Interim Financial Report at 30 June 2016

Transcription

1 Interim Financial Report at 30 June 2016 (Translation from the Italian original which remains the definitive version)

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3 Interim Financial Report at 30 June 2016 Zignago Vetro SpA Registered office: Fossalta di Portogruaro (VE), Via Ita Marzotto 8 Share Capital: Euro 8,800,000 fully paid-in Tax and Venice Company Register No.:

4 Contents Group Structure pag. 3 Company bodies pag. 5 Directors Report: - The Zignago Vetro Group pag. 8 - The Company Zignago Vetro SpA pag The Consolidated Subsidiaries pag Significant events after 30 June 2016 pag Outlook pag. 53 Condensed Interim Consolidated Financial Statements at 30 June 2016: 1) Consolidated Financial Statements: - Consolidated Statement of Financial Position Pag Consolidated Income Statement pag Consolidated Statement of Comprehensive Income pag Consolidated Statement of Cash Flows Pag Statement of Changes in Consolidated Equity pag. 60 2) Notes to the Financial Statements pag. 62 Statement as per Article 81-ter of CONSOB Reg. No of May 14, 1999 and subsequent modifications and integrations pag. 98 Independent Auditors Report pag

5 STRUCTURE OF THE ZIGNAGO VETRO GROUP AT 29 JULY 2016 ACTIVITIES AND SHAREHOLDINGS ZIGNAGO VETRO SpA PRODUCTION AND SALES OF HOLLOW GLASS CONTAINERS 100% 50% 100% VERRERIES BROSSE SAS PRODUCTION AND SALE OF GLASS BOTTLES FOR LUXURY FRAGRANCES VETRI SPECIALI SpA PRODUCTION AND SALES OF SPECIALITY HOLLOW GLASS CONTAINERS HUTA SZKŁA CZECHY S.A. PRODUCTION AND SALE OF HOLLOW GLASS CONTAINERS 100% ZIGNAGO GLASS USA Inc. SALE OF GLASS CONTAINERS 30% VETRECO Srl TREATMENT AND SALE OF RECYCLED GLASS 3

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7 COMPANY BODIES Board of Directors Board of Statutory Auditors in office for the three-year period in office for the three-year period chairman Paolo Giacobbo vice chairman Nicolò Marzotto chief executive officer Paolo Giacobbo statutory auditors Alberta Gervasio - chairman Carlo Pesce Stefano Meneghini alternate auditors Cesare Conti Chiara Bedei directors Alessia Antonelli Ferdinando Businaro Giorgina Gallo Franco Grisan Daniela Manzoni Gaetano Marzotto Luca Marzotto Stefano Marzotto Franco Moscetti Manuela Romei Supervisory Board Alessandro Bentsik - chairman Massimiliano Agnetti Nicola Campana Independent Auditors Control and Risks Committee for the period Alessia Antonelli Luca Marzotto Giorgina Gallo Remuneration Committee Franco Moscetti Stefano Marzotto Daniela Manzoni KPMG SpA Management industrial director & deputy general manager Ovidio Dri chief financial officer and investor relations manager Roberto Celot Committee for Transactions with Related Parties commercial management Biagio Costantini Stefano Bortoli Manuela Romei Ferdinando Businaro Alessia Antonelli Lead Independent Director Franco Moscetti 5

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9 Directors' Report 7

10 Directors Report THE ZIGNAGO VETRO GROUP The Zignago Vetro Group operates in the production and marketing of high quality hollow glass containers prevalently for the Food and Beverage, Cosmetics and Perfumery and Specialty Glass sectors (highly customised glass containers in small batches, typically used for wine, liquors and oils). The Zignago Vetro Group utilises a business-to-business model supplying containers to its clients, which are then used in their respective industrial activities. Specifically, in the Italian market, the Group is one of the leading producers and distributors of glass containers for the food and beverage sector, while at international level it has a strong market share in the cosmetics and perfumery and specialty glass sectors. * * * The Annual and Condensed Interim Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board ( IASB ) and endorsed by the European Union in accordance with Regulation No. 1606/2002 ( IFRS ). In particular, the condensed interim consolidated financial statements of the Group at 30 June 2016 (hereafter the Condensed InterimFinancial Statements ) are prepared in accordance with IAS 34 Interim Reporting and Article 154-ter of the CFA, following the summary form permitted under the standard. The condensed interim financial statements therefore do not include all the information published in the annual report and must be read together with the financial statements at 31 December 2015 for full and complete disclosure of the Group financial position, results of operations and cash flow. The accounting policies adopted for the preparation of the Condensed InterimFinancial Statements are the same as those utilised for the consolidated financial statements of the Zignago Vetro Group at 31 December 2015, except for the adoption of the new standards, amendments and interpretations approved by the IASB and endorsed for adoption in Europe, which is obligatory for accounting periods beginning 1 January

11 Directors Report IFRS 11 - Joint arrangements, applicable for the Group as from 1 January 2014, replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities Non-Monetary Contributions by Venturers, and identifies, on the basis of the rights and obligations of the participants, two types of agreements - joint operations and joint ventures - and governs the consequent accounting treatment to be adopted for recognition in the financial statements, removing the option to consolidate jointly controlled companies proportionally and requiring jointly controlled companies defined as joint ventures to be recognised using the equity method. In the condensed interim consolidated financial statements, the comparative financial statements at 30 June 2015 and the financial statements at 31 December 2015, the Group recognised the investments held in Vetri Speciali and Vetreco, which are classified as joint ventures, under the equity method, instead of the proportional consolidation method. However, in the Directors Report the figures (and the subsequent comments) are based on the management view of the Group business, which provides for the proportional consolidation of joint ventures, in continuity with the accounting policies adopted until 31 December These figures however must not be considered as an alternative to those provided for by IFRS, but rather exclusively for supplementary disclosure and reflective of management s view of the business. For this purpose, a reconciliation of the Statement of Financial Position and of the Income Statement, prepared according to IFRS in force as from 1 January 2014 and those in force at 31 December 2013, is provided in the Directors Report. Pursuant to CONSOB communication DEM of 28 July 2006 and ESMA/2015/1415 recommendations on alternative performance indicators utilised by the Parent - which although not specifically defined by IAS/IFRS are considered particularly useful to monitor the business performance - we provide the following information: - net financial debt is defined by the Company as the sum of current loans and borrowings, cash and cash equivalents and non current loans and borrowings, net of cash and cash equivalents and current financial assets. This net figure is the same as the net financial position as per CONSOB communication No. DEM/ of 28 July 2006; - value of production: the Company defines this as the arithmetical sum of revenues, the change in finished products, semi-finished products, and work-in-progress and the internal work capitalised; - value added: the Company defines this as the difference between value of production and raw materials consumed (purchase costs plus or minus the change in raw materials and service costs ); - EBITDA: the Company defines this as a difference between value added and personnel expense (including those of temporary workers), plus the effect of the measurement of joint ventures using the equity method. EBITDA is a measure utilised by the issuer to monitor and measure operating performance although it is not an accounting measure under IFRS. The measurement criteria of this indicator may not be in line with that utilised by other entities and therefore it may not be entirely comparable. Within this context the issuer utilised a calculation model in line with its core business which included the effects deriving from the application of IFRS 11. The Company considers the results deriving from its equity investments in joint ventures as operating items and non- 9

12 Directors Report financial items of the Group s business, related to a clearly defined investment strategy and as such classified within the Groups operating results; - EBIT: the Company defines this as the difference between Ebitda and depreciation & amortisation of property, plant and equipment and intangible assets and accruals to provision for impairment; - Operating profit: this performance measure is also contained in IFRS and is defined as the difference between EBIT and the net balance of non-recurring operating costs and income. We point out that this latter item includes incidental income and costs, capital gains and losses on sales of asset, insurance compensation and other minor positive and negative items; - Free cash flow: the Company defines this as the sum of the cash flows from operating activities and cash flows from investing activities. The figures reported in the Directors Report and in the tables of the Notes are shown in thousands of Euro for greater clarity. The amounts in the Directors Report are expressed in millions of Euro, while those in the Notes are stated in thousands of Euro. * * * The Zignago Vetro Group, according to management s view, operates through six Business Units, each being a separate legal entity. Given this, information concerning the operating performance of the various operating and geographical segments (segment reporting under IFRS 8) is included in the illustration of the financial reporting data for each company and is an integral part of this Directors Report. Segment reporting which coincides with the various legal entities is provided below, independently of the respective consolidation method applied. Disclosure by geographical segments is not considered appropriate for the Group. The operating segments ( Business Units ) are identified as follows: - Zignago Vetro SpA: this Business Unit carries out the production of glass containers for food and beverages and for cosmetics and perfumery; - Zignago Glass USA Inc.: this Business Unit carries out the sales promotion of glass containers for food and beverages and for cosmetics and perfumery in North America; - Verreries Brosse SAS: this Business Unit carries out the production of glass containers for perfumes; - Vetri Speciali SpA: this Business Unit includes the production of specialty containers, principally for wine, vinegar and olive oil; 10

13 Directors Report - Huta Szkla Czechy SA: this Business Unit undertakes the production of a wide range of customised products for cosmetic and perfumery containers and also for food and beverage niche markets worldwide. - Vetreco Srl: this Business Unit is engaged in the processing of raw glass into the finished material ready for use by glassmakers. The consolidation scope of the Zignago Vetro Group at 30 June 2016 and 2015 and at 31 December 2015 was as follows: - Zignago Vetro SpA (parent) The companies consolidated using the line-by-line method are as follows: - Verreries Brosse SAS - Huta Szkła Czechy S.A. (HSC SA) - Zignago Glass USA Inc. The companies measured using the equity method are the following: - Vetri Speciali SpA - Vetreco Srl 11

14 Directors Report The basis of consolidation and measurement criteria, including the equity investments held by Zignago Vetro S.p.A. are outlined in the paragraph accounting principles and measurement criteria in the notes to the consolidated financial statements. In the Directors Report, as previously stated, the figures are based on the management view of the Group business, which provides for the proportional consolidation of joint ventures, in continuity with the accounting policies adopted until 31 December Legally-required audit The appointment for the legally required audit of the Annual Financial Statements and the review of the condensed interim financial statements was awarded to KPMG SpA for the period. Significant events in the first half of 2016 Distribution of dividends The Shareholders Meeting of Zignago Vetro SpA of 28 April 2016 approved the distribution of a dividend of Euro per share, totaling Euro 20.3 million, with payment date of 11 May Treasury shares On 28 April 2016 the Shareholders Meeting of Zignago Vetro SpA revoked, for the part not executed, the resolution granted in favour of the Board of Directors to purchase and sell treasury shares as approved by the Shareholders Meeting of 28 April 2015 and authorised the Board of Directors to purchase and sell treasury shares for a maximum number not exceeding the total nominal amount, including any shares held by subsidiaries, corresponding to one-fifth of the share capital. The new authorisation is proposed for a period of 18 months, commencing from 28 April The minimum purchase price shall not be less than 20%, and the maximum price not more than 20%, of the share price registered on the trading day prior to each transaction; the sale price shall not be 20% higher or lower than the share price registered on the trading day prior to each transaction. These price limits will not be applied where the sale of shares is to employees, including management, executive directors and consultants of Zignago Vetro and its subsidiaries in relation to incentive stock option plans. 12

15 Directors Report Within the share buy-back programme reported above, at 28 July 2016, 1,421,390 treasury shares, taking account, in respect of the number of treasury shares held, and of the effect from the Scrip issue approved on 23 April 2012, had been acquired, corresponding to 1.615% of the share capital, for a payment of Euro 5 million. In the first six months of 2016, no treasury shares were sold or acquired. 13

16 Directors Report Operating performance In the first half of the year, Beverage and Food glass container demand in Italy and Europe continued to moderately develop, supported by finished product export demand and also by a contained recovery in domestic consumption. Overall, the Perfumery markets continued to expand, with divergent performances across the various regions. The Luxury segment of the Perfumery market continued to feature excess supply, against demand which - although improving - stemmed mainly from long-standing products and the use principally of flankers for new initiatives. Demand in some Cosmetics sector segments slowed (in particular for nail varnish containers), impacted in part by socio-political conditions in a number of countries. However, positive signals emerged from some regions, among which those emerging economies with a particular demand for high product quality. The skincare segment continued to grow. Overall, in the first half of the year the Group strongly improved revenues - driven by volume growth. Results were impacted by a number of non-recurring events, some of which external to the company and particularly the repeated strikes called in France in response to the Government s labour market reform initiatives. Consolidated revenues in the first half of 2016 amounted to Euro million, an increase of 3.7% on the same period in the previous year (Euro million). Materials and external services in H1 2016, including changes in inventories and internal production, amounted to Euro 89.9 million compared to Euro 87 million in the first half of 2015 (+3.3%). As a percentage on revenues, these costs decreased from 54.2% to 54%. The consolidated added value in the first half of 2016 was Euro 76.6 million compared to Euro 73.6 million in the same period of the previous year (+4.1%). The margin was 46% compared to 45.8%. Personnel expense in the first half of 2016 amounted to Euro 38 million compared to Euro 36.3 million in the first half of 2015 (+4.6%). The increase is related to labour cost movements and an increase in the workforce. The percentage on revenues increased from 22.6% in the first half of 2015 to 22.8% in H The Consolidated EBITDA in the first half year of 2016 was Euro 38.6 million compared to Euro 37.3 million in the same period of 2015 (+3.6%) and represents 23.2% of revenues (unchanged on H1 2015). The Consolidated EBIT in H totaled Euro 21.2 million compared to Euro 20.3 million in the first half of 2015 (+4.3%). The margin was 12.7% of revenues (unchanged on the previous year). 14

17 Directors Report The consolidated operating profit in the first half of 2016 was 2% higher than the same period in the previous year (respectively Euro 21.7 million and Euro 21.3 million). The margin was 13% in the first half of 2016 compared to 13.2% in H The consolidated profit before tax for the period was Euro 18.9 million compared to Euro 19.7 million in the same period of the previous year (-4%). The margin was 11.4% in the first six months of 2016 compared to 12.3% in H The tax rate in the period was 33.5% compared to 33.3% in H The consolidated net profit in H was Euro 12.6 million compared to Euro 13.2 million in the same period of the previous year (-4.3%). The margin was 7.6% compared to 8.2% in The cash flow generated from the profit for the period and amortisation/depreciation in H amounted to Euro 29.4 million compared to Euro 29.7 million in the same period of the previous year (-0.8%). 15

18 Directors Report The key data of the Zignago Vetro Group reclassified consolidated income statement in H and 2015, according to management s view as described previously, are shown below. Change Euro thou. % Euro thou. % % Revenues 166, % 160, % 3.7% Changes in finished and semi-finished products and work in progress (1,579) (0.9%) 5, % n.a. Internal production of fixed assets and contributions on investments % % (21.3%) Value of production 165, % 166, % (0.7%) Cost of goods and services (88,867) (53.4%) (93,074) (57.9%) (4.5%) Value added 76, % 73, % 4.1% Personnel expense (37,968) (22.8%) (36,313) (22.6%) 4.6% EBITDA 38, % 37, % 3.6% Amortisation & Depreciation (16,831) (10.1%) (16,495) (10.3%) 2.0% Accruals to provisions (589) (0.4%) (442) (0.3%) 33.3% EBIT 21, % 20, % 4.3% Net recurring non-operating income % % (47.6%) O perating Profit 21, % 21, % 2.0% Net financial expense (2,455) (1.5%) (1,686) (1.0%) 45.6% Net exchange rate gains/(losses) (298) (0.2%) % n.a. Profit before taxes H H , % 19, % (4.0%) Income taxes (6,347) (3.8%) (6,578) (4.1%) (3.5%) (Tax-rate H1 2016: 33.5%) (Tax-rate H1 2015: 33.3%) Profit for the period 12, % 13, % (4.3%) Consolidated net revenues for H and 2015 were as follows: (Euro thousands) H H Change % Zignago Vetro SpA 93,439 86, % Verreries Brosse SAS 27,613 28,129 (1.8%) Vetri Speciali SpA 36,064 36,705 (1.7%) HSC SA 11,396 11, % Vetreco 1,931 1, % Zignago Glass USA Inc % Total aggregate 170, , % Elimination of intercompany sales (4,128) (3,931) 5.0% Total consolidated 166, , % 16

19 Directors Report Consolidated revenues by geographical segment for the first half 2016 and 2015 were broken down as follows: (Euro thousands) H H Change % Italy 103,667 98, % European Union (Italy excluded) 51,173 50, % Other segment 11,639 11,996 (3.0%) Total consolidated 166, , % Consolidated revenues outside Italy for the first half 2016 amounted to Euro 62.8 million, compared to Euro 62 million in the first half of 2015 (+1.3%) and account for 37.7% of total revenues (38.6% in the first half 2015). The breakdown by Company was as follows: (Euro thousands) H H Change % Zignago Vetro SpA 20,072 19, % Verreries Brosse SAS and its subsidiary 26,077 25, % Vetri Speciali SpA and its subsidiary 8,914 9,622 (7.4%) HSC SA 7,749 7, % Total 62,812 62, % The contribution to the consolidated profit for the first half of 2016 and 2015 of each of the Companies included in the consolidation scope was as follows: (Euro thousands) H H Change % Zignago Vetro SpA 16,119 13, % Verreries Brosse SAS (1,798) 686 n.a. Vetri Speciali SpA 6,840 6, % HSC SA % Vetreco Srl (158) (178) (11.2%) Zignago Glass USA Inc. (94) (24) 291.7% Total aggregate 21,625 21, % Consolidation adjustments (9,031) (8,339) 8.3% Profit for the period 12,594 13,157 (4.3%) The consolidation adjustments relate principally to the elimination of the Vetri Speciali SpA dividends (Euro 9.1 million in 2016, Euro 8.4 million in 2015). 17

20 Directors Report The key data of the reclassified consolidated IFRS income statement of the Zignago Vetro Group in H and 2015, applying IFRS 11, are illustrated below. H H Change Euro thou. % Euro thou. % % Revenues 129, % 123, % 5.0% Changes in finished and semi-finished products and work in progress (1,470) (1.1%) 6, % n.s. Internal production of fixed assets and contributions on investments % % (21.3%) Value of production 128, % 130, % (1.2%) Cost of goods and services (71,580) (55.3%) (75,201) (61.0%) (4.8%) Value added 57, % 54, % 3.8% Personnel expense (30,049) (23.2%) (29,008) (23.5%) 3.6% Investments in JV valued at Equity 6, % 6, % 3.8% EBITDA 33, % 32, % 4.0% Amortisation & Depreciation (14,752) (11.4%) (14,333) (11.6%) 2.9% Accruals to provisions (464) (0.4%) (357) (0.3%) 30.0% EBIT 18, % 17, % 4.3% Net recurring non-operating income (28) % n.s. Operating Profit 18, % 17, % 2.5% Net financial expense (2,234) (1.7%) (1,397) (1.1%) 59.9% Net exchange rate gains/(losses) (302) (0.2%) % n.s. Profit before taxes 15, % 16, % (4.9%) Income taxes (3,316) (2.6%) (3,569) (2.9%) (7.1%) (Tax-rate H1 2016: 20.8%) (Tax-rate H1 2015: 21.3%) Profit for the period 12, % 13, % (4.3%) 18

21 Directors Report For a better understanding of the performance for H1 2016, stated in accordance with management s view, a reconciliation is provided below of the reclassified income statement with joint ventures measured using the equity method and that utilising the proportional consolidation method, as adopted by the Group until 31 December Revenues H IAS/ IFRS Vetri Speciali SpA Proportional consolidation Vetreco Srl Adjustment to Parent principles Neutralisation JV under the equity method H pre- IFRS 11 (management view) Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. 129,520 36,064 1,931 (1,036) 166,479 Changes in finished and semi-finished products and work in progress (1,470) (691) (33) 615 (1,579) Internal production of fixed assets and contributions on investments Value of production 128,599 35,373 1,898 (421) ,449 Cost of goods and services (71,580) (16,046) (1,646) 405 (88,867) Value added 57,019 19, (16) ,582 Personnel expense (30,049) (7,707) (212) (37,968) Effect of measurement of JV using Equity method 6,720 (6,720) --- EBITDA 33,690 11, (16) (6,720) 38,614 Amortisation & Depreciation (14,752) (1,926) (153) (16,831) Accruals to provisions (464) (125) (589) EBIT 18,474 9,569 (113) (16) (6,720) 21,194 Net recurring non-operating income (28) Operating Profit/(loss) 18,446 10,025 (113) 56 (6,720) 21,694 Net financial expense (2,234) (146) (75) (2,455) Net exchange rate gains/(losses) (302) (298) Profit/(loss) before taxes 15,910 9,883 (188) 56 (6,720) 18,941 Income taxes (3,316) (3,043) 30 (18) --- (6,347) Profit/(loss) for the period 12,594 6,840 (158) 38 (6,720) 12,594 19

22 Directors Report Statement of financial position The reclassified statement of financial position of the Zignago Vetro Group at 30 June 2016, prepared according to management s view as described previously, is presented in condensed form and compared with 31 December and 30 June Euro thou. % Euro thou. % Euro thou. % Trade receivables 72,265 66,674 68,417 Other receivables 13,085 14,870 11,934 Inventories 73,961 77,222 73,251 Current non-financial payables (67,196) (70,934) (67,026) Payables on fixed assets (9,393) (7,975) (16,812) A) Working capital 82, % 79, % 69, % Property plant and equipment 169, , ,402 Goodwill 40,780 40,808 40,853 Other equity investments and noncurrent assets 6,701 8,133 8,145 Non-current provisions and nonfinancial payables (17,761) (18,186) (18,679) B) Net fixed capital 199, % 194, % 189, % A+B= Net capital employed 281, % 274, % 259, % Financed by: Current loans and borrowings 109, , ,789 Cash and cash equivalents (79,217) (103,542) (103,894) Current net debt 30, % % (1,105) (0.4%) Non-current loan and borrowings debt 113, % 128, % 130, % C) Net financial debt 144, % 128, % 129, % Opening equity 145, , ,766 Dividends (20,346) (17,316) (17,316) Change in translation reserve & other eq. changes Hedging reserve Profit for the period (621) ,594 29,046 13,157 D) Closing equity 137, % 145, % 129, % C+D= Total net financial debt and equity 281, % 274, % 259, % 20

23 Directors Report Working capital at 30 June 2016 increased overall by Euro 2.9 million on 31 December Trade receivables increased Euro 5.6 million, fixed asset payables increased Euro 1.4 million. There were reductions however in inventories of Euro 3.3 million, in other receivables of Euro 1.8 million and in current non-financial payables of Euro 3.7 million. Net fixed capital at 30 June 2016 increased on 31 December 2015 by Euro 4.5 million. In particular, in the period capital expenditure (Euro 25.3 million), net of disposals, was higher than depreciation (Euro 16.8 million). Capital expenditure in the first half of 2016 amounted to Euro 27.4 million (Euro 27.4 million in H1 2015) and concerns: - Zignago Vetro SpA for Euro 6.8 million for the replacement of plant, machinery and equipment, including moulds and pallets (Euro 23.3 million in the same period of 2015 and mainly relating to the refurbishment of a kiln and the replacement of plant, machinery and equipment); - Verreries Brosse SAS for Euro 1.3 million (Euro 1.5 million in the first half of 2015) principally for plant and industrial equipment, including moulds; - Vetri Speciali SpA for Euro 8.7 million (Euro 1 million in H1 2015) for payments on account for new plant and the replacement of plant and equipment; - HSC SA for Euro 8.1 million for new plant, as well as equipment and moulds (Euro 1.7 million in H for new plant). At 30 June 2016, the Zignago Vetro Group had 2,088 employees. At 31 December 2015, there were 1,975 employees, while at 30 June 2015 employees numbered 1,888. The employees of Vetri Speciali SpA and Vetreco have been fully incorporated. The composition of Group personnel at 30 June 2016 is shown in the table below. Composition Executives Managers White-collars Blue-collars Total Men (number) , Women (number) of which: - open ended contracts , term contracts Average age Years of service

24 Directors Report Equity at 30 June 2016 amounted to Euro 138 million (at 31 December 2015: Euro million; at 30 June 2015: Euro million). The decrease on 31 December 2015 is principally due to the distribution of dividends (Euro million), the translation reserve decrease (Euro -0.6 million), the hedging reserve increase (Euro +0.5 million) and the profit for the period (Euro million). The consolidated net financial debt at 30 June 2016 was Euro million (Euro million at 31 December 2015, Euro million at 30 June 2015). The cash flow movements in the consolidated net financial debt at 30 June 2016 and at 31 December 2015 and 30 June 2015 were as follows: (Euro thousands) (Euro thousands) (Euro thousands) Net financial debt at January 1 (128,960) (107,749) (107,749) Self-financing: - profit for the period 12,594 29,046 13,157 - amortisation & depreciation 16,831 32,062 16,495 - accruals to provisions, net of utilisations (651) 707 1,200 - net gains/(losses) on sale of property, plant & equipment (241) 212 (290) 28,533 62,027 30,562 Increase in working capital (2,865) (19,404) (9,311) Investments in property, plant & equipment (24,830) (50,360) (27,419) Investments in intangible assets (108) (223) (20) Net Decrease (increase) in other non-current Proceeds assets from sale of property, plant & 1,432 (410) (422) equipment 2,285 4,532 2,202 (24,086) (65,865) (34,970) Free cash flow 4,447 (3,838) (4,408) Distribution of dividends (20,346) (17,316) (17,316) Effect on equity of translation of foreign currency financial statements and other changes 660 (57) (134) (19,686) (17,373) (17,450) Increase of net financial debt (15,239) (21,211) (21,858) Net financial debt (144,199) (128,960) (129,607) 22

25 Directors Report The reclassified statement of financial position of the Zignago Vetro Group at 30 June 2016, according to IFRS in force at the 30 June 2016, including the effects of applying IFRS 11, as from 1 January 2014, compared with 31 December 2015 and 30 June 2015, is reported below: Euro thou. % Euro thou. % Euro thou. % Trade receivables 57,175 53,476 53,439 Other receivables 10,372 11,879 9,738 Inventories 64,217 66,487 63,787 Current non-financial payables (53,274) (55,554) (52,779) Payables on fixed assets (5,764) (7,320) (16,323) A) Working capital 72, % 68, % 57, % Net property, plant and equipment 132, , ,725 Goodwill Equity-accounted investees measured using the equity method 57,956 60,292 53,850 Other equity investments and noncurrent assets 6,151 7,564 7,319 Non-current provisions and nonfinancial payables (14,771) (15,137) (15,413) B) Net fixed capital 182, % 187, % 176, % A+B= Net capital employed 255, % 256, % 234, % Financed by: Current loans and borrowings 92,741 92,475 87,366 Cash and cash equivalents (79,180) (100,063) (102,998) Current net debt 13, % (7,588) (3.0%) (15,632) (6.7%) Non-current loans and borrowings 104, % 118, % 119, % C) Net financial debt 117, % 110, % 104, % Opening equity 145, , ,766 Dividends (20,346) (17,316) (17,316) Other changes in equity (621) Hedging reserve Profit for the period 12,594 29,046 13,157 D) Closing equity 137, % 145, % 129, % C+D= Total financial debt and equity 255, % 256, % 234, % 23

26 Directors Report For a better understanding of the statement of financial position at 30 June 2016, stated in accordance with management s view, a reconciliation is provided below of the financial position with joint ventures measured using the equity method and that utilising the proportional consolidation method, as adopted by the Group until 31 December IAS/IFRS Vetri Speciali SpA Proportional consolidation Vetreco Srl Adjustment to Parent policies Neutralisation JV under the equity method pre-ifrs 11 (management view) Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. Trade receivables 57,175 14, (92) 72,265 Other receivables 10,372 1, ,085 Inventories 64,217 9, (466) 73,961 Current non-financial payables (53,274) (12,548) (1,466) 92 (67,196) Payables on fixed assets (5,764) (3,604) (25) (9,393) A) Working capital 72,726 10, (466) ,722 Net property, plant and equipment 132,916 31,903 4, ,507 Goodwill ,086 40,780 Equity-accounted investees measured using the equity method 57,956 (57,956) --- Other equity investments and noncurrent assets 6, ,701 Non-current provisions and nonfinancial payables (14,771) (2,978) (12) (17,761) B) Net fixed capital 182,946 69,409 4, (57,956) 199,227 A+B= Net capital employed 255,672 79,444 5,109 (320) (57,956) 281,949 Financed by: Current loans and borrowings 92,741 11,745 5, ,611 Cash and cash equivalents (79,180) (30) (7) (79,217) Current net debt 13,561 11,715 5, ,394 Non-current loans and borrowings 104,361 9, ,805 C) Net financial debt 117,922 21,159 5, ,199 Opening equity 145,629 60, (358) (60,292) 145,629 Dividends (20,346) (9,056) 9,056 (20,346) Other changes in equity (621) (621) Hedging reserve Profit for the period 12,594 6,840 (158) 38 (6,720) 12,594 D) Closing equity 137,750 58,285 (9) (320) (57,956) 137,750 C+D= Total financial debt and equity 255,672 79,444 5,109 (320) (57,956) 281,949 24

27 Directors Report Research, development and advertising costs The companies of the Group undertook research and development focused on process and product innovation which resulted in, among other developments, the use of new materials, the introduction of new products and the application of new technical-production solutions for the food and beverages, cosmetics and perfumery and special containers sectors. The Parent also carried out research and development for the design and introduction of new information management systems, including improvements to the process IT set up, in order to create more efficient and effective operating instruments. Therefore, the Company can avail of the tax credit under Law 190/2014, establishing this amount according to the methodologies communicated in the Tax Agency Circular. Environmental information In the first half of 2016, the commitment of the Zignago Vetro Group continued in the protection of the environment with the continual improvement of the policies of territorial protection and management of environmental issues with actions aimed to reduce atmospheric emissions and energy consumption in the utilisation of natural resources and the optimisation of the production cycle, while remaining continually attentive to new and future technology developed internationally. Risks related to personnel, safety and security and management The Companies of the Zignago Vetro Group implement plant management policies to minimise the risk of accidents ensuring high levels of security in line with best industrial practices, utilising insurance to guarantee an extensive degree of protection for company structures, third party risks and interruptions in production activity. The company trains and motivates the workforce to guarantee efficiency and normal operational continuity. Personal data security and protection Pursuant to rule 26 of Attachment B of Legislative Decree No. 196 of 30 June 2003 (Employee data protection code), the Companies of the Group adopted new security measures required by the abovementioned decree and updated the Security Programming Document. 25

28 Directors Report Financial instruments: Group objectives & policies and description of risks The main financial instruments used by the Zignago Vetro Group consist of trade receivables and payables, cash & cash equivalents, bank loans and borrowings and interest rate swaps and commodity swaps. As regards the Group s financial management, the cash flows from operating activities are considered to be consistent with objectives for repayment of existing debt and such as to assure appropriate financial balance and adequate return on equity via dividend flows. At 30 June 2016 the Zignago Vetro Group had undertaken, 6 interest rate swaps in order to hedge the interest rate risk on non-current loans undertaken by the parent Zignago Vetro SpA. The markto-market of these derivatives at 30 June 2016 was as follows (in thousands of Euro): Company Bank Underlying Date Notional Expiry Market of amount at value at signing reference date Zignago Vetro SpA Unicredit Loan 31/12/ ,143 31/12/2020 (362) Zignago Vetro SpA Unicredit Loan 31/03/ ,857 31/12/2020 (482) Zignago Vetro SpA Mediobanca Loan 21/01/ ,857 31/12/2020 (275) Zignago Vetro SpA Mediobanca Loan 31/03/ ,143 31/12/2020 (367) Zignago Vetro SpA Banco Brescia Loan 18/12/ ,170 18/12/2019 (193) Zignago Vetro SpA BNL Loan 22/12/ ,000 22/06/2021 (619) Total 113,170 (2,298) The above-mentioned transactions were undertaken for hedging purposes. However, these transactions do not comply with all the requirements of IFRS to qualify for hedge accounting. For these transactions Zignago Vetro SpA does not use the so-called hedge accounting method and records the economic effects of hedging directly to profit or loss. We consider that the Zignago Vetro Group is not exposed to credit risk any higher than the industry average, given that most receivables relate to customers of well-established commercial reliability and that receivables are insured. Allowance for impairmentdebts has in any case been made to cover against any residual credit risks. We specify that such allowance were made in the period and in previous periods against specific positions involved in procedures or with longer past-due status than the Group companies average collection times. Collective allowances for impairment have also been made for potential bad debts. In relation to the currency risk the Group did not subscribe to any currency hedging instruments and, in accordance with the Group policy to date, derivative financial instruments are not taken out for trading purposes. Therefore the Group remains exposed to the currency risk on the assets and liabilities in foreign currencies at year-end, which is not considered significant. A number of Group subsidiaries are located in countries not within the Eurozone: the United States and Poland. As the Group s functional currency is the Euro, the income statements of these companies are translated 26

29 Directors Report into Euro at the average exchange rate and, on like-for-like basis for revenues and profit in the local currency, changes in the exchange rate may impact the value in Euro of revenues, costs and profit (loss) for the period. Zignago Vetro SpA is exposed to fluctuations in some commodity prices, in particular those relating to energy factors, such as fuel, utilised in the production process. In order to neutralise the price effect, as these fluctuations may significantly impact upon production costs, the Company undertook hedging transactions through the use of derivative financial instruments. At 30 June 2016 Zignago Vetro has two commodity swap contracts in place, signed with a leading Italian banking institution, to hedge against the risk in fluctuations in the cost of fuel. The mark-tomarket of these derivatives at the date of the present report was Euro +720 thousand, gross of the tax effect. Therefore, for these transactions, Zignago Vetro adopted the so-called hedge accounting method, recording the effects of the mark-to-market changes in a specific equity reserve and not through profit or loss. The Group s present reference market does not include areas possibly requiring country-risk management. Trade transactions substantially take place in western countries, primarily in the Euro and USD areas. * * * Pursuant to the Bank of Italy/ Consob /Isvap document No. 2 of February 6, 2009 and IAS , it is considered, based on the Group s strong profitability, solid financial position and in spite of the current economic environment, that there are no uncertainties or risks with regard to the going concern of the business. 27

30 Directors Report Reconciliation between the Zignago Vetro Group and the Parent Zignago Vetro SpA profit for the period and equity The reconciliation between the profit for the period and equity at 30 June of the Parent and the Consolidated profit for the period and equity are summarised below: (Euro thousands) Profit for the period H Equity Financial statements of the Parent 16,119 92,472 Consolidation adjustments: - interests in joint ventures measured using equity method 6,720 31,706 - reversal of inter-group dividend (9,056) reversal of inter-company Profit (13) (40) - goodwill on acquisition of HSC SA and adjustment to period-end exchange rate Carrying amount of equity investments: (2,349) 32,360 Verreries Brosse SAS --- (4,000) Zignago Glass USA Inc. --- (189) HSC SA --- (10,327) --- (14,516) Profit for the period and equity of the subsidiaries: Verreries Brosse SAS (1,798) 12,312 Zignago Glass USA Inc. (94) (13) HSC SA ,135 (1,176) 27,434 Consolidated financial statements 12, ,750 * * * * It is considered that the information provided, together with the information illustrated below and relating to the performance of the individual companies, represents a true, balanced and exhaustive analysis of the situation of the Group and of the results of operations, for the overall operations and in the various sectors, in accordance with the size and complexity of the Group s business operations. For greater clarity, the results of operations and statement of financial position of the parent and subsidiaries are presented according to the contribution of each of them to the Condensed Interim Consolidated at 30 June 2016 financial statements. They are shown according to normal reporting practices. 28

31 Directors Report THE COMPANY Zignago Vetro SpA In the first half of the year, Beverage and Food glass container demand in Italy and Europe continued to steadily develop, supported by finished product export demand and also by a contained recovery in domestic consumption. The global luxury Perfumery market again overall performed well, in particular the emerging economies and North America, while Europe was more stable. Demand for varnish containers in the Cosmetics sector slowed, impacted in part by socio-political conditions in certain regions. Positive signals emerged from certain emerging economies which particularly demand high product quality. The skincare segment continued to grow. The profit for the period were impacted by the consequences of an accidental fire in one of the Company facilities. 29

32 Directors Report The Zignago Vetro SpA reclassified income statement for the first half of 2016 compared to the same period of the previous year is shown below: Revenues Change Euro thou. % Euro thou. % % 93, % 86, % 7.5% Changes in finished and semi-finished products and work in progress (57) (0.1%) 2, % n.a. Internal production of fixed assets and contributions on investments % % n.a. Value of production 93, % 90, % 3.9% Cost of goods and services (52,915) (56.6%) (54,744) (63.0%) (3.3%) Value added 40, % 35, % 15.1% Personnel expense (17,630) (18.9%) (16,377) (18.8%) 7.7% EBITDA 23, % 19, % 21.4% Amortisation & Depreciation (10,175) (10.9%) (9,614) (11.1%) 5.8% Accruals to provisions (257) (0.3%) (133) (0.2%) 93.2% EBIT 12, % 9, % 36.5% Net recurring non-operating income (4) % n.a. Operating Profit 12, % 9, % 32.9% Investment income 9, % 8, % 7.8% Net financial expense (2,011) (2.2%) (995) (1.1%) 102.1% Net exchange rate gains/(losses) (61) (0.1%) % n.a. Profit before taxes H H , % 17, % 15.7% Income taxes (3,564) (3.8%) (3,077) (3.5%) 15.8% (Tax-rate H1 2016: 18.1%) (Tax-rate H1 2015: 18.1%) Profit for the period 16, % 13, % 15.7% Revenues in the first half of 2016 of Euro 93.4 million grew 7.5% on the first half of the previous year (Euro 86.9 million). Sales of glass containers and accessories (these latter referring to Zignago Vetro SpA services on the market) amounted to Euro 86.8 million, up 8.8% (Euro 79.8 million in the first half of 2015). Exports increased in H by 3.1% on the first half of the previous year, accounting for 23.9% of containers and accessories revenues (25% in 2015). 30

33 Directors Report Revenues by geographic segment, excluding sundry materials and services: (Euro thousands) H H Change % Italy 65,607 59, % European Union (Italy excluded) 15,927 16,377 (2.7%) Other segment 4,692 3, % Total 86,226 79, % of which export 20,619 19, % % 23.9% 25.0% Raw material and service costs on revenues, net of changes in inventories and internal production and grants, in H were 56.4% compared to 59.2% in H amounting to Euro 52.7 million in H and Euro 51.5 million in the first half of The added value was 43.6% of revenues in the first half of 2016 compared to 40.8% in the first half of Personnel expense increased in H compared to the same period of 2015 by 7.7% % of revenues compared to 18.8%. Ebitda totalled Euro 23.1 million in H compared to Euro 19 million in the first half of 2015 (+21.4%), a margin of 24.8% (21.9% in the first half of the previous year). Ebit in the first half of 2016 increased 36.5% on the corresponding period (Euro 12.7 million compared to Euro 9.3 million), reporting a margin 13.6% to revenues (10.7% in H1 2015). Investment income in the first half of 2016 amounting to Euro 9.1 million comprises Vetri Speciali SpA dividends (Euro 8.4 million in 2015). The profit before taxes for H was Euro 19.7 million compared to Euro 17 million in H (Euro +2.7 million; +15.7%). The margin was 21.1% compared to 19.6%. The tax rate in the period, taking account of the largely exempt investment income in the separate financial statements of Zignago Vetro, was 18.1%, in line with H The profit for H amounted to Euro 16.1 million compared to Euro 13.9 million in the first half of 2015 (+15.7%). The cash flow generated from profit for the period and amortisation/depreciation in the first half of the year amounted to Euro 26.3 million, compared to Euro 23.5 million in the same period of the previous year (+11.9%). Cash flow as a percentage of revenues was 28.1% compared to 27.1%. 31

34 Directors Report The reclassified statement of financial position of Zignago Vetro SpA at 30 June 2016, 31 December 2015 and 30 June 2015 was as follows: Euro thou. % Euro thou. % Euro thou. % Trade receivables 43,580 39,664 40,563 Other receivables 7,266 8,931 6,797 Inventories 42,077 43,168 37,665 Current non-financial payables (40,167) (42,472) (38,185) Payables on fixed assets (3,872) (5,613) (14,767) A) Working capital 48, % 43, % 32, % Net property, plant and equipment 89,705 95,034 92,379 Equity investments 40,766 40,766 40,436 Non consolidated equity investments and other non-current assets 4,042 5,867 5,911 Non-current provisions and nonfinancial payables (11,980) (12,400) (12,639) B) Net fixed capital 122, % 129, % 126, % A+B= Net capital employed 171, % 172, % 158, % Financed by: Current loans and borrowings 73,775 73,478 64,463 Cash and cash equivalents and fin.assets (89,706) (104,362) (105,168) Current net debts (15,931) (9.2%) (30,884) (17.9%) (40,705) (25.7%) Non-current loans and borrowings 94, % 107, % 112, % C) Net financial debt 78, % 76, % 71, % Opening equity 96,205 89,867 89,867 Dividends (20,346) (17,316) (17,316) Profit for the period 16,119 23,543 13,933 Hedging reserve Other changes in equity D) Closing equity 92, % 96, % 86, % C+D= Total financial debt and equity 171, % 172, % 158, % Working capital at 30 June 2016 rose on 31 December 2015 by Euro 5.2 million (+11.9%). Trade receivables increased Euro 3.9 million compared to 31 December 2015, due to seasonal effects and increased sales, with other receivables reducing Euro 1.7 million following the decrease in tax assets, while inventories decreased Euro 1.1 million (-2.5%) compared to 31 December Current nonfinancial payables decreased Euro 2.3 million compared to 31 December 2015 fixed asset payables decreased Euro 1.7 million. 32

35 Directors Report Net fixed capital at 30 June 2016 was Euro 6.7 million lower than at 31 December 2015, mainly due to lower net investments (overall Euro 4.8 million) than amortisation and depreciation of the period (Euro 10.2 million). The net capital employed at 30 June 2016 decreased Euro 1.5 million compared to 31 December The decrease in equity at 30 June 2016 of Euro 3.7 million on 31 December 2015 is due to the distribution of dividends of Euro 20.3 million greater than the profit for the period of Euro 16.1 million and the increase in the hedging reserve of Euro 0.5 million. Mainly due to investments of the period and dividends, the net financial debt at 30 June 2016 amounted therefore to Euro 78.9 million, rising Euro 2.2 million on 31 December, 2015 and Euro 7.3 million on 30 June Employees of the Company at 30 June 2016 numbered 608, broken down as follows: 11 executives, 141 white-collars and 456 blue-collars. There were 44 fixed-term employees. At 31 December 2015, employees numbered 585: 9 executives, 133 white-collars and 443 bluecollars. There were 27 fixed-term employees. At 30 June 2015, there were 605 employees, of which: 8 executives, 142 white-collars and 455 bluecollars. There were 54 fixed-term employees. Market conditions in the first part of the year, although featuring uneven performances among market segments and regions, indicate a substantial maintenance of glass container demand with a consequent expectation of improved results. 33

36 Directors Report THE CONSOLIDATED SUBSIDIARIES Verreries Brosse SAS Registered office: Vieux-Rouen-sur-Bresle (France) Business sector: glass bottles for luxury fragrances Chairman Board of Directors Paolo Giacobbo Maurizio Guseo - General Manager Roberto Celot Ovidio Dri Alberto Faggion Franco Grisan Maurizio Guseo Nicolò Marzotto Michele Pezza Global luxury Perfumery market demand remained moderately strong, driven by the emerging economies and North America, while Europe reported a slight decline. The large players again focused on long-standing products and principally relied on flankers for new initiatives. The demand for skincare containers continues to be strong. In this context, the revenues of the Company in the first half of the year were impacted by delays in the sales of bottles to the luxury spirits market, which should be re-absorbed during the year. Results were impacted by a number of external events, and particularly the repeated strikes called in France in response to the Government s labour market reform initiatives. 34

37 Directors Report The reclassified consolidated income statement of Verreries Brosse in H compared to the same period of the previous year is shown below: H H Change Euro thou. % Euro thou. % % Revenues 27, % 28, % (1.8%) Changes in finished and semi-finished products and work in progress (876) (3.2%) 4, % n.a. Value of production 26, % 32, % (16.8%) Cost of goods and services (15,916) (57.6%) (17,270) (61.4%) (7.8%) Value added 10, % 14, % (27.2%) Personnel expense (9,422) (34.1%) (9,917) (35.3%) (5.0%) EBITDA EBIT 1, % 4, % (71.7%) Amortisation & Depreciation (3,256) (11.8%) (3,497) (12.4%) (6.9%) Accruals to provisions (160) (0.6%) (195) (0.7%) n.a. (2,017) (7.3%) 1, % n.a. Net recurring non-operating income (charges) (28) (0.1%) n.a. O perating Profit/(loss) (2,045) (7.4%) 1, % n.a. Net financial expense (181) (0.7%) (348) (1.2%) (48.0%) Net exchange rate gains/(losses) (6) % n.a. Profit/(loss) before taxes (2,232) (8.1%) 1, % n.a. Income taxes % (357) (1.3%) n.a. Profit/(loss) for the period (1,798) (6.5%) % n.a. Revenues in the first half of 2016 of Euro 27.6 million reduced -1.8% on the same period of the previous year (Euro 28.1 million). Revenues by geographic segment: (Euro thousands) H H change % Italy 1,519 2,413 (37.0%) European Union (Italy excluded) 23,982 23, % Other segment 2,112 2, % Total 27,613 28,129 (1.8%) 35

38 Directors Report Material costs and external services, including changing in inventories, in the first half of 2016 were 60.8% of revenues compared to 47.1% in the first half of 2015, also due to the repeated strikes against the French Government s labour reform laws. Personnel expense in H decreased 5% on the same period of As a percentage of revenues, these costs decreased from 35.3% to 34.1%. EBITDA in the first half of 2016 totalled Euro 1.4 million, compared to Euro 4.9 million in the same period of The revenues margin was 5.1% compared to 17.6%. EBIT in HI 2016 totaled Euro -2 million compared to Euro 1.3 million in the first half of the previous year. The loss for the period before taxes in H was Euro 2.2 million (profit of Euro 1 million in the first half of 2015). The loss forthe period was Euro 1.8 million. The cash flow generated from the loss for the period and amortisation/depreciation in the first half of 2016 and 2015 amounted to Euro 1.5 million and Euro 4.2 million, respectively. 36

39 Directors Report The reclassified statement of financial position of Verreries Brosse at 30 June 2016, 31 December 2015 and 30 June 2015 was as follows: Euro thou. % Euro thou. % Euro thou. % T rade receivables 11,867 11,897 11,142 Other receivables 2,031 2,129 2,246 Inventories 17,007 18,119 20,408 Current non-financial payables (11,537) (11,228) (13,016) Payables on fixed assets (665) (1,063) (811) A) Working capital 18, % 19, % 19, % Net property, plant and equipment 22,776 24,684 25,236 Investments and non-current assets 1,610 1, Non-current provisions and nonfinancial payables (1,662) (1,585) (1,609) B) Net fixed capital 22, % 24, % 24, % A+B= Net capital employed 41, % 44, % 44, % Financed by: Current loans and borrowings 26,825 26,846 30,752 Cash and cash equivalents (6,644) (6,391) (6,723) Current net debt 20, % 20, % 24, % Non-current loans and borrowings 8, % 9, % 5, % C) Net financial debt 29, % 30, % 29, % Opening equity 14,110 13,900 13,900 Other changes in equity Profit for the period (1,798) D) Closing equity 12, % 14, % 14, % C+D= Total financial debt and equity 41, % 44, % 44, % 37

40 Directors Report Working capital at 30 June 2016 decreased Euro 1.2 million compared to 31 December 2015 (inventories decreased Euro 1.1 million, current non-financial payables increased Euro 0.3 million fixed asset payables decreased Euro 0.4 million). Compared to 30 June 2015, working capital decreased Euro 1.3 million due to the increase in trade receivables (Euro 0.7 million), the decrease in other receivables (Euro 0.2 million), the decrease in inventories (Euro 3.4 million) and the decrease in current non-financial payables (Euro 1.5 million). Net fixed capital at 30 June 2016 decreased on 31 December 2015 by Euro 1.6 million, owing principally to capital expenditures (Euro 1.3 million) lower than amortisation/depreciation (Euro 3.3 million). The net financial debt amounted to Euro 29.1 million at 30 June 2016 (Euro 30 million at 31 December 2015 and Euro 29.8 million at 30 June 2015). At30 June 2016, there were 329 employees (at 31 December and 30 June and 343 employees), respectively. In the second half of the year it is expected that the Company - in the absence of external events scope such as the strikes in the first half year - may achieve a recovery in margins. 38

41 Directors Report Huta Szkła Czechy S.A. (HSC SA) Registered office: Trabkj (Poland) Business sector: glass containers Chairman: Management Board : Paolo Giacobbo Roberto Cardini General Manager Roberto Celot Alberto Faggion Franco Grisan Nicolò Marzotto Stefano Marzotto Supervisory Board : Paolo Nicolai - chairman Stefano Perosa Carlo Pesce The European hollow glass market for Beverages and Food was unchanged compared to the first quarter of 2016, with moderate consumption demand for containers. It is currently difficult to assess the potential consequences of recent geo-political events, including Brexit. In H the global Perfumery market again performed well, supported by emerging economy and North American sales and a degree of stability in Europe. In the Cosmetics sector, demand for nail varnish products remained low, due to a reduced sell out in some countries. The political situations in Turkey, Eastern European and Venezuela have also had an impact. The skincare segment continued to grow. 39

42 Directors Report The reclassified income statement of HSC SA in the first half of 2016 compared to the previous year is shown below: H H Change Euro thou. % Euro thou. % % Revenues 11, % 11, % 1.7% Changes in finished and semifinished products and work in progress % (79) (0.7%) n.a. Internal production of fixed assets % % (0.8%) Value of production 11, % 11, % 3.0% Cost of goods and services (6,392) (56.1%) (6,766) (60.4%) (5.5%) Value added 5, % 4, % 15.5% Personnel expense (2,785) (24.4%) (2,679) (23.9%) 4.0% EBITDA 2, % 1, % 31.5% Amortisation & Depreciation (1,321) (11.6%) (1,222) (10.9%) 8.1% Accruals to provisions (47) (0.4%) (29) (0.3%) 62.1% EBIT 1, % % 72.0% Net recurring non-operating income % (75.0%) O perating Profit 1, % % 68.7% Net financial expense (42) (0.4%) (54) (0.5%) (22.2%) Net exchange rate gains/(losses) (235) (2.1%) (40) (0.4%) 487.5% Profit before taxes % % 49.2% Income taxes (191) (1.7%) (129) (1.2%) 48.1% Profit/(loss) for the period % % 49.5% 40

43 Directors Report Revenues in HI 2016 totalled Euro 11.4 million, compared to Euro 11.2 million in H (+1.7%). Exports accounted for 68.9% of revenues. Revenues include, in addition to glass containers, also decoration services and the contribution charged to clients for the creation of moulds for specific products and other services. Revenues by geographical segment: (Euro thousands) H H change % Italy 3,536 4,055 (12.8%) European Union (Italy excluded) 6,954 5, % Other segment 906 1,533 (40.9%) Total 11,396 11, % Materials and external services, including changes in inventories and internal work capitalized, amounted in the first six months of 2016 to Euro 6.1 million 53.2% of revenues (Euro 6.6 million and 58.8% in H1 2015). Personnel expense amounted to Euro 2.8 million % of revenues (23.9% in the same period of the previous year). The increase in the first six months of 2016 compared to the same period of 2015 (+4%) is principally due to the expanded workforce, related to the installation of the new furnace. EBITDA in H amounted to Euro 2.5 million a margin on revenues of % (H Euro 1.9 million % margin). EBIT totalled Euro 1.2 million in H compared to Euro 0.7 million in H1 2015, with a 10.4% margin compared to 6.1% in the previous year. The profit before taxes in H amounted to Euro 0.9 million (8% margin) compared to Euro 0.6 million in H (5.4% margin). The first half of 2016 reported a profit for the period of Euro 0.7 million compared to Euro 0.5 million in H1 2015, although with margins of 6.3% and 4.3%, respectively. The cash flow generated by the net profit and amortisation/depreciation amounted to Euro 2 million, 17.9% of revenues (in H Euro 1.7 million, 15.2% of revenues). 41

44 Directors Report The reclassified statement of financial position of HSC SA at 30 June 2016 and at 31 December and 30 June 2015 is as follows: Euro thou. % Euro thou. % Euro thou. % Trade receivables 3,319 3,100 3,617 Other receivables 1, Inventories 5,191 5,239 5,760 Current non-financial payables (3,223) (3,063) (3,490) Payables on fixed assets (1,227) (644) (745) A) Working capital 5, % 5, % 5, % Net property, plant and equipment 20,435 14,249 12,110 Other equity investments and non-current assets Non-current provisions and non-financial payables (1,129) (1,152) (1,165) B) Net fixed capital 19, % 13, % 11, % A+B= Net capital employed 24, % 19, % 17, % Financed by: Current loans and borrowings 1,139 5,451 2,651 Cash and cash equivalents (3,404) (2,551) (1,484) Current net debt (2,265) (9.1%) 2, % 1, % Non-current loans and borrowings 12, % 1, % 1, % C) Net financial debt 9, % 4, % 2, % Opening equity 15,010 13,789 13,789 Other changes in equity (591) Profit for the period 716 1, D) Closing equity 15, % 15, % 14, % C+D= Total financial debt 24, % 19, % 17, % and equity Working capital at 30 June 2016 decreased Euro 0.3 million compared to 31 December Net fixed capital amounted to Euro 19.8 million at 30 June 2016, increasing Euro 6.2 million on 31 December 2015, principally due to amortisation/depreciation (Euro 1.3 million) lower than investments (Euro 8.1 million). The debt at 30 June 2016 was Euro 9.8 million, while Euro 4 million and Euro 2.9 million at 31 December 2015 and 30 June 2015, respectively. At 30 June 2016 employees numbered 441, while 418 and 377 at 31 December and 30 June 2015, respectively. Improved business volumes and margin growth are forecast for the current year. 42

45 Directors Report Vetri Speciali SpA Registered office: Trento Via Manci, 5 Business sector: specialty glass containers Chairman: Vice Chairman: Chief Executive Officer: Directors: Statutory Auditors: Vitaliano Torno Stefano Marzotto Giorgio Mazzer Luca Marzotto Massimo Noviello Carlo Pesce - chairman Lorenzo Buraggi Stefano Meneghini In the first half of 2016, special container demand remained at strong levels. This was seen generally across all market segments, in particular for operators with a greater export focus. The sales of the company were however impacted by contingent factors and principally the timing between production and sale. It is expected however in the second quarter that these timing differences will rebalance. 43

46 Directors Report The reclassified consolidated income statement of Vetri Speciali SpA for H compared to the same period of the previous year, for the share pertaining to Zignago Vetro SpA (50%), is summarised below: Consolidated revenues in the first half of 2016 amount to Euro 36.1 million, a decrease of 1.7% compared to Euro 36.7 million in the first half of the previous year. Revenues Change Euro thou. % Euro thou. % % 36, % 36, % (1.7%) Changes in finished and semi-finished products and work in progress (691) (1.9%) (1,420) (3.9%) (51.3%) Value of production 35, % 35, % 0.2% Cost of goods and services (16,046) (44.5%) (16,870) (46.0%) (4.9%) Value added 19, % 18, % 5.0% Labour costs (7,707) (21.4%) (7,110) (19.4%) 8.4% EBITDA 11, % 11, % 2.8% Amortisation & Depreciation (1,926) (5.3%) (2,012) (5.5%) (4.3%) Provisions (125) (0.3%) (85) (0.2%) 47.1% EBIT 9, % 9, % 3.9% Net recurring non-operating income % % (25.1%) O perating Profit 10, % 9, % 2.1% Net financial charges (146) (0.4%) (212) (0.6%) (31.1%) Net exchange gains/(losses) n.a. Profit before taxes H H , % 9, % 2.7% Income taxes (3,043) (8.4%) (3,021) (8.2%) 0.7% (Tax-rate H1 2016: 30.8%) (Tax-rate H1 2015: 31.4%) Net Profit 6, % 6, % 3.6% Exports amounted to 24.7% of revenues (26.2% in the same period of 2015). Revenues by geographical segment: (Euro thousands) H H change % Italy 27,150 27, % European Union (Italy excluded) 4,995 4, % Other segment 3,919 4,726 (17.1%) Total 36,064 36,705 (1.7%) 44

47 Directors Report The share of material costs and external services in the first half of 2016, including the changes in the share of inventories, account for 46.4% of revenues compared to 49.8% in the first half of The share of personnel expense in H compared to the same period in 2015 increased by 8.4%, following the increase in the workforce also due to the new kiln currently being installed and wages increases. The share of EBITDA amounted to Euro 11.6 million in H1 2016, an increase of 2.8% compared to the same period of 2015 (Euro 11.3 million), and a margin on revenues of 32.2% (30.8% in H1 2015). The share of EBIT in the period was Euro 9.6 million, up 3.9% (Euro 9.2 million in the same period of 2015), with a margin on revenues of 26.5% compared to 25.1%. The share of profit before taxes in H rose 2.7% to Euro 9.9 million (27.4% margin) compared to Euro 9.6 million in H (26.2% margin). The tax rate in the first six months of 2016 was 30.8%, compared to 31.4% in H The share of profit for the period in H was Euro 6.8 million compared to Euro 6.6 million in the first half of the previous year (+3.6%), equal to 19% and 18% of revenues respectively. The cash flow generated from the profit for the period and amortisation/depreciation in the first half of the year amounted to Euro 8.8 million compared to Euro 8.6 million in the same period of

48 Directors Report The reclassified consolidated statement of financial position of Vetri Speciali SpA at 30 June 2016 and 31 December 2015 and 30 June 2015, for the share pertaining to Zignago Vetro SpA (50%), was as follows: Euro thou. % Euro thou. % Euro thou. % Trade receivables 14,533 12,567 14,471 Other receivables 1,714 1,865 1,690 Inventories 9,940 10,877 9,641 Current non-financial payables (12,548) (13,738) (12,903) Payables on fixed assets (3,604) (652) (486) A) Working capital 10, % 10, % 12, % Net property, plant and equipment 31,903 25,204 24,804 Goodwill 40,086 40,086 40,119 Other equity investments and noncurrent assets Non-current provisions and nonfinancial payables (2,978) (3,034) (3,255) B) Net fixed capital 69, % 62, % 62, % A+B= Net capital employed 79, % 73, % 74, % Financed by: Current loans and borrowings 11,745 6,374 10,386 Cash and cash equivalents (30) (3,479) (854) Current net debt 11, % 2, % 9, % Non-current loans and borrowings 9, % 10, % 10, % C) Net financial debt 21, % 13, % 20, % Opening equity 60,501 55,962 55,962 Dividends (9,056) (8,402) (8,402) Other changes in equity Profit for the period 6,840 12,923 6,600 D) Closing equity 58, % 60, % 54, % C+D= Total financial debt 79, % 73, % 74, % and equity The share of trade receivables at 30 June 2016 increased 15.6% (Euro 2 million) compared to 31 December 2015 and Euro 0.1 million on 30 June The share of inventories at 30 June 2016 decreased Euro 0.9 million (-8.6%) compared to 31 December 2015 and increased Euro 0.3 million (+3.1%) compared to 30 June The share of net fixed capital of Euro 69.4 million at 30 June 2016 was Euro 6.8 million higher than 31 December 2015 and Euro 7.2 million higher than 30 June 2015, due to greater capital expenditure than depreciation. 46

49 Directors Report The share of net financial debt at 30 June 2016 amounted to Euro 21.2 million, an increase of Euro 8.1 million (+61.9%) on 31 December 2015 and of Euro 0.7 million (+3.7%) on 30 June During the period the share of dividends paid was Euro 9.1 million (Euro 8.4 million in 2015). At 30 June 2016 employees numbered 684 (100% of the data), while at 31 December and 30 June and 549, respectively. Profit for the year are expected to be in line with 2015, once again supported by strong demand levels. * * * For completeness the reclassified consolidated income statement and statement of financial position of Vetri Speciali SpA (100% of the relative data) are presented below. The reclassified consolidated income statement of Vetri Speciali SpA (100% of the data) for H and H is shown below: Revenues H H Change Euro thou. % Euro thou. % % 72, % 73, % (1.7%) Changes in finished and semi-finished products and work in progress (1,382) (1.9%) (2,840) (3.9%) (51.3%) Value of production 70, % 70, % 0.2% Cost of goods and services (32,092) (44.5%) (33,740) (46.0%) (4.9%) Value added 38, % 36, % 5.0% Personnel expense (15,414) (21.4%) (14,219) (19.4%) 8.4% EBITDA 23, % 22, % 2.8% Amortisation & Depreciation (3,851) (5.3%) (4,023) (5.5%) (4.3%) Accruals to provisions (250) (0.3%) (170) (0.2%) 47.1% EBIT 19, % 18, % 3.9% Net recurring non-operating income % 1, % (25.1%) O perating Profit 20, % 19, % 2.1% Net financial expense (291) (0.4%) (423) (0.6%) (31.2%) Net exchange rate gains/(losses) n.a. Profit before taxes 19, % 19, % 2.7% Income taxes (6,088) (8.4%) (6,045) (8.2%) 0.7% Profit for the period 13, % 13, % 3.6% 47

50 Directors Report The reclassified consolidated statement of financial position of Vetri Speciali SpA (100% of the data) at 30 June 2016, 31 December 2015 and 30 June 2015 is summarised below: Euro thou. % Euro thou. % Euro thou. % T rade receivables 29,066 25,133 28,941 Other receivables 3,428 3,730 3,380 Inventories 19,879 21,754 19,282 Current non-financial payables (25,095) (27,475) (25,805) Payables on fixed assets (7,208) (1,304) (971) A) Working capital 20, % 21, % 24, % Net property, plant and equipment 63,805 50,407 49,607 Goodwill 80,171 80,171 80,237 Other equity investments and noncurrent assets Non-current provisions and nonfinancial payables (5,955) (6,067) (6,509) B) Net fixed capital 138, % 125, % 124, % A+B= Net capital employed 158, % 147, % 149, % Financed by: Current loans and borrowings 23,490 12,748 20,772 Cash and cash equivalents (60) (6,957) (1,707) Current net debt 23, % 5, % 19, % Non-current loans and borrowings 18, % 20, % 21, % C) Net financial debt 42, % 26, % 40, % Opening equity 121, , ,924 Dividends (18,112) (16,805) (16,805) Other changes in equity Profit for the period 13,681 25,847 13,200 D) Closing equity 116, % 121, % 108, % C+D= Total financial debt 158, % 147, % 149, % and equity 48

51 Directors Report Vetreco Srl Registered office: Supino (FR) Via Morolense Business sector: treatment and sale of recycled glass Chairperson: Vice Chairman: Directors: Statutory Auditors: Germana Signa Roberto Celot Rocco Furia Dario Lorenzon John Gerard Sadlier Maria Gabriella Spinelli Alberto Faggion - chairman Riccardo Bolla Augusto Valchera In the first half of 2016, the Company delivered improved production and plant performances. However, results were impacted by rising raw material procurement costs, the low quality of raw glass - still not at expected levels - and consequent higher treatment costs, in addition to longer than expected scheduled maintenance stoppages. The Company is highly focused on continual technical and organisational research to resolve existing issues and ensure better results. 49

52 Directors Report The reclassified income statement of Vetreco Srl (100% of the data) for H and 2015 is reported below: Revenues H H Change Euro % Euro % Euro 6, % 5, % 25.2% Changes in finished and semi-finished products and work in progress (110) (1.7%) % n.a. Value of production 6, % 5, % 21.9% Cost of goods and services (5,485) (85.2%) (4,495) (87.4%) 22.0% Value added % % 20.9% Personnel expense (707) (11.0%) (649) (12.6%) 8.9% EBITDA % % 183.3% Amortisation & Depreciation (511) (7.9%) (499) (9.7%) 2.4% EBIT (375) (5.8%) (451) (8.8%) (16.9%) Net recurring non-operating income O perating Loss (375) (5.8%) (451) (8.8%) (16.9%) Net financial expense (250) (3.9%) (258) (5.0%) (3.1%) Loss before taxes (625) (9.7%) (709) (13.8%) (11.8%) Income taxes % % (14.8%) Loss for the period (527) (8.2%) (594) (11.5%) (11.3%) In the first at 30 June 2016 the company reported revenues of Euro 6.4 million, principally relating to the sale of raw glass ready for kilns (Euro 5.5 million), processing of raw glass for third parties (Euro 0.7 million) and the sale of scrap metal (Euro 0.2 million). 50

53 Directors Report The reclassified statement of financial position of Vetreco Srl (100% of the data) at 30 June 2016, 31 December 2015 and 30 June 2015 was as follows: Euro % Euro % Euro % Trade receivables 2,162 2,416 1,884 Other receivables 3,329 3,754 2,290 Inventories 901 1, Current non-financial payables (4,888) (5,787) (4,674) Payables on fixed assets (82) (11) (11) A) Working capital 1, % 1, % % Net property, plant and equipment 15,625 16,019 16,243 Other equity investments and noncurrent assets Non-current provisions and nonfinancial payables (38) (47) (34) B) Net fixed capital 15, % 15, % 16, % A+B= Net capital employed 17, % 17, % 16, % Financed by: Current loans and borrowings 17,082 17,133 16,791 Cash and cash equivalents (23) --- (141) C) Net financial debt 17, % 17, % 16, % Opening equity Capital injection --- 1,100 Loss for the period (527) (1,237) (594) D) Closing equity (30) (0.2%) % % C+D = Total financial debt and equity 17, % 17, % 16, % Working capital amounted to Euro 1.4 million, a decrease of Euro 0.2 million on 31 December 2015, principally due to the decrease in trade receivables (Euro 0.3 million), other receivables (Euro 0.4 million), inventories (Euro 0.4 million) and current non-financial payables (Euro 0.9 million). Net fixed capital at 30 June 2016 was Euro 0.4 million lower than 31 December

54 Directors Report Net capital employed at 30 June 2016 decreased Euro 0.6 million compared to 31 December The reduction in equity at 30 June 2016 compared to 31 December 2015 was Euro 0.5 million, is due to the loss for the period. The net financial debt at 30 June 2016 amounted to Euro 17 million, a decrease of Euro 0.1 million on 31 December The workforce at 30 June 2016 totaled 31, of which 14 on term contracts. At 31 December 2015, the workforce numbered 17, of which 12 temporary personnel. At 30 June 2015, employees numbered 33, of which 20 on term contracts. It is expected that Company s results will improve, although this will depend on the procurement costs of raw scrap, its quality and its availability. Atypical and/or unusual transactions There were no atypical and/or unusual transactions for the period ended 30 June 2016 as defined by Consob Communication DEM/

55 Significant events after 30 June 2016 Outlook Significant events after 30 June 2016 There were no significant events after 30 June Outlook Based on the information available, demand in the sectors in which the Group operates is overall expected to remain at a good level, resulting in increased sales and margins. Fossalta di Portogruaro, 29 July 2016 For the Board of Directors The Chairman Paolo Giacobbo (signed on the original) 53

56

57 Significant events after June 30, 2015 Outlook Condensed Interim Consolidated Financial Statements Interim Consolidated Financial Statements 55

58 Condensed Interim Consolidated Financial Statements Consolidated Statement of Financial Position (Euro thousands) Note ASSETS Non-current assets Property, plant & equipment 132, , ,673 (1) Goodwill (2) Intangible assets Equity-accounted Joint Ventures 57,956 60,291 53,850 (3) Equity investments Other non-current assets 2,433 4,247 4,438 (4) Deferred tax assets 3,331 2,931 2,495 Total non-current assets 197, , ,628 Current assets Inventories 64,217 66,487 63,787 (5) Trade receivables 57,175 53,476 53,439 (6) Other current assets 7,982 9,220 7,606 (7) Tax Assets 2,390 2,659 2,132 Cash and cash equivalents 79, , ,998 (8) Total current assets 210, , ,962 TO TAL ASSETS 408, , ,590 EQUITY & LIABILITIES EQ UITY Share capital 8,800 8,800 8,800 Reserves 35,521 35,521 35,521 Treasury shares (5,027) (5,027) (5,027) Retained earnings and profit for the period 100, ,006 92,117 Other equity items (1,798) (1,671) (1,533) TO TAL EQ UITY ATTRIBUTABLE TO O WNERS O F THE PARENT 137, , ,878 EQ UITY ATTRIBUTABLE TO NO N- CO NTRO LLING INTERESTS TO TAL EQ UITY 137, , ,878 LIABILITIES Non-current liabilities Provisions for risks and charges 3,636 3,867 3,258 (10) Post-employment benefits 4,732 4,838 4,890 (11) Non-current loans and borrowings 104, , ,831 (12) Other non-current liabilities 3,820 4,063 4,590 (13) Deferred tax liabilities 2,583 2,369 2,675 Total non-current liabilities 119, , ,244 Current liabilities Bank loans and borrowings - current portion 92,741 92,475 87,366 (14) Trade and other payables 42,145 44,412 52,100 (15) Other current liabilities 16,194 16,583 16,098 (16) Current income taxes 699 1, (17) Total current liabilities 151, , ,468 TO TAL LIABILITIES 270, , ,712 TO TAL EQ UITY AND LIABILITIES 408, , ,590 (9) 56

59 Condensed Consolidated Half-Year Financial Statements Consolidated Income Statement (Euro thousands) H H Note Revenues 129, ,378 (18) Raw material, ancillaries, consumables and goods (37,707) (28,042) (19) Service costs (33,941) (39,451) (20) Personnel expense (29,952) (28,926) (21) Amortisation & Depreciation (14,752) (14,333) (22) Other operating costs (2,480) (1,799) Other operating income 1, Effect of measurement of Joint Ventures using equity method 6,720 6,471 (3) Operating Profit 18,446 17,993 Financial income Financial expense (2,328) (1,714) (23) Net exchange rate gains (losses) (302) 130 Profit before taxes 15,910 16,726 Income taxes (3,316) (3,569) (24) Profit for the period 12,594 13,157 Earnings per share: Basic (and diluted) earnings per share

60 Condensed Interim Consolidated Financial Statements Consolidated Statement of Comprehensive Income (Euro thousands) H H Profit for the period 12,594 13,157 Items that will be subsequently reclassified to profit or loss Translation difference for foreign operations (621) 271 Gains/(losses) on hedges Tax effect (226) --- (127) 271 Total Items that may be subsequently reclassified to profit or loss (127) 271 Items that will not be subsequently reclassified to profit or loss Actuarial gains/(losses) on defined benefit plans Tax effect Total items that will not be subsequently reclassified to profit or loss O ther comprehensive income (expense) for the period, net of taxes (127) 271 Total comprehensive income for the period 12,467 13,428 Attributable to: Owners of the parent 12,467 13,428 Non-controlling interests

61 Consolidated Financial Statements Consolidated Statement of Cash Flows (Euro thousands) H12016 H12015 CASH FLO WS FRO M O PERATING ACTIVITIES: Profit before taxes 15,910 16,726 Adjustments to reconcile profit for the period with cash flows generated from operating activities: Amortisation & Depreciation 14,752 14,333 Gains/ (Losses) on sale of property, plant & equipment (241) (287) Accrual to allowance for impairment Net changes in post-employment benefits (106) (125) Net changes in other provisions (231) 82 Financial income and exchange gains (94) (447) Financial expenses and exchange losses 2,630 1,714 Income taxes paid in the period (4,638) (1,122) Measurement of joint ventures at equity (6,720) (6,471) Dividends distributed by equity-accounted joint ventures 9,056 8,402 Changes in operating assets and liabilities: Decrease/(increase) in trade receivables (3,841) (5,491) Decrease/(increase) in other current assets 1,238 (900) Decrease/(increase) in inventories 2,270 (5,753) Increase/(decrease) in trade and other payables (712) 2,383 Increase/(decrease) in other current liabilities (359) 955 Change in other non-current assets and liabilities 1, Total adjustments and changes 14,717 8,224 Net Cash Flows from operating activities (A) 30,627 24,950 CASH FLO WS FRO M INVESTING ACTIVITIES: Investments in intangible assets (92) (1) Investments in property, plant and equipment (16,182) (26,415) Increase/(decrease) in trade payables for purchases of non-current assets (1,556) (3,941) Proceeds from sales of property, plant and equipment 2,280 2,163 Net cash flows used in investing activities (B) (15,550) (28,194) CASH FLO WS FRO M FINANCING ACTIVITIES: Interest paid in the period (2,660) (1,874) Interest received in the period Net change in current loans and borrowings (9,575) (5,675) Net change in non-current loans and borrowings ,950 Repayments of non-current loans and borrowings (4,133) (4,088) Dividends distributed (20,346) (17,316) Net cash flows used in financing activities Change in assets and liabilities items due to translation effect Net change in cash and cash equivalents (C) (36,620) 16,444 (D) (A+B+C+D) (20,883) 13,219 Cash and cash equivalents at beginning of period 100,063 89,779 Cash and cash equivalents at end of period 79, ,998 59

62 Condensed Interim Consolidated Financial Statements Statement of Changes in Consolidated Equity Share capital Legal reserve Revaluation reserve Other reserves Capital paid in Treasury shares Translation reserve Hedging reserve Actuarial gains/(losses) on benefits employee Balance at 31 December ,800 1,760 27,334 6, (5,027) (1,101) --- (703) 72,438 23, ,766 Retained earnings Profit for the period Total Equity Profit for the period ,157 13,157 Other comprehensive income, net of tax Total Comp. Income ,157 13,428 Allocation of profit for the period ,838 (23,838) --- Distribution dividends (17,316) --- (17,316) Other changes Balance at 30 June ,800 1,760 27,334 6, (5,027) (830) --- (703) 78,960 13, ,878 Profit for the period ,889 15,889 Other comprehensive income, net of tax effect (266) (138) Total Comp. Income (266) ,889 15,751 Other changes Balance at 31 December ,800 1,760 27,334 6, (5,027) (1,096) --- (575) 78,960 29, ,629 Profit for the period ,594 12,594 Other comprehensive income, net of tax (621) (127) Total Comp. Income (621) ,594 12,467 Allocation of profit for the period ,046 (29,046) --- Distribution of dividends (20,346) --- (20,346) Balance at 30 June ,800 1,760 27,334 6, (5,027) (1,717) 494 (575) 87,660 12, ,750 60

63 Notes to the condensed interim consolidated financial statements 61

64 Notes SUMMARY OF IFRS (INTERNATIONAL ACCOUNTING STANDARDS) USED FOR THE PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT 30 JUNE 2016 Group activities Zignago Vetro SpA is a joint stock company limited by share and is domiciled at Fossalta di Portogruaro via Ita Marzotto 8. The publication of the condensed interim consolidated financial statements at June 30, 2016 of Zignago Vetro S.p.A. was approved by the Board of Directors on 29 July General preparation criteria The condensed interim consolidated financial statements as at 30 June 2016 and for the period ended at that date are presented in accordance with IAS 34 Interim financial reporting, which relates to the reporting of interim financial information and data (the Condensed Interim Consolidated Financial Statements ). IAS 34 provides for a minimum level of information significantly lower than that generally required by IFRS, where information has already been published on the complete Financial Statements prepared in accordance with IFRS. Therefore, the present condensed interim consolidated at financial statements, which were prepared in condensed form and include the minimum disclosures required by IAS 34, should be read together with the Group consolidated financial statements as at and for the year ended 31 December 2015, prepared in accordance with the International Accounting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ) and endorsed by the European Union. IFRS include all the revised international accounting standards (IAS), and all of the interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ), previously known as the Standing Interpretations Committee ( SIC ). The consolidated interim financial statements at 30 June 2016 consist of the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Statement of Financial Position, the Consolidated Statement of Cash Flows, the Statement of changes in Equity and these Notes. The accounting policies adopted for the preparation of the Condensed Interim Consolidated Financial Statements are the same as those utilised for the consolidated financial statements of the Zignago Vetro Group at 31 December 2015, except for the adoption of new standards, amendments and interpretations approved by the IASB and endorsed in Europe,application of which is obligatory for accounting periods beginning 1 January 2016, as follows: - Amendments to IAS 27 (2011) (Equity method in the separate financial statements) 62

65 Notes This document introduces the possibility to utilise the equity method also in the Separate Financial Statements for the investments in subsidiaries, joint ventures and associates. These amendments, which also resulted in amendments to IFRS 1 and IAS 28 Investments in associates and joint ventures, contains references to IFRS 9 Financial instruments which currently may not be applied as this latter standard has not yet been endorsed by the European Union. Therefore any reference to IFRS 9 must be read as reference to IAS 39 Financial instruments: recognition and measurement. - Amendment to IAS 1 (Disclosure Initiative) These amendments clarify some aspects with reference to the presentation of financial statements underlying the significance of the disclosures in the financial statements, clarifying that there is no longer a specific order for the presentation of the Notes and permitting aggregation/de-aggregation of financial statement accounts for clearer disclosure so that the accounts considered as minimum disclosure in IAS 1 may be aggregated if considered not significant. In these evaluations professional judgement must be utilised. - Improvements in international financial reporting standards ( cycle) The amendments are within the ordinary improvement cycle to remove any inconsistencies and provide clarifications on terminology. The amendments concern: IAS 19 Employee Benefits : the IASB clarified that the discounting rate of an obligation for defined benefit plans should be established according to high-quality corporate bonds or governments bonds identified in the same currency used to pay the benefits; IFRS 7 - Financial instruments: additional disclosure: the IASB clarified that an entity which has transferred financial assets and has entirely derecognised them from their statement of financial position is required to provide supplementary information with regards to its continuing involvement, where applicable. In addition, the disclosures in accordance with IFRS 7 concerning the offsetting of financial assets and liabilities is obligatory only in relation to the annual financial statements and will be included, in the interim financial statements, only if considered necessary; IAS 34: IASB clarified that the additional disclosures required by this standard may be included in the Notes to the interim financial statements or may be included in other documents (for example the report on risks), through reference inserted in the interim financial statements, provided that that the readers of the interim financial statements have access under the same conditions and terms as to the interim financial statements. IFRS 5 Non-current assets held for sale and discontinued operations With the amendment to IAS 16 Property, plant and equipment and IAS 38 Intangible assets, the IASB clarified that the depreciation process based on revenues may not be applied with reference to property, plant and equipment, in that this method is based on factors, for example volumes and sales prices, which do not represent the effective consumption of the economic benefits of the underlying asset. The amendments to FRS 11 Accounting for Acquisitions of Interests in Joint Operations clarify the accounting treatment for the acquisition of an interest in a joint operation which represents a business. The amendments to IAS 16 Property, plant and equipment and IAS 41 Agriculture, relate to the accounting treatment of bearer fruits. The adoption of the above-mentioned standards, amendments and interpretations did not have any significant impact on the Group condensed interim financial statements. 63

66 Notes Below we report the international accounting standards, interpretations and amendments to existing accounting standards and interpretations, or specific provisions within the standards and interpretations approved by the IASB, which have not yet been endorsed in Europe at the approval date of these interim financial statements. Document title Issue date by IASB Effective entry date of the IASB document Standards IFRS 9 Financial Instruments July January 2018 IFRS 14 Regulatory Deferral Accounts January January 2016 IFRS 15 Revenues from Contracts with Customers (including amendments to effective date issued in September 2015) May January 2018 IFRS 16 Leases January 2016 January January 2019 Amendments Amendments to IFRS 10 and IAS 28 (2011): Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (including amendment to effective date issued in December 2015) September 2014 not determined Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception December January 2016 Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses January January 2017 Amendments to IAS 7: Disclosure Initiative January January 2017 The Company is analysing the content and will adopt the standards and improvements upon entry into force, although a material impact on the consolidated financial statements is not expected. The income statement and the statement of cash flows for the period ended June 30, 2016 shows the comparative figures for the period ending 30 June The statement of financial position shows the comparative figures as at 31 December 2015 and 30 June These figures are consistent with those presented at those dates and show the consolidated statement of financial position of the Zignago Vetro Group, with the full consolidation of Verreries Brosse SAS and of HSC SA and application of the equity method to Vetri Speciali SpA and Vetreco Srl.. These condensed interim consolidated financial statements of the Zignago Group as at and six months ended 30 June 2016 were prepared using the historical cost method, except for investments in financial assets and in derivative instruments, which are recognized at fair value. 64

67 Notes These condensed interim consolidated financial statements were presented in Euro, being the currency in which the Group operates and consist of the consolidated statement of financial position, the income statement, the statement of comprehensive income, the statement of cash flows, the statement of changes in consolidated equity and the notes to the financial statements. All the amounts reported in the statements and notes to the condensed interim consolidated financial statements are expressed in thousands of Euro, unless otherwise indicated. Scope and basis of consolidation The main consolidation criteria adopted were as follows: - the elimination of the carrying amount of equity investments against recognition of the relevant assets and liabilities of the subsidiary using the line-by-line method or the equity method; - the recognition of non-controlling interest in equity, if any; - the elimination of all intragroup transactions, consisting of payables and receivables, sales and purchases, and unrealised profits and losses. The assets and liabilities, expenses and income of the companies consolidated using the line-by-line method are fully included in the consolidated financial statements; the book value of the investments is eliminated against the corresponding portion of equity of the investees. At the control acquisition date, the equity of the investees is established attributing to the individual assets and liabilities their present value. Any positive difference between the acquisition cost and the fair value of the net assets acquired is recognized in the asset account Goodwill ; if negative, it is recognised in profit or loss. The shares of equity and of profit or loss for the period elating to non-controlling interests are recognised in specific accounts in equity and in profit or loss. In the case of full control not being acquired the non-controlling interest equity is established based on the share of the current value attributable to the assets and liabilities at the date of acquisition of control, excluding any attributable goodwill (so-called partial goodwill method). Alternatively, in the case of full control not being acquired, the entire amount of goodwill (negative goodwill) generated by the acquisition is recorded considering therefore also the shareholding of non-controlling interests (so-called full goodwill method); they are expressed at their overall fair value including therefore the share of goodwill (negative goodwill). The goodwill calculation method (negative goodwill) is chosen on a case by case basis for each business combination. With regard to equity investments acquired subsequent to the acquisition of control (non-controlling interest acquisitions), any difference between the acquisition cost and the corresponding portion of equity acquired is recognised in equity; similarly the effects from the sale of the non-controlling interest without loss of control are recognised in equity. 65

68 Notes If the acquisition value of the investments is above the pro-rata value of the investee s equity, the positive difference is attributed, where possible, to the net assets acquired based on the fair value while the residual is recognized in Goodwill. Goodwill is not amortised but is tested for impairment, at least annually, when events or changes occur indicating that the carrying amount can no longer be recovered. Goodwill is stated at cost net of any impairment losses. If the carrying amount of the investments is lower than the relevant portion of equity, the negative difference is recognised in profit or loss. Acquisition costs are expensed in the period. The interim financial statements of the subsidiaries utilised for the preparation of the condensed interim consolidated financial statements are those approved by the respective Board of Directors. The data of the consolidated companies are adjusted, where necessary, in line with the accounting policies utilised by the Parent, which are in accordance with the IFRS endorsed by the European Union. 66

69 Notes The companies included in the consolidation scope at 30 June 2016 and 2015 and at 31 December 2015 are shown below; the percentages of investment refer to 30 June CONSOLIDATION SCOPE Company Registered office Share/quota capital (in Units of local currency) Percentage of investment of the Group Zignago Vetro SpA (Parent) Fossalta di Portogruaro (VE) 8,800, Companies consolidated using the line by-line method: Verreries Brosse SAS Vieux-Rouen-sur-Bresle (France) 4,000, % Huta Szkła Czecky SA (HSC SA) Trabkj (Poland) PNL 3,594, % Zignago Glass USA Inc. New York (U.S.A.) USD 200, % Equity-accounted investees: Vetri Speciali SpA Trento (TN) 10,062,400 50% Vetreco Srl Supino (FR) 400,000 30% 67

70 Notes Translation of financial statements in currencies other than the Euro The rules for the translation of financial statements of Companies which operate in a currency other than the Euro are the following: - the assets and the liabilities are translated using the exchange rate at the reporting date; - the costs and revenues, and income and expenses, are translated using the average exchange rate for the period; - the Translation reserve includes both the exchange rate differences generated from the translation of foreign currency profit and loss items and at a rate different from the closing rate exchange and also those generated from the translation of opening equity at a closing rate exchange which is different ratefrom those using in prior period closing ; - goodwill related to the acquisition of a foreign entity is treated as assets and liabilities of the foreign entity and translated at the closing rate. For the translation of the Financial Statements expressed in foreign currencies, the rates indicated in the following table are applied (foreign currency for every 1 Euro). Description USD US Dollar PLN Polish Zloty Average exchange rate: - January/June January/December January/June Closing exchange rate at: - 30 June December June Use of estimates The preparation of the Condensed Interim Consolidated Financial Statements and the relative notes in application of IFRS require that management make estimates and assumptions on the values of the assets and liabilities in the interim consolidated financial statements and on the disclosure relating to the contingent assets and liabilities at the balance sheet date. The actual figures may differ from those estimated. The estimates are used to determine the accruals to the allowance for impairment, the provision for inventory write-down, depreciation and amortisation, impairment losses on assets, employee benefits, income taxes, other provisions and funds. The estimates and assumptions are reviewed periodically and the effects of all variations are immediately recognised in profit or loss. The estimation criteria are the same for all periods presented. 68

71 Notes IFRS 13 requires that the financial instruments measured at fair value are classified based on three fair value hierarchy levels which reflect the significance of the input utilised in the determination of fair value. Based on the standard, the three fair value levels are as follows: Level 1 of fair value: the measurement inputs of the instrument are quoted prices for identical instruments in active markets that the entity can access at the measurement date; Level 2 of fair value: the measurement inputs of the instrument are different from the abovementioned quoted prices and are directly or indirectly observable on the market; Level 3 of fair value: the measurement inputs of the instrument are not based on observable market data. As indicated by the regulation, the hierarchy of the approaches adopted for the determination of all financial instruments (shares, units, bonds and derivatives), attributes priority to official prices available on active markets for the assets and liabilities to be measured and, in their absence, to the measurement of assets and liabilities based on significant quotations, where they refer to similar assets and liabilities. On a residual basis, measurement techniques may be utilised based on nonobservable inputs, and, therefore, more discretional. Assets and liabilities measured at fair value on a recurring basis: breakdown by fair value level The following table shows the assets and liabilities measured at fair value at 30 June 2016 by fair value hierarchy level. Book Fair Value Value Level Total Financial assets not measured at Fair Value Cash and cash equivalents (*) Trade receivables (*) Financial assets measured at Fair Value Hedges 79, , Financial liabilities not measured at Fair Value Non-current loans and borrowings (*) 104,361 0 Bank loans and borrowings and current portion of non-current loans and borrowings 92,741 Other non-current payables (*) Trade and other payables (*) 3, ,145 0 (*) The amounts refer to current financial assets and liabilities whose book value reasonably approximates fair value, which consequently has not been stated. 69

72 Notes NOTES TO THE MAIN STATEMENT OF FINANCIAL POSITION ITEMS NON-CURRENT ASSETS Property, plant & equipment 132, , ,673 Property, plant and equipment at 30 June 2016 amounted to Euro 132,795 thousand, after depreciation of the period of Euro 14,681 thousand and capital expenditure of Euro 16,209 thousand, net of fixed assets in progress items (gross of decreases of the period). The table below shows the historical cost, accumulated depreciation and carrying amount of property, plant and equipment in the half year periods: (Euro thousands) Balance at Balance at Historical Accumulated Carrying Historical Accumulated Carrying cost Depreciation Amount Cost Depreciation Amount Land and buildings 51,709 (31,187) 20,522 48,045 (29,871) 18,174 Plant and machinery 261,955 (176,780) 85, ,558 (168,991) 91,567 Industrial and commercial equipment 70,554 (59,774) 10,780 61,877 (55,660) 6,217 Other assets 5,840 (4,740) 1,100 5,521 (4,413) 1,108 Assets in progress 15, ,218 12,607 12,607 Total 405,276 (272,481) 132, ,608 (258,935) 129,673 Balance Acquisitions & Decreases DepreciationExchange rate Balance (Euro thousands) capitalisation difference Land and buildings 21, (1,010) (118) 20,522 Plant and machinery 93,892 2,057 (34) (10,384) (356) 85,175 Industrial and commercial equipment 11,058 4,748 (2,011) (2,990) (25) 10,780 Other assets 1, (20) (297) (10) 1,100 Assets in progress 6,149 10,062 (969) --- (24) 15,218 Total 133,865 17,178 (3,034) (14,681) (533) 132,795 Assets in progress principally refer to payments on account to suppliers for the purchases of plant by Huta Szkla Czechy. 70

73 Notes Goodwill The Euro 694 thousand recognised as goodwill at30 June 2016 relates to the higher value paid for the acquisition in 2011 of Huta Szkła Czechy SA (HSC SA). The changes in the period stem from exchange rate effects. No impairment test on goodwill was carried out as no indicators existed of an impairment loss in the first half year Equity-accounted Joint Venture 57,956 60,291 53,850 The Group holds two investments in jointly-controlled companies: - Vetri Speciali SpA; - Vetreco Srl Vetri Speciali SpA derives from a corporate restructuring operation undertaken in 2004 and is involved in the production and sale of specialty glass containers. The company s registered offices are at via Manci 5, Trento. Production is carried out at the Pergine Valsugana (TN), Ormelle (TV) and San Vito al Tagliamento (PN) facilities. The JV is a strategic investment for the Group, undertaken as part of the production diversification pursued by the Parent. The Zignago Group holds 50% of ordinary company shares; all shares guarantee equal rights. In 2016, the Company distributed dividends totalling Euro 18.1 million to shareholders. Vetreco Srl is an Italian limited company domiciled in Supino (FR), incorporated in July 2010 as a joint venture, involved in the processing of raw glass and the supply of cullet ready for re-use in production. The investment percentage of Zignago Vetro SpA is 30%. As previously stated, in accordance with IAS 31 Interests in joint ventures (before adoption of IFRS 11), the share of assets, liabilities, revenues and costs of the Group in both companies were consolidated proportionally until 31 December Since the adoption of IFRS 11 they have been measured at equity. 71

74 Notes The valuation of both joint ventures at equity and the movements in the period are summarised below: (Euro thousands) Investment amount of Vetri Speciali SpA as recognised in separate financial statements of Zignago Vetro 25,320 25,320 25,320 Vetri Speciali Equity at 100% 116, , ,319 Vetri Speciali Equity at 50% 58,285 60,501 54,159 Difference between investment value and portion of Eq. of the subsidiary 32,965 35,181 28,840 Measurement of the investment in Vetri Speciali using the equity metod Portion of equity 58,285 60,501 54,159 Harmonization accounting policies (320) (358) (322) Total measurement using the equity method 57,965 60,143 53,837 Increase/(decrease) of book value of investment compared to measurement using the equity method 32,645 34,823 28,517 Movement in measurement using the equity method Measurement using the equity method at beginning of period 60,142 55,591 55,591 Profit for the period: pro quota 6,840 12,923 6,600 Other comprehensive income (expense): IAS 19 effect Dividends paid in the period (9,056) (8,402) (8,402) Harmonisation accounting policies Measurement using the equity method at end of period 57,965 60,143 53,837 P&L effect of measurement using the equity method 6,879 12,937 6,648 72

75 Notes (Euro thousands) Investment amount of Vetreco S.r.l. as recognised in separate financial statements of Zignago Vetro Vetreco Equity at 100% (30) Vetreco Equity at 30% (9) Difference between investment value and portion of Eq. of the subsidiary (939) (781) (588) Measurement of the investment in Vetreco using the equity method Portion of equity (9) Harmonization accounting policies Total measurement using the equity method (9) Increase/(decrease) of book value of investment compared to measurement using the equity method (939) (781) (588) Movement in measurement using the equity method Measurement using the equity method at beginning of period Profit for the period: pro quota (158) (372) (179) Other comprehensive income (expense): IAS 19 effect Dividends paid in the period Capital injection 330 Harmonisation accounting policies Measurement using the equity method at end of period (9) P&L effect of measurement using the equity method (158) (372) (179) The key financial and performance indicators of the jointly-controlled companies recognised in the consolidated financial statements and valued at equity are also reported. These figures relate also to the Parent interim reporting date and incorporate the totality of investments held. All investments operate on a going concern basis. The figures do not take account of the effects, although contained, from the standardisation of the accounting principles adopted by the individual investee companies with the Parent. 73

76 Notes The statement of financial position and income statement of Vetri Speciali SpA are summarised below: Vetri Speciali SpA Group (100%) (Euro thousands) Goodwill 80,171 80,171 80,237 Other non-current assets 64,601 51,205 50,591 Non-current assets 144, , ,828 Cash and cash equivalents 60 6,957 1,707 Other current assets 52,373 50,617 51,603 Current assets 52,433 57,574 53,310 TOTAL ASSETS 197, , ,138 Equity Capital and Reserves 116, , , , , ,319 Non current loans and borrowings 18,887 20,355 21,762 Other non-current liabilities 5,955 6,067 6,509 Non-current liabilities 24,842 26,422 28,271 Current loans and borrowings 23,490 12,748 20,772 Other current liabilities 32,303 28,779 26,776 Current liabilities 55,793 41,527 47,548 TOTAL LIABILITIES 197, , ,138 Vetri Speciali SpA Group (100%) (Euro thousands) Revenues 72,128 73,410 Costs of production (48,226) (49,751) Amortisation & Depreciation (3,851) (4,023) Operating Profit 20,051 19,636 Financial Income Financial Expense (291) (423) Exchange rate gains/(losses) 8 32 Profit before taxes 19,768 19,245 Income taxes (6,088) (6,045) Profit for the period 13,680 13,200 Other comprehensive income (expense) Total comprehensive income 13,680 13,200 74

77 Notes The financial position and income statement of Vetreco Srl is summarised below: Vetreco (100%) (Euro thousands) Other non-current assets 15,645 16,039 16,866 Non-current assets 15,645 16,039 16,866 Cash and cash equivalents Other current assets 6,415 7,436 4,543 Current assets 6,415 7,436 4,685 TOTAL ASSETS 22,060 23,475 21,551 Capital and Reserves (30) Equity (30) Other non-current liabilities Non-current liabilities Current loans and borrowings 17,082 17,134 16,791 Other current liabilities 4,970 5,797 4,686 Current liabilities 22,052 22,931 21,477 TOTAL LIABILITIES 22,060 23,475 21,551 Vetreco (100%) (Euro thousands) Revenues 6,438 5,143 Costs of production (6,302) (5,095) Amortisation & Depreciation (511) (499) Operating Loss (375) (451) Financial expense (250) (258) Loss before taxes (625) (709) Income taxes Loss for the period Total comprehensive loss (527) (594) (527) (594) 75

78 Notes Neither joint venture is quoted, and a fair value deriving from a quoted market price is not available. Relating to the goodwill which constitutes part of the book value allocated to the Vetri Speciali joint venture following the application of the equity method, it should be noted that this was not subject separately to an impairment test, but is included within any impairment test undertaken on the investment. In relation to this there was no indication of an impairment loss on the joint venture Other non-current assets 2,433 4,247 4,438 The account principally includes the tax asset related to investments in the second half of 2014 and first half of 2015 (capital grants based on Article 18 of Legs. Decree 91/2014) and receivables for guarantee deposits provided to suppliers and for lease companies, the duration of which correlates to that of the contract, normally between one and five years. In particular, the company recognised a tax asset of Euro 2,327 thousand, equal to 15% of investment expenditure, of a unitary amount above Euro 10 thousand, incurred in the second half of 2014 and first half of 2015 in excess of the average investment in core assets in the five preceding tax years, excluding from the calculation the period in which the investments were higher. The receivable may be used as an offset over three equal annual portions from the second tax period subsequent to which the investment was made. CURRENT ASSETS Inventories 64,217 66,487 63,787 The table below shows the composition of inventories: (Euro thousands) Balance at Balance at Balance at Raw materials, and ancillaries and consumables 9,640 11,049 8,643 Work-in-progress and semi-finished products 7,262 7,968 10,172 Finished products 50,065 50,701 48,125 Provision for inventory write-down (2,750) (3,231) (3,153) Total 64,217 66,487 63,787 76

79 Notes Trade receivables 57,175 53,476 53,439 The table below illustrates the trade receivables and the relative allowance for impairment: (Euro thousands) Balance at Balance at Balance at Trade receivables - Italy 35,618 26,300 33,054 Trade receivables - abroad 21,265 20,615 20,818 Receivables from parents Bills 3,801 9,987 3,156 Allowance for impairment (3,509) (3,426) (3,609) Total 57,175 53,476 53,439 At 30 June 2016 and 31 December 2015 gross trade receivables were as follows: The largest part of the receivables of Zignago Vetro SpA, representing 76% of the Group receivables, are covered by insurance policies. The companies do not have significant concentrations of credit risk at the reporting date. (Euro tho us ands ) Not overdue < 30 days other Total days days 30 June ,413 9, , , December ,235 9,743 1, ,902 77

80 Notes The movements during the period in the allowance for the impairment were as follows: (Euro thousands) Balance at Balance at Balance at Provision at beginning of period 3,426 3,456 3,456 Accruals to provisions Utilisations (98) (108) --- Total 3,509 3,426 3,609 The table below shows the breakdown of trade receivables by geographical segment: (Euro thousands) Balance at Balance at Balance at Italy 36,313 33,164 32,229 E.U. 18,213 17,870 18,071 Other countries 2,649 2,442 3,139 Total 57,175 53,476 53, Other current assets 7,982 9,220 7,606 The table below shows the composition of Other current assets : (Euro thousands) Balance at Balance at Balance at VAT assets 2,487 4,820 4,145 Advances to social security institutions and other employee & agent receivables Tax assets as per Law no. 91/14 1,842 1, Other receivables 3,259 2,585 3,042 sub) 7,728 8,720 7,247 Accrued income for: - interest on bank deposits services Prepayments: - insurance premiums rent expenses and lease payments services sub) The account Other receivables principally includes receivables for the energy consumption contribution, white certificates and the short-term portion of the tax asset on new investments. 78

81 Notes Cash and cash equivalents 79, , ,998 The table below shows the composition of cash and cash equivalents: (Euro thousands) Balance at Balance at Balance at Time deposits 8,892 21,947 56,984 Bank and postal accounts 70,267 78,098 45,991 Cash in hand and similar Total 79, , ,998 For the cash flow performance of the company, reference should be made to the interim consolidated statement of cash flows. 79

82 Notes EQUITY Group Equity 137, , ,878 Equity at 30 June 2016 decreased on 31 December 2015 by Euro 7,879 thousand and is attributable to the profit for the period (Euro 12,594 thousand), the distribution of dividends (Euro 20,346 thousand), the decrease in the translation reserve (Euro 621 thousand) and the increase in the hedging reserve (Euro 494 thousand). An analysis of the movements in consolidated equity is shown in the condensed interim consolidated financial statements. Equity attributable to non-controlling interests was not recorded in the periods considered. NON-CURRENT LIABILITIES Provisions for risks and charges 3,636 3,867 3,258 The table below shows the composition of the provisions for risks and charges: (Euro thousands) Balance at Balance at Balance at Agents leaving indemnity Provision for contractual risks Provision for industrial risks 1,293 1,215 1,250 Post-employment benefits 1,472 1,447 1,232 Provision for emission trading Total 3,636 3,867 3, Post-employment benefits 4,732 4,838 4,890 The table below shows the movements in the provision in the periods considered: (Euro thousands) Balance at Balance at Balance at Balance at January 1 4,838 5,015 5,015 Interest Actuarial gain/(loss) --- (153) --- Payments (144) (259) (125) Provision at end of period 4,732 4,838 4,890 80

83 Notes Non current loans 104, , ,831 The table below shows the composition of non current loans and borrowings: (Euro thousands) Balance at Balance at Balance at Unsecured loan, nominal amount Euro 30 million, (A) BNL, Euribor 3 months floating rate, maturing on 22 June 2021, repayment in quarterly/deferred instalments 29,827 29,810 29,793 Unsecured loan, nominal amount Euro 70 million, Unicredit / Mediobanca, Euribor 3 months floating (B) rate, maturing on 31 December 2020, repayment in half-yearly instalments 69,435 69,372 69,309 Unsecured loan, nominal amount Euro 15 million, Banco di Brescia, Euribor 3 months floating rate, (C) maturing on 18 December 2019, repayment in halfyearly/deferred instalments 13,117 14,940 14,933 Unsecured loan, nominal amount Euro 10 million, GE Capital Interbanca, Euribor 3 months floating (D) rate, maturing in 3-years with option for additional 1 year ,109 Advance on Banca Popolare Friuladria SpA loan, (E) repayable by 2016, at a floating rate ,000 Unicredit SpA loan, repayable by 2016, at a floating (F) rate --- 1,160 2,305 French banking system loan to Verreries Brosse (G) SAS 1,362 1,716 2,064 (H) Bank Pekao Loan HSC SA 1,645 2,234 2,817 (I) HSC SA finance leases (J) BNP Paribas Loan (K) BPI Paribas Loan 1,000 1, (L) BNL Loan 5,000 5, (M) Societè Generale Loan (N) Casse D Epargne Loan (O) CRCA Loan ,942 Total non current loans and borrowings 124, , ,297 Less current portion (20,467) (10,626) (11,466) Non current portion 104, , ,831 81

84 Notes Loan covenants Against the loans reported in the table at letters (A), (D) and (F), the Company is bound by a set of financial covenants to be calculated on the consolidated financial statements, for the duration of the loan: (i) maintain a ratio between net financial debt and equity of below 1.5% on the GE Capital Interbanca contract (letter D) and lower than 1 on the Unicredit contract (letter F) and BNL (letter A); (ii) maintain a ratio between net financial debt and EBITDA of below 2 for all three contracts. Against the loan reported in the table at letter (B), the Company is bound by a set of financial covenant ratios to be calculated on the consolidated financial statements, as follows: (i) ratio between net financial debt and equity not above 1.5 for the period between 31 December 2014 and 31 December 2017 included and 1.0 between 1 January 2018 until final maturity; (ii) ratio between net financial debt and EBITDA not above 2.5 for the period between 31 December 2014 and 31 December 2017 included and 2.0 between 1 January 2018 until final maturity. Against the loan reported in the table at letter (C), the Parent is bound by a set of financial covenant ratios to be calculated on the separate financial statements, for the duration of the loan: (i) maintain a ratio between net financial debt and equity of not greater than 1.25; (ii) maintain a ratio between net financial debt and EBITDA of not greater than 3. These covenants had been comfortably complied with at 30 June Other non-current liabilities 3,820 4,063 4,590 The account includes at 30 June 2016 and 31 December 2015 the deferred income recognised against the tax asset for investments in new machinery under Legislative Decree no. 91/2014, which will be recognised in profit or loss on the basis of the depreciation calculated on the investments. 82

85 Notes CURRENT LIABILITIES Bank loans and borrowing Current portion 92,741 92,475 87,366 The table below shows the composition of the bank payables and the current portion of the non current loans and borrowing: (Euro thousands) Balance at Balance at Balance at Advances on bank bills 3,801 9,987 2,411 Current loans 66,175 70,529 73,005 Financial liabilities for fair value derivative contracts on int. rates 2,298 1, Current portion of non current loans and borrowing 20,467 10,626 11,466 Total 92,741 92,475 87,366 For further details on leases and non current loans, the current portion of which is included under bank loans and borrowings, reference should be made to the paragraph Non current loans. The following table highlights the composition of the net financial debt at 30 June 2016, 31 December 2015 and 30 June 2015 in accordance with CONSOB communication No.DEM/ of 28 July 2006: (Euro thousands) A. Cash B. Other cash equivalents 79, , ,975 C. Securities held for trading D. Liquidity (A) + (B) + (C) 79, , ,998 E. Current financial assets F. Current bank loans and borrowings 69,976 80,516 75,416 G. Current portion of non-current debt 20,467 10,626 11,466 H. Other current fin. payables (derivatives) 2,298 1, I. Current financial debt (F) + (G) + (H) 92,741 92,475 87,366 J. Net current financial position (I) - (E) - (D) 13,561 (7,588) (15,632) K. Non-current bank loans and borrowings 104, , ,831 L. Bonds issued M. Other non-current payables N. Non-current financial debt (K) + (L) + (M) 104, , ,831 O. Net financial debt (J) + (N) 117, , ,199 83

86 Notes Trade and other payables 42,145 44,412 52,100 The table below shows the breakdown of trade payables by geographic segment: (Euro thousands) Balance at Balance at Balance at Italy 31,230 32,769 39,069 E.U. 10,871 11,572 13,019 Other countries Total 42,145 44,412 52,100 Included among trade payables are those related to purchase of capital expenditure of Euro 5,764 thousand at 30 June 2016 (Euro 7,320 thousand at 31 December 2015; Euro 16,323 thousand at 30 June 2015) Other current liabilities 16,194 16,583 16,098 The table below shows the composition of Other current liabilities : (Euro thousands) Balance at Balance at Balance at Social security institutions 2,987 3,781 3,391 Withholding taxes on employees and consultants remuneration 1,335 1,485 1,293 Payables to employees 10,511 8,803 9,251 Contributions payable to social security authority Advances from customers Current portion of tax credit on Law 91/2014 investment Other payables VAT liabilities Accrued expense and deferred income - employees interest current portion of contrib. on investments Total 16,194 16,583 16, Current tax liabilities 699 1, Tax liabilities relate to Income tax for the period for some Group Companies. The Parent Zignago Vetro SpA, where applicable, complied with the option exercised by its Parent Zignago Holding SpA in relation to the national fiscal consolidation. 84

87 Notes NOTES TO THE MAIN INCOME STATEMENT ITEMS H H Revenues 129, ,378 The following table shows the breakdown of revenues by product line: (Euro thousands) H H Core business products 121, ,807 Various materials 5,497 5,399 Service revenue 1,397 2,134 Other revenue 1,381 1,038 Total 129, ,378 Further information on revenues is reported in the Directors Report. H H Raw materials, consumables and goods 37,707 28,042 The table below shows the costs for raw materials, ancillaries, consumables and goods: (Euro thousands) H H Purchases 36,255 34,045 Change in inventories of raw materials ancillaries, consumables and finished goods 753 1,114 Changes in inventory of work-in-progress semi finished and finished 853 (6,739) Increases of fixed assets from works-in-progress (154) (378) Total 37,707 28,042 H H Service costs 33,941 39,451 The following table shows service costs: (Euro thousands) H H Energy and industrial services 22,994 29,041 Transport and other trading costs 6,360 5,821 Conai contribution 1,540 1,530 Other costs 3,047 3,059 Total 33,941 39,451 85

88 Notes It should be noted that the account Energy and industrial services includes energy costs acquired from the related party Zignago Power for Euro 2,422 thousand (in H Euro 2,523 thousand). H H Personnel expense 29,952 28,926 The following table reports personnel expense: (Euro thousands) H H Wages and salaries 21,646 20,602 Social security charges 7,512 7,551 Post-employment benefits Total 29,952 28,926 H H Amortisation & Depreciation 14,752 14,333 The following table reports amortisation & depreciation: (Euro thousands) H H Depreciation of property, plant and equipment 14,681 14,249 Amortisation of intangible assets Total 14,752 14,333 H H Financial expense 2,328 1,714 The following table shows the financial expense: (Euro thousands) H H Interest on bank accounts Loan interest Financial expense on interest rate hedges Effect of IRS measurement at fair value 965 (390) Other Total 2,328 1,714 86

89 Notes H H Income taxes 3,316 3,569 The table below shows the composition of income taxes separating deferred and current taxes: (Euro thousands) H H Current taxes 3,304 3,389 Net deferred tax expense Total 3,316 3,569 OTHER INFORMATION Earnings per share The share capital of Zignago Vetro SpA at 30 June 2016 consists of 88,000,000 ordinary shares with a par value of Euro 0.10 each, fully subscribed and paid-in. As outlined on pages 12 and 13, Zignago Vetro SpA, as part of its purchase programmes, at 30 June 2016 held a total of 1,421,390 treasury shares for a total amount of Euro 5,027 thousand. No acquisitions or sales were made in the first half of 2016 and until the date of the approval of these interim financial statements. Information is shown below concerning the profit for the period and the calculation of the basic and diluted earnings per share: Profit attributed to ordinary shareholders of the Parent for basic earnings and the diluted earnings per share (in Euro thousands) 12,594 13,157 Weighted average number of ordinary shares, including treasury shares, to calculate basic earnings per share 88,000,000 88,000,000 Weighted average number of treasury shares (1,421,390) (1,421,390) Weighted average number of ordinary shares, excluding treasury shares, to calculate basic earnings per share 86,578,610 86,578,610 Earnings per share - basic, for profit attributed to the ordinary shareholders of the parent diluted, for profit attributed to the ordinary shareholders of the parent

90 Notes The basic earnings per share is calculated by dividing the net profit attributable to the ordinary shareholders of the parent by the average weighted number of ordinary shares outstanding during the period, excluding the average weighted number of treasury shares. No capital transactions which would have dilutive effects on the profit attributable to each share were noted. 88

91 Notes Segment disclosure Segment reporting which coincides with the various legal entities is provided below. The information on the secondary segment (geographic segments) is not significant in relation to the Group. In particular, the Business Units identified are reported at pages 10 and 11. The criteria applied for the identification of the reporting segment were based on, among other issues, the manner in which management directs the Group and attributes managerial responsibility. Operating segment disclosure is provided below: (Euro thousands) H Zignago Vetro SpA Verreries Brosse Group HSC SA Zignago Glass (Eliminations) USA Consolidated Revenues 93,439 27,613 11, (3,092) 129,520 Amortisation & Depreciation (10,175) (3,256) (1,321) --- (14,752) Operating Profit (Loss) 12,699 (2,045) 1,184 (93) 6,701 18,446 Profit (Loss) for the period 16,119 (1,798) 716 (94) (2,349) 12,594 Assets 317,142 61,935 33, (4,423) 408,661 Liabilities 224,670 49,623 18, (22,267) 270,911 Investments in: Intangible assets Proprerty, plant and equipment 6,780 1,348 8, ,182 (Euro thousands) H Zignago Verreries HSC Zignago Vetro Brosse SA Glass (Eliminations) Consolidated SpA Group USA Revenues 86,921 28,129 11, (2,917) 123,378 Amortisation & Depreciation (9,614) (3,497) (1,222) (14,333) Operating Profit (Loss) 9,533 1, (24) 6,511 17,993 Profit (Loss) for the period 13, (24) (1,917) 13,157 Assets 328,919 66,533 24, , ,590 Liabilities 242,435 51,947 9,742 8 (12,420) 291,712 Investments in: Intangible assets Property, plant and equipment 23,269 1,470 1, ,415 89

92 Notes Related party transactions In accordance with Consob letter of 28 July 2006, the disclosure concerning transactions with related parties, the events and significant non-recurring and/or atypical and unusual transactions are outlined below. The table below shows the composition of the receivables of the Zignago Vetro Group with related party companies at the reporting date: (Euro thousands) Balance at Balance at Balance at Zignago Holding SpA 3,707 1,235 3,149 Zignago Immobiliare Srl Santa Margherita SpA & subsidiaries 1, ,203 New High Glass Inc Total receivables from related parties 5,170 2,243 4,822 The receivables from Zignago Holding SpA relate to the payments on account and the request for repayment of taxes for previous years, in relation to the Group tax consolidation, while the receivables from Santa Margherita and its subsidiaries and from New High Glass Inc. derive from trade transactions. The table below shows the composition of the payables of the Zignago Vetro Group to related companies at the reporting date: (Euro thousands) Balance at Balance at Balance at Zignago Holding SpA Zignago Immobiliare Srl Santa M argherita SpA & subsidiaries La Vecchia Scarl Zignago Servizi Srl Zignago Power Srl Vetreco Srl Multitecno Srl New High Glass Inc Total payables to related parties 1,500 1,508 1,144 The payables to Zignago Immobiliare Srl, La Vecchia Scarl and Zignago Servizi Srl are related to services received. The payables to Zignago Power Srl relate to the purchase of electricity and the payables to Zignago Holding SpA relates to a tax asset arising from a tax assessment, while all the other payables derive from trade transactions. 90

93 Notes The table below shows the composition of the revenues of the Zignago Vetro Group from related parties in the periods: (Euro thousands) H H Santa Margherita SpA & subsidiaries 2,203 2,593 New High Glass Inc Zignago Power Srl 1 5 Total revenue from related parties 2,851 3,330 The revenues from Santa Margherita and its subsidiaries and from New High Glass Inc. derive from trade transactions. The table below shows the composition of the costs of the Zignago Vetro Group with related parties in the periods: (Euro thousands) H H Zignago Holding SpA Zignago Immobiliare Srl Santa M argherita SpA & subsidiaries La Vecchia Scarl Zignago Servizi Srl Zignago Power Srl 2,422 2,523 Multitecno Srl 25 1 Vetreco Srl 1,351 1,154 Total costs with related parties 5,398 5,137 In particular, the costs in the first half of 2016 amounting to Euro 2,422 thousand include those of Zignago Power Srl concerning the supply of electricity to the Fossalta di Portogruaro production site. The costs in the first half of 2016 of Euro 1,351 thousand concerning Vetreco Srl relate to the purchase of scrap glass. Management of capital The share capital includes the shares and the equity attributable to owners of the parent. The primary capital management objective of the Group is to guarantee the maintenance of a strong credit rating in order to support operations and maximise value for shareholders. In order to achieve this objective, the management of Group capital aims, among other matters, to ensure compliance with covenants, related to interest bearing loans, based on financial performance indicators. Breaches in the covenants would permit the banks to request immediate repayment of the loans. There were no breaches of the covenants in the current year in relation to interest bearing loans for any of the Group companies. 91

94 Notes The Zignago Vetro Group has payables to financial intermediaries and has a financial debt position related to the business development plan. The high generation of operating cash flows enables Group Companies not only to repay existing loans, but also to guarantee an adequate dividend to Shareholders and pursue a growth strategy. In this context, the Group, in order to maintain or amend the capital structure, may pay dividends to Shareholders, acquire treasury shares on the market or issue new shares. No substantial amendments were made to these objectives, to policies or to processes in the first half of 2016 and 2015 or for the year

95 Notes Risk management policies The Group will continue to prudently manage risks in all departments with careful monitoring in order to identify, reduce and eliminate such risk, therefore extensively protecting shareholder interests. Currency risk The currency risk is the risk that the fair value or the future cash flows of a financial instrument is altered following changes in exchange rates. The exposure of the Group to changes in exchange rates principally concerns the operating activities of the Group (when revenues and costs are denominated in a currency other than the presentation currency of the Group). Where these transactions are significant, the Group Companies assess the possibility of undertaking currency hedges in order to mitigate these fluctuations. During the years presented the Group has not undertaken currency hedges, as such transactions undertaken by the companies of the Group are not considered significant. Credit and country risks The credit risk represents the exposure of the Group to potential losses deriving from noncompliance with obligations by trading partners; this activity is subject to ongoing monitoring within the normal management of business operations, in order to minimise the exposure to counterparty credit risk, also utilising appropriate insurance instruments to protect the solvency of the client or of the country risk in which this latter operates. The Group Companies constantly assess political, social and economic risks in the areas in which they operate. No significant cases of non fulfilment by trading partners have occurred and no significant credit risk by individual segment and/or client exists. The Group in fact only deals with established and reliable clients. Customers that request extensions of payment are subject to a credit rating check. Moreover, the collection of receivables is monitored during the year so that the exposure to losses is not substantial. Finally, in the case of new clients operating in non EU countries, the Group companies obtain letters of credit and advance payments. Interest rate risk The interest rate risk is a risk that the fair value or the future cash flows of a financial instrument alters due to changes in market interest rates. The Companies of the Group are exposed to the risk of fluctuations in interest rates principally in relation to the non current loans and borrowings, negotiated at floating interest rates, and amount to Euro million. Where these risks are considered significant, the Companies of the Group undertake interest rate swaps in order to convert the floating rate of the non current loans into fixed rates, which reduces the impact of the fluctuations in interest rates. Therefore, the Parent undertook interest rate swaps in order to hedge the interest rate risk on medium-long term loans for a notional amount of Euro 113 million. 93

96 Notes The characteristics of the derivative contracts, their notional amount and the market value at 30 June 2016, are as follows (in Euro thousands): Company Bank Underlying Date Notional Expiry Market of amount at value at signing reference date Zignago Vetro SpA Unicredit Loan 31/12/ ,143 31/12/2020 (362) Zignago Vetro SpA Unicredit Loan 31/03/ ,857 31/12/2020 (482) Zignago Vetro SpA Mediobanca Loan 21/01/ ,857 31/12/2020 (275) Zignago Vetro SpA Mediobanca Loan 31/03/ ,143 31/12/2020 (367) Zignago Vetro SpA Banco Brescia Loan 18/12/ ,170 18/12/2019 (193) Zignago Vetro SpA BNL Loan 22/12/ ,000 22/06/2021 (619) Total 113,170 (2,298) Liquidity risk The Group monitors the risk of a deficiency in liquidity utilizing a liquidity planning instrument. The Group objective is to maintain a balance between continuity of available funds, flexibility of utilisation through utilisation of instruments such as bank overdrafts, bank loans, finance leases and adequate remuneration of its liquidity, temporarily investing exclusively with banking counterparties. In particular the profile of the financial liabilities at 30 June 2016, 31 December 2015 and 30 June 2015 on the basis of non-discounted contractual payments, including trade payables and other current liabilities, is summarised as follows: (Euro thousands) 2016 Less than 3 From 3 to 12 From 1 to 5 Beyond Total 30 June 2016 months months years Non current loans and borrowings ,378 2, ,361 Other non-current liabilities , ,820 Bank loans and current portion of non current loans and borrowings 69,974 20,469 2, ,741 Trade and other payables 42, ,145 Other current liabilities 16, ,194 Current income taxes Total 128,313 21, ,496 2, ,960 94

97 Notes (Euro thousands) 2015 Less than 3 From 3 to 12 From 1 to 5 Beyond Total 30 June 2015 months months years Non current loans and borrowings ,653 21, ,831 Other non-current liabilities , ,590 Bank loans and current portion of non current loans and borrowings 75,416 11, ,366 Trade and other payables 52, ,100 Other current liabilities 16, ,098 Current income taxes Total 143,614 12, ,727 21, ,889 (Euro thousands) 2015 Less than 3 From 3 to 12 From 1 to 5 Beyond Total 31 December 2015 months months years Non current loans and borrowings ,216 4, ,335 Other non-current liabilities , ,063 Bank loans and current portion of non current loans and borrowings 80,519 10,623 1, ,475 Trade and other payables 44, ,412 Other current liabilities 16, ,583 Current income taxes --- 1, ,878 Total 141,514 12, ,612 4, ,746 The terms and conditions of financial liabilities are listed below: There is no interest on trade payables and they are normally paid at 60 days; Other payables are normally paid within the month following recognition. Risks related to the fluctuation in energy prices The Group is exposed to fluctuations in energy purchase costs, a significant cost component in the glass sector. Where this risk is considered significant, hedges may be undertaken in order to convert the variable cost into a fixed cost, which reduces the impact of fluctuations. From 2012, the supply of energy at Fossalta di Portogruaro facilities of the Parent has been guaranteed by Zignago Power Srl, a company wholly-owned by the parent Zignago Holding SpA., which started up a natural biomass energy production plant. The risk concerning energy cost fluctuation is therefore greatly reduced. In 2016, the Parent also agreed supply contracts at fixed prices, in line with its production programmes. In the first half of 2016, Zignago Vetro also signed two commodity swap contracts with a primary Italian banking institution to hedge the risk of fluctuation in the cost of fuel, whose mark-to-market at the date of the present report amounted to Euro +720 thousand, gross of tax effect. The exposure of the Group to the risk of fluctuations in energy prices is therefore considered marginal. 95

98 Notes Significant non-recurring events or transactions arising from atypical and/or unusual transactions There were no significant non-recurring atypical and/or unusual transactions in the period ended 30 June 2016 as defined by Consob Communication DEM/

99 Statements as per Article 81-ter, CONSOB Regulation no /

100 Declaration of the Condensed Consolidated Half-Year Financial Statements STATEMENT Statement of the Condensed Interim Consolidated Financial Statements as per Article 81-ter of CONSOB Regulation no of 14 May 1999 and subsequent modifications and integrations. 1) The undersigned Paolo Giacobbo, CEO, and Roberto Celot, Executive Officer for Financial Reporting of Zignago Vetro SpA, also in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58 of 24 February 1998 state: the accuracy of the information on company operations and the effective application, of the administrative and accounting procedures for the condensed interim consolidated financial statements as at and for the period from 1 January to 30 June ) No significant aspects emerged concerning the above. The adequacy of the administrative and accounting procedures for the compilation of the condensed interim consolidated financial statements at 30 June 2016 was evaluated using an Internal Control System based on the Internal Control Integrated Framework model issued by the Committee of Sponsoring Organisations of the Treadway Commission which represents a standard framework generally accepted at international level. 3) We also state that: 3.1) The condensed interim consolidated financial statements: a) are drawn up in conformity with the applicable international accounting standards endorsed by the European Union in conformity with Regulation (CE) No. 1606/2002 of the European Parliament and the Commission of 19 July 2002; b) correspond to the underlying accounting documents and records; c) provides a true and fair view of the financial position, financial performance and cash flows of the issuer and of the other companies in the consolidation scope. 3.2) The Directors Report on operations includes a reliable analysis of the significant events in the first six months of the year and their impact on the condensed interim consolidated financial statements, with a description of the principal risks and uncertainties for the remaining six months. The Directors Report also contains a reliable analysis of the significant transactions with related parties. Fossalta di Portogruaro, 29 July 2016 Mr. Paolo Giacobbo Mr. Roberto Celot Chairman & Chief Executive Officer Executive Officer for Financial Reporting (Signed on the original) (Signed on the original) 98

101 Independent Auditors Report on the Condensed Interim Consolidated Financial Statements The attached auditors report and the related condensed interim consolidated financial statements are in accordance with the original version in the Italian language filed at the registered office of Zignago Vetro SpA and published in accordance with law and, subsequent to this date, KPMG SpA has not undertaken any further audit work. 99

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104 ZIGNAGO VETRO SpA Registered office: Fossalta di Portogruaro (VE), Via Ita Marzotto n. 8