HOCHDORF Holding Ltd

Notes to the annual financial statements for 2019

Notes in accordance with article 959c et seqq. CO

1. Company, name, registered office

HOCHDORF Holding Ltd, Siedereistrasse 9, 6280 Hochdorf LU
The holding does not have any staff.

2. Principles

General information

These financial statements have been prepared in accordance with the provisions on commercial accounting from the Swiss Code of Obligations (articles 957-963 b CO, valid from 1 January 2013).

The additional requirements for large companies under Article 961 d (1) of the Swiss Code of Obligations (CO) (additional information in the notes, cash flow statement and management report) are waived because the company prepares its consolidated financial statements in accordance with Swiss GAAP FER.

Cash and cash equivalents

Cash and cash equivalents include cash and deposits in postal and bank accounts. They are recognised at their nominal value. Short-term securities are measured at the market price on the balance sheet date.

Accounts receivable

Accounts receivable are measured at nominal value less value adjustments. Recognisable individual risks are taken into account by means of corresponding value adjustments.

Loans to shareholdings, financial assets

Financial assets include loans to group companies. They are measured at their acquisition costs less possible value adjustments.

Own shares

Own shares are entered in the balance sheet as a deduction from equity at cost at the time of acquisition. At subsequent resale, the gain or loss is recorded in the income statement as financial income or expense.

3. Information on balance sheet and income statement items

3.1. Other short-term receivables to related parties

This item comprises the outstanding payments of Pharmalys Invest Holding AG due to the sale of Pharmalys Laboratories SA, Pharmalys Tunisie S.à.r.l. and Pharmalys Africa S.à.r.l. Payment dates are 31 March 2020 (CHF 20 million) and 30 September 2020 (CHF 40.2 million).

3.2. Loans to shareholdings

TCHF31.12.201931.12.2018
Loans to subsidiaries247,903261,981
Value adjustments to loans to subsidiaries–16,2170
Total231,686261,981

3.3. Shareholdings

   Capital in 1,000Capital and voting share 
 PurposeCurrency31.12.201931.12.201831.12.201931.12.2018 
Switzerland Milch-Gesellschaft Ltd, HochdorfInactiveCHF100100100%100% 
HOCHDORF Swiss Nutrition Ltd, HochdorfProductionCHF30,00030,000100%100%
Marbacher Ölmühle GmbH, Marbach, GermanyProductionEUR2,0002,000100%100%
Uckermärker Milch GmbH, Prenzlau, GermanyProductionEUR10,00010,00060%60%
Ostmilch Handels GmbH, Bad Homburg, GermanyRetailEUR1,0001,00026%26%
Ostmilch Handels GmbH Frischdienst Oberlausitz KG, Schlegel, GermanyLogisticsEUR515126%26%
Ostmilch Frischdienst Magdeburg GmbH, Meitzendorf, GermanyRetailEUR252526%26%
HOCHDORF America’s Ltd, Montevideo, UruguayRetailUYU3,2833,28360%60%
HOCHDORF South Africa Ltd, SA Cape TownProductionZARn. a.500n. a.90%2)
Pharmalys Africa S.à.r.l., Tunis, TunisiaBoard of DirectorsTNDn. a.120n. a.51%3)
Pharmalys Laboratories SA, HochdorfRetailCHFn. a.100n. a.51%3)
Pharmalys Tunisie S.à.r.l., Sousse, TunisiaProductionTNDn. a.3,300n. a.51%3)
Snapz Foods AG, HochdorfTradeCHF10010065%65%
Zifru Trockenprodukte GmbH, Zittau, GermanyProduction,EUR200200100%100%
Snapz Foods USA Inc., WilmingtonTradeUSD505065%65%.
Bimbosan AG, Welschenrohr, SwitzerlandProductionCHF350350100%100%
Thur Milch Ring AG, Ermatingen, SwitzerlandTradeCHF170n. a.56%n. a.1)
  1. Purchase of 56.47% as at 1.1.2019
  2. Sale of 90% as at 30.6.2019
  3. Sale of 51% as at 6.12.2019, closing 13.12.2019
The following changes took place in the reporting period (in TCHF): 31.12.2019
Shareholding value 1.1.2019 349,705
Disposal of shareholding in HOCHDORF South Africa Ltd. due to sale -35
Disposal of shareholding in Pharmalys Laboratories SA due to sale -243,992
Disposal of shareholding in Pharmalys Tunisie S.à.r.l. due to sale -1,220
Disposal of shareholding in Pharmalys Africa S.à.r.l. due to sale -27
Depreciation of shareholding in Uckermärker Milch GmbH -8,980
Depreciation of shareholding in Snapz Foods AG -65
Depreciation of shareholding in Zifru Trockenprodukte GmbH -1,468
Partial depreciation of shareholding Ostmilch Handels GmbH -3,488
Addition of shareholding in Thur Milch Ring AG due to purchase 125
Shareholding value 31.12.2019 90,555

3.4 Short-term liabilities

TCHF31.12.201931.12.2018
Services provided by third parties140157
Short-term interest-bearing liabilities6,0000
Other (government bodies)1,1142
Accrued liabilities and deferred income2,7420
Short-term provisions11,1240
Total21,120159

Tranche B of the syndicated loan is to be amortised by CHF 6 million by 31.12.2020
Short-term provisions include the provisions for the risk of the takeover of the loan from Commerzbank AG to Uckermärker Milch GmbH.

 

3.5. Long-term interest-bearing payables

TCHF31.12.201931.12.2018
Syndicated loan96,000131,000
Long-term financial liabilities (bonds)244,895343,490
Loans of shareholdings9695
Total340,991474,585

Long-term financial liabilities include the outstanding CHF 119.895 million mandatory convertible bond and the outstanding CHF 125 million hybrid bond.

Maturity structure

TCHF31.12.201931.12.2018
Up to 5 years215,991349,585
More than 5 years125,000125,000
Total340,991474,585

3.6. Financial expenses

TCHF31.12.201931.12.2018
Interest costs–16,107–11,396
Expenses, procurement of credit–608–94
Deposit fees, fees (revenue stamp)–409–329
Exchange rate losses–2,303–3,017
Value adjustments on shareholdings–15,6520
Value adjustments on shareholdings from sale–145,262–9,313
Value adjustments on loans to subsidiaries–19,3330
Value adjustments on loans to subsidiaries from sale–3880
Provision for Commerzbank loan to Uckermärker Milch GmbH–11,1240
Total–211,186–24,149

3.7. Operating expenses

TCHF31.12.201931.12.2018
Personnel expenses-1450
Property insurances, fees-890
Administration and IT expenditure-1,022-366
Marketing and sales expenditure-87-1
Other operating expenses-2-2
Bank charges, agency fees-8-48
Total-1,353-417

4. Shareholders

>3%31.12.201931.12.2018
Amir Mechria, Zug18.34%n. a.
Stichting General Holdings, Amersfoort17.81%4.23%
ZMP Invest AG, Lucerne12.23%14.51%
Weiss Family and Innovent Holding AG, Wollerau4.65%5.35%
Taaleri Plc., Helsinki<3.00%3.14%
Maurer Group, Hunzenschwil<3.00%3.04%

5. Transactions with own shares

Business year 2019     Business year 2018    
01.01.2019 balance 30,952 shares at price 209.30 01.01.2018 balance 36,133 shares at price 232.22
FY 2019 purchases 0 shares at av. price 0.00 FY 2018 purchases 8,110 shares at av. price 140.00
FY 2019 sales/allocations 1,214 shares at av. price 115.79 FY 2018 sales/allocations 13,291 shares at av. price 264.62
31.12.2019 balance 29,738 shares at price 209.30 31.12.2018 balance 30,952 shares at price 209.30

6. Contingent capital

As at 31 December 2019, HOCHDORF Holding Ltd had contingent capital in the nominal amount of CHF 3,937,710, corresponding to 393,771 registered shares at a nominal value of CHF 10. The contingent capital is reserved for the outstanding mandatory convertible bond with a term from 30.3.2017 to 30.3.2020.

7. Shareholdings of the Board of Directors and the Group Management

As at 31 December, the members of the Board of Directors and the Group Management (including related persons) held the following number of shares in the company:

Board of Directors

Number of shares
31.12.2019
Number of shares
31.12.2018
Bernhard Merki, Chair, Personnel and Remuneration Committee; since 12.4.20195n. a.
Jörg Riboni, Vice Chair, Audit Committee, Personnel and Remuneration Committee; since 12.4.20190n. a.
Markus Kalberer, Audit Committee; since 12.4.201910n. a.
Markus Bühlmann, Market and Strategy Committee; since 12.4.20190n. a.
Dr Walter Locher, Audit Committee, Personnel and Remuneration Committee1,7131,713
Dr Daniel Suter, Chair, Audit Committee; until 12.4.2019n. a.895
Dr Anton von Weissenfluh, Vice Chair, Personnel and Remuneration Committee; until 12.4.2019n. a.1,809
Michiel de Ruiter, Market and Strategy Committee; until 30.9.2019n. a.225
Ulrike Sailer, Market and Strategy Committee, until 30.9.2019n. a.233
Niklaus Sauter, Audit Committee, Personnel and Remuneration Committee; until 12.4.2019n. a.620
Prof Dr Holger Karl-Herbert Till, Market and Strategy Committee; until 12.4.2019n. a.339
Total – Board of Directors1,7285,834

Group Management

Dr Peter Pfeilschifter, Interim CEO from 11.3.2019, CEO from 19.12.2019, Managing Director Dairy Ingredients25763
Jürgen Brandt, CFO from 18.11.20190n. a.
Christoph Peternell, COO658170
Frank Hoogland, Managing Director Baby Care482290
Dr Thomas Eisenring, CEO until 8.3.2019 n. a.2,309
Marcel Gavillet, CFO until 14.11.2019n. a.1,802
Total – Group Management1,3974,634
Total – Board of Directors and Group Management3,12510,468
in %0.18%0.73%

According to the remuneration regulations, 30% of the variable profit-sharing of Group Management is paid in the form of shares. Shares are allocated at the average price on the effective date before allocation. Other trading is carried out directly on a private basis.

8. Contingent liabilities

HOCHDORF Holding Ltd is liable as joint and several debtor by way of assuming the debt for the credit line a bank institute awarded to Uckermärker Milch GmbH for EUR 10 million. A provision is recorded for this amount (see point 3.2.).

9. Assessment as a going concern

9.1. Development since 30.06.2019

The notes to the consolidated half-year financial statements from the Board of Directors of 30.6.2019 stated that there were various uncertainties regarding the continuation of Pharmalys Laboratories SA and the refinancing of the Group at that time. Solutions have been found for both issues in the meantime.

  1. The existing syndicated loan agreement was extended on 23.10.2019. The credit line was supplemented with a new tranche D of CHF 30 million against a reduction of the previous tranche C from CHF 40 million to CHF 10 million. With the sale of Pharmalys Laboratories SA, the credit line was reduced by the elimination of tranche C (CHF 10 million) and the amortisation of tranche B (CHF 39 million) to CHF 129 million.
  2. The shares of Pharmalys Laboratories SA were sold with effect from 13.12.2019 to the co-owner Pharmalys Invest Holding AG.

9.2. Uncertainties at 31.12.2019 and for the 2020 business year

The Board of Directors sees the following uncertainties, which require a special focus in the current financial year:

  1. Receivables from Pharmalys Invest Holding AG: payment of the outstanding purchase price instalments from the sale of the shareholdings in the Pharmalys companies in the amount of CHF 60 million in accordance with the contractually agreed payment terms. Additionally, the payment of the outstanding loan in the amount of CHF 4.1 million.
  2. Compliance with the financial covenants from the credit agreement.

9.3. Assessment by the Board of Directors

The Board of Directors is of the opinion that sufficient security has been provided by the buyer to secure payment of the purchase price. Hochdorf Holding Ltd has established a directly enforceable guarantee from the owner of Pharmalys Invest Holding AG, Mr Amir Mechria, the rights to the existing and future trademark rights of Pharmalys Laboratories SA, and a lien on 51% of the shares in the same. Should there be a delay in the due payments of the purchase price instalments, the liquidity of the HOCHDORF Group would still be secured. Within the syndicated loan agreement, the Group also has access to more than CHF 25 million (as at: 14.2.2020), which can be used to finance business operations. If the receivable is not paid and the existing collateral cannot be realised, the corresponding write-down would have a negative impact on the equity situation and on HOCHDORF Holding Ltd's compliance with the financial ratios vis-à-vis the banks.

The budget approved by the Board of Directors for the 2020 financial year and the medium-term plan of the HOCHDORF Group show that based on this plan data, compliance with the financial covenants should be ensured throughout the entire planning period (until 2022). The EBITDA covenant of CHF >0 as of 30.6.2020 is not considered a risk, also due to the distribution of profits (HY-1/HY-2) in previous years. The EBITDA covenant of 31.12.2020 depends largely on the achievement of the budget for 2020 and is therefore subject to uncertainties.

The Board of Directors and Group Management believe that a continuation of the HOCHDORF Group can currently be assumed.