ALBÉA GROUP. UNAUDITED PROFORMA Condensed interim CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED

Transcription

1 ALBÉA GROUP UNAUDITED PROFORMA Condensed interim CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2018

2 NOTE TO READERS We present here proforma combined figures to better disclose the fair performance of Albea Group from the 1st January 2018 to 30th June According to IFRS, since Hercule PAI Holdings SARL (managed by PAI Partners) is the new shareholder of the Group from 23th March 2018, we should have disclosed financial statements from the 23th March 2018 to 30th June In June 2018, restructuring operations in the US Entities took place, Albea Beauty Holding sold Twist Beauty Packaging Holding Corp s. stock to Hercule Ventures Inc. in exchange for novation of Albea Beauty Holding s Term Loan B of $252.9 million. Thereafter, Twist Beauty Packaging Holding Corp Shares and ICP loans were transferred to Hercules Ventures Inc. as result of chain of transfer transactions happened between the intermediary holding entities. The next step will be the transfer of the Term Loan B to Twist Beauty Packaging Corp, this last step of this US restructuring operation is expected to be complete by Q Therefore, hereby for presenting financial statements at Albea Beauty Holdings level, we are adding up the financial statements of Hercules Ventures Inc. to obtain the full value of Term loan B to the proforma financial statement. 1

3 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements Consolidated balance sheet Consolidated income statement Note 6 Notes to the balance sheet Consolidated statement of comprehensive income Note 6.1 Goodwill Consolidated balance sheet assets Note 6.2 Intangible assets and Consolidated balance sheet equity and liabilities Property, plant and equipment Consolidated cash flows statement Note 6.3 Other financial assets Consolidated statement of changes in equity Note 6.4 Inventories Note 6.5 Trade and other receivables Note 6.6 Cash and cash equivalents Consolidated general information Note 6.7 Assets / Liabilities held for sale Note 6.8 Capital stock Borrowings and other financial Note 6.9 Note 1 General information liabilities Note 2 Accounting Policies Note 6.10 Pension and other long-term employee benefits obligations Note 3 Other information Note 6.11 Provisions Note 4 Segment reporting Note 6.12 Trade and other payables Consolidated income statement Additional Disclosures Note 5 Notes to the income statement Note 7 Related Parties Note 5.1 Revenue Note 8 Subsequent event Note 5.2 Cost of sales Note 5.3 Selling and Administrative expenses Note 5.4 Restructuring and project costs Note 5.5 Other income / (expense) Note 5.6 Net finance costs Note 5.7 Share of profit of associates Note 5.8 Income tax Note 5.9 Employee Benefit Expenses and personnel expenses 2

4 CONSOLIDATED INCOME STATEMENT Note Continuing operations: Revenue Cost of sales 5.2 ( ) ( ) Gross profit Selling and administrative expenses 5.3 ( ) (88 502) Restructuring and project costs 5.4 (10 046) (9 938) Other income / (expense) 5.5 (7 272) Operating profit Financial income Financial expense (60 664) (34 984) Financial result 5.6 (59 405) (3 761) Share of profit of associates 5.7 (427) (271) Profit (loss) from continuing operations before income taxes (14 762) Income tax expense 5.8 (8 656) (7 654) Profit (loss) from continuing operations (23 418) Profit (loss) for the period attributable to owners of the parent (23 418) The notes are an integral part of the consolidated financial statements. 3

5 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December 31, Profit/(Loss) for the period (23 418) Other comprehensive income: Items that will not be reclassified to profit or loss 556 (262) Actuarial gains/(losses) on post-employment benefit plans Tax effects (102) (643) Items that may be reclassified to profit or loss (74 131) Net change in foreign currency translation adjustments (75 757) Mark to market variance for hedge instrument Total other comprehensive income for the period, net of tax (74 393) Total comprehensive income for the period (13 022) (5 551) Attributable to: i) Owners of the parent (13 022) (5 551) ii) Non-controlling interests - - The notes are an integral part of the consolidated financial statements. 4

6 CONSOLIDATED BALANCE SHEET ASSETS At At December 31, Note Non-current assets Goodwill Intangible assets Property, plant and equipment Deferred tax assets Investments in associates Other financial assets Total non-current assets Current assets Inventories Trade and other receivables Other financial assets Cash and cash equivalents Assets held for sale Total current assets Total assets The notes are an integral part of the consolidated financial statements. 5

7 CONSOLIDATED BALANCE SHEET - EQUITY AND LIABILITIES At At December 31, Equity Share capital Additional paid-in capital Retained earnings and other components of equity ( ) ( ) Other comprehensive income (23 906) (34 302) Equity excluding non-controlling interests ( ) ( ) Total proforma Equity (*) ( ) ( ) Non-current liabilities Borrowings Deferred tax liabilities Pensions and other post-employment benefit obligations Other long-term employee benefit obligations Termination benefits Non-current provisions Total non-current liabilities Current liabilities Borrowings Other current financial liabilities Trade and other payables Income taxes payable Current provisions Total current liabilities Total liabilities Total equity and liabilities (*) Due to the scheme used to present the financial statements, we present a proforma equity. The notes are an integral part of the consolidated financial statements. 6

8 CONSOLIDATED CASH FLOW STATEMENT Loss for the period (23 419) Adjustments for : Share of profit of associates Income tax expense recognized in profit or loss Net finance costs Depreciation and amortization Use of government grant - (89) Net (gain)/loss on disposal of assets (2) (17 742) Unrealized foreing exchange gains (losses) on working capital (203) Movements in working capital (30 541) (35 039) Movements in working capital - inventories (28 110) (11 632) Movements in working capital - receivables (29 548) (38 727) Movements in working capital - payables Change in provisions (814) (474) Income taxes paid (15 356) (7 531) Cash flow from operating activities Acquisitions of assets (40 897) (28 561) Loans (advances)/repayments 95 (53) Disposal of assets Acquisition / Disposal of subsidiary, net of cash acquired (1) (19 401) Other (1 279) (802) Cash flow used in investing activities (57 949) (24 455) Cash flow from operating and investing activities (12 965) Loans issued (2) Factoring (12 491) Repayment of loans (3) ( ) ( ) Interest paid (4) (26 791) (61 200) Dividends paid - (77 774) Cash flow from (used in) financing activities (11 404) Net increase / (decrease) in cash and cash equivalents (8 731) Cash and cash equivalents at beginning of the period Exchange gains/(losses) (2 142) Cash and cash equivalents at end of the period (1) Albéa received in June 2017 the last cash settlement for USD 3.2 million which is the last step of Shenzhen sales. It includes also the cash balance variance since December 2016 which was classified in assets held for sale in accordance with IFRS5 As on June 2018: The amount includes the price paid for the shares for Covit SL for USD 19.6 million net of cash USD 0.3 million (see note 3.1) (2) As on 2018, Loan issued includes March Term Loan B repricing operation amount to USD 879 million [split into USD 406 million US tranche and EUR 385 million euro tranche], net of the repricing bank fees paid for USD (3.2) million, February RCF drawdown for EUR 16 million equivalent to USD 19.7 million operation done in February 2018 for Covit SL acquisition. June Cap premium for EUR TLB part for USD (3) million, and US Term Loan B Novation operation USD 252.9million (see note 3.2) (3) Repayment of loans as on June 2018 are mainly impacted by March repricing operation Term loan B repayment for USD 877 million net of realized foreign exchange cash out impact (split into USD 408 million and EUR 385 million) and novation of Term Loan B to US operation USD m (see note 3.2) (4) Interests paid at the end of June 2017 include Bond redemption costs for USD 27.6 million. 7

9 CONSOLIDATED STATEMENT OF CHANGES IN PROFORMA EQUITY Proforma equity (*) Share capital Additional paid-in capital Attributable to owners of the parent Retained earnings Unrealized Cumulative gains translation (losses) adjustment s Total Non controlling interest Total proforma equity At December 31, ( ) (12 595) ( ) - ( ) Loss for the period Other comprehensive income (262) (74 130) (74 392) - (74 392) Total comprehensive income (262) (74 130) (5 550) - (5 550) Proceeds from shares issued PECS and CPEC redemption - - (78 699) - - (78 699) (78 699) At December 31, ( ) (12 857) (21 445) ( ) - ( ) Profit (Loss) for the period - - (23 418) - - (23 418) - (23 418) Other comprehensive income Total comprehensive income - - (23 418) (13 022) - (13 022) Proceeds of share issue Dividend to shareholder At ( ) (12 301) (11 605) ( ) - ( ) (*) Due to the scheme used to present the financial statements, we present a proforma equity. The notes are an integral part of the consolidated financial statements. 8

10 NOTE 1-GENERAL INFORMATION General information Albéa Beauty Holdings. (the Company ) is domiciled in Luxembourg and registered in the Luxembourg Trade and Companies Registry (Registre du Commerce et des Sociétés de Luxembourg) under number B included in the scope of consolidation constitute Albéa Group before set up of the new organization structure ( Albéa or the Group ). Albéa is one of the world s leading producers of plastic packaging products for the beauty and cosmetics industry, providing a wide range of solutions for the make-up, fragrance, skincare, personal and oral care markets. The operational headquarters of Albéa are located in Gennevilliers, France. Albéa employs about people and operates 39 manufacturing facilities in 16 different countries across Europe, the Americas and Asia The Group was created by Sun Capital after the acquisition of the Beauty Packaging business from Rio Tinto Alcan on July 2, On December 31, 2012, Albéa completed the acquisition 100% of Rexam Personal Care, a leading producer of dispensing systems and make-up packaging for the Cosmetics and Personal Care markets. On March 23, 2018, Hercule PAI Holdings SARL, managed by PAI Partner a leading pan-european private equity firm, has completed the acquisition of Albéa, the present financial statement does not include post acquisitions operations. We present here proforma combined figures to better disclose the fair performance of Albea Group from the 1st January 2018 to 30th June According to IFRS, since Hercule PAI Holdings SARL (managed by PAI Partners) is the new shareholder of the Group from 23th March 2018, we should have disclosed financial statements from the 23th March 2018 to 30th June In June 2018, restructuring operations in the US Entities took place, Albea Beauty Holding SARL sold Twist Beauty Packaging Holding Corp s. stock to Hercule Ventures Inc. in exchange for novation of Albea Beauty Holding s Term Loan B of $252.9 million. Thereafter, Twist Beauty Packaging Holding Corp Shares and ICP loans were transferred to Hercules Ventures Inc. as result of chain of transfer transactions happened between the intermediary holding entities. The next step will be the transfer of the Term Loan B to Twist Beauty Packaging Corp, this last step of this US restructuring operation is expected to be complete by Q Therefore, hereby for presenting financial statements at Albea Beauty Holdings level, we are adding up the financial statements of Hercules Ventures Inc. to obtain the full value of Term Loan B to the proforma financial statement. The consolidated financial interim statements are presented in thousands of US dollars and all values are rounded to the nearest thousand ( 000) except where otherwise indicated. 9

11 General information (continued) The new organization chart for the new structure at the closing date 2018 is as followed: 10

12 NOTE 2 ACCOUNTING POLICIES The accounting policies and practices applied are the same as those applied for the consolidated financial statements for the year ended December 31, STATEMENT OF COMPLIANCE Those condensed interim consolidated financial statements are prepared in accordance with IAS 34 Interim Financial Reporting. They do not contain all the disclosures required for annual consolidated financial statements and should therefore be read in conjunction with the Group s annual consolidated financial statements for the year ended December 31, 2017, prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted for use in the European Union ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of condensed interim consolidated financial statements requires management to exercise its judgment and make estimates and assumptions. These estimates and underlying assumptions are based on past experience and other factors considered reasonable under the circumstances. They serve as the basis for any judgment required for determining the carrying amounts of assets and liabilities when such amounts cannot be obtained directly from other sources. Actual amounts may differ from these estimates. The main sources of uncertainty relating to estimates used to prepare the condensed interim consolidated financial statements were the same as those described in the full year annual consolidated financial statements for the year ended December 31, 2017, with the exception of changes in estimates that are required in determining the provision for income taxes. 11

13 2.3. SPECIFIC ITEMS CONCERNING THE PREPARATION OF INTERIM FINANCIAL STATEMENTS For the purposes of preparing the Group s condensed interim consolidated financial statements, the following calculations and estimates are applied in addition to the recognition, measurement and presentation rules described in Note The current and deferred tax expense for the period is calculated by applying the estimated average annual tax rate for the current fiscal year to pre-tax income for the first six months of the year. The estimate average annual tax rate results from taxes on income accrued at the level of each entity of the group, using the tax rate that would be applicable to expected total annual profit or loss. - Expenses relating to pensions and other post-employment benefit obligations are estimated based on the pro-rata amount expected for the full year, except where specific events (such as a significant change in the discount rate) occur having a material impact on the consolidated financial statements, in which case adjustments are made. During the six-month period ended 2018, the discount rate have not changed significantly and there is no impact on other comprehensive income. 2.4 SEASONALITY The Group s performance is not affected by significant cyclical factors 12

14 NOTE 3 OTHER INFORMATION 3.1. COVIT ACQUISITION; On 27th of February 2018, Albéa acquired 100% of Covit S.L., a leading manufacturer of metal parts, from PHI private equity fund. Covit S.L is a leader in the drawing, anodizing, assembly and decoration of metal parts for packaging products, based in Torello, Spain. The price paid for the acquisition, amount to USD 19.3 million net of cash acquire (USD 0.3 million), funded by RFC drawdown for EUR 16 million equivalent to USD 19.7 million. COVIT SL contribution in the consolidated income statement from June 2018 as follows: - Revenue: USD 1.5 million - Net income USD 0.1 million Since the acquisition was completed on February 28, 2018, the initial accounting has been carried out on a provisional basis based on the carrying amounts in the seller s book of the assets and liabilities acquired. Some adjustments in accordance with IFRS 3R have been recorded: depreciation of receivables and inventories have been estimated in compliance with Albéa accounting policy. The final purchase price allocation has not been yet carried out as at All assets, liabilities and contingent liabilities will be measured at their final fair value in accordance with IFRS 3R Business Combinations within 12 months after the acquisition date REPRICING PROCESS Last April 2017, Albéa has completed a debt refinancing with BNP Paribas S.A. and Goldman Sachs International as Joint Global Coordinators and, together with Credit Agricole Corporate, Investment Bank, HSBC Bank PLC and ING Bank N.V. mandated Lead Arrangers and Joint Book runners to arrange a USD 923 million senior secured credit facility comprising. As a reminder: USD 818 million 7-year covenant-lite term loan B facility divided in two tranches the 408 million USD tranche at Libor US bps, with a 1% floor; the 385 million EUR tranche at Euribor bps, with a 0% floor; USD 105 million 6-year revolving credit facility. On March 28, 2018, Albéa has completed a debt repricing modifying USD tranche margin from 375 to 300 bps (floor still at 1%) and EUR tranche margin from 400 to 325 bps. The amount and maturities remain the same. The new Term loan B tranches are measured at amortized costs, this loan in the financial statement include USD 3.3 million of capitalized issuance cost. In accordance to IFRS 9, the amortized fees capitalized last April for the first insurance of the Term Loan B have been write off, for USD (18.1) million (see note 5.6). 13

15 3.2. REPRICING PROCESS (CONTINUED) Mid June 2017, USD Tranche of Luxembourg Term Loan B has been hedged by an interest rate CAP of 2% with a Maturity date of May In May 2018, EUR tranche of Luxembourg Term Loan B has been hedged by two interest rate CAPS: First of 0.25%, starting May 2018 with a maturity date of May 2020 and second of 0.75%, starting May 2020 with a maturity date of May The CAPs Premium Fair value has been recognized in Other financial assets. Albéa Beauty Holdings undertakes to comply with the specific covenant. According to the Term loan B agreement signed with the lenders on April 20, 2017, amended March , the Consolidated Senior Secured Net Debt ratio to EBITDA should remain below TERM LOAN B NOVATION In June 2018, restructuring operations in the US Entities took place, Albea Beauty Holding sold Twist Beauty Packaging Holding corp s. stock to Hercules Venture Inc in exchange for the assumption by novation of Albea Beauty Holding s Term Loan B worth $252.9 million. 14

16 NOTE 4 SEGMENT REPORTING As described below, Albéa has two operating segments, and reports the corporate costs not allocated to either of these two segments in the Corporate segment: - Tubes: laminate and plastic tubes for the oral care and cosmetics industry and dispensing system for Tubes - Cosmetic Rigid Plastic (CRP): skincare caps, lipstick, compacts, mascara, trading activities and dispensing system for Fragrance and cosmetic - Corporate: Holding & Corporate costs not allocated to the two operating segments Albéa also presents data based on three geographical market, consisting of its three main geographic markets: Europe, Americas (of which North America - includes US and Mexican activities - and South America) and Asian countries (of which China and South Asia). The Adjusted EBITDA- non-gaap Measure- is defined as operating profit before depreciation & amortization, restructuring costs and severance costs, non-recurring fees, shareholders management fees, separation costs, acquisitions, integration and transformation costs, other compensation and termination benefits, unrealized foreign exchange gains [losses], gains [losses] on disposals, impairment, bargain purchase gain. Operating segments figures in this section are the same as the figures included in the internal reporting provided to Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the executive committee that assess performance and allocates resources. Adjusted EBITDA BRIDGE Note Operating Profit Depreciation/amortization Restructuring & project costs Others 468 (10 111) Adjusted EBITDA The detail of the others is the following: Note Management fees (SUN Capital) Impairment 6.2 (136) (146) (Gains)/losses on disposals (2) (17 742) Unrealized foreign exchange (Gains)/losses on working capital (203) Other Others 468 (10 111) Unrealized forex gain (non-cash) on working capital. 15

17 4.1. SEGMENT REPORTING As at 2018 At 2018 TUBES CRP Corporate Consolidated Segment revenue Adjusted EBITDA (11 763) Depreciation/amortization (15 751) (29 588) (835) (46 174) Restructuring and projects costs (1 343) (1 502) (7 201) (10 046) Others ( 1 ) (5 843) (5 420) (468) Operating Profit (9 004) Segment assets ( 2 ) Capital expenditure of the period Cash flow (21 078) (18 912) (908) (40 898) (1) See Adjusted EBITDA Bridge.: The Others for the corporate includes mainly management fees recharged to the other segments. (2) Segment assets are reconciled with the balance sheet as follows: At 2018 (Segment assets) Notes TUBES CRP Corporate Consolidated Non current assets (*) Inventories, net WC - Receivables WC - Payables 6.13 ( ) ( ) (21 715) ( ) Segment assets (*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to CRP segment 16

18 4.1. SEGMENT REPORTING (CONTINUED) As at 2017 At 2017 Notes TUBES CRP Corporate Consolidated Segment revenue Adjusted EBITDA (5 863) Depreciation/amortization (15 159) (26 778) (678) (42 615) Restructuring and projects costs (1 533) (4 168) (4 237) (9 938) Others (1) (8 178) Operating Profit (2 372) Capital expenditure of the period Cash flow (12 282) (15 421) (857) (28 560) (1) See Adjusted EBITDA Bridge.: The Others for the corporate includes mainly management fees recharged to the other segments. As at December 31, 2017 Segment assets as December 2017 are reconciled with the balance sheet as follows: At December 31, 2017 (Segment assets) Notes TUBES CRP Corporate Consolidated Non current assets (*) Inventories, net WC - Receivables WC - Payables 6.12 ( ) ( ) (25 604) ( ) Segment assets (*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to CRP segment 17

19 4.2. GEOGRAPHICAL INFORMATION As at 2018 At 2018 Notes Europe America Asia Corporate Consolidated Revenue Adjusted EBITDA (11 763) Depreciation/amortization (20 519) (11 543) (7 234) (6 878) (46 174) Restructuring and projects costs (928) (1 766) (151) (7 201) (10 046) Others (1) (6 827) (3 650) (785) (468) Operating Profit (15 048) Geographical assets (2) Capital expenditure of the period Cash flow (20 695) (14 775) (4 519) (909) (40 898) Of which: America North America South America Total America Asia China South Asia Total Asia SALES SALES Adjusted EBITDA Adjusted EBITDA (1) See Adjusted EBITDA Bridge (2) Geographical assets are reconciled with the balance sheet as follows At 2018 Notes Europe America Asia Corporate Consolidated Non current assets (*) Inventories, net WC - Receivables WC - Payables 6.13 ( ) (83 664) (51 508) (21 715) ( ) Geographical assets (*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to Corporate Geographical area. 18

20 4.2. GEOGRAPHICAL INFORMATION (CONTINUED) As at 2017 At 2017 Notes Europe America Asia Corporate Consolidated Revenue Adjusted EBITDA (5 863) Depreciation/amortization (17 855) (11 774) (6 267) (6 719) (42 615) Restructuring and projects costs (3 399) (1 446) (857) (4 236) (9 938) Others (1) (3 605) (8 348) Operating Profit (8 411) Capital expenditure of the period Cash flow (14 572) (10 033) (3 098) (857) (28 560) Of which: America North America South America Total America Asia China South Asia SALES SALES Adjusted EBITDA Adjusted EBITDA Total Asia (1) See Adjusted EBITDA Bridge (2) December2017 Geographical assets are reconciled with the balance sheet as follows At December 31, 2017 (Geo assets) Notes Europe America Asia Corporate Consolidated Non current assets (*) (*) Inventories, net WC - Receivables WC - Payables 6.12 ( ) (78 525) (49 752) (25 604) ( ) Geographical assets (*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to Corporate Geographical area. 19

21 NOTE 5- NOTES TO THE INCOME STATEMENT 5.1. REVENUE Revenue represents sales of goods deriving from Albéa s main activities, net of value added tax (VAT). The breakdown of revenue by segment and by geographic segment is presented in the Note COST OF SALES Note Employee benefit expenses - COGS 5.9 ( ) ( ) Depreciation production assets - COGS 6.2 (37 767) (33 145) Other expenses ( ) ( ) Total cost of sales ( ) ( ) Changes in the cost of sales are directly linked to changes in revenue. Other expenses can be broken down as follows: Raw materials and components (resins, film, inks, purchase for resale, etc.) ( ) ( ) Other production consumables, energy and utilities (30 107) (27 268) Freight out costs (17 860) (14 802) Other costs (repairs, maintenance, services, etc.) (79 611) (72 287) Total other expenses (from Costs of sales) ( ) ( ) 20

22 5.3. SELLING AND ADMINISTRATIVE EXPENSES Note Employee benefit expenses - SAE 5.9 (65 897) (57 191) Depreciation and amortization - SAE (2 486) (2 563) Other expenses - SAE (33 921) (28 748) Total selling and administrative expenses ( ) (88 502) Other expenses for the period ended 2018 include mainly: External costs USD 22.3 million (mainly operational consulting and advisory fees): IT (USD 3.8 million), Finance (USD 3.8 million) and Human resources (USD 3.1 million) Selling costs: USD 3.6 million Rental costs: USD 2.5 million Travel cost USD 5.6 million Other expenses for the period ended 2017 include mainly: External costs (mainly operational consulting and advisory fees): IT (USD 5.3 million), Finance (USD 3.2 million) and Human Resources (USD 2.6 million) Selling costs: USD 3.2 million Rental costs: USD 2.3 million Travel costs: USD 4.2 million 5.4. RESTRUCTURING AND PROJECT COSTS Allowances / reversal of Restructuring provisions (non cash) (269) (945) Other costs for the year - Restructuring (9 777) (8 993) Total restructuring and project costs (10 046) (9 938) For the period ended 2018, the main components of restructuring and projects costs are as follows: USD (1.5) million, severance costs and restructuring expenses USD (2.1) million, transformation project cost USD (5.4) million, cost incurred following the change of shareholder (mainly post PAI acquisition costs) USD (0.9) million, other For the period ended 2017, the main components of restructuring and projects costs are as follows: USD (2.6) million, severance costs and restructuring expenses USD (3) million, transformation project cost (footprint optimization in Europe, lay out costs, other industrial optimization costs,..) USD (2.1) million, non-core business fees (fees incurred for shareholders projects) USD (0.4) million integration cost linked to Albéa Slovakia and merger acquisitions project costs USD (1.8) million, other 21

23 5.5. OTHER INCOME (EXPENSE) June 30, Management fees (Sun Capital) (768) (2 231) Intangible assets depreciation (*) (6 708) (6 654) Gains (losses) on disposals Unrealized forex gains (losses) on working capital 203 (5 307) Impairment charges Other - OIE (136) (1 457) Total other income/(expense) (7 271) At the end of June 2018, other income and expenses includes Intangible assets amortization. At the end of June 2017, other income and expense are mainly by the gain on disposal for USD 17.7 million related to Shenzhen Disposal. 22

24 5.6. NET FINANCE COSTS (CONTINUED) Some subsidiaries of Albéa group hedge the exposure to volatility in foreign currency when they subscribe loans or perform business transactions expressed in a currency that is not their functional currency. Changes in the fair value of these derivatives are recognized within finance income in the consolidated income statement. Unrealized income related to the underlying financial assets / liabilities is offset within finance income. Breakdown of Financial result Cost of net debt (59 234) (33 087) Interest costs on net debt (23 568) (27 272) Amortized costs (22 104) (2 174) Realized foreign exchange losses on net debt - (175) Unrealized foreign exchange losses on net debt (13 562) (2 081) Bonds break up fees (1 385) Other financial expense (1 430) (1 897) Interest costs on pensions (1 103) (1 002) Other financial expense (327) (895) Financial expense (60 664) (34 984) Other financial income Actuarial gains on other benefit obligations Realized foreign exchange gains on net debt Unrealized foreign exchange gains on net debt Other financial income Financial income Net finance costs (59 405) (3 760) The new Term loan B tranches are measured at amortized costs, this loan in the financial statement include USD 3.3 million of capitalized issuance cost. In accordance to IFRS 9, the amortized fees capitalized last April for the first insurance of the Term Loan B have been write off, for USD (18.1) included in Amortized costs in this note. This is a non-cash item linked to the translation of Bonds USD held by the company whose functional and reporting currency is euro SHARE OF PROFIT ASSOCIATES Share of profit of associates are linked to Cosmetech Mably International (HK) Ltd 5.8. INCOME TAX Analysis of the income tax expense Albéa is subject to income tax in a number of jurisdictions. Significant judgment is required in determining the provision for income tax as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Albéa recognizes liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were recorded, such differences will impact the current and deferred income tax provisions and results of operations in the period in which such ultimate tax determination is made. 23

25 5.8. INCOME TAX (CONTINUED) June 30, Current income tax charge (10 643) (9 431) Deferred income tax benefit / (charge), net Income tax benefit / (expense) (8 656) (7 654) Reconciliation between the statutory tax rate in Luxembourg and Albéa s effective tax rate Income before taxes (21 718) Standard tax rate applicable in Luxembourg (in %) 27,08% Theoretical income tax benefit / (expense) Effect of: - Differences in current tax rates of foreign countries (274) - Income not subject to tax or taxed at a reduced rate 78 - changes in caps on tax rates during the period (73) - deferred tax assets (16 018) - Utilization during the period of unused tax losses and other deductible temporary differences not previously recognized as deferred tax assets Prior year adjustments (653) - Expenses not deductible for tax purposes (544) - Other permanent differences (27) - Withholding tax (1 278) - Impacts of others Tax (French CVAE, Italian IRAP, ) (269) Actual income tax benefit / (expense) (8 656) 2018 Effective tax rate (in %) N/A The non-activation of tax losses for USD (16) million as at period ended June 2018 are mainly linked to losses making in entities where no taxable profit is expected in the foreseeable future (mainly Luxembourg) and interest expenses which are not deductible in some countries EMPLOYEE BENEFIT EXPENSES AND PERSONNEL EXPENSES Wages, salaries, social security costs and pension costs - defined contribution plans ( ) ( ) Pension costs - defined benefit plans and other post-retirement benefits (2 139) (1 714) Total employee benefit expenses ( ) ( ) Number of employees (Full Time Equivalent )

26 NOTE 6 NOTES TO THE BALANCE SHEET 6.1. GOODWILL At At December 31, Note Betts (1) Rexam PC (2) Albéa Slovakia (3) Covit (4) Goodwill (1) For the purpose of impairment testing, the goodwill related to the acquisition of Betts Group has been allocated to groups of cash-generating units, which belong to Tubes segment reporting. The variance between 2017 and 2018 is due to foreign exchange rate as Betts goodwill is in GBP. (2) Rexam PC goodwill has been allocated to a group of CGUs which uses the dispensing technology. (3) Albéa Slovakia goodwill has been allocated to the group CGUs Tube Europe The variance between 2017 and June 2018 is due to foreign exchange rate as Albéa Slovakia goodwill is recorded in EUR (4) Covit goodwill is not fully allocated. The final has to be completed within 12 months after the acquisition (see note 3.1) 6.2. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT At 2018 The following table shows the opening and closing balances and the activity of property, plant and equipment and intangible assets for the period ended Intangible assets Land Buildings Machinery and Equipment Other Construction Property, tangible assets in progress Plant and Equipment At December 31, Other additions Disposals and write-offs - - (9) (4 236) (3) 713 (3 535) Depreciation and amortization (8 935) (287) (2 910) (33 678) (1 142) (1) (38 018) Impairment charges Transfers in(out) from contructions in progress (11 577) (82) Change in the scope of consolidation (1) (10) Foreign exchange difference and other (425) (314) (4 062) (9 813) (103) (1 719) (16 011) At (1) Change in the scope of consolidation is related to Covit acquisition at February closing 2018 Construction in progress represents the value of capitalized equipment under construction and/or not yet commissioned as of June

27 At December 31, 2017 Intangible assets Land Buildings Machinery and Equipment Other Construction in tangible progress assets Property, Plant and Equipment At December 31, Additions under finance lease (6) 177 Other additions Disposals and write-offs - - (81) (2 925) (7) (72) (3 085) Depreciation and amortization (17 324) (528) (4 902) (63 449) (2 387) (127) (71 393) Impairment charges - (736) (200) Transfers in(out) from contructions in progress (35 665) (3 973) Foreign exchange difference and other Other reclassifications At December 31, Depreciation, impairment and amortization expense Total depreciation, impairment and amortization expense related to intangible assets and property, plant and equipment was charged to the consolidated income statement as follows: Cost of sales - Depreciation 2018 (37 767) Selling and administrative expenses - Depreciation (2 486) Other income and expenses - Amortization (6 708) Impairment of intangible and tangible fixed assets 136 Total depreciation, impairment and amortization expense (46 825) 26

28 6.3. OTHER FINANCIAL ASSETS At At December 31, Factoring - Financial Assets Deposits Employee loans (from French "1% logement") Term Loan B Cap Premium Fair value Other non-current financial assets Total other financial assets Of which current Of which non current As at 2018, Other non-current financial assets consist of long term receivable of USD 3.3 million linked to the acquisition of Albéa Slovakia to be received at the end of the lease on land and buildings, when Albéa will execute the buy-back option. Cap Fair value of USD 8 million includes - Term loan B USD tranche : 2% Cap Premium concluded in June 2017 on USD 388 million maturity date of May Term loan B EUR tranche : Fair value of two interest rate CAPS on Term Loan B EUR Tranche conclude in June 2018 : one of 0.25%, starting May 2018 with a maturity date of May 2020 and one of 0.75%, starting May 2020 with a maturity date of May (see note 3.2 and note 6.9) INVENTORIES Inventories are carried at the lower of cost or net realizable value, which requires the estimation of the future sales price of goods. Any differences between the expected and actual sales price achieved will be recognized in the income statement in the period in which the sale is made. At At December 31, Work in Progress Finished goods Raw Materials Provision / Impairment on Inventories (15 150) (14 796) Total inventories The amounts shown above include provisions and the elimination of the intercompany margin in finished goods inventory for Albéa entities. 27

29 6.5. TRADE AND OTHER RECEIVABLES At At December 31, Trade receivables, gross Less : impairment (1 897) (1 978) Trade receivables, net Operating Working Capital - assets Non-operating Working Capital - assets Other debtors Total Trade receivables and other debtors Due to their short-term maturities, the fair value of Trade receivables and other is close to its carrying amount. None of Albéa s trade receivables is interest bearing. The ageing of Albéa s past due trade receivables is as follows: Ageing of Albéa's past due trade receivables At At December 31, Not Due - Receivables day - Receivables Less than 1 month - Receivables Between 31 days and 60 days - Receivables Between 61 days and 90 days - Receivables - 56 Total past due trade receivables Additions to and reversals of provisions for bad debt have been included in selling and administrative expenses in the consolidated income statement. When a trade receivable is deemed uncollectible, it is written off against the provision for bad debt account. Subsequent recoveries of amounts previously written off are credited against selling and administrative expenses in the consolidated income statement CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash in bank accounts and on hand, short-term deposits held on call with banks and highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value, less bank overdrafts that are repayable on demand. At At December 31, Cash in bank accounts and on hand Short-term bank deposits and investments Cash and cash equivalents Less: Bank overdrafts repayable on demand (458) (497) Net Cash and cash equivalents Bank overdrafts are included in current borrowings (See note 6.9). Net cash and cash equivalents include USD 44 million of cash from some Asian subsidiaries which is not immediately available at group level. 28

30 6.7. ASSETS/LIABILITIES HELD FOR SALE Non-current assets (or disposal groups) held for sale Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction which is considered highly probable by Albéa's management. They are stated at the lower of carrying amount and fair value less costs to sell. As at December 31, 2017 and 2018, they include mainly Albéa Tube France: Assets for USD 0.3 million for Building in Sainte Ménéhould CAPITAL STOCK The capital of Albéa Beauty holding SA amounts to EUR BORROWINGS AND OTHER FINANCIAL LIABILITIES Changes in borrowings during the year Asset Based Lending / Factoring Term Loan B, Net (1) Other Finance lease borrowings liabilities At December 31, New finance lease obligations - - (2) - (2) Proceeds from loans other than lease obligations Repayment of loans - ( ) (4 083) (9 551) ( ) Factoring Accrued interests (3 241) (3 241) Amortization of arrangement fees Proceeds from / (repayment of) bank overdrafts (33) (33) Change in the scope of consolidation Exchange differences (745) (12 092) (549) (2 778) (16 164) At Total (1) Term Loan B, net as at December 31, 2017: include gross debt for US million, Term loan B amortized fees for USD (21.7) million. Term Loan B, net as at 2018: include gross debt for US million, Term loan B amortized fees for USD (3.2) (see note 3.2) Asset Based Lending / Factoring: Transferred assets under these factoring arrangements are Trade receivables for the Credit Agricole Leasing Factoring / Eurofactor European arrangement and Hong-Kong arrangement, and Trade receivables and Inventories for the ABL US arrangement. In accordance with IFRS9, these transferred assets are not derecognized in the financial statements as Albéa is still considered as "continuing involved" in the recoverability of these assets. When risk and rewards attached to receivables are transferred, the assets are not anymore recognized (USD 89.3 million as at 2018 net of deposit). The main components of the other borrowings are as follows: - Brazil: USD 7.1 million - Luxembourg RCF USD 18.6 million - France: USD 7.6 million - Slovakia USD 12.5 million - Accrued interest USD 0.8 million - Bank overdrafts: USD 0.5 million 29

31 6.9. BORROWINGS AND OTHER FINANCIAL LIABILITIES Net debt Net debt is a non IFRS GAAP measure which include interest bearing debt less cash and cash equivalents and finance lease receivable At At December 31, Note Asset Based Lending / Factoring Term Loan B Finance lease liabilities Other (excluding bank facilities and bank overdraft) Borrowings excluding bank facilities and bank overdraft ( A ) Other current financial assets Other non-current financial assets Other financial assets ( B ) Short-term bank deposits and investments Cash in bank accounts and on hand Bank facilities and bank overdraft (458) (497) Net Cash and cash equivalents ( C ) Net Debt ( A ) - ( B ) - ( C ) Term Loan B net as at June 2018: include gross debt for US million, Term loan B amortized fees for USD (2.2) million (see note 3.2) The maturity schedule of the borrowings is as follows: At 2018 Less than one year Between 1 and 4 years 5 years and more Total Asset Base Landing / Factoring Term Loan B Finance lease liabilities Others Gross borrowings Less: Amortized financing fees (584) (1 947) (750) (3 281) Borrowings Others include bank facilities and overdraft. 30

32 6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS The present value of Albéa s defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the defined benefit obligations and net pension costs include the expected long-term rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions may impact the amounts recorded in Albéa s consolidated financial statements. Pensions Other long-term Termination benefits Total At December 31, employee benefit obligations Current service costs Interest costs Benefits paid (871) (100) (193) (1 164) Acquisition / Divestitures Change in exchange variation (1 937) (174) (74) (2 185) Actuarial gains and losses on benefit obligations (660) - (660) At Description of plans Albéa operates a number of pension plans. Some of these plans are defined contribution plans and some are defined benefit plans (France, Germany, Indonesia, and Italy). Valuations of these plans are produced and updated annually at December 31, 2017 by qualified actuaries. Termination Termination plan concerns only German early retirement program. Pension plans The majority of Albéa's pension obligations relate to unfunded defined benefit pension plans mostly in France and Germany, and lump-sum indemnities payable upon retirement to employees in France. Pension benefits are generally based on the employee s service and highest average eligible compensation before retirement, and are periodically adjusted for increases in the cost of living, either by Albéa practices, collective agreements or statutory requirements. 31

33 6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED) Main Assumptions (rates per annum) The main assumptions used in the valuations of the plans are set out below: France Germany At 2018 Rate of increase in salaries 2.0% + nominal rate between 0.25% to 3,50% 0,00% Rate of increase in pensions N/A 2,00% Discount rate 1,30% 1,50% Inflation 2,00% 0,00% Duration 14 years 18.9 years At December 31, 2017 Rate of increase in salaries 2.0% + nominal rate between 0.25% to 3,50% 0,00% Rate of increase in pensions N/A 2,00% Discount rate 1,30% 1,50% Inflation 2,00% 0,00% Duration 14 years 18.9 years The Iboxx AA rate has been used as reference to determine the discount rate of the euro zone. Total expense and Income recognized in the consolidated income statement Note Current employer service cost for defined benefit plans (2 139) (1 714) Pension interest costs (Other than normal service costs) (1 103) (1 002) Actuarial Gain / (Losses) on other benefit obligations Total expenses (3 242) (2 298) PROVISIONS The amounts of provisions recognized represent management s best estimates of the liabilities at the reporting date. Expectations will be revised each period until the actual liability is settled, with any difference accounted for in the period in which the revision is made. (Excluding pension and OPEB) At December 31, 2017 Allowances Reversals of provisions used Reversals of provisions not used Change of scope Foreign exchange impact Other At 2018 Restructuring (1 178) (102) - (171) (40) Other provisions for risks and contingencies (92) (1 865) 810 (128) (30) Total Provisions (1 270) (1 967) 810 (299) (70) of which current - Provision of which non current - Provision The other provisions for risks and contingencies are related to employees, tax litigations and building dilapidation cost or commercial claims. 32

34 6.12. TRADE AND OTHER PAYABLES At At December 31, Trade payables Other payables Employee payables Total Trade and other payables The ageing of Albéa s past due trade payables is as follows: At At December 31, Not Due - Payables day - Payables Less than 1 month - Payables Between 31 days and 60 days - Payables Between 61 days and 90 days - Payables Between 91 days and 365 days - Payables Total past due trade payables NOTE 7- RELATED PARTIES To the best of management s knowledge, there is no significant related-parties transactions with the new shareholder PAI Partner at Albéa Beauty Holding SARL Level NOTE 8- SUBSEQUENT EVENT To the best of management s knowledge, there is no significant event that occurred since 2018, which would materially impact the interim condensed consolidated financial statements. 33