The HOCHDORF Group prepares its consolidated financial statements in compliance with all existing guidelines of Swiss GAAP FER (Swiss accounting and reporting recommendations) and the provisions of Swiss law. The consolidated annual financial statements reflect the actual status of the Group's asset, financial and revenue position. The consolidated annual financial statements are based on the principle of historical purchase costs or production cost or current values and are based on the annual financial statements for the Group companies as at 31 December 2018, prepared according to uniform principles. The consolidated financial statements are prepared in Swiss francs (CHF).
Scope of consolidation/consolidation method
The consolidated annual financial statements of the HOCHDORF Group comprise the annual financial statements of the HOCHDORF Holding Ltd parent company as well as all subsidiaries in which there is a capital- and vote-relevant majority or where control over the financial and business policy is exercised through contractual agreement. Shareholdings with 20% to 50% of the voting rights are accounted for using the equity method. Financial statements or reconciliations with Swiss GAAP FER are used to determine the proportionate equity. The consolidated individual financial statements for the companies are adapted to the standard Group structure and evaluation regulations and entered in accordance with the full consolidation method. 100% of the assets and liabilities as well as expenses and revenues are included in the consolidated annual financial statement and all inter-company transactions are eliminated. Significant interim profits within the Group are considered in this elimination.
The share of the minority shareholders in the company's own share capital and of the results is shown separately in the Group balance sheet and income statement.
For capital consolidation, assets and liabilities on holdings are evaluated at the time of the takeover according to standard Group principles (purchase method). Any remaining surplus/shortfall (goodwill/badwill) of this revaluation is offset against equity. Companies sold during the year are excluded from the consolidated financial statements from the date of sale. If shares in fully consolidated companies or companies accounted for using the equity method are sold, the difference between the disposal proceeds and the proportionate carrying amount, including goodwill/badwill, is recognized as a gain or loss on the income statement.
The consolidated cash flow statement is generated on the basis of the consolidated balance sheet and income statement.
Foreign currency translation
The annual accounts of consolidated companies in foreign currencies are converted as follows: current assets, fixed assets and external capital at end-of-year exchange rates (period end exchange rate); equity at historical exchange rates. The income statement and the cash flow statement are converted at average annual rates. The conversion differences incurred are recognised in equity without affecting net income. The foreign currency items included in the individual financial statements of the consolidated companies are converted as follows: foreign currency transactions at the exchange rate of the transaction day (current exchange rate); at the end of the year, foreign currency balances are converted at the end-of-year exchange rate (period-end exchange rate) and affect net income. The resulting exchange rate differences are shown in the income statement.
The accumulated translation differences from the translation of the annual financial statements and intercompany loans recorded in equity for a foreign company are derecognised when the company is sold and recognised in the income statement as part of the gain or loss on disposal.
|Income statement average exchange rates||Balance sheet; end-of-year exchange rates|
Cash flow statement
Cash and cash equivalents form the basis for the presentation of the cash flow statement. Cash flow from operating activities is calculated using the indirect method.
| Capital in thousands|
|HOCHDORF Holding Ltd||Hochdorf CH||Holding||CHF||14,348||100%||100%|
|HOCHDORF Swiss Nutrition Ltd||Hochdorf CH||Production||CHF||30,000||100%||100%|
|HOCHDORF Baltic Milk UAB 1||Medeikiai LT||Production and trade||EUR||n. a.||n. a.||100%|
|Switzerland. Milch-Gesellschaft Ltd||Hochdorf CH||Shell company||CHF||100||100%||100%|
|Marbacher Ölmühle GmbH||Marbach DE||Production and trade||EUR||2,000||100%||100%|
|Uckermärker Milch GmbH||Prenzlau DE||Production||EUR||10,000||60%||60%|
|HOCHDORF Americas Ltd||Montevideo UY||Trade||UYU||3,283||60%||60%|
|HOCHDORF South Africa Ltd||Cape Town ZA||Production||ZAR||500||90%||90%|
|Pharmalys Africa S.à.r.l.||Tunis TU||Marketing||TND||120||51%||51%|
|Pharmalys Laboratories SA, Hochdorf||Hochdorf CH||Trade||CHF||100||51%||51%|
|Pharmalys Tunisie S.à.r.l.||Sousse TU||Production||TND||3,300||51%||51%|
|Snapz Foods AG||Hochdorf CH||Trade||CHF||100||65%||65%|
|Zifru Trockenprodukte GmbH||Zittau DE||Production||EUR||200||100%||100%|
|Bimbosan AG 2||Welschenrohr CH||Production and trade||CHF||350||100%||n. a.|
|Snapz Foods USA Inc. 3||Delaware USA||Trade||USD||50||65%||n. a.|
- Sale as at 19.06.2018
- Acquisition as at 30.04.2018
- Foundation as at 29.05.2018 as 100% subsidiary of Snapz Foods AG
| Capital in thousands|
|Ostmilch Handels GmbH||Bad Homburg DE||Trade||EUR||1,000||26%||26%|
|Ostmilch Handels GmbH & Co. Frischdienst Oberlausitz KG||Schlegel DE||Logistics||EUR||51||26%||26%|
|Ostmilch Frischdienst Magdeburg GmbH||Meitzendorf DE||Trade||EUR||25||26%||26%|
The accounting is carried out based on the assumption of the continuation of the operational activities. Assets are measured at cost, taking into account the necessary value adjustments. Liabilities are recognised at nominal value. All identifiable loss risks and depreciations are offset by value adjustments or deferrals. Expense and income items are accrued periodically.
Cash and cash equivalents as well as securities without shareholding character
Cash and cash equivalents include cash and deposits on postal and bank accounts, as well as short-term time deposits with a remaining term of less than three months. They are recognised at their nominal value. Securities are measured at the market value on the balance sheet date. The remaining securities are balanced at acquisition value or at a lower market value.
Receivables are measured at nominal value less value adjustments. Identifiable individual risks are taken into account with appropriate value adjustments. Indications for possible impairment are given if payment is delayed, the customer is experiencing financial difficulties or recapitalisation or bankruptcy is likely. The value adjustments for doubtful accounts receivable are established based upon the difference between the nominal value of accounts receivable and the estimated net collectible amount. The amount of the respective estimated loss is recognized in the income statement within the item "Specific valuation adjustment on accounts receivable". As soon as a receivable becomes uncollectible, it is written off and charged against the item "Accounts receivable losses" under derecognition/adjustment of the item "Specific valuation adjustment on accounts receivables". General value adjustments are made for items which have not already been subject to specific value adjustments. The general value adjustment is based on the assumption that the default risk rises as the receivable becomes increasingly overdue. For this purpose, the following value adjustment approaches are applied, which can be deviated from in justified cases:
|Receivables||Specific value adjustment|
|Overdue for 1–30 days||2% of the receivable amount|
|Overdue for 31–90 days||5% of the receivable amount|
|Overdue for 91–180 days||10% of the receivable amount|
|Overdue for more than 180 days||20% of the receivable amount|
|Ongoing collections||100% of the receivable amount|
Raw materials, operational materials and auxiliary materials are measured at the lower of cost or market. Semi-finished and finished products are measured at production cost, including the direct material and production unit costs as well as material costs and production overheads. Appropriate value adjustments are undertaken for goods with a low rate of inventory turnover.
The rates used in determining value adjustments are as follows for raw, auxiliary and operating materials:
|Inventory turnover rate||Value adjustment|
|Under 0.5 times||25.0% of the purchase or manufacturing costs (PMC)|
|0.5 – 1 times||12.5% of the purchase or manufacturing costs|
|Over 1 – 1.5 times||5.0% of the purchase or manufacturing costs|
|Over 1.5 – 3 times||2.5% of the purchase or manufacturing costs|
|Over 3 times||0% of the purchase or manufacturing costs|
There are no calculated value adjustments if additional acquisitions of the same raw material are made in the reporting period.
For semi-finished and finished products:
|Inventory turnover rate||Value adjustment|
|Under 0.5 times||100% of the purchase or manufacturing costs|
|0.5 – 1 times||50% of the purchase or manufacturing costs|
|Over 1 – 1.5 times||20% of the purchase or manufacturing costs|
|Over 1.5 – 3 times||10% of the purchase or manufacturing costs|
|Over 3 times||0% of the purchase or manufacturing costs|
The value adjustments calculated in this way are adjusted accordingly for normal saleability or longer shelf life. Apart from this, inventories whose realisable disposal value is lower than the purchase or manufacturing cost (PMC) are adjusted in value according to the "lower of cost or market" principle. The current market price on the sales market is assumed when defining the realisable disposal value. The typical sales deductions, sales expenses and any administrative expenses still to be incurred have to be deducted and the reimbursements of customs calculated.
The consumption is measured in accordance with the first-expiry-date-first-out principle, meaning products with the shortest first-expiry date are sold first.
Interim profits on internal Group inventories are eliminated, if significant.
Discounts (in the sense of markdowns) granted by suppliers are entered as acquisition price reductions.
Prepayments and accrued income as well as accrued liabilities and deferred income
Accruals and deferrals are recognised at their nominal value.
Impairment of assets
A check is made on each balance sheet date to see if assets are impaired in value. The check is based on events or indicators that show that an overvaluation of the book value may be possible. A loss from value impairment is posted with an effect on net income if the book value of an asset exceeds the recoverable amount. A recoverable amount is the higher of the net market value and the utility value.
Tangible assets are measured at the acquisition cost less the economically necessary depreciation. Permanent impairments are taken into account. Depreciation is calculated on a straight line basis from the purchase value. All acquisitions over a value of CHF 5,000 are deemed investments. Projects in progress are capitalised as current investment projects and are not depreciated. Interests on assets under construction are not capitalised. Fixed assets are written down over the following useful lives.
|Asset group||Service life|
|Property, plant||15 – 65 years|
|Devices, equipment||5 – 25 years|
|Machines, appliances||5 – 25 years|
|IT systems, communication||5 – 10 years|
|Vehicles||5 – 10 years|
|Intangible assets||5 – 10 years|
Assets from financial leasing are capitalised and the relevant leasing liabilities are posted as a liability. With amortisations, the interest is charged directly to financial expenditure. Expenses for operating leasing are charged directly to the income statement.
Financial assets include long-term held securities, deferred tax assets as well as assets from pension funds and employer contribution reserves and long-term receivables from third parties. Securities are measured at purchase value less the economically necessary value adjustments.
Intangible assets include software, patents, licences and brand values. These are recognised at the lower of purchase cost or utility value. They are depreciated over their economic service life on a straight line basis.
Own shares are recognised as a deduction from equity at cost. Profits and losses from transactions with own shares are recognised in capital reserves without affecting net income.
The hybrid bond is a perpetual subordinated bond. The hybrid bond has its first call date after five-and-a-half years. This is the first possible call date in the case of the bond for HOCHDORF. If this is not exercised, the amount of interest payable increases (step-up of 2.5%). The hybrid bond is classified for the most part as equity. The issuing costs were deducted from the issue price. The obligations for the interest payable are discounted for the first five-and-a-half years (first call date) from the issue date. The conditions for the syndicated loan provide a basis of comparison for the interest rate. The discounted interest obligations are shown under short-term and long-term financial liabilities in accordance with their maturities. The interest payable is offset against the corresponding financial liabilities. Only the accrued interest of the relevant business year is recognised in interest expenses.
Equity/mandatory convertible bond
The mandatory convertible bond is a bond that does not give the bondholder any voting rights. The bond is converted into shares of HOCHDORF Holding Ltd at the latest at the end of its term as a mandatory requirement. The mandatory convertible bond is classified for the most part as equity. The issuing costs are recognised in equity via the capital reserves. The obligations for the interest payable are discounted from the issue date. The conditions for the syndicated loan provide a basis of comparison for the interest rate. The discounted interest obligations are shown under short-term and long-term financial liabilities in accordance with their maturities. The interest payable is offset against the corresponding financial liabilities. Only the accrued interest of the relevant business year is recognised in interest expenses.
Short-term/long-term external capital
Liabilities are measured at the nominal amount. Short-term external capital includes liabilities with due dates of less than 12 months and short-term accrual items. Long-term liabilities include financing with a runtime of more than a year.
The calculation of the provisions requires assumptions on the probability, amount and time of an outflow of cash. If an outflow of cash is likely and a reliable estimate is possible, a provision is reported.
The revenue taxes payable on taxable profits for the individual companies are accrued. Likewise, the incurred capital taxes are accrued. Valuation of deferred taxes occurs in line with the tax rates that are actually expected in meeting future tax liability or in the realisation of future receivables (liability method). There are no negative valuation differences that could lead to tax assets. Clearable tax credits from carried forward losses are capitalised if it is likely that they might be realised in the future by sufficient taxable profits. Capital taxes are posted under operating expenses.
Derivative financial instruments
Derivative financial instruments are used to hedge risks in currencies, interest rates and commodities. The booking of derivative financial instruments depends on the hedged underlying transaction. Derivatives to hedge the changes in the value of an already reported underlying transaction are reported in accordance with the same valuation principles that are used for the hedged underlying transaction. Instruments for hedging future cash flows are not reported on the balance sheet, but rather disclosed in the Notes to the financial statements until the recognition of the future cash flow. When the future transaction or sale of the derivative occurs, the current value of the derivative financial instrument is reported and simultaneously recognised with the recognition of the hedged cash flow on the income statement. The derivative financial instruments that were unsettled on the balance sheet date are disclosed in the notes to the consolidated financial statements under "Further notes – Unsettled derivative financial instruments".
Employee pension plan
HOCHDORF Holding Ltd's pension liabilities and those of its subsidiaries in Switzerland are set out in the completely autonomous HOCHDORF Group pension fund. The pension scheme includes a defined contribution in accordance with Swiss GAAP FER 16. The costs resulting from the employee pension are charged to the income statement for the appropriate period. The actual economic effects of pension plans on the company are calculated on the balance sheet date. An economic benefit is carried as an asset if it is used for the company's future pension expenses. A financial obligation is shown as a liability if the requirements for the creation of a provision are met.
Employees and former employees of foreign companies receive different employee pension payments or old-age pensions corresponding to the legal requirements applicable in the countries where they are paid out.
Sales and revenue recognition
Net sales include the receipt of economic benefits from the sale of goods and services within the scope of ordinary business activity during the reporting period. Reductions in revenue such as discounts, rebates and other price reductions as well as duties paid to third parties such as commissions, fees and any value-added taxes must be deducted from reported net sales. All inter-group turnover is eliminated in the consolidation process.
Turnover is booked when a Group company has transferred the definitive benefits and risks that are associated with ownership of the sold products and the power of disposal to the customer, and the ability to collect the receivables resulting from such is adequately secured. Turnover from the provision of services is reported in the accounting period in which the service was provided. The consideration of reductions in revenue for customers takes place in the same period as the turnover that caused these reductions in revenue in accordance with the terms and conditions of the order. The HOCHDORF Group does not have any brokerage transactions or business events with multiple, separate components.
Research and development
Research and development costs are charged in full to the income statement. These costs are included in the items «Personnel expenses» and «Remaining operating costs».
Contingent liabilities are valued on the balance sheet date. A provision is formed if a cash outflow is likely without a useful cash inflow.
Transactions with related parties
Business relationships with related parties are conducted at arm's length. Related parties (natural or legal) are defined as any party directly or indirectly able to exercise significant influence over financial or operating decisions of the organisations. Organisations that are controlled directly or indirectly by related parties are also considered to be related.
Notes to the consolidated financial statements
The acquisition of Bimbosan AG as at 30 April 2018, the sale of HOCHDORF Baltic Milk UAB as at 19 June 2018 and the formation of Snapz Foods USA Inc. lead to corresponding changes in the individual balance sheet items. The values are therefore only somewhat comparable with the previous year overall.
1. Cash and cash equivalents
The valuation of cash and cash equivalents is at nominal value and comprises the following:
|Accounts receivables from third parties||70,454||81,862|
|Minus provision for doubtful accounts||0||–378|
|Short-term receivables from related parties||48,686||44,100|
|Accounts receivables from associated companies||1,711||1,556|
|Other receivables from related parties||78||0|
Diversification means there is no concentration of credit risk with regard to accounts receivable. The other receivables mainly result from credit from welfare institutions and from government bodies (VAT, Directorate General of Customs).
|Raw materials, packaging materials, operating materials||14,439||12,375|
|Finished and semi-finished products, trade goods||54,435||44,343|
|Value adjustments for inventories||–1,959||–1,707|
The accrued income is comprised of revenues not yet received as well as costs paid in advance. The increase compared to the prior year primarily results from the still outstanding «Schoggi Law» payments, which were also higher year on year due to larger price differences in the market.
|TCHF||Property, plant 1||Equipment, warehouse equipment, fixed equipment||Machines, production appliances, furnishings||Office equipment, |
IT systems, communication, fittings
|Net accounting value 01.01.2017||72,439||27,773||56,765||6,914||1,002||38,084||202,977|
|As at 01.01.2017||151,474||59,574||144,679||20,060||2,606||38,084||416,477|
|Change in scope of consolidation 4||3,543||148||3,766||7||1||0||7,465|
|Currency translation differences||4,045||1,100||2,646||112||100||205||8,208|
|As at 31.12.2017||173,552||73,385||158,908||23,199||2,732||83,285||515,061|
|As at 01.01.2017||79,035||31,801||87,914||13,146||1,604||0||213,500|
|Change in scope of consolidation 4||31||57||1,126||7||1||0||1,222|
|Currency translation differences||1,820||742||2,068||36||65||0||4,731|
|As at 31.12.2017||83,084||35,043||95,300||14,782||1,858||0||230,067|
|Net accounting value as at 31.12.2017||90,468||38,342||63,608||8,417||874||83,285||284,994|
|As at 01.01.2018||173,552||73,385||158,908||23,199||2,732||83,285||515,061|
|Change in scope of consolidation 5||5,267||–3,846||–3,447||–150||–343||0||–2,519|
|Currency translation differences||-2,162||–460||–1,579||–50||–26||–80||–4,357|
|As at 31.12.2018||201,976||93,150||206,559||25,348||2,106||13,336||542,475|
|As at 01.01.2018||83,084||35,043||95,300||14,782||1,858||0||230,067|
|Change in scope of consolidation 5||4,188||–1,637||–1,899||–98||–297||0||257|
|Currency translation differences||–876||–312||–992||–25||–20||0||–2,225|
|As at 31.12.2018||89,319||36,260||97,307||16,424||1,319||0||240,629|
|Net accounting value 31.12.2018||112,657||56,890||109,252||8,924||787||13,336||301,846|
- The Group holds available, undeveloped parcels of land.
- The current investment projects are plants under construction.
- New acquisitions are posted with project numbers under «current investment projects» as inward movements. After the start of operations, there is a transfer posting from the «current investment projects» account to the appropriate fixed asset account. A decision is taken about which purchase costs are capitalised or posted via the income statement.
- In the context of the purchase of Zifru Trockenprodukte GmbH.
- In the context of the purchase of Bimbosan AG and the sale of HOCHDORF Baltic Milk UAB.
|Net accounting value 01.01.2018||8,454||5,094|
|As at 01.01.2018||9,956||5,094|
|Disposals – of instalments||0||–1,952|
|Currency translation difference||–29||–6|
|As at 31.12.2018||9,927||3,136|
|As at 01.01.2018||1,502||0|
|Currency translation difference||–14||0|
|As at 31.12.2018||2,057||0|
|Net accounting value as at 31.12.2018||7,870||3,136|
|Associated companies||Location||Function||Currency|| Capital in|
| Shareholdings 31.12.2017|
|Ostmilch Handels GmbH||Bad Homburg DE||Trade||EUR||1,000||2,292||2,560|
|Ostmilch Handels GmbH & Co Frischdienst Oberlausitz KG||Schlegel DE||Logistics||EUR||51||0||0|
|Ostmilch Frischdienst Magdeburg GmbH||Meitzendorf DE||Trade||EUR||25||116||79|
|Deferred tax assets||4,178||2,085|
|Assets from employer contribution reserves||8,259||8,077|
The deferred tax assets result from existing carried forward losses in the tax balance sheet. The increase comes primarily from the negative results of various subsidiaries.
Taxable losses carried forward after expiration
|2023 and later||20,188||7,999|
Employer contribution reserve
|Result of the committee of works and staff councils in personnel expenses|
|HGR pension fund||8,259||0||8,259||182||8,077||0||0|
The posting of interest from employer contribution reserves through pension plans appears as a credit in the financial revenues. Interest of 2.25% (prev. year: 2.25%) was calculated on the employer contribution reserves in 2018.
Economic benefit/economic liability
and pension expenditure
|Credit/debit balance||Economic share of the organisation||Change from the previous year||Contributions accrued for the period||Pension expenditure in personnel expenses|
|HGR pension fund||9,018||0||0||146||2,288||2,288||2,142|
|TCHF||Software||Brands||Others intangible assets||Current projects||Total|
|Net accounting value as at 01.01.2017||1,612||684||88||2,384|
|As at 01.01.2017||2,791||0||0||88||3,579|
|Currency translation difference||59||0||0||0||–59|
|As at 31.12.2017||3,370||3,520||700||185||7,775|
|As at 01.01.2017||1,179||0||16||0||1,195|
|Currency translation differences||45||0||0||0||45|
|As at 31.12.2017||1,738||117||156||0||2,011|
|Net accounting value as at 31.12.2017||1,632||3,403||544||185||5,764|
|As at 01.01.2018||3,370||3,520||700||185||7,775|
|Currency translation difference||–29||0||0||0||–29|
|As at 31.12.2018||3,896||3,520||700||219||8,335|
|As at 01.01.2018||1,738||117||156||0||2,011|
|Currency translation difference||–22||0||0||0||–22|
|As at 31.12.2018||2,226||821||296||0||3,343|
|Net accounting value as at 31.12.2018||1,670||2,699||404||219||4,992|
- Intangible assets only cover acquired assets. Own brand names and licenses are not evaluated and not balanced on the balance sheet date.
|To third parties||54,413||72,506|
|To related parties||4,484||2,170|
|To associated companies||452||155|
|Other financial liabilities 1||12,479||9,571|
- Including discounted interest amounts from the convertible bond and the hybrid bond for 2019; see additional explanations in point 15.
|To related parties||9,537||96,829|
|Other short-term liabilities||11,537||6,229|
|Employee holiday credits||676||658|
|Salary accounts (salary payments, profit-sharing, AHV, SUVA, health insurance, etc.)||1,211||4,035|
|Government bodies (taxes, source taxes, value added taxes)||1,238||5,804|
The other short-term liabilities include the so-called "Schoggigesetz" (chocolate law) fund in particular. This fund is augmented from charges raised per litre of milk delivered. The funds are used to compensate for any gaps in the «Schoggi Law» credit from the state. It is calculated annually. Money that is not used is carried over to the new year.
The deferred income essentially includes accruals in the context of reimbursements and commissions ("Schoggigesetz") as well as invoices not yet received for goods receipts and other supplier services (power, water, transport).
|Mortgages, loans 1||417||452|
|To related parties||6,860||0|
|Other financial liabilities 2||13,831||24,336|
- Loan commitment to a former shareholder of Marbacher Ölmühle GmbH.
- Including discounted interest amounts from the convertible bond and the hybrid bond for 2020 and subsequent years; see additional explanatory remarks in point 15.
Terms and interest rates (long-term and short-term financial liabilities)
|Due date||Interest rate|
|Syndicated loan||131,000||8.11.2023||from 0.70% to 2.60%|
|Bank loans – short term||3||2019||from 4.80% to 6.80%|
|Bank loans – long term||11,311||>2021||from 1.50% to 7.11%|
|Geiger loan||417||>2021||from 1.26% to 2.68%|
|Leasing – short term||1,897||2019||from 1.85% to 5.34%|
|Leasing – long term||1,152||2020||from 1.85% to 5.34%|
|Other short-term financial liabilities||12,479||2019||from 0.00% to 7.97%|
|To related parties – short term||9,537||2019||No interest|
|To related parties – long term||6,860||>2020||No interest|
|Other long-term liabilities||13,831||2020/2023||No interest|
Development of provisions
|Damages claims||Various provisions||Deferred|
|As at 31.12.2016||80||0||13,934||14,014|
|Provisions made (with effect on net income)||0||5||3,223||3,228|
|Currency translation differences||0||0||442||442|
|As at 31.12.2017||0||5||17,417||17,422|
|Change in scope of consolidation 1||0||0||32||32|
|Currency translation differences||0||0||–240||–240|
|As at 31.12.2018||0||5||18,559||18,564|
15. Share capital – mandatory convertible bond – hybrid capital – contingent capital
The share capital of HOCHDORF Holding Ltd was unchanged at CHF 14,347,600 as at 31 December 2018. It is divided into 1,434,760 registered shares at a nominal value of CHF 10 each (2017: 1,434,760 registered shares).
The mandatory convertible bond issued in 2017 with a nominal value of CHF 218.49 million was not converted during the financial year. The nominal amount is therefore unchanged; duration from 30.03.2017 – 30.03.2020; interest rate of 3.5% for the entire term; conversion price CHF 304.67; securities number 35,275,641; ISIN CH0352756412; Conversion period: 03.01.2018 to and with 13.03.2020.
The mandatory convertible bond is classified for the most part as equity. It is split into an equity component and a liabilities component. The liabilities component includes all future bond interest payments. These were discounted on the issue date of 30 March 2017 at an interest rate of 1%. This interest rate corresponds to the syndicated loan's margin at the time. Of the whole bond amount of CHF 218.49 million, CHF 133.285 million are effectively interest-bearing from 30 March 2017 until 30 March 2018. From 1 April 2018, interest will be charged on the full bond amount. The effective interest payments will be drawn from the corresponding financial liabilities and will not be charged to income. Only the accrued interest of the relevant business year is recognised in interest costs.
HOCHDORF Holding Ltd has contingent capital of CHF 7,173,800 for the creation of 717,380 registered shares to service the mandatory convertible bond.
Likewise in 2017 (payment 21.12.), HOCHDORF Holding Ltd issued a public hybrid bond with a nominal volume of CHF 125 million, net CHF 124.17 million. It is a perpetual subordinated bond which pays interest with a coupon rate of 2.5%. The hybrid bond has its first call date after five-and-a-half years (21.06.2023). If this is not exercised, the amount of interest payable increases (step-up). Securities number 39,164,798; ISIN CH0391647986.
The hybrid bond is classified for the most part as equity due to its properties. It is split into an equity component and an external capital component. The external capital component includes all future bond interest payments until the first call date. These were discounted on the issue date of 21.12.2017 at an interest rate of 1%. This interest rate corresponds to the syndicated loan's margin at the time. The effective interest payments will be drawn from the corresponding financial liabilities and will not be charged to income. Only the accrued interest of the relevant business year is recognised in interest expenses.
A liabilities component is used on the grounds that the interest payments, which can, in principle, be delayed, have to be paid up to and including 30 March 2020, according to the issue prospectus. This is because the interest payments for the hybrid bond cannot be suspended as long as interest is paid for the mandatory convertible bond (compulsory events), which will be the case until the bond matures on 30.3.2020. In addition, it can be assumed on the basis of the dividend policy of HOCHDORF Holding Ltd that no interest payments will be delayed until the first call date as a result of dividend payments.
Notes to the consolidated income statement
The following explanatory remarks are given to supplement the income statement, structured in accordance with the total cost of expenditure method (production income statement). The income statement items include the values of Bimbosan AG for the first time in 2018 (from 1 May 2018). 2018 includes the values of HOCHDORF Baltic Milk UAB until 31 May 2018, as it was sold at the end of May 2018. As of 1 June 2018, the values of the newly founded Snapz Foods USA Inc. are included. Therefore, a direct comparison with the prior year is only of limited value.
- The remaining turnover comprises deliveries to customers who export the goods and where the destination country is not separately recorded.
|Cereals & Ingredients||30,652||5.46%||26,645||4.44%|
As a result of possible competitive disadvantages compared to non-listed and large listed competitors, customers and suppliers, presentation of the segment results was waived, pursuant to Swiss GAAP ARR 31/8. The Swiss milk market is small and tightly knit with few key companies and providers. The supplier side (milk producers) is organized within several milk producer organisations. On the processing side, the market is dominated by the cheeseries and four large dairies. On the customer side, the chocolate industry segment is predominant, likewise with just a few large producers. In the area of infant formula (based on milk), only one other firm produces infant formula for the Swiss and international market, apart from the HOCHDORF Group.
Various other operating income includes the renting of office and production space as well as private shares from employees for the use of vehicles as larger positions. In 2018, there were also insurance payments of CHF 2.25 million for the fires at the Hochdorf and Sulgen plants. The corresponding offsetting items are recorded under cost of materials and operating costs.
|Incidental wage costs incl. temporary staff||–3,670||–3,156|
|Facilities expenditure (incl. warehouse rents)||–5,858||–4,934|
|Vehicle and transport costs||–10,803||–10,035|
|Insurance, fees, duties||–1,954||–1,404|
|Energy and disposal expenditure||–16,890||–15,723|
|Administration and IT expenditure||–5,974||–4,728|
|Advertising costs incl. commissions to customers||–24,842||–14,409|
|Various other operating costs||–6,611||–5,646|
|Interests from cash and cash equivalents||1||1|
|Revenues from holdings and financial assets incl. associated parties||0||613|
|Value adjustment from financial assets||0||19|
|Other financial revenue||0||0|
|Exchange rate gains||10,308||7,262|
|Total financial revenue||10,309||7,895|
|Expenses from shareholdings and financial assets incl. associated parties||–2,297||0|
|Value adjustment from financial assets||–4||0|
|Deposit fees, fees||–423||–18|
|Exchange rate losses||–13,614||–3,274|
|Total financial costs||–18,447||–4,611|
The external properties refer to a building lease at Rothenburg fuel depot as well as an owner's association parking level at Hochdorf station.
|Profit from the disposal of operating fixed assets||–103||–48|
|Current income taxes|
|Taxes on operating result||–3,086||–3,793|
|Deferred income taxes|
|Net change in deferred tax assets and liabilities||1,337||–1,217|
Valuation of deferred taxes occurs in line with the tax rates that are actually expected in meeting future tax liability or in the realisation of future receivables (liability method). The tax rate is 12% for companies exclusively based in the canton of Lucerne; it is 15% for HOCHDORF Swiss Nutrition Ltd, with its production in the Thurgau canton. 25% was applied to the subsidiary in Welschenrohr; 25% was also applied to the subsidiaries in Germany and Uruguay, and 20% to the subsidiary in South Africa.
The weighted average tax rate relates to the Group’s earnings before taxes (EBT) and amounts to 16.64% (previous year: 10.73%). In the previous year, the subsequent approval of carry-over losses at the foreign subsidiaries reduced the tax rate. In the year under review, the write-down of CHF 2.85 million on investments at the Group level led to lower earnings before taxes and thus to a higher average tax rate. Without this additional write-down, the weighted, average tax rate would be 13.09%.
Capital taxes are reported separately in operating costs. 2016 and years before have been definitively assessed for the Swiss companies. The companies abroad have been provisionally assessed.
Earnings per share, basic
|Weighted average shares outstanding||1,404,931||1,404,639|
|Net profit after minority interests||2,844,707||25,894,285|
|Earnings per share in CHF, basic||2.02||18.43|
To determine the net profit per share, the net profit due to the HOCHDORF Group shareholders is divided by the average number of outstanding shares. Own shares held are not included in the calculation of the average outstanding shares. The weighted average number of shares is a result of the total of all transactions in the reporting year and additions due to the creation of new registered shares from the conversion of the convertible bond.
Earnings per share, diluted
|Weighted average shares outstanding, basic||1,404,931||1,404,639|
|Dilution effect of convertible bond 1||717,136||717,136|
|Weighted average shares outstanding, diluted||2,121,067||2,121,775|
|Net profit after minority interests||2,844,707||25,894,285|
|Interest on convertible bond 2||118,701||26,045|
|12% tax effect (interest on convertible bond*0.12/1.12)||–12,718||–2,791|
|Net profit after minority interests, diluted||2,950,690||25,917,539|
|Earnings per share in CHF, diluted||1.39||12.22|
- The dilution is calculated from the mandatory convertible loan of CHF 218.49 million and the conversion price CHF 304.67, from which a maximum of 717,136 new shares are generated. The conversion period runs from 3 January 2018 to 13 March 2020. As of 31 December 2018, the entire mandatory bond was therefore outstanding.
- In this case only the accrued interest on the liabilities component for the current business year is taken into account in interest costs. The actual interest payments are offset against the liabilities component of the discounted interest payments, as described in point 15.
HOCHDORF Group pension fund
|Registered shares of HOCHDORF Holding Ltd||18,000||18,000|
Transactions with own shares
|Balance as at 1 January in units||36,133||24,372|
|At the average price per share of CHF||237.20||211.14|
|Purchases in units||8,110||13,004|
|At the average price per share of CHF||140.00||279.91|
|Sales/allocations in units||–13,291||–1,243|
|At an average price per share of CHF||264.62||303.22|
|Balance as at 31 December in units||30,952||36,133|
|At an average price per share of CHF||237.49||237.20|
As described in the remuneration report, 20% of the Board of Directors’ remuneration, excluding expenses, is paid out in the form of HOCHDORF Holding Ltd shares. In the case of Group Management, 30% of the variable remuneration is also paid out in the form of HOCHDORF Holding Ltd shares. They are allocated at the volume-weighted average price of all transactions on the SIX on the day before allocation.
|Allocation||Allocation date||Allocated securities||Volume-weighted|
average exchange rate
|Recognised expenses (CHF)|
|Variable remuneration paid to Group Management||13.03.2018||1,118||300.99||336,506.08|
|Fee for Board of Directors||07.12.2018||1,173||96.43||113,116.76|
|Exchange rate instruments||Value changes||2018|
|Interest rate swaps||0||0||0||Hedging||0||0||0||Hedging|
|Forward exchange contracts||229||0||0||Hedging||–229||0||229||Hedging|
|Total assets and liability values||229||0||0||-229||0||229|
The market values of forward exchange contracts to hedge future cash flows are not reported on the balance sheet, similar to the underlying transaction. The corresponding profit from the derivative is reported on the income statement at the time the hedged transaction occurs.
The unrecognised leasing debts are for the full operational leasing of a car, which includes variable costs, such as maintenance, servicing and fuel.
The liabilities from the pension fund relate to the premiums invoice for the month of December, which had not yet been paid as at the balance sheet date.
For the purpose of the strategic further development of the Baby Care Division, HOCHDORF Holding Ltd acquired 100% of the shares in Bimbosan AG, headquartered in Welschenrohr (Switzerland), on 30 April 2018, thus gaining control over the company. The company is specialized in the distribution of food, especially baby food.
The acquired net assets are as follows:
|Cash and cash equivalents||681|
|Other short-term receivables||515|
|Property and plant||2,733|
|Other fixed assets||406|
|Other short-term liabilities||–755|
|Accrued liabilities and deferred income||–339|
|Identified net assets||3,996|
In accordance with the Group guidelines, goodwill of CHF 28.8 million was offset against equity. The purchase price was largely paid in cash. About 10% of the purchase price was paid with shares of HOCHDORF Holding Ltd.
On 31 May 2018, HOCHDORF Holding Ltd sold 100% of the shares in HOCHDORF Baltic Milk UAB, headquartered in Medeikiai, Lithuania, in connection with the streamlining of the Dairy Ingredients Division, and thus relinquished control.
The composition of the net assets sold was as follows:
|Cash and cash equivalents||1,449|
|Other short-term receivables||271|
|Property and plant||1,654|
|Other fixed assets||4,261|
|Other short-term liabilities||–181|
|Accrued liabilities and deferred income||–3|
|Identified net assets||7,745|
When the company was acquired in 2010, no goodwill arose in connection with the purchase price allocation, which, according to our guidelines, would have had to be recognised in equity. The sale resulted in a total value correction of CHF 5,867 thousand, CHF 2,850 thousand of which were posted through EBIT and CHF 3,017 thousand were posted through exchange rate losses. With this sale, the HOCHDORF Group has significantly reduced the business risks in the Dairy Ingredients Division.
In 2017, the company generated net sales of CHF 18.8 million, with EBIT of CHF –1.7 million. In the half-year report as at 30 June 2017, net sales of CHF 9.4 million were generated with an EBIT of CHF –0.4 million. As at 31 May 2018, the accumulated net sales amounted to CHF 8.0 million, with an EBIT of CHF –0.8 million and a net loss of CHF –1.2 million.
Purchase price calculation for Pharmalys
On 19 December 2016, in connection with the strategic development of the Baby Care division, HOCHDORF Holding Ltd acquired 51% of the shares in Pharmalys Laboratories SA., with its registered office in Baar (now Hochdorf), and 49% of the shares in Pharmalys Tunisie S.à.r.l., with its registered office in Kondar, Tunesia. As at 14 March 2017, HOCHDORF Holding Ltd additionally acquired 2% of the shares in Pharmalys Tunisie S.à.r.l., with the result that it now holds 51% of the shares.
The purchase price is calculated on the basis of the average EBIT in 2016 and 2017 for Pharmalys Laboratories SA and Pharmalys Tunisie S.à.r.l. multiplied by a factor of 14. In addition to this, there is a one-off upside compensation for an increase in the value of the shares of HOCHDORF Holding Ltd from the signing of the Memorandum of Understanding through 24 October 2016. The purchase price is thus variable. The purchase price of CHF 248.213 million was calculated and recorded in the financial statements as at 31 December 2017. The parties decided by mutual consent, contrary to the arrangements in the share purchase agreement, to create an additional side letter, listing items that have an impact on the calculation of the purchase price, but can only be definitively determined in 2018. On 1 November 2018, the parties agreed on the final purchase price of CHF 245.212 million, resulting in a reduction of CHF 3.0 million in the purchase price.
|As at 1 January||245,178||169,096|
|Adjustment – Pharmalys||–3,001||76,082|
|Addition – Bimbosan||28,776||0|
|As at 31 December||270,953||245,178|
|As at 1 January||–35,436||–1,617|
|As at 31 December||–87,708||–35,436|
|Theoretical price as at 31 December||183,245||209,742|
A goodwill of CHF 73,082 thousand resulted from the determined purchase price for Pharmalys. This is shown based on a linear amortisation over 5 years (pro rata). Badwill generated is not taken into account in these explanatory remarks. The statement of changes in shareholders' equity shows goodwill as a net position.
The effects of a theoretical capitalisation on the income statement and balance sheet are shown in the following table.
|Depreciation of goodwill||–52,272||–33,819|
|Theoretical net profit||–43,616||7,027|
Transactions with related persons and companies
The business transactions with related persons and companies are based on standard commercial contracts and conditions. All transactions are reported in the consolidated annual financial statements for 2018 and 2017. These cover deliveries of goods and raw materials as well as services to and from related companies.
Transactions with associated companies
|Cost of goods||–48,564||–10,755|
Transactions with related companies
|Cost of goods||0||0|
|Service costs 1||–2,216||–2,136|
- Service costs include the employer contributions for employees, which are settled in the related HOCHDORF Group pension fund.
Events after the balance sheet date
After the balance sheet date and until the adoption of the consolidated financial statements by the Board of Directors, no significant events have occurred that could affect the informational value of the 2018 annual financial statements or which must be disclosed here.
The consolidated financial statements were approved in the form presented here by the Board of Directors at its meeting on 8 March 2019.
On 15 January 2019, HOCHDORF Holding Ltd acquired a majority stake in Thur Milch Ring AG according to the press release of 21 November 2018. The Group holds a total of 56.47% of the shares. The purchase price totals CHF 124 thousand, of which CHF 30 thousand already comes from previous ownership. With this investment, HOCHDORF aims to secure reliable and regular milk deliveries for the Sulgen plant. This is necessary due to the significantly higher production volume of baby food in the future.