DRAFT Interim Financial Report at 31 March 2018

Transcription

1 DRAFT Interim Financial Report at 31 March

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3 Interim Financial Report at 31 March 2018 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. 4 Directors Report: - The Zignago Vetro SpA Group pag. 6 - The Company Zignago Vetro SpA pag The Consolidated Subsidiaries pag Significant events after 31 March 2018 pag Outlook pag. 58 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 Equity pag Notes to the Financial Statements pag. 66 Statement as per Article 154-bis, paragraph 2 of Leg. Decree 58/1998 pag. 73 2

5 ZIGNAGO VETRO GROUP STRUCTURE AT 9 MAY 2018 ACTIVITIES AND SHAREHOLDINGS ZIGNAGO VETRO SpA PRODUCTION AND SALE OF HOLLOW GLASS CONTAINERS 50% 100% 100% VERRERIES BROSSE SAS PRODUCTION AND SALE OF GLASS BOTTLES FOR LUXURY FRAGRANCES VETRI SPECIALI SpA PRODUCTION AND SALE OF SPECIALITY HOLLOW GLASS CONTAINERS HUTA SZKŁA CZECHY S.A. PRODUCTION AND SALE OF HOLLOW GLASS CONTAINERS 100% 30% ZIGNAGO GLASS USA Inc. SALES PROMOTION OF GLASS BOTTLES VETRECO Srl TREATMENT AND SALE OF RECYCLED GLASS 51% VETRO REVET Srl TREATMENT AND SALE OF RECYCLED GLASS 3

6 CORPORATE 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 chief financial officer and investor relations manager Roberto Celot operations director Roberto Cardini Committee for Transactions with Related Parties commercial management Biagio Costantini Stefano Bortoli Manuela Romei Ferdinando Businaro Alessia Antonelli Lead Independent Director Franco Moscetti 4

7 5 Directors Report

8 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 operates in the market with 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 Interim Report for the period ended 31 March 2018 and 2017, unaudited, was prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board ( IASB ) and approved by the European Union in accordance with Regulation No. 1606/2002 ( IFRS ). The Interim Report at 31 March 2018 is prepared in accordance with IAS 34 Interim Reporting and Article 154-ter of the CFA, following the summary form permitted under the standard. This Interim Report therefore does not include all the information published in the annual report and must be read together with the financial statements at 31 December 2017 for full and complete disclosure of the Group accounts. In particular, the accounting policies adopted for the preparation of the Interim Report for the period ended 31 March 2018 and 2017 are the same as those utilised for the consolidated financial statements of the Zignago Vetro Group for the year ended 31 December 2017, with the exception of that reported below, and were applied consistently for all periods presented, except for the adoption of the new standards, amendments and interpretations approved by the IASB and approved for adoption in Europe and obligatory for accounting periods beginning 1 January We recall that IFRS 11 - Joint arrangements, applicable for the Group 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 Consolidated Financial Statements to the Interim Report for the period ended 31 March 2018 and for the comparative financial statements at 31 March 2017 and the annual financial statements at 31 December 2017, 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. 6

9 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 from 1 January 2014 and those in force at 31 December 2013, is provided in the Interim Report. New accounting policies and interpretations adopted by the Group from 1 January 2018 The IAS/IFRS endorsed by the EU at 31 December 2017 and the relative IFRIC interpretations applicable to financial statements for periods beginning from 1 January 2017 as early application is permitted, an option which the Group has decided not to exercise, are reported below. Document title IFRS 15 - Revenue from contracts with customers IFRS 9 - Financial Instruments Date of issue May 2014 (Note 1) Effective entry date Date approved EU Regulation and publication date 1 January September 2016 (EC) 2016/ October 2016 July January November 2016 (EC) 2016/ November 2016 Clarifications to IFRS 15 April January October 2017 (EC) 2017/ November 2017 Joint application of IFRS 9 Financial instruments and IFRS 4 Insurance contracts (Amendments to IFRS 4) IFRS 16 Leasing September 2016 January January November 2017 (EC) 2017/ November January October 2017 (EC) 2017/ November 2017 (Note 1) The amendment changed the effective date of IFRS 15 published in September

10 With regards to IFRS 15 Revenue from contracts with customers, on 28 May 2014 the IASB published the document establishing that revenue is recognised on the transfer of control of the goods or services to customers for an amount equal to the consideration for which a right emerges in exchange for these products or services. The standard introduces a revenue recognition model in five steps: 1) Identification of the contract with the client; 2) Identification of the performance obligations; 3) Calculation of the transaction price; 4) Allocation of the remuneration related to the provision of the service; 5) Recognition of the revenues related to the provision of the service. The new standard furthermore requires additional information concerning the nature, amount, times and uncertainty regarding the revenues and the cash flows from contracts with customers. The IASB establishes adoption from 1 January 2018 and the European Union endorsed the standard on 22 September In addition, on 12 April 2016 the IASB published amendments to the standard in order to clarify the means by which the company is identified as a Principal or Agent and to establish whether licensing revenues should be deferred for their duration. With regards to IFRS 9 Financial instruments, on 24 July 2014 the IASB published the final document in conclusion of the process, broken down into three phases Classification and Measurement, Impairment and General Hedge Accounting, in full review of IAS 39. The document introduces new criteria for the classification and measurement of financial assets and liabilities. The new standard uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the many different rules in IAS 39. For financial liabilities however the standard is mainly amended with regard to the accounting treatment of the fair value changes of a financial liability allocated as valued at fair value through the income statement, in the case in which these relate to changes in the credit position of the financial liability. According to this new standard, these changes should be recorded to other items of the statement of comprehensive income. The new document includes a single model for the impairment of financial assets based on expected losses. The IASB establishes adoption from 1 January 2018 and the European Union endorsed the standard on 22 November For IFRS 16 Leasing, on 13 January 2016 the IASB published a new standard IFRS 16 - Leases, which replaces IAS 17. This document was adopted by the European Union through publication on 9 November IFRS 16 applies to financial statements for periods beginning 1 January 2019 or subsequently. The new standard eliminates the difference in the recognition of operating and finance leases, while also presenting elements which simplify application and introduces the concept of control within the definition of leasing. In particular, in order to determine whether a contract represents leasing, IFRS 16 requires to verify whether the lessee has the right to control the use of a determined asset for a determined period of time. With regards to IFRS 4 Insurance Contracts, on 12 September 2016 the IASB issued a number of amendments to resolve inconsistencies regarding the differing dates for the entry into force of IFRS 9 and IFRS 4. 8

11 Below we report the IFRS, interpretations and amendments to existing accounting policies and interpretations, or specific provisions within the standards and interpretations approved by the IASB, which have not yet been endorsed for adoption in Europe at the approval date of these consolidated financial statements. Document title Standards IFRS 14 Regulatory Deferral Accounts Date of issue by the IASB Effective entry date of the IASB document Expected endorsement date by EU January 2014 (Note 1) (Note 1) IFRS 17 Insurance Contracts May January 2021 TBD Interpretations IFRIC 22 Foreign Currency Transactions and Advance Consideration IFRIC 23 Uncertainty over Income Tax Treatments Amendments Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions Annual Improvements to IFRS Standards ( Cycle) Amendments to IAS 40: Transfers of Investment Property Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures Amendments to IFRS 9: Prepayment Features with Negative Compensation Annual Improvements to IFRS Standards ( Cycle) December January 2018 Q June January September 2014 June 2016 December 2016 December 2016 Deferred until the completion of the IASB project on the equity method 1 January January January 2018 Postponed ahead of the conclusion of the IASB project on the equity method Q Q January 2018 Q October January October January December January The Group adopted IFRS 15 Revenue from contracts with customers and IFRS 9 Financial instruments from 1 January The effects from application of the new standard IFRS 15 Revenue from contracts with customers refer in particular to the recognition of revenues for packaging returns. These revenues carry in fact, in accordance with the standard, an obligation, although time limited, arising from the commitments to repurchase that which the company provides on initial sale. All of the packaging which the customer, within a reasonable timeframe, returns in good condition shall be repurchased at the same sales price. 9

12 No impacts were noted from application of IFRS 9 Financial instruments. In addition, until 31 December 2017, a portion of the above-stated packaging (pallets) was recognised as assets by the Parent; from 1 January 2018, the standard was amended, recognising such as inventory (as for all other types of packaging materials). The adoption of the above new standards impacts the parent Zignago Vetro Spa and Vetri Speciali Spa, while the other companies are unaffected. The restated column of the following tables presents the historic amounts restated to reflect the effects of the application of these new standards. Movements between periods are calculated with reference to the above-stated column. The Interim Report at 31 March 2018 and 2017 was prepared in accordance with the Issuers Regulation No of 14 May 1999, as amended and supplemented. Reference should be made to the Notes with regards to the accounting policies and consolidation principles adopted. 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. 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); 10

13 - EBITDA: the Company defines this as a difference between value added and personnel expense (including those of temporary workers), plus the result of the investments in joint ventures under 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-financial items of the Group s business, related to a clearly defined investment strategy and as such classified within the Group s interim operating results; - EBIT: the Company defines this as the difference between EBITDA and depreciation & amortisation of tangible assets plus provisions & write-downs, including allowance for bad debts; - 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 assets, insurance compensation, grants, 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 this Interim Report, if not otherwise stated, are expressed in thousands of Euro in the financial statements and in millions of Euro in the Explanatory Notes, excepted where otherwise stated. * * * The Zignago Vetro Group, according to management s view, operates through five Business Units, each being a separate legal entity. Given this, information concerning the operating performance of the various business units 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. 11

14 Segment reporting which coincides with the various legal entities is provided below, independently of the respective consolidation method applied. Disclosure by region 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; - HSC 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 and Vetro Revet Srl: these Business Units are 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 31 March 2018 is unchanged on 31 December 2017 and altered on 31 March 2017 with the consolidation of Vetro Revet Srl. The companies consolidated using the line-by-line method are 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. - Vetro Revet Srl The companies valued under the equity method are the following: - Vetri Speciali SpA; - Vetreco Srl. 12

15 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 Events in the first three months of 2018 Dividends distributed. The Shareholders Meeting of Zignago Vetro SpA on 27 April 2018 approved the distribution of a dividend of Euro 0.32 per share, totaling Euro million, with payment date of 16 May Treasury shares. On 27 April 2018, the Shareholders Meeting 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 27 April 2017 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 27 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. In the first three months of the year, 729,122 treasury shares were sold, for a total amount of Euro 6.09 million and a gain of Euro 3.52 million recognised to an equity reserve. Subsequently, an additional 21,629 shares were sold for Euro 0.18 million. At 31 March 2018, the company still had in portfolio 330,604 treasury shares, corresponding to 0.38% of the share capital, purchased for Euro 1.17 million. In the first three months of 2018, no treasury shares were acquired. 13

16 Performance of the Zignago Vetro Group The first quarter of 2018 featured growing Beverage and Food demand across all the main market segments, both in Italy and Europe in general, thanks to strong end consumption - particularly on segments driven by finished product exports. The global Perfumery markets confirmed the good prior year performance, particularly in the specialised categories. For the Cosmetics market, nail varnish container demand still appears weak, while the Skincare and Make up segments performed strongly. In order to better illustrate the performance, as previously stated, the figures are based on the management view of the Group business, which provides for the proportional consolidation of joint ventures, as permitted by the accounting standards in force until 31 December According to management s view therefore, consolidated revenues of the Zignago Vetro Group for the first quarter of 2018 amounted to Euro 94.3 million (+14.2% on the same period of the previous year: Euro 82.6 million). Materials and external services, including changes in inventories and internal production of fixed assets, amounted to Euro 47.7 million compared to Euro 42.5 million in Q (+12.1%), accounting for 50.6% of revenue compared to 51.5% in the same period of the previous year. Personnel expense amounted to Euro 21.6 million, compared to Euro 20.1 million in Q (+7.6%). These costs on revenues decreased from 24.3% to 22.9%. Consolidated EBITDA totalled Euro 25 million compared to Euro 20 million in the same period of 2017 (+25.1%), a revenue margin of 26.5% compared to 24.2%. Consolidated EBIT was Euro 14 million compared to Euro 10.7 million in the first quarter of 2017 (+31%), with a revenue margin of 14.8% compared to 12.9% in the previous year. The consolidated operating profit in the first quarter of 2018 grew 27.2% on the same period of the previous year (Euro 14.1 million compared to Euro 11.1 million), a 14.9% margin compared 13.4%. The consolidated profit was Euro 9.8 million compared to Euro 7.6 million in the same period of 2017 (+27.9%). The revenue margin increased from 9.2% to 10.4%. The tax rate decreased from 29.8% in the first quarter of 2017 to 26.2% in the first quarter of

17 The cash flow generated from the profit in the period and amortisation/depreciation amounted to Euro 20.2 million compared to Euro 16.7 million in the same period of the previous year (+21%). The key data of the reclassified consolidated income statement of the Zignago Vetro Group in Q and 2017, prepared based on management s view as described previously, are reported below. Q Q restated Change Q Euro thou. % Euro thou. % % Euro thou. % Revenues 94, % 82, % 14.2% 84, % Changes in finished and semi-finished products and work in progress (1,385) (1.5%) 1, % n.a. 1, % Internal production of fixed assets % % 63.2% % Value of production 93, % 84, % 11.2% 86, % Cost of goods and services (47,130) (50.0%) (44,205) (53.5%) 6.6% (46,384) (56.2%) Value added 46, % 40, % 16.4% 40, % Personnel expense (21,578) (22.9%) (20,052) (24.3%) 7.6% (20,052) (24.3%) EBITDA 25, % 20, % 25.1% 20, % Amortisation & Depreciation (10,461) (11.1%) (9,088) (11.0%) 15.1% (9,238) (11.2%) Accruals to provisions (617) (0.7%) (266) (0.3%) 132.0% (266) (0.3%) EBIT 13, % 10, % 31.0% 10, % Net recurring non-operating income % % (73.9%) % Operating Profit 14, % 11, % 27.2% 11, % Net financial expense (760) (0.8%) (251) (0.3%) 202.8% (251) (0.3%) Net exchange rate gains/(losses) (497) (0.5%) % n.a % Profit before taxes 12, % 10, % 17.6% 10, % Income taxes (3,357) (3.6%) (3,250) (3.9%) 3.3% (3,250) (3.9%) (Tax-rate Q1 2018: 26.2%) (Tax-rate Q1 2017: 29.8%) (Profit) loss non-con. int Profit for the period 9, % 7, % 27.9% 7, % 15

18 The breakdown of consolidated revenues for Q and 2017 are shown below: (Euro thousands) Q Q restated Q Zignago Vetro SpA 50,587 45,727 47,719 Verreries Brosse SAS 16,218 14,415 14,415 HSC SA 10,335 6,466 6,466 Zignago Glass USA Inc Vetri Speciali SpA 19,255 17,622 17,989 Vetreco Srl 1,145 1,062 1,062 Vetro Revet Srl Total aggregate 98,544 85,361 87,720 Elimination inter-company revenues (4,261) (2,766) (2,766) Total Consolidated 94,283 82,595 84,954 Revenues breakdown by geographic area: (Euro thousands) Q Q restated Q Italy 62,103 49,586 51,945 European Union (exc. Italy) 28,230 26,975 26,975 Other areas 3,950 6,034 6,034 Total 94,283 82,595 84,954 Group revenues outside Italy amounted to Euro 35.4 million, compared to Euro 33 million in the first quarter of 2017 (+7.3%) and account for 37.6% of revenues (Q1 2017: 38.9%). In detail: (Euro thousands) Q Q Change % Zignago Vetro SpA 10,165 10,653 (4.6%) Verreries Brosse SAS and its subsidiary 15,327 13, % HSC SA 6,527 4, % Vetri Speciali SpA 3,394 4,446 (23.7%) Total 35,413 33, % The profit in the first quarter of 2018 and 2017 was as follows: (Euro thousands) Q Q restated Q Zignago Vetro SpA 6,271 12,600 12,600 Verreries Brosse SAS HSC SA Zignago Glass USA Inc. (116) (29) (29) Vetri Speciali SpA 2,823 3,158 3,189 Vetreco S.r.l Vetro Revet S.r.l. (674) Total aggregate 8,992 16,828 16,859 Consolidation adjustments 453 (9,188) (9,188) (Profit) loss non-con. int Profit for the period 9,775 7,640 7,670 16

19 The key data of the reclassified consolidated income statement of the Zignago Vetro Group in Q1 2018, in application of IFRS 11 and compared with the same quarter of the previous year is illustrated below. Q Q restated Change Q Euro thou. % Euro thou. % % Euro thou. % Revenues 74, % 64, % 15.0% 66, % Changes in finished and semi-finished products and work in progress (576) (0.8%) (848) (1.3%) n.a. (848) (1.3%) Internal production of fixed assets % % n.a % Value of production 74, % 64, % 16.0% 66, % Cost of goods and services (38,679) (52.1%) (34,733) (53.8%) 11.4% (36,575) (56.7%) Value added 35, % 29, % 21.4% 29, % Personnel expense (16,872) (22.7%) (15,462) (24.0%) 9.1% (15,462) (24.0%) Effect of measurement of JV using Equity method EBITDA 3, % 3, % 6.7% 3, % 22, % 17, % 29.7% 17, % Amortisation & Depreciation (8,698) (11.7%) (7,446) (11.5%) 16.8% (7,596) (11.8%) Accruals to provisions (595) (0.8%) (232) (0.4%) 156.5% (232) (0.4%) EBIT 13, % 9, % 36.7% 9, % Net recurring non-operating income % (92.1%) % Operating Profit 13, % 9, % 32.7% 9, % Net financial expense (670) (0.9%) (151) (0.2%) 343.7% (151) (0.2%) Net exchange rate gains/(losses) (479) (0.6%) % n.a % Profit before taxes 11, % 9, % 21.8% 9, % Income taxes & IRAP (2,456) (3.3%) (2,133) (3.3%) 15.1% (2,133) (3.3%) (Tax-rate Q1 2018: 20.6%) (Tax-rate Q1 2017: 21.8%) Profit (loss) non-con. int. Profit for the period % n.a , % 7, % 27.9% 7, % 17

20 For a better understanding of the results for Q1 2018, stated in accordance with management s view, a reconciliation is provided below of the reclassified income statement between the version which values the investments in joint ventures at equity and the version utilising the proportional consolidation method, as adopted by the Group until 31 December Revenues Q1 Proportional consolidation Q IAS/ IFRS Vetri Vetreco Neutralisation Adjustment 2018 pre- Speciali SpA Srl JV using the to Parent IFRS 11 equity principles (management criteria view) Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. 74,209 19,255 1, (326) 94,283 Changes in finished and semifinished products and work in progress (576) (840) (1,385) Internal production of fixed assets Value of production 74,475 18,415 1, (326) 93,740 Cost of goods and services (38,679) (8,391) (929) (47,130) Value added 35,796 10, ,610 Personnel expense (16,872) (4,616) (90) (21,578) Effect of measurement of JV using Equity method 3, (3,395) EBITDA 22,319 5, (3,395) ,032 Amortisation & Depreciation (8,698) (1,687) (76) --- (10,461) Accruals to provisions (595) (22) (617) EBIT 13,026 3, (3,395) ,954 Net recurring non-operating income Operating Profit 13,050 3, (3,395) ,059 Net financial expense (670) (55) (35) (760) Net exchange rate gains/(losses) (479) (18) (497) Profit before taxes 11,901 3, (3,395) ,802 Income taxes & IRAP (2,456) (884) (16) (3,357) (Profit) loss non-con. int. Profit for the period ,775 2, (3,395) 542 9,775 18

21 The reclassified statement of financial position of the Zignago Vetro Group at 31 March 2018, prepared according to management s view as described previously, is presented below in condensed form and compared with 31 March and 31 December 2017: restated restated Euro thou. % Euro thou. % Euro thou. % Euro thou. % Euro thou. % Trade receivables 89,106 71,458 81,935 71,458 81,935 Other receivables 13,643 12,601 22,321 12,601 22,321 Inventories 92,615 84,782 93,518 83,310 91,334 Current non-financial payables (84,177) (71,942) (85,107) (70,440) (82,828) Payables on fixed assets (5,654) (9,993) (10,193) (9,993) (10,193) A) Working capital 105, % 86, % 102, % 86, % 102, % Net tangible and intangible assets 237, , , , ,426 Goodwill 42,834 40,814 42,969 40,814 42,969 Other equity investments and noncurrent assets 6,387 6,344 5,346 6,344 5,346 Non-current provisions and nonfinancial payables (17,921) (17,682) (17,759) (17,682) (17,759) B) Net fixed capital 268, % 235, % 269, % 235, % 269, % A+B= Net capital employed 374, % 322, % 372, % 322, % 372, % Financed by: Current loans and borrowings 82, ,823 88, ,823 88,431 Cash and cash equivalents (67,581) (63,928) (41,319) (63,928) (41,319) Current net debt 15, % 46, % 47, % 46, % 47, % Non-current loans and borrowings 165, % 112, % 148, % 112, % 148, % C) Net financial debt 180, % 158, % 195, % 158, % 195, % Opening equity 177, , , , ,519 Dividends (21,818) --- (21,818) Other equity changes 5, , ,990 Profit for the period 9,775 7,640 39,779 7,670 39,874 D) Closing equity 193, % 163, % 177, % 163, % 177, % E) Non-controlling interest equity (91) (496) (496) D+E Group Equity 193, , , , ,069 C+D +E= Total financial debt & equity 374, % 322, % 372, % 322, % 372, % 19

22 Working capital increased at 31 March 2018 by Euro 18.6 million compared to 31 March 2017 and by Euro 3.1 million compared to 31 December In comparison to 31 March 2017, trade receivables increased (+Euro 17.6 million), as did other receivables (+Euro 1 million) and inventories (+Euro 7.8 million); current non-financial payables increased (+Euro 12.2 million), while payables on fixed assets decreased (-Euro 4.3 million). The net fixed capital at 31 March 2018 decreased on 31 December 2017 (Euro million compared to Euro 270 million: -0.6%), principally due to higher depreciation than investments in the period. Zignago Vetro Group capital expenditure in the first quarter of 2018 totalled Euro 8.2 million (Euro 11.4 million in the first quarter of 2017). This related in particular to: - Zignago Vetro SpA for Euro 3.7 million (Euro 2.5 million in the same period of 2017) mainly for plant, machinery, and equipment and for the purchase of moulds; - Verreries Brosse SAS for Euro 0.6 million for plant and industrial equipment, including moulds. In the first quarter of 2017, investments of Euro 0.9 million were made; - Huta Szkła Czechy S.A. for Euro 0.4 million, principally for the completion of plant interventions; in the first quarter of 2017 investments of Euro 6.4 million were made; - Vetri Speciali SpA (for its share) for Euro 4.3 million for interventions on industrial plant and equipment, including moulds and pallets (Euro 1.6 million in Q1 2017). Consolidated equity, inclusive of the profit for the period, amounted to Euro million (31 December 2017: Euro million). The increase of Euro 16.1 million is due to the consolidated profit for the period (+Euro 9.8 million) and the change in the Treasury shares reserve recognised to other Equity reserves (+Euro 5.9 million). 20

23 The net financial debt at 31 March 2018 was Euro million, decreasing Euro 14.5 million on 31 December 2017 and increasing Euro 22 million on 31 March The cash flow movements affecting the consolidated net financial position in Q and 2017 and in the previous full year, based on management s view, were as follows: (Euro thousands) Net financial debt at end of preceding period 31 March March 2017 restated 31 December 2017 restated (195,482) (156,428) (156,428) Self-financing: - profit for the period 9,775 7,640 39,779 - amortisation & depreciation 10,461 9,088 37,094 - net accruals to provisions (utilisations) net gain (loss) on sale of property, plant & equipment ,398 16,829 78,306 (Increase) decrease in working capital 1,575 (6,674) (24,910) Investments in property, plant and equipment (12,728) (12,671) (76,297) Investments in intangible assets --- (5) (2,055) Net dec. (increase) of other med./long term assets ,129 Realisable value of property, plant and equipment sold 9 1,094 7,333 (10,893) (18,205) (94,800) Free cash flow 9,505 (1,376) (16,494) Dividends distributed (21,818) Consolidation Vetro Revet (4,750) Sale of treasury shares 6, ,954 Unionvetro acquisition (1,292) Effect on equity of translation of foreign currency financial statements & other changes 235 (1,154) 1,054 5,038 (1,154) (22,560) Decrease (increase) of net financial debt 14,543 (2,530) (39,054) Net financial debt at end of period (180,939) (158,958) (195,482) 21

24 The table below shows the composition of the consolidated net financial position, on the basis of management s view, at 31 March 2018, compared to 31 March 2017 and 31 December (Euro thousands) A. Cash B. Other cash equivalents 67,539 63,916 31,666 C. Securities held for trading D. Liquidity (A) + (B) + (C) 67,581 63,928 31,686 E. Current financial assets F. Current bank loans & borrowings 49,833 77,502 28,042 G. Current portion of non-current debt 31,933 32,006 31,257 H. Other current fin. payables (derivatives) 946 1, I. Current financial debt (F) + (G) + (H) 82, ,823 60,245 J. Net current financial position (I) - (E) - (D) 15,131 46,895 28,559 K. Non-current loans & borrowings 165, , ,608 L. Bonds issued M. Other non-current payables N. Non-current financial debt (K) + (L) + (M) 165, , ,608 O. Net financial debt (J) + (N) 180, , ,167 22

25 The reclassified statement of financial position of the Zignago Vetro Group at 31 March 2018 according to IFRS in force, including the effects of applying IFRS 11, compared to 31 March and 31 December 2017 is shown below: restated restated Euro thou. % Euro thou. % Euro thou. % Euro thou. % Euro thou. % Trade receivables 72,474 56,481 67,493 56,481 67,493 Other receivables 10,259 8,798 17,865 8,798 17,865 Inventories 72,946 69,746 74,090 68,609 72,840 Current non-financial payables (67,017) (47,029) (67,092) (45,892) (65,842) Payables on fixed assets (3,135) (8,527) (6,992) (8,527) (6,992) A) Working capital 85, % 79, % 85, % 79, % 85, % Net tangible and intangible assets 178, , , , ,224 Goodwill 2, , ,884 Equity investments measured using the equity method 72,632 58,236 69,237 58,266 69,332 Other equity investments & non-current assets 4,328 5,714 4,405 5,714 4,405 Non-current provisions and non-financial payables (15,095) (14,597) (14,973) (14,597) (14,973) B) Net fixed capital 243, % 207, % 244, % 207, % 244, % A+B= Net capital employed 328, % 286, % 330, % 286, % 330, % Financed by: Current loans and borrowings 55,748 96,243 60,245 96,243 60,245 Cash and cash equivalents (63,035) (58,914) (31,686) (58,914) (31,686) Current net debt (7,287) (2.2%) 37, % 28, % 37, % 28, % Non-current loans and borrowings 142, % 85, % 124, % 85, % 124, % C) Net financial debt 135, % 122, % 153, % 122, % 153, % Opening equity 177, , , , ,519 Dividends (21,818) --- (21,818) Other equity changes 5, , ,990 Profit for the period 9,775 7,640 39,779 7,670 39,874 D) Closing equity 193, % 163, % 177, % 163, % 177, % E) Non-controlling interest equity (91) (0.0%) --- n.a. (496) (0.2%) --- n.a. (496) (0.2%) D)+E) Consolidated Group equity 193, % 163, % 176, % 163, % 177, % C+D+E = Total financial debt and equity 328, % 286, % 330, % 286, % 330, % 23

26 For a better understanding of the balance sheet of the Zignago Vetro Group at 31 March, 2018, stated in accordance with management s view, a reconciliation is provided below of the version which values the investments in joint ventures at equity and the version utilising the proportional consolidation method, as adopted by the Group until 31 December, Proportional consolidation IAS / IFRS Vetri Speciali Vetreco Neutralisation Adjustment pre- SpA Srl JV using to Parent IFRS 11 the equity principles (management criteria view) Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. Euro thou. Trade receivables 72,474 15, (253) 89,106 Other receivables 10,259 2, ,643 Inventories 72,946 19, ,615 Current non-financial payables (67,017) (15,724) (1,689) 253 (84,177) Payables on fixed assets (3,135) (2,515) (4) (5,654) A) Working capital 85,527 19, ,533 Net tangible and intangible assets 178,462 54,427 4, ,185 Goodwill 2,747 40, ,834 Equity investments measured using the equity method 72, (72,632) --- Other equity investments & non-current assets 4,328 2, ,387 Non-current provisions and non-financial payables (15,095) (2,806) (20) (17,921) B) Net fixed capital 243,074 93,759 4,283 (72,632) ,485 A+B= Net capital employed 328, ,245 4,803 (72,632) ,018 Financed by: Current loans and borrowings 55,748 26, ,712 Cash and cash equivalents (63,035) (4,092) (454) (67,581) Current net debt (7,287) 21, ,131 Non-current loans and borrowings 142,809 19,076 3, ,808 C) Net financial debt 135,522 41,001 4, ,939 Opening equity 177,470 69, (69,237) (542) 177,470 Dividends Other equity changes 5, ,925 Profit for the period 9,775 2, (3,395) 542 9,775 D) Closing equity 193,170 72, (72,632) ,170 E) Non-controlling interest equity (91) (91) D)+E) Consolidated Group equity 193,079 72, (72,632) ,079 C+D +E= Total financial debt & equity 328, ,245 4,803 (72,632) ,018 24

27 The Group workforce at 31 March 2018 numbered 2,334, compared to 2,215 at 31 March 2017 and 2,249 at 31 December The increase includes also 43 personnel at Vetro Revet Srl, while the employees of Vetri Speciali SpA and Vetreco Srl have been fully included. 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. The Company availed of the tax credit under Law 190/2014, establishing this amount according to the methodologies to be communicated in the Tax Agency Circular. Environmental information In the first quarter of 2018, 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. 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. 25

28 Financial instruments: Group objectives & policies and description of risks With regards to No. 6 bis of paragraph 3 of Article 2428 of the Civil Code, the main financial instruments used by the Zignago Vetro Group consist of trade receivables and payables, cash & cash equivalents, bank borrowings and interest rate swap contracts. The exchange risk is not currently considered significant. As regards the Group s financial management, the cash flow 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. The Zignago Vetro SpA Group had undertaken at 31 March 2018 five interest rate swaps in order to hedge the interest rate risk on medium-long term loans undertaken by Zignago Vetro SpA. The mark to market of these derivatives at 31 March 2018 were as follows (in Euro): Company Bank Underlying Date Notional Expiry Market of amount at value at signing reference date Zignago Vetro SpA Unicredit Loan 27/10/ ,000,000 27/10/2021 (390,303) Zignago Vetro SpA Mediobanca Loan 21/01/2015 9,925,714 31/12/2020 (96,574) Zignago Vetro SpA Mediobanca Loan 31/03/ ,234,286 31/12/2020 (128,766) Zignago Vetro SpA Banco Brescia Loan 18/12/2014 7,603,233 18/12/2019 (67,580) Zignago Vetro SpA Banca Intesa Loan 14/11/ ,000,000 30/12/ Zignago Vetro SpA BNL Loan 22/12/ ,000,000 22/06/2021 (400,761) Total 141,763,233 (1,083,984) The above-mentioned transactions were undertaken for hedging purposes, and provide for the payment of a fixed interest rate against the receipt of a variable interest rate. However, these transactions do not comply with all the requirements of IFRS to qualify for hedge accounting. Therefore, the Zignago Vetro Group does not use the so-called hedge accounting method and records the economic effects of hedging directly to profit or loss. 26

29 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 also that most are insured. Allowance for impairment debts has in any case been made to cover against any residual credit risks. We specify that such allowance was 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. The currency risk is currently not considered significant, as transactions are almost exclusively carried out in Euro. 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 Zignago Vetro 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 subsidiaries of the Zignago Vetro Group are located in countries not within the Eurozone: the United States and Poland. As the Zignago Vetro Group s functional currency is the Euro, the income statements of these companies are translated 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). 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. Where considered appropriate, in order to neutralise the price effect, the Company undertook hedging transactions through the use of derivative financial instruments. At 31 March 2018, Zignago Vetro SpA did not have any commodity swap contracts to hedge against fluctuations in energy factors. The markets of the companies of the Zignago Vetro Group are not located in areas 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 6 February 2009, it is considered, based on the strong profitability, on the Group s solid balance sheet and in spite of the current economic environment, that there are no uncertainties or risks on the going concern of the business. 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, overall and in the various sectors, in accordance with the size and complexity of the Group s business operations. 27

30 Reconciliation between the Group and Zignago Vetro SpA result and equity The reconciliation of the equity and profit of Zignago Vetro SpA and the consolidated accounts at 31 March, 2018 are disclosed below as per Consob communication No. DEM/ of 28 July (Euro thousands) * * * 2018 Profit for the period Q Equity 31/03/2018 Financial statements of the Parent 6, ,920 Consolidation adjustments: - interests in joint ventures measured using equity method 3,395 46,273 - reversal of inter-group dividends reversal of inter-company Profit (94) (104) - goodwill on acquisition of HSC SA and adjustment to year-end exchange rate goodwill on acquisition of Vetro Revet --- 1,275 - Loan HSC 5 (193) 3,306 48,029 Carrying amount of equity investments: Verreries Brosse SAS 0 (4,000) Zignago Glass USA Inc. 0 (189) HSC SA 0 (10,327) Vetro Revet Srl 0 (2,265) Profit/(loss) and equity of the subsidiaries: --- (16,781) Verreries Brosse SAS ,282 Zignago Glass USA Inc. (116) (453) HSC SA ,618 Vetro Revet Srl (674) 555 (132) 36,002 Non-controlling interest profit & equity: 330 (91) Consolidated Financial Statements 9, ,079 In the following pages we review and comment upon the results of the Parent and of individual subsidiaries. For greater clarity the operating results and statement of financial position of Zignago Vetro SpA and its subsidiaries are presented according to the contribution of each of them to the Interim Financial Report at 31 March They are shown according to normal reporting practices. 28