Net profit from discontinued operations revenue margin Net profit for the year revenue margin Group profit Basic earnings per share (*) from continuing and discontinued operations (Euro/cents) from continuing operations (Euro/cents) Diluted earnings per share (*) from continuing and discontinued operations (Euro/cents) from continuing operations (Euro/cents)
12.31.2009
12.31.2008
2009 vs 2008 %
335,135 732 0.2% (2,079) (0.6%) 782 0.2% 0.0% 782 0.2% 231
385,435 2,594 0.7% 136 0.0% 4,171 1.1% 63 0.0% 4,234 1.1% 3,579
(13.1%) (71.8%)
0.41 0.41
6.28 6.17
(93.5%) (93.4%)
0.41 0.41
6.28 6.17
(93.5%) (93.4%)
(1.628.7%) (81.3%) (100.0%) (81.5%) (93.5%)
(*) The earnings per share for 2009 and 2008 were calculated by dividing the Group net profit from continuing operations by the number of outstanding shares at the respective reporting dates.
EBITDA is the operating profit (EBIT) plus amortisation and depreciation and write-downs of goodwill for losses in value. EBIT is the operating profit from continuing operations as reported in the consolidated income statement. In Euro thousands
12.31.2009
12.31.2008
Trade receivables Inventories Trade payables Managerial Working Capital % on revenue
85,589 41,451 (86,806) 40,234 12.0%
91,335 51,868 (86,968) 56,235 14.6%
Other net receivables/payables Net Working Capital % on revenue
(6,963) 33,271 9.9%
(7,919) 48,316 12.5%
12.31.2009
12.31.2008
19,235
14,968
Finance leases and other lenders Bank loans and mortgages Long-term debt
(2,430) (14,780) (17,210)
(3,914) (4,677) (8,591)
Finance leases and other lenders Bank loans and mortgages Short-term debt
(1,903) (23,058) (24,961)
(1,000) (40,324) (41,324)
Net Debt
(22,936)
(34,947)
In Euro thousands Cash and cash equivalents
CONSOLIDATED FINANCIAL STATEMENTS
Net debt is the algebraic sum of amounts due under finance leases and other borrowings (current and non-current) plus bank borrowings and mortgages (current and non-current), less cash and cash equivalents, as reported in the balance sheet. The account “Other net receivables/payables” include the accounts “Other receivables/payables” and “Tax receivables/payables” and Provisions for risks and charges of current assets/liabilities.
2009 OPERATING PERFORMANCE In 2009, Group consolidated revenues decreased by 13.1% on the previous year, with a greater contraction in the first part of the year and growth in the final quarter. The decrease in revenues was more significant in the Motors SBU4 (-28%) which however grew in the fourth quarter, than for Range Hoods (-10%) against a decrease in global demand of 16%. In relation to the geographic areas, the reduction in revenues was more significant in the Americas, which however grew by 13.5% in local currency in the fourth quarter, compared to Europe and the Rest of the World. In the Range Hoods SBU, the revenues in the “own brands” area increased by 9.7% on 2008, countering the market. The Group market share5 with the principal OEM6 clients remains solid, while the rationalisation of the client portfolio with credit ratings less than average was also carried out. EBITDA before restructuring charges amounted to 6.6% of revenues compared to 6.5% in 2008. In Q4 alone EBITDA before restructuring charges amounted to 8% of revenues compared to 4% in Q4 2008. This performance follows the actions taken to render the operating cost structure more efficient and flexible, the transferring of production to Poland and Mexico, the growth in own brand revenues and the recovery of OEM volumes. In 2009, the Temporary Lay-off Scheme was utilised, along with social security measures aimed at maintaining the level of personnel employed. On the completion of the industrial restructuring (begun in 2008) the present Financial Statements include restructuring costs of Euro 1.9 million, relating to personnel costs. The continuation of the volatility in demand and the problematic nature of making forecasts for the coming years led Management to prudently recognise a permanent impairment in the value of goodwill following the annual impairment test in accordance with IAS 36 of the Motors CGU7 for Euro 2,771 thousand. The movement in exchange rates had little impact on EBITDA, thanks to the increase in purchases in foreign currencies. Net interest expense, including the financial component of IAS 19, saw an improvement on 2008 (Euro 1.9 million in 2009 compared to Euro 2.6 million in 2008), although with a higher average debt. Managerial Working Capital on net revenues improved from 14.6% in December 2008 to 12.0% in December 2009. This improvement was possible thanks to the significant reduction in inventories and the improved management of trade payables, whose effects more than offset the support activities in favour of clients. The reduction in Net Working Capital and investments enabled a significant reduction in the Net Financial Position from a net debt of Euro 34.9 million at December 31, 2008 to Euro 22.9 million at December 31, 2009.
4. 5. 6. 7.
Strategic Business Unit Volume share Original Equipment Manufacturer Cash Generating Unit
ANNUAL REPORT 2009
Magic Wand, Ola, Elica
ELICA GROUP 77
RECONCILIATION BETWEEN PARENT COMPANY AND CONSOLIDATED NET EQUITY AND NET PROFIT The following table contains a reconciliation between the equity and profit for the year of Elica S.p.A. and Consolidated equity and net profit.
As at December 31, 2008 In Euro thousands As per Parent Company Financial Statements
NET PROFIT FOR THE YEAR
NET EQUITY
1,373
128,726
221 (229) 41 (95)
(136) (549) 216 (95)
182
160
Elimination of the effect of intercompany operations net of tax effect: Non-realised gains on fixed assets Non-realised gains on sale of goods Tax effect Dividends received from consolidated companies Share of expenses/(income) from equity investments Carrying value of consolidated companies Net equity and result for the year of consolidated companies
(112,724) 2,897
76,181
(156)
8,891 23,824
As per Consolidated Financial Statements
4,234
124,494
Group share Minority interest share
3,579 655
122,528 1,966
Allocation of differences to assets of consolidated companies and related depreciation and write-down Intangible and tangible assets Consolidation difference
CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2009 In Euro thousands
NET PROFIT FOR THE YEAR
NET EQUITY
(6,550 )
121,113
(142 )
(278)
Non-realised gains on sale of goods
12
(533)
Tax effect
40
256
(1,027)
(1,027)
134
380
-
(105,760)
8,358
93,648
As per Parent Company Financial Statements Elimination of the effect of intercompany operations net of tax effect: Non-realised gains on fixed assets
Dividends received from consolidated companies Share of expenses/(income) from equity investments Carrying value of consolidated companies Net equity and result for the year of consolidated companies Allocation of differences to assets of consolidated companies and related depreciation and write-down Intangible and tangible assets
(43)
Consolidation difference
1,148 15,210
As per Consolidated Financial Statements
782
124,157
Group share
231
122,045
Minority interest share
551
2,112
GUIDANCE FOR 2010 In 2010, Elica Group Management will continue to implement its strategic plans begun in 2007, considering that they are designed to develop the business and to strengthen the competitive position. This includes: • launch of new products both in the own brand business unit and in the third party brand business unit; • maintenance of the competitive position in the principal markets; • acceleration of the production outsourcing plans in Poland and Mexico; • acceleration of the purchasing process in the Low Cost Countries, utilising also the Chinese Purchasing Office; • aligning productive capacity with demand; • reduction of industrial and corporate costs; • rationalisation of non-core expenditure.
ANNUAL REPORT 2009
ELICA GROUP 79
ELICA S.P.A. AND THE FINANCIAL MARKETS
ELICA
FTSE Italia STAR
147.67%
55.20%
-37.27% JAN. 2009
APR. 2009
JUL. 2009
OCT. 2009
DEC. 2009
The graph shows the performance of the Elica S.p.A. share price in 2009 in comparison to the average performance of other listed companies on the STAR segment. The Share Capital consists of 63,322,800 ordinary voting shares. At December 31, 2009, the shareholders of Elica S.p.A. were as follows: SHAREHOLDER FAN S.A. Elica S.p.A. Whirlpool Corporation Henderson Global Investor S.A.F.E. S.a.p.a. Francesco Casoli Gianna Pieralisi Altri Total
NUMBER OF SHARES HELD
SHAREHOLDING
33,440,445 6,332,280 4,432,596 1,736,926 116,245 70,000 52,000 17,142,308
52.81% 10.00% 7.00% 2.74% 0.18% 0.11% 0.08% 27.07%
63,322,800
100.00%
At December 31, 2009, Elica S.p.A. held 6,332,280 shares from the buy-back programme; at the date of the present report the number of treasury shares held remained unchanged.
CONSOLIDATED FINANCIAL STATEMENTS
SHARES HELD BY DIRECTORS, OFFICERS, STATUTORY AUDITORS AND KEY EXECUTIVES At December 31, 2009, the table below provides details of the shares of Elica S.p.A. held by members of the Board of Directors, Board of Statutory Auditors and executives with strategic responsabilities: NAME Francesco Casoli Gianna Pieralisi Executives with strategic responsabilities
NO. OF SHARES AT 12.31.2008
NO. OF SHARES ACQUIRED
NO. OF SHARES SOLD
NO. OF SHARES AT 12.31.2009
70,000 52,000 5,850
-
-
70,000 52,000 5,850
The number of shares at December 31, 2008 is not in line with that published in the “2008 Consolidated Financial Statements” following the change in the composition of the “Executives with strategic responsibilities”.
SIGNIFICANT EVENTS IN 2009 The Board of Directors’ meeting of March 30, 2009 approved the Consolidated Financial Statements and the parent company’s financial statements. On April 27, 2009, the Shareholders’ AGM8 of Elica S.p.A. approved the 2008 Directors’ Report and parent company financial statements and a dividend of Euro 0.0187 per share, corresponding to a payout ratio of 33.0% on the Group Consolidated Result, with the exclusion of the shares in portfolio at May 4, 2009, date of the coupon. The dividend was paid on May 7, 2009. The residual amount of profit was allocated to the Extraordinary Reserve. The Majority shareholder revoked the immediate dividend right as a tangible move in support of the corporate strategy to strengthen the Balance Sheet of the company at this particular time. The Chairman and Board of Directors and the Board of Statutory Auditors of Elica S.p.A. were also appointed, which will remain in office for the years 2009, 2010 and 2011. On June 15, 2009, the Board of Directors of Elica S.p.A. approved the amendment to the Options Agreement signed on December 10, 2007 with Whirlpool. The amendment to the Agreement relates to the extension of the exercise period of the call option on Elica shares to December 31, 2009. Furthermore, in the same period, Whirlpool was recognised the right to purchase up to 3% of Elica shares on the market, with Elica having the right to receive Euro 0.50 for each share purchased within a maximum overall shareholding of Whirlpool reaching 15%, as stated in the Options Agreement. The modification of the agreement is due to the persistence of the exceptional macro-economic conditions which have affected its fulfilment and represents the will of the individual parties. Detailed information regarding the Shareholder Agreements will be communicated through the publication of the extract of the Agreements in the manner and within the time limits established by article 122 of Legislative Decree No. 58/1998. On October 12, 2009, the Board of Directors of Elica S.p.A. resolved in extraordinary session and by public deed the merger by incorporation of the company FIME S.p.A. into Elica S.p.A. while the extraordinary shareholders’ meeting of FIME S.p.A. also approved the merger. The minutes of the merger resolution of Elica S.p.A. were filed, in accordance with law, at the registered offices of the company, Borsa Italiana and CONSOB and are available on the Internet site www.elicagroup.com. The minutes were registered at the Ancona Company Registration Office on October 13, 2009. On December 14, 2009, the merger deed was signed and registered on December 16, 2009 at the Ancona Company Registration Office. The merger was effective from January 1, 2010. The operation is part of the reorganisation of the Elica Group, through simplifying the holding structure, achieving greater operational efficiency and integration and a reduction of administrative costs, which will be achieved in part through the transfer of the main administrative offices to Elica S.p.A..
Information in relation to the treatment of personal data With reference to the provisions on the protection of personal data, the company updated and implemented the Document on personal data security in accordance with articles 33-34-35-36 and regulation 19 and 26 of Attachment B, of the Technical Regulations in relation to minimum security requirements, pursuant to Legislative Decree No. 196/2003. 8. Annual General Meeting
ANNUAL REPORT 2009
ELICA GROUP 81
Information relating to the environment The Elica Group operates in compliance with all regulations - local, national and international – for the protection of the environment both in relation to products and the productive cycles. It is highlighted that the types of activities carried out have limited implications in environmental terms and in terms of atmospheric emissions, waste disposal and water disposal. The maintenance of such standards however requires the incursion of costs for the Group.
Information relating to personnel In 2008, no major workplace accidents occurred. The Group, in its commitment to continuous improvement, has undertaken initiatives focussed on increasing security levels at the plant, reducing and monitoring risks and training personnel for more conscientious behaviour and prudency in the workplace, further improving the already low staff turnover levels and accidents.
Exposure to risks and uncertainty and financial risk factors The Elica Group holds leadership positions in the principal markets. Moreover, in a market affected by economic-financial tensions, the Group sees its financial flexibility and Balance Sheet solidity as an element of stability. The Elica Group has brought forward its cost savings programmes set out in the development plan. These positions mitigate the uncertainties in the market and business risks. The principal financial risks to which the Elica Group is exposed are: • risks related to exchange rate movements; • risks related to interest rate movements; • risks related to the change in raw material costs; • risks related to changes in operating cash flows; • risks related to liquidity. In order to mitigate the impact of these risks on the company’s results, the Elica Group commenced the implementation of a financial risk monitoring system through a “Financial Risk Policy” approved by the Board of Directors of the parent company. Within this policy, the Group constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary. The main guidelines for the Group risk policy management are as follows: • identify the risks related to the achievement of the business objectives; • assess the risks to determine whether they are acceptable compared to the controls in place and require additional treatment; • reply appropriately to risks; • monitor and report on the current state of the risks and the effectiveness of their control. The Group “Financial Risk Policy” is based on the principle of a dynamic management and the following assumptions: • prudent management of the risk with a view to protecting the expected value of the business; • use of “natural hedges” in order to minimise the net exposure on the financial risks described above; • undertake hedging operations within the limits approved by Management and only in the presence of effective and clearly identified exposures. The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct separation of the activities of conclusion, settlement, registration and reporting of the results.
CONSOLIDATED FINANCIAL STATEMENTS
ELICA GROUP STRUCTURE AND CONSOLIDATION SCOPE The Elica Group is currently the world’s largest manufacturer of kitchen range hoods for domestic use and is leader in Europe in the sector of motors for boilers used in home heating systems.
Parent company • Elica S.p.A. - Fabriano (AN) is the parent company of the Group. Subsidiaries at the publication date of the Financial Statements • FIME S.p.A. – Castelfidardo (AN). This company operates in the sector of electric motors, mainly for home appliances (range hoods, ovens, • • • • • • • • • •
refrigerators), home heating and ventilation (fan coils) systems. It operates mainly in European markets, where it holds significant market shares. Elica Group Polska Sp.zo.o – Wroclaw (Poland). This company has been operational since September 2005 in the sector of electric motors and from December 2006 in the production of exhaust range hoods for domestic use. ELICAMEX S.A. de C.V. – Queretaro (Mexico). The company was incorporated at the beginning of 2006 (Elica S.p.A. owns 98% directly and 2% through Elica Group Polska Sp.zo.o). Through this company, the Group intends to concentrate the production of products for the American markets in Mexico and reap the benefits deriving from optimisation of operational and logistical activities. Leonardo Services S.A. de C.V. – Queretaro (Mexico). This wholly owned subsidiary was incorporated in January 2006 (the parent company owns 98% directly and 2% indirectly through Elica Group Polska Sp.zo.o). Leonardo Services S.A. de C.V. manages all Mexican staff, providing services to ELICAMEX S.A. de C.V.. ARIAFINA CO., LTD– Sagamihara-Shi (Japan). Established in September 2002 as a 50/50 joint venture with Tokyo-based Fuji Industrial leader in Japan with over 70% of the range hood market. Elica S.p.A. acquired control of this joint venture in May 2006 to provide further impetus to the development of the important Japanese market, where high-quality products are sold. Airforce S.p.A. –Fabriano (AN). This company operates in a specialised segment of the hood sector.The holding of Elica S.p.A. is 60%. Airforce Germany Hochleistungs-Dunstabzugssysteme GmbH – Stuttgart (Germany) (hereafter Airforce Ge). Airforce S.p.A. owns 95% of Airforce Germany GmbH, a company that sells hoods in Germany through so-called “kitchen studios”. Elica Inc. – Chicago, Illinois (United States). The company aims to develop the Group’s brands in the US market by carrying out marketing and trade marketing with resident staff. The company is a wholly owned subsidiary of ELICAMEX S.A. de C.V.. Elica International S.à.r.l. – Luxembourg, 100% held by Elica S.p.A.. Elica Finance Limited – Dublin (Ireland), 100% held by Elica International S.à.r.l.. Exklusiv-Hauben Gutmann GmbH – Mülacker (Germany) - a German company entirely held by Elica International S.à.r.l. and the German leader in the high-end kitchen range hood market, specialised in “tailor made” and high performance hoods.
Associated companies • I.S.M. Srl – Cerreto d’Esi (AN). The company manufactures semi-finished products for the hood production cycle. Elica S.p.A. has a 49.385% equity interest in this company.
ANNUAL REPORT 2009
ELICA GROUP 83
ELICA GROUP INTER-COMPANY AND OTHER RELATED-PARTY TRANSACTIONS In 2009, transactions were entered into with subsidiaries, associated companies and other related parties. All transactions were conducted on an arm’s length basis in the ordinary course of business.
Subsidiary companies – key data according to local accounting principles and performance in the year In Euro thousands
ASSETS
LIABILITIES
NET EQUITY
REVENUES
NET RESULT
Subsidiary companies FIME S.p.A. Airforce S.p.A. ARIAFINA CO., LTD Airforce Ge (*) Elica Group Polska Sp.zo.o ELICAMEX S.A. de C.V. Leonardo Services S.A. de C.V. Elica Inc. Elica International S.à.r.l. Elica Finance Limited Exklusiv-Hauben Gutmann GmbH
54,889 8,465 4,959 207 46,858 30,089 262 218 27,102 12,030 23,619
40,306 6,652 2,439 7 20,043 11,315 287 158 12,945 6 22,818
14,583 1,813 2,520 200 26,815 18,774 (25) 60 14,157 12,024 802
57,367 17,495 12,396 40 53,001 24,137 2,854 976 20,370
(926) 374 799 (16) 5,945 (546) (33) 21 902 (19) (789)
(*) Airforce Germany Hochleistungs-Dunstabzugssysteme GmbH (hereafter Airforce Ge)
Commercial transactions between the companies of the Elica S.p.A. and FIME S.p.A. with the group companies Elica Group Polska Sp.zo.o. and ELICAMEX S.A. de C.V. are at market value in accordance with the OECD9 principles and based on the specific economic context and the relative trade strategies. Elica S.p.A. also carries out financial operations with Group companies as part of a general plan to centralise treasury management activities. These loans are interest bearing and at market rates. Transactions with consolidated companies have been eliminated from the Consolidated Financial Statements. As a result they are not reported in these notes.
Associated companies The table below summarises key operating and financial data for associated companies, as derived from the companies’ Financial Statements in accordance with Italian GAAP10 and local GAAP for foreign companies.
Associated companies: Key data at December 31, 2008 In Euro thousands I.S.M. Srl Inox Market Mexico S.A. de C.V.
REGISTERED OFFICE
% HELD
SHARE CAPITAL
NET EQUITY
NET RESULT
Cerreto d’Esi (AN) Queretaro (Messico)
49.385 13.289
10 4,523
2,146 3,626
315 (255)
REGISTERED OFFICE
% HELD
SHARE CAPITAL
NET EQUITY
NET RESULT
Cerreto d’Esi (AN)
49.385
10
2,328
177
Associated companies: Key data at December 31, 2009 In Euro thousands I.S.M. Srl
Elica Group Headquarters
9. Organization for Economic Co-Operation and Development 10. Generally Accepted Accounting Principles
CONSOLIDATED FINANCIAL STATEMENTS
The table below shows the operating and financial amounts from transactions with associated companies for 2009. No separate disclosure of these positions was given in the Financial Statements, given the limited amounts involved. In Euro thousands
PAYABLES
RECEIVABLES
COSTS
REVENUES
I.S.M. Srl
2,779
8
10,755
117
Total
2,779
8
10,755
117
The costs incurred with I.S.M. Srl include Euro 10,440 thousand related to outsourcing services (shown in the income statement under “Service expense”).
CORPORATE GOVERNANCE AND SHAREHOLDER STRUCTURE REPORT In accordance with article 123-bis of Legislative Decree No. 58/1998, with article 89-bis of CONSOB Resolution No.11971/1999 and successive amendments and integrations of article I.A.2.6 of the Regulation Instructions of Markets Organised and Managed by Borsa Italiana S.p.A., Elica S.p.A. provides complete disclosure on the Corporate Governance system adopted, at March 30, 2010, in line with the recommendations of the Self-Governance Code, in the Annual Corporate Governance Report, available on the website of the company www.elicagroup.com in the Investor Relations/Corporate Governance section.
EVENTS AFTER DECEMBER 31, 2009 AND OUTLOOK The ongoing demand analysis activity by Management continues. The first quarter of 2010 performed in line with forecasts, therefore not necessitating the carrying out of an impairment test. The principal markets in which the Group carries out its trading activities improved slightly; demand visibility remains limited however. The Group will present to the Shareholders’ AGM, convened for the approval of the Financial Statements at December 31, 2009, a share-based remuneration plan – a Stock Grant plan for employees, including senior Management, advisors and executive directors of the company and of its subsidiaries considered “key managers” for the achievement of the business growth and development objectives of the company, pursuant to article 114 of Legislative Decree No. 58/1998. For further information, reference is made to the Information Document of March 30, 2010 which will be filed at the same time as the present report and available on the website of the company www.elicagroup.com in the Investor Relations/Corporate Governance section. In addition, it is noted that Whirlpool Europe Srl on February 23, 2010 reached a 10% stake in Elica and that the entire holding is subject to the Shareholder Agreement signed between FAN Srl (previously FAN S.A., parent company of Elica) and Whirlpool Europe Srl on December 10, 2007.
Compliance pursuant to Section VI of the regulation implementing Legislative Decree No. 58 of February 24, 1998 concerning market regulations (“Market Regulations”) In accordance with article 36, Elica S.p.A., having control, directly or indirectly, over some companies registered in countries outside of the European Union, the Financial Statements of the above-mentioned companies, prepared for the purposes of the Elica Group Consolidated Financial Statements, were made available in accordance with the provisions required by the current regulations. For the reasons for which it is considered that the company is not under the direction and control of the parent company, in accordance with article 37, reference is made to paragraph “8. Disclosure in accordance with IAS 24 on the payment of management and related parties”.
Fabriano, March 30, 2010
ANNUAL REPORT 2009
For the Board of Directors Executive Chairman Francesco Casoli
ELICA GROUP 85
CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS INDEPENDENT AUDITORS Deloitte & Touche S.p.A.
REGISTERED OFFICE AND COMPANY DATA Elica S.p.A. Registered office: Via Dante, 288 – 60044 Fabriano (AN) Share Capital: Euro 12,664,560.00 Tax Code and Companies’ Register Number: 00096570429 Ancona REA No. 63006 – VAT Number 00096570429 Alba Cubo, Elica
CONSOLIDATED FINANCIAL STATEMENTS
ELICA GROUP - CONSOLIDATED FINANCIAL STATEMENTS AT 12.31.2009 Registered Office at Via Dante, 288 - 60044 Fabriano (AN) - Share Capital Euro 12,664,560 fully paid-in
CONSOLIDATED INCOME STATEMENT In Euro thousands Revenues Other operating revenues Changes in inventories of finished and semi-finished goods Increase in internal work capitalised Raw materials and consumables Services Labour costs Amortisation & Depreciation Other operating expenses and provisions Restructuring charges Write-down of Goodwill for loss of value EBIT Share of profit from associates Financial income Financial charges Exchange gains/(losses) Pre-tax result Income taxes Net profit from continuing operations Net profit from discontinued operations Net profit for the year of which: Minority interests share Group net profit Basic earnings per share From continuing and discontinued operations (Euro/cents) From continuing operations (Euro/cents) Diluted earnings per share From continuing and discontinued operations (Euro/cents) From continuing operations (Euro/cents)
NOTE
12.31.2009
12.31.2008
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.21
335,135 2,831 4,720 2,937 (180,198) (66,676) (66,854) (16,556) (9,896) (1,940) (2,771) 732 107 1,197 (3,069) (207) (1,240) 2,022 782 782
385,435 6,213 (402) 2,762 (206,024) (83,873) (69,911) (16,855) (9,030) (2,453) (3,268) 2,594 149 843 (3,393) 2,686 2,879 1,292 4,171 63 4,234
551 231
655 3,579
0.41 0.41
6.15 6.04
0.41 0.41
6.15 6.04
5.11 5.12 5.13 5.14 5.15 5.16
5.17 5.18
5.18 Â
Cloud Nine, Elica
ANNUAL REPORT 2009
ELICA GROUP 87
COMPREHENSIVE CONSOLIDATED INCOME STATEMENT In Euro thousands Net profit Other comprehensive income statement items: Exchange differences on the conversion of foreign Financial Statements Net change in cash flow hedge and Stock Option reserves Income taxes on other comprehensive income statement items Total other comprehensive income statement items, net of tax effects: Total comprehensive result of which: Minority interests share Group comprehensive net profit/(loss)
12.31.2009
12.31.2008
782
4,234
467 4 (1) 470 1,252
(8,061) (69) 15 (8,115) (3,881)
448 804
859 (4,740)
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET In Euro thousands Property, plant & equipment Goodwill Other intangible assets Investments in associated companies Other financial assets Other receivables Tax receivables Deferred tax assets Financial assets available-for-sale Total non-current assets Trade receivables and loans Inventories Other receivables Tax receivables Hedging financial instruments Cash and cash equivalents Current assets
NOTE
12.31.2009
12.31.2008
5.20 5.21 5.22 5.23 5.24 5.25 5.26 5.36 5.27
69,100 33,818 21,093 2,309 30 200 6 9,200 680 136,436 85,589 41,451 3,841 9,663 770 19,235 160,549
70,010 35,862 20,199 2,627 30 344 6 6,372 191 135,641 91,335 51,868 5,722 9,131 2,554 14,968 175,578
296,985
311,219
9,554 5,752 5,328 2,430 14,780 1,381 1,058 40,283 1,082 1,903 23,058 86,806 14,686 4,699 311 132,545 12,665 71,123 (8,431) (17,629) 64,086 231 122,045 1,561 551 2,112 124,157
11,023 3,127 7,739 3,914 4,677 1,225 1,400 33,105 1,307 1,000 40,324 86,968 17,122 4,343 2,556 153,620 12,665 71,123 (9,081) (17,629) 61,871 3,579 122,528 1,311 655 1,966 124,494
296,985
311,219
5.28 5.29 5.30 5.31 5.32 5.33
Total assets Liabilities for post-employment benefits Provisions for risks and charges Deferred tax liabilities Finance leases and other lenders Bank loans and mortgages Other payables Tax payables Derivative financial instruments Non-current liabilities Provisions for risks and charges Finance leases and other lenders Bank loans and mortgages Trade payables Other payables Tax payables Derivative financial instruments Current liabilities Share Capital Capital reserves Hedging, translation and stock option reserve Treasury shares Retained earnings Group profit Group shareholders’ equity Capital and reserves of minority interests Minority interest profit Minority interest equity Consolidated shareholders’ equity Total liabilities and shareholders’ equity
5.34 5.35 5.36 5.37 5.38 5.39 5.40 5.32 5.35 5.37 5.38 5.41 5.39 5.40 5.32
5.42
Elica Group Headquarters, Auditorium
ANNUAL REPORT 2009
ELICA GROUP 89
CONSOLIDATED CASH FLOW STATEMENT In Euro thousands
12.31.2009
12.31.2008
14,968 732 16,556 2,771 20,059 12,368 16,001 (3,633) 99 (2,122) 355 (7) (30,752)
21,948 2,594 16,855 3,268 22,717 (2,971) 1,014 (3,985) (1,180) (5,698) (2,381) 23 (4,084) 6,425
Net increases Intangible assets Property, plant & equipment Equity investments and other financial assets Exchange rate effect Divestment of Business Unit Purchase of equity investments Cash flow from investments
(16,243) (4,792) (11,748) (64) 361 (16,243)
(17,071) (6,905) (5,419) (736) (4,011) 1,190 (12,551) (28,432)
Acquisition of treasury shares Dividends Increase/(decrease) financial payables Net changes in other financial assets/liabilities Interest paid Cash flow from financing activity
(1,066) (7,744) (181) (1,188) (10,179)
(10,958) (2,817) 30,649 869 (2,337) 15,406
4,330
(6,600)
(63)
(379)
19,235
14,968
Opening cash and cash equivalents EBIT- Operating profit Amortisation, depreciation and write-downs Write-down of Goodwill for loss of value EBITDA Changes in Working Capital trade working capital other working capital accounts Exchange rate effect Income taxes paid Change in provisions Other changes Gain on earthquake write-offs Cash flow from operating activity
Change in cash and cash equivalents Effect of exchange rate change on liquidity Closing cash and cash equivalents
NOTE
5.21
CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
SHARE CAPITAL
SHARE PREMIUM RESERVE
12,665
71,123
Change in cash flow hedges net of the tax effect
Recognition of stock options
Differences arising from translation of foreign subsidiaries’ financial statements
Total gains/(losses) recognised directly to equity in the year
-
-
Net profit for the year
Total gains/(losses) recognised in the income statement
-
-
Acquisition of treasury shares
Allocation of net profit
Other movements
Dividends
12,665
71,123
Change in cash flow hedges net of the tax effect
Recognition of stock options
In Euro thousands
Balance at December 31, 2007
Balance at December 31, 2008
Differences arising from translation of foreign subsidiaries’ financial statements
Total gains/(losses) recognised directly to equity in the year
-
-
Net profit for the year
Total gains/(losses) recognised in the income statement
-
-
Acquisition of treasury shares
Allocation of net profit
Other movements
Dividends
12,665
71,123
Balance at December 31, 2009
ANNUAL REPORT 2009
ELICA GROUP 91
ACQUISITION OF TREASURY SHARES
RETAINED EARNINGS
(6,671)
55,341
HEDGE, TRANSLATION & STOCK OPTION RESERVE
RESULT FOR THE YEAR
TOTAL GROUP NET EQUITY
TOTAL MINORITIES NET EQUITY
TOTAL NET EQUITY
(803)
9,252
140,907
1,150
142,057
(19)
(19)
(19)
(35)
(35)
(8,224)
(8,224)
163
(8,061)
-
-
(8,278)
-
(8,278)
163
(8,115)
3,579
3,579
655
4,234
-
-
3,579
3,579
655
4,234
(10,958)
(10,958)
(10,958)
9,252
(9,252)
-
-
95
95
(2)
93
(2,817)
(2,817)
(2,817)
(17,629)
61,871
(9,081)
3,579
122,528
1,966
124,494
3
3
3
-
(35)
-
569
569
(103)
466
-
-
572
-
572
(103)
469
231
231
551
782
-
-
231
231
551
782
3,501
78
(3,579)
-
-
(220)
(220)
(302)
(522)
(1,066)
(1,066)
(1,066)
(17,629)
64,086
(8,431)
231
122,045
2,112
124,157
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2009 1. Group structure and activities 2. Accounting principles and basis of consolidation 3. Significant accounting estimates 4. Composition and changes in the consolidation scope 5. Notes to the consolidated income statement, balance sheet and cash flow statement 6. Guarantees, commitments and contingent liabilities 7. Risk management policy 8. Disclosure pursuant to IAS 24 on Management compensation and related-party transaction 9. Disclosure pursuant to article 149-duodecies of the CONSOB Issuer’s Regulation 10. Positions or transactions arising from exceptional and/or unusual transactions 11. Events after the year-end
Uno, Elica
ANNUAL REPORT 2009
ELICA GROUP 93
1. GROUP STRUCTURE AND ACTIVITIES Elica S.p.A. is a company incorporated under Italian law based in Fabriano (AN). The main activities of the company and its subsidiaries as well as its registered office and secondary offices are illustrated in the Directors’ Report on Operations under “Elica Group structure and Consolidation Scope”. The Euro is the functional and presentation currency of Elica S.p.A. and all of the consolidated companies, except for the foreign subsidiaries Elica Group Polska Sp.zo.o, ELICAMEX S.A. de C.V., Leonardo Services S.A. de C.V., ARIAFINA CO., LTD and Elica Inc. which prepare their Financial Statements in the Polish Zloty, the Mexican Peso (ELICAMEX S.A. de C.V. and Leonardo Services S.A. de C.V.), the Japanese Yen and US Dollars respectively. The Board of Directors today approved the Consolidated Financial Statements for the year ended December 31, 2009 and authorised its publication.
2. ACCOUNTING PRINCIPLES AND BASIS OF CONSOLIDATION The Consolidated Financial Statements were prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board and approved by the European Union, as well as in accordance with article 9 of Legislative Decree No. 38/2005 and related CONSOB regulations. The Consolidated Financial Statements at December 31, 2009 are compared with the previous year and consist of the balance sheet, the income statement, the comprehensive income statement, the cash flow statement, the statement of changes in shareholders’ equity and the explanatory notes thereto. The Financial Statements and related notes comply with the minimum disclosure requirements of IFRS, as supplemented, where applicable, by the provisions enacted by law and by CONSOB. The Group did not make any changes in the accounting principles applied between the comparative dates of December 31, 2008 and December 31, 2009. Furthermore, neither the International Accounting Standards Board (IASB) nor the International Financial Reporting Interpretation Committee (IFRIC) have revised or issued standards or interpretations due to take effect on January 1, 2009 that have had a material effect on the Consolidated Financial Statements. The Consolidated Financial Statements were prepared on the basis of the historical cost convention, except for some financial instruments which are recognised at fair value. The financial statement accounts have been measured in accordance with the general criteria of prudence and accruals and on a going concern basis, and also take into consideration the economic function of the assets and liabilities.
BASIS OF CONSOLIDATION The Consolidated Financial Statements for the year ended December 31, 2009 include the financial statements of the company and the companies it controls directly or indirectly (the subsidiaries). Control is exercised when the company has the power to determine the financial and operating policies of an entity so as to benefit from its activity. The Separate Financial Statements at December 31, 2009 of the parent company Elica S.p.A. were prepared in accordance with IFRS, in accordance with Legislative Decree No. 38/2005 and CONSOB regulations. The Financial Statements of the Italian subsidiaries and associated companies - except for FIME S.p.A. which were prepared in accordance with international accounting standards - were prepared in accordance with Legislative Decree No. 127/1991 as supplemented, where necessary, by accounting standards issued by the Italian Accounting Profession (Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri) and, in the absence of standards laid down by this latter, by accounting standards issued by the IASB, as well the documents issued by the Italian Accounting Standards Setter. The financial statements of foreign subsidiaries were prepared in accordance with applicable local regulations. All the Group companies have provided the data and information required to prepare the Consolidated Financial Statements in accordance with IFRS. For information on the consolidation scope and the associated companies reference should be made to sections “4. Composition and changes in the consolidation scope” and “8. Disclosure pursuant to IAS 24 on Management compensation and related-party transactions”. The results of subsidiaries acquired or sold during the year are included in the Consolidated Income Statement from the date of acquisition until the date of sale. All significant transactions between companies included in the consolidation scope are eliminated. Gains and losses arising on inter-company sales of tangible fixed assets are eliminated, where considered material. Minority interest share in the net assets of consolidated subsidiaries are recorded separately from the Group Shareholders’ Equity (“Minority
CONSOLIDATED FINANCIAL STATEMENTS
Interest”). Minority Interest Net Equity includes the amount attributable to the minority shareholders at the original acquisition date (see below) and changes in equity after that date. Losses attributable to minority shareholders in excess of the minority interest share in the subsidiary’s equity are allocated to equity attributable to the shareholders of the parent company, except to the extent that the minority shareholders are subject to a binding obligation and are capable of making additional investments to cover the losses. Consolidation of foreign companies and translation into Euro of foreign-denominated items The assets and liabilities of consolidated foreign companies in currencies other than the Euro are translated using the exchange rates at the Balance Sheet date. Revenues and costs are translated into Euro using the average exchange rate for the year. Translation differences are recognised in the translation reserve until the investment is sold. At December 31, 2009, the consolidated foreign companies whose operating currency is other than the Euro are Elica Group Polska Sp.zo.o, ELICAMEX S.A. de C.V., Leonardo Services S.A. de C.V, ARIAFINA CO., LTD and Elica Inc., which use the Polish Zloty, the Mexican Pesos (ELICAMEX S.A. de C.V. and Leonardo Services S.A. de C.V.), the Japanese Yen and the US Dollar respectively. The exchange rates used for translation purposes are set out below: CURRENCY USD JPY PLN MXN
12.31.2009
AVERAGE 2009
1.44 133.16 4.10 18.92
1.39 130.34 4.33 18.80
Business Combinations Business combinations are recorded in accordance with the purchase method. The cost of the business combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group, in exchange for control of the company acquired, plus any costs directly attributable to the business combination. The identifiable assets, liabilities and contingent liabilities of the company acquired that comply with the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, with the exception of non-current assets (or disposal groups) which are classified as available-for-sale in accordance with IFRS 5 and are recognised and measured at fair value less costs to sell. Other intangible assets recognised on acquisition are recorded separately from Goodwill if their fair value can be determined on a reliable basis. Goodwill acquired in a business combination is recognised as an asset and initially measured at its cost - being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised exceeds the cost of the business combination, the excess is immediately recognised in the income statement. The minority interests in the companies acquired are initially measured at the fair value of the assets, liabilities and contingent liabilities recognised. Investments in associated companies and joint ventures An associated company is a company in which the Group has significant influence, but not full control or joint control. The Group exerts its influence by taking part in the associated company’s financial and operating policy decisions. A joint venture is a contractual agreement whereby the Group undertakes a jointly controlled business venture with other parties. Joint control is defined as a contractually shared control over a business. It exists only when the strategic financial and operating decisions of the business require the unanimous approval of all of the parties that share control. The profits and losses, assets and liabilities of associated companies and joint ventures are recorded in the Consolidated Financial Statements using the Equity method, except where the investments are classified as held for sale. Under this method, investments in associated companies and joint ventures are recorded in the balance sheet at cost, as adjusted for changes after the acquisition of the net assets of the associated companies, less any impairment in the value of the individual investments. Losses of the associated companies and joint ventures in excess of the Group share are not recorded unless the Group has an obligation to cover them. Any excess of the acquisition cost over the Group’s share in the fair value of the identifiable assets, liabilities and contingent liabilities at the acquisition date, is recognised as Goodwill. Goodwill is included in the carrying value of the investment and is subject to an impairment test.
ANNUAL REPORT 2009
ELICA GROUP 95
Any excess of the Group’s share in the fair value of the identifiable assets, liabilities and contingent liabilities of the associated company over the cost of acquisition is recorded in the income statement in the year of acquisition. Unrealised profits and losses on transactions between a Group company and an associated company or joint venture are eliminated to the extent of the Group’s share in the associated company or joint venture, except when the unrealised losses constitute a reduction in the value of the asset transferred.
ACCOUNTING PRINCIPLES AND POLICIES The main accounting principles and policies adopted in the preparation of the Consolidated Financial Statements are described below. Property, plant & equipment Property, plant and equipment are recorded at purchase or production cost, including any directly attributable costs. Some assets have been adjusted under specific revaluation legislation prior to January 1, 2004 and are considered representative of the fair value of the asset at the revaluation date (“deemed cost” as per IFRS 1). Depreciation is calculated on a straight-line basis on the cost of the assets based on their estimated useful lives applying the following rates:
buildings lightweight buildings plant and machinery industrial and commercial equipment office furniture and equipment EDP commercial vehicles automobiles
3.0% 10.0% 10.0% - 15.5% 10.0% - 25.0% 12.0% 20.0% 20.0% 25.0%
Assets held under finance leases are recorded as property, plant and equipment and depreciated on a straight-line basis over their estimated useful lives, on the same basis as owned tangible fixed assets. Purchase cost is also adjusted for capital grants already allocated to the Group companies. These grants are recognised in the income statement by gradually reducing the depreciation charged over the useful life of the assets to which they relate. Maintenance, repair, expansion, modernisation and replacement costs that do not lead to a significant, measurable increase in the production capacity and useful life of the asset are charged to the income statement in the year incurred. Goodwill Goodwill arising on the acquisition of a subsidiary or other business combinations represents the excess of the acquisition cost over the Group’s share in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the acquisition date. Goodwill is recognised as an asset and reviewed at least annually for any impairment. An impairment loss is recorded immediately in the income statement and is not restated in a subsequent period. On the sale of a subsidiary, any Goodwill not amortised attributable to the subsidiary is included in determining the gain or loss on the sale. Goodwill arising on acquisitions prior to January 1, 2004 is carried at the amount recognised under Italian GAAP after an impairment test at that date.
CONSOLIDATED FINANCIAL STATEMENTS
Research and development costs The research costs are recognised in the income statement in the year in which they are incurred. Development costs in relation to projects are capitalised when all of the following conditions are satisfied: • the costs can be reliably determined; • the technical feasibility of the product is demonstrated; • the volumes, and expected prices indicate that costs incurred for development will generate future economic benefits; • the technical and financial resources necessary for the completion of the project are available. The development costs capitalised are amortised on a straight-line basis, commencing from the beginning of the production over the estimated life of the product. The carrying value of the development costs are reviewed annually through a test in order to record any loss in value when the asset is no longer in use, or with greater frequency when there are indications of a possible loss in the carrying value. All other development costs are charged to the income statement when incurred. Other intangible assets The other intangible assets acquired or produced internally are recorded under assets, in accordance with the provisions of “IAS 38 – Intangible Assets”, when it is probable that the use of the asset will generate future economic benefits and when the cost of the asset can be determined reliably. The useful life of the intangible assets are classified as definite or indefinite. Intangible fixed assets with a definite useful life are amortised monthly for the duration of the period. The useful life is reviewed on an annual basis and any changes are made in accordance with future estimates. The intangible assets with indefinite useful life are not amortised but are subject annually or, more frequently where there is an indication that the activity may have suffered a loss in value, to a verification which identifies any reduction in value. Impairment Test At each Balance Sheet date, the Group assesses whether events or circumstances exist that raise doubts as to the recoverability of the value of tangible and intangible fixed assets with a definite useful life. If there are any indications that there has been an impairment, the Group estimates the recoverable value of the tangible and intangible assets so as to determine the extent of the impairment loss (if any). Intangible assets with an indefinite useful life – in particular Goodwill – are subject to an impairment test at least annually or when there is an indication of a loss in value. In these situations, the recoverable value of these assets is estimated so as to determine the amount of the impairment. The recoverable value is the higher between fair value less costs to sell and value in use. In accordance with the accounting standards, the impairment test is performed in respect of each individual asset, where possible, or in respect of groups of assets (Cash-Generating Units - CGU). Cash-Generating Units are identified depending on the organisational and business structure of the Group as units that generate cash on an autonomous basis as a result of the continuous use of the assets allocated. If the recoverable value of an asset (or a CGU) is considered lower than its carrying value, it is reduced to its recoverable value. An impairment is recognised in the income statement immediately unless the asset consists of land or buildings other than investment property recorded at the revalued amount; in this case, the impairment loss is charged to the revaluation reserve. When the reasons for the impairment no longer exist, the carrying value of the asset (or CGU) – except for Goodwill – is increased to the revised estimate of its recoverable value. The new value cannot exceed the net carrying value if no write-down for impairment had being recorded. The reversal of an impairment loss is recorded immediately in the income statement unless the asset is stated at the revalued amount, in which case the reversal is credited to the revaluation reserve. Inventories Inventories are recorded at the lower of purchase or production cost and net realisable value. The purchase cost of raw, ancillary, supplies and goods for resale is determined using the weighted average cost method. The production cost of finished goods, work in progress and semi-finished goods is determined considering the cost of the materials used plus direct operating costs and overheads. Net realisable value represents the estimated selling price less expected completion costs and selling costs. Obsolete and slow moving inventories are written down taking account of their prospects of utilisation or sale. Trade receivables and loans and other financial assets Financial assets other than trade receivables, loans and cash and cash equivalents are initially recorded at fair value, including charges directly related to the transaction.
ANNUAL REPORT 2009
ELICA GROUP 97
Trade receivables and loans are recorded at nominal value which normally represents their fair value. In the event of a significant difference between nominal value and fair value, the receivables are recorded at fair value and subsequently valued at amortised cost using the effective interest rate method. The receivables are adjusted through a provision for doubtful debt so as to reflect their realisable value. The provision is calculated as the difference between the carrying amount of the receivables and the present value of the expected cash flow discounted at the effective interest rate on initial recognition. Non-current assets held for sale Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying value and market value less selling costs. Non-current assets (and disposal groups) are classified as held for sale when their carrying value is expected to be recovered by means of a sales transaction rather than through use in company operations. This condition is met only when the sale is highly likely, the assets (or group of assets) are available for immediate sale in their current condition and, consequently, Management is committed to a sale, which should take place within 12 months of the classification as held for sale. Cash and cash equivalents Cash and cash equivalents include cash balances and bank current accounts and deposits repayable on demand plus other highly liquid short term financial investments that can be readily converted into cash and are not subject to a significant risk of a change in value. Financial liabilities and Equity instruments Financial liabilities and equity instruments issued by the Group are classified based on the substance of the contractual agreements that generated them and in accordance with the respective definitions of financial liabilities and Equity instruments. Equity instruments consist of contracts which, stripped of the liability component, give rights to a share in the assets of the Group. Accounting policies adopted for specific financial liabilities and Equity instruments are indicated below. Trade payables and other financial liabilities Trade payables and other financial assets are recorded at nominal value which generally represents their fair value. In the event of significant differences between nominal value and fair value, trade payables are recorded in the Balance Sheet at fair value and subsequently measured at amortised cost using the effective interest rate method. Bank and other borrowings Bank borrowings – comprising of medium/long-term loans and bank overdrafts – and other borrowings, including the liabilities deriving from finance leases, are recorded in the Balance Sheet based on the amounts received, less transaction costs, and subsequently measured at amortised cost using the effective interest rate method. Derivative instruments and hedge accounting Derivative financial instruments are used with the intention of hedging, in order to reduce the foreign currency or interest rate risk or from fluctuations in market prices. In compliance with IAS 39, the derivative financial instruments can be recorded in accordance with the “hedge accounting” method only when at the beginning of the hedge, the formal designation and documentation relating to the hedge exists, it is presumed that the hedge is highly effective, such effectiveness can be reliably measured and the hedge is highly effective over the accounting periods for which it was designated. All the derivative financial instruments are measured at fair value, in accordance with IAS 39. When the financial instruments have the necessary characteristics to be recorded under hedge accounting, the following accounting treatment is applied:
• for derivatives that hedge scheduled transactions (i.e. cash flow hedges), changes in the fair value of derivative instruments are allocated to Equity for the portion considered effective while the portion considered ineffective is recognised in the income statement;
• for derivatives that hedge receivables and payables recorded in the Balance Sheet (i.e. fair value hedges), differences in fair value are
recognised in full in the income statement. Moreover, the value of the receivables/payables hedged is adjusted for the change in the risk hedged, again in the income statement;
CONSOLIDATED FINANCIAL STATEMENTS
• for derivatives classified as hedges of a net investment in a foreign operation, the effective portion of profits or losses on the financial instruments are recorded under net equity. The cumulative gains or losses are reversed from the net equity and recorded in the income statement on the sale of the foreign operation.
If the hedge accounting cannot be applied, the profits or losses deriving from the fair value of the derivative financial instruments are immediately recognised in the income statement. Concerning the management of the risks related to the exchange rates and interest rates reference should be made to section “7. Risk management policy” of the notes. Treasury shares Treasury shares are recorded at cost as a reduction of Shareholders’ Equity. The gains and losses deriving from trading of treasury shares, net of the tax effect are recorded under Equity reserves. Employee benefits Post-employment benefits Italian post-employment benefits are considered equivalent to a defined benefit plan. For defined benefit plans, the cost of the benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each year. Actuarial gains and losses that exceed 10% of the fair value of the benefits defined by the Group are amortised over the estimated average remaining employment service of the employees taking part in the scheme. Post-employment benefits recognised in the Balance Sheet represent the fair value of liabilities under defined benefit plans as adjusted for unrecorded actuarial gains and losses. Finally, the Group records the interest on employee benefit plans under finance costs. Up to December 31, 2006, the employee leaving indemnities of the Italian companies were considered as defined benefit plans. The regulations of this provision were modified by Law No. 296 of December 27, 2006 (“2007 Finance Act”) and subsequent Decrees and Regulations issued at the beginning of 2007. In view of these changes, and specifically with reference to companies with more than 50 employees, this fund is now to be considered a defined benefit plan exclusively for the amounts matured prior to January 1, 2007 (and not paid at the Balance Sheet date), while subsequent to this date they are similar to a defined contribution plan. Share-based payments The Group, in accordance with IFRS 2, classifies the Stock Options in accordance with “equity-settled share-based payment transactions”, which provide for the physical transfer of the shares, the determination of the fair value of the options issued at the granting date and its recognition under cost to be accrued over the vesting period and credited to an Equity reserve. This treatment is made based on an estimate of the options that will effectively mature in favour of the personnel having the right, taking into consideration the conditions of normal take-up not based on the market value of the options. The determination of the fair value is made using the “binominal” model.
Provisions for risks and charges Provisions are recorded when the Group has a current obligation that is the result of a past event and it is probable that the Group will be required to fulfil the obligation. Provisions are made based on Management’s best estimate of the cost of fulfilling the obligation at the Balance Sheet date and are discounted to present value when the effect is significant. Revenues and income Revenues from the sale of goods are recognised when the goods are shipped and the company has transferred the significant risks and rewards of ownership of the goods to the buyer. Interest income is recorded on an accruals basis based on the amount financed and the effective interest rate applicable: this represents the rate at which the expected future cash flow along the life of the financial asset is discounted to equate them with the carrying amount of the asset. Dividends are recorded when the shareholders have the right to receive them.
ANNUAL REPORT 2009
ELICA GROUP 99
Leases and lease agreements Leasing contracts are classified as finance lease contracts when the terms of the contract are such that they substantially transfer all of the risks and rewards of ownership to the lessee. All the other leases are considered operating leases. Assets held under finance leases are recorded as assets of the Group at the lower of their fair value at the date of the lease contract and the present value of the minimum payments due under the lease contract. The corresponding liability towards the lessor is included in the balance sheet as a finance lease obligation. Finance lease payments are divided between a capital portion and an interest portion in order to apply a constant interest rate on the residual liability. The finance costs are recorded directly in the income statement for the year. Operating lease costs are recorded on a straight-line basis over the term of the lease agreement. Benefits received or receivable as an incentive for entering into operating lease agreements are also recorded on a straight-line basis over the duration of the operating lease agreement. Foreign currency transactions In the preparation of the Financial Statements of the individual Group companies, transactions in foreign companies entered into by Group companies are translated into the functional currency (the currency in the main area in which the company operates) using the exchange rate at the transaction date or otherwise at the date on which the fair value of the underlying assets/liabilities is determined. Foreign currency assets and liabilities are translated at the balance sheet date using the exchange rate at the balance sheet date. Non-monetary assets and liabilities valued at historical cost in foreign currency are translated using the exchange rate at the transaction date. Exchange differences arising on such transactions or on the translation of monetary assets and liabilities are recorded in the income statement except for those arising on derivative financial instruments qualified as cash flow hedges. These differences are recorded in Equity if unrealised, otherwise they are recorded in the income statement. Public grants Grants from public bodies are recorded when there is a reasonable certainty that they the conditions required to obtain them will be satisfied and that they will be received. Such grants are recorded in the income statement over the period in which the related costs are recorded. The accounting treatment of benefits deriving from a public loan obtained at a reduced rate are similar to those for public grants. This benefit is calculated at the beginning of the loan as the difference between the initial book value of the loan (fair value plus direct costs attributable to obtaining the loan) and that received, and subsequently recorded in the income statement in accordance with the regulations for the recording of public grants.
Income taxes Income taxes for the year represent the sum of current and deferred taxation. Deferred income taxation is recorded on temporary timing difference between the statutory financial statements and the fiscal assessable result, recorded under the liability method. The deferred taxes are calculated based on the fiscal rates applicable when the temporary differences reverse. The deferred tax charges are recognised in the income statement with the exception of those relating to accounts recognised in equity in which case the deferred tax charges are also recognised in equity. Deferred tax income is recognised when the income taxes are considered recoverable in relation to the assessable results expected for the period in which the deferred tax asset is reversed. The carrying value of deferred tax assets is revised at the end of the year and reduced, where necessary. The compensation between deferred tax assets and liabilities is carried out only for similar items, and if there is a legal right to compensation the current deferred tax assets and liabilities; otherwise they are written separately under receivables and payables. Elica S.p.A. and the subsidiaries FIME S.p.A. (since 2005 with renewal in 2008) and Airforce S.p.A. (since 2008) have opted for a consolidated tax regime in Italy. This means that the IRES (Corporation Tax) charge is calculated on a tax base representing the aggregate of the taxable income and tax losses of the individual companies. Transactions plus reciprocal responsibilities and obligations between the parent company and the aforementioned subsidiaries are defined by a consolidation agreement prepared with each consolidated company. With regard to responsibility, the agreement provides that the parent company is jointly liable with the subsidiary for: • amounts due by the subsidiary under article 127(1) of the Income Tax Code; • payment of amounts due to the tax authorities, should it emerge that sums declared in the consolidated tax return have not been paid; • consolidation adjustments made based on figures supplied by the subsidiary and contested by the tax authorities. The Group tax liability is shown under “Tax payables” or “Tax receivables” in the accounts of the consolidating company, less payments made on account. In the accounts of the subsidiaries and in the present accounts of the Elica Group the debt for the transfer of income taxes to the parent company is recorded under “Other payables”. The receivables which derive from the transfer of income tax losses are classified in the account “Other receivables”.
CONSOLIDATED FINANCIAL STATEMENTS
Earnings per share Basic earnings per share is calculated based on the net profit of the Group and the weighted average number of shares outstanding at the Balance Sheet date. Treasury shares are excluded from the calculation. Diluted earnings per share equate to the basic earnings per share adjusted to assume conversion of all potentially dilutable shares, i.e. all financial instruments potentially convertible into ordinary shares with a dilutive effect on earnings. Accounting principles, amendments and interpretations from January 1, 2009 The accounting principles, amendments and interpretations, also revised following the 2008 annual Improvement process carried out by IASB11 applicable to the Group from January 1, 2009 are reported below. IFRS 8 - Operating segments The accounting standard IFRS 8 - Operating Segments, is applicable from January 1, 2009 in place of IAS 14 - Segment Information. This standard requires the presentation of information on operating segments of the Group and replaces the requirements for the determination of the primary (business) and secondary (geographic) segments of the Group. The new accounting standard requires the company to base the segment information on the elements which Management utilises to make its operating decisions, therefore requiring the identification of the operating segments on the basis of the internal reporting which is regularly reviewed by Management for the allocation of resources to the different segments and for the purposes of performance analysis. The adoption of the standard will not have an impact on the valuation of accounts in the Financial Statements. IAS 1 Revised - Presentation of Financial Statements The revised IAS 1 – Presentation of Financial Statements - requires, as well as the traditional Financial Statements, the presentation of a “Statement of comprehensive income” which shows both the results of the income statement (defined as the result of the changes generated from transactions with non shareholders) and the income statement results recorded directly to net equity (“other comprehensive income”). The standard allows the company to present this result alternatively in a single “Comprehensive Income Statement” or in separate statements presented consecutively: 1. a first separate statement (“income statement”) which shows the profit (loss) components of the period; 2. a second statement (“Comprehensive Income Statement recorded in the period”) which, beginning with the profit/(loss) in the period, includes the other Comprehensive Income Statement components (“other comprehensive income”). The Group opted for the presentation of two separate statements. IAS 27 & IFRS 1 – Consolidated and Separate Financial Statements & FTA IFRS 1 was amended in 2008 in order to enable in the transition phase to IFRS/IAS the valuation of holdings in subsidiaries, associated companies and those under joint control: 1. at cost in accordance with IAS 27; 2. at replacement cost, which may be: - the fair value at the date of transition to IFRS/IAS in the separate Financial Statements; - the book value under the previous accounting principles at the date of transition. The amendments to IAS 27 relate essentially to the elimination of the so-called cost method concept, based on which the “pre-acquisition dividend” must be recorded as a reduction in the carrying value of the investment, as this is similar to a repayment of the investment. Consequently, from January 1, 2009, the dividends matured must be recorded in the income statement whether they refer to the pre/post acquisition phases. Amendment to IFRS 7 - Financial Instruments: disclosures The amendment, which must be applied from January 1, 2009, was issued to increase the disclosure level required in the case of valuation at fair value and to expand the existing standards in relation to disclosure on liquidity risks of financial instruments. In particular, the amendment requires a disclosure of the determination of the fair value of financial instruments by hierarchical valuation levels. The adoption of the standard did not have any impact on the valuation and recording of any accounts in the Financial Statements, but only on the type of information presented in the relative notes. Accounting standards, amendments and interpretations not yet effective and not adopted in advance by the Group The standards which may apply to the Group are summarised below. IFRS3 - Business Combinations and IAS 27R - Consolidated and Separate Financial Statements The principal changes to IFRS 3 relate to the elimination of the obligation to value the individual assets and liabilities of a subsidiary at fair value for each successive acquisition, in the case of several acquisitions in an investment. The goodwill will only be determined in the acquisition 11. International Accounting Standards Board
ANNUAL REPORT 2009
ELICA GROUP 101
phase and will be the difference between the value of the investments immediately before the payment for the transaction and the value of the net assets acquired. In addition, where the company does not acquire 100% of the investment, the minority interest share of net equity may be valued at fair value or utilising the method already contained previously in IFRS 3. The revised version of the standard provides for the allocation to the income statement of all the costs relating to the business combination and recognition at the acquisition date of the liabilities for payments subject to conditions. In the amendment to IAS 27, the IASB has established that the modifications in shareholdings which do not constitute a loss of control must be treated as an equity transaction and therefore recorded under equity. In addition, it is established that when a parent company loses control of an investment but still has a holding, the investment must be valued at fair value with recording of any gains or losses deriving from the loss of control in the income statement. Finally, the amendment to IAS 27 requires that all the losses attributable to minority shareholders are allocated to the minority shareholders net equity, even when this exceeds their holding in the investment. The new regulations must be applied in prospective manner from January 1, 2010. IFRS 8 – Operating sectors This amendment requires that companies provide the value of all assets for each sector subject to disclosure, if this value is provided periodically at the highest operating level. This information was required previously without this condition.
3. CRITICAL JUDGEMENTS AND ESTIMATES In the preparation of the Consolidated Financial Statements in accordance with IFRS, the Group’s Management must make accounting estimates and assumptions which have an effect on the values of the assets and liabilities and disclosures. The actual results may differ from these estimates. The estimates and assumptions are revised periodically and the effects of any change are promptly reflected in the Financial Statements. In this context it is reported that the situation caused by the current economic and financial crisis resulted in the need to make assumptions on a future outlook characterised by significant uncertainty, for which it cannot be excluded that results in the coming years will be different from such estimates and which therefore could require adjustment, currently not possible to estimate or forecast, which may even be significant, to the book value of the relative items. The account items principally concerned by uncertainty are: Goodwill, doubtful debt provision and inventory write downs, non-current assets (tangible and intangible), pension funds and other post-employment benefits, provisions for risks and charges and deferred tax assets. Reference should be made to the comments of each individual account in the Financial Statements for further information on the estimates mentioned.
CONSOLIDATED FINANCIAL STATEMENTS
4. COMPOSITION AND CHANGES IN THE CONSOLIDATION SCOPE At December 31, 2009, the consolidation scope includes the companies controlled by the parent company, Elica S.p.A.. Control exists where the parent company has the power to determine, directly or indirectly, the financial or management policies of an entity so as to obtain benefits from the activities of the company. The following table contains a list of the companies consolidated on a line-by-line basis and controlled directly or indirectly by the parent company:
COMPANIES CONSOLIDATED BY THE LINE-BY-LINE METHOD REGISTERED OFFICE
CURRENCY
SHARE CAPITAL
DIRECT HOLDING
INDIRECT HOLDING
Elica S.p.A.
Fabriano (AN)
EUR
12,664,560
-
-
-
FIME S.p.A.
Castelfidardo (AN)
EUR
2,990,000
100
-
100
Elica Group Polska Sp.zo.o
Wroklaw (Poland)
PLN
78,458,717
62
38 (a)
100
ELICAMEX S.A. de C.V.
Queretaro (Mexico)
MXN
458,633,513
98
2 (b)
100
Leonardo Services S.A. de C.V.
Queretaro (Mexico)
MXN
50,000
98
2 (b)
100
Sagamihara-Shi (Japan)
JPY
10,000,000
51
-
51
Fabriano (AN)
EUR
103,200
60
-
60
Stuttgart (Germany)
EUR
26,000
-
57 (c)
57
Chicago, Illinois (United States)
USD
5,000
-
100 (d)
100
COMPANY
ARIAFINA CO., LTD Airforce S.p.A. Airforce Ge Elica Inc. Elica International S.à.r.l.
-
TOTAL HOLDING
Luxembourg
EUR
100,001
100
Dublin (Ireland)
EUR
12,050,001
-
100 (e)
100
Mühlacker (Germany)
EUR
25,000
-
100 (e)
100
Elica Finance Limited Exklusiv-Hauben Gutmann GmbH
100
(a) Held through FIME S.p.A. (b) Held through Elica Group Polska Sp.zo.o (c) Held through Airforce S.p.A. (d) Held through ELICAMEX S.A. de C.V. (e) Held through Elica International S.à.r.l. The main changes relating to the companies consolidated under the line-by-line method during the year are shown below: • in the year Elica S.p.A. converted the financial receivables for a total amount of Euro 14 million in favour of the subsidiary Elica International S.à.r.l. into “Share Capital ” for an amount of Euro 1 and in the “Share premium reserve” for the remaining part; • on April 6, 2009, Elica Germany GmbH incorporated Exklusiv-Hauben Gutmann GmbH (held 100%), changing the name to that of the incorporated company. The following table contains a list of associated companies consolidated under the Equity method and held directly or indirectly by the parent company:
ASSOCIATED COMPANIES MEASURED UNDER THE EQUITY METHOD COMPANY I.S.M. Srl
REGISTERED OFFICE
CURRENCY
SHARE CAPITAL
% HELD DIRECTLY
% HELD INDIRECTLY
TOTAL HELD
Cerreto d’Esi (AN)
EUR
10,327
49
-
49
In 2009, Inox Market Mexico S.A. de C.V., which is 13.2885% owned by ELICAMEX S.A. de C.V. and processes stainless steel and steel for industrial purposes in general and markets its products primarily in Mexico and the United States, ceased to be an associated company as a significant influence was no longer exercised. Concerning data and information on associated companies, reference should be made to section 8 of the notes.
ANNUAL REPORT 2009
ELICA GROUP 103
5. NOTES TO THE CONSOLIDATED INCOME STATEMENT, BALANCE SHEET AND CASH FLOW STATEMENT CONSOLIDATED INCOME STATEMENT 5.1 Revenues Details of the Group’s revenue are as follows: In Euro thousands Revenues from product sales Service revenues Total
12.31.2008
12.31.2009
CHANGES
385,346
335,091
(50,255)
89
44
(45)
385,435
335,135
(50,300)
For an analysis on revenues, reference should be made to the paragraph “Financial and operating review” in the Directors’ Report. The decrease in the account follows the change in the consolidation scope in 2008 for Euro 17,251 thousand. Clients who comprise more than 10% of total revenues constituted 30.5% of revenues in 2009 compared to 25.7% in 2008. The table below provides an analysis of sales by geographic area, regardless of the origin of the goods and services. The Group’s activities are located in Italy, Mexico, Japan, Poland, Germany and the United States.
REVENUES BY GEOGRAPHIC AREA 12.31.2009 12.31.2008
EUROPE + CIS
OTHER COUNTRIES
283,852
25,017
312,324
34,647
THE AMERICAS
26,266
CONSOLIDATED
38,465
335,135
385,435
The changes in the consolidation scope affected the account “Europe+CIS” for Euro 17,251 thousand.
5.1.1 Segment information The form of segment reporting is by business sector in which the Group operates. The breakdown by segment is as follows: -“Hoods”: production and sale of range hoods and accessories; - “Motors”: production and sale of electric motors. Segment revenues are determined in accordance with the classification of the products sold in a business sector. Segment results are determined by taking into account all the costs that can be allocated directly to sales in a specific segment. Costs not allocated to the segments include all costs not directly attributable to the area, including manufacturing, sales, general, administrative costs, as well as financial income and charges and taxes. Inter-segment revenues include revenues between Group segments that are consolidated on a line-by-line basis in relation to sales made to other segments.
CONSOLIDATED FINANCIAL STATEMENTS
Assets, liabilities and investments are allocated directly on the basis of their classification in a specific sector. The following tables contain segment information by business segment as defined above:
INCOME STATEMENT
HOODS DEC.09
Segment revenues: customers Inter-segment
NOT ALLOCATED AND ELIMINATIONS
ELECTRIC MOTORS
DEC.08
DEC.09
CONSOLIDATED
DEC.08
DEC.09
DEC.08
DEC.09
DEC.08
287,897
319,710
47,238
65,725
335,135
385,435
272
599
19,963
24,457
(20,235)
(25,056)
288,169
320,309
67,201
90,182
(20,235)
(25,056)
335,135
385,435
51,960
42,181
9,178
9,198
61,138
51,379
Overheads not allocated
(60,406)
(48,785)
EBIT Share of profit from associates Financial income
732
2,594
107 1,197
149 843
107 1,197
149 843
Financial charges
(3,069)
(3,393)
(3,069)
(3,393)
Exchange gains/(losses)
(207)
2,686
(207)
2,686
Profit/(loss) before taxes
(1,240)
2,879
(1,240)
2,879
Income taxes Net profit from normal operations Net profit from discontinued operations
2,022
1,292
2,022
1,292
782
4,171
782
4,171
Total revenues Segment result:
Net profit for the year
BALANCE SHEET
782
Segment assets Investments in associated companies Assets not allocated Total operational assets Total assets of discontinued operations Total assets Liabilities Segment liabilities
ELECTRIC MOTORS
HOODS DEC.09
Assets:
63 4,234
NOT ALLOCATED AND ELIMINATIONS
DEC.08
DEC.09
DEC.08
188,474
170,703
66,946
63,660
DEC.09 (4,369)
782
4,234
CONSOLIDATED
DEC.08
63
DEC.09
(3, 767)
DEC.08
251,051
230,596
2,309
2,627
2,309
2,627
43,625
77,996
43,625
77,996
296,985
311,219
296,985
311,219
4,371
3, 767
(96,360)
(97,991)
(78,241)
(84,087)
(22,490)
(17,671)
Liabilities not allocated
(76,468)
(88,734)
(76,468)
(88,734)
Net equity
(124,157)
(124,494)
(124,157)
(124,494)
Total operational liabilities Total liabilities of discontinued operations
Total liabilities
ANNUAL REPORT 2009
(296,985) (311,219) -
-
(296,985) (311,219)
ELICA GROUP 105
5.2 Other operating income In Euro thousands
12.31.2008
12.31.2009
CHANGES
5
-
(5)
Operating grants
555
255
(300)
Ordinary gains on disposal
520
316
(204)
Claims and insurance payouts
292
145
(147)
Rental income
Expenses recovered
800
540
(260)
Other revenues and income
4,041
1,575
(2,466)
Total
6,213
2,831
(3,382)
The change in the account is principally due to the earthquake suspension payables relating to the earthquake in 1997 which in 2008 had an impact of Euro 1,543 thousand on “Other income and revenues” as well as the reduction in bonuses related to lower volumes in the year.
5.3 Changes in inventories of finished and semi-finished goods The account Change in finished and semi-finished product inventory increased by Euro 5,122 thousand on 2008; the change in the consolidation scope in 2008 had a positive impact for Euro 5,807 thousand.
5.4 Increases on internal work capitalised The account increases on internal work capitalised amounts to Euro 2,937 thousand (Euro 2,762 thousand in the previous year) and mainly relates to the capitalisation of charges regarding the design and development of new products, the in-house construction of mouldings and equipment and the up-grading of technical-management software.
5.5 Raw and consumable materials In Euro thousands Purchases of consumable materials Purchases of supplies Purchases of raw materials Change in inventory of raw materials, consumables and goods for re-sale Purchases of finished products Packaging Other purchases Shipping expenses on purchases Total
12.31.2008
12.31.2009
CHANGES
1,300
1,100
(200)
588
457
(131)
179,240
147,813
(31,427)
4,081
15,057
10,976
4,660
4,537
(123)
13,563
9,031
(4,532)
430
351
(79)
2,162
1,852
(310)
206,024
180,198
(25,826)
The consumption of raw materials decreased by Euro 25,826 thousand, despite the positive effect from the change in the consolidation scope in 2008 of Euro 13,258 thousand. This decrease is due to a significant decrease in the production volumes which however, net of the changes in the consolidation area in 2008, results in an improvement in the revenue percentage of this account from 53% in 2008 to 52% in 2009. This positive effect is due to the amendments introduced as part of the purchases and logistics policies.
CONSOLIDATED FINANCIAL STATEMENTS
5.6 Service expenses In Euro thousands Outsourcing expenses
12.31.2008
12.31.2009
CHANGES
39,819
26,429
(13,390)
Transport
9,529
7,457
(2,072)
Finished goods inventories
4,839
4,007
(832)
Consulting
5,236
6,157
921
Maintenance
2,928
3,144
216
Utilities
4,156
3,744
(412)
Commissions
2,230
2,214
(16)
Travel expenses
2,702
2,039
(663)
Advertising
1,689
1,173
(516)
Insurance premiums
1,276
1,219
(57)
Remuneration of Directors and Statutory Auditors
904
908
4
Trade fairs and promotional events
990
311
(679)
Industrial services
624
563
(61)
Banking commissions and charges Other services Total
258
360
102
6,693
6,951
258
83,873
66,676
(17,197)
Service expenses decreased by Euro 17,197 thousand, despite the change in the consolidation scope of Euro 3,522 thousand. The percentage on revenues was 20%, compared to 22% in the previous year. The decrease is principally related to the contraction in both outsourcing and transport costs. The account Other services includes communication services (Euro 984 thousand), technical assistance costs (Euro 1,827 thousand), canteen costs (Euro 451 thousand), cleaning costs (Euro 604 thousand), vehicle expenses (Euro 395 thousand) and training courses (Euro 290 thousand).
5.7 Labour costs Labour costs incurred by the Group in 2008 and 2009 were as follows: In Euro thousands
12.31.2008
12.31.2009
CHANGES
Salaries and wages
47,993
46,700
(1,293)
Social security charges
16,056
14,673
(1,383)
Employee leaving indemnity
3,433
2,214
(1,219)
Other costs
2,429
3,267
838
69,911
66,854
(3,057)
Total
This account decreased, despite the change in the consolidation area in 2008 with an impact of Euro 3,641 thousand, by Euro 3,057 thousand. During the year, the Group has utilised the Temporary Lay-off and Mobility Schemes, coupled with social security benefits for the employees involved in order to rationalise labour costs within the production sites.
ANNUAL REPORT 2009
ELICA GROUP 107
“Other costs” include temporary employees for Euro 1,601 thousand (Euro 1,615 thousand in 2008) and leaving incentives of Euro 1,997 thousand (Euro 885 thousand in 2008). The change in the account is more limited due to the effect of the earthquake suspensions payables relating to the earthquake in 1997 which had a positive impact of Euro 2,434 thousand in 2008. The table below shows the Group workforce at December 31, 2008 and December 31, 2009: WORKFORCE
12.31.2008
Executives
12.31.2009
CHANGES
23
22
(1)
521
524
3
Blue-collar
1,888
1,772
(116)
Temporary
1
20
19
2,433
2,338
(95)
White-collar
Total
5.8 Amortisation and depreciation The total amount of amortisation and depreciation is in line with the previous year, decreasing from Euro 16,885 thousand in 2008 to Euro 16,556 thousand in 2009. The breakdown of this account is reported in the fixed asset paragraphs.
5.9 Other operating expenses and provisions The details of the account are as follows:
In Euro thousands
12.31.2008
12.31.2009
CHANGES
Leasing and rental
1,703
1,280
(423)
Rental of vehicles and industrial equipment
1,706
1,810
104
Expenses for hardware, software and patents
1,006
1,192
186
595
543
(52)
42
73
31
Other taxes Magazines and newspapers subscriptions Various equipment
287
201
(86)
Catalogues and brochures
530
147
(383)
Losses and bad debts
730
1,622
892
Provisions for risks and charges
465
1,876
1,411
Other prior year expenses and losses
1,966
1,152
(814)
Total
9,030
9,896
866
The principal changes in the year are related to the provisions for risks and charges. These provisions were recorded for Euro 700 thousand related to the risk of non return of assets following the sub-entry into of a leasing contract and Euro 570 thousand for risks of a commercial nature.
CONSOLIDATED FINANCIAL STATEMENTS
The account “Other prior year expenses and losses” principally includes expenses for damages and penalties amounting to Euro 148 thousand, income taxes relating to the previous year of Euro 139 thousand and samples for Euro 414 thousand. The reduction in the account “Leasing and rental” is related to the reduction in rentals following the optimisation of industrial structure uses. The changes in the consolidation scope in 2008 resulted in a change in the account of Euro 431 thousand.
5.10 Restructuring charges
The account restructuring charges includes the charges relating to the restructuring operations described in note 5.44.
5.11 Share of profit/(loss) from associates In Euro thousands
12.31.2008
12.31.2009
CHANGES
Share of profit/(loss) from associates
149
107
(42)
Total
149
107
(42)
The amounts recorded under this heading relate to the Equity method of accounting for investments in associates, as shown in the following table:
In Euro thousands
12.31.2008
12.31.2009
CHANGES
I.S.M. Srl
182
107
(75)
Inox Market Mexico S.A. de C.V.
(33)
-
33
Total
149
107
(42)
In particular, in 2009 adjustments in the value of investments were recorded, as reported in paragraph 5.23, for an amount of Euro 163 thousand, and charges from the associated company for an amount of Euro 56 thousand. In 2009, the company Inox Market Mexico S.A. de C.V. ceased to be an associated company as reported in paragraph “4. Composition and changes in the consolidation scope”.
5.12 Financial income
The details of financial income are reported below, which is in line with that of the previous year: In Euro thousands Income from other non-current financial assets Interest income from associated companies Interest on bank deposits Interest income from customers
12.31.2008
12.31.2009
CHANGES
14
34
20
3
-
(3)
251
45
(206)
69
-
(69)
Other financial income
506
1,118
612
Total
843
1,197
354
The increase in the account “other Financial income” is principally related to the fee paid by Whirlpool of Euro 633 thousand. Reference is made to note 5.44. The account “Other financial income” includes interest for the discounting of payables of Euro 342 thousand as well as a decrease related to the change in the consolidation scope of Euro 142 thousand.
ANNUAL REPORT 2009
ELICA GROUP 109
5.13 Financial charges In Euro thousands
12.31.2008
12.31.2009
CHANGES
1,849
1,819
on other borrowings
320
145
(30)
on employee leaving indemnity
660
574
Discounts on sales
564
516
-
-
Losses/(Gains) from cash flow hedges transferred from equity
-
15
Net financial gains/(losses) from traded financial instruments
-
-
3,393
3,069
Financial charges: on overdrafts and bank loans
Other financial expenses Other financial expenses
Total
(175) (86) (48) 15 (324)
The account decreased by Euro 324 thousand due to a reduction in interest rates which also contributed to a strong improvement in the Net Financial Position as described in the Directors’ Report. Euro 15 thousand refers to the recording of a cap option to hedge interest rate fluctuations as described in paragraph “7. Information on risk management” of the present notes.
5.14 Exchange gains/(losses) In Euro thousands
12.31.2008
12.31.2009
(12,126)
(5,201)
6,925
13,236
5,159
(8,077)
(89)
(929)
(840)
Profits on derivative instruments
1,665
764
(901)
Total exchange gains/(losses)
2,686
(207)
(2,893)
Exchange losses Exchange gains Charges on derivative instruments
CHANGES
Net exchange losses in the year amounted to Euro 207 thousand compared to gains of Euro 2,686 thousand in the previous year. The account includes the balance of the non-realised gains and losses deriving from the adjustment at the end of the year of debtor and creditor positions in foreign currencies of Euro 978 thousand in 2009 and Euro 1,026 thousand in 2008. The exchange gains and losses decreased considerably on the previous year following a decrease in the volatility of the currencies in which the Group operates, specifically, US Dollars, Polish Zloty and Mexican Pesos. A large part of the exchange gains and losses are concentrated in the parent company Elica S.p.A. (Euro 293 thousand), in Elica Group Polska Sp.zo.o (Euro 741 thousand) and in ELICAMEX S.A. de C.V. (Euro 434 thousand). For further comments on the gains and losses in the year, reference should be made to the Directors’ Report. The account “Net financial gains/(losses) from derivative instruments” in 2009 amounted to a loss of Euro 165 thousand compared to a gain of Euro 1,576 thousand in 2008, and relates principally to income on currency derivatives, which in accordance with the accounting standards may not be treated as hedging operations, although they were made for this purpose, and are recorded at fair value through the profit and loss account.
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT 2009
ELICA GROUP 111
5.15 Income taxes Deferred and current taxes in 2009 are broken down as follows: In Euro thousands Current income tax
12.31.2008
12.31.2009
CHANGES
(3,514)
(3,116)
398
Deferred taxes
4,806
5,138
332
Total income taxes
1,292
2,022
730
The positive tax effects in 2009 for Euro 2,022 thousand is related both to the decrease in assessable taxes of the Italian Group companies and the recording of a tax credit by the subsidiary Elica Polska Sp.zo.o. Following admission to the Special Economic Zone by the Polish Tax Authorities in February 2007, the Group acquired tax credit rights related to an investment programme, equal to Zloty 41 million, to be realised by December 31, 2011, which require the maintenance of a workforce of 160 persons until December 31, 2016. The current income taxes in 2009 include a net positive amount of Euro 877 thousand deriving from the exercise of the option as per law No. 244 of 2007 (2008 Finance Act) to recognise, through the payment of a substitute tax of Euro 327 thousand, the misalignment between the result for the year and the assessable base for taxes prior to 2007. This effect was positive in 2008 for Euro 2,609 thousand. In 2009, the parent company was subject to a statutory tax rate (on pre-tax result) of 31.63%, 32.23% in 2008, based on the corporate income tax (IRES) and regional business tax (IRAP) rates applicable to the reported taxable income for the year ended December 31, 2009. For foreign subsidiaries the statutory tax rate varies from country to country. The table below shows a reconciliation between the theoretical and effective income taxes (“IRES� for the Italian Group companies) paid by the parent company.
Ola, Elica
CONSOLIDATED FINANCIAL STATEMENTS
Theoretical IRES rate
Theoretical IRAP rate
In Euro thousands
Income taxes
- Current
- Deferred – cost/(income)
[A] TOTAL INCOME TAXES
PROFIT/(LOSS) BEFORE TAXES
+
Tax calculated using local tax rate
+
Tax effect of (expenses)/revenues that are not deductible for tax purposes
-
Tax effect on the different tax rates of the foreign subsidiaries
-
Decrease/(increase) in deferred tax assets/(liabilities) due to changes in tax rates
[B] Effective tax charge and tax rate net of substitute tax
-
Tax credit from Polish investments
-
Substitute Tax effect
[C] Effective tax charge and tax rate
Wizard, Elica
ANNUAL REPORT 2009
ELICA GROUP 113
2009
27.50%
4.73%
2008
ASSESSABLE
INCOME REGIONAL TAXES TAXES
% ON TOTAL PRE-TAX PROFIT
27.50%
4.13%
ASSESSABLE
INCOME TAXES
REGIONAL TAXES
% ON TOTAL PRE-TAX PROFIT
1,654
1,860
3,514
1,583
1,534
3,116
(4,219)
(587)
(4,806)
(5,084)
(54)
(5,138)
(2,565)
1,273
(1,292)
-89.1%
(3,501)
1,479
(2,022)
282.4%
2,879
(1,240)
792
27.5%
(341)
27.5%
800
221
7.7%
(2,142)
(589)
47.5%
(3,523)
(969)
-33.7%
(2,775)
(763)
61.5%
-
-
0.0%
-
-
0.0%
156
44
1.5%
(6,156)
(1,693)
136.5%
-
-
0.0%
(1,257)
101.5%
(2,609)
-90.6%
(550)
44.4%
156
(2,565)
-89.1%
(6,156)
(3,501)
282.4%
CONSOLIDATED FINANCIAL STATEMENTS
5.16 Assets of discontinued operations In 2009 no effects were recorded in the account. In 2008, the costs and revenues and the assets and liabilities of the “ACEM division” available-for-sale were eliminated from the consolidated balance sheet and income statement and reported in a single line item of assets and of liabilities and in the income statement in accordance with IFRS 5.
5.17 Minority interest share The minority interest profit relates to those subsidiaries not wholly owned by the Elica Group. They include ARIAFINA CO., LTD (minority interest 49%), Airforce S.p.A. (40%) and Airforce Germany Hochleistungs-Dunstabzugssysteme GmbH (43%).
5.18 Basic earnings per share – Diluted earnings per share The calculation of basic and diluted earnings per share is based on the following data:
12.31.2008
12.31.2009
From continuing and discontinuing operations: Net profit for the year (thousands of Euro) Average number of ordinary shares net of treasury shares Basic earnings per share Weighted average number of ordinary shares to calculate diluted earnings per share Diluted earnings per share
3,579
231
58,222,618
56,990,520
6.15
0.41
58,222,618
56,990,520
6.15
0.41
From continuing operations: Net profit for the year (thousands of Euro) Average number of ordinary shares net of treasury shares Basic earnings per share Weighted average number of ordinary shares to calculate diluted earnings per share Diluted earnings per share
3,516
231
58,222,618
56,990,520
6.04
0.41
58,222,618
56,990,520
6.04
0.41
The earnings per share was calculated based on the Group net profit and the weighted average shares outstanding, excluding the treasury shares, at December 31.
5.19 Other information on the income statement accounts The research and development costs charged in the income statement in 2008 and 2009 are summarised in the table below: In Euro thousands R&D costs expensed Amortisation of capitalised R&D costs Total R&D costs R&D costs capitalised during the year
12.31.2008
12.31.2009
CHANGES
5,758
5,318
(440)
591
800
209
6,349
6,118
(231)
622
752
130
“Development costs capitalised in the year” regards product design and development activities. The increase mainly relates to the cost of developing new products.
ANNUAL REPORT 2009
ELICA GROUP 115
CONSOLIDATED BALANCE SHEET 5.20 Property, plant & equipment The table below shows details of the changes in property, plant and equipment in 2008 and 2009: 01.01.2008
INCREASES
DISPOSALS
OTHER MOVEMENTS
12.31.2008
Land and buildings
47,696
4,603
-
(1,934)
50,365
Plant & equipment
75,440
3,053
(6,984)
(813)
70,696
Commercial and industrial equipment
83,573
3,924
(2,842)
(730)
83,925
PROPERTY, PLANT & EQUIPMENT In Euro thousands Historical cost
Other assets
9,557
717
(1,079)
(17)
9,178
Assets in progress and advances
3,260
1,288
(2,995)
(128)
1,425
219,526
13,585
(13,900)
(3,622)
215,589
Total
DISPOSALS
OTHER MOVEMENTS
12.31.2008
1,576
-
(119)
11,688
5,014
(6,092)
(216)
52,366
69,843
6,977
(2,605)
(292)
73,923
7,701
543
(597)
(44)
7,603
Total
141,435
14,110
(9,294)
(671)
145,580
In Euro thousands
01.01.2008
INCREASES
DISPOSALS
Land and buildings
37,465
4,063
-
Plant & equipment
21,780
3,053
(892)
Commercial and industrial equipment
13,730
3,924
(239)
In Euro thousands
01.01.2008
DEPRECIATION
Land and buildings
10,231
Plant & equipment
53,660
Commercial and industrial equipment
Accumulated depreciation
Other assets
OTHER DEPRECIATION 12.31.2008 MOVEMENTS
Net value
(1,815)
(1,576)
38,677
(597)
(5,014)
18,330
(438)
(6,977)
10,002
(543)
1,576
Other assets
1,856
717
(482)
28
Assets in progress and advances
3,260
1,288
(2,995)
(128)
78,091
13,585
(4,606)
(2,950)
Total
1,425 (14,110)
70,010
CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY, PLANT & EQUIPMENT In Euro thousands
01.01.2009
INCREASES
OTHER MOVEMENTS
DISPOSALS
12.31.2009
Historical cost
Land and buildings
50,365
1,411
-
335
52,111
Plant & equipment
70,696
3,296
(1,555)
252
72,689
Commercial and industrial equipment
83,925
4,359
(3,268)
302
85,318
Other assets
9,178
1,079
(986)
(53)
9,218
Assets in progress and advances
1,425
1,158
-
277
2,860
215,589
11,303
(5,810)
1,114
222,196
Total
In Euro thousands
01.01.2009
DEPRECIATION
DISPOSALS
OTHER MOVEMENTS
12.31.2009
Accumulated depreciation
Land and buildings
11,688
1,635
-
(2)
13,321
Plant & equipment
52,366
4,564
(1,171)
64
55,823
Commercial and industrial equipment
73,923
5,913
(3,239)
125
76,722
7,603
547
(850)
(70)
7,230
145,580
12,658
(5,260)
117
153,096
Other assets Total
In Euro thousands
DISPOSALS
OTHER MOVEMENTS
DEPRECIATION
12.31.2009
1,411
-
336
(1,635)
38,789
3,296
(385)
188
(4,564)
16,866
01.01.2009
INCREASES
Land and buildings
38,677
Plant & equipment
18,330
Commercial and industrial equipment
Net value
10,002
4,359
(29)
177
(5,913)
8,596
Other assets
1,576
1,079
(137)
17
(547)
1,989
Assets in progress and advances
1,425
1,158
-
277
-
2,860
70,010
11,303
(550)
995
(12,658)
69,100
Total
The net book value of tangible fixed assets amounts to Euro 69,100 thousand compared to Euro 70,010 thousand at the end of the previous year. Investments in the year refer principally to the construction of a warehouse at the Polish factory and the purchase of equipment and moulds for the development of new products and an increase in production. The column “Other movements� includes exchange gains of Euro 434 thousand. Property, plant and equipment are adequately insured against fire, weather damage and similar risks by means of insurance policies arranged with leading insurance companies. They include assets obtained under finance lease agreements. Details of the historical cost, accumulated depreciation and depreciation charged to the income statement in the year as a result of application of the method recommended by IAS 17 for the accounting treatment of assets held under finance lease agreements are provided below.
ANNUAL REPORT 2009
ELICA GROUP 117
LEASED ASSETS TABLE OF LEASED ASSETS In Euro thousands
LAND AND BUILDINGS
PLANT & EQUIPMENT
COMMERCIAL AND INDUSTRIAL EQUIPMENT
TOTAL
Gross value
15,250
9,643
7,419
32,311
Accumulated depreciation
(4,266)
(8,752)
(7,252)
(20,270)
10,984
890
167
12,041
477
951
904
2,331
Gross value
16,415
10,773
7,321
34,509
Accumulated depreciation
(4,967)
(9,873)
(7,251)
(22,091)
11,448
900
70
12,418
491
932
449
1,872
12.31.2008 Depreciation at December 31, 2008
12.31.2009 Depreciation at December 31, 2009
It is recalled that the historical cost criteria was retained as the measurement criteria for property, plant and equipment after initial recognition. The historical cost includes revaluations permitted by previous legislation as considered representative of the fair value of the property, plant and equipment when the revaluation was made.
5.21 Goodwill In Euro thousands
12.31.2008
12.31.2009
CHANGES
Goodwill
35,862
33,818
(2,044)
Goodwill
35,862
33,818
(2,044)
12.31.2008
ACQUISITIONS (WRITE-DOWNS)
12.31.2009
(2,771)
19,896
Details of the allocations are provided below: In Euro thousands CGU Electric motors
22,667
Hoods
3,863
-
3,863
Gutmann Hoods
9,332
727
10,059
35,862
(2,044)
33,818
Total book value of goodwill
In line with the strategic vision of the Group, we have historically identified the Range Hood CGU and the Motors CGU and more recently the Gutmann Range Hood CGU in 2008. The distinction between the cash flows of the range hoods business and the motors business is due to the different uses which the two products satisfy within the market. In particular, range hoods are focused on the final consumer combining functional aspects - the removal of odours and filtering of fats, with the satisfaction of other consumer needs such as the lighting of the worktop and the enhancement of the kitchen with a highly technological and well designed product. The electric motor is produced exclusively for other industries belonging to the heating sector (components for wall and gas boilers) or the electrical appliances sector (components for refrigerators, for electric ovens or for range hoods). In relation to the acquisition of the German company Gutmann, the Group opted for a non integrated management model, respecting the specific needs of the business specialised in the production of “personalised” and highly performance range hoods, creating therefore a third CGU. The goodwill acquired on the mergers was allocated to the CGU’s as described above based on the estimated benefits deriving from the synergies created.
CONSOLIDATED FINANCIAL STATEMENTS
The recoverable value of the CGU’s to which the individual goodwill is allocated is verified through the determination of the value in use considered as the current value of the expected cash flows utilising a rate which reflects the risks of the individual CGU’s at the valuation date. Such calculations discount the cash flows projected by the respective CGU’s over a time horizon of five years, of which the first (2010) based on the updated budget and the subsequent years (2011-2014) estimated as follows. The years 2011-2014 were extrapolated from the 2010 budget, utilising an annual average growth rate of revenues of 5.7% for the Range Hoods CGU, of 4.9% for the Motors CGU and of 6.7% for the Gutmann Range Hood CGU, in line with the best estimates available. The percentage of raw material costs on revenues is expected to decrease for the Range Hood CGU and for the Gutmann Range Hood CGU by 0.2%, while the Motors CGU will see a 1.2% increase. These changes reflect the values in the 2010 budget for the various materials utilised, of which the principle component increased by 1% on the previous year. The variable operational cost components (direct labour, outsourcing, commercial costs) are expected to remain constant in terms of revenues while the fixed operating cost components are projected to increase by 1.7% in the 2010 budget, in line with inflation. The working capital absorbed by the CGU’s is expected to remain constant in terms of revenues at around 11% for the Range Hoods CGU and 15% for the Motors CGU, in line with the historical data. The terminal value was determined through the discounting of the perpetual return of cash flow freely available estimated for 2014 and at a growth rate of 1.7%. The discount rate (WACC) was estimated net of taxes (in line with the cash flows to be discounted) at 8.35% (9.41% in 2008) for the Range Hoods and the Motors CGU’s and 7.21% for the Gutmann Range Hood CGU (7.37% in 2008). These are the principal assumptions used by the Group to estimate future performance; a change in these assumptions could result in a significantly different value in use and thus difficulties arise in determining “impairment”. For this reason, and considering the uncertainties which currently pervade the market, Management will monitor periodically the circumstances and the events which affect the above-mentioned assumptions and future trends. In relation to the Motors CGU, the valuations at December 31, 2009 resulted in the recognition of a loss in value of Goodwill of Euro 2,771 thousand, recorded in the income statement in the account “Write-down of Goodwill for loss in value”. This write-down aligns the book value with the recoverable value; therefore changes in the base assumptions will affect in a linear manner the difference between the book value and the recoverable value. The Range Hoods CGU has however a coverage of the book value against the value in use of 1.6 times. The changes in the base assumptions necessary to neutralise this difference are significant enough as not to be considered a reasonable likelihood. The increase of the Gutmann Range Hoods CGU is related to the adjustment of the initial provisional value of the acquisition in the fourth quarter of 2008, as established by IFRS 3 “Business combinations” in force at December 31, 2009. The excess of the value in use over the book value was approximately Euro 13.8 million and growth in revenues close to 0% would neutralise this excess. At the date of the preparation of the present document, the capitalisation on the Stock Exchange of the company was substantially in line with the Net Equity.
5.22 Other intangible assets The table below shows details of changes in other intangible assets in 2008 and 2009: INTANGIBLE ASSETS In Euro thousands
01.01.2008
INCREASES DECREMENTS
OTHER MOVEMENTS
AMMORTISATION 12.31.2008
Development Costs Industrial patents and intellectual property rights Concessions, licenses, trade marks & similar rights
1,805
1,641
-
(218)
(642)
2,586
1,734
2,164
(1)
19
(1,411)
2,505
121
88
-
2,098
(69)
2,238
Assets in progress and advances
1,359
4,204
(1,539)
1
-
4,025
496
648
(19)
8,343
(623)
8,845
5,515
8,745
(1,559)
10,243
(2,745)
20,199
Net value
Other intangible assets Total
ANNUAL REPORT 2009
ELICA GROUP 119
INTANGIBLE ASSETS In Euro thousands
01.01.2009
Net value
INCREASES
DECREMENTS
OTHER AMMORTISATION 12.31.2009 MOVEMENTS
Development Costs Industrial patents and intellectual property rights Concessions, licenses, trade marks & similar rights
2,586
449
-
321
(812)
2,544
2,505
4,295
-
2,983
(1,736)
8,047
2,238
2
-
6
(156)
2,090
Assets in progress and advances
4,025
419
(7)
(3,855)
-
582
Other intangible assets
8,845
122
(15)
72
(1,194)
7,830
20,199
5,288
(22)
(474)
(3,898)
21,093
Total
At December 31, 2009, intangible assets amounted to Euro 21,093 thousand, a net increase of Euro 894 thousand on the previous year. “Development costs” relate to product design and development activities. The increase is mainly attributable to the cost of developing new products. Development costs are amortised on a straight-line basis over a five-year period. “Industrial patents and intellectual property rights” includes patents and royalties regarding the recognition of patents, intellectual property rights and software programs. The increase for the year is related to a new product development project and the continuous upgrading of technical and management reporting software (Sap, Txt). The patents and intellectual property rights are amortised over three years. “Concessions, licenses, brands and similar rights” refers to the registration of brands by Group companies. The account “Assets in progress and payments on account” includes the advances relating to the implementation of software projects; the increase in the year of Euro 419 thousand principally refers to the design and development of a new and innovative electronic platform and the related IT project. The column “Other changes” relates to the various intangible fixed assets accounts. The account “Other intangible fixed assets” relates principally to the recording both of technologies developed and the client portfolio deriving from the acquisition of the German subsidiary Exklusiv-Hauben Gutmann GmbH in 2008. The column “Other changes” includes exchange losses of Euro 34 thousand and Euro 2,983 thousand for the reclassification from the account “Assets in progress and payments on account” to “Industrial patents and intellectual property rights” relating to the projects described above. The method applied to amortise intangibles is considered appropriate to reflect the remaining useful life of the assets.
5.23 Investments in associated companies The table below shows changes in investments in associated companies: 12.31.2008
ACQUISITION OR SUBSCRIPTION
TRANSLATION RESERVE
REVALUTATION/ (WRITE-DOWNS)
12.31.2009
Investments in associated companies
2,627
-
(481)
163
2,309
Total
2,627
-
(481)
163
2,309
In Euro thousands
The balance in the column Revaluations/(Write-downs) of a net increase of Euro 163 thousand refers to the balance of the adjustments made in the year to investments recorded under the Equity method, shown in the table below.
CONSOLIDATED FINANCIAL STATEMENTS
The table below shows the carrying values at the end of the previous year and as at December 31, 2009:
In Euro thousands
I.S.M. Srl
PURCHASE COST
(EXCLUD. DIVIDENDS)
RECLASS.
BALANCE AT 12.31.2009
(EXCLUD. DIVIDENDS)
1,899
245
2,144
1,899
410
-
2,309
516
(33)
483
516
(33)
(483)
-
2,415
212
2 ,627
2,415
377
(483)
2,309
Inox Market Mexico S.A. de C.V. Total
PRO-QUOTA PRO-QUOTA POSTPOSTACQUISITION BALANCE AT PURCHASE ACQUISITION GAIN/LOSS 12.31.2008 COST GAIN/LOSS
5.24 Other financial assets The account at December 31, 2009 amounted to Euro 30 thousand (in line with December 31, 2008) and principally relates to an insurance investment.
5.25 Other receivables (non current) The breakdown of the other receivables is as follows: In Euro thousands
12.31.2008
12.31.2009
CHANGES
Employees
165
159
(6)
Other receivables
179
41
(138)
Total
344
200
(144)
12.31.2008
12.31.2009
CHANGES
Other tax receivables
6
6
-
Total
6
6
-
The decrease in the account “Other receivables” is related to a reduction in deposits.
5.26 Tax Receivables (non current) The breakdown of non-current tax receivables are as follows: In Euro thousands
ANNUAL REPORT 2009
ELICA GROUP 121
5.27 Financial assets available-for-sale This account regards investments held by the Elica Group in other companies. The investments are held in unlisted companies whose shares are not traded on a regulated market. Therefore, as there were no purchases or sales of these shares in the last year, their fair value cannot be determined in a reliable manner. The carrying value at cost of the investments is shown below: In Euro thousands Meccano S.p.A.
12.31.2008
12.31.2009
CHANGES
15
15
-
UnifabrianoSoc. Srl
2
2
-
Consorzio Energia
4
4
-
Ceced
5
5
-
162
162
-
Inox Market Mexico S.A. de C.V.
-
489
489
Other minor investments
3
3
-
191
680
489
ACEM Srl
Total
The increase in the account relates to the investment in the company Inox Market Mexico S.A. de C.V. which in 2009 ceased to be an associated company as explained in paragraph “4. Composition and changes in the consolidation scope�.
5.28 Trade receivables and loans The account consists of: In Euro thousands Trade receivables Receivables from associated companies Total
12.31.2008
12.31.2009
CHANGES
90,802 533
85,581 8
(5,221) (525)
91,335
85,589
(5,746)
Trade receivables and loans recorded a decrease of Euro 5,746 thousand. This account does not include any receivables due after more than five years at the year-end. Receivables are recorded net of provisions of Euro 2,687 thousand made following an analysis of the credit risk on receivables and on the basis of historical data on credit losses, considering that a substantial portion of the receivables are insured by prime international insurance companies. Management considers that the value approximates the fair value of the receivables. The charge for the year, considered adequate to adjust receivables to their realisable value, was Euro 1,622 thousand. The receivables from associated companies refer to normal operations of the Group; these are regulated at market conditions and are of a commercial nature: In Euro thousands
12.31.2008
12.31.2009
CHANGES
I.S.M. Srl
533
8
(525)
Total
533
8
(525)
CONSOLIDATED FINANCIAL STATEMENTS
5.29 Inventories In Euro thousands Raw material, ancillary and consumables
12.31.2008
12.31.2009
CHANGES
23,621
15,160
(8,461)
(992)
(903)
89
22,629
14,257
(8,372)
16,193
13,733
(2,460)
Raw materials obsolescence provision Total Products in work-in-progress and semi-finished Work-in–progress obsolescence Total Finished proucts and goods fore resale
(670)
(870)
(200)
15,523
12,863
(2,660)
13,418
14,769
1,351
Finished products obsolescence provision Total
(249)
(708)
(459)
13,169
14,061
892
547
270
(277)
51,868
41,451
(10,417)
Payments on account Book value
The value of final inventories decreased by Euro 10,417 thousand. Inventories are stated net of obsolescence provisions of approximately Euro 2,481 thousand, in order to take into consideration the effect of waste, obsolete and slow moving items and the risk estimates of the use of some categories of raw and semi-finished materials based on assumptions made by Management. Inventories also include materials and products that were not physically held by the Group at the Balance Sheet date. These items were held by third parties on display, for processing or for examination. Recognition of the inventories at current value does not entail any difference from recognition with the average weighted cost method.
5.30 Other receivables (current) The breakdown is as follows: In Euro thousands
12.31.2008
12.31.2009
CHANGES
Other receivables
4,433
2,523
(1,910)
Prepaid and accrued income
1,289
1,318
29
Total
5,722
3,841
(1,881)
The reduction in the account iS principally related to advances to suppliers, in particular for the new international initiatives, advances on services, deposits on packaging and the receivable relating to customs reimbursements. This account does not include receivables due after more than five years at the year-end.
5.31 Tax receivables (current) The breakdown of the account “Tax Receivables” is summarised in the table below: In Euro thousands
12.31.2008
12.31.2009
CHANGES
IRAP
364
252
(112)
IRES
4,001
3,966
(35)
VAT
4,069
4,121
52
697
1,324
627
9,131
9,663
532
Other tax receivables Total
The VAT receivable and other indirect foreign taxes are in line with the previous year. The change in the income tax and regional tax receivables is the difference between the payments on accounts and income tax payables for the year 2009. The change in “other tax receivables” is principally due to the recording of a tax receivable of Euro 510 thousand as reimbursement for IRAP relating to the years 2004-2007 following the application of article 6 of Legislative Decree No.185/2008. ANNUAL REPORT 2009
ELICA GROUP 123
5.32 Derivative financial instruments In Euro thousands Foreign exchange derivatives Irs/Cap Total
12.31.2008 ASSETS
12.31.2009
LIABILITIES
ASSETS
LIABILITIES
2,554
2,529
725
288
-
27
45
23
2,554
2,556
770
311
of which Non-current
Current
Total
-
-
-
-
2,554
2,556
770
311
2,554
2,556
770
311
For a description of the above account reference should be made to paragraph “7. Risk management” of the present notes.
5.33 Cash and cash equivalents In Euro thousands Bank and postal deposits Cash in hand and similar Total
12.31.2008
12.31.2009
CHANGES
14,901
19,224
4,323
67
11
(56)
14,968
19,235
4,267
This account reflects positive balances held in bank current accounts and cash on hand. The decrease was due to a different composition in the Group’s Net Financial Position. The book value of these assets reflects their fair value. For further information, reference should be made to the section on the Net Financial Position in the Directors’ Report on operations.
5.34 Liabilities for post-employment benefits The Elica Group reports obligations of Euro 9,554 thousand, reflecting the present value of its retirement benefit obligations accruing at the year end in favour of employees of the Group’s Italian companies and representing termination benefits at the end of the employment period. The most recent actuarial calculations of the present value of the provision were performed at December 31, 2009 by Mercer Human Resource Consulting Srl, with a projection of the expected cost at December 31, 2008.
CONSOLIDATED FINANCIAL STATEMENTS
The amounts recognised in the income statement may be summarised as follows: In Euro thousands Costs relating to current employee services Net actuarial losses recognised in the year Financial charges Total
12.31.2008
12.31.2009
CHANGES
3,328
2,123
(1,205)
3
4
1
660
574
(86)
3,991
2,701
(1,290)
The changes for the year regarding the present value of retirement benefit obligations were as follows: In Euro thousands Opening balance Change in consolidation scope/method
Costs relating to current employee services Curtailment effect Net actuarial losses recognised in the year
BALANCE AT 12.31.2008
BALANCE AT 12.31.2009
12,349
11,023
-
-
12,349
11,023
3,328
2,123
102
87
3
4
3,433
2,214
Financial charges
660
574
Benefits provided
(3,062)
(2,186)
Pension fund
(2,357)
(2,071)
Total
11,023
9,554
The Group has decided to use the corridor method. Under this method it may elect not to recognise the actuarial gains or losses, where these do not exceed 10% of the present value of the defined benefit obligation. Following these adjustments, actuarial gains have not been recorded at December 31, 2009 of Euro 1,064 thousand, while in 2008 these gains amounted to Euro 59 thousand. Lastly, the Group shows the interest component of the charge relating to employee defined-benefit schemes under “Financial charges”, with a resulting increase of Euro 574 thousand in this item for the year. The cost of current retirement benefits and net actuarial losses were recorded under staff costs. The costs relating to current employee services and utilisations of pension funds respectively include the charges and liquidations in the period.
ASSUMPTIONS ADOPTED FOR THE CALCULATION
12.31.2008
12.31.2009
Discount rate to determine the obligation
5.75%
5.00%
Expected salary growth rate
2.50%
2.90%
Rate of inflation
2.00%
2.00%
Discount rate to determine pension cost
5.50%
5.75%
At December 31, 2009 the company had 2,338 employees (2,433 in 2008), as detailed in paragraph 5.7.
ANNUAL REPORT 2009
ELICA GROUP 125
5.35 Provisions for risks and charges The composition and movements of the provisions are as follows: 12.31.2008
PROVISIONS
UTILISATIONS
OTHER MOVEMENTS
12.31.2009
Supplementary agent termination benefits
659
448
(456)
-
651
Directors’ termination benefits
108
-
-
-
108
Restructuring provisions
675
1,860
(675)
-
1,860
Provisions for risks
1,685
1,679
(234)
3
3,133
Product warranty provisions
1,307
209
(623)
-
893
189
189
4,434
4,385
(1,988)
3
6,834
In Euro thousands
Other Provisions Total of which
Non-current
3,127
5,752
Current
1,307
1,082
Total
4,434
6,834
The “Supplementary agent termination benefits” are intended to cover possible charges upon termination of relations with agents and sales representatives. The utilisation of provisions during the year was triggered by the termination of several agency relationships following the strengthening of the “strategic business area” of the own brand product sales and the Contractual indemnity provision which during the year was provisioned Euro 215 thousand. The Directors’ termination benefits regard the termination benefits for the parent company’s Executive Chairman. The “Restructuring provision” was accrued in the year against charges relating to restructuring operations as described in paragraph 5.44. The “Provisions for risks” relates to likely costs and charges to be incurred as a result of ongoing legal disputes. The provisions have been determined based on the best possible estimates, considering the available information. For comments in relation to risk provisions, reference is made to paragraph “5.9 Other operational expenses and provisions”. “Product warranty provisions” represent an estimate of the costs likely to be incurred to repair or replace items sold to customers. These provisions reflect the average warranty costs historically incurred by the Group as a percentage of sales still covered by warranty. The column “Other movements” refer exclusively to exchange rate movements.
5.36 Deferred tax assets – Deferred tax liabilities At December 31, 2009, details of deferred tax assets and liabilities, determined on the basis of the asset-liabilities method, were as follows: In Euro thousands Deferred tax assets Deferred tax liabilities Net deferred tax liabilities
12.31.2008
12.31.2009
CHANGES
6,372
9,200
2,828
(7,739)
(5,328)
2,411
(1,367)
3,872
5,239
CONSOLIDATED FINANCIAL STATEMENTS
The table below shows all the types of timing differences that gave rise to deferred taxes: 12.31.2008 In Euro thousands ASSETS Provisions Goodwill
OTHER MOVEMENTS
CREDIT/DEBIT TO P&L
LIABILITIES
768
-
DEFERRED TAX ASSETS
DEFERRED TAX LIAB.
12.31.2009 ASSETS LIABILITIES
817
-
-
1,585
-
847
(3,863)
187
701
(50)
1,032
(3,110)
Losses carried forward
2,040
(37)
2,273
18
104
4,417
(19)
Inventory write-down
520
-
66
-
-
587
-
Restructuring charges
165
-
202
-
-
367
-
-
(626)
-
171
-
-
(453)
Gains, grants Merger adjustments
-
(610)
-
25
-
-
(585)
Exchange differences Provision for employee leaving indemnity Amortisation & Depreciation
591
(527)
(501)
377
-
90
(150)
157
(934) (169)
108
0 61
-
265
(934) (108)
Set up and expansion costs Elimination of intercompany profits Other
740
-
(370)
-
-
370
-
240 303
28 (1,002)
(29) (27)
69 989
51 -
211 276
44 (13)
6,372
(7,739)
2,726
2,411
105
9,200
(5,328)
Total
The column “Other movements” includes all of the movements of “Deferred Tax Assets” and “Deferred Tax Liabilities” which do not have an effect on the income statement; they principally include the exchange rate movements. The calculation of deferred tax assets was carried out through critically evaluating the existence of future recoverability requisites of these assets. No deferred tax assets were not recorded in the present Financial Statements.
5.37 Finance leases and other lenders MINIMUM PAYMENTS DUE UNDER FINANCE LEASE AGREEMENTS AND OTHER LOANS
FINANCE LEASES AND OTHER LENDERS In Euro thousands
12.31.2008
12.31.2009
PRESENT VALUE OF MINIMUM PAYMENTS DUE UNDER FINANCE LEASES AND OTHER LOANS 12.31.2008
12.31.2009
Due within one year
1,185
2,113
1,000
1,903
Due within five years
4,071
2,488
3,914
2,430
Due over five years
-
-
-
-
5,256
4,601
4,914
4,333
342
268
-
-
4,914
4,333
4,914
4,333
- due within one year
1,000
1,903
- due beyond one year
3,914
2,430
of which: - future financing costs - present value of obligations under finance leases of which:
Amounts due under finance leases relate to buildings, plant, machinery, equipment and other assets. The current value of the minimum payments due at December 31, 2009 is Euro 4,333 thousand, of which Euro 1,903 thousand due within 12 months. The interest rates are linked to one-month or three-month Euribor and are set at the date the finance lease agreement is signed. All finance lease agreements involve a fixed repayment plan and there is no contractual provision for rescheduling the debt.
ANNUAL REPORT 2009
ELICA GROUP 127
5.38 Bank loans and mortgages BALANCE AT 12.31.2008
BALANCE AT 12.31.2009
CHANGES
45,001
37,838
(7,163)
45,001
37,838
(7,163)
40,324
23,058
(17,266)
1,323
3,566
2,243
Within three years
634
3,442
2,808
Within four years
643
3,482
2,839
In Euro thousands Bank loans and mortgages Total Bank loans and mortgages have the following repayment schedules On demand or within one year Within two years
Within five years Beyond five years Total Less amounts to be repaid within one year Due beyond one year
651
3,523
2,872
1,426
766
(660)
45,001
37,838
(7,163)
40,324
23,058
(17,266)
4,677
14,780
10,103
All “Bank borrowings and mortgages” are denominated in Euro. The main borrowings indicated above carry a floating rate of interest. While it is exposed to interest rate risk, in 2009 the Group did not systematically hedge its exposure as, given the expectations of constantly generated cash flows, it is inclined to repay early its bank loans, thus eliminating the need for any such “hedge”. For further information on interest rate hedges, reference should be made to paragraph “7. Risk management” of the present notes.
5.39 Other Payables Other Payables (non-current) In Euro thousands Other payables
12.31.2008
12.31.2009
CHANGES
1
60
59
INAIL contributions – earthquake suspension 1997
91
94
3
INPDAI contributions – earthquake suspension 1997
48
51
3
Employee INPS contributions – earthquake 1997
1,080
1,176
96
Freelance INPS contributions – earthquake 1997
5
-
(5)
1,225
1,381
156
Total
The increase in the account is related to the discounting and repayment of earthquake suspension payables following the earthquake in 1997. The balance includes Euro 602 thousand to be paid beyond 5 years.
CONSOLIDATED FINANCIAL STATEMENTS
Other payables (current) In Euro thousands
12.31.2008
12.31.2009
CHANGES
Payments to social security institutions
3,185
2,641
(544)
Other payables
7,145
7,317
172
Payables to personnel for remuneration
5,053
3,809
(1,244)
406
158
(248)
Customers Accruals and deferred income
432
210
(222)
Customer advances
853
548
(305)
48
3
(45)
17,122
14,686
(2,436)
Directors and Statutory Auditors Total
The account “Other payables” in 2009 includes Euro 6,376 thousand (Euro 5,685 thousand in 2008) relating to the payable for the “earn out” deriving from the purchase of the company Gutmann on November 11, 2008. The account “Payables to Social Institutions” and “Payables to personnel for remuneration” decreased in line with the changes in the cost of labour as reported in paragraph 5.7.
5.40 Current and non-current tax liabilities Tax payables (non-current) In Euro thousands
12.31.2008
12.31.2009
201
218
17
10
-
(10)
ILOR (former local income tax) payable – earthquake suspension ICI (local property tax) payable – earthquake suspension Employee leaving indemnity payable – earthquake suspension
CHANGES
29
32
3
Flat tax payable – earthquake suspension
414
1
(413)
IRPEF (employees income tax) payable – earthquake suspension
184
198
14
Taxes on equity reserves – earthquake suspension
562
609
47
1,400
1,058
(342)
Total
The decrease in the account is principally related to the discounting and repayment of earthquake suspension payables following the earthquake in 1997. The balance includes Euro 550 thousand to be paid beyond 5 years.
Tax payables (current) In Euro thousands Other taxes Flat tax IRPEF withheld IRES payable for the year Total
12.31.2008
12.31.2009
CHANGES
1,123
1,083
(40)
551
422
(129)
2,639
2,314
(325)
30
880
850
4,343
4,699
356
Income tax payables in the year relate principally to the subsidiary ARIAFINA CO., LTD. The IRPEF withholding taxes payable reduced due to the decreased cost of labour.
5.41 Trade payables In Euro thousands Trade payables Associated companies Total
ANNUAL REPORT 2009
12.31.2008
12.31.2009
CHANGES
82,780
84,027
1,247
4,188
2,779
(1,409)
86,968
86,806
(162)
ELICA GROUP 129
Trade payables mainly include payables for trade purchases and other costs. Management believes that the book value of trade payables and other payables reflects their fair value. The payables to associated companies are exclusively of a commercial nature and include: In Euro thousands
12.31.2008
12.31.2009
CHANGES
I.S.M. Srl
4.188
2.779
(1.409)
Total
4.188
2.779
(1.409)
5.42 Group shareholders’ equity For the analysis on the movements in Shareholder’s Equity reference should be made to the relative table. Comments are provided on each of the Equity reserves.
Share Capital The Share Capital at December 31, 2009 amounts to Euro 12,664,560, consisting of 63,322,800 ordinary shares with a par value of Euro 0.2 each, fully subscribed and paid-in.
Capital Reserves The capital reserves amount to Euro 71,123 thousand and relate entirely to the Share Premium Reserve. The costs of the IPO, amounting to Euro 3,650 thousand, net of the relevant tax effect of Euro 2,190 thousand, were charged to the Share Premium Reserve, in accordance with IAS/IFRS.
Hedging, translation and stock option reserves This negative account of Euro 8,431 thousand (negative for Euro 9,081 thousand in 2008), changed on the translation of the Financial Statements of subsidiaries in foreign currencies (ELICAMEX S.A. de C.V., Leonardo Services S.A. de C.V., Elica Group Polska Sp.zo.o, ARIAFINA CO., LTD and Elica Inc.) for a positive value of Euro 571 thousand, the change in the fair value of the cash flow hedges less the tax effect for Euro 3 thousand and a positive amount of Euro 78 thousand due to the elimination of the 2008 income statement items included in this account.
Treasury shares Opening balance at January 1, 2009 Changes Closing balance at December 31, 2009
NUMBER
BOOK VALUE (IN ‘000 OF EURO)
6,332,280
17,629
-
-
6,332,280
17,629
At December 31, 2009, the treasury shares in portfolio represent 10% of the Share Capital. No share buyback operations were carried out during the year.
Retained earnings In Euro thousands Legal reserve Undistributed earnings
12.31.2008
12.31.2009
CHANGES
2,533
2,533
-
658
2,566
1,908
IAS transition reserve
1,675
1,675
-
Extraordinary reserve
53,130
53,437
307
3,875
3,875
-
61,871
64,086
2,215
Reserve restricted under Law 488/1992 Total
The retained earnings includes the allocation of the profit for the year 2008 amounting to Euro 3,501 thousand, other movements of Euro 220 thousand and the distribution of dividends of Euro 1,066 thousand. The Majority shareholder postponed immediate receipt of a dividend as a tangible move in support of the corporate strategy to strengthen the Balance Sheet of the company at this particular time.
CONSOLIDATED FINANCIAL STATEMENTS
Minority interest shareholders’ equity The account increased by Euro 146 thousand principally due to the increase of Euro 551 thousand for the allocation of the 2009 minority profit and a decrease of Euro 103 thousand relating to the minority interest share of the translation effect of Financial Statements of the company ARIAFINA CO., LTD, stated in foreign currency. The reconciliation between Net Equity and profit attributable to shareholders of the parent company and the corresponding consolidated items is provided in the Directors’ Report.
5.43 Net debt, default risk and covenants (In accordance with CONSOB No. DEM/6064293 of July 28, 2006) In Euro thousands
12.31.2009
12.31.2008
Cash and cash equivalents
19,235
14,968
Finance leases and other lenders
(2,430)
(3,914)
Bank loans and mortgages Long-term debt
(14,780)
(4,677)
(17,210)
(8,591)
(1,903)
(1,000)
(23,058)
(40,324)
Short-term debt
(24,961)
(41,324)
Net Debt
(22,936)
(34,947)
Finance leases and other lenders Bank loans and mortgages
For further information on the Net Financial Position movements, reference should be made to the Directors’ Report. Concerning the default risk and covenants on debt reference should be made to section “7. Risk management” of the notes.
5 .44 Significant non-recurring events and operations A summary of the significant non-recurring operations during the year and with their relative impact, net of taxes, on the Net Equity and Net Profit are shown below:
In Euro thousands Book values
NET EQUITY AMOUNT
NET PROFIT
%
AMOUNT
124,157
%
782
a) Restructuring charges
1,326
1.1%
1,326
169.6%
b) Gain from payable of substitute tax
(550)
(0.4%)
(550)
(70.4%)
c) Write-down of Goodwill for loss of value
2,096
1.7%
2,096
268.0%
d) Whirlpool options
(459)
(0.4%)
(459)
(58.7%)
126,570
3,195
Gross notional book value
a) The account refers to the Group industrial reorganisation charges of Euro 1,940 thousand and the relative tax effect. b) The amounts shown in the table illustrates the benefit deriving from the exercise of the option contained in Law No. 244 of 2007 (2008 Finance Act) to recognise, with the payment of the substitute tax, the misalignment between the result for the year and the assessable base for taxes prior to 2007. c) These accounts includes the effects of the write-down of Goodwill for loss in value, as described in paragraph 5.21, net of the relative tax effect. d) This account refers to the fee paid by Whirlpool of Euro 0.50 for every share purchased during the Derogation Period of the Modifying Agreement signed on December 3, 2008. Due to the above-mentioned agreement, Whirlpool, in derogation of the exclusivity obligation set out in the Share Options Agreement, purchased 1,266,456 ordinary shares of the company, comprising 2% of the Share Capital, on the market in the period between the signing of the Modifying Agreement and March 31, 2009.
ANNUAL REPORT 2009
ELICA GROUP 131
6. GUARANTEES, COMMITMENTS AND CONTINGENT LIABILITIES A) CONTINGENT LIABILITIES
The parent company and its subsidiaries are not involved in administrative, judicial or arbitration proceedings that are underway or have been settled by means of a ruling or arbitration award issued in the last 12 months and which might have or might have had an effect on the financial situation or profitability of the Group. Group companies have valued the contingent liabilities that could arise from pending judicial proceedings and have made appropriate provisions in their financial statements on a prudent basis. The provision included in the Group Consolidated Financial Statements at December 31, 2009 for contingent risks and charges relating to legal disputes amount to Euro 1,269 thousand. Management considers that the provision for risks in order to cover possible liabilities from pending or potential disputes is, on the whole, adequate.
Chrome, Elica
CONSOLIDATED FINANCIAL STATEMENTS
B) GUARANTEES AND COMMITMENTS Commitments with suppliers for the purchase of raw materials amounted to Euro 4,696 thousand while the amount relating to fixed asset purchases at December 31, 2009 was approx. Euro 107 thousand, principally relating to investments in the productive capacity such as equipment, plant and buildings for the expansion of industrial activities. On December 10, 2007, FAN SA (now “FAN Srl”), parent company of Elica S.p.A., and Whirlpool signed a shareholder agreement (the “Shareholder Agreement”) which provides for (i) a purchase contract by Whirlpool of Elica shares, representing 5% of the Share Capital (the “5% Holding”) and (ii) regulations concerning the governance of the company. At the same time, in accordance with the Shareholder Agreement, Whirlpool and the Company signed an options agreement on Shares (the “Share Options Agreement”) providing Whirlpool with the right to purchase Treasury Shares of the Company up to a further 10% of the Shares with voting rights of the company, for a period of 18 months from the date of receiving from Elica the communication of the purchase of the 5% Share (the “Option Period”). This Agreement was modified through two additional agreements signed between Whirlpool Europe Srl and Elica S.p.A. respectively on December 3, 2008 (the “Modifying Agreement”) and June 15, 2009 (“the “Second Modifying Agreement”). On December 18, 2009, Whirlpool Europe Srl, Prop Srl and Elica S.p.A., signed, thus confirming their respective obligations, the communication issued by FAN S.A. relating to the merger by incorporation of the same into Prop Srl, which at the same time changed its name to FAN Srl Following the merger, FAN Srl. with registered offices in Rome, via Parigi, No.11, registered in the Rome Company Registration Office at No.10379911000, assumed the rights and obligations of FAN S.A. and continues all activities of FAN S.A., including the Shareholder Agreement. For further information on the Agreement, the Modifying Agreements and the subsequent events to December 31, 2009 reference is made to the “Annual Corporate Governance and Shareholder Report” of Elica S.p.A., updated to March 30, 2010 and available on the website of the company www.elicagroup.com in the Investor Relations/Corporate Governance section as well as the extracts of the Agreement published in accordance with law on the site www.consob.it. The amendments to the Agreement described above had no impact on Elica S.p.A. which pursuant to article 93 of the Consolidated Finance Act, continues to be indirectly held by Mrs. Gianna Pieralisi. In 2008, the parent company Elica S.p.A. issued the following guarantees which are still in place: • a surety in favour of Unicredit S.p.A. for a value of Euro 5,500 thousand for the credit lines granted by Bayerische Hypo und Vereinsbank Ag to the company Elica Germany GmbH (now Exklusiv-Hauben Gutmann GmbH); this surety will expire in 2010; • two sureties in favour of Bank DnB Nord for a value of Euro 3,000 thousand and PLN 15,000 for credit lines granted to the subsidiary Elica Group Polska Sp.zo.o; these sureties will expire in 2012.
C) OPERATING LEASES At the Balance Sheet date there were rental agreements for several industrial and commercial properties, motor vehicle rental agreements and operating leases for hardware. The payments due by the Group under the property rentals and operating leases are summarised in the following table: In Euro thousands
12.31.2008
12.31.2009
Property rentals
1,689
1,128
Car and fork lift rental
3,199
2,187
Hardware operating leases
1,321
1,848
44
10
6,253
5,173
Equipment Total In Euro thousands
12.31.2009
WITHIN 1 YEAR
1-5 YEARS
OVER 5 YEARS
Property rentals
1,128
435
693
-
Car and fork lift rental
2,187
1,689
498
-
Hardware operating leases
1,848
555
1,293
-
10
10
-
-
5,173
2,689
2,484
-
Equipment Total
The decrease in property rentals is primarily due to the cancellation of contracts regarding industrial premises previously held by the parent company, Elica S.p.A..
ANNUAL REPORT 2009
ELICA GROUP 133
7. RISK MANAGEMENT POLICY Introduction The Elica Group’s operations are exposed to different types of financial risks, or risks associated to changes in exchange rates, interest rates, commodity prices and cash flow. In order to mitigate the impact of these risks on the company’s results, the Elica Group commenced the implementation of a financial risk monitoring system through a “Financial Risk Policy” approved by the Board of Directors of the parent company. Within this policy, the Group constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary. The main guidelines for the Group risk policy management are as follows: • identify the risks related to the achievement of the business objectives; • assess the risks to determine whether they are acceptable compared to the controls in place and require additional treatment; • reply appropriately to risks; • monitor and report on the current state of the risks and the effectiveness of their control. The Group “Financial Risk Policy” is based on the principle of a dynamic management and the following assumptions: • prudent management of the risk with a view to protecting the expected value of the business; • use of “natural hedges” in order to minimise the net exposure on the financial risks described above; • undertake hedging operations within the limits approved by Management and only in the presence of effective and clearly identified exposures. The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct separation of the activities of conclusion, settlement, registration and reporting of the results. The paragraphs below report an analysis of the risks which the Elica Group is exposed to, indicating the level of exposure and, for the market risks, the potential impact on the results deriving from hypothetical fluctuations in the parameters (sensitivity analysis).
Market risk Within these types of risks, IFRS 7 includes all the risks directly or indirectly related to the fluctuations of the general market prices and the financial markets in which the company is exposed: • foreign currency risks; • commodity risk, related to the volatility of the prices of the raw materials utilised in the production processes; • interest rate risk. In relation to these risk profiles, the Group uses derivative instruments to hedge its risks. The Group does not engage in derivative trading. The paragraphs below individually analyse the different risks, indicating where necessary, through sensitivity analysis, the potential impact on the results deriving from hypothetical fluctuations in the parameters.
Foreign currency risks The Group’s operating currency is the Euro. However, the Group companies trade also in US Dollars (USD), British Pounds (GBP), Japanese Yen (JPY), Polish Zloty (PLN), Mexican Pesos (MXN), Swiss Francs (CHF) and Russian Roubles (RUB). In all of these currencies, except for the Swiss Franc and the Russian Rouble, the Elica Group has higher revenues than costs; therefore changes in the exchange rates between the Euro and these currencies impact the Group results as follows: • the appreciation of the Euro has negative effects on revenue and operating results; • the depreciation of the Euro has positive effects on revenues and operating results. The amount of the exchange risk, defined in advance by Management of the Group on the basis of the budget for the period, is gradually hedged over the acquisition process of the orders, up to the amount of the orders corresponding to budget projections. The hedge is made through agreements with third party financiers of forward contracts for the purchase and sale of foreign currency. As previously described, these operations are undertaken without any speculative or trading purpose, in line with the strategic policies of a prudent management of the cash flows. As well as the trading risks just described, the Group is also exposed to Balance Sheet translation risks. The assets and liabilities of companies consolidated in currencies other than the Euro may be translated into Euro at varying exchange rates, whose amount is recorded in the “translation reserve” under Group Net Equity. The Group monitors this exposure, against which there were no hedging operations at the Balance Sheet date; in addition, against the total control by the parent company over its subsidiaries, the governance on the respective foreign currency operations is greatly simplified.
CONSOLIDATED FINANCIAL STATEMENTS
The values are shown below at December 31, 2009 of the Balance Sheet accounts in foreign currencies for the most significant currencies: In Euro thousands
2008
2009
CURRENCY CHF GBP JPY PLN RUB USD MXN
ASSETS 574 332 9,865 22 12,547 2,341
LIABILITIES (311) (22) (1) (9,647) (1) (7,413) (4,212)
ASSETS 946 123 17,275 39 8,945 658
LIABILITIES (311) (21) (11,536) (3) (3,968) (779)
Total
25,681
(21,607)
27,985
(16,618)
For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the Euro/CHF, Euro/GBP, Euro/YEN, Euro/PLN, Euro/RUB, Euro/USD and Euro/MXN rates were analysed. The following table shows the sensitivity to reasonably possible movements in the exchange rates, maintaining all other variables unchanged, of the pre tax profit, due to changes in the value of current assets and liabilities in foreign currencies: In Euro thousands CURRENCY
2008
2009
DEPRECIATION OF FOREIGN CURRENCIES10%
APPRECIATION OF FOREIGN CURRENCIES 10%
DEPRECIATION OF FOREIGN CURRENCIES 5%
APPRECIATION OF FOREIGN CURRENCIES 5%
CHF
28
(35)
15
(16)
GBP
(50)
61
(44)
49
JPY
(30)
37
(6)
6
PLN
20
(24)
(273)
302
RUB
(2)
2
(2)
2
USD
(467)
571
(237)
262
MXN
(170)
208
6
(6)
Total
(671)
820
(541)
598
The hedging operations as at December 31, 2009 with financial counterparties have a total fair value of approx. Euro 435 thousand. The table below shows the details of the notional and fair values:
Foreign exchange derivatives CURRENCY USD Forward Options GBP Forward Options PLN Options JPY Forward Options Total
NOTIONAL AT 31.12.08
FAIR VALUE AT 12.31.2008 (IN EURO/000)
NOTIONAL AT 12.31.2008
(IN FOREIGN CURRENCY/000)
FAIR VALUE AT 12.31.2009
7,000 2,500 450 350 3,480 1,100,000 1,250,000
36 41 48 4 162 (342) 77
4,100 9,200 500 37,465 -
(19) 196 (1) 259 -
26
435
(IN FOREIGN CURRENCY/000)
(IN EURO/000)
For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the EUR/USD, EUR/GBP and EUR/PLN and the rate curves of the Euro exchange rates were analysed. In the stress testing we have stressed, as well as the spot to spot exchange rate, also the monetary curve rates at December 31, 2009 in order ANNUAL REPORT 2009
ELICA GROUP 135
to show the effect of changes in the rate curve. A change of 5% in the exchange rate was the maximum deviation which the exchange rate saw from the beginning of December 2009 to the first week of January 2010. For the rates, a change of 25 basis points (bps) for the monetary curve and 50 bps for the medium-long term curve represents the possible deviation that the curves may undergo given the market conditions. The following table shows the sensitivity to reasonably possible movements in the exchange rates and the rate curves, maintaining all other variables unchanged, of the fair value of the operations in foreign currencies at December 31, 2009 (compared with December 31, 2008): In Euro thousands Exchange depreciation 10% Currency depreciation EUR 25 bps Currency depreciation 30 bps Sensitivity to Depreciation Exchange appreciation 10% Currency appreciation EUR 25 bps Currency appreciation 30 bps Sensitivity to Appreciation
In Euro thousands Depreciation of foreign currencies 5% Currency depreciation EUR 25 bps Currency depreciation 25 bps Sensitivity to Depreciation Appreciation of foreign currencies 5% Currency appreciation EUR 25 bps Currency appreciation 25 bps Sensitivity to Depreciation
2008 USD NOTIONAL 9,500 USD/000
GBP NOTIONAL 800 GBP/000
PLN NOTIONAL 3,480 PLN/000
JPY NOTIONAL 2,350,000 JPY/000
(534,026) 14,572 (8,820)
(36,182) 790 (744)
(66,648) 108 (171)
(67,299) 3,523 (1,529)
(528,274)
(36,136)
(66,711)
(65,305)
487,258 (8,622) 3,051
39,288 (258) 245
49,462 (132) 113
209,944 (2,107) 118
481,687
39,275
49,443
207,955
2009 USD
GBP
PLN
NOTIONAL 13,300 USD/000
NOTIONAL 500 GBP/000
NOTIONAL 37,465 PLN/000
298,419
27,007
(134,419)
6,389
1,211
(5,693)
(2,510)
(816)
7,029
302,298
27,401
(133,084)
(247,173)
(29,429)
292,074
(2,694)
(816)
6,399
6,198
1,211
(6,289)
(243,669)
(29,035)
292,184
Commodity risk The Group is subject to market risk deriving from fluctuations in commodity prices used in the production process. The raw materials purchased by the Group (including copper and aluminium) are affected by the trends of the principal markets. The Group regularly evaluates its exposure to the risk of change in the price of commodities and manages this risk principally through fixing the price of contracts with suppliers. Based on this strategy, the Elica Group does not adopt any hedging through derivative financial instruments, as the company implements a hedging policy based on quantities. In particular, as illustrated by Management, between the end and the beginning of the year, on the basis of the production budget for the year, the raw material orders are made establishing the delivery period and the price to be paid. Operating in this manner, the Group covers the standard cost of the raw materials contained in the budget from possible increases in commodity prices, achieving the operating profit objective.
CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risk The management of the interest rate risk by the Elica Group is in line with the consolidated practices over time to reduce the volatility risk on the interest rates, while at the same time minimising the borrowing charges within the established budget limits. The Group’s debt carries mainly a floating rate of interest. Relating to the Group debt (as already described prevalently at a variable rate), from the sensitivity analysis a change of -25 bps in the interest rate curve in the short-term incurs lower financial charges of Euro 57,300, while a change of +25 bps in the same interest rate curve converts into higher financial charges of Euro 57,300. The Group hedges part of the interest rate risk through the utilisation of an Interest Rate Swap and through the purchase of a cap option against specific medium-long term loans at variable rate. The table below shows the details of the notional and fair values:
DERIVATIVES ON INTEREST RATES INSTRUMENT Interest Rate Swap Cap Total
NOTIONAL 12.31.08
FAIR VALUE 12.31.08
NOTIONAL 12.31.09
FAIR VALUE 12.31.09
(EURO/000)
(EURO/000)
(EURO/000)
(EURO/000)
1,221
(26,5)
915
(22,5)
-
-
6,550
40,1
1,221
(26,5)
7.465
17,6
Also the interest rate risk is measured through sensitivity analysis, in accordance with IFRS 7. The changes in the interest rate curve utilised for the sensitivity analysis were based on the volatility of the market rates. The analysis showed that a change of the interest rate curve in the short-term of -25 bps and of the long-term curve of -50 bps converts into a decrease in the fair value of the Interest Rate Swap at December 31, 2009 of Euro 1,000. A change of the interest rate curve in the short-term of +25 bps and of the long-term curve of +50 bps converts into an increase in the fair value of the Interest Rate Swap of Euro 1,000. With reference to the cap option the sensitivity analysis carried out on the interest rate curve shows against a change in the short-term curve of -25 bps and in the long-term curve of -50 bps, the fair value of the cap decreases by Euro 500. A change in the interest rate curve in the short-term of +25 bps and a change in the long-term curve of +50 bps converts into an increase in the fair value of the cap of Euro 500.
Credit risk The credit risks represent the exposure of the Elica Group to potential losses deriving from the non-compliance of obligations by trading partners. This risk derives in particular from economic-financial factors related to a potential solvency crisis of one or more counterparties. The Group only deals with well known and reliable clients. It is Group policy to analyse clients in order to award a credit rating. Moreover, the collection of receivables is monitored during the year so that the exposure to losses is not substantial. The maximum theoretical exposure to the credit risk for the Group at December 31, 2009 is the carrying value of the financial assets recorded in the accounts, and the nominal value of the guarantees given on debts and commitments to third parties as indicated in paragraph “6. Commitments, guarantees and contingent liabilities”. At December 31, 2009, trade receivables, amounted to Euro 85.6 million, including approx. Euro 8.5 million relating to overdue receivables. 0.6% of receivables were overdue by 60 days. The amount of trade receivables reported in the Balance Sheet is net of the allowance for doubtful accounts. The allowance is made on the basis of past experience and on the basis of specific considerations on the individual customers. The doubtful debt provision was created based on the guidelines contained in the attachment to the Financial Risks Policy specifically relating to the management of credit risk. For the management of credit risk, the Group utilises insurance coverage to guarantee against the non payment of a significant part of its clients.
Liquidity risk The liquidity risk represents the risk related to the unavailability of financial resources necessary to meet short-term commitments assumed by the Group and its own financial needs. The principal factors which determine the liquidity of the Group are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the maturity dates and the renewal of the payable or liquidity of the financial commitments and also market conditions. These factors are monitored constantly in order to guarantee a correct equilibrium of the financial resources. ANNUAL REPORT 2009
ELICA GROUP 137
The following table shows the expected cash flows in relation to the contractual expiries of trade payables and various financial liabilities from derivatives:
Data at December 31, 2009 In Euro thousands
Finance leases and other lenders Bank loans and mortgages Trade and other payables Total
WITHIN 12 MONTHS
1-5 YEARS
OVER 5 YEARS
1,903 23,058 101,492
2,430 14,014 1,381
766 -
126,453
17,825
766
WITHIN 12 MONTHS
1-5 YEARS
OVER 5 YEARS
1,000 40,324 104,090
3,914 3,251 1,225
1,426 -
145,414
8,390
1,426
Data at December 31, 2008 In Euro thousands
Finance leases and other lenders Bank loans and mortgages Trade and other payables Total
During the year, the Group signed with major financial counterparties three Medium-Long term loan contracts which include an obligation to respect financial covenants based on the Consolidated Financial Statements. In particular, the covenants on some of the loans do not immediately determine default of the loan through non respecting of the limits, but in the first instance impose an increase in the cost of the loan. At December 31, 2009 the level of the covenants in question were significantly better than the terms of the first threshold to increase the cost of the loan or of the default of the credit line. Management believes that at the present moment, the funds available, in addition to those that will be generated from operating and financial activities, will permit the Group to satisfy its requirements deriving from investment activities, working capital management and repayment of debt in accordance with their maturities. For details on the Net Financial Position, reference should be made to note 5.43 of the notes.
Classification of the Financial instruments In Euro thousands Other financial assets
12.31.2009
12.31.2008
30
30
Financial assets available-for-sale
680
191
Non-current assets
710
221
Derivative financial instruments Cash and cash equivalents Current assets Finance leases and other lenders Bank loans and mortgages Non-current liabilities Finance leases and other lenders Bank loans and mortgages Derivative financial instruments Current liabilities
770
2,554
19,235
14,968
20,005
17,522
2,430
3,914
14,780
4,677
17,210
8,591
1,903
1,000
23,058
40,324
311
2,556
25,272
43,880
CONSOLIDATED FINANCIAL STATEMENTS
Hierarchy of fair value according to IFRS 7 IFRS 7 requires that the classification of financial instruments valued at fair value is determined based on the quality of the input sources used in the valuation of the fair value. The IFRS 7 classification implies the following hierarchy:
• Level 1: determination of fair value based on prices listed in active markets for identical assets or liabilities; • Level 2: determination of the fair value is calculated based on the valuation techniques which utilise market parameters, other than listings of the financial instrument;
• Level 3: determination of the fair value is calculated based on the valuation techniques which utilise non-market parameters. The classification of the financial instruments may have a discretional element, although not significant, where in accordance with IFRS, the Group utilises, where available, prices listed on active markets as the best estimate of the fair value of derivative instruments. All the derivative instruments in place at December 31, 2009 belong to level 2 of the fair value hierarchy.
Instruments in place at December 31, 2009 The table below shows the following information on derivative instruments at December 31, 2009: • the notional value of the derivative contracts, broken down by maturity; • the book value of these contracts, represented by their fair value. In Euro Interest rate risk Cash Flow hedge as per IAS 39 Fair Value hedge as per IAS 39 Not considered hedges under IAS 39
NOTIONAL VALUE Maturity within 1 year 915
Total derivatives on interest rates
Foreign currency risks Considered hedges under IAS 39 - On commercial operations - On financial operations Not considered hedges under IAS 39 - On commercial operations - On financial operations Total derivatives on foreign exchange
ANNUAL REPORT 2009
22
915
6,550
22
Maturity within 1 year sales purchases 9,698 5,700 9,698
Maturity over 1 year 6,550
BOOK VALUE
5,700
Maturity over 1 year sales purchases 112 3,450 112
3,450
435 435
ELICA GROUP 139
8. DISCLOSURE PURSUANT TO IAS 24 ON MANAGEMENT COMPENSATION AND RELATED-PARTY TRANSACTIONS The Group is indirectly controlled by the Casoli Family through Fintrack S.p.A. of Fabriano. Francesco Casoli, Executive Chairman of Elica S.p.A., is the majority shareholder and Sole Director of Fintrack S.p.A., a holding company that does not carry out management and coordination activities in accordance with article 2497 and subsequent of the Civil Code. This conclusion derives from the fact that the majority shareholder does not carry out management activities within the company and, although exercising their voting rights at the shareholders’ meeting, does not exercise any managerial directives or have any involvement in the production and financial programmes. The company therefore carries out its operations through a totally autonomous and independent decision-making process. Gianna Pieralisi Casoli holds a life-time right of usufruct on 68.33% of the shares of Fintrack S.p.A., thus exercising control over the Issuer, pursuant to article 93 of the Consolidated Finance Act.
8.1 Remuneration of Directors, Statutory Auditors and Senior Management with strategic responsibility The remuneration of the above-mentioned parties is indicated below (in Euro thousands):
OFFICE
DURATION
EMOLUMENTS
NONMONETARY BENEFITS
Francesco Casoli
Chairman of the Board of Directors
Account approval 2011
341
5
154
Andrea Sasso
Chief Executive Officer
111
4
509
NAME
Gianna Pieralisi
Executive director
Gennaro Pieralisi
Director
Giovanni Frezzotti
Director
Stefano Romiti
Director
Fiorenzo Busso
Director
Total
NAME
Account approval 2011 Account approval 2011 Account approval 2011 Account approval 2011 Account approval 2011
OFFICE
DURATION
Corrado Mariotti
Chair. Board of Statutory Auditors (*)
Stefano Marasca
Statutory Auditor
Gilberto Casali
Statutory Auditor
Franco Borioni (*)
Statutory Auditor
Daniele Capecci (*)
Statutory Auditor
Guido Cesarini (**)
Statutory Auditor
Account approval 2011 Account approval 2011 Account approval 2011 Account approval 2011 Account approval 2011 Account approval 2008
Total
BONUS AND OTHER INCENTIVES
OTHERS
161 23 23 23 11 693
9
-
663
EMOLUMENTS
NONMONETARY BENEFITS
BONUS AND OTHER INCENTIVES
OTHERS
-
-
-
48 32 34 114
(*) Appointed on 04/27/2009 (**) In office until 04/27/2009
The senior managers with strategic responsibilities in Elica S.p.A are the following: the Administration, Finance and Control Director, the Supply Chain Director, the B2B Commercial Director, the Industrial Area Director, the Human Resource Director, the Marketing and Innovation Director, the ELICAMEX General Manager, the Product Direction Director and the ICT and Business Integration Director. The aggregated remuneration in 2009 amounted to Euro 1,849 thousand.
CONSOLIDATED FINANCIAL STATEMENTS
8.2 Share-based payments Stock options granted to the members of the Board of Directors and senior managers with strategic responsibilities are listed below.
OFFICE HELD
NUMBER OF OPTIONS
Chief Executive Officer
-
Senior executives
-
NAME Andrea Sasso
OPTIONS ASSIGNED DURING THE YEAR
Senior executives
AVERAGE EXERCISE PRICE
OPTIONS HELD AT THE END OF THE YEAR
AVERAGE EXPIRY
NUMBER OF OPTIONS
AVERAGE EXERCISE PRICE
AVERAGE EXPIRY
-
-
62,333
Euro 5
12.31.2011
-
-
82,821
Euro 5
12.31.2011
8.3 Information on subsidiary companies The tables below show key data for subsidiaries and the amount of transactions entered into with them for the year ended December 31, 2009:
SUBSIDIARY COMPANIES – KEY DATA ACCORDING TO LOCAL ACCOUNTING PRINCIPLES In Euro thousands
ASSETS
LIABILITIES
NET EQUITY
REVENUES
NET RESULT
Subsidiary companies FIME S.p.A. Airforce S.p.A. ARIAFINA CO., LTD Airforce Ge (*) Elica Group Polska Sp.zo.o ELICAMEX S.A. de C.V. Leonardo Services S.A. de C.V. Elica Inc. Elica International S.à.r.l. Elica Finance Limited Exklusiv-Hauben Gutmann GmbH
54,889 8,465 4,959 207 46,858 30,089 262 218 27,102 12,030 23,619
40,306 6,652 2,439 7 20,043 11,315 287 158 12,945 6 22,817
14,583 1,813 2,520 200 26,815 18,774 (25) 60 14,157 12,024 802
57,367 17,495 12,396 40 53,001 24,137 2,854 976 20,370
(926) 374 799 (16) 5,945 (546) (33) 21 902 (19) (789)
Elica S.p.A. also has financial relations with Group companies as a result of loans made to them as part of a general plan to centralise cash management activities. These loans are interest bearing and at market rates. Transactions with consolidated companies have been eliminated from the Consolidated Financial Statements. As a result they are not reported in these notes.
8.4 Information on associated companies The table below shows the operating and financial amounts arising from transactions with associated companies for 2009. No separate indication of these positions was given in the Financial Statements as the amounts involved were limited. All transactions were conducted on an arm’s length basis in the ordinary course of business. The table below summarises key operating and financial data for associated companies, as derived from the companies’ Financial Statements in accordance with Italian GAAP and local GAAP for foreign companies.
Associated companies SUMMARY DATA AT DECEMBER 31, 2009 In Euro thousands I.S.M. Srl
ANNUAL REPORT 2009
REGISTERED OFFICE
% HELD
SHARE CAPITAL
NET EQUITY
NET RESULT
Cerreto d’Esi (AN)
49,385
10
2,328
177
ELICA GROUP 141
SUMMARY DATA AT DECEMBER 31, 2008 REGISTERED OFFICE
% HELD
SHARE CAPITAL
NET EQUITY
NET RESULT
Cerreto d’Esi (AN)
49.385
10
2,146
315
Queretaro (Messico)
13.289
4,523
3,626
(255)
In Euro thousands I.S.M. Srl Inox Market Mexico S.A. de C.V.
COMMERCIAL TRANSACTIONS WITH ASSOCIATED COMPANIES In Euro thousands
PAYABLES
RECEIVABLES
COSTS
REVENUES
I.S.M. Srl
2,779
8
10,755
117
Total
2,779
8
10,755
117
8.5 Transactions with other related parties In 2009, transactions with other related parties took place. All transactions were conducted on an arm’s length basis in the ordinary course of business. The table below shows the main operating and financial amounts arising from trading transactions with FASTNET S.p.A. (30% interest held by the parent company of Elica S.p.A.), with Roal Electronics S.p.A. (21.276% interest held by the parent company of Elica S.p.A.) and with Fintrack S.p.A. (company that indirectly controls the parent company, Elica S.p.A.).
ELICA GROUP AND FASTNET S.P.A. In Euro thousands
12.31.2008
12.31.2009
Payables
51
19
Costs
14
19
12.31.2008
12.31.2009
1,069
1,017
12.31.2008
12.31.2009
36
49
1,010
1,048
49
72
4,181
3,107
ELICA GROUP AND FINTRACK S.P.A. In Euro thousands Receivables
ELICA GROUP AND ROAL ELECTRONICS S.P.A. In Euro thousands Receivables Payables Revenues Costs
The operating and financial balances arise from trading transactions conducted to purchase goods and services on an arm’s length basis. The trading relationship with FASTNET S.p.A. forms part of a strategic partnership to develop projects and implement advanced technological solutions. These projects have accompanied and continue to accompany the growth of the business; from intranet solutions to extranet solutions, from wiring to wireless solutions, from software consultancy to hardware consultancy and from training to web marketing. The transactions with Fintrack S.p.A. regard management and administrative/accounting services. It is noted that the receivable is related to the sale in 2007 of the shareholding in Roal Electronics S.p.A.. The transactions with Roal Electronics S.p.A. relate to the supply of electronic control systems for equipment.
CONSOLIDATED FINANCIAL STATEMENTS
9. DISCLOSURE PURSUANT TO ARTICLE 149-DUODECIDES OF THE CONSOB ISSUER’S REGULATION The following table, prepared pursuant to article 149-duodecides of the CONSOB Issuer’s Regulations, reports the payments made in 2009 for audit and other services carried out by the audit firm and entities associated with the audit firm: PARTY PROVIDING THE SERVICE
COMPANY
REMUNERATION In Euro thousands
Audit
Deloitte & Touche S.p.A.
Elica S.p.A.
237
Audit
Deloitte & Touche S.p.A.
FIME S.p.A.
46
Audit
Deloitte & Touche S.p.A.
Airforce S.p.A.
27
TYPE OF SERVICE
Audit
Deloitte & Touche S.C.
ELICAMEX S.A. de C.V.
19
Audit
Deloitte & Touche Sp.zo.o
Elica Group Polska Sp.zo.o
25
Audit
Deloitte & Touche S.A.
Elica International S.à.r.l.
8
Audit
Deloitte & Touche GmbH
Exklusiv-Hauben Gutmann GmbH
32
Other services
Deloitte & Touche S.p.A.
Elica S.p.A.
5
Other services
Deloitte & Touche Sp.zo.o
Elica Group Polska Sp.zo.o
13
Other services
Deloitte & Touche S.C.
ELICAMEX S.A. de C.V.
7
Other services
Deloitte & Touche S.p.A.
FIME S.p.A.
2
420
PARTY PROVIDING THE SERVICE
COMPANY
REMUNERATION In Euro thousands
FGS
Elica Finance Limited
4
Total
TYPE OF SERVICE Audit Total
ANNUAL REPORT 2009
4
ELICA GROUP 143
10. POSITIONS OR TRANSACTIONS ARISING FROM EXCEPTIONAL AND/OR UNUSUAL TRANSACTIONS In 2009, no operations classifiable in this category were recorded.
11. EVENTS AFTER THE YEAR-END For information on events after the year-end, reference should be made to the Directors’ Report.
Fabriano, March 30, 2010
For the Board of Directors Executive Chairman Francesco Casoli
CONSOLIDATED FINANCIAL STATEMENTS
DECLARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AS PER ARTICLE 81-TER OF CONSOB REGULATION NO. 11971 OF MAY 14, 1999 AND SUBSEQUENT MODIFICATIONS AND INTEGRATIONS The undersigned Andrea Sasso, as Chief Executive Officer, and Vincenzo Maragliano, Executive responsible for the preparation of the corporate accounting documents of Elica S.p.A., affirm, and also in consideration of article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58/1998: • the accuracy of the information on company operations and • the effective application of the administrative and accounting procedures for the compilation of the Consolidated Financial Statements for 2009. In addition, we declare that the Consolidated Financial Statements: a) correspond to the underlying accounting documents and records; b) were prepared in accordance with International Financial Reporting Standards adopted by the European Union and also in accordance with article 9 of Legislative Decree No. 38/2005 and provide a true and fair representation of the Balance Sheet, financial position and results of the issuer and of the consolidated companies.
Fabriano, March 30, 2010
The Chief Executive Officer Andrea Sasso
ANNUAL REPORT 2009
Executive responsible for the preparation of corporate accounting documents Vincenzo Maragliano
ELICA GROUP 145
AUDITORS’ REPORT
This report has been translated into the English language solely for the convenience of international redares.
CONTACTS & CREDITS
HEADQUARTERS
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T. +39 0732 610 200 F. +39 0732 610 740
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Financial Information
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ANNUAL REPORT 2009
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ELICA GROUP 147
ANNUAL REPORT 2009
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