Notes to the 2020 consolidated financial statements of the HOCHDORF Group

Principles of consolidation

General information

The Board of Directors of HOCHDORF Holding Ltd approved these consolidated financial statements on 9 April 2021. They are subject to approval by the Annual General Meeting.

Consolidation principles

Basic accounting principles

The consolidated financial statements are based on the annual financial statements of the Group companies as at 31 December 2020, prepared in accordance with uniform principles. The Group's financial statements are prepared in accordance with all the guidelines of the Swiss GAAP FER (Accounting and Reporting Recommendations) and the provisions of Swiss law.

The valuation basis is formed by acquisition or production costs or current values. The income statement is presented in accordance with the overall cost procedure. The consolidated annual financial statements are based on business values and reflect the actual status of the asset, financial and revenue position. The financial statements are prepared on the assumption of the continuation of operational activities.

The consolidated financial statements are prepared in Swiss francs (CHF). There has been a change in accounting policy in the valuation of the hybrid bond in equity, which is explained below.

Change in the accounting policy for hybrid bond

HOCHDORF undertook a reassessment of the accounting for the hybrid bond in 2020 and has come to the conclusion that only the payments to be made contractually, which HOCHDORF cannot prevent, should be included in the debt component. This concerns the interest payments until 21 June 2020, the interest date after conversion of the mandatory convertible bond. After this date, HOCHDORF can defer the payment of interest. Originally, based on an assessment that interest payments after this date are also likely due to the dividend policy, the interest until June 2023 (the first call date of the hybrid bond) was also allocated to the debt component. In HOCHDORF's assessment, the adjusted principle leads to a better informative value for the accounting of a hybrid bond as in the present case.

The change in the accounting principle was made retroactively as of 1 January 2019, so that the previous period was adjusted (restatement).

Adjusted accounting policy hybrid-bond
The hybrid bond is a perpetual subordinated bond. The hybrid bond has its first call date after five-and-a-half years (21.06.2023). 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% + 5-year mid swap rate with floor at zero).

The interest payments under the hybrid bond are in principle only due after the occurrence of a mandatory payment event, in particular after a resolution of the general meeting to pay a dividend. If no such event exists and no voluntary interest payments are made, the interest obligation is deferred until the occurrence of a mandatory event. The future obligations are only recognised as liabilities at the time of the occurrence of a corresponding condition (e.g. dividend resolution by the general meeting).

Financial implications of the adjustment of consolidation and measurement principles
The amount for the interest obligation for the period from the conversion of the mandatory convertible bond to the first call date for the hybrid bond of TCHF 8,848 was reclassified to equity as at 1 January 2019. As at 31 December 2020, there is no longer a liability from the hybrid bond. In detail, the following effects on the previous year's values resulted (in TCHF):

Balance sheet as at 31.12.18
As reported
Adjustment31.12.18
Restated
Other short-term financial liabilities 3,063 47 3,110
Short-term financial liabilities 14,379 47 14,426
Total short-term external capital 111,248 47 111,295
     
Other long-term financial liabilities 11,975 –8,895 3,079
Long-term financial liabilities 157,711 –8,895 148,816
Total long-term external capital 183,136 –8,895 174,240
     
Hybrid capital 107,589 8,848 116,437
Shareholders’ equity 280,847 8,848 289,695
Total liabilities and equity 575,231 0 575,231
   
   
Balance sheet as at 31.12.19
As reported
Adjustment31.12.19
Adjusted
Other short-term financial liabilities 3,033 77 3,110
Short-term financial liabilities 12,330 77 12,407
Other financial liabilities 5,151 2 5,153
Total short-term external capital 68,454 79 68,533
   
Other long-term financial liabilities 8,942 –8,942 0
Long-term financial liabilities 121,439 –8,942 112,497
Total long-term external capital 138,165 –8,942 129,223
 
Hybrid capital 107,589 8,848 116,437
Results for current year –239,215 14–239,200
Shareholders’ equity 248,953 8,863 257,816
Total liabilities and equity 455,572 0 455,572
Income statement 2019
As reported
Adjustment2019
Restated
Financial result–8,692 16,495 –8,675
Taxes 2,585 –2,029 2,583
Net profit –271,393 14 –271,378
Attributable to:
Parent company shareholders –39,215 14 –239,200
Minority interests –32,178 0–32,178

Consolidation basis and methods

The consolidated annual financial statements of the HOCHDORF Group comprise the annual financial statements of HOCHDORF Holding Ltd holding company as well as all subsidiaries in which HOCHDORF Holding Ltd has a capital-relevant and vote-relevant majority or where control over the financial and business policy is exercised through contractual agreement. Assets and liabilities as well as expenses and revenue are recorded at 100% for the fully consolidated companies. Minority interests in the consolidated shareholders' equity and in the business results are shown separately. All intercompany transactions and relationships between consolidated companies are eliminated. Intercompany profits on such transactions are eliminated. 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.

Shareholdings in joint enterprises or shareholdings with 20% to 50% of the voting rights are accounted for using the equity method.

Capital consolidation

The capital consolidation is carried out according to the purchase method. Companies acquired during the year are consolidated from the date on which control is transferred. The net assets acquired in an acquisition are revalued at current values as at the acquisition date. The difference between the purchase price and the pro rata revalued net assets is offset against equity as goodwill/bad will.

The acquisition of minority interests is also accounted for using the purchase method. Here, a purchase price allocation is waived. Accordingly, the difference between the purchase price and the pro rata equity capital is offset against equity capital as goodwill or bad will in accordance with Swiss GAAP FER.
Companies sold during the year are excluded from the consolidated financial statements from the date on which control is transferred. 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/bad will, is recognised as a gain or loss on the income statement. Minority interests in subsidiaries with negative equity are also recognised proportionately with this negative equity.

Foreign currency translation

The foreign currency transactions and items included in the individual financial statements of the consolidated companies are converted as follows: foreign currency transactions are translated into the book currency at the exchange rate of the transaction date (current rate). At the end of the year, monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss at the exchange rate prevailing on the balance sheet date. Foreign currency gains and losses from the valuation of intercompany loans of an equity nature are recognised in equity.

The consolidated financial statements are presented in Swiss francs. Assets and liabilities of Group companies with different currencies are translated at year-end rates (closing rates), equity at historical rates, and the income statement and cash flow statement at average rates for the year. The conversion differences incurred are recognised in equity without affecting net income.

The accumulated translation differences for 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.

 Average exchange ratesEnd-of-year exchange rates
2020201931.12.202031.12.2019
1 EUR1.0721.1121.0811.087
1 USD0.9350.9920.8830.968
1 GBP1.211n.a.1.208n.a.
1 UYU0.0220.0280.02080.025

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.

Valuation methods

Cash and cash equivalents

Cash and cash equivalents include cash and deposits on postal and bank accounts, as well as short-term time deposits with a remaining time of less than three months. They are balanced at nominal values.

Securities

Securities are measured at the market value on the balance sheet date. Unlisted securities are stated at cost less any value impairments. The securities are not of a participating nature and are short-term.

Accounts receivables from third parties

Accounts receivables from ordinary business activities include short-term receivables with a remaining term of up to one year. Accounts receivables are valued at nominal value. The operational default risks are taken into account by means of individual and general value adjustments. 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.

ReceivablesGeneral 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

Accounts receivables from related and associated parties

The operational default risk from receivables from deliveries and services to related and associated parties are taken into account through individual value adjustments.

Inventories

Internally produced goods are valued at manufacturing cost. Any lower net market value is taken into account. Raw materials and supplies as well as merchandise are valued at the lower of cost or net market value.

Depending on the inventory turnover, value adjustments are taken into account. The value adjustments calculated in this way are adjusted accordingly for normal saleability or longer shelf life.

Property/plant and other fixed assets

Fixed assets are measured at the acquisition cost less economically necessary depreciation and permanent value impairments. Own work is only capitalised if it is clearly identifiable and the costs can be reliably determined, and if it provides the company with a measurable benefit over several years. Depreciation is calculated on a straight-line basis over the useful life of the asset as shown in the table below.

Asset groupService life
Property, plant15 – 65 years
Devices, equipment 5 – 25 years
Machines, appliances 5 – 25 years
IT systems, communication 5 – 10 years
Vehicles 5 – 10 years

Financial assets

Financial assets include long-term held securities, deferred tax assets as well as assets from pension funds, employer contribution reserves and long-term loans from third parties. Securities and loans are measured at purchase value less the economically necessary value adjustments. Employer contribution reserves are recognised at nominal value.

Intangible assets

Intangible assets include software, patents, licences and brand values. These are accounted for at acquisition costs. They are depreciated on a straight-line basis over their useful economic life of 5-10 years and impaired if there are indications of impairment.

Impairment

The recoverability of non-current assets is assessed at each balance sheet date. If there are indications of impairment, the recoverable amount is calculated (impairment test). The achievable value is the higher value of net market value utility value. If the book value exceeds the recoverable amount, an adjustment is made to the income statement through unscheduled depreciation.

For cash-generating units, an impairment test is performed annually based on value-in-use calculations, in case impairment indication is existing. These are based on the cash flows for the next five years as a rule and the extrapolated values from the sixth year onwards. The figures used are part of the multi-year plan approved by the Board of Directors.

Liabilities

Liabilities are measured at the nominal amount.

Provisions

Provisions are recognised when there is a reasonable probable obligation as a result of a past event, the amount and/or timing of which is uncertain but can be estimated. The measurement of the provision is based on the estimate of the cash outflow to settle the obligation.

Deferred taxes

The accrual of deferred income tax is based on a balance sheet approach and generally takes into account all future income tax effects. The calculation of deferred income taxes to be accrued annually is based on the future tax rate applicable to the respective taxable entity as at the balance sheet date. Deferred income tax assets and deferred income tax liabilities are offset if they relate to the same taxable entity and are levied by the same taxation authority. Deferred tax assets on temporary differences and tax losses carried forward are only capitalised if it is probable that they can be offset against future taxable profits.

Equity/own shares

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.

Equity/mandatory convertible bond

The mandatory convertible bond is a bond that does not give the bondholder any voting rights. The issuing costs are recognised in equity via the capital reserves. The obligations for the interest payable are discounted from the issue date at a market 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. The mandatory convertible bond was converted on 30 March 2020.

Equity/goodwill

The option described in Swiss GAAP FER 30 of offsetting goodwill/bad will against equity is exercised. The disclosure on the theoretical capitalisation of goodwill is shown in the notes to the consolidated income statement.

Employee pension plan

Employees and former employees of all companies receive different employee pension payments or old-age pensions corresponding to the legal requirements applicable in the countries where they are paid out.

The pension liabilities of HOCHDORF Holding Ltd and its subsidiary HOCHDORF Swiss Nutrition Ltd are governed by the legally independent pension fund of the HOCHDORF Group. The pension fund is a defined contribution plan. 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. Existing employer contribution reserves are recognised as an asset under assets (financial assets).

Net sales revenue from deliveries and services

Net sales include revenues from the sale of goods and services. Revenue from the sale of goods is recognised in the income statement when the risks and rewards of ownership of the products are transferred to the buyer. Revenue from services is recognised in the period in which the services are rendered. Sales deductions such as discounts, credit notes, rebates and sales taxes are deducted in the reported net sales.

Research and development

In-house 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

The probability and amount of contingent liabilities are assessed and evaluated on the balance sheet date and disclosed in the notes.

Transactions with related parties

Business relationships with related parties are conducted at arm's length. Related parties (natural or judicial) are defined as any party directly or indirectly able to exercise significant influence over financial or operating decisions of organisations. Organisations that are controlled directly or indirectly by the same related parties are also considered to be related.

Notes to the consolidated balance statement

Changes to the consolidation basis
In 2020, the following changes were made to the scope of consolidation of the HOCHDORF Group and led to corresponding changes in the balance sheet items (see also note 27 "Sale of companies").

Consolidated companiesLocationCurrency Capital in thousands
31.12.2020
Capital share
31.12.2020
Capital share
31.12.2019
Marbacher Ölmühle GmbHMarbach, GermanyEURSold as of 31.12.20202,0000%100%
Uckermärker Milch GmbHPrenzlau, GermanyEURSold as of 28.02.202010,0000%60%
Snapz Foods USA Inc.;
liquidated
Delaware, USAUSDDeconsolidated as of 30.06.2020500%65%

For further information on the companies included in the scope of consolidation, see note 32.

1. Cash and cash equivalents

TCHF20202019
Adjusted
Cash1017
Post account193608
Bank account12,20819,576
Total12,41120,201

Cash and cash equivalents are recognised at nominal value. In 2019, securities (see note 2) were also reported under cash and cash equivalents.

2. Securities

TCHF20202019
Adjusted
Securities231231
Total231231

In 2019 these items in cash and cash equivalents were shown as short-term investments.

3. Accounts receivables

TCHF20202019
Accounts receivables from third parties35,75044,264
Minus provision for doubtful accounts–11,755–12,334
Short-term receivables from related parties32,12910,139
Accounts receivables from associated companies1157,118
Other receivables2,7683,238
Other receivables from related parties40,60264,191
Total99,609116,616

The accounts receivables from third parties do not contain any concentration of credit risk due to customer diversification. The bad debt item includes the value adjustment made in 2019 for a receivable from a customer that will still be carried under accounts receivables from third parties in 2020.

Accounts receivables from related parties include outstanding invoices from deliveries of goods to Pharmalys Laboratories SA. The other accounts receivables mainly include receivables from government agencies (value added tax, Directorate General of Customs) and from social welfare organisations.

Other receivables from related parties mainly include 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 for the payments in connection with the sale are 15 May 2021 (CHF 10 million) and 30 September 2021 (CHF 24.2 million). In 2020, a purchase price payment of CHF 30 million was made.

With regard to the recoverability of the accounts receivables and the other receivables from related parties, see the implementation of the going concern principle in note 33.

4. Inventories

TCHF20202019
Raw/auxiliary/operating materials5,5179,836
Finished and semi-finished products26,32246,376
Value adjustments for inventories–2,605–14,592
Total29,23541,620

Value adjustment in 2020 due to a damage claim and from sales price devaluations for skimmed milk powder. In the previous year 2019, extraordinary value adjustments due to the effects of a technical damage claim and customer-specific value adjustments were shown in this item.

5. Accrued income

TCHF20202019
Total3,3834,027

The accrued income is comprised of revenues not yet received as well as costs paid in advance. Significant items are receivables from the Directorate General of Customs due to milk export transactions and receivables for CO2 refunds.

6. Fixed assets

Depreciation includes an impairment of CHF 65.7 million on the buildings and property, plant and equipment of the relatively new spray tower plant 9 and the associated canning line. We have taken this as a measure to reflect the low utilisation of these facilities as well as the high risk in the Baby Care business with regard to its customer portfolio.

TCHF Property and plant Equipment, warehouse equipment, fixed equipment Machines, production appliances, furnishings Office equipment,
IT systems, communication, equipment
Vehicles Current
investment
projects (assets under construction)
Total
Net accounting value 01.01.2019 112,657 56,890 109,252 8,924 787 13,336 301,846
 
Purchase value
As at 01.01.2019 201,976 93,150 206,559 25,348 2,106 13,336 542,475
Change in scope of consolidation 2 –1,242 –264 –1,601 –24 –17 –19 –3,167
Additions 0 21 0 45 44 8,339 8,449
Disposals – 80 –477 –2,093 –215 –166 0 –3,031
Reclassification 1 1,398 5,916 9,138 979 79 –17,510 0
Currency differences –1,708 –353 –1,146 –43 –10 –26 –3,286
As at 31.12.2019 200,344 97,993 210,857 26,090 2,036 4,120 541,440
 
Accumulated depreciation
As at 01.01.2019 89,319 36,260 97,307 16,424 1,319 0 240,629
Change in scope of consolidation 2 –259 –22 –337 –13 –17 0 –648
Disposals –41 –407 –2,004 –173 –156 0 –2,781
Depreciation 3,499 4,331 7,040 2,024 164 0 17,058
Value impairments 4 19,049 2,703 8,490 512 80 0 30,834
Currency differences –1,208 –311 –1,049 –35 –8 0 –2,611
As at 31.12.2019 110,359 42,554 109,447 18,739 1,382 0 282,481
 
Net accounting value as at 31.12.2019 89,985 55,439 101,410 7,351 654 4,120 258,959
 
Purchase value
As at 01.01.2020 200,344 97,993 210,857 26,090 2,036 4,120 541,440
Change in scope of consolidation 3 –44,527 –9,638 –29,356 –1,190 –231 –99 –85,042
Additions 0 0 0 0 0 3,718 3,718
Disposals  –94 –876 –2,021 –404 –164 0 –3,559
Reclassification 1 319 2,897 1,123 947 84 –5,369 0
Currency differences –927 –193 –639 –25 –4 –1 –1,789
As at 31.12.2020 155,115 90,183 179,964 25,418 1,721 2,369 454,769
 
Accumulated depreciation
As at 01.01.2020 110,359 42,554 109,447 18,739 1,382 0 282,481
Change in scope of consolidation 3 –36,863 –8,839 –28,150 –1,165 –216 0 –75,233
Disposals  –34 –929 –1,969 –393 –148 0 –3,472
Depreciation  2,738 4,479 6,500 1,701 167 0 15,585
Value impairments 5 16,822 13,329 35,146 1,246 99 0 66,643
Currency differences –808 –188 –626 –25 –4 0 –1,651
As at 31.12.2020 92,214 50,407 120,348 20,104 1,281 0 284,354
 
Net accounting value 31.12.2020 62,901 39,776 59,616 5,314 440 2,369 170,415
  1. 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
  2. In the context of the purchase of the holding in Thur Milch Ring AG and the sale of the holding in HOCHDORF South Africa Pty (Ltd), Pharmalys Laboratories SA, Pharmalys Tunisie S.à.r.l. and Pharmalys Africa S.à.r.l.
  3. The changes to the consolidation basis reflect the sale of ­Marbacher Ölmühle GmbH and Uckermärker Milch GmbH
  4. Residual depreciation and dismantling costs of plants that were decommissioned in 2020 in HOCHDORF as well as impairments on tangible assets for companies that are to be sold or liquidated
  5. Due to the low capacity utilisation and to take into account the high risk in the Baby Care business, we carried out an impairment of property, plant and other fixed assets in connection with the spray tower plant 9 and canning line 2 at the Sulgen site (total CHF 65.8 million). Further impairment of real estate/property of Zifru Trockenprodukte GmbH (TCHF 311; company in liquidation) as well as BIMBOSAN AG due to the closure of the Welschenrohr site (TCHF 524; equipment no longer needed at the site as production was integrated in Hochdorf)

Of which assets subject to financial leasing

 TCHFTotalOpen instalments
Net accounting value 01.01.20207,3821,475
  
Purchase value
As at 01.01.20209,5541,475
Additions00
Disposals incl. instalments–9,549–1,470
Currency differences–5–5
As at 31.12.202000
 
Accumulated depreciation
As at 01.01.20202,1720
Depreciation2480
Disposals–2,4200
Currency differences00
As at 31.12.202000
 
Net accounting value as at 31.12.202000

The assets under assets subject to financial leasing in 2019 mostly belonged to Uckermärker Milch GmbH and have ceased to exist as a result of the sale in 2020.

7. Financial assets

TCHF 2020 2019
Securities 37 37
Loans 150 150
Value adjustments for loans –69 –42
Deferred tax assets 0 2,763
Assets from employer contribution reserves 4,0567,071
Total 4,174 9,979

The deferred tax assets have ceased to exist as a result of the sale of Uckermärker Milch GmbH. In the case of HOCHDORF Holding Ltd and HOCHDORF Swiss Nutrition Ltd, no deferred tax assets were formed on the loss carried forward, as it is not certain that they can be offset against future taxable profits within the next few years.

Taxable losses carried forward after expiration

Taxable losses carried forward after expiration TCHF 2020 2019
2024 and later Cantonal tax 340,371 97,005
Total 340,371 97,005
Taxable losses carried forward after expiration TCHF20202019
2024 and later Federal tax330,591304,517
Total330,591304,517

If the deferred tax assets were fully capitalised, including the losses carried forward at HOCHDORF Holding Ltd and Hochdorf Swiss Nutrition Ltd, there would be a deferred tax asset of TCHF 25,217 for federal tax (PY: TCHF 32,673) and a deferred tax asset of TCHF 17,975 for cantonal tax (PY: TCHF 15,053).

The increase in taxable losses carried forward in the 2019 comparison at the level of cantonal taxes is based on the decision that HOCHDORF Holding Ltd will retroactively waive the holding company privilege as early as 01.01.2019 and will be subject to ordinary taxation. As a result, the loss generated in 2019 can also be carried forward for cantonal taxes. Written confirmation from the tax authorities is still pending.

Assets from employer contribution reserves

TCHF
Employer contribution reserve
Nominal value
31.12.2020
Renounced use
31.12.2020
Balance sheet
31.12.2020
Creation per
2020
Balance sheet
31.12.2019
Result of the committee of works and staff councils in personal expensesResult of the committee of works and staff councils in financial revenues
2020 2019 2020 2019
HGR pension fund 4,056 0 4,056 0 7,071 –3,109 –1,36597 177

The posting of interest from employer contribution reserves through pension plans appears as a credit in the financial revenues. Interest of 1.7% (PY: 2.25%) was calculated on the employer contribution reserves in 2020. Since 01.05.2019, employer contributions are no longer paid to the pension fund, but offset against the employer reserves. In 2020, the possibility of offsetting additional employee contributions against the employer's reserves has also been used on the basis of the Covid-19 regulation (03-08/2020, 11-12/2020).

TCHF
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
31.12.2020 31.12.2020 31.12.2019     2020 2019
HGR pension fund 14,606 0 0 0 3,109 3,109 2,204

8. Intangible assets

 

TCHF Software Brands Others intangible assets Current projects Total
Net accounting value as at 01.01.2019 1,670 2,699 404 219 4,992
           
Purchase value
As at 01.01.2019 3,896 3,520 700 219 8,335
Additions 272 0 0 –86 186
Disposals –30 0 0 0 –30
Reclassifications 88 0 0 –88 0
Currency differences –30 0 0 0 –30
As at 31.12.2019 4,196 3,520 700 45 8,461
 
Accumulated depreciation
As at 01.01.2019 2,226 821 296 0 3,343
Disposals –4 0 0 0 –4
Depreciation 605 352 140 0 1,097
Value impairments 264 2,347 0 0 2,611
Currency differences –28 0 0 0 –28
As at 31.12.2019 3,063 3,520 436 0 7,019
           
Net accounting value as at 31.12.2019 1,133 0 264 45 1,442
 
Purchase value
As at 01.01.2020 4,196 3,520 700 45 8,461
Change in scope of consolidation 1 –809 0 0 –16 –825
Additions 179 0 0 623 803
Disposals –23 0 0 0 –23
Reclassifications 216 0 0 –216 0
Currency differences –15 0 0 0 –16
As at 31.12.2020 3,7433,5207004378,400
 
Accumulated depreciation
As at 01.01.2020 3,063 3,520 436 0 7,019
Change in scope of consolidation 1 –798 0 0 0 –798
Disposals –23 0 0 0 –23
Depreciation 518 0 140 0 658
Value impairments 26 0 0 0 26
Currency translation difference –15 0 0 0 –15
As at 31.12.2020 2,771 3,520 576 0 6,867
 
Net accounting value as at 31.12.2020 973 0 124 437 1,533

Intangible assets only cover acquired assets. Own brand names are not evaluated and not balanced on the balance sheet date.

  1. Sold companies Uckermärker Milch GmbH and Marbacher Ölmühle GmbH

9. Trade payables

TCHF20202019
To third parties22,05737,110
To related parties03,599
To associated companies304672
Total22,36141,381

10. Short-term financial liabilities

TCHF20202019
Adjusted
Other financial liabilities 105,184
Leasing liabilities01,223
Bank loans 206,000
Total012,407
  1. Previous year's figures adjusted due to the change in the valuation principles for the hybrid bond (see also the notes to the consolidated financial statements of the HOCHDORF Group "Principles of consolidation" and note 15; debt component of the hybrid bond reclassified to equity
  2. The short-term tranche of the syndicated loan was repaid in full in 2020

11. Other financial liabilities

TCHF20202019
To related parties0163
Other short-term liabilities 11,7052,615
Employee overtime138127
Employee holiday credits498466
Salary accounts (salary payments, profit-sharing, AHV, SUVA, health insurance, etc.)303469
Government bodies (taxes, source taxes, value added taxes)1,4481,473
Total4,1415,313
  1. The largest items under "Other short-term liabilities" are advance payments from customers and the payments made in 2021 to the BOM (Swiss Milk Sector Organisation) for the fund contributions from milk suppliers collected in December

12. Accrued liabilities and deferred income

TCHF20202019
Total4,1354,527

The accrued liabilities and deferred income mainly comprises accruals in the context of reimbursements and commissions ("Schoggi law") as well as invoices not yet received for goods receipts and other supplier services (power, water, transport).

13. Long-term financial liabilities

TCHF 2020 2019
Adjusted
Loans 1 0 375
Leasing liabilities 0 252
Bank loans 100,000 111,870
To associated companies 0 870
Other financial liabilities 2 0 0
Total 100,000 113,367
  1. Loan commitment to a former shareholder of Marbacher Ölmühle GmbH has ceased to exist as a result of the sale
  2. Previous year's figures adjusted due to the change in the valuation principles for the hybrid bond (see also the notes to the consolidated financial statements of the HOCHDORF Group "Principles of consolidation" and note 15; debt component of the hybrid bond reclassified to equity

Terms and interest rates (long-term and short-term financial liabilities)

Position Book value
TCHF
Due date Interest rate
Syndicated loan 1 100,000 08.11.2023 from 2.75% to 5.50%
Total 100,000

The financial liabilities are recorded and valued at the nominal value.

  1. The interest rate depends on the debt factor

Syndicated loan

On 23 October 2019, the banking consortium extended and adjusted the syndicated loan for HOCHDORF Holding Ltd. The loan has a term until September 2023. Partial repayments have reduced the limit to CHF 120 million. As before, key financial covenants are the equity ratio and the debt factor. The debt factor is considered to be breached if the debt factor as of 30 June 2021 is greater than 5.0x and as of 31 December 2021 is greater than 4.0x. For the equity ratio, a ratio of 40% applies as of 30 June 2020. In the event of a breach of the covenants, the credit agreement can be terminated extraordinarily (with immediate maturity of all liabilities). The credit agreement only allows dividend payments if certain debt factors are met.

14. Provisions

TCHF
Development of provisions
Short-term provisions Damages claimsVarious provisionsDeferred tax provisionsTotal
As at 31.12.201800518,55918,564
Change in scope of consolidation 100–30,979–237–31,216
Provisions made 24,903032,9293,65341,485
Provision used00000
Provision released00–5–7,868–7,873
Currency differences000–201–201
As at 31.12.20194,90301,95013,90620,759
Change in scope of consolidation 3000–58–58
Provisions made 4350008358
Provision used 5–4,5660–4190–4,985
Provision released000–3,422–3,422
Reclassification810–8100
Currency differences00000
As at 31.12.202076801,45010,43512,653
  1. In the context of the purchase of the holding in Thur Milch Ring AG and the sale of the holding in HOCHDORF South Africa Pty (Ltd), Pharmalys Laboratories SA, Pharmalys Tunisie S.à.r.l. and Pharmalys Africa S.à.r.l.
  2. Provisions formed in connection with the restructuring and for outstanding legal transactions
  3. In connection with the sale of the Marbacher Olmühle GmbH and Uckermärker Milch GmbH
  4. In connection with impending legal disputes
  5. In connection with settlement of a claim

15. Share capital – mandatory convertible bond – hybrid bond – contingent capital

The share capital of HOCHDORF Holding Ltd of CHF 21,517,570 is higher by a nominal CHF 3,933,800 as of 31 December 2020 compared to 2019. The increase results from the end of the term of the mandatory convertible bond and thus the final conversion as of 30 March 2020 of a nominal value of CHF 119,895,000. It is divided into 2,151,757 registered shares at a nominal value of CHF 10 each (2019: 1,758,369 registered shares). The conditional capital (CHF 3,937,710 as at 31 December 2019) was used for this purpose.

The mandatory convertible bond is classified for the most part as equity. It was divided into an equity component and a liabilities component. The liabilities component includes all future bond interest payments. The effective interest payments are taken from the corresponding financial liabilities and are not charged to the income statement. Only the accrued interest of the relevant business year was recognised in interest costs. The mandatory convertible bond was finally converted on 30.03.2020.

In 2017 (payment 21.12) HOCHDORF Holding Ltd issued a public hybrid bond with a nominal value 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 of 2.50% + 5-year mid swap rate with floor at zero). Securities number 39,164,798; ISIN CH0391647986.

The interest payments under the hybrid bond are basically optional and HOCHDORF Holding Ltd can choose whether to make the interest payments annually or defer them. Certain interest payments on the hybrid bond were linked to the interest payments on the mandatory convertible bond for the term of the mandatory convertible bond, i.e. if interest was paid on the mandatory convertible bond, interest also had to be paid on the hybrid bond. The remaining interest payments become payable upon the occurrence of certain events, e.g. when HOCHDORF Holding Ltd declares and pays dividends on its shares.

The hybrid bond is treated as a compound financial instrument and consists of a debt and an equity component. The debt component includes all contractually owed and unavoidable payments. This includes the interest payments until 21.06.2020, the interest date after conversion of the mandatory convertible bond. The liability was discounted to the issue date with an interest rate of 1%. This interest rate corresponded to the syndicated loan's margin at the time. The effective interest payments were taken from the corresponding financial liabilities and were not charged to the income statement. Only the accrued interest of the relevant business year was recognised in interest costs. As at 31 December 2020, there was no longer a liability.

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). In 2020, the income statement items include the values of Uckermärker GmbH until 28 February 2020 and Marbacher Ölmühle GmbH until 31 December 2020. For the sake of comparability, it should also be noted that in 2019 the companies Pharmalys Laboratories SA, Pharmalys Tunisie S.a.r.l. and Pharmalys Africa S.a.r.l. were sold as of 6 December 2019 and were thus included in the majority of the consolidated results in the 2019 income statement.

16. Net sales from goods and services

Net sales in 2019 included provisions for possible losses of receivables and for claims totalling CHF 48.1 million. The actual net sales of products sold is higher by this amount. No significant impairments were made in 2020.

By product group

TCHF 2020 2019  
Milk products/cream 78,305 25.6% 193,110 42.3%
Milk powder 113,425 37.0% 174,111 38.1%
Infant formula 97,026 31.7% 71,222 15.6%
Specialities 11,231 3.7% 13,293 2.9%
Bakery/confectionary goods 1,014 0.3% 4,201 0.9%
Other products/services 5,198 1.7% 860 0.2%
Total 306,199 100% 456,797 100%

The Baby Care division includes the infant formula product group and products from other groups.

By region

TCHF 2020   2019  
Switzerland/Liechtenstein 162,433 53.0% 196,193 42.9%
Europe 69,212 22.6% 200,528 43.9%
Asia 6,815 2.2% 8,974 1.9%
Middle East/Africa 1) 60,572 19.8% 46,215 10.1%
USA/Canada 7 0.0% 474 0.1%
Americas (others) 2) 7,160 2.3% 4,413 1.1%
Total 306,199 100.00% 456,797 100.00%
  1. Net revenues with Pharmalys Laboratories SA are also reported in 2020 under Middle East/Africa for better comparability
  2. The remaining turnover comprises deliveries to customers who export the goods and where the destination country is not separately recorded

By division

The Board of Directors of HOCHDORF Holding decided in 2019 to discontinue the Cereals & Ingredients division (see also notes 27 and 28). The associated companies were either sold or liquidation proceedings were initiated. Remaining products and net sales are organisationally assigned to the Food Solutions division as of 1 January 2020 (e.g. Marbacher Ölmühle GmbH).

TCHF 2020   2019  
Food Solutions (formerly: Dairy Ingredients) 206,708 67.5% 360,008 78.8%
Baby Care 99,490 32.5% 72,836 16.0%
Cereals & Ingredients 00% 23,953 5.2%
Total 306,199 100.00% 456,797 100.00%

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 FER 31/8. The Swiss milk market is small and tightly knit with few key companies and providers. The supplier side (milk producers) is organised within several milk producer organisations. On the processing side, the market is dominated by the cheese dairies 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.

17. Other operating income

TCHF 2020 2019
Various other operating income 994 1,493
Total 994 1,493

Various other operating income includes the rental of storage space as well as insurance benefits and, in the previous year, the private share of employees for the use of vehicles as major items.

18. Personnel expenses

TCHF 2020 2019
Wages –32,373 –41,025
Social contributions –5,144 –6,455
Incidental wage costs –2,205 –3,277
Total –39,722 –50,757

As at 31.12.2020, the HOCHDORF Group reported a headcount of 391 (31.12.2019: 618).

19. Other operating expenses

TCHF20202019
Facilities expenditure (incl. warehouse rents)–3,685–5,151
Maintenance, repairs–6,406–8,930
Vehicle and transport costs–5,118–8,584
Insurance, fees, duties–1,635–2,103
Energy and disposal expenditure–10,869–18,440
Administration and IT expenditure–5,202 –8,601
Advertising costs incl. commissions to customers–3,928–28,064
Various other operating costs–3,896–5,881
Total–40,741–85,754

20. Financial result and income from associates and joint ventures

TCHF20202019
Adjusted
Income from associates and joint ventures350354
Interests from cash and cash equivalents011
Revenues from holdings158–286
Revenues from financial assets 418667
Interest revenue 11,3000
Exchange rate gains2,5897,662
Value adjustment from financial assets01,223
Total financial income4,4649,277
 
Interest costs 2–5,494–6,951
Value adjustment from financial assets 3–1,037–264
Deposit fees, fees–455–1,078
Exchange rate losses–2,570–9,658
Total financial costs–9,556–17,952
Total–5,092–8,675
  1. The interest income in 2020 mainly includes interest from Pharmalys Laboratories AG and Pharmalys Invest Holding AG
  2. Previous year's figures adjusted due to the change in the valuation principles for the hybrid bond (see also the notes to the consolidated financial statements of the HOCHDORF Group "Principles of consolidation" and note 15)
  3. The negative increase in the value adjustment from financial assets is a net effect of the (negative) elimination and the (positive) reversal of value adjustments made in 2019 for loan waivers

21. Non-operating result

TCHF20202019
Revenue from external properties511
Total511

The non-operating income consists of expenses and rental income from non-operating properties.

22. Extraordinary result

TCHF20202019
Profit from the disposal of operating fixed assets0–343
Extraordinary result  10
Total1–343

23. Taxes

TCHF20202019
Adjusted
Current income taxes  
Taxes on operating result 1–180–439
   
Deferred income taxes  
Net change in deferred tax assets and liabilities2,5153,023
Total2,3352,583
  1. Previous year's figures adjusted due to the change in the valuation principles for the hybrid bond (see also the notes to the consolidated financial statements of the HOCHDORF Group "Principles of consolidation" and note 15)

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). For HOCHDORF Swiss Nutrition, with its operating site in the canton of Thurgau, this is 13.23%. For the subsidiary Bimbosan in Welschenrohr, 16.49% is applied. Companies with their registered office exclusively in the Canton of Lucerne are subject to 12.62%. Subsidiaries in Germany and Uruguay are subject to 25%.

In the case of HOCHDORF Holding Ltd and HOCHDORF Swiss Nutrition Ltd, no deferred tax assets were formed on the loss carried forward, as it is not certain that they can be offset against future taxable profits within the next years. If the possible deferred tax assets for HOCHDORF Holding Ltd (at a tax rate of 8.5%) and for HOCHDORF Swiss Nutrition Ltd were offset, and taking into account the maximum possible capitalisation for the other companies, the weighted average tax rate would be 13.20%. In the previous year, this was stated at 11.39%.

For further information on the impact of the ordinary taxation after the loss of the holding privilege, see note 7.

Capital taxes are reported separately in operating costs.

24. Earnings per share

Earnings (shareholders) per share, basic

20202019
Adjusted
Weighted average shares outstanding2,026,8721,453,643
Earnings current year (shareholder); TCHF–70,133–239,200
Earnings per share (shareholder) in CHF, basic–34.60–164.55
  1. Previous year's figures adjusted due to the change in the valuation principles for the hybrid bond (see also the notes to the consolidated financial statements of the HOCHDORF Group "Principles of consolidation" and note 15)

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 (29,738 shares) 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 393,388 new registered shares from the conversion of the convertible bond on 31.03.2020.

Earnings per share (shareholder), diluted

2020 2019
Adjusted
Weighted average shares outstanding, basic 2,026,872 1,453,643
Dilution effect of convertible bond 1 0 393,524
Weighted average shares outstanding, diluted 2,026,872 1,847,167
     
Earnings current year (shareholder); TCHF –70,133 –239,200
Interest on convertible bond, in TCHF 2 0 112
12% tax effect; TCHF (interest on convertible bond*0.12/1.12) 0 –12
Earnings current year (shareholder), diluted; TCHF 3 –70,133 –239,100
Earnings per share (shareholder) diluted (in CHF) –34.60–164.55
  1. 2019 calculation: the dilution was calculated from the mandatory convertible bond 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 ran from 03.01.2018 up to and including 13.03.2020. As of 31.12.2019 a nominal amount of CHF 119,895,000 was still outstanding after the conversions amounting to CHF 98,595,000. 2020 calculation: the total mandatory convertible bond was converted on 30.03.2020
  2. 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
  3. There is no dilution effect due to the negative company result

25. Treasury shares

Transactions with own shares

 20202019
Balance as at 1 January in units29,73830,952
At the average price per share of CHF238.93237.49
Purchases in units00
At the average price per share of CHF00
Sales/allocations in units0–1,214
At an average price per share of CHF 0115.79
   
Balance as at 31 December in units29,73829,738
At an average price per share of CHF238.93238.93
    As at 31.12.2020, HOCHDORF Holding Ltd held 29,738 own shares. No transactions with own shares took place in 2020. There is no share-based compensation for either the Board of Directors or the Group Management. In 2019, 1,214 shares with a value of CHF 115.79 were issued to the Group Management.

HOCHDORF Group pension fund

 2020
Number
2019
Number
Registered shares of HOCHDORF Holding Ltd 18,00018,000
Total18,00018,000

26. Further notes

Leasing debts

TCHF20202019
Unrecognised leasing debts218359
Total218359

The unrecognised leasing debts are for the leasing contracts for transport, cars and operating equipment.

Liabilities from pension fund

TCHF20202019
HOCHDORF Group pension fund121163
Total121163

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.

27. Sale of companies

As of 28 February 2020, HOCHDORF Holding Ltd sold Uckermärker Milch GmbH (60% shareholding, Germany) in connection with the agreed streamlining of the Food Solutions division (formerly Dairy Ingredients). The buyer was Ostmilch Handels GmbH, in which HOCHDORF Holding holds a minority share of 26% (see note 32 to the consolidated financial statements of the HOCHDORF Group). Marbacher Ölmühle (100% shareholding, Germany) was also sold as of 31 December 2020 due to the discontinuation of the Cereals & Ingredients business division.

The Group companies sold in the reporting year had the following key balance sheet figures at the time of sale:

 TCHF Uckermärker Milch GmbH,
Germany
Marbacher Ölmühle GmbH,
Germany
Time of disposal 28.02.202031.12.2020
Share capital60%100%
Cash and cash equivalents 286 97
Accounts receivables 7,790 213
Inventories7,661 619
Other current assets 3,000 2
Non-current assets 6,702 4,946
Trade payables –12,949–268
Other short-term liabilities –2,613 –30
Non-current financial liabilities –6,962 –1,401
Net assets 2,915 4,179

The acquisition of Uckermärker Milch GmbH in 2014 resulted in a bad will of TCHF 5,053 in the purchase price allocation, which was offset against equity. The sale resulted in a positive value adjustment totalling TCHF 3,304, of which TCHF 3,732 was posted through EBIT (item Profit from sale of subsidiaries) and TCHF –428 was posted through exchange rate losses. In 2020, the company generated net sales of TCHF 25,797 with an EBIT of TCHF –208 prior to its sale.

The acquisition of Marbacher Ölmühle GmbH in 2014 resulted in goodwill of TCHF 798 in the purchase price allocation, which was offset against equity. The sale resulted in a negative value adjustment of TCHF 2,397, of which TCHF 2,562 was posted through EBIT (item Profit from sale of subsidiaries) and TCHF 165 was posted as an exchange rate profit (financial result). The company achieved net sales of TCHF 4,229 in 2020 until the sale, with EBIT of TCHF –499.

28. Companies in liquidation

The Board of Directors of HOCHDORF Holding decided to discontinue the Cereals & Ingredients division in the second half of 2019. This consisted of the companies Marbacher Ölmühle GmbH, Zifru Trockenprodukte GmbH, Snapz Foods AG and Snapz Foods USA Inc. as well as wheat germ processing at HOCHDORF Swiss Nutrition Ltd. In 2019 the above listed companies realised net sales of CHF 24.7 Mio. and a negative EBIT of CHF –10.8 Mio. As no buyers were found for Zifru Trockenprodukte GmbH (Germany), Snapz Foods AG (Switzerland) and Snapz Foods USA Inc., liquidation proceedings were opened in May 2020. There were no longer any significant business activities at Snapz Food AG and Snapz Food USA in 2020. Snapz Food USA was deconsolidated as of 30 June 2020.

At Zifru Trockenprodukte GmbH, inventories were sold off in the second half of 2020 and buyers were sought by the liquidator for the remaining facilities, land and buildings. In 2020, the company generated net sales of TCHF 1,274 with an EBIT of TCHF –874.

29. Goodwill offset against equity

Purchase costs

TCHF20202019
Adjusted
As at 1 January30,792269,850
Sale of Pharmalys (revival of goodwill)0–239,071
Acquisition of Thur Milch Ring AG, Switzerland013
Disposal of Marbacher Ölmühle GmbH, Germany–7990
Disposal of Uckermärker Milch GmbH, Germany5,0540
As at 31 December35,04730,792

In 2014, Uckermärker Milch GmbH and Ostmilch Handels GmbH were acquired together. For all acquired companies, there was a total net badwill of TCHF 1,084 (badwill for Uckermärker Milch GmbH of TCHF 5,054 and goodwill for Ostmilch GmbH of TCHF 3,969), which had not been reflected in the shadow account since the acquisition in 2014. This was corrected as part of the divestment of Uckermärker Milch GmbH, and the previous year's figures were also adjusted accordingly (including calculation of depreciation). The net accounting value as at 01.01.2019 and the theoretical amortisation of goodwill decreased by TCHF -1,103 and TCHF -1,084 respectively, while the net accounting value as at 31.12.2019 is unchanged.

Accumulated amortisation TCHF

TCHF20202019
Adjusted
As at 1 January–11,598 –86,840
Additions–5,755–5,777
Disposals–4,25581,019
As at 31 December–21,608–11,598
Theoretical goodwill as at 31 December 13,439 19,194

This is shown based on a linear depreciation over 5 years (pro rata). The statement of changes in shareholders’ equity shows goodwill as a net position. The effects of theoretical capitalisation on the income statement and balance sheet are shown in the following tables.

TCHF20202019
Adjusted
Net profit–70,274–271,378
Depreciation of goodwill–5,755–5,777
Depreciation of goodwill correction from sale of Pharmalys081,020
Theoretical net profit–76,029–277,155
   
TCHF20202019
Adjusted
Equity180,548257,816
Theoretical goodwill 13,43919,194
Theoretical equity193,987277,010

Previous year's figures adjusted due to the change in the valuation principles for the hybrid bond (see also the notes to the consolidated financial statements of the HOCHDORF Group "Principles of consolidation" and note 15).

30. Transactions with related parties 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 2019 and 2020. These cover deliveries of goods and raw materials as well as services to and from related companies. This is shown separately in the corresponding balance sheet items.

Transactions with associated companies

TCHF20202019
Net revenue20,759 123,976
Cost of goods–7,802 –54,601
Service costs–1–543
Operating expenses0–1
Financial revenue143761
Financial expenditure–195–1,098

Associated: Ostmilch Handels GmbH, Uckermärker Milch GmbH (sale of directly held 60% share in Ostmilch Handels GmbH; see also note 32 of the notes to the consolidated financial statements of the HOCHDORF Group).

Transactions with related companies

TCHF20202019
Net revenue40,631 130,069
Service revenue315445
Operating expenses0–15,769
Financial revenue9,348 3,522
Financial expenditure–1,445 –3,814

Related parties: Pharmalys Laboratories AG, Pharmalys Invest Holding (see also note 33 to the consolidated financial statements of the HOCHDORF Group on the recoverability of outstanding receivables from Pharmalys companies).

31. Contingent liabilities

The HOCHDORF Group becomes involved in legal disputes as part of its normal business. Although the outcome cannot be conclusively assessed at the present time, HOCHDORF assumes that it will not have any significant negative impact on its business activities or financial position. Anticipated payments to be made are set aside. There were no material contingent liabilities as at the balance sheet date.

32. Overview of the Group companies and associated companies

Consolidated companiesLocationFunctionCurrencyCapital in
thousands
31.12.2020
Capital share
31.12.2020
Capital share
31.12.2019
HOCHDORF Holding LtdHochdorf, SwitzerlandHoldingCHF21,517100%100%
HOCHDORF Swiss Nutrition LtdHochdorf, SwitzerlandProductionCHF30,000100%100%
Schweiz. Milch-Gesellschaft LtdHochdorf, SwitzerlandShell companyCHF100100%100%
Marbacher Ölmühle GmbH 1Marbach, GermanyProduction and tradeEUR00%100%
Uckermärker Milch GmbH 2Prenzlau, GermanyProductionEUR00%60%
HOCHDORF Americas LtdMontevideo, UruguayTradeUYU3,28360%60%
Snapz Foods AG 3Hochdorf, SwitzerlandTradeCHF100100%65%
Zifru Trockenprodukte GmbH 3Zittau, GermanyProductionEUR200100%100%
Bimbosan AGWelschenrohr, SwitzerlandProduction and tradeCHF350100%100%
Snapz Foods USA Inc. 4Delaware, USATradeUSD00%65%
Thur Milch Ring AGSulgen, SwitzerlandTradeCHF17056.47%56.47%
  1. Sold as of 31.12.2020
  2. Sold as of 28.02.2020
  3. In Liquidation; due to non-payment of the pro rata capital by the minority shareholder, the shares reverted to HOCHDORF Holding
  4. In Liquidation; deconsolidated as of 30.06.2020
Associated companiesLocationFunctionCurrencyCapital in
thousands
31.12.2020
Capital share
31.12.2020
Capital share
31.12.2019
Ostmilch Handels GmbHBad Homburg, GermanyTradeEUR1,00026%26%
Ostmilch Handels GmbH & Co. Frischdienst Oberlausitz KGSchlegel, GermanyLogisticsEUR5126%26%
Ostmilch Frischdienst Magdeburg GmbHMeitzendorf, GermanyTradeEUR2526%26%
Uckermärker Milch GmbH 1Prenzlau, GermanyProductionEUR10,00026%60%
  1. Indirectly associated; Uckermärker Milch GmbH has been 100% owned by Ostmilch Handels GmbH since 28.02.2020

33. Assessment as a going concern

Uncertainties at 31.12.2020 and for the 2021 and 2022 business year

There are material uncertainties (listed below) which, depending on how the situation develops, may cast significant doubt about the Group's ability to continue as a going concern. The Board of Directors and the Group Management are of the opinion that, despite these uncertainties, HOCHDORF's ability to continue as a going concern is not currently in question.

  • Recoverability of receivables from Pharmalys Group companies (as at 31 December 2020: CHF 32.1 million from delivery business and CHF 40.6 million outstanding purchase price instalments from the sale of shares in the Pharmalys company, repayment of loan outstanding and interest)
  • Securing solvency due to (partial) payment defaults and postponements by Pharmalys companies
  • Compliance with the financial covenants from the credit agreement

The Board of Directors is currently focusing on developing financial strategy options, which may include capital measures to further stabilise the balance sheet and the liquidity position and to support sustainable corporate growth.

Based on the assumptions made, the Board of Directors sees realistic opportunities for the implementation of the 2021 budget approved by the Board of Directors and the 2025 medium-term plan with projected sales volume and revenue increases and assumed financing from own cash flow in the divisions of Baby Care and Food Solutions (formerly Dairy Ingredients). To this end, we have already initiated strategic and operational measures in 2020 to create the basis for sustainable growth. In 2020, these included enhanced project development with new customers, two initial deliveries to Vietnam and the launch of new projects in Southeast Asia, the development of new products (including goat milk, vegan bisoja, pre-term formula), integration of Bimbosan, strengthening of the Baby Care sales team and expansion of the OPTIMA cost reduction programme.

Assessment by the Board of Directors

Recoverability of receivables from Pharmalys Group companies

As part of an agreement concluded on 30 September 2020 between Pharmalys Invest Holding AG, Pharmalys Laboratories SA and Amir Mechria, HOCHDORF was able to significantly expand its collaterals with regard to receivables due from the supply business and in connection with the resale in 2019 (see also note 3). In addition to the rights to the existing and future trademark rights of Pharmalys Laboratories SA, liens have been established on 100% of the shares of Pharmalys Invest Holding AG and Pharmalys Laboratories SA as well as on the shares of HOCHDORF Holding held by Mr Mechria (second ranking). The Board of Directors has commissioned a consulting firm to carry out a valuation of the liens and to work out strategic options for a possible realisation. According to current knowledge, the Board of Directors assumes that the proceeds from a possible realisation will cover all outstanding claims from the delivery business as well as from the resale.

Securing solvency

HOCHDORF currently has a free credit line of CHF 13 million (as at: 7 April 2021), which can be used to finance business operations. The 12-month liquidity plan shows that this credit line would be sufficient in case of realisation of the approved budget and in case of assumed massive payment delays by the Pharmalys companies. However, this credit line would not be able to compensate for a complete default of the Pharmalys Group's outstanding payments. At present, the Board of Directors does not assume a complete default of payment, but a significant postponement of payments.

Compliance with the financial covenants from the credit agreement

The budget approved by the Board of Directors for the 2021 financial year and HOCHDORF's medium-term plan for 2025 show that the covenants can be met if the plans are realised. However, a value adjustment of the receivables from Pharmalys, for example, would have a significant negative impact on the EBITDA and the equity and would severely jeopardise compliance with the covenants (see note 13 to the consolidated financial statements of the HOCHDORF Group). At present, the Board of Directors does not anticipate a value adjustment.

After the balance sheet date, the following events occurred with respect to the risks described:

  • As of 31 December 2020, Pharmalys Laboratories SA defaulted on payments. As a consequence, all outstanding payments of the Pharmalys companies became due
  • Since 31 December 2020, there has been a cumulative payment receipt from the Pharmalys companies of CHF 9.0 million (as at: 7 April 2021)
  • An indicative valuation of the Pharmalys Group has shown that all of HOCHDORF's outstanding receivables are covered. The valuation is therefore substantiated

Other events after the balance sheet date

The following events occurred after the balance sheet date and until the approval of the consolidated financial statements by the Board of Directors:

  • On 19 February 2021, a purchase agreement was concluded between Bimbosan AG and a third party for the sale of the buildings and land at the Welschenrohr site, which was closed in 2020, with a transition date of 31 December 2021. The book value of the real estate and land was TCHF 1,984 as at 31.12.2020; no significant book profit is expected from the transaction.

Otherwise, no significant events have occurred since the balance sheet date of 31.12.2020 that could affect the informational value of the 2020 annual financial statements or that would have to be disclosed here. The consolidated financial statements were approved by the Board of Directors in its meeting on 9 April 2021.

34. Non-GAAP indicators used in this report

The financial information in the annual financial statements includes certain non-GAAP indicators that are not defined by Swiss GAAP FER. These indicators are used by management to set targets and assess HOCHDORF's performance. The non-GAAP indicators used may differ from similar measures used by other companies and should not be considered a substitute for the Swiss GAAP FER indicators.

Gross operating profitThe gross operating profit includes net revenues (gross revenues less sales deductions) plus other operating income and changes in inventories less cost of materials.
EBITDAThe EBITDA result comprises the gross operating profit less personnel expenses and other operating expenses.
EBITEarnings before interest and taxes (EBIT) comprise EBITDA less amortisations on tangible assets and intangible assets as well as impairment of investments.
Free cash flowFree cash flow includes cash flow from working capital less changes in net working capital and cash flow from investing activities