CIE AUTOMOTIVE, S.A. AND SUBSIDIARIES. Abbreviated consolidated interim financial statements for the six month period ending 30 June 2012

Transcription

1 CIE AUTOMOTIVE, S.A. AND SUBSIDIARIES Abbreviated consolidated interim financial statements for the six month period ending 30 June 2012

2 Table of content of the abbreviated consolidated interim financial statements of CIE Automotive, S.A. and subsidiaries for the six month period ended 30 June 2012 Note Page CONSOLIDATED BALANCE SHEET 1-2 CONSOLIDATED INCOME STATEMENT 3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 5-6 CONSOLIDATED CASH FLOW STATEMENT 7 EXPLANATORY NOTES TO THE ABBREVIATED CONSOLIDATED FINANCIAL STATEMENTS 1 General information and regulatory framework 1.1 CIE Automotive group and activities Regulatory framework Summary of the main accounting policies applied 2.1 Basis of presentation Consolidation principles Segment reporting Accounting estimates and judgments New IFRS and IFRIC interpretations Seasonal nature of business and business volume Liquidity management and working capital Segment information Property, plant and equipment Intangible assets Financial assets Cash and other cash equivalents 36 8 Disposal group assets, items classified as held-for-sale and discontinued operations Capital and share premium Borrowings Provisions Corporate income tax Earnings per share Dividends per share Cash generated from operations Commitments Business combinations Related-party transactions Joint ventures Events after the balance sheet date 51 APPENDIX: LIST OF SUBSIDIARIES AND ASSOCIATES

3 NOTES CONSOLIDATED BALANCE SHEETS AT 30 JUNE 2012 AND 31 DECEMBER 2011 Note ASSETS Non-current assets Property, plant and equipment 4 743, ,469 Goodwill 5 294, ,738 Other intangible assets 5 30,596 32,533 Non-current financial assets 6 29,881 30,481 Investments in associates ,349 Deferred tax assets - 105, ,453 Other non-current assets - 12,561 12,798 1,216,384 1,229,821 Current assets Inventories - 195, ,519 Trade and other receivables - 193, ,718 Other current assets - 3,804 2,483 Current tax assets - 47,053 41,194 Other current financial assets 6 34,676 44,459 Cash and cash equivalents 7 490, , , ,716 Disposable group assets held for sale 8 1,699 1,676 Total assets 2,183,339 2,204,213 The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 1.-

4 NOTES CONSOLIDATED BALANCE SHEETS AT 30 JUNE 2012 AND 31 DECEMBER 2011 Note EQUITY Capital and reserves attributable to the Company's shareholders Share capital 9 28,500 28,500 Treasury shares 9 (40,863) (22,697) Share premium 9 33,752 33,752 Retained earnings - 393, ,036 Interim dividend - (9,847) Accumulated exchange differences - (34,628) (30,806) Non-controlling shareholdings - 135, ,579 Total equity 514, ,517 Deferred income - 27,733 29,939 LIABILITIES Non-current liabilities Non-current provisions 11 43,159 52,534 Long-term borrowings , ,507 Deferred tax liabilities - 50,448 51,176 Other non-current liabilities - 75,117 79, , ,305 Current liabilities Short-term borrowings , ,793 Trade and other payables - 447, ,727 Other current financial liabilities Current provisions 11 6,073 5,613 Current tax liabilities - 38,633 41,108 Other current liabilities - 62,927 55, , ,460 Disposable group liabilities held for sale Total liabilities 1,640,788 1,648,757 Total equity and liabilities 2,183,339 2,204,213 The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 2.-

5 NOTES CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTH PERIODS ENDED 30 JUNE 2012 AND 2011 Six month period to 30 June Note OPERATING REVENUE 891,659 1,010,963 Net turnover - 853, ,683 Other operating revenues - 33,562 30,373 Changes in inventories of finished goods and work in progress - 5,047 12,907 OPERATING EXPENSES (819,855) (928,719) Consumption - (506,313) (605,585) Employee benefit expenses - (178,614) (182,877) Depreciation 4/5 (45,714) (44,728) Other operating expenses - (89,214) (95,529) Other gains / (losses) OPERATING PROFIT 71,804 82,244 Financial income - 25,704 12,132 Financial expenses - (46,691) (42,852) Exchange differences ,744 Share in profit/(loss) of associates 6 - (499) PROFIT BEFORE TAXES 51,389 62,769 Corporate income tax 12 (9,585) (16,092) PROFITS FROM CONTINUING OPERATIONS AFTER TAX 41,804 46,677 After-tax losses on discontinued operations PROFIT FOR THE PERIOD 41,819 46,677 Attributable to non-controlling share holdings - (8,434) (10,628) PROFIT ATTRIBUTABLE TO THE PARENT COMPANY S SHAREHOLDERS 33,385 36,049 Earnings per share attributable to Company shareholders during the period (expressed in euro per share) - Basic From continuing operations From discontinued operations Diluted From continuing operations From discontinued operations - - The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 3.-

6 NOTES CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTH PERIODS ENDED 30 JUNE 2012 AND 2011 Six month period to 30 June Note PROFIT FOR THE PERIOD 41,819 46,677 OTHER COMPREHENSIVE INCOME Cash flow hedges ,752 Net investment hedges 6 (5,909) - Foreign currency conversion differences - (11,742) (13,886) Tax effect - 1,240 (491) OTHER COMPREHENSIVE INCOME FOR THE PERIOD NET OF TAXES (16,191) (12,625) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 25,628 34,052 Attributable to: - Parent company 25,465 28,599. Continuing operations 25,450 28,599. Discontinued operations Non-controlling interests 163 5, ,052 The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 4.-

7 NOTES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTH PERIODS ENDED 30 JUNE 2012 AND 2011 Attributable to the Parent Company's shareholders Share capital (Note 9) Treasury shares (Note 9) Share premium (Note 9) Reserve for first conversion to IFRS-EU and other reserves for revaluation and adjustments Cumulative exchange differences Retained earnings Non-controlling interests Total equity Balance at 31 December ,400-89,551 - (12,182) 105, , ,999 Effects of the merger (Notes 1 and 9) (*) 8,100 (7,314) (55,799) 2,974 (5,689) 170,214 (112,486) - Merged balance at 1 January (7,314) 33,752 2,974 (17,871) 276,138 34, ,999 Total comprehensive income for the period ended 30 June ,261 (8,710) 36,048 5,453 34,052 Distribution of 2010 profits Acquisition/sale of treasury shares - (797) (797) Changes to scope of consolidation and other operations with minority interests (Notes 1.1 and 17) ,925 60, , ,043 Other movements (722) 294 (428) Balance at 30 June ,500 (8,111) 33,752 4,235 (24,656) 371, , ,869 (*) As a result of the merger process described in Note 1, the equity of INSSEC (the target company) was restructured to make it consistent with that of CIE Automotive, S.A. (the acquiring company). The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 5.-

8 NOTES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTH PERIODS ENDED 30 JUNE 2012 AND 2011 Attributable to the Parent Company's shareholders Share capital (Note 9) Treasury shares (Note 9) Share premium (Note 9) Reserve for first conversion to IFRS-EU and other reserves for revaluation and adjustments Cumulative exchange differences Retained earnings Interim dividend Minority interests Total equity Balance at 1 January ,500 (22,697) 33,752 53,053 (30,806) 329,983 (9,847) 143, ,517 Total comprehensive income for the period ended 30 June (3,949) (3,971) 33, ,628 Distribution of 2011 profits (9,847) 9, Complementary dividend (9,678) - - (9,678) Acquisition/sale of treasury shares - (18,166) (18,166) Other movements (8,727)(*) (8,483) Balance at 30 June ,500 (40,863) 33, (34,628) 343, , ,818 (*) Basically relates to the distribution of dividends to non-controlling interests. The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 6.-

9 NOTES CONSOLIDATED CASH-FLOW STATEMENTS FOR THE SIX MONTH PERIODS ENDED 30 JUNE 2012 AND 2011 Year ended 30 June Notes Cash flows from operating activities Cash generated by continuing operations and discontinued operations 15 77,289 81,609 Interest paid - (33,259) (28,716) Interest received - 24,489 11,630 Taxes paid - (10,489) (8,268) Net cash generated from operating activities - 58,030 56,255 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired 17 (1,449) - Acquisition of property, plant and equipment 4 (39,055) (45,591) Income from sales of property, plant and equipment and intangible assets 15 1,804 4,290 Acquisition of intangible assets 5 (2,607) (2,537) Acquisitions / disposals of other non-current assets (3,674) Acquisition/disposal of financial assets - 9,923 (50,334) Net cash used in investing activities (31,147) (97,846) Cash flows from financing activities Acquisition/(sale) of treasury shares 9 (18,166) (797) Funds obtained from IPO 1-165,442 Income from borrowings ,224 - Income (net of reimbursements) from high rotaion borrowings 10 (29,304) 231,208 Repayment of loans 10 (104,000) (136,981) Net capital grants received ,827 Dividends paid to the parent company s shareholders - (19,525) - Other payments/income to/from minority interests - (8,727) (306) Net cash generated on financing activities - (50,417) 262,393 Exchange differences and other liquid assets - (15,935) (1,090) Net (decrease)/increase in cash and cash equivalents (39,469) 219,712 Cash and equivalents at beginning of the year 7 530, ,919 Cash and bank overdrafts at end of the year 7 490, ,631 The accompanying notes included in pages 8 to 51 are an integral part of these abbreviated consolidated interim financial statements. 7.-

10 ( 000) 1. General information and regulatory framework 1.1 CIE Automotive group and activities Merger with INSSEC The merger by absorption of CIE Automotive, S.A. (the acquiring company) and the Instituto Sectorial de Promoción y Gestión de Empresas, S.A. INSSEC (the target company) took place on 1 January Until that time, the latter had been the majority shareholder of the former. The merger plan was approved by the Boards of Directors of the companies on 30 June 2010 and by the General Shareholders' Meetings in October 2010 and entered in the Mercantile Register in December As a result of the merger, INSSEC (as the target company) was dissolved but not liquidated. Through this reverse merger process, in which the subsidiary legally absorbs the parent, even though for accounting purposes INSSEC was the acquiring company, CIE Automotive, S.A. assumed the technological services and solutions business from the subgroup Global Dominion Access and took full (100%) control of the biofuel business through CIE Automotive Bioenergía, S.L. Also as a result of the merger, INSSEC s shares were redeemed and extinguished, in exchange for which its shareholders received 73,817,005 shares in CIE Automotive, S.A. formerly owned by INSSEC. The total number of CIE Automotive, S.A. shares remained unchanged. The merger swap rate, based on the real values of each company, was shares of CIE Automotive, S.A. for each post-merger INSSEC share (see the process described below). Prior to the merger, certain corporate operations were carried out by INSSEC and its technology business group led by Global Dominion Access, S.A. These operations are described below: Reorganization of the subgroup led by Global Dominion Access, S.A. This reorganisation, carried out through a number of operations including the purchase and sale of assets, business lines and subsidiaries on 25 June 2010, permitted the separation of the technology services and solutions business from the rest of the subgroup's activities (basically mobile sales and telephone services) which are now handled by a new parent company named Global Near S.L. (formerly Distribución y Desarrollo Global de Tecnologías de la Información, S.L.). Merger by absorption of INSSEC and its wholly-owned subsidiaries holding, SALTEC, S.L.U., INSSEC Participadas, S.L.U. and SALTEC Participadas, S.L.U., (to 100%) effective for accounting purposes on 1 January Split of INSSEC into two groups, each one of which included: - INSSEC (parent company of the CIE Automotive Group): CIE Automotive subgroup, Global Dominion Access subgroup (technological services and solutions group) and a 19.5% stake in CIE Automotive Bioenergía, S.L. (the other 80.5% of which is owned by CIE Automotive). - INSSEC DOS: Beroa subgroup, Global Near S.L. subgroup (formerly Distribución y Desarrollo Global de Tecnologías de la Información) and all other investee companies. This split took effect for accounting purposes on 14 December 2010, the date on which the agreement was registered. Regarding the technological services and solutions business taken over by the CIE Automotive Group and according to the agreement signed on 20 September 2010 by CIE Automotive, INSSEC and the shareholders of INSSEC DOS, in addition to the habitual guarantees to protect against damages to the assets transferred to the CIE Automotive Group 8.-

11 ( 000) that could potentially arise as a result of the acts or omissions of INSSEC prior to the effective date of the merger (1 January 2011), it was agreed that if the arithmetic average of normalized EBITDA (as this ratio is defined) of the technological services and solutions business (Dominion Group) assumed by the CIE Automotive Group for 2011 and 2012 were to differ from the figure established in the Business Plan by more than 10% (EUR million), CIE Automotive and INSSEC DOS (Newco) would provide compensation in an amount obtained by applying a multiple of 5.35 to the difference, plus 8% interest. The agreement also calls for the precalculation of this compensation in the event of any divestment by Dominion Group before the enf of guarantee period, in which case the sale value would be taken as a reference and limit of the compensation to be paid, regardless of the results obtained from the calculations described above. In this respect, "Financial assets" include a deposit guaranteeing this potential readjustment amounting to 21 million (Note 6). The merger between INSSEC and CIE Automotive, S.A. availed itself of the tax exemption established in Regional Corporate Tax Law 3/1996. Activity Since 1 January 2011, the date for accounting purposes of the merger described above, the CIE Automotive Group carries out its activities in three different sectors: the automotive sector, the biofuel sector and the Technological Solutions and Services (TSS) sector (formerly the Information and Communication Technologies (ICT) sector), the activities of which are described below: - Automotive CIE Automotive, S.A. is the parent company of an industrial group formed by several companies that are mainly engaged in the design, manufacture and sale of and sub-units on the world market. It applies complementary technologies aluminium, moulding, metals and plastics - and several associated processes: machining, welding, painting and assembly. Its main facilities are located in Europe: Spain (Álava, Barcelona, Cádiz, Guipúzcoa, Orense and Vizcaya), France, Portugal, Czech Republic, Romania, Morocco, Lithuania, Nafta (Mexico), South America (Brazil), the People s Republic of China and Russia. - Biofuel The biofuel segment is composed of several plants devoted to the production and distribution of biofuel. Note 1.2 to these financial statements summarises the main lines of the regulatory framework of this new business. The principal facilities where this activity is carried on are located in Spain (Álava, Madrid, Vizcaya and Huelva), Brazil and Guatemala. - Technological Solutions and Services (TSS) (formerly Information and Communications Technologies (ICT)) At 1 January 2011 and as a result of the merger described above, a new group of companies was added to the CIE Automotive Group. The parent company of the group is Global Dominion Access, S.A. The Group operates internationally developing global technological solutions for new digital and sustainable companies, offering technological solutions to the education, health care, sustainability, transport and communications sectors. It has facilities in Spain, Mexico, Brazil, Argentina, Chile and Peru. In addition to this stable presence, the company is working on international projects, primarily in Latin America. The registered offices of CIE Automotive are located at Calle Iparraguirre 34-2º derecha, Bilbao (Vizcaya). 9.-

12 ( 000) Group structure CIE Automotive, S.A. (a listed company) currently directly or indirectly owns 100% of CIE Bérriz, S.L. and CIE Inversiones e Inmuebles, S.L.U., 75% of CIE Automotive Nuevos Mercados, S.L., 100% of CIE Automotive Bioenergía, S.L., 50% of R.S. Automotive, B.V., and finally 84.95% of Global Dominion Access, S.A., holding companies to which the Group's production companies report. The list of subsidiaries and associates at 30 June 2012 operating in both lines of business, together with information concerning the same, is set out in the Appendix to these Notes, which are an inseparable part of these interim financial statements. All subsidiaries under the control of the CIE Automotive Group are fully consolidated while joint ventures are consolidated using the proportionate method. The associates consolidated using the equity methods are as follows: % interest Belgium Forge, N.V. (1) 100% 100% Biocombustibles de Zierbana, S.A. (2) 20% 20% Biocombustibles La Seda, S.L. (2) 40% 40% Galfor Eólica, S.L. (2) (3) 50% 50% ACS México, S.A. de C.V. (4) 50% 50% Gescrap Autometal Comercio de Sucatas Ltda (2) (4) 30% - (1) Under liquidation/ dormant (2) There is no control. (3) Company under construction. (4) Newly incorporated company in the process of starting up facilities. Floating of stock On 30 April 2010 CIE Automotive Group reported to the Brazilian Stock Market Authoristies (CVM de Brazil) its intention to list its Brazilian subsidiary Autometal, S.A., on the stock market and registered a public share offering for shares in Autometal, S.A. (hereinafter the Offer ) in Brazil by filing the provisional registration forms and the offer prospectus. On date 19 January 2011, Autometal S.A. published the Market Announcement of its intention to carry out the public share offering of the shares issued by Autometal, in Brazil in accordance with the terms CVM Regulation 480/09 and CVM Regulation 400/03, in order to place and publicly distribute shares abroad. Finally, on 4 February 2011 it was made publicly announced that Autometal S.A. concluded the relevant contracts and published the Initiation Announcement of the public share offering. The placement price was 14 Brazilian real per share and Autometal, S.A. started to be traded on the Brazilian stock market (BMF&BOVESPA Novo Mercado) on 7 February A total of 31,482,300 new shares (equivalent to 25% of the total number of shares representing share capital after the increase) totalling 440,752 thousand reals and a total of 27,482,300 shares were placed with external investors in the market and CIE Autometal, S.A. subscribed the remaining 4,000,000 shares, in accordance with the commitments with the placement agents and the terms of the prospectus that allowed the controlling shareholder (CIE Autometal, S.A.) to subscribe up to 15% of the share capital increase. 10.-

13 ( 000) On 18 February 2011, in accordance with the placement agents, the option for supplementary placement was partiality execuled up to a total of 968,530 shares owned by CIE Autometal, S.A. (Greenshoe options originally established in the prospectus up to maximum porcentage of 15% of the total offer at the same placement price) and the Closing announcement of the Offer was published on 24 February After the Offer, CIE Automotive, S.A. controls, indirectly, 97,132,501 shares, equivalent to % of the share capital os Autometal, S.A. The cost of the operation totalled 9.3 million and therefore the entry of resources into CIE Automotive Group totalled million. This transaction represented a significant increase in the Group's equity and the entry of new-controlling shareholdings totalling 103 million, wich are broken down in thw following table, and a significant decrease in net financial debt. The effects of the flotation on the Brazilian stock market on equity in 2011 are shown below: Amount in thousands of euro at the time of the operation Funds obtained from subscribers 174,713 - Cost of the operation (9,271) Inflow of funds 165,442 Equity acquired through non-controlling interests (103,441) Net capital gain of parent company shareholders (*) 62,001 (*) This amount is shown in the Consolidated Statement of Change in Equity for the six month period ended 30 June 2011, broken down under the headings Gains/(losses) on exchange and Retained earnings. Changes in the scope of consolidation Six month period ended 30 June 2012 a) Automotive segment On 31 March 2012 the Group company Investigación, Innovación y Desarrollo Grupo Recyde, A.I.E., owned by the following Group subsidiaries: Nova Recyd, S.A.U (25%), Recyde, S.A.U. (25%), Componentes de Automoción Recytec, S.L.U. (20%), Alfa Deco, S.A.U. (15%), Alucery, S.A.U. (10%) and Tarabusi, S.A.U. (5%) (Schedule I) was would up. On 10 April 2012 the Group acquired, through its subsidiary CIE Automotive Nuevos Mercados, S.L. 15% of the share capital of the Russian company CIE-Avtocom, LLC and increased its effective interest from 35% to 50%. On that same date, through the subsidiaries CIE Automotive Nuevos Mercado S.L. and CIE-Avtocom, LLC, the group subscribed the capital increase in the Russian company, CIE-Avtocom Kaluga, LLC and increased its effective interest by 15% to the present 50%. b) Biofuel segment On 4 January 2012 the Group acquired through its subsidiary Bionor Transformación, S.A.U. a 51% interest in the Spanish company, Recogida de Aceites y Grasas Maresme, S.L. (REMA), engaged in the marketing and recycling of raw materials in order to transform them into biofuel. c) Technological Solutions and Services (TSS) On 22 February 2012, the Peruvian company Dominion Perú Soluciones y Servicios, S.A.C. was created, owned 99,99% by the Group company Global Dominion Access, S.A. 11.-

14 ( 000) Six month period ended 30 June 2011 a) Automotive segment The following mergers took place on 1 January 2011 in the Mexican subgroup operating in the automotive segment (Appendix I): - The Mexican company Percaser de México S.A. de C.V. (the acquiring company) was merged with the Mexican companies Organización ADTEC, S.A. de C.V. and Pesimex, S.A. de C.V. (the targets). - Blanking, S.A. de C.V. (the acquiring company) was merged with Nugar S.A.P.I. de C.V. (the target) and the new company's name was changed to Nugar, S.A. de C.V. On 7 June 2011, the CIE Automotive Group signed an agreement with the Galician business group HISPAMOLDES to set up a joint venture in which each party would hold 50% of the capital. The joint venture between CIE Automotive, S.A. and HISPAMOLDES, which will take the legal form of a private limited company, is being created to promote the joint participation in projects in the automotive components manufacturing sector in the Kingdom of Morocco. The first project to be undertaken by the members of the joint venture involves plastic components technology. The partners will build a plant where plastic parts will be manufactured using injection systems, then assembled and painted in a sustainable, quality-controlled, affordable and environmentally-friendly process. The plant will be located in the Tangiers Free Zone (Kingdom of Morocco), a focal point for the automotive sector in that country. In May 2011 the Group, through the subsidiary Plasfil Plásticos da Figueira, S.A., acquired a 55% interest in the Portuguese company Apolo Blue Tratamentos, Lda. (Note 17). In addition, on 22 June 2011 the Group acquired its interests in GSB-TBK AUTOMOTIVE COMPONENTS, S.L. which had been held until that time by minority shareholders, at which point it became a sole proprietorship company. (Note 17). On 30 June 2011, the Group acquired an interest in CIE Galfor, S.A. which had been controlled by minority shareholders until that time, at which point the Group became the company s only shareholders (Note 17). b) Biofuel segment On 15 June 2011 Bionor Inversiones e Inmuebles S.L. (that was merged with Bionor Transformación S.A.U. with accounting effects 1 January 2011) sold its 100% interest in the Brazilian company Naturoil Combustíveis Renováveis S.A. to the Brazilian company CIE Autometal, S.A. This purchase-sale of shares had no effect on the CIE Automotive consolidated group. In 2011 the agreement was approved for the merger of Bionor Transformación S.A.U. and Bionor Inversiones e Inmuebles S.L., the former prevailing as the acquiring company and the latter being extinguished as the target. This merger took effect for accounting purposes on 1 January 2011 and does not entail any change in the consolidation of the CIE Automotive Group. c) Technological Solutions and Services (TSS) (formerly Information and Communications Technologies (ICT)) During 2011 Dominion Soluciones Tecnológicas, S.L.U., Dominion Instalaciones y Montajes, S.A.U., Install Telecom, S.A. and Dominion Seguridad, S.A. were merged, the acquiring company being Dominion Instalaciones y Montajes, S.A.U. This merger did not give rise to any change in the consolidation. Shareholders of the Group s parent company At 30 June 2012 and 2011 the companies with a direct or indirect interest in the share capital of CIE Automotive, S.A. of more than 10% are as follows (Note 9): 12.-

15 ( 000) % interest Corporación Gestamp, S.L. (*) % Elidoza Promoción de Empresas, S.L % (*) % directly and % indirectly through Risteel Corporation, B.V.. Preparation of interim financial statements These consolidated interim financial statements were prepared by the Board of Directors of the parent company on 24 July Regulatory framework The Biofuel business is subject to a specific regulatory framework in different areas: Safety equipment inventories On 27 August 2004 Royal Decree 1716/2004 came into effect, developing the Law on Fossil Fuels, in relation to the obligation to maintain minimum inventory levels in the petrol and natural gas sectors and the obligation to diversify natural gas supplies. The parties subject to these obligations are defined together the content of these, the amount, form and location of these inventories, reporting obligations and administrative competences relating to the inspection and control of these obligations. This Royal Decree also governs the operation of Corporación de Reservas Estratégicas de Productos Petrolíferos (CORES) and shortages of fossil fuel supplies. In this respect, the subsidiary VIA Operador Petrolífero, S.L.U., as an oil production operator, and in accordance with Royal Decree 1716/2004, amended by Royal Decree 1766/2007, is subject to the obligation to maintain buffer stocks of oil products. Oil product operators are required to maintain buffer stocks equal to the days' sales established in regulatory legislation (currently 92 days) of which Corporación de Reservas Estratégicas de Productos Petrolíferos (CORES) is required to cover 42 days and operators the remainder. Of these 42 days, 35 are held by CORES through a lease agreement between both parties. Inspection and control of compliance with this obligation are handled by Corporación de Reservas Estratégicas (CORES), which was set up on 7 July Obligations Order ITC/2877/2008 requires the subject parties to evidence ownership of the minimum quantity of biofuel certificates to the certification body ownership annually, enabling the attainment of the targets set (which have been changed under several decrees and currently under Royal Decree 459/201l). The term certificate is understood to refer to the document issued at the subject party's request, evidencing that it has attested to sales or consumption of a tonne of oil equivalent (toe) of biofuel in a specific year. In the event of non-compliance by the subject parties with the levels of consumption indicated, there is a penalty of 350 euro per biofuel certificate not obtained. As mentioned above, Royal Decree 459/ 2011, which replaced Royal Decree 1783/2010, was published on 2 April 2011 and establishes the following general biofuel targets which replaced the specific diesel targets: Biofuel targets 6.2% 6.5% 6.5% Diesel biofuel targets 6% 7% 7% 13.-

16 ( 000) Sustainability Royal Decree 1597/2011 was published on 4 November 2011, regulating sustainability criteria of biofuels and bioliquids, the National System of Verification of Sustainability and the double counting of certain biofuels for the pertinent calculation purposes. This Royal Decree, which considers the CNE to be the system management entity, establishes the double counting of certain biofuels for the purposes of complying with biofuel consumption and sales obligations and attaining the renewable energy target on transport set for 2020 (10%). Legislative novelties 2012 Order IET 822/2012 was published in the Official State Gazette on 20 April 2012 and regulates the assignment of biodiesel amounts for the calculation of mandatory biofuel targets. The Order will be in effect for 24 months although it may be extended for an additional two year period. The purpose of this law is to act as a licence such that only those European plants requesting an amount of biodiesel will be assigned it and for the purposes of determining the obligation, only those amounts acquired from biodiesel producers that have asked for and been granted the amount involved will be taken into account. From a market viewpoint, the proposed system limits supply, ensuring that biodiesel does not derive from a mere mix of imported biodiesel fuels. The quota application period ended on 21 May 2012 and the Ministry of Industry, Energy and Tourism is currently analysing the requests submitted. The initial quota assignment will be completed by 21 October 2012 and the order is expected to be fully effective shortly following the assignment of amounts, being already applicable in the calculation of the mandatory targets. 2. Summary of the main accounting policies applied Except as indicated in Notes 2.1 and 2.5 below, the accounting policies used to prepare these abbreviated consolidated interim financial statements for the six month period ended 30 June 2012 are consistent with those used to prepare the 2011 consolidated annual accounts of CIE Automotive, S.A. and subsidiaries. These abbreviated consolidated interim financial statements for the six month period ended 30 June 2012 were prepared according to International Accounting Standards (IAS) 34, Interim financial reporting and should be read along with the consolidated annual accounts at 31 December 2011 which were prepared according to IFRS-EU for CIE Automotive, S.A. and subsidiaries. 2.1 Basis of presentation The Group s abbreviated consolidated interim financial statements for the six month period ended 30 June 2012 have been drawn up in accordance with the International Financial Reporting Standards adopted for utilisation in the European Union (IFRS-EU) and approved under European Commission Regulations in force at 30 June The consolidated interim financial statements have been prepared on a historical cost basis, as modified by the revaluation of available-for-sale financial assets and financial assets and liabilities (including derivatives) at fair value through profit and loss. The preparation of interim financial statements and annual accounts under IFRS-EU requires the use of certain critical accounting estimates. The application of IFRS also requires that management exercise judgement in the process of applying the Company s accounting policies. The judgements and estimates made by management when preparing the consolidated interim financial statements at 30 June 2012 are consistent with those used to prepare the consolidated annual accounts at 31 December 2011 of CIE Automotive and subsidiaries. 14.-

17 ( 000) As a result of certain International Financial Reporting Standards coming into effect on 1 January 2012, the Company has adapted its interim financial statements to those standards. The standards that came into effect are detailed in Note 2.5 below. The income statement for the first half of 2012 and 2011 does not include any unusual items that would require details and/or the reconciliations of figures. 2.2 Consolidation principles Appendix I to these notes identifies the subsidiaries included in the scope of consolidation. The criteria used in the consolidation, except for those mentioned in Note 2.5, have not varied with respect to those used in the year ended 31 December 2011 by CIE Automotive, S.A. and subsidiaries. The consolidation methods used are described in Note 1. The financial statements used in the consolidation process are, in all cases, those relating to the six month period to 30 June 2012 and Segment reporting The management of the CIE Automotive Group has defined the way in which it analyses the Group's financial information, in accordance with IFRS 8 Operating segments and taking into account the changes brought about by the merger in 2011 with its parent INSSEC (Note 1). The management of CIE Automotive, S.A. has decided to divide the Automotive business into two geographical areas, Europe and America, and to arrange the Biofuel business as another distinct segment. In addition, following the merger effective for accounting purposes as from 1 January 2011, there is a new business, Technological Solutions and Services (TSS), which is the new name for the segment formerly named Information Technologies and Communications (ITC) and which is defined as another distinct segment. These segments are described in Note 5 to the 2011 consolidated annual accounts of CIE Automotive. 2.4 Accounting estimates and judgements The preparation of interim financial statements requires management to make judgements, estimates and assumptions affecting the application of accounting policies and the amounts presented under assets and liabilities, income and expenses. Actual results may differ from these estimates. In the preparation of these abbreviated interim financial statements, the important judgements made by management on applying the Group's accounting policies and the key sources of uncertainty in their estimation have been the same as those which were applied in the consolidated annual accounts for the year ended 31 December Corporate income tax Corporate income tax expense for the six month periods to 30 June 2012 and 2011 has been estimated based on profits before taxes, as adjusted for any permanent and/or temporary differences envisaged in tax legislation governing the corporate income tax base calculation. The tax is recognised in the income statement, except insofar as it relates to items recognised directly in equity, in which case, it is also recognised in equity. Tax credits and deductions and the tax effect of applying tax-loss carryforwards that have not been capitalised are treated as a reduction in the corporate income tax expense for the year in which they are applied or offset. Calculating the tax did not require the use of significant estimates, with the exception of the amount recognized as capitalized tax credits, which was at all times consistent with the annual financial statements. Bearing in mind the economic and time parameters used for the estimates, had the premises used been modified by 10%, it would not have had a significant positive or negative effect on the results of the six month period ended 30 June

18 ( 000) Deferred taxes Deferred taxes are calculated in accordance with the balance sheet liability method based on the temporary differences between the tax bases of assets and liabilities and their carrying values in the consolidated financial reports. However, if the deferred taxes arise from the initial recognition of a liability or an asset on a transaction other than a business combination that at the time of the transaction has no effect on the tax gain or loss, they are not accounted for. Deferred income tax is determined using tax rates (and laws) that have been approved or substantially approved by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred taxes on temporary differences arising on investments in subsidiaries, associates and joint ventures are recognised, except where the Group may control the date on which the temporary differences reverse and such temporary differences are unlikely to reverse in the foreseeable future. Deferred tax assets deriving from tax credits in respect of losses available for offset and corporate income tax allowances and deductions to which the company is entitled are recognised to the extent that there will be sufficient tax profits in the future against which to offset the temporary differences. When tax deductions are taken for investments, the balancing entry of the amount recognised is recorded in the deferred income account. The amount is recorded as a decrease in the expense over the time during which depreciation is charged on the property, plant and equipment that generated the tax credits, recognising the right by credit to deferred income over various fiscal years. Useful lives of property, plant and equipment Group management systematically determines the estimated useful lives of fixed asset items based on the depreciation charges. The depreciation of non-production assets (except land, which is not depreciated) is calculated on a straight-line basis in order to assign cost to residual values based on the estimated useful lives. Production assets are depreciated on a systematic basis over their useful lives, which are estimated based on actual production levels (i.e., according to the production unit method) and the residual value of the assets as well as the maximum useful life for each type of asset. Estimated impairment loss on goodwill The Group tests goodwill annually for impairment. The recoverable amounts of cash generating units, which were determined on the basis of calculations of value in use, did not give rise to impairment risks on the Group's goodwill at 31 December The assumptions used in the analyses, the effects of the sensitivity analysis and other information on these impairment analyses are included in Note 7 to the consolidated annual accounts of CIE Automotive, S.A. and subsidiaries at 31 December The performance of the different business lines of the CIE Automotive Group was positive in the first half of 2012 (Note 2.6). There was no indication of a risk of impairment which would modify the conclusions of the analyses and estimates made at 31 December Fair value of derivatives and other financial instruments The fair value of the financial instruments used by the Group, primarily interest rate swaps and foreign currency insurance, is determined in the reports drafted by the Group s financial analysts and contrasted with those received from the financial institutions with which the financial instruments were contracted. Note 6.b) details the conditions, notional amounts and valuation of those instruments at the balance sheet date. 16.-

19 ( 000) 2.5 New IFRS and IFRIC interpretations a) Mandatory standards, amendments and interpretations for all years starting 1 January 2012 IFRS 7 (Amendment) Financial Instruments: Disclosures Transfers of Financial Assets" The amendment of IFRS 7 requires additional disclosure of the exposure to risks arising from financial assets transferred to third parties. It requires disclosure of the assessment of risks and rewards for transactions that have not qualified for derecognition of financial assets and the identification of the associated financial liabilities while disclosure of information on operations that have qualified for derecognition of financial assets increases: results generated on the transaction, remaining risks and rewards and their accounting, initially and in the future, and the estimated fair value of "continuing involvement" reflected in the balance sheet. This amendment affects financial asset sales, factoring agreements, financial asset securitisation and security loan agreements, among other things. The application of amendments to IFRS 7 is mandatory for all years starting on and after 1 July The Group has assessed the new reporting requirements in order to comply with them and the effect for the Group is not significant. b) Standards, amendments and interpretations that may be adopted early before the start of years commencing 1 January 2012 As of the date of signature of these abbreviated consolidated interim financial statements, the IASB and IFRIC had published the standards, amendments and interpretations described below and mandatory as from years beginning The Group has not adopted the following early: IAS 1 (Amendment), Presentation of Financial Statements This amendment changes the presentation of the statement of comprehensive income, requiring that the items included in comprehensive income be grouped into two categories depending on whether or not they are transferred to the income statement. As in the previous version of IAS 1, the option to present items of other comprehensive income before tax is retained. If an entity opts for this option, the tax effect of both item groups should be presented separately. In IAS 1, the title statement of comprehensive income" has been changed to statement of profit and loss and other comprehensive income". The possibility of using alternative names is retained. This amendment applies to all years starting on or after 1 July Early application is permitted. This amendment does not have a significant effect in the Group. IAS 19 (Amendment), Employee Benefits. The amendment of IAS 19 introduces significant changes to the recognition and measurement of defined benefit pension expenses, termination benefits and disclosures of all employee benefits. The following aspects of IAS 19 have been amended, inter alia: o Actuarial gains and losses (now named "restatements") may only be recognised in other comprehensive income. The options to defer actuarial gains and losses through the corridor approach and recognise them directly in the income statement are eliminated. Restatements recognised in other comprehensive income may not be transferred to the income statement. o Past service costs should be recognised in the year in which the plan is amended while benefits not vested may not be deferred over a future service period. Curtailments only arise when there is a significant fall in the 17.-

20 ( 000) number of employees affected by the plan. Gains and losses on curtailments are recognised in the same way as past service costs. o o The annual expense of a funded benefit plan includes the net interest expense or income, calculated by applying the discount rate to the net asset or liability for defined benefits. Benefits which entail a future service requirement are not considered indemnities. The application of IAS 19, amended, is mandatory for all years starting on or after 1 January Early application is permitted. No significant effect is expected to arise in the Group that has not applied it early. c) Standards, amendments and interpretations applied to existing standards that have not been adopted by the European Union As of the date of signature of these abbreviated consolidated interim financial statements, the IASB and IFRIC had published the standards, amendments and interpretations described below, which are pending adoption by the European Union. IFRS 1 (Amendment) Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters The amendments relative to high levels of hyperinflation provide guidance on how to present for the first time, or summarise with the presentation of financial statements prepared under IFRS after a period of time during which the company was unable to meet IFRS requirements because of the high levels of hyperinflation affecting its functional currency. This amendment applies to all years starting on or after 1 July 2011 and is not expected to have a significant effect in the Group. IAS 12 (Amendment) Deferred tax: Recovery of Underlying Assets" The amendment of IAS 12 offers a practical approach to the measurement of deferred tax assets and liabilities related to investment property carried at fair value, one of the measurement options offered by IAS 40 "Investment properties". The application of this amendment is mandatory to all years starting on or after 1 January The Group does not have this type of investments. IFRS 9, Financial Instruments The publication of IFRS 9 Financial instruments in November 2009 was the first step in the process undertaken by IASB to replace IAS 39, Financial instruments: Recognition and Measurement". IFRS 9 simplifies the way in which financial assets are accounted for and introduces new classification and measurement requirements. It requires that financial assets which are held mainly to collect cash flows representing payment of the principal and interest should be carried at amortised cost while other financial assets, including those held for trading, should be carried at fair value. Therefore it only requires an impairment model for financial assets carried at amortised cost. In October 2010, the IASB updated the contents of IFRS 9 to incorporate the standards for subsequent recognition and measurement of financial liabilities and other criteria for writing off financial instruments. This standard applies to years starting on or after 1 January 2015, although early application is permitted. The Group has not analysed its possible impact at the time of its application. 18.-

21 ( 000) IFRS 9 (Amendment) and IFRS 7 (Amendment) "Mandatory Effective Date and Transition Disclosures The IASB published an amendment under which the entry into effect of IFRS 9 "Financial Instruments" was postponed, the application of which will be mandatory for the years starting on and after 1 January According to the original transitional provisions, IFRS 9 was set to come into effect on 1 January The early application of IFRS 9 continues to be permitted. It is also noteworthy that the amendment of IFRS 9 introduces changes with respect to comparative information and the additional disclosures that should be provided following adoption of the new standard, depending on its first application. The Group is analysing the new information requirements in order to comply with these requirements when they come into effect. IFRS 10 "Consolidated Financial Statements IFRS 10 introduces changes in the concept of control, which continues to be defined as the factor determining whether or not an entity should be included in the consolidated financial statements. IFRS 10 replaces the control and consolidation guidelines contained in IAS 27 Consolidated and Individual Financial Statements" and eliminates IAS 12 Consolidation Special Purpose Entities". For control to exist, two conditions must be met: there must be authority over an entity and the right to variable returns. This amendment applies to all years starting on or after 1 January Its early application is permitted provided that IFRS 11 Joint Arrangements", IFRS 12 Disclosures of Interests in Other Entities", IAS 27 (amended in 2011), Separate Financial Statements" and IAS 28 (amended in 2011) Investments in Associates and Joint Ventures are adopted at the same time. On the basis of the analysis performed, this standard is not expected to have significant effects for the Group with respect to the criteria applied in the past. IFRS 11 "Joint Arrangements IFRS 11 addresses the accounting treatment of joint arrangements based on the rights and obligations arising from the agreement rather than the legal status. The types of joint arrangements are reduced to two: joint operations and joint ventures. Under a joint operation a member has direct rights over the assets and liabilities arising from the arrangement and therefore reflects its proportional interest in the assets, liabilities, income and expenses of the entity in which it participates. A joint venture is when a member is entitled to the profits or net assets of the entity in which it participates and therefore uses the equity method to account for its interest in the business. The proportionate consolidation method is no longer permitted to account for interests held in joint ventures. This amendment applies to all years starting on or after 1 January Changes to the accounting treatment required under IFRS 1 are reflected at the start of the earliest period presented in the financial statements. Early application of IFRS 1 is permitted provided that IFRS 10 Consolidated Financial statements, IFRS 12 Disclosures of Interests in Other Entities, IAS 27 (amended in 2011) Separate Financial Statements and IAS 28 (amended in 2011) Investments in Associates and Joint Ventures" are adopted at the same time. The Group is assessing the impact of this standard which it expects could be significant. 19.-