Interim report Q2 2013

Transcription

1 Company announcement no. 11/2013 August 22, 2013 SE no Interim report Q Continued progress Helping you grow

2 MANAGEMENT S REVIEW 3 Highlights 4 Objectives and strategy 6 Financial highlights and key figures 7 Financial results 9 Market and sales 11 Corporate social responsibility 12 Management s Statement ACCOUNTS AND NOTES 13 Income statement 13 Statement of comprehensive income 14 Balance sheet 15 Cash flow statement 16 Statement of changes in equity 16 Notes Presentation of financial highlights at CET President & CEO Kurt Pedersen Kaalund and Senior Vice President, Finance & Support, Jesper Barslund Jacobsen (CFO in Cheminova) will present the financial highlights for analysts and institutional investors via audiocast today, August 22, 2013, at am CET (Danish time). The presentation of the financial highlights including Q&A session and conference call can be followed directly on auriga-industries.com, where the related presentation will be available approx. 30 minutes beforehand. An indexed version of the presentation will be available on the website afterwards. Presentation, Q&A session and conference call will be conducted in English. Conference call Participants are kindly requested to call in before 9.55 am CET on tel (Danish participants) and tel (international participants) providing passcode More information about the financial statements Kurt Pedersen Kaalund, President & CEO Mobile: Jesper Barslund Jacobsen, CFO in Cheminova Mobile: Jens Ole Jensen, Vice President Mobile: Investor Relations Tel investor@auriga.dk Please notice that meetings with investors and analysts will take place on August 23, 2013 in Copenhagen. AURIGA INDUSTRIES A/S P.O. Box 9, DK-7620 Lemvig Telephone: Fax: Registered address: Finlandsgade 14, DK-8200 Århus N investor@auriga.dk SE no Visiting address: Thyborønvej 78, DK-7673 Harboøre CHEMINOVA A/S Thyborønvej 78, DK-7673 Harboøre Telephone: Fax: RISK AND FORWARD-LOOKING STATEMENTS The outlook is based on current foreign exchange rate levels, while it is also assumed that the global economic and financial situation will not materially affect business conditions for the group in Auriga s results are generally impacted by developments in the agricultural sector, and by climatic, economic, foreign exchange and market conditions, including the scope for obtaining registrations and re-registrations. Risk factors in general are described in the annual report for Forward-looking statements, including the outlook for revenue and financial results, are associated with risks and uncertainties that may cause actual results to differ materially from expectations. To the extent that legislation and good practice so require, Auriga is obliged to update and adjust specifically stated expectations. The interim report has been prepared in Danish and English. The Danish version is prevailing in case of misunderstandings arising out of the English translation. info@cheminova.com SE no Auriga Industries A/S

3 Highlights Continued satisfactory growth in Q2 (Unaudited Figures in brackets are for the prior-year period) Auriga posted revenue of DKKm 1,851 for Q2, corresponding to organic growth of 12%. Gross margin developed positively and EBITDA increased to DKKm 268. A free cash flow of DKKm 228 and improved working capital contributed to reducing net interest-bearing debt and strengthening the cash reserves. The previously announced outlook for 2013 is maintained. Organic growth for Q2 and H was 12%. Revenue increased by 7% to DKKm 1,851 (DKKm 1,727) in Q2 and in H1 by 6% to DKKm 3,521 (DKKm 3,337) due to increased volumes and implemented price increases. The divestment of Stähler Switzerland had a negative impact on revenue of DKKm 31 in Q2 and of DKKm 109 in H1. The lower exchange rates for especially BRL and INR reduced revenue in Q2 by DKKm 40 and by DKKm 81 for H1. Gross margin in Q2 is normally high totaling 31.3% (30.8%). The improvement compared to 2012 is a result of higher sales prices and an improved product mix. Fixed costs amounted to 19.4% (19.3%) of revenue as a result of increasing development activity. Earnings improved in Q2 and EBITDA increased to DKKm 268 (DKKm 250), while EBIT was DKKm 224 (DKKm 208). For H1, EBITDA was DKKm 529 (DKKm 437) corresponding to an EBITDA margin of 15.0% (13.1%), while EBIT was DKKm 432 (DKKm 356) corresponding to an EBIT margin of 12.3% (10.7%). Financing costs declined to DKKm 59 (DKKm 75) in Q2, thus resulting in a profit before tax for the group of DKKm 167 (DKKm 133) for Q2 and of DKKm 338 (DKKm 233) for H1. The working capital was further improved in Q2 with the cash flow from operating activities amounting to DKKm 308 (DKKm 345) and the free cash flow totaling DKKm 228 (DKKm 368). For H1, a cash flow from operating activities of DKKm 100 (DKKm 158) was realized, while the free cash flow was DKKm 14 (DKKm 112). The divestment of Stähler Switzerland has resulted in a net improvement of cash flows and reduced net interest-bearing debt by DKKm 76 for H1. Net interest-bearing debt (NIBD) was reduced by DKKm 174 to DKKm 1,875 (DKKm 2,049) in Q2, while the debt burden (NIBD/EBITDA) was reduced to 2.8 (3.1). Outlook 2013 It is assumed that the market conditions in H2 will continue to be positive with a healthy end to the season in the northern hemisphere in addition to continued high crop prices, which raises expectations for a good season in i.a. Latin America where large parts of the sales will happen towards the very end of the calendar year. Auriga maintains the previously announced outlook for 2013 of growth of approx. 10%, with revenue of up towards DKK 6.8 billion and an EBITDA margin of approx. 12%. Focus remains on improving working capital to realize a positive free cash flow despite maintaining the investment level in product development and production plants. Q2 Q2 H1 H1 FY DKKm Revenue 1,851 1,727 3,521 3,337 6,263 Growth 7.3% 9.7% 5.5% 12.4% 9.4% Organic growth 11.6% 9.5% 11.6% 12.5% 10.4% Gross profit ,084 1,007 1,853 Gross margin 31.3% 30.8% 30.8% 30.2% 29.6% EBITDA before special items* EBITDA margin before special items* 14.5% 14.5% 15.0% 13.1% 10.7% Profit before tax Cash flow from operating activities Free cash flow Net interest-bearing debt 1,875 2,049 1,883 * EBITDA for FY 2012 calculated before special items of DKKm 95 resulting from the arbitration case. 3 / Interim report Q / Management s review / Highlights Auriga Industries A/S

4 Objectives and strategy Growth in earnings and value creation On track to realizing the long-term strategic objectives. Earnings and value creation According to Auriga s strategic objectives, the ambition is to achieve improvements in earnings and value creation. Focus is on execution within three strategic focus areas, and the results show that we are on the right track. The continued progress achieved this year is supporting the development towards the long-term objectives for 2014 defined in 2010, which comprise: Earnings (EBITDA) in the range of 13-18%. Objectives and strategic focus areas DEVELOPMENT AND GROWTH EFFICIENCY IMPROVEMENTS AND COST CONTROL EARNINGS AND VALUE CREATION WORKING CAPITAL AND DEBT BURDEN A return on invested capital (ROIC) of approx. 15%. Ordinary earnings (EBITDA) increased to DKKm 268 (DKKm 250), and the EBITDA margin, calculated on an LTM basis (Last- Twelve-Months) in Q2, rose to 11.8% against 10.7% in the prior-year period. The return on invested capital (ROIC) on an LTM basis was up at 10.0% (8.5%) when adjusted for last year s non-recurring expense of DKKm 95 in connection with the arbitration case. Development and growth Cheminova s product portfolio has undergone considerable renewal and has in recent years been developed to include a number of new products and formulations. A broader and more differentiated product portfolio is helping to strengthen the market position through penetration into more markets and segments, thus ensuring continued growth while reducing the level of volatility in the business. In Q2, organic growth of 12% was realized, while the gross margin increased to 31.3% (30.8%). Calculated on an LTM basis, the gross margin was 29.9% (28.6%), corresponding to a 1.3 percentage point improvement. EARNINGS AND VALUE CREATION DEVELOPMENT AND GROWTH Revenue EBITDA % of revenue Revenue Gross margin DKKm % DKKm % 6, , ,000 5,500 5,000 4, ,000 5,500 5,000 4, , , The graphs are based on last-twelve-months data. 4 / Interim report Q / Management s review / Objectives and strategy Auriga Industries A/S

5 Efficiency improvements and cost control The group continues to focus on strict cost control and efficiency improvements, i.a. through the use of Lean measures in production as well as administrative functions. Capacity costs increased to DKKm 360 (DKKm 334) as a result of the increasing revenue and a high activity level within development and registration in Q2 in general as well as expensed anniversary bonuses for the employees. Together with costs related to product introductions, this has impacted the group s average fixed capacity costs, which calculated on an LTM basis increased by 0.1 percentage points to 17.4% (17.3%). The cost ratio is expected to improve for the year as a whole. Working capital and debt burden A traditionally high level of funds tied up in working capital, i.a. due to the long credit periods in Latin America, poses a considerable challenge to Cheminova and other players in the industry. The company is therefore focusing on initiatives aimed at reducing the working capital and helping to strike the right balance between continued profitable growth and the debt developments. EFFICIENCY IMPROVEMENTS AND COST CONTROL Revenue DKKm 6,500 6,000 5,500 5,000 4,500 4,000 Fixed costs in % of revenue* % * Fixed costs in production, sales, administration and development. At the end of June 2013, working capital totaled DKKm 2,371 (DKKm 2,414) corresponding to a reduction of DKKm 43. The improvement is particularly attributable to reduced inventories as well as longer credit terms with suppliers. Net trade receivables have increased by DKKm 100, though slightly improved calculated relative to revenue. The use of new financing instruments increased by DKKm 44, and was DKKm 365 (DKKm 321) at the end of Q2. WORKING CAPITAL AND DEBT BURDEN DKKm 6,500 6,000 5,500 5,000 4,500 4,000 Revenue Average working capital % % The graphs are based on last-twelve-months data. Calculated on an LTM basis, the average working capital improved 5.1 percentage points to 40.1% (45.2%) of revenue. Auriga s net interest-bearing debt was reduced by DKKm 174 to DKKm 1,875 (DKKm 2,049). The group s debt burden defined as NIBD/EBITDA was reduced to 2.8 against 3.1 at the end of Q2 last year. 5 / Interim report Q / Management s review / Objectives and strategy Auriga Industries A/S

6 Financial highlights and key figures Financial highlights and key figures Q2 Q2 H1 H1 FY DKKm Income statement: Revenue 1,851 1,727 3,521 3,337 6,263 Gross profit ,084 1,007 1,853 Operating EBITDA (before special items*) EBITDA Depreciation, amortization, impairment losses and write-downs Operating profit, EBIT (before special items*) Operating profit (EBIT) Net financials (59) (75) (94) (123) (215) Profit before tax Net profit Balance sheet: Balance sheet total 6,904 6,670 6,381 Share capital Equity 2,286 2,068 2,044 Net assets 4,311 4,217 4,138 Interest-bearing debt 2,329 2,481 2,388 Interest-bearing receivables Net interest-bearing debt 1,875 2,049 1,883 Q2 Q2 H1 H1 FY Cash flows: Cash flows from operating activities Cash flows from investing activities (80) 23 (86) (46) (204) - of which invested in property, plant and equipment (18) (31) (34) (54) (117) Free cash flow Financial ratios: EBITDA margin (before special items*) 14.5% 14.5% 15.0% 13.1% 10.7% EBITDA margin 14.5% 14.5% 15.0% 13.1% 9.2% EBIT margin (before special items*) 12.1% 12.1% 12.3% 10.7% 8.0% EBIT margin 12.1% 12.1% 12.3% 10.7% 6.5% NOPLAT ROIC ** 8.0% 8.5% 8.0% 8.5% 6.9% NIBD/EBITDA *** NIBD/equity Debt ratio 43% 49% 43% 49% 46% Share-related ratios: Profit in DKK per share of DKK Cash flows from operating activities per share of DKK Equity value in DKK per share of DKK Share price Price/earnings ratio Share price/equity value Market value 4,106 1,811 4,106 1,811 2,231 * Before special items relating to FY 2012 where the US arbitration case resulted in non-recurrent expenditures of DKKm 95. ** When calculating ROIC, NOPLAT is based on current 12 months. *** When calculating NIBD/EBITDA, EBITDA is based on current 12 months. The ratios have been calculated consistently with the annual report for / Interim report Q / Management s review / Financial highlights and key figures Auriga Industries A/S

7 Financial Satisfactory results financial results The positive developments from the beginning of the year has continued in Q2 with satisfactory financial results. Consolidated revenue Consolidated revenue increased by 7% in Q2 to DKKm 1,851 (DKKm 1,727). Adjusted for the divestment of Stähler Switzerland and the development in exchange rates, organic growth was 12%. Growth was positively impacted by price increases of approx. 3%, while the effect of exchange rate changes represented a negative impact of just over 2%, particularly due to decreased BRL and INR exchange rates. Calculated at unchanged exchange rates, revenue would have been DKKm 40 higher. Gross profit The gross profit improved at DKKm 580 (DKKm 532), and the gross margin was up 0.5 percentage points at 31.3% (30.8%). The gross margin primarily increased through an improved product mix, while the higher sales prices offset the increase in energy and raw materials costs. Costs and operating results The group s capacity costs were DKKm 360 (DKKm 334), corresponding to a cost ratio of 19.4% (19.3%). The cost increase was primarily due to increased development and registration activities. As can be seen from Table 2, development costs of DKKm 51 (DKKm 36) were capitalized, while the Table 1: Impact of divestment of Stähler Switzerland Financial reporting Net effect Stähler Switzer- Net DKKm Q Q Change land change Revenue 1,851 1, (31) 155 EBIT (4) 20 Free cash flow (140) (40) (100) Financial reporting Net effect Stähler Switzer- Net DKKm H H Change land change Revenue 3,521 3, (109) 293 EBIT Free cash flow (98) 76 (174) Table 2: Development and registration costs Q2 Q2 H1 H1 DKK mio Development costs incurred before capitalization Of which capitalized (51) (36) (76) (68) Amortization and impairment losses, development projects Earnings impact of development costs earnings impact of the development costs totaled DKKm 47 (DKKm 32). Auriga s operating profit before depreciation and amortization (EBITDA) increased to DKKm 268 (DKKm 250), corresponding to an EBITDA margin of 14.5% (14.5%). After depreciation and amortization of DKKm 44 (DKKm 42), an operating profit (EBIT) of DKKm 224 (DKKm 208) was realized, corresponding to an EBIT margin of 12.1% (12.1%). Financial items and results for the period Financial expenses declined by DKKm 16 to DKKm 59 (DKKm 75). Interest expenses were on par with the prior-year period, while the effect of exchange rate changes was less negative than in Q2 2012, when the financing costs were also affected by DKKm 12 from the divestment of Auriga Ejendomme A/S. Consolidated profit before tax increased by DKKm 34 to DKKm 167 (DKKm 133), while the profit for the period after tax totaled DKKm 115 (DKKm 100) based on an estimated tax rate of 28% (25%). The higher estimated tax rate is primarily due to an adjustment of tax assets as a consequence of a reduction in the Danish income tax. Cash flows and balance sheet The cash flows from operating activities developed positively in Q2 and totaled DKKm 308 (DKKm 345). Revenue growth of 33% in Latin America contributed to increasing net trade receivables to DKKm 2,329 (DKKm 2,229), see Table 3. Calculated relative to revenue, net trade receivables have, however, improved. The effect on trade receivables from factoring and securitization totaled DKKm 365 (DKKm 321) at the end of June. Inventories have been reduced by DKKm 38 to DKKm 1,919 (DKKm 1,957), while payables were increased to DKKm 1,424 (DKKm 1,310). 7 / Interim report Q / Management s review / Financial results Auriga Industries A/S

8 Cash flows from investing activities totaled DKKm 80 against positive net investments of DKKm 23 in Q being positively impacted by the divestment of Auriga Ejendomme A/S. Consequently, the free cash flow for the quarter totaled DKKm 228 (DKKm 368). The balance sheet total increased by DKKm 234 to DKKm 6,904 (DKKm 6,670) at the end of June. Equity was improved by DKKm 218 to DKKm 2,286 (DKKm 2,068), corresponding to an equity interest of 33% (31%). Net interest-bearing debt (NIBD) According to Table 4, net interest-bearing debt was reduced by DKKm 174 to DKKm 1,875 (DKKm 2,049). The debt reduction can be ascribed to a combination of improved earnings and working capital in addition to the divestment of Stähler Switzerland in Q1. The share of net interestbearing debt arranged in foreign currencies was 35% (50%), with 48% (55%) of the debt being fixed-interest loans. At the end of June, the debt burden (NIBD/EBITDA) has been reduced to 2.8 (3.1). Cash reserves At the end of Q2, the group s cash reserves in the form of unutilized credit facilities and cash and cash equivalents totaled DKKm 1,739 (DKKm 1,299). According to Table 5, total credit facilities amounted to DKK 3.6 billion (DKK 3.4 billion), of which DKK 2.3 billion (DKK 2.1 billion) are in the form of committed facilities falling due after more than one year. Table 3: Trade receivables factoring DKKm Trade receivables, gross 2,694 2,550 Factoring Trade receivables, net 2,329 2,229 Table 4: Net interest-bearing debt DKKm Interest-bearing debt 2,329 2,481 Cash and cash equivalents Interest-bearing receivables Net interest-bearing debt 1,875 2,049 Table 5: Credit facilities DKKbn Committed over 3 years Committed 1-3 years Committed under 1 year Committed, total % of total 64% 63% Uncommitted % of total 36% 37% Total credit facilities Cash and cash equivalents Utilized Unutilized / Interim report Q / Management s review / Financial results Auriga Industries A/S

9 Market Growth and in all sales regions Positive market and growing demand leading to increased sales globally. The crop protection industry is favored by a growing demand for food and high crop prices, which is encouraging farmers to protect their crops through the increased use of crop protection products. Despite a late start to the season in the northern hemisphere, which in Q1 led to higher distribution channel inventories, the industry experienced growth in Q2. Cheminova has managed to make the most of the favorable market conditions, and has realized organic growth of 12% for Q2 as well as H1. This means that the company has increased its global market share. In H1, all regions experienced growth in revenue and earnings except region International realizing slightly lower earnings. The positive developments can in particular be attributed to increased market penetration for products already introduced in the first markets as well as a streamlining of the product portfolio. Region Europe After a satisfactory Q1, particularly Northern Europe was affected by a cold and Revenue regions Q Europe 46% (48%) North America 10% (9%) Latin America 16% (13%) International 23% (24%) Global activities 5% (6%) Figures in brackets are Q figures. wet climate in Q2. Despite this, the region succeeded in increasing revenue and, adjusted for the divestment of Stähler Switzerland, achieved organic growth of 7% in Q2. The market in Eastern Europe and the companies in France and Germany continued the positive developments. Like the smaller companies in Eastern Europe, the company in Poland experienced increasing sales and improved earnings. In France, recently introduced products such as pethoxamide and epoxiconazole contributed to a considerable improvement in earnings. In Germany, the restructuring of Cheminova Deutschland has strengthened the business, and a successful introduction of trinexapac contributed to improved earnings. Region North America With growth in Q1 of more than 60%, the region had a good start to the year. Even though cold weather resulted in a late growing season start, revenue increased by 16% in Q2. Increased market penetration with more differentiated products, including i.a. selective herbicides and gamma-cyhalothrin, have in combination with the successful introduction of a new mixture based on flutriafol contributed to growth. A strong demand for glyphosate at Revenue product groups Q Herbicides 34% (33%) Insecticides 35% (35%) Fungicides 18% (20%) Other crop protection products 8% (7%) Other activities 5% (5%) higher prices, but continued low margins, increased revenue. Traditional OP insecticides such as dimethoate, chlorpyrifos and malathion also impacted sales positively. New product introductions, including fungicides based on azoxystrobin and several selective herbicides, are expected to strengthen the market position in the region further in the years to come. Region Latin America A streamlining of the product portfolio resulted in a slight 12% revenue decline in Q1 due to lower sales in Argentina and Colombia. Positive Q2 developments were leading to 33% revenue growth. Growth is especially driven by positive developments in Brazil, where the increasing demand for crop protection products is driven by the high crop prices. The market penetration for products based on gamma-cyhalothrin, flutriafol and azoxystrobin continues, while the market for fluazinam declined due to fewer outbreaks of white mold in soybeans. The region maintains focus on improving the product portfolio and earnings by introducing new products and phasing out less profitable products. Region International With a 5% revenue increase in Q2, the region made up for the weak start to the year. In India, a satisfactory monsoon rain ensured a positive start to the growing season. Developments have also been positive in Asia and the CIS countries. In Australia, the outlook for the coming season is more positive than in 2012, and the ongoing improvement of the product portfolio is expected to support earnings in this competitive market. Product groups In Q2, sales of herbicides increased by 11% and accounted for 34% (33%) of total revenue. The sulfonylurea herbicides have developed positively. Also, the selective herbicides based on the active ingredient pethoxamide experienced satisfactory growth. Glyphosate accounted for just over 10% of revenue due to higher market prices. 9 / Interim report Q / Management s review / Market and sales Auriga Industries A/S

10 Insecticides achieved growth of 6% in Q2 and still account for 35% (35%) of revenue. Traditional products such as chlorpyrifos, malathion and dimethoate also developed positively. Several of the newer products experienced healthy growth, including differentiated products based on gammacyhalothrin, thereby leading to increased activity levels in H1 on the production plant at the factory in Denmark. In Q2, fungicide sales were on par with the prior-year period and accounted for 18% (20%) of total revenue. Flutriafol performed particularly well, especially following a successful introduction in a new mixture in the US. The market penetration with azoxystrobin continues with registrations in several countries, and a registration application has been submitted in the US. Products based on the active ingredient epoxiconazole also experienced solid growth in Europe. Sales of other crop protection products, including micronutrients, growth regulators, etc. have developed satisfactorily accounting for 8% (7%) of revenue in Q2 among other as a result of a successful introduction of trinexapac in the first markets in Europe. Unchanged, other activities accounted for 5% (5%) of revenue. 10 / Interim report Q / Management s review / Market and sales Auriga Industries A/S

11 Corporate Social Responsibility Targets and action plans for significant activities in 2013 are outlined in Cheminova s CSR report for 2012, which is part of Auriga s annual reporting. The work in H has progressed according to plan. Since 2009, Cheminova has supported the UN Global Compact, which means that we support the endeavors to raise standards in a number of areas, such as labor rights, environmental protection as well as anticorruption, which are all covered by the company s Code of Business Principles and form part of the CSR work. Sales of crop protection products Crop protection products contribute to increasing and improving food production for the benefit of farmers and the world s population. However, the safe and correct use of these products is a prerequisite for ensuring sustainability in this area. Teaching and demonstrating the appropriate handling and use of our products is therefore an integrated part of marketing activities in the developing countries. In addition, Cheminova is actively involved in a number of the industry s activities with the purpose of improving safety, including i.a. programs for the collection and disposal of used packaging. Village projects Cheminova s mission of helping to improve the quality of life for the world s population is central to projects at village level in Brazil and India. The key elements of these projects are improved agricultural practices, the safe use of crop protection products as well as a commitment to social and educational conditions. The projects are progressing according to plan. In Brazil, the new project for sustainable protection against fungal diseases in banana growing plantations near environmentally sensitive areas is off to a good start, and the farmers in the area are increasingly interested in participating in the project. In India, all projects are progressing according to plan, an expert assessment of project progress has been launched in two project villages, and the areas covered by the Aakash Ganga project for conserving rainwater are being extended in several villages. Production Work continues at the production units to improve occupational health and safety and to reduce the company s environmental impact through specific activities concerning i.a. waste-water treatment, waste management, reduced dust emissions, energy consumption, etc. The work to achieve the defined targets is progressing as planned. Helping you grow Chemistry with Care In addition to the above-mentioned activities relating to crop protection and energy consumption, we strive to reduce the environmental exposure to xenobiotics related to the use of our products. These activities include developing effective mixtures containing more than one active ingredients in addition to product types with a lower level of volatile compounds, chemical solvents besides dry products entirely free from solvents. Furthermore, the new products developed in 2013 address the goal of reduced toxicity. Human resources The work associated with achieving the specific targets is progressing according to plan. An employee appraisal system linked to Cheminova s KPIs, the establishment of a recruitment policy and procedure in addition to the establishment of visible and successful global career paths are areas where work has been commenced and is progressing as planned. Moreover, the work environment program SAFE (aiming at improving safety standards and routines) is being further developed in Denmark with education and training of the employees. More crop protection Less chemistry Fewer resources Several new efficient products. Increased food production. Reduce environmental exposure to xenobiotics. New pro-environmental products. Efficient and energy-saving production. Reduced use of fossil fuels in manufacturing. 11 / Interim report Q / Management s review / Corporate Social Responsibility Auriga Industries A/S

12 Management s statement The Board of Directors and the Board of Executives have today considered and approved the interim report for the period January 1 - June 30, 2013 for Auriga Industries A/S. The interim report has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies, including the requirements of NASDAQ OMX Copenhagen concerning the presentation of financial statements. In our opinion, the accounting policies applied are expedient, so that the interim report gives a true and fair view of the group s assets and liabilities, financial position as at June 30, 2013 and of the results of the group s activities and cash flows for the period January 1 - June 30, In our opinion, the management s review provides a true and fair description of the development in the group s activities and financial affairs, the results for the period and the group s financial position as a whole as well as a description of the most important risks and uncertainty factors faced by the group. The interim report has not been audited or reviewed by the company s auditors. Harboøre, August 22, 2013 Board of Directors: Jens Due Olsen Torben Svejgård Lars Hvidtfeldt Chairman Deputy Chairman Jørgen Jensen Karl Anker Jørgensen Jutta af Rosenborg Kapil Kumar Saini Peder Munk Sørensen Jørn Sand Tofting Board of Executives: Kurt Pedersen Kaalund President & CEO 12 / Interim report Q / Management s review / Management s statement Auriga Industries A/S

13 Income statement Q2 Q2 H1 H1 FY DKKm Note Revenue 2 1,851 1,727 3,521 3,337 6,263 Production costs 1,271 1,195 2,437 2,330 4,410 Gross profit ,084 1,007 1,853 Other operating income Selling and distribution costs Administrative expenses Development and registration costs Operating profit before special items Special items, costs Operating profit Income from investments (18) Net financials (59) (75) (94) (123) (215) Profit before tax Tax 3 (52) (33) (95) (58) (51) Net profit To be distributed as follows: Shareholders of Auriga Industries A/S Minority interests Earnings per share (EPS): Earnings per share Diluted earnings per share Statement of comprehensive income Q2 Q2 H1 H1 FY DKKm Net profit for the period Other comprehensive income Items that may be reclassified to the income statement: Foreign currency translation adjustments of foreign enterprises (50) (24) (19) (8) 24 Fair value adjustment of financial instruments 32 (16) 22 3 (14) Other movements (5) 0 (5) 5 (3) Other comprehensive income (23) (40) (2) 0 7 Total comprehensive income / Interim report Q / Accounts and notes / Statements of Income and Comprehensive income Auriga Industries A/S

14 Balance sheet DKKm Assets Non-current assets Intangible assets 1,162 1,063 1,118 Property, plant and equipment Financial assets Total non-current assets 1,939 1,803 1,912 Current assets Inventories 1,919 1,957 1,597 Trade receivables 2,329 2,229 2,156 Income tax Other receivables Cash Total current assets 4,965 4,867 4,469 Total assets 6,904 6,670 6,381 Equity and liabilities Equity 2,281 2,058 2,035 Minority interests Total equity 2,286 2,068 2,044 Non-current liabilities Credit institutions etc. 1,446 1,497 1,347 Deferred tax Other payables Total non-current liabilities 1,537 1,551 1,448 Current liabilities Credit institutions etc ,042 Trade payables 1,424 1,310 1,134 Income tax Other payables Total current liabilities 3,081 3,051 2,889 Total liabilities 4,618 4,602 4,337 Total equity and liabilities 6,904 6,670 6, / Interim report Q / Accounts and notes / Balance sheet Auriga Industries A/S

15 Cash flow statement Q2 Q2 H1 H1 FY DKKm Note Operating profit Depreciation, amortization, impairment losses and write-downs Other adjustments Change in working capital (260) (123) 106 Operating cash flows Financial income received Financial expenses paid (93) (215) (223) (307) (500) Cash flows generated from operations Income tax paid (87) (25) (102) (54) (117) Cash flows from operating activities Acquisition of intangible assets (58) Investment concerning intangible assets under development (62) (47) (93) (93) (131) Acquisition of property, plant and equipment (18) (31) (34) (54) (117) Sale of property, plant and equipment Acquisition of financial assets (8) Sale of financial assets Cash flows from investing activities (80) 23 (86) (46) (204) Free cash flow Repayment of non-current payables (377) (100) (948) (100) (1,259) Raising of long-term loan 182 (117) ,100 Dividend paid (2) Cash flows from financing activities (195) (217) (19) (25) (161) Change in cash and cash equivalents (5) Cash and cash equivalents, beginning of period (486) (710) (459) (645) (645) Value adjustment Cash and cash equivalents, end of period (441) (536) (441) (536) (459) 15 / Interim report Q / Accounts and notes / Cash flow statement Auriga Industries A/S

16 Statement of changes in equity Accumu- Accumulated fair lated- Share Retained value translation Minority DKKm capital earnings adjustment adjustment Total interests Total Statement of changes in equity, 2013 Equity as at January 1, ,821 (1) (40) 2, ,044 Net profit for the period Other comprehensive income (19) 3 (4) (1) Equity as at June 30, , (59) 2, ,286 Accumu- Accumulated fair lated- Share Retained value translation Minority DKKm capital earnings adjustment adjustment Total interests Total Statement of changes in equity, 2012 Equity as at January 1, ,699 9 (59) 1, ,914 Net profit for the period Other comprehensive income 0 0 (13) (8) (21) 0 (21) Equity as at June 30, ,874 (4) (67) 2, ,068 Notes Unless otherwise indicated, all figures are stated in DKKm. NOTE 1 Accounting policies The interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies. No interim report has been prepared for the parent. The accounting policies have been applied consistently with the annual report for The annual report for 2012 contains the full description of the accounting policies applied and the definitions of the stated ratios. Assumptions and estimates The preparation of the interim report requires management to make assumptions and estimates that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The most significant estimates made by management in applying the group s accounting policies, and the most significant uncertainties attaching to these estimates in connection with the preparation of the interim report are the same as for the estimates in connection with the preparation of the annual report for the year ending December 31, / Interim report Q / Accounts and notes / Statement of changes in equity and notes Auriga Industries A/S

17 Notes Note 2 Segment information North Latin Inter- Global Group DKKm Europe America America national activities total Regions Q Revenue ,851 Operating profit North Latin Inter- Global Group DKKm Europe America America national activities total Regions Q Revenue ,727 Operating profit North Latin Inter- Global Group DKKm Europe America America national activities total Regions H Revenue 1, ,521 Operating profit 294* (12) 432 Net financials (94) Profit before tax 338 * The operating profit for region Europe is positively impacted by the divestment of Stähler Switzerland in Q North Latin Inter- Global Group DKKm Europe America America national activities total Regions H Revenue 1, ,337 Operating profit Net financials (123) Profit before tax 233 Activities are divided into four geographical regions: Europe, North America (USA and Canada), Latin America and International (India, Australia, New Zealand, the CIS countries: Russia, Ukraine etc., Asia, the Middle East and Africa). Global activities include Cheminova s sale of fine chemicals, the parent s direct sales to global contract customers and Auriga Ejendomme. The investment property Auriga Ejendomme A/S was divested on June 29, Other crop Herbi- Insecti- Fungi- protection Other Group DKKm cides cides cides products activities total Revenue by product groups Q ,851 Q ,727 H ,208 1, ,521 H ,114 1, ,337 Other crop protection products include micronutrients and growth regulators. Other activities include the company s sales of a number of intermediates and flotation agents for the mining industry (fine chemicals). Note 3 Tax The taxes payable stated in the income statement of the interim report have been calculated based on the profit before tax and an estimated effective tax rate for the group as a whole for The estimated effective tax rate for 2013 is 28% (compared to 25% on June 30, 2012 and for FY 2012, a tax rate of 29.5% was realized). The increased estimated tax rate is primarily due to an adjustment of tax assets as a consequense of a reduction in the Danish income tax. 17 / Interim report Q / Accounts and notes / Notes Auriga Industries A/S

18 Note 4 Change in working capital Q2 Q2 H1 H1 FY DKKm Change in receivables (305) (166) (194) Change in inventories 28 (36) (418) (417) (77) Change in trade payables etc. (197) (2) Change in securitization Total (260) (123) 106 Note 5 Divestment of subsidiary On January 29, 2013, and with closing on March 1, 2013, it was agreed to divest the wholly owned subsidiary Stähler Suisse SA (Stähler Switzerland) with revenue in 2012 of more than DKKm 100. The divestment contributed a profit for accounting purposes of DKKm 44 and reduced the net interestbearing debt by just over DKKm 100. Note 6 Contingent liabilities The parent and the group comply with all current requirements stipulated by the environmental authorities, also pumping up and treating water from the subsoil to reduce the risk of unwanted environmental impacts to the greatest possible extent. A chemical waste depot established at the factory site in Harboøre, Denmark, also complies with all statutory requirements and approvals. Removal of the depot commenced in 2012 and is expected to be completed in The provision made for removal of the depot is expected to cover the total costs of removing it. As an international group, the parent and the group s subsidiaries are regularly called in for tax and transfer pricing audits. In 2012, the parent was called in for a tax audit of FY and a transfer pricing audit in respect of FY The tax audit was completed in 2012 without reservations, while the transfer pricing audit has not yet been completed. Moreover, at the end of 2012, the group s subsidiary Cheminova France was called in for a transfer pricing audit of FY Auriga Industries A/S is jointly and severally liable with the other companies in the group s joint taxation group for the total income tax payable etc. in the group. The company respects intellectual property rights such as patents, trademarks and registration data. Own rights and the freedom to operate in relation to the rights of other companies are proactively defended. Internal processes are implemented to prevent patent infringements, and the company will concurrently defend its patent rights against other companies. Neither these issues nor any other disputes pending or concluded have materially affected or are expected to materially affect the group s financial position. Note 7 Fair value measurement of financial instruments The group uses forward exchange contracts and interest rate swaps to hedge financial risks. By June 30, 2013, the fair value of interest rate swaps was DKKm -37. Interest rate swaps are valued using level 2 inputs with recurring fair value measurements based on relevant swap curves observable. The fair value of forward exchange contracts by June 30, 2013 was DKKm 17, valued using level 2 inputs with recurring fair value measurements based on relevant foreign exchange rates observable. Listed securities, which by June 30, 2013 totaled DKKm 0.2, are categorized in level 1 in the fair value hierarchy with recurring fair value measurements based on quoted prices and price quotations. It is the group s policy to recognize transfers between the various categories from the time when an event or a change of circumstances lead to a change in categorization. No recategorizations were made between the individual levels in H The valuation methods have been applied consistently with the annual report for Note 8 Events occurring after the balance sheet date No significant events have occurred after the balance sheet date. 18 / Interim report Q / Accounts and notes / Notes Auriga Industries A/S