Notes to the consolidated financial statements
1. Segment information
1. Segment information
1.1 Net sales by region
Total net sales were 11.6 % (CHF 51.5 million) up on their prior-year level, or 12.6 % (CHF 56.0 million) up based on prior-year currency translation rates. The impact of currency movements amounted to –1.0 % (CHF – 4.5 million). The average EUR/CHF currency exchange rate was 0.9 % up on the previous year, while the average USD/CHF rate showed a 2.6 % decline.
1.2 Income statement by division
2. Other operating income
2. Other operating income
Other operating income was substantially higher in 2021 than it had been the previous year owing to the sales of carbon credits which had been issued to Perlen Papier AG between 2018 and 2021 (see also Note 16). ‘Miscellaneous’ for 2021 includes government grants (in the USA) amounting to CHF 1.4 million (prior year: CHF 0.0 million).
3. Personnel expense
3. Personnel expense
Personnel expense for 2021 was 0.8 % (CHF 0.8 million) below its prior-year level. Personnel numbers were increased in the Chemistry Division in response to the high product demand, while personnel expense for the Paper and Packaging divisions were below those of 2020. The Paper Division received short-time working compensation amounting to CHF 0.2 million (prior year: CHF 1.6 million). In addition to the contributions to state social security institutions, ‘Pension scheme contributions and other social security expense’ includes the contributions to company pension schemes described in Note 19. Members of Group Executive Management were assigned a total of 2 682 shares in 2021 under their share-based compensation provisions. Based on a share price of CHF 66.80, the corresponding expense, which is included under ‘Salaries and wages’, amounted to CHF 0.18 million.
4. Other operating expense
4. Other operating expense
The CHF 24.9 million of other operating expense (prior year: CHF 24.7 million) includes sales and administrative costs and further operating expenses.
5. Impairment
5. Impairment
The fixed assets of the Paper Division were tested for impairment as at 31 December 2021.
The European market for graphic printing paper has been undergoing radical structural change for over ten years now. Print newspapers are losing ground to digital platforms as a news medium. The trend is accompanied by consolidation within the media market. So not only are newspapers shrinking in print run and page volume terms: numerous titles have been merged or have closed entirely. As a result, the demand for newsprint has been falling in Western Europe since 2008 by some 6 – 8 % a year. The decline has also prompted adjustments to production capacities. But since such reductions take longer to effect, overcapacities have developed, and with them strong pricing pressures. This in turn has halved paper prices from their previous highs.
With substantially less paper manufactured during the coronavirus pandemic, less waste paper was also available for recycling use. The industry thus faced a shortage of recovered paper in 2021 when demand for its products picked up again in the course of the year. The situation was exacerbated by higher demand from the cardboard packaging sector, which used both waste cardboard and waste paper as raw materials to provide sufficient volumes of packaging for the booming online sales segment. As a result, recovered paper prices rose to historic highs, and waste paper supply lines were tested to the extreme. Steep rises were also seen in electricity and thermal energy prices.
No medium-term easing of the European paper and raw materials market situation is currently in sight. Margins will remain under pressure, accentuated by still-high raw materials and energy prices. In view of the continuing predatory competition and the substantially higher raw materials and energy prices, an impairment of CHF 150 million (prior year: CHF 0) was effected to net market value (see also Note 17). As a result, the assets concerned are now valued on the basis of their net market value, which is negligibly above their value in use. An impairment of CHF 4.1 million (prior year: CHF 0) was also recognized in theoretical goodwill movement (see Note 16).
7. Financial expense
7. Financial expense
Financial expense was CHF 0.3 million below its prior-year level owing to lower currency exchange rate losses.
8. Non-operating result
8. Non-operating result
The non-operating income of CHF 7.7 million (prior year: CHF 7.3 million) comprises rental income and proceeds from the sale of real estate not required for operations in Buchrain (CHF 4.6 million, prior year CHF 5.2 million) and Full-Reuenthal (CHF 3.1 million, prior year CHF 0.1 million). Prior-year non-operating income also includes 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 0.4 million (prior year: CHF 0.5 million) consists of expenditure relating to the sale and management of non-operating real estate in Uetikon, Perlen, Buchrain and Full-Reuenthal.
9. Extraordinary result
9. Extraordinary result
There was no extraordinary income or extraordinary expense in 2021. In the previous year, the provisions for the lake bed clean-up at the former Uetikon site were reduced by CHF 12.0 million, with the release effected via the extraordinary result by analogy to the original creation in 2016 of the provisions concerned (see Notes 26/28).
10. Income taxes
10. Income taxes
Income tax expense for 2021 amounted to CHF 2.2 million. In the previous year an intragroup transfer of real estate at the Perlen site resulted in deferred tax assets and corresponding deferred tax income of CHF 11.9 million.
Tax rates varied in 2021 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 2021 amounted to 11.6 % (prior year: 18.2 %). 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/loss situation and changed tax rates at the various group member companies. The difference in the year under review between the estimated income tax expense and the income tax expense shown in the income statement is attributable largely to the non-recognition of losses carried forward from 2021 (primarily the fixed assets impairment at Perlen Papier AG).
In accordance with the consolidated accounting principles, deferred taxes on losses carried forward are not capitalized. Uncapitalized losses carried forward increased in 2021 to CHF 285.7 million (prior year: CHF 65.2 million), with a potential tax impact of CHF 20.8 million (prior year: CHF 7.4 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 fixed assets impairment. CHF 3.3 million of the losses carried forward are of indefinite duration (prior year: CHF 0.0 million), and CHF 13.4 million thereof (prior year: CHF 5.2 million) will expire within a year.
In 2020 Perlen Papier AG transferred real estate at the Perlen site to 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 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.
11. Liquid funds and securities
11. Liquid funds and securities
Liquid funds decreased from CHF 116.3 million to CHF 95.1 million in 2021 as a result of the negative free cash flow developments and the repayment of financial liabilities.
12. Trade accounts receivable
12. Trade accounts receivable
Trade accounts receivable were CHF 16.4 million above their prior-year level, owing to the higher net sales.
Individual adjustments are effected to certain doubtful receivables. Such adjustments were CHF 1.0 million lower in 2021 than they had been for the prior year. The levels of such adjustments could be reduced in the Paper and Packaging divisions.
13. Other receivables
13. Other receivables
Other receivables were CHF 11.4 million up on their prior-year level. The increase is attributable largely to a reclassification of short-term receivables relating to the lake bed clean-up and to real estate activities.
14. Prepaid expenses and accrued income
14. Prepaid expenses and accrued income
The CHF 2.5 million change in prepaid expenses and accrued income is attributable to outstanding state ‘KEV’ compensation for green energy generated.
15. Inventories
15. Inventories
15.1 Inventories by division
15.2 Inventories by type
Inventories were CHF 9.2 million above their prior-year levels, owing primarily to the increases in raw materials prices.
Inventories were subjected to an overall impairment of CHF 4.7 million (prior year: CHF 4.4 million).
16. Intangible assets
16. Intangible assets
‘Additions’ above include major investments in ERP system software in the Packaging Division.
The intangible assets as at 31 December 2021 include zero carbon credits (prior year: 214 504 credits) issued free of charge by the Swiss Federal Office for the Environment to Perlen Papier AG, which are initially capitalized at zero nominal value. These carbon credits are realized upon their use or sale. Any income deriving from such sales is shown under other operating income.
The goodwill deriving in 2020 from the acquisitions of business activities and minorities was offset directly against equity (see Note 29).
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 the income statement is shown below:
Theoretical goodwill movement
Impact of goodwill on the income statement
Impact of goodwill on the balance sheet
17. Tangible fixed assets
17. Tangible fixed assets
Tangible fixed assets for 2021 include a net book value of CHF 0.3 million for leased assets (vehicles) capitalized through finance leases maturing between 2022 and 2024. Leasing liabilities amount to some CHF 0.3 million, of which CHF 0.2 million are short-term.
The production facilities of the Paper Division were tested for impairment as at 31 December 2021. This resulted in an impairment charge of CHF 150.0 million (see also Note 5).
Investments in the Chemistry Division in 2021 included various expansion projects at the Rüti ZH/CH, Zvornik/BA, Louisville/USA and Lianyungang/CN sites. The Paper Division invested in maintaining and further raising the efficiency of its production plant. In addition to efficiency enhancement and infrastructure modernization projects, the Packaging Division primarily invested a substantial amount in 2021 in its new coating plant in Anápolis/BR.
Tangible fixed assets for 2020 included a net book value of CHF 0.5 million for leased assets (vehicles) capitalized through finance leases maturing between 2021 and 2023. Leasing liabilities amounted to some CHF 0.5 million, of which CHF 0.3 million were short-term.
As at 31 December 2020 there were no indications that any impairment might be required on any production facilities.
18. Long-term financial assets
18. Long-term financial assets
As in 2020, 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.
19. Assets from employer contribution reserves and pension schemes
19. Assets from employer contribution reserves and pension schemes
19.1 Pension schemes in Switzerland (542 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 as at 31 December 2020, 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 2021. In accordance with a board of trustees’ resolution of 10 November 2021, the actuarial interest rate was reduced from 2.0 % to 1.75 % and the scheme newly adopted the currently valid BVG 2020 actuarial foundations. With the exception of the employer contribution reserve of CHF 11.3 million (prior year: CHF 11.2 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 127 % as at 31 December 2021 (prior-year actual funding ratio: 118 %).
The UBV Uetikon Betriebs- und Verwaltungs AG Staff Welfare Fund
The UBV Uetikon Betriebs- und Verwaltungs AG Staff Welfare Fund was an employer’s fund for all employees at the CPH Group’s Uetikon and Rüti sites which provided provident benefits for employees and financial assistance for employees and their families in hardship situations. Contributions to it were made solely by the employer. The Canton Zurich occupational pension law and occupational pension fund supervisory authority approved an application from the Fund’s board of trustees for the Fund’s liquidation and the transfer of its assets and liabilities to The Perlen Group Assistance Fund, Perlen effective 1 January 2021 in accordance with a corresponding transfer agreement of 18 November 2021. The Fund’s freely disposable trust capital (including fluctuation reserves) amounted to CHF 0.0 million on 31 December 2021 (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 in Switzerland. 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 2021 (prior year: CHF 0.0 million). The Fund’s freely disposable trust capital (including fluctuation reserves) amounted to CHF 15.3 million on 31 December 2021 (prior year: CHF 13.7 million). As for 2020, economic interest was calculated based on freely disposable trust capital excluding fluctuation reserves.
19.2 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 97 members as of 31 December 2021 (prior year: 101 members). The scheme currently has a funding shortfall of USD 1 489 000 (prior year: USD 1 309 000). The calculations were made using the Current Liability Method, under which no regard is paid to future salary increases or expected investment returns.
The Group’s pension schemes in its other countries of operation are of insignificant size, and provide all the social benefits prescribed by law.
19.3 Breakdown of pension scheme costs
20. Other long-term receivables
20. Other long-term receivables
Other long-term receivables consist of a CHF 21.1 million (prior year: CHF 29.6 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 26 and 28 on short-term and long-term provisions. The use of CHF 6.0 million of provisions expected in the following year (prior year: CHF 1.4 million) was reclassified as other short-term receivables.
21. Deferred tax assets
21. Deferred tax assets
The deferred tax assets for 2021 stem primarily from temporary differences deriving from an intragroup real estate transaction in 2020, which resulted in deferred tax assets of CHF 11.9 million. The remaining CHF 1.2 million (prior year: 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.
22. Trade accounts payable
22. Trade accounts payable
Trade accounts payable increased in 2021 owing to the higher product demand and the substantial rises in raw materials prices.
23. Other payables
23. Other payables
The change in other payables for 2021 is due to lower customer prepayments in the Chemistry Division.
24. Accrued liabilities and deferred income
24. Accrued liabilities and deferred income
25. Short-term financial liabilities
25. Short-term financial liabilities
Details of short-term financial liabilities are shown in Note 27.
26. Short-term provisions
26. 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 28 for further details). The provisions for the clean-up of the Rotholz waste disposal site in Meilen were released in 2020.
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.
27. Long-term financial liabilities
27. 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 2021
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 31.12.2021.
The CPH Group also has an additional CHF 40 million credit facility with Swiss banks (until 2022/23).
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.
28. Long-term provisions
28. Long-term provisions
The provisions for major repairs and renovations relate to the work required on the Perlen weir. The corresponding project has been approved by Canton Lucerne, 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 planned 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 this 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 commenced in November 2021, and will take around two to three years. The corresponding provisions amounted to CHF 15.4 million at the end of 2021 (prior year: CHF 19.0 million), of which CHF 6.0 million are short-term provisions and CHF 9.4 million are long-term provisions.
The further CHF 3.8 million of provisions for environmental protection measures (CHF 0.1 million short-term, CHF 3.7 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’ include provisions for personnel-related obligations in Germany.
All provision amounts expected to be paid in the following year are reclassified as short-term provisions (see Note 26).
29. Purchase of business activities and minority shareholdings
29. Purchase of business activities and minority shareholdings
The CPH Group acquired no significant business activities in 2021.
In the previous year Perlen Packaging AG had acquired the remaining 40 % of the capital of Perlen Packaging Anápolis Indústria e Comércio Ltda., Anápolis, State of Goia (Brazil) on 4 December 2020. The consideration amounted to CHF 1.6 million, of which CHF 0.3 million was taken to minorities and CHF 1.3 million to goodwill.
30. Additional corporate governance information
30. Additional corporate governance information
30.1 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.
30.2 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 2021 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 2021.
UBV Immobilien Treuhand Perlen AG, Root/CH was integrated into CPH Immobilien AG, Root/CH by merger on 22 November 2021.
Uetikon Industrieholding AG, which had previously been the main shareholder of CPH Chemie + Papier Holding AG with a holding of 49.99 %, was acquired by the latter through a merger by absorption effective 11 June 2021. Under the merger transaction, the previous shareholders of Uetikon Industrieholding AG exchanged their shares therein for a commensurate number of shares of CPH Chemie + Papier Holding AG, and have thence held direct CPH shareholdings. Under the merger agreement, further assets and liabilities of a net value of CHF 0.2 million were also acquired for a payment of CHF 0.2 million.
30.2.1 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 its Group Executive Management in 2020. The general contractual foundations and the vesting conditions thereof are detailed in the Remuneration Report. A total of 2 682 shares (prior year: 2 381 shares) with a vesting period of three years were awarded under the programme in 2021.
30.2.2 Significant shareholders and numbers of shares held
* linked through a shareholders’ agreement
31. Net financial liabilities
31. Net financial liabilities
32. Contingent liabilities and off-balance-sheet business
32. Contingent liabilities and off-balance-sheet business
32.1 Contingent liabilities
As in the prior year, there were no guarantees towards third parties as of 31 December 2021.
32.2 Pledged assets
Real estate of Jiangsu Zeochem Technology Co. Ltd., China with a book value of CHF 3.3 million (prior year: CHF 3.2 million) was subject to a CHF 3.1 million (prior year: CHF 3.0 million) lien as at 31 December 2021. Liquid funds with a value of CHF 0.6 million (prior year: CHF 0.7 million) are pledged.
32.3 Other off-balance-sheet obligations
Operating lease agreements with notice periods of more than one year amounted to CHF 0.9 million (prior year: CHF 0.8 million), and relate mainly to vehicle leases. They show the following maturities:
Off-balance-sheet obligations relating to rental agreements amounted to CHF 6.1 million (prior year: CHF 4.0 million), and relate largely to rental agreements in Rüti (Switzerland), Utzenstorf (Switzerland), Whippany (USA) and Anápolis (Brazil). They show the following maturities:
Purchase obligations for the acquisition of tangible fixed assets and intangible assets totalled CHF 19.0 million as at 31 December 2021 (prior year: CHF 12.3 million).
32.4 Derivative financial instruments and foreign-currency hedges
As in the prior year, no derivative financial instruments subject to balance sheet reporting were held as at 31 December 2021.
Open foreign-currency hedges as at 31 December 2021
The open foreign-currency hedges are forward contracts designed to secure future cash flows.
33. Net result per share
33. 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 188 treasury shares in 2021 (prior year: 474 shares). Since no authorized or conditional capital is currently outstanding, diluted net result per share is identical to the net result per share amount.
34. Treasury shares
34. Treasury shares
The company held no treasury shares at the end of 2021 (prior year: 376 shares).
A total of 5 593 treasury shares were purchased on the SIX Swiss Exchange in the course of 2021 (prior year: 21 438 shares) at an average purchase price of CHF 70.45 (prior year: CHF 71.97) per share. A total of 3 287 treasury shares were sold via the SIX Swiss Exchange in the course of 2021 (prior year: 19 253 shares) at an average sale price of CHF 71.49 (prior year: CHF 70.38) per share. A total of 2 682 shares with a vesting period of three years were awarded in 2021 in the form of share-based compensation.
35. Subsequent events
35. Subsequent events
No significant events occurred between 31 December 2021 and 11 February 2022 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.
In response to a cyber attack, the IT systems of the CPH Group were shut down in a controlled manner on 7 January 2022 and production had to be halted at the Perlen and Müllheim sites. Once the key IT systems were back in operation, production was resumed at the sites concerned in the course of 13 January 2022. The CPH Group does not expect this incident to have any material impact on its 2022 business results.
The Board of Directors approved these consolidated financial statements at its meeting of 11 February 2022. They are also subject to the approval of the Ordinary General Meeting of 17 March 2022.