Notes to the consolidated financial statements
1. Segment information
1. Segment information
1.1 Net sales by region
Total net sales were 15.1 % (CHF 79.5 million) below their prior-year level, or 10.7 % (CHF 59.8 million) down based on prior-year currency exchange rates and excluding acquisitions. The impact of currency movements amounted to –4.4 % (CHF –19.7 million) while, as in 2019, acquisitions and disposals had no impact on net sales results. Average Swiss-franc currency exchange rates were down 3.7 % against the euro and down 5.6 % against the US dollar.
1.2 Income statement by division
2. Other operating income
2. Other operating income
Other operating income for 2020 was broadly in line with its prior-year level.
3. Personnel expense
3. Personnel expense
Personnel expense for 2020 was a 0.2 % (CHF 0.2 million) increase on the prior year. The Packaging Division saw its workforce further enlarged in response to high product demand. By contrast, personnel expense for the Paper and Chemistry divisions (excluding the special impact of US pension scheme expense, see Note 18.2) was lower as a result of the lower business demand, rigorous cost management and short-time working compensation (CHF 1.6 million). In addition to the contributions to state social security institutions, “Pension scheme contributions and other social security costs” includes the contributions to company pension schemes described in Note 18. Members of Group Executive Management were assigned a total of 2 381 shares in 2020 under their share-based compensation provisions. At a share price of CHF 75.75, the corresponding expense, which is shown under “Salaries and wages”, amounted to some CHF 180 000.
4. Other operating expense
4. Other operating expense
The CHF 24.7 million of other operating expense (prior year: CHF 26.1 million) includes sales and administrative costs and further operating expenses. Thanks to consistent cost management and reduced travel activities in the light of the COVID-19 pandemic, other operating expense was CHF 1.4 million or 5.2 % below its 2019 level.
5. Financial income
5. Financial income
Financial income was CHF 0.3 million below its prior-year level, owing to lower exchange rate gains on amounts held in foreign currencies.
6. Financial expense
6. Financial expense
Financial expense was CHF 1.3 million below its prior-year level owing to lower interest expense (in 2019 interest was paid on two parallel corporate bonds).
7. Non-operating result
7. Non-operating result
The non-operating income of CHF 7.3 million (prior year: CHF 1.4 million) comprises rental income and sale proceeds from non-operating real estate in Buchrain (CHF 5.2 million, prior year CHF 0.8 million) and Full-Reuenthal (CHF 0.1 million, prior year CHF 0.6 million), along with the release of CHF 2.0 million of provisions made for environmental protection measures to clean up the Rotholz waste disposal site in Meilen, Canton Zurich. The non-operating expense of CHF 0.5 million (prior year: CHF 0.6 million) consists of expenditure relating to the sale and management of non-operating real estate in Uetikon, Perlen, Buchrain and Full-Reuenthal.
8. Extraordinary result
8. Extraordinary result
The provisions for the lake bed clean-up at the former Uetikon site were reduced by CHF 12.0 million in 2020, with the release effected via the extraordinary result by analogy to the original creation in 2016 of the provisions concerned (see Notes 25/27). There was no extraordinary income or extraordinary expense in 2019.
9. Income taxes
9. Income taxes
Perlen Papier AG has transferred real estate at the Perlen site to newly founded group member company Perlen Papier Immobilien AG at market rates. The transaction was effected using a previously uncapitalized CHF 97.1 million of tax losses carried forward. The intragroup transaction resulted in 2020 in deferred tax assets and corresponding deferred tax income of CHF 11.9 million, as the purely tax-related upward revaluation generated a deductible temporary difference. This resulted overall in profits from income taxes of CHF 8.1 million for the year. Tax rates varied in 2020 between 10 % and 34 % (prior year: between 10 % and 34 %) depending on the country and the location.
The Group’s expected income tax rate for 2020 amounted to 18.2 % (prior year: 14.2 %). This is the weighted average tax rate based on the individual profits/losses before taxes and tax rates for each group member company. The change in this expected income tax rate is due to the profit situation and changed tax rates at the various group member companies. The difference between the estimated income tax expense and the income tax expense shown in the income statement is attributable largely to the offsetting of losses carried forward from previous years in connection with an intragroup real estate transaction.
In accordance with the consolidated accounting principles, deferred taxes on losses carried forward are not capitalized. Uncapitalized losses carried forward declined for 2020 to CHF 65.2 million (prior year: CHF 199.5 million), with a potential tax impact of CHF 7.4 million (prior year: CHF 11.8 million), paying due regard to the multi-year plan and the provisions of and possibilities under the relevant national tax laws. The change is attributable in particular to the use of CHF 97.1 million of losses carried forward in connection with an intragroup real estate transaction. None of the losses carried forward are of indefinite duration, and CHF 5.2 million thereof will expire within a year.
10. Liquid funds and securities
10. Liquid funds and securities
Liquid funds increased from CHF 93.1 million to CHF 116.3 million in 2020 as a result of the positive free cash flow trends. Financial liabilities were also reduced by a net CHF 4.8 million.
11. Trade accounts receivable
11. Trade accounts receivable
Trade accounts receivable were CHF 19.5 million below their prior-year level, owing to the lower net sales in the Paper Division.
Individual adjustments are effected to certain doubtful receivables. Such adjustments were CHF 2.3 million lower in 2020 than they had been for the prior year. A long-standing receivable issue with a Paper Division client was also resolved in the course of the year.
12. Other receivables
12. Other receivables
Other receivables were CHF 3.2 million up on their prior-year level. The increase is attributable largely to real estate activities and environmental protection actions.
13. Prepaid expenses and accrued income
13. Prepaid expenses and accrued income
Prepaid expenses and accrued income were down CHF 1.9 million from their prior-year level. 2019 had seen a substantially higher amount of outstanding state “KEV” compensation for green energy generated.
14. Inventories
14. Inventories
14.1 Inventories by division
14.2 Inventories by type
Inventories for 2020 were broadly at prior-year levels. Volumes of finished and semi-finished products declined in the Chemistry and Paper divisions as a result of active and cautious inventory management. Inventories for Packaging increased owing to the division’s sales growth.
Inventories were subjected to an overall impairment of CHF 4.4 million (prior year: CHF 2.8 million), primarily for the Paper Division.
15. Intangible assets
15. Intangible assets
The goodwill deriving from the acquisitions of business activities and minorities was offset directly against equity (see Note 28). The “Additions” position reflects major investments in new ERP systems (software) for the Packaging Division.
The “Additions” position reflects major investments in adopting a new ERP system (software) in the Chemistry Division.
Goodwill is offset against equity (retained earnings) at the time of its acquisition. The impact of a theoretical capitalization of goodwill with five-year straight-line amortization on the balance sheet and income statement is shown below:
Theoretical goodwill movement
Impact of goodwill on the income statement
Impact of goodwill on the balance sheet
16. Tangible fixed assets
16. Tangible fixed assets
Tangible fixed assets for 2020 include a net book value of CHF 0.5 million for leased assets (vehicles) capitalized through finance leases maturing between 2021 and 2023. Leasing liabilities amount to some CHF 0.5 million, of which CHF 0.3 million are short-term.
The production facilities of the Paper Division were assessed in terms of their current value as of 31 December 2020. No impairment was deemed necessary. The valuations were conducted using a WACC of 5.4 % and EUR/CHF exchange rates of CHF 1.05 for the 2021 plan period, CHF 1.11 for 2022 and CHF 1.14 for 2023. The values of the projected income statements were adjusted to take account of the facts and findings available on the balance sheet date.
Investments in the Chemistry Division in 2020 included various optimization projects (in Louisville, USA) and real estate (in Lianyungang, China). The Paper Division invested in a range of projects to maintain and further raise the efficiency of its production plant. The Packaging Division also made major investments at multiple locations: in enhancing the efficiency of the mono film production at its Müllheim (Germany) site, in modernizing the infrastructure at its Perlen facility and in expanding its production capacities in Suzhou, China.
Tangible fixed assets for 2019 included a net book value of CHF 0.8 million for leased assets (vehicles) capitalized through finance leases maturing between 2021 and 2023. Leasing liabilities amounted to CHF 0.9 million, of which CHF 0.4 million were short-term.
There were no indications as of 31 December 2019 that any impairment might be necessary on any production facilities.
17. Long-term financial assets
17. Long-term financial assets
As in 2019, the long-term financial assets consist of the 10 % equity holding in waste incinerator company Renergia Zentralschweiz AG, Root, with which a supply agreement has been concluded for the provision of low-pressure steam to the Perlen paper factory.
18. Assets from employer contribution reserves and pension schemes
18. Assets from employer contribution reserves and pension schemes
18.1 Pension schemes in Switzerland (547 working insurees)
Under the investment regulations of the CPH Group Pension Scheme, the scheme is considered to have a funding surplus if it has a fluctuation reserve amounting to 16.5 % or more of its total asset investments (calculated using the Value-at-Risk Method).
The CPH Group Pension Scheme is a defined-contributions pension scheme offering old-age, death and disability benefits. Employer’s contributions are strictly defined in the scheme’s regulations and deed of trust. The companies concerned do not bear any primary risk, i. e. the insurance and investment risks are borne primarily by the pension scheme itself. Actuarial recalculations are regularly conducted.
The latest static recalculation of actuarial capital was performed on 31 December 2019, based on an actuarial interest rate of 2.0 %, the actuarial foundations of the BVG 2015 Generation Table and a conversion factor of 5.8 %. Actuarial capital has since been further developed in line with insuree numbers effective 31 December 2020. With the exception of the employer contribution reserve of CHF 11.2 million (prior year: CHF 11.1 million), all the scheme’s surpluses are payable solely to its beneficiaries. According to its provisional balance sheet, the scheme had a funding ratio of 118 % as of 31 December 2020 (prior-year actual funding ratio: 116 %).
The UBV Uetikon Betriebs- und Verwaltungs AG Staff Welfare Fund
The UBV Uetikon Betriebs- und Verwaltungs AG Staff Welfare Fund is an employer’s fund for all employees at the CPH Group’s companies in Uetikon and Rüti. The Fund provides provident benefits for employees and financial assistance for employees and their families in hardship situations. Contributions to it are made solely by the employer. The Fund’s freely disposable trust capital (including fluctuation reserves) amounted to CHF 0.8 million on 31 December 2020 (prior year: CHF 0.8 million).
The Perlen Group Assistance Fund, Perlen
The Perlen Group Assistance Fund is an employer’s fund for all employees at the CPH Group’s Perlen site. The Fund provides provident benefits for employees and financial assistance for employees and their families in hardship situations. Contributions to it are made solely by the employer. The Fund can also be used to finance employer’s contributions to the occupational pension schemes of the Group’s Perlen-based companies. The Fund paid CHF 0.0 million to these schemes for such purposes in 2020 (prior year: CHF 0.0 million). The Fund’s freely disposable trust capital (including fluctuation reserves) amounted to CHF 13.7 million on 31 December 2020 (prior year: CHF 13.5 million).
As for 2019, economic interest was calculated based on freely disposable trust capital excluding fluctuation reserves.
18.2 Pension schemes outside Switzerland
In the USA the CPH Group has one defined-contributions and one defined-benefits occupational pension scheme.
The 401(k) defined contribution plan is a purely contributions-based savings scheme that does not expose the company to any liability and has neither a surplus nor a shortfall.
The defined-benefits scheme was frozen on 1 January 2016. As a result, there have been no further increases in pension obligations to beneficiaries since this date, and no further beneficiaries have been admitted. The scheme had 101 members as of 31 December 2020 (prior year: 108). The scheme currently has a funding shortfall of USD 1 309 000 (prior year: USD 700 000). The calculations were made using the Current Liability Method, under which no regard is paid to future salary increases or expected returns on investment.
The Group’s occupational pension schemes in its other countries of operation are of insignificant size, and provide all the social benefits prescribed by law.
18.3 Breakdown of pension scheme costs
19. Other long-term receivables
19. Other long-term receivables
Other long-term receivables consist mainly of a CHF 29.6 million (prior year: CHF 31.1 million) remaining receivable from Canton Zurich in connection with the sale in 2016 of the former Uetikon operating site and the cost of cleaning up the adjacent lake bed (a total of CHF 32.0 million was originally retained in this regard from the sale proceeds of CHF 52.0 million). Following a downward adjustment of the originally estimated CPH share of the lake bed clean-up costs from CHF 32 million to CHF 20 million in May 2020, some CHF 12 million should be returned to CPH after the project’s completion in 2024. For further information see also Notes 25 and 27 on short-term and long-term provisions. The CHF 1.4 million of costs expected to be incurred in the following year (prior year: CHF 0.0 million) were reclassified as other short-term receivables.
20. Deferred tax assets
20. Deferred tax assets
Temporary differences deriving from an intragroup real estate transaction resulted in deferred tax assets of CHF 11.9 million for 2020 (see also Note 9). The remaining CHF 0.5 million of this item relates to further temporary differences arising from deviations between the group consolidated value and the tax value of assets, equity and liabilities.
21. Trade accounts payable
21. Trade accounts payable
Trade accounts payable declined in 2020 owing to the lower demand for the products of the Paper Division.
22. Other payables
22. Other payables
The increase in other payables for 2020 is due to higher customer prepayments in the Chemistry Division.
23. Accrued liabilities and deferred income
23. Accrued liabilities and deferred income
Accrued liabilities and deferred income increased by CHF 0.6 million as a result of higher income taxes owed and accrued personnel expense.
24. Short-term financial liabilities
24. Short-term financial liabilities
Details of short-term financial liabilities are shown in Note 26.
25. Short-term provisions
25. Short-term provisions
The environmental protection measures relate to the lake bed clean-up at the former Uetikon site and to future waste disposal site obligations (see Note 27 for further details). The provisions for the clean-up of the Rotholz waste disposal site in Meilen were released in May 2020. The income expected from the sale of the Rotholz site should cover all its clean-up costs.
The restructuring provisions relate to the closure of the Uetikon site (and the associated lake bed clean-up).
The guarantee obligations stem from the Paper and Packaging divisions, and relate to any claims or entitlements arising from customer complaints.
26. Long-term financial liabilities
26. Long-term financial liabilities
1) unsecured bond, SIX Swiss Exchange “CPH18”, issued 12.10.2018
1) unsecured bond, SIX Swiss Exchange “CPH18”, issued 12.10.2018
Financial liabilities for 2020
1) Repayment in steps; debt ratio max. 2.5 (from 31.12.2019). The debt ratio is calculated as follows: total financial liabilities/EBITDA for the Packaging Division for the last 12 months. This requirement was still being met as of 31.12.2020.
The CPH Group also has an additional CHF 40 million credit facility with Swiss banks.
Financial liabilities for 2019
1) Repayment in steps; debt ratio max. 2.5 (from 31.12.2019). The debt ratio is calculated as follows: total financial liabilities/EBITDA for the Packaging Division for the last 12 months. This requirement was still being met as of 31.12.2019.
27. Long-term provisions
27. Long-term provisions
The provisions for major repairs and renovations relate to the work required on the Perlen weir. The corresponding project was approved by Canton Lucerne in 2019, enabling the work to be performed in the next few years.
Environmental risks arise as a result of the Group’s business activities.
In connection with the CHF 52.0 million sale of the Uetikon operating site in 2016, provisions of CHF 32.0 million (80 % of the CHF 40.0 million estimated total costs) were made at the time for CPH’s share in the expense of cleaning up the adjacent lake bed. The remaining 20 % of these costs are being met by Canton Zurich. Since the site’s sale was concluded, a pilot project and inspections were conducted for the lake bed clean-up between 2016 and 2018. A tender invitation for the clean-up work was issued in 2019, and a study was also commissioned on the options available. In May 2020 Canton Zurich awarded the commission for the work to a general contractor. As a result of this, the Canton now expects the total cost of the work to be CHF 25.0 million, of which 80 % or CHF 20.0 million will be borne by the CPH Group. In view of this, the corresponding provisions were reduced by CHF 12.0 million, in the form of extraordinary income, in May 2020. The clean-up work is expected to commence towards the end of 2021, and will take about two years. The corresponding provisions amounted to CHF 19.0 million at the end of 2020 (prior year: CHF 31.4 million), of which CHF 1.4 million are short-term provisions and CHF 17.6 million long-term provisions. The use of these provisions since their creation in 2016 has been largely for the project work and the external consultancy and inspection services required.
The further CHF 3.8 million of provisions for environmental protection measures (CHF 0.5 million short-term, CHF 3.3 million long-term) relate to future waste disposal site running cost obligations and a possible transfer thereof to the Canton Zurich Waste Disposal Site Aftercare Fund.
“Other provisions” consist mainly of provisions for agency agreements in the Paper Division.
All provision amounts expected to be paid in the following year are reclassified as short-term provisions (see Note 25).
28. Purchase of business activities and minority shareholdings
28. Purchase of business activities and minority shareholdings
Perlen Packaging AG acquired the remaining 40 % of the capital of Perlen Packaging Anápolis Indústria e Comércio Ltda., Anápolis, State of Goia (Brazil) on 4 December 2020, and now wholly owns the company. The consideration amounted to CHF 1.6 million, of which CHF 0.3 million was accounted for in minority interest and CHF 1.3 million in goodwill.
The CPH Group acquired no business activities in 2019.
29. Additional corporate governance information
29. Additional corporate governance information
29.1 Capital structure
The registered shares of CPH Chemie + Papier Holding AG are listed on the SIX Swiss Exchange in the Swiss Reporting Standard segment. The company’s share capital amounts to CHF 1.2 million and is fully paid in. The share capital consists of 6 000 000 registered shares with a nominal value of CHF 0.20 each.
29.2 Transactions with related parties and companies
All balances and business transactions between companies within the scope of consolidation were eliminated during consolidation and are not shown here. As in the previous year, all transactions with related parties and companies in 2020 were conducted at market rates. The following transactions were effected for services rendered with companies associated with the CPH Group and members of its Board of Directors:
As in the previous year, no loans or credits were granted to related parties in 2020.
29.2.1 Shares held by members of the Board of Directors and Group Executive Management
Shares held by members of the Board of Directors (including related parties):
Shares held by members of Group Executive Management (including related parties):
CPH Chemie + Papier Holding AG introduced a long-term incentive (LTI) programme for the members of Group Executive Management in 2020. The general contractual foundations and the vesting conditions thereof are detailed in the Remuneration Report. A total of 2 381 shares with a vesting period of three years were awarded under the programme in 2020.
29.2.2 Significant shareholders and numbers of shares held
30. Net financial liabilities
30. Net financial liabilities
31. Contingent liabilities and off-balance-sheet business
31. Contingent liabilities and off-balance-sheet business
31.1 Contingent liabilities
As in the prior year, there were no guarantees towards third parties as of 31 December 2020.
31.2 Pledged assets
Real estate of Jiangsu Zeochem Technology Co. Ltd. with a book value of CHF 3.2 million (prior year: CHF 2.4 million) was subject to a CHF 3.0 million (prior year: CHF 2.4 million) lien as of 31 December 2020. Liquid funds with a value of CHF 0.7 million are pledged.
31.3 Other off-balance-sheet obligations
Operating lease agreements with notice periods of more than one year amounted to CHF 0.8 million (prior year: CHF 1.0 million), and relate mainly to vehicle leases. They show the following maturities:
Off-balance-sheet obligations relating to rental agreements amounted to CHF 4.0 million (prior year: CHF 4.7 million), and relate largely to rental agreements in Rüti (Switzerland), Utzenstorf (Switzerland) and Whippany (USA). They show the following maturities:
Purchase obligations for the acquisition of tangible fixed assets and intangible assets totalled CHF 12.3 million as of 31 December 2020 (prior year: CHF 5.1 million).
31.4 Derivative financial instruments and foreign-currency hedges
As in the prior year, no derivative financial instruments subject to balance sheet reporting were held as of 31 December 2020.
Open foreign-currency hedges as of 31 December 2020
The open foreign-currency hedges are forward contracts designed to secure future cash flows.
32. Net result per share
32. Net result per share
Net result per share is calculated by dividing the net result for the year by the average number of shares entitled to dividend issued, less any treasury shares. The company held an average of 474 treasury shares in 2020 (prior year: 816 shares). Since no authorized or conditional capital is currently outstanding, diluted net result per share is identical to the net result per share amount.
33. Treasury shares
33. Treasury shares
The company held 376 treasury shares at the end of 2020 (prior year: 572 shares).
A total of 21 438 treasury shares were purchased on the SIX Swiss Exchange in the course of 2020 (prior year: 16 584 shares) at an average purchase price of CHF 71.97 (prior year: CHF 81.91) per share. A total of 19 253 treasury shares were sold via the SIX Swiss Exchange in the course of 2020 (prior year: 17 075 shares) at an average sale price of CHF 70.38 (prior year: CHF 81.67) per share. A total of 2 381 shares with a vesting period of three years were awarded in 2020 in the form of share-based compensation.
34. Subsequent events
34. Subsequent events
The Board of Directors of CPH Chemie + Papier Holding AG has proposed to the company’s shareholders to acquire Uetikon Industrieholding AG, which is presently the company’s largest shareholder, via a merger by absorption. Under the merger proposal, the shareholders of Uetikon Industrieholding AG will exchange their shares therein for a commensurate number of shares in CPH Chemie + Papier Holding AG, newly giving them a direct CPH shareholding. The proposal will be submitted to the shareholders concerned for approval at an Extraordinary General Meeting in early June 2021.
No further events occurred between 31 December 2020 and 12 February 2021 which would require adjustments to the book values of the Group’s assets, equity and liabilities or would need to be divulged here. There are also no exceptional pending business items or risks which would need to be mentioned in the income statement.
The Board of Directors approved these consolidated financial statements at its meeting of 12 February 2021. They are also subject to the approval of the Ordinary General Meeting.