Additional information on the consolidated financial statements

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.

Other operating income for 2020 was broadly in line with its prior-year level.

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.

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.

Financial income was CHF 0.3 million below its prior-year level, owing to lower exchange rate gains on amounts held in foreign currencies.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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:

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.

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.

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 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 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.

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.

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.

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.

Trade accounts payable declined in 2020 owing to the lower demand for the products of the Paper Division.

The increase in other payables for 2020 is due to higher customer prepayments in the Chemistry Division.

Accrued liabilities and deferred income increased by CHF 0.6 million as a result of higher income taxes owed and accrued personnel expense.

Details of short-term financial liabilities are shown in Note 26.

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.

The CPH Group also has an additional CHF 40 million credit facility with Swiss banks.