REGISTRATION DOCUMENT
FINANCIAL ANNUAL REPORT
2012
Registration Document Financial Annual Report
Year ending 31 December 2012
The present document was submitted to the French Securities Regulator (AMF) on 26 April 2012 in accordance with Article 212-13 of its General Regulations. It may be used to support a financial transaction if it is accompanied by a prospectus approved by the AMF. This document was drawn up by the Issuer and incurs the liability of its signatories.
Pursuant to Article 28 of EC Regulation No. 809/2004 on prospectuses, the following information is incorporated by reference into this registration document: - the annual financial statements of NATUREX S.A as well as the statutory auditors’ report on the annual financial statements of NATUREX S.A for the financial year ended 31 December 201 as presented on pages 195 to 222 of the registration document filed with the French Securities Regulator (AMF) on 26 April 2012 under number D.12- 0424; - the consolidated financial statements of the Group as well as the statutory auditors’ report on the consolidated financial statements for the financial year ended 31 December 2011 as presented on pages 143 to 194 of the registration document filed with the French Securities Regulator (AMF) on 26 April 2012 under No. D.11-0424.
- the annual financial statements of NATUREX S.A as well as the statutory auditors’ report on the annual financial statements of NATUREX S.A for the financial year ended 31 December 2010 as presented on pages 181 to 201 of the registration document filed with the French Securities Regulator (AMF) on 28 April 2011 under number D.11- 0389; - the consolidated financial statements of the Group as well as the statutory auditors’ report on the consolidated financial statements for the financial year ended 31 December 2010 as presented on pages 131 to 180 of the registration document filed with the French Securities Regulator (AMF) on 28 April 2011 under No. D.11-0389.
The two aforementioned registration documents are available: - on the Company’s website, www.naturex.com, or - on the website of the French Securities Regulator (AMF), www.amf-france.org
Copies of this Registration Document are available free of charge from: NATUREX SA, Site d’Agroparc – BP 1218 – 84911 Avignon Cedex 9 Contents 1. NATUREX AND ITS ENVIRONMENT History ______2 Legal structure ______4 Key Figures 2012______5 I- NATUREX: World leader in specialty plant-based natural ingredients ______7 II- Solid positioning in high growth markets ______20 2. SUSTAINABLE DEVELOPMENT I- Employee relations information ______36 II- Environmental responsibilities ______46 III- Identifying and managing the main factors of risk ______57 3. COMPANY GOVERNANCE AND ORGANISATION I- General information ______65 II- Chairman’s report on the conditions for preparing and organising of the Board of Directors’ work and the internal control procedures implemented ______71 Statutory Auditors’ Report on the Chairman’s Report ______98 III- Corporate governance ______100 4. CHANGES IN CAPITAL AND SHAREHOLDER STRUCTURE I- Changes in capital ______115 II- Changes and breakdown of the shareholder structure______122 III- Potential capital ______128 IV- Shareholder information ______132 5. ANALYSIS OF OPERATIONS IN FY 2012 I- Comments on the 2012 consolidated financial statements ______133 II- Comments on the NATUREX S.A. 2012 annual financial statements ______151 III- Research and development ______156 IV- Sumptuary expenses ______156 V- Proposal for the allocation of income and dividend distribution ______157 VI- Dividends paid for the last three financial years ______157 6. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES AT 31 DECEMBER 2012 Consolidated balance sheet ______160 Consolidated income statement ______161 Consolidated cash flow statement ______163 Change in consolidated shareholders' equity ______164 Notes to the consolidated financial statements ______166 Statutory Auditors’ Report on the consolidated financial statements ______219 7. NATUREX S.A FINANCIAL STATEMENTS AND NOTES AT 31 DECEMBER 2012 Balance Sheet ______224 Income statement ______225 Notes to the annual financial statements ______226 Statutory Auditors’ Report on the annual financial statements ______246 Statutory auditors’ special report on regulated agreements and commitments ______248 8. RECENT DEVELOPMENTS AND OUTLOOK I- A very good start to 2013 ______257 II- Forecasts ______259 9. PERSONS RESPONSIBLE FOR THE REGISTRATION DOCUMENT AND AUDITING THE FINANCIAL STATEMENTS I- Person responsible for the registration document ______261 II- Person responsible for auditing the financial statements ______262 III- Information policy ______263 10. CROSS-REFERENCE TABLES WITH THE SCHEDULE OF EC REGULATION NO. 809/2004 Cross-reference table with the Schedule of EC Regulation no. 809/2004 ______264 Cross-reference table with the information required in the annual financial report and the management report268 11. APPENDICES Statutory Auditors’ fees ______271 Annual registration document ______272 Chapter 1 Naturex and its markets
HISTORY 20 years of organic growth and market expansion
2013 The Group launches a new phase of development A solid foundation is laid with a capital structure supported by two long-term shareholders: SGD, held by Finasucre (the Lippens family) and Caravelle, held by Mrs. Martel Massignac. The Group also has optimised its organisation and operating capabilities to meet the challenges of the rapid growth of recent years, by strengthening its workforce and creating a Management Committee to implement its strategy. Finally, Naturex strengthened its financial base by an €18 million OCEANE convertible bond issue, with €12 million taken up by France's Strategic Investment Fund (Fonds stratégique d’Investissement or FSI) and €6 million by Salvepar (Tikehau Capital), providing additional resources to pursue its future expansion.
Head office extension / Avignon 2012 Acquisition of Pektowin in Poland, Valentine in India and DBS in the United States 2012 was sadly marked by the sudden passing of Jacques Dikansky. In homage to his memory, Naturex foundation was renamed "Fondation Naturex-Jacques Dikansky". In 2012, Naturex finalised the acquisition programme launched in October 2011 with the addition of three new companies: Pektowin in Poland, specialised in the production of fruit and vegetable concentrated juices, Valentine India, specialised in the production of fruit and vegetable powders and natural colours and finally DBS in the United States, specialised in cranberry extracts. These acquisitions allowed Naturex to develop industrial bases in two emerging countries with strong growth potential and acquire a portfolio of high value added products with the acquisition of DBS.
2011 Burgundy acquisition (France and Spain) In October 2011, Naturex launched a rights issue that raised €48.8 million to finance a new acquisition cycle. Burgundy, specialised in the production and marketing of plant extracts for the nutraceutical, pharmaceutical and cosmetic industries, was the first in a series of acquisitions. With this addition, Naturex has two high- capacity quality pharmaceutical plants and benefits from an enhanced product line for the nutraceutical, pharmaceutical and cosmetic segments.
2010 Successful integration of the Ingredients Division of the Spanish group Natraceutical and continued sales development worldwide Naturex doubled its size in one year and posted record organic growth over the year, while continuing to develop its sales network.
2009 Acquisition of the Ingredients Division of the Spanish group, Natraceutical With this acquisition, Naturex becomes the world leader in speciality plant-based ingredients through a balanced global presence, high-performance and complementary production sites and an expanded product range.
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HISTORY 20 years of organic growth and market expansion
2008 Acquisition of the "Actifs Innovants" (innovative active ingredients) Division of French company, Berkem Naturex benefits from a range of innovative plant extracts whose effectiveness has been proven through clinical trials. Naturex creates a Chinese subsidiary based in Shanghai with a quality control laboratory dedicated to sourcing raw materials.
The Naturex Foundation is established. Its aim is to help improve the social conditions of the communities in those countries that provide Naturex with its raw materials. The Foundation supports missions in Morocco, Peru and India with its programme destined to be expanded to new projects in other countries.
2007 Acquisition of Hammer Pharma and HP Botanicals, two Italian companies based in Milan. With Hammer Pharma, Naturex acquires a genuine pharmaceutical site. Acquisition of the American company Chart Corporation This addition expands Naturex's product range for the flavouring and beverage industries.
2005 Acquisition of Pure World Inc., an American company specialised in the production of plant extracts for the food processing, nutraceutical, pharmaceutical and cosmetics industries. Naturex now benefits from real identity in the US market and production facilities that allow it to supplement and expand its product range.
2004 Acquisition of a rosemary extracts business held by two US companies, RFI Ingredients and Hauser Naturex becomes a leading player in the natural antioxidant market with its two renowned brands and three patents for its rosemary extracts.
2002 Acquisition of the US company, Brucia Plant Extracts Inc. As such, Naturex supplements its product range in the nutraceutical market and strengthens its positions in the American market.
1997 Naturex expands into the nutraceutical market Naturex opens a subsidiary in the United States (Mamaroneck, New York).…………………………………… The production unit in Morocco moves to Casablanca and is enlarged.
1996 IPO and listing on the Paris stock exchange (NYSE Euronext Paris – Segment B)
1992 Naturex is founded in Avignon by Jacques Dikansky and Thierry Lambert The company opens two factories, in Avignon (France) and in Kenitra (Morocco), and begins to produce plant extracts with flavouring, colouring and anti-oxidant properties for the food processing industry.
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LEGAL STRUCTURE (April 2013) An integrated multinational organisation
NATUREX S.A France
100% NATUREX Holdings Inc 100% NATUREX Inc USA USA
100% NATUREX AG 100% NATUREX Cooperative LLC Switzerland USA 0,01% 100% NATUREX Spain SL 99,99% NATUREX Coöperatief U.A Spain Netherlands
100% NATUREX Trading Shanghai Co, Ltd NATUREX Ingredientes Naturais Ltda 100% China Brazil
100% NATUREX SpA KF Specialty Ingredients Pty Ltd 100% Italia Australia
100% NATUREX Sprl NATUREX Australia Pty Ltd 100% Belgium Australia 100% NATUREX GmbH NATUREX Ltd 100% Germany United Kingdom 100% 99% NATUREX LLC The Talin Co. Ltd Russia United Kingdom
96,30% NATUREX Maroc S.A NATUREX - DBS LLC 95% Morocco (ex Decas Botanical Synergies) USA 100% ITRAD Ivory Coast 100% SCI Les Broquetons France
100% NATUREX UK Ltd United Kingdom
100% NATUREX Ingredientes Naturales SA de CV Mexico
100% NATUREX Inc Canada 100% NATUREX K.K Japan
100% NATUREX Korea
100% PEKTOWIN S.A Spzoo Poland
100% VALENTINE Agro Private Ltd India 100% VALENTINE Foods Private Ltd India
Geographic Area Europe / Africa Americas
Asia / Pacific
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KEY FIGURES Excellent full-year performance
Strong revenue growth: +18.2% Good current operating performance +13.9% at constant exchange rates
35.9 299.8 m 253.6 € 30.1 m € Sales in Sales Current Operating IncomeinCurrentOperating
2011 2012 2011 2012 2011: Non-current expenses of €1.6 million 2012: Non-current expenses of €4.4 million and Non-current income of €6.1
Revenue mix by region Revenue mix by business
12.2% 1.6% 4.6%
47.5%
30.8%
63.0% 40.3%
Food & Beverage Nutrition & Health Europe / Africa Americas Asia / Pacific Personal Care Toll-Manufacturing
Europe / Americas Asia / Pacific Total F&B N&H Personal Toll- Total Africa Care Manufacturing
142.3 120.9 36.6 299.8 188.8 92.3 4.8 13.9 299.8
+11.1% +30.4% +11.6% +18.2% +12.2% +29.7% +48.1% +28.2% +18.2% Sales in in €m Sales Sales in Sales€m in
2012 vs 2011 2012 vs 2011 Current Exchange rate Current Exchange rate
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Selected financial information
€ millions FY FY FY IFRS 2012 2011* 2010
Consolidated income statement * Early adoptionof IAS 19 (refer to Consolidated the
Revenue 299.8 253.6 226.3
Gross margin 175.5 148.6 132.1
Current operating income (EBIT) 35.9 30.1 27.3
Net operating income 37.6 28.5 27.3
Operating margin (%) 12.5% 11.2% 12.1%
Net income attributable to the Group 22.9 15.6 14.8
Basic earnings per share (in euros) 2.97 2.31 2.32
Consolidated balance sheet 31 December 2012 31 December 2011* 31 December 2010*
Non-current assets 251.3 209.8 189.4
financial statements and notes: Note 4.1 "Change inaccounting method" and Note 13 "Employee benefits" - of which goodwill 114.9 93.5 83.9
- of which property, plant and equipment 117.0 103.2 92.3
Current assets 220.4 216.3 169.3
- of which inventory 137.2 115.2 98.2
- of which trade and other receivables 71.1 61.6 49.6
- of which cash and cash equivalents 10.6 37.7 17.5
Total assets 471.6 426.1 358.0
Shareholders’ equity 258.6 236.6 168.3
Non-current liabilities 86.1 103.3 123.8
- of which other long-term debt 69.3 87.3 108.4
Current liabilities 126.9 86.2 65.0
- of which current financial liabilities 51.0 17.6 9.9
- of which trade and other payables 64.5 65.2 51.2
- of which bank credit facilities 7.2 0.9 1.3
Total equity and liabilities 471.6 426.1 358.0
Group net financial debt 116.9 68.2 102.1
Cash flow highlights 31 December 2012 31 December 2011* 31 December 2010
Cash flow 51.3 42.1 33.4
Net cash provided by operating activities 14.6 25.6 17.1
Net cash used in investing activities (56.6) (25.9) (15.7)
Net cash provided by financing activities 8.5 20.9 4.2
Net change in cash and cash equivalents (33.6) 20.6 5.6
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I. Naturex: world leader in speciality plant-based ingredients1
Naturex produces and sells specialty plant-based ingredients for the food, nutraceutical, pharmaceutical and cosmetics industries.
Naturex's strength is in knowing how to develop genuine expertise in specific products that form niche markets.
Naturex's strategy has been based on sustained organic growth combined with steady expansion through acquisitions to develop a positioning as a world leader in the speciality plant-based ingredients market.
This strategy has enabled Naturex to substantially grow in size, with revenue multiplied by twenty over the last ten years. This result highlights its expertise and an established track record in integrating companies or divisions of businesses offering synergies and creating value.
The success of the strategy is based on a proven economic model driven in particular by: - High-performance and quality-certified industrial resources, supplemented by a high degree of expertise in the sourcing of raw materials and sustained research and development; - A high value added product range segmented around three complementary markets; and - A dynamic worldwide sales network.
I.1 Unique expertise in the production of speciality plant-based natural ingredients
Naturex controls all production phases, from selecting raw materials to the finished product based on an extremely rigorous quality control process.
Research and development is a key component of this process, driving innovation in elaborating natural ingredients with high value added to best meet our customers’ specific needs.
Control and Worldwide Formulation / Quality Production sourcing Applications Insurance
Responsible sourcing with a focus on quality
By leveraging its positioning as a world leader in specialty plant-based natural ingredients, Naturex has substantial sourcing capabilities that give it access to a wide selection of plants with an ability to select the best species in the world.
1 According to Naturex’s assessment in view of its positioning in its markets. 2012 Registration Document 7 Chapter 1 Naturex and its markets
This focus on quality is accompanied by a stringent procurement policy with suppliers in more than fifty countries through eight purchasing offices worldwide and coordinated by the Group's head office to best satisfy the quality, price and lead-time criteria customers expect: - Over the years, Naturex has developed close relations with its partners and sources its supplies: . Directly from local producers (cooperatives, independent growers, etc.) for irreproachable quality and perfect traceability of raw materials; . Near the production sites that represent strategic sources of procurement (rosemary, apricot kernels in Morocco, etc.), and . From industrial intermediaries for purchases of crude extracts (paprika, turmeric, ginseng, green tea, etc.) or concentrates (tomato concentrate, etc.). - Naturex selects its main suppliers with the aim of improving performances of the sourcing and collection processes, and moving to develop activities in the area of crop and plant harvesting defined and managed through partnership agreements with local market participants. - Naturex pays special attention when selecting carriers and forwarders to ensure the fully reliable transport for raw materials or semi-finished products to the production sites.
The Group also shares with its local partners the practice of ethical standards essential for responsible and sustainable collaboration: - Naturex is a member of the United Nations Global Compact and ensures compliance with its principles, and notably in the areas of human rights, labour standards, anti-corruption and protecting the environment, - In March 2008, Naturex created the Naturex Foundation, an independent non-profit entity, whose purpose is to improve the living conditions of the communities located in the regions where the Group obtains its raw materials. Since its creation, the Naturex foundation has supported missions in Morocco, Peru, India and the Amazon region…
Preserving biodiversity
Since it was founded, sustainable development and preserving biodiversity have been a guiding priority of Naturex. With the assistance of an ethnobotanist, Naturex teams conduct very targeted worldwide sourcing campaigns seeking to develop close relations with local farmers and ensuring complete traceability for raw materials from selection to harvest.
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Purchasing offices located near raw material sources for optimised management of the development cycle (Selection – Growth – Harvesting)
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High-performance industrial resources
Over the years, Naturex has built a network of high-performance production facilities, primarily through acquisitions. Indeed, only the Avignon site in France and the Casablanca site in Morocco were created by the company.
Its 15 production sites, located in Europe (France (2), Italy, Spain, United Kingdom, Switzerland (2) and Poland), Morocco, the United States (2), Brazil, Australia and India, allow Naturex to not only increase its production capacities but also to acquire a significant competitive advantage in terms of products, markets, expertise and innovative potential (approved pharmaceutical sites in France, Spain and Italy, the world's tallest spray dryer tower in Switzerland, etc.). Furthermore, it is important for Naturex to develop its own identity as a local producer as a way of strengthening local ties with customers.
The industrial facilities at each site meet high quality standards and make use of highly advanced technological resources. Even though the service life of this equipment is relatively long, regular maintenance, technological monitoring and targeted investments contribute to the building a permanent industrial base and boosting Naturex’s level of expertise.
Through the flexibility and the quality of its industrial resources, Naturex has developed genuine expertise, allowing it to provide customised solutions fully in line with regulatory standards. The production process is comprised of the following steps:
- Extraction, transforming the plant into an extract. This extraction process requires expertise in the science of natural chemistry with an ability to identify and extract the main aromatic, colouring, health and other agents contained in plants.
- Drying, which involves extracting all moisture contained in the extract through evaporation until a dry product is obtained, or dehydrating a liquid product and transforming it into a powder, using a vacuum spray or drying technique. This is a major intermediate step in the process that requires powerful and substantial industrial resources to obtain premium-quality ingredients (tomato powders, ingredients for baby, etc.). For example, Naturex has the world's tallest low-temperature spray dryer tower in Burgdorf, Switzerland.
- Formulation for transforming the crude extract into a customised extract. The formulation process makes it possible to modify the chemical and physical properties of the extracts to be adapted according to the final applications.
At present, Naturex has one of the largest extraction and drying capacities in the world in its business speciality with annual production of several thousand tonnes of plant extracts.
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15 industrial sites worldwide
France Spain
Created and 1992 Acquired in 2011 Acquired in 2010 Acquired in 2011 Avignon Reyssouze Valence Palafolls 3,700 m² on 1.6 Ha + Extension - 11,200 m² on 11 Ha -
United Kingdom Switzerland Italy
Acquired in 2010 Acquired in 2010 Acquired in 2010 Acquired in 2007 Birmingham Burgdorf Bischofszell Milan 5,600 m² on 1.1 Ha 8,700 m² on 1.7 Ha 9,843 m² on 16 Ha 7,300 m² on 2.3 Ha
United States Brazil Australia
Acquired in 2005 Acquired in 2002 Acquired in 2010 Acquired in 2010 South Hackensak-New Jersey Shingle Springs-Californie Manaus Sydney 9,000 m² on 2.0 Ha 2,460 m² on 1.4 Ha 9,843 m² on 1.6 Ha 2,000 m² on 0.4 Ha
Morocco Poland India
Created and 1998 Acquired in 2012 Acquired in 2012 Casablanca Jaslo 3,600 m² on 1.4 Ha Roha - -
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Strict quality control for full traceability
Naturex owes its expertise not only to continuously optimised production facilities, but also to a team of men and women driven by the same creative and proactive spirit committed to helping customers develop their projects and provide them with a high-quality, personalised service, in compliance with national and international regulatory requirements.
Naturex has adopted a quality control process based on the principle of continuous improvement, revolving around three major priorities: - Improve competitiveness; - Maintain growth momentum; - Improve the reliability of existing systems.
This quality policy aims to (i) maintain Naturex's forward momentum relative to competitors and thereby confirm its position as a leader in the world market and (ii) optimise its organisation by improving the quality process every day, in line with customer requirements.
Naturex has implemented quality control steps at all phases in the manufacturing process. - Incoming raw materials are sampled and completely analysed; - Each batch of plants undergoes a series of tests to check their identity and their quality before entering the production cycle; - Finished products (plant extracts) are inspected in order to comply with the most stringent analytical standards and guarantee consumer safety (pathogens, pesticides, heavy metals, etc.).
This work is based on developing and validating new methods for analysing new products, in line with customer expectations.
Finally, each new product developed undergoes a full review to ensure it complies with applicable regulatory requirements, customer-specific requirements and internal quality criteria.
All Group production sites are equipped with an independent quality control laboratory with powerful analytical equipment (HPLC-MS, HPLC, PPSL, NMR, GC-MS, ICP, ICP-MS, HPTLC, TLC).
On each site, a quality management leader coordinates the application of the quality management system and ensures it is improved continuously in the Company’s various departments through regularly updated documentary support, tracking indicators and scheduled audits, in order to carry out any corrective and preventive action necessary to ensure compliance with the objectives defined previously as part of the quality policy.
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15 flexible and high performance industrial facilities based in three global regions
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Sustained research and development
For all of these processes (sourcing – production – quality control), research and development exercises a pivotal strategic role for the development of innovative, personalised and high value added solutions. 15% of Group personnel work in the scientific department which includes R&D, quality assurance and regulatory affairs, quality control and the support laboratories. Spearheaded from the head office in Avignon, the Group's R&D labs are located in seven countries (France, the United Kingdom, Switzerland, Poland, India, the United States, Australia). It has furthermore has established application labs (front labs) in France (Avignon), Russia (Moscow), the United States (South Hackensack in New Jersey and Gainesville in Florida), Brazil (Sao Paulo), China (Shanghai) and Australia (Sydney) with the goal of creating regional hubs throughout the world located near customers. In laboratories with state-of-the-art technology, Naturex's scientific teams have developed unique know-how in the botanical identification, extraction and formulation of extracts. Over the years this work has led to innovative discoveries (specific properties of a natural ingredient, unknown agents, etc.) and the perfecting of new manufacturing processes. This strong involvement in research and development and capacity for innovation provides Naturex with a definite competitive advantage. Naturex's research teams regularly publish articles in international scientific journals. Naturex also works closely with its customers’ R&D departments for increased proximity and anticipation concerning their technical requirements, as well as with international university research centres to remain constantly up-to-date on the latest technological breakthroughs and create collaborative gateways to develop innovative projects.
ASMF files
For years now, Naturex has compiled ASMF files for many plant extracts, thereby authorising their use in any application, including for pharmaceutical products. The ASMF (Active Substance Master File) includes all information on the preparation method and the quality of an active pharmaceutical substance. Used when product marketing authorisation (AMM) applications are filed for a medication, it serves as the basis for evaluating the active substance and allows experts to check the quality of the substance before it is placed on the market. With regards to Naturex, plant extracts enter into the composition of traditional plant-based medications.
Senifood, a joint initiative with food manufacturers in Spain
Senifood is a project initiated by the Spanish Ministry of Science and Innovation within the framework of the National Strategic Programme for Technical Research (CENIT-E).
The purpose of the programme is to define a line of prepared dishes for the elderly that offer a more balanced diet.
Naturex is leading the project, which began in 2009, and includes a consortium of companies specialising in Research and Development (Biopolis), but also professionals in the food sector (Biobiotica, Ordesa Group, Corporacion Alimentaria Penasanta – Capsa, Campofrio, Fundacion Matia et Mugaritz, etc.) and research centres as well as the main university centres in Spain specialised in nutrition. Through this initiative, Naturex intends to make use of its research and development expertise by offering innovative solutions in terms of speciality plant-based natural ingredients that favour the health and well-being of seniors, more exposed to malnutrition and dietary deficiencies as well as pathologies stemming from a poor diet.
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An organisation promoting in-house innovation
75 Innovation Platform R&D People 17 Ph D. 30 Engineers R&D R&D R&D R&D 28 Technicians Nutrition & Food Ingredients Colours Personal Care Health 2,000 Department R&D Developments / year
5 to 10 Scientific publications / year Development Pilote Plant R&D Analytic Front Lab (Peer review journal) pharma/ASMF 50
Patent families Laboratories Support
A worldwide network of R&D platforms
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I.2 Three strategic and complementary markets
Since it was created and through acquisitions carried out in recent years, Naturex's know-how in designing and producing speciality plant-based natural ingredients has been constantly progressing through continuous advances.
The range of natural ingredients developed by Naturex has grown substantially over time, especially through the acquisitions carried out as part of its development strategy, and has become increasingly segmented in light of the specific properties offered by each plant extract and possible applications: - Flavouring, colouring, preserving and texturising properties for the food processing market; and - Health and well-being effects extended to the nutraceutical, pharmaceutical and cosmetics markets.
In addition, Naturex benefits from a highly favourable underlying trend linked to increasing worldwide demand, including in emerging countries, for healthy natural-origin products, supported by increasingly strict regulations.
To effectively leverage its business experience with its customer base and raise the visibility of its product range, Naturex is organised around three strategic and complementary markets:
- Food & Beverage, for food processing industries and flavouring specialists worldwide. The Group's core business, this activity represented 63% of revenue in 2012.
- Nutrition & Health, for the nutraceutical and pharmaceutical markets. This activity, which is particularly dynamic in the United States and Southeast Asia, but with increasingly strict regulations in Europe, represented 31% of revenue in 2012.
- Personal Care, for the cosmetics industry plus beauty and care brands. This activity, which has substantial growth potential, represented nearly 2% of revenue in 2012.
This segmentation makes it possible to design ranges, through a global offering of speciality plant-based natural ingredients perfectly targeted and adapted to the specific needs of each customer profile.
Each product range is coordinated by a market manager serving as the interface between the various support departments (R&D, marketing, sales, etc.) and the customers. This makes it possible to provide all assistance and recommendations they expect and adapted to their specific constraints and requirements.
Naturex also provides toll extraction services for selected customers. This high value added activity allows Naturex’s customers to use its extraction resources and know-how for their own specific needs. This business (5% of revenue in 2012) is based on long-standing sustainable industrial partnerships, involving close collaboration in light of the rather long industrial process that requires very specific technological and scientific know-how. This activity is expected to develop further in the coming years following the creation of a joint venture for krill extraction with Aker BioMarine, the Norwegian-based world leader in krill harvesting and specialised in the
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development, production and commercialisation of Omega-3 rich krill oil-based products. This joint venture, whose production plant will be based in the US, will combine Aker BioMarine's know-how with Naturex's expertise in extraction, and will guarantee increased volumes for sourcing krill oil, supplementing the current production of Naturex Spain (Valencia).
A very large and evolving product range for a differentiating high added value offering
Acquisitions made by Naturex within the framework of its development strategy have enhanced its product ranges while adding specific knowledge and additional know-how in a number of areas (plants, extracts, production processes, etc.). Naturex's resulting product range is consequently very extensive which makes it possible to offer multiple combinations for custom-made solutions.
Food & beverage, the Group's core business
Natural ingredients with aromatic, preservative, healthy, texturing and sweetening properties
This market is specialised in the design and development of speciality plant-based natural ingredients with flavouring, colouring, preserving, texturising and sweetening properties or properties that provide a health benefit. Naturex targets worldwide flavouring specialists and food processing manufacturers (multinationals, subsidiaries of large groups or local SMES). The Food & Beverage product line is comprised of seven ranges for food applications and beverages that make it possible to satisfy manufacturers’ expectations for innovative and high-performance ingredients and consumer demand for entirely natural products: - NAT stabil® is a range of plant extracts (rosemary, pomegranate, etc.) that improve the preservation of foods and beverages through their anti-oxidant property.
- NAT arom® offers a rich palette of plant extracts (hydroalcoholic extracts, oleoresins and essential oils) for flavouring specialists, beverage producers and food processing manufacturers. Exclusive industrial development processes allow aromatic compounds to be protected from the natural loss and degradation of flavouring.
- NAT color® includes two segments: . E-Color™designates a range of natural colouring additives. Extracted from natural raw materials, these additives that comply with European regulations cover a large range of precise and intense colours. They are formulated to provide a stable solution for all types of food processing applications. . VegeBrite™ covers a range of fruit and vegetable concentrates with colouring powers achieved without any extraction solvent, formulation additives or preservatives. These “Colouring Foodstuffs” meet the strictest criteria of the “clean label” designation highly valued by manufacturers.
- NAT healthy™ is a line of plant extracts known for their beneficial health effects. It includes natural ingredients with physiological benefits (antioxidants, digestive, energising, anti-stress properties, etc.) for functional foods.
- NAT F&V™ designates a range of fruit and vegetable powders based on a drying process that uses state-of-the-art technology. These powders are produced from fruit and vegetable concentrates and intended for applications like infant food, soups, sauces, seasoning, cereals, etc.
- NAT textur™ is a range of apple and citrus pectin offered for customised applications in sweets, jams, preparations for yoghurt, other desserts, etc. Pectin is known for its gelling and thickening properties, but it is also a source of soluble fibres that present unquestionable nutritional and health benefits.
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- NAT taste™ is a range of ingredients to improve the taste of food products: . Talin® (Thaumatococcus daniellii) is a natural protein extracted from the Katemfe fruit, gathered in the tropical forests of West Africa. Talin® is a "multifunctional" ingredient that can notably react as a flavour enhancer or a bitterness masker. It can be used in beverages, pastries, sweets, etc. Talin® received the “Best innovative Stevia Product 2010” award at the Malta 2010 Conference on Stevia (natural sweetener), organised by ISANH (International Society of Antioxidants in Nutrition and Health). . Kemfe™ is a natural ingredient, also extracted from the Katemfe fruit with a sweet flavour that can improve the overall perception of taste.
Nutrition & Health, recognised scientific expertise
Plant extracts and innovative active ingredients for nutraceutical applications and pharmaceuticals
This market is specialised in the design and development of plant extracts and ingredient concepts for nutraceuticals applications and plant extracts for pharmaceutical products. Consumer trends in the pharmaceutical / nutraceutical market (products sold in personal hygiene and beauty shops, dietary supplements, etc.), primarily address the concerns of an older and more urban population that pays more attention to well-being as well as a positive perception by public authorities in most countries towards nutritional programmes in favour of health, against the background of a stringent regulatory framework concerning health benefits and claims. Innovation is a key priority for development focusing on the objective of meeting the requirements of market professionals and complying with the regulatory authorities. The Nutrition Health product line is comprised of three ranges that not only comply with strict regulatory requirements (European Directives, ASMF procedures – Active Substance Master Files, etc.) but also with draconian controls by Naturex's partners (regular audits of Naturex factories by international pharmaceutical laboratories). Naturex’s teams include seasoned scientists who provide their expertise in identifying the exact characteristics of raw materials, assistance on in-depth bibliographical research and =conducting in vitro, in vivo or clinical trials. Regulatory and marketing materials are also made available to customers to provide a basis for creating concepts and marketing products under their own brand (compiling of regulatory files, patent filing, registered trademarks, positioning study, information website for consumers, etc.). - NAT life™ is a range of patented natural ingredients, with clinically proven effects, marketed under registered trademarks for dietary supplements and functional foods. Among these innovative extracts may be cited natural ingredients that favour cognitive performance (Cereboost®), slimming ingredients (Svetol®), anti-stress ingredients (Cyracos®), ingredients that improve performance and energy (Powergrape®), extracts recognised for their action on discomfort associated with menopause (Lifenol®), a hibiscus flower extract to reduce the frequency of urinary infections (Utirose™) and lastly, a cranberry extract as an agent useful against urinary infections (Pacran™).
- NAT activ® is a broad line of pure plant extracts known for their beneficial health effects, formulated for the nutraceutical market.
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- NAT pharma™ is a range of plant extracts designed for pharmaceutical laboratories. This range benefits from ASMF files (Active Substance Master Files) compiled by the Naturex teams for many plant extracts, so they can be used in pharmaceutical products as traditional plant-based medications.
Personal Care, a high potential market
Innovative active natural ingredients, plant extracts and functional raw material
This market is specialised in developing agents, natural ingredients and plant extracts for cosmetics applications. The natural cosmetics market has very strong growth potential in Asia, Europe and the United States in the coming years (Kline Group Study). These trends confirm consumers’ (primarily women) awareness of the toxicity of ordinary beauty products, who consequently are turning to natural plant-based products, and the increased number of cosmetics companies with an international scope launching natural products in response. The quality of the natural products selected for cosmetics applications and the various certification models are essential factors that guide the choice of consumers who are very demanding in this area. The Personal Care product line is comprised of two ranges that meet the specific needs and requirements of the cosmetics industry. The scientific teams at Naturex make use of their expertise to identify raw materials that are perfectly adapted to cosmetics applications, select highly targeted and standardised extracts, and conduct in vitro trials for the formulation of unique extracts. - NAT beauty™ offers innovative agents. This range focuses on unique extracts whose mechanisms of action and activity have been proven by in vitro trials: . Macaderm™ is an anti-ageing agent derived from Peruvian Maca; . Effineo™ is a caffeine-free slimming agent derived from green coffee; . Seveov™ is a capillary agent that stimulates hair growth; . Aurealis™ is a moisturising agent extract derived from the flower of orange trees; . Dragon’s blood(extract of dragon’s blood – Croton lechleri) is a revitalising agent that repairs and regenerates cutaneous tissues for youthful skin.
- NAT select™ is a range of plant extracts specially formulated for cosmetic applications.
At the InCosmetics 2013 exhibition held in Paris in April 2013, Naturex unveiled its new "Magic of Africa" botanical collection, a new line of extracts sourced from the continent with legendary virtues. This collection's origin is rooted in the biodiversity of the African Ivory Coast (green coffee, cacao, kola nut) to South Africa (green rooibus) and Burkina Faso (hibiscus) and Togo (kigela). Each of these natural ingredients is proposed in the form of standard extracts but can also be fine-tuned through toll extraction to specific formulation requirements.
Green coffee Hibiscus
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I.3 An integrated global sales network
Naturex operates worldwide through a fully integrated sales network present in 20 countries(France, Italy, Spain, United Kingdom, Belgium, Germany, Switzerland, Russia, Poland, Morocco, India, UAE., Thailand, Japan, China, Australia, United States, Canada, Mexico and Brazil).
This local presence on all five continents results in a dense geographical coverage that increases Naturex's visibility worldwide, both in developed and mature countries as well as high growth potential emerging countries. In this way, it is able to respond to specific demands from multinationals in the food processing industry, pharmaceutical/nutraceutical industry and in the cosmetics sector.
Indeed, the presence of regional sales offices has several advantages:
- Proximity with the main production sites and sources of raw materials;
- Reinforcement of the relations with local SMEs or the subsidiaries of major international groups contending with specific issues linked to their site and their manufacturing process; and
- Better visibility and local recognition which can form a point of entry into certain markets and a springboard for establishing positions, especially in Asia.
This worldwide network provides customers with flexible, efficient and quick responses.
Naturex combines this sales network with an industrial presence when opportunities arise that fit its development strategy in order to strengthen its local industrial base that further reinforces proximity to customers.
II. Solid positioning in growth markets
II.1 New challenges for the perception of natural and health-related concepts
A global societal challenge
According to UN estimates, the outlook for worldwide demographic growth is impressive. In 2012, the world population will reach 7 billion inhabitants and is expected to reach 8 billion in 2025 and not less than 9 billion around 2050. Moreover, the various phases in this demographic transition, especially in the second half of the 20th century, in both the so-called developed countries (20% of the world's population) and the intermediate countries (70% of the world's population), have accelerated the ageing of the population.
Consequently, the phenomena of demographic growth and population ageing have had an impact and major repercussions on food and health.
As such, according to the WHO’s worldwide estimates, obesity in the world almost doubled since 1980. In 2008: - Approximately 1.5 billion adults were overweight - More than 300 million women and nearly 200 million men were obese.
The WHO predicts that by 2015, some 2.3 billion adults will be overweight and more than 700 million will be obese. Being overweight and obesity lead to serious consequences for health, especially cardiovascular diseases, diabetes and some cancers.
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Growth and ageing of the population Overweight and obesity
- 9 billion people in the world in 2050 - 3 billion adults overweight or obese in
(9.75 billion in 2150) 2030 (vs. 1.5 billion in 2008)
- 2 billion people more than 60 years old in - Increased risks of chronic diseases 2050 (x3 vs. 2000) The ever-increasing frequency of overweight and obesity in the world is caused by several factors, including: - A change in diet observed on a worldwide scale: increased consumption of foods prepared industrially, highly caloric, rich in fat and sugar, but low in vitamins, minerals and other micronutrients; and - The trend of less physical exercise due to the ever-increasing sedentary nature of our lifestyles (work, transport, urbanisation, etc.).
Once considered as problems limited to high revenue countries, overweight and obesity are also increasing spectacularly in countries with low or medium income levels, especially in urban areas, thereby confirming the worldwide dimension of this problem. Increased awareness of the public authorities, consumers and manufacturers Health and nutrition have emerged in the last few years as major worldwide challenges, including for emerging countries, causing growing awareness by: - Public authorities and sanitary and social authorities, who have multiplied the initiatives with the goal of controlling dietary behaviour through preventive measures, information campaigns and setting up nutritional policies (in Europe – FoodRisC (Food Risk Communication), in France – National Health Nutrition Programme (PNNS), in Spain – SENIFOOD, etc.);
- Consumers showing increasing interest in products that are safe for their health and who are looking for quality food products with a nutritional profile adapted to their needs;
- Manufacturers who are multiplying innovations by modifying the composition of processed foods to offer consumers products with specific and targeted effects designed to build health capital, optimise body functions and improve quality of life. Moreover, creating an environment making it possible to adopt healthy lifestyle practices is strongly supported by strict regulations in favour of better communication on food and nutraceutical risks and benefits.
Growth drivers created by changing needs and regulations
In this context, consumers are confronted with an uninterrupted flow of new information about health, compounded by constant concern about food safety and the claims of manufacturers of dietary and nutritional supplements.
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The change in lifestyles (70% of the world's population will be urban in 2050 compared to 46% today) and the increasing share of an ageing population and consequently more affluent, have modified consumer behaviour with regards to their needs: - In the hierarchy of needs described by Maslow, physiological needs (hunger, thirst, etc.) are overridden by needs for safety (body, health, etc.), belonging (age bracket, group, etc.), esteem and accomplishment. This results in a quest for well-being illustrated by a strong trend towards prevention and self-medication, leading to growing demand for products that have an instant effect on health for complete self-fulfilment, - A new need has appeared in our societies (including in emerging countries) not included in Maslow's needs pyramid: the need for eternity or immortality. This is illustrated by an attraction to products that promise rejuvenation or act on the effects of time, symptomatic behaviour of a population that is increasingly hedonistic.
These behaviours have immediate repercussions on the markets in which Naturex operates, and constitute growth factors for the coming years.
Regulations implemented in various market segments also act as a growth driver for natural ingredients: - When regulations aim to strengthen information systems with regards to consumers (labelling, list of prohibited ingredients, alerts on the risks incurred, etc.), they can then favour the replacement of synthetic ingredients and other chemical additives by natural and, in particular, plant-based ingredients, and; - When regulations aim to strengthen the control and quality systems concerning an ingredient’s composition or the manufacturing standards (clinical trials, ASMF files, good manufacturing practices, etc.), this can encourage the adoption of ingredients whose traceability has been perfectly verified.
Food processing market
Spontaneous demand for natural and healthy ingredients An underlying trend in favour of natural products and well-being has been developing for a number of years, encouraged by increasing demand from consumers not only concerned about the harmful effects of synthetic products and other chemical additives contained in the foods they eat, but also seeking to profit from the health benefits of certain food products. Furthermore an expanded product range from food processing manufacturers is sustaining this trend as manufacturers position themselves in the natural ingredient and preventive nutrition segments to achieve competitive differentiation while complying with regulatory recommendations.
There are natural ingredients in practically all food product segments, and even if substitution of one category for another is theoretically possible, this is not done systematically (natural ingredients cannot replace or reproduce all of the features of synthetic ingredients) or immediately since it often involves substantial economic and technical constraints, from production to marketing.
Furthermore, growth prospects in the market for natural and biological ingredients in food processing are very positive across the different segments:
The natural ingredients market worldwide will reach €155 billion1 in 2012 and the market for organic products €24 billion, with an estimated growth rate of 10%. These two categories will continue to have significant growth rates through to 2017, 13% on average for natural ingredients and 7% on average for organic ingredients in the American market.
- Rosemary antioxidant extracts are also among the natural ingredients whose growth prospects will be considerable in the coming years since rosemary extracts have been added to the list of food additives authorised by European Union regulations for its antioxidant properties. Indeed, the 2010/67/EU and 2010/69/EU directives
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established the criteria concerning purity for antioxidant rosemary extracts and the maximum doses that can be used in the applications where they are authorised for use. This recognition will encourage food processing manufacturers who were waiting for this classification to use rosemary antioxidant extracts in their products and will help meet the increasing demand from consumers worldwide for speciality plant-based natural products, free from additives of chemical origin.
Naturex initiated the registration process for rosemary extracts as a food antioxidant with the European Union in 1996 and invested in toxicological studies along with two other producers by forming the EREMG (European Rosemary Extracts Manufacturers Group).
The antioxidant activity with rosemary extracts is directly linked to their carnosic acid and carnosol content, the main liposoluble antioxidant compounds in rosemary. According to the 2010/69/EU Directive, it is the total intake of carnosic acid and carnosol that must be taken into consideration, not the total dose of the extract. In consequence, this involves controlling the identification and the isolation of the active principles in rosemary. Naturex, leader in this market, possesses all the expertise and resources required to provide food processing manufacturers with a safe, effective and natural alternative to synthetic antioxidants.
- The natural aromatic extract segment should continue progressing in Western Europe and North America, the main contributors to world flavouring sales in the food processing industry, driven by strong consumer interest for natural products in foods and beverages. Growth in this segment in emerging countries such as Eastern Europe, Russia, China, India and South America, should be faster in light of the change in consumers’ behaviour.
- The colouring market in the food processing industry was estimated at US$1.55 billion in 2011 with natural colour additives accounting for US$600 million1 . Included in this this latter sub-segment, "colouring foodstuffs2" was valued at €50 -€100 million, compared to US$570 million for synthetic colour additives , US$263 million for "nature identical3", US$117 million and caramel 117 US million dollars. In light of this segment’s substantial potential for substitution and food processing manufacturers intention to provide, in accordance with regulations, genuine innovation in applications like the beverages, sweets, pastries, etc. categories, the effects on consumption will be felt in the coming years, boosting sales in this segment where the penetration rates are still low in countries around the world and especially in the emerging countries in Eastern Europe, Asia and South America.
Today, consumers are more than ever aware that food plays an essential role in contributing to their well being and health. In response, they are adopting a dietary behaviour that is in phase with this objective. As such, worldwide sales in the functional foods category is expected to reach US$175 billion4 in 2012 representing growth of 22% driven by consumers’ increased demand for nutritional products with a preventive action on health, supported by an innovative product range from food processing professionals. This category should reach a 23% share of the American food market in 2017, the pioneer in this area, and the trend should spread to Western Europe and the emerging countries, since it is consumers’ top concern in terms of nutrition. Furthermore, the dividing line between this category of food products with health "claims" and nutraceuticals is very thin, and some food processing specialists are increasingly using a mixed positioning as regulations are becoming tighter on nutritional and health claims and the scientifically-proven beneficial effects on health.
Regulations accelerating the adoption of natural products Consumers are increasingly demanding with respect to the functional features of the products they consume, but even more so about characteristics of colour, taste, texture…
1 Leatherhead Food Research – November 2010 2 Natural ingredients with colouring properties and without additives (example: fruit juices). 3 Product derived from chemical synthesis with chemical properties approaching those found in nature. 4 Euromonitor 2009-2010
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The many public health problems linked to food ingredients have led them to be more vigilant about the synthetic ingredients they consume with effects considered potentially harmful to their health.
Communicating in a targeted manner on food risks is a major challenge for the European Union and the multiplication of information sources and messages can lead to confusion or risks of an incorrect interpretation.
In response, European regulations have become organised, specifically calling attention to the harmful effects on health of certain food colourings or additives or monitoring compliance of nutritional or health claims mentioned on the labels of certain products:
- An increasing number of foods sold in the European Union are subject to nutritional and health claims. A nutritional claim communicates or suggests that a food product has beneficial nutritional properties. A health claim means any information provided on labels for the purposes of advertising or marketing, whereby the consumption of a given food can have beneficial effects on health. In 2006, the European Union adopted a regulation concerning the use of nutritional and health claims concerning food items, based on the nutritional profiles. One of its key objectives is to guarantee that any claim appearing on the label of a food item sold within the European Union is clear and justified based on scientific proof. Since November 2010, the EFSA (European Food Safety Authority) has initiated a vast scientific assessment programme on food products to ensure compliance between the nutritional and health claims mentioned on the label of these products, the advertising promoting them and the actual benefit for the consumer.
- The British food safety agency financed a study conducted by researchers at the University of Southampton in 2007. This study showed that a mixture of colourings and a preservative could have an effect on hyperactivity in children. Most of the colourings (E102-tartrazine, E104-quinoline yellow, E110-sunset yellow, E122-carmoisine, E124-Ponceau 4R and E129-allura red) and the preservative (E211-sodium benzoate) are especially present in sweets and beverages for which children are the primary targets.
In July 2008, the European Parliament decided to oblige manufacturers to adapt the labels of products that contain these substances by affixing a mandatory statement ("may have undesirable effects on children’s activity and attention"), thereby requiring food processing manufacturers to remove these products from their manufacturing process and to favour the use of natural colours.
Nutraceutical market
An increasingly health-centric demand Probiotics, prebiotics, phytosterols, dietary fibres, plant extracts, omega-3, milk protein, vitamins, minerals, etc… over the last few years, the worldwide market for health ingredients has grown faster than the overall food ingredients market given consumers’ increasing health concerns and a strong self-medication trend, plus sector manufacturers’ desire to develop ingredients that are positioned on promising pathologies, especially those linked to ageing and obesity.
In this context, world demand for nutraceutical ingredients was projected to expand 6.2% annually to US$21.8 billion in 20131. The United States will remain a leader in this market due to its extremely broad range of dietary supplements and nutraceuticals though the Chinese and Indian markets will rapidly expand in line with their economic growth and the development of their long-standing know-how in the use of traditional plants for medicinal uses. European markets, still in early stages of development, should expand at a sustained pace in light of the drivers available to manufacturers for leveraging the potential of health ingredients: Innovation in the manufacturing process in order to stabilise and protect the ingredients so they can fulfil their health promises once incorporated into applications;
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Diversification and shifting the product range upmarket via a scientific caution on the features and the health effects announced. Moreover, worldwide demand for natural vitamins should also increase 5.9% per year to reach $7.1 billion by 2013. Finally, the growing popularity with consumers and the gradual recognition by medical professionals of plant extracts and their beneficial health effects (garlic-heart, green tea-cancer, heart of palm-prostate, etc.) should lead this segment to grow by 6.2% per year to reach US$2.2 billion in 2013.
Regulations closely aligned with pharmaceutical standards However, the insufficient scientific bases for health ingredients and the overuse of the health/well-being argument in the product lines of the nutraceutical market players, are generating consumer doubt and mistrust. Regulations on functional and nutraceutical products and plant-based medications (traditional herbal remedies) are getting stricter, especially in Europe, with the adoption of standards that are close to those applied to pharmaceutical products. These measures are aimed at dispelling consumer fears and cleaning up the market by relying on in-depth scientific studies and strict registration procedures, in order to provide proof of the real benefit of the active principle that comprises the product and to establish universal manufacturing standards.
In North America, any new functional ingredient must be submitted for approval to the FDA (Food & Drug Administration) based on a review by a group of experts formed to rule on the product. Moreover, the manufacture of the product must comply with "good manufacturing practices" when dietary supplements are involved. These two processes are barriers to entry for the manufacturing and marketing of functional ingredients. Clinical trials are not mandatory but they have a significant advantage in terms of the product sales pitch in the various specialised distribution channels, especially for pharmacies.
In Europe, European regulation No. 1924/2006 and the various authorisation procedures implemented for nutritional claims (source of, rich in, etc.) and health claims (benefits) for products are very restrictive:
- The "generic functional" claims falling under Article 13.1 of the European regulations concern the role of a nutrient or another substance in the body’s growth, development and functions, the psychological and behavioural functions, weight loss and weight control, satiety and the reduction in the diet’s energy value. The EFSA’s scientific evaluation helps ensure the seriousness and accuracy of the claims concerning the labelling of foodstuffs and the advertising promoting nutrition and health.
- For products with specific claims (activity on cognitive performance, improvement in blood circulation, etc.), falling under Articles 13.5 and 14 of the European regulations, an ASMF file (Active Substance Master File, formerly the EDMF – European Drug Master File) has to be filed. This document includes information on how to prepare an active drug substance and on its quality, as support for a product marketing authorisation request.
Very few players in the market have the ability to support the process required to produce such a document and in consequence this constitutes a genuine hindrance to marketing products if the manufacturer is unable to demonstrate the quality of the active substance used. For years now, Naturex has compiled ASMF files for many plant extracts, thereby authorising their use in any application, including for pharmaceutical products.
- According to European Directive 2004/24/EC, which took effect on 30 April 2011, the claims concerning plant substances (plant-based medications falling within the framework of "traditional herbal remedies") will also have to be backed by clinical trials in order to obtain a product marketing authorisation. Plant-based medications must be manufactured according to "Good Manufacturing Practices" (GMP) in order to demonstrate their beneficial effect and confirm the quality of the finished product. Only plant substances that were mentioned in the pharmacopoeia over the last 30 years are not affected by this directive. Concerning plant extracts whose beneficial effects were recorded in the pharmacopoeia more than 30 2012 Registration Document 25 Chapter 1 Naturex and its markets
years ago but which have fallen out of use since, no product marketing authorisation will be granted without a prior clinical trial.
This directive forms genuine barriers to entry for players in the market who have not anticipated the tightening of these regulations and who consequently do not have the required infrastructures or suitable technical means to comply with them.
Naturex has three pharmaceutical sites based in France, Spain and Italy able to conduct clinical trials on plant extracts and produce them in compliance with pharmaceutical standards. This constitutes a clear competitive advantage in meeting the highly-targeted demand of the main pharmaceutical laboratories around the world in complete compliance with current regulations.
Cosmetics Market
Natural cosmetics, creators of global trends According to a survey taken by Datamonitor1, more than half of consumers (52%) in the world consider that cosmetic products formulated with natural ingredients are better than synthetic products. This simple observation partially explains the sharp growth in the sector over the last few years during which, because of the large high-end positioning of its range of products range of finished products, has been only marginally affected by the financial crisis.
The market research firm Kline anticipates worldwide demand for natural cosmetics to grow approximately 10% a year until 2016 compared with 4% to 5% for the market overall. Whereas in Europe natural cosmetics represent about 3% of the overall cosmetics market, in some countries like the United States, Germany and Switzerland, their market share is close to 10%. According to Organic Monitor, in five years natural and organic cosmetics will represent 30% of the total cosmetics market.
The growth outlook for natural cosmetics by 2014 is promising in Asia, Europe and the United States: - Asian markets (especially Japan and Korea) could post double-digit growth (approximately 14%), reaching sales of nearly US$14.8 billion, bolstered in particular by the Asian population’s traditional know-how of herbal products, especially in Indonesia, China and India, and consumer trend at the high end of the range, close to that of western markets, given an increasingly urban population.
- In Europe, market research specialists are expecting revenue of more than US$6.3 billion over the next five years, with highly sustained growth in Germany, France and the United Kingdom.
- In the United States, sales in the natural cosmetics segment could reach US$5.8 billion with a very marked orientation for 100% natural products in light of manufacturers’ efforts in product formulation.
- The Brazilian market is also showing excellent momentum with an annual average growth rate of 20% between 2005 and 2010, and bolstered by the wealth of the country's biodiversity and, in particular, the flora in the Amazon region, whose many extracts are already known for their cosmetic properties.
The main factors for this worldwide growth are: - The increase in R&D investments of worldwide cosmetics giants resolutely focused on innovation and research in high-performance raw materials in this highly-competitive market segment;
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- The increase in marketing investments associated with natural products, making it possible for international brands to expand their product lines; - Emerging countries’ strong interest in this type of product, made possible by the opening of relocated production sites so specific demand can be met at more accessible prices; and - The increased power of distribution networks (hypermarkets, supermarkets and selective networks) and the multiplication of retail distribution (exclusive shops, spas, websites, etc.).
A regulatory framework slow to evolve The growing importance of the role of regulations has been an inevitable consequence to the increasing multiplication of so-called “natural” or “organic” cosmetics lines. However, if the number of standards for organic and natural cosmetics is proliferating, the outlook for a worldwide and unified standard seems reduced and the recent emergence of new labels and logos as well as certification procedures have not made the choice of professionals or consumers any easier:
- Europe, where almost two-thirds of the products undergo certification, has the most developed system of standards. Ecocert and BDIH are the main standards, in part thanks to high adoption rates in France and Germany, respectively. Ecocert's popularity results from its status as a standard for both natural products and organic products, whereas most of the other certification bodies only offer one or the other.
- Even though different standards were introduced in North America during the past two years, very few products have been certified. Organic Monitor estimates that less than 5% of the natural or organic products are certified in the region. Supported by the major manufacturers of natural cosmetics, the standard of the Natural Products Association (NPA) is leading the way but as a private standard, it is not recognised by ANSI (American International Standards Institute), ISO’s official representative in the United States. The NSF ANSI 305 ‘made with organic’ standard should gain in popularity once the certification process begins. The lack of a standard that applies to organic cosmetics is leading several American companies to adopt the USDA's NOP standard. Although the latter is designed for food products, it is relatively popular with companies that use cosmetics ingredients.
- Organic and natural cosmetics standards have also been created in other regions, such as Asia-Pacific and Latin America. Adoption rates however are especially low. Many cosmetics companies in these regions are concentrating on exports and prefer to use the European standards. Consequently, the Ecocert standard has become the most popular standard in countries like Japan, Malaysia and Brazil.
Although the standards are gaining in popularity, they are primarily adopted on a national basis. Very few standards have developed a regional scope of application, and even less an international scope.
However two recent initiatives in France could change the situation and harmonise certification in this market segment:
- The Cosmos-Standard AISBL standard, officially launched at the Biofach-Vivaness trade shows in Nuremberg in February 2011, was developed after more than seven years of negotiations between the major certification agencies in Europe, who are also founding members of the label (BDIH in Germany, Cosmebio and Ecocert in France, ICEA in Italy and Soil Association in the United Kingdom).
The launching of this label represents a significant step for the natural and organic cosmetics industry in Europe and the Cosmos-Standard will also be open to other certification bodies. Together the founding members of the Cosmos-Standard represent more than 1,400 certified cosmetics brands and more than 24,000 products sold in more than 40 countries.
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Products certified in compliance with the new standard will be labelled with the statement "COSMOS ORGANIC" or "COSMOS NATURAL" according to their level of certification, along with the label of the certification body involved.
- However, its objective of becoming a European standard has run into competition from NaTrue, an international interest group of natural and organic cosmetics manufacturers, created in 2007 to promote the virtues of the ingredients used in natural and organic cosmetics, both for the health of consumers and for the environment, and which in 2010 launched its own European label under the same name, NaTrue.
NaTrue defined the criteria for its label by establishing three levels of certification, which incorporate a rigorous definition of natural and organic cosmetics in order to maintain the highest level of requirements possible for this category of products: - Level 1: "Natural Cosmetics" - Level 2: "Natural cosmetics with an organic portion" - Level 3: "Organic cosmetics.
In February 2011 at the Biofach-Vivaness trade shows in Nuremberg, NaTrue announced a partnership with NSF International, a certification body accredited by ANSI (American Standards Institute) to develop the first official North American standard for natural cosmetics. At the same time, a mutual recognition agreement was signed between NaTrue and NSF International concerning the NaTrue label – level 2 (Natural cosmetics with an organic portion) and NSF 305. The harmonisation of the various labels and certifications in these segments requires stricter international transparency criteria that consumers can place their trust in and that manufacturers can adhere to with a concern for quality and reducing certification costs.
II.2 A Preferred Partner with a customer-centric approach
In order to ensure customer trust and satisfaction, Naturex has agreed to provide raw materials of an irreproachable quality and constantly improving services, with very strict rules concerning safety and hygiene.
A strong focus on customer demand is a key component of Naturex's strategy and a driving force behind the Naturex's privileged relations it cultivates with each of its customers.
As such, Naturex's sales engineers identify customer needs and expectations and act as the interface with the various departments in the Group and, in particular, the research and development teams.l
An international and diversified customer base
Naturex maintains close and long-standing relationships with a highly diversified worldwide customer base that includes flavouring specialists, local independent SMEs, subsidiaries of large well-known international and multinational groups in the food and beverage markets, in the pharmaceutical and nutraceutical industry and in the cosmetics markets.
These partnerships accelerate Naturex's development and strengthen its positioning in the various markets.
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Supplier of customised solutions
Naturex's product range is not limited to offering a portfolio of standardised products. The value-added resides in the Group's ability to create customised technical solutions based on very precise specifications, defined beforehand with the customer's laboratories and Naturex's research and development department.
Relations with the customer are initiated in the earliest stages of a product’s production phase, either on the occasion of a request to substitute a speciality plant-based natural ingredient for a synthetic ingredient or, above all, through long-term partnerships concluded within the framework of strategic projects concerning new product launches.
The project gestation period can be long (two to three years) and sometimes may never be completed or undergo many simulations in order to find the right compromise between the customer's requirements, the specific features of their final product and the properties of the natural extract.
Bolstered by its expertise and based on the creativity of its teams, Naturex has successfully developed a highly varied portfolio of customised formulas and solutions, in line with customer requirements and in accordance with current regulatory practices.
Maintaining permanent relations to build long-term customer loyalty
Relations with the customer last throughout the product's life cycle in order to detect any improvements that can be made to the composition of the speciality plant-based natural ingredients and anticipate the customer's future needs based on market trends and changes.
Naturex has set up a genuine centralised IT platform that makes it possible to compile a database that the research & development and quality assurance departments keep up to date, bringing together all of the created extracts shown in the Group's product portfolio. In the event a customer requests information on its product, Naturex's international sales teams have access to all of the certificates and technical data sheets so they can provide the customer with information.
In addition, customers conduct quality audits of the Group's production sites in order to verify the quality of our production process.
This relationship built on exchange and trust is essential to continue innovating in perfect harmony with customers.
Systematic presence at international trade shows
Naturex is also present at numerous professional trade shows around the world to promote its know-how in terms of innovation and quality.
These events offer key opportunities for acquiring sales contacts to present the various product ranges to all professionals in the markets where Naturex operates and initiate new partnerships.
During these trade shows the Group's market managers also participate in conferences on targeted themes in order to inform professionals of a product’s latest technical and scientific breakthroughs or provide an overview of trends.
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II.3 Competition still fragmented in a market moving towards consolidation
The speciality plant-based natural ingredient market in which Naturex operates remains fragmented despite the very strong trend towards consolidation over the last ten years.
A compartmentalised market
In the speciality plant-based natural ingredient market, there are two categories of participants:
- A multitude of small or medium-size participants, representing nearly half of the market. These are most often small family-operated companies, benefiting from historical know-how about the market and almost craft like production facilities. Lean structures, these SMEs have a similar profile. For the most part, they are profitable because they have a loyal customer base, even if their development is hindered by increasingly restricted means and increasingly complicated constraints (regulations, quality control, supplier concentration, etc.).
These participants can be divided into three categories: Medium-size companies positioned in market niches with specific product ranges or customer targets. Small companies or cooperatives located near the raw materials they use. For the most part, they are mono- customer. Companies with a different core business though engaged though transforming raw materials as a secondary activity.
- About fifteen companies of an average size These are independent SMEs or subsidiaries of major groups in the food processing, pharmaceutical or cosmetics industry. Few in number, these companies have substantial capital coming either from the financial markets or private financing from major groups or merchant banks. They are profitable in their market. Over the years, these companies have acquired a strong reputation in their segment linked to their business expertise, the notoriety of their customer base or the performance of their production facilities and their high capacity for innovation.
This category contains the most dynamic participants, Naturex's direct or indirect competitors, which are driving the concentration in the natural ingredients market.
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A leadership position in the speciality plant-based natural ingredient market
Naturex is positioned in niche markets (speciality products) and covers the food processing, nutraceutical and cosmetics markets:
- Each market has its own ecosystem and participants; - Naturex competes with several participants around the world in each of its markets and these same participants can sometimes represent a target customer base; - Finally, Naturex does not participate in traditional products referred to as commodities, but markets speciality products whose initial production requires special know-how or where the format meets specific requirements. There are few competitors for each product or range of products, especially since each participant tries to differentiate its own product (raw material, new properties, formulation, etc.).
Naturex has been among the main consolidators in the market with 12 successful acquisitions over the last ten years, and the Group believes it is the revenue leader in all of its markets. Naturex's strategy has consistently focused on acquiring companies or divisions of companies operating in its core business and offering possibilities to provide a complementary range of products and additional technical and manufacturing know-how that supplement the Group's sales and manufacturing geographical presence.
Naturex's competitive advantage is based on its position as an independent company with high-performance production facilities, a permanent focus on research and development, privileged access to a broad selection of raw materials and a wide range of customised solutions with high value added, for the speciality plant-based natural ingredient market, allowing it to be the privileged partner for a customer base of world-class companies.
32 2012 Registration Document Chapter 1 Naturex and its markets
Main competitors by product range
Naturex is a “pure player” in the speciality plant-based natural ingredient market and collects a comprehensive body of know-how in various extracts that comprise niches.
With no competitors having been identified that operate in all its markets (Food & Beverage, Nutrition & Health, Personal Care) or ranges, Naturex's global offering is unique.
The following table lists identified competitors by product ranges in Naturex's two main markets, Food & Beverage and Nutrition & Health. The Personal Care market is highly fragmented and comprised of several small players. The size of the market is not significant today.
Nutrition Food & Beverage & Health powders with Fruit health colors Natural pectins and juice juice and extracts extracts Extracts Flavoring beneficial effects on effects Rosemary Antioxidant Antioxidant concentrates F&V
Chris Hansen (Denmark) CPKelco (USA) Cargill (USA) Danisco (Denmark) D.D Williamson (USA) Diana Naturals (France) Euromed (Spain) Finzelberg-Plantextrakt (Germany) Frutarom (Israel) GNT (Germany) Indena (Italy) Kalsec (USA) Kerry (Ireland) Sensient (USA) Vitiva (Slovenia)
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Solid barriers to entry The risk of new companies arriving in the market is limited given the strong barriers to entry into the natural ingredients market, which are closely interrelated:
- The regulatory standards in the various markets are increasingly restrictive and require a genuine internal organisation in terms of quality assurance and anticipation, thanks to very active research and development efforts; - There are substantial technological constraints in terms of business know-how (raw materials procurement, manufacturing processes, etc.) and the ability to innovate, which require considerable capital resources; - The size effect is a strategic stake in terms of purchasing power for raw materials procurement, but also within the framework of the process of becoming an authorised supplier of multinationals and the audit procedures they conduct throughout the year; - Speciality plant-based natural products meet very precise specifications that are developed by working closely with customers over often long periods of time and for that reason cannot be substituted by a product from a competitor’s portfolio.
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SUSTAINABLE DEVELOPMENT Balancing development with corporate social responsibility
From the very beginning, Naturex made the commitment with its employees, partners, customers and shareholders to pursue a socially, societal and environmentally responsible policy.
For Naturex, sustainable development involves reconciling economic development, social equity and respect for the environment combining the principles of continuous improvement, risk management and prevention.
This CSR process (Corporate Social Responsibility) is gradually developed over time so to be incorporated in the decision-making mechanisms at Naturex and its subsidiaries and shared, based on each country's specific characteristics.
Compliance with these commitments forms the basis for the Group's long-term development and highlights its priority of responsible corporate citizenship.
Group efforts in terms of transparency and the scope of its progress within the framework of its CSR strategy were rewarded by Naturex's inclusion in the Gaia Index. This CSR index launched in 2008 by EthiFinance and IDMidCaps includes 70 top ranking Mid Caps listed on NYSE Euronext Paris operating in all sectors selected from a panel of more than 200 companies. This selection is based exclusively on extra-financial criteria (corporate governance, human resources management, environmental impact, relations with stakeholders). In 2012, Naturex ranked 45th among 111 companies in the industrial segment, 44th among companies of Segment B of the NYSE Euronext Paris (market capitalisation between €100 million and €1 billion), and 22nd among the 74 companies in the €150-€500 million revenue range.
CSR framework
The Group has chosen to present CSR information in accordance with the disclosure requirements established by the French regulatory framework for environmental reporting (implementation decree of the "NRE" law, article L.225- 102-1 of the French commercial code, "Grenelle II Act" of 12 July 2010, completed by the implementation decree of 24 April 2012). For environmental information, this has been supplemented by additional performance indicators based on the GRI (Global Reporting Initiative) "sustainability reporting guidelines reporting" though without applying all the methodologies in light of Naturex's structure and degree of advancement in the area of CSR.
Information required by Article 225 of the "Grenelle II Act" of 12 July 2010, and the implementation decree of 24 April 2012 destined to inform the public on the social and environmental consequences of companies' activities and their societal commitments in favour of sustainable development is thus presented below in three sections: (social, environmental and societal).
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CSR reporting boundary and methodology
The reporting boundary for social, environmental and societal information covers all consolidated subsidiaries. Reported data covers fiscal 2012 as compared with 2011.
Information collected within the framework of a social and environmental reporting system is supplemented respectively by information provided by the human resources department and quality, safety and environmental department. The latter in turn collects this information from the relevant operating departments of the Group's different legal entities. Pending publication of a decision establishing the framework of reference for assessments, the obligation for an independent assessment of this information was not applicable for this year.
I. Social information
Naturex's development and ability to meet its customers’ requirements largely depend on the expertise and commitment of its employees. Naturex Group relies on shared values and a strong corporate culture to successfully implement its development strategy. The human resources department’s priority is to support both the Group's very strong organic growth and its strategy of expansion through acquisitions pursued over the last twelve years. This latter strategy has resulted in major international acquisitions and in particular: The last four acquisitions completed between the fourth quarter of 2011 and the third quarter of 2012 (Burgundy in France and Spain, Pektowin in Poland, Valentine in India, DBS in the United States), resulted in an increase in the capital's workforce.
I.1 A dynamic and centralised policy of labour relations
The human resources management process covers the management of: - Recruiting; and - Training and the skills of personnel. Executive Management sets the main guidelines of the Group's employee relations policy, with the purpose of anticipating human resources needs and identifying the skills needed to implement the Group's strategy in order to manage its development and meet future economic challenges. The human resources department ensures that each Group subsidiary applies these priorities, while respecting the specific local and cultural regulatory constraints in a manner consistent with the company's values: business responsiveness and motivation, mobility, creativity and a sense of innovation, team spirit and company spirit.
Anticipating human resources needs
A proactive recruiting policy
Naturex conducts a proactive recruiting policy throughout the year, not only with international recruitment agencies but also specialised institutions of higher education, especially in the fields of chemistry and food processing, after Group departments and Executive Management have identified needs.
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International career management
Naturex combines a balanced international mobility policy with the joint development of local talents, thereby encouraging cultural diversity and the sharing of know-how in each of the Group's businesses. In light of its continuous growth and its extensive international expansion, Naturex has adopted international career management procedures to: - Promote geographical and functional mobility of executives within Group entities; - Identify young talent; and - Plan for Group development trends based on market opportunities.
Promoting broad-based employee engagement
Naturex’s goal is to offer its employees working conditions that favour their professional growth and the achievement of their assignments. Naturex's employee relations policy strives to consolidate, strengthen and increase personnel’s skills in order to encourage their development. Naturex has implemented an active integration and training process to facilitate the adaptation of all employees to their professional and market environment.
Individualised support
On their first day, all employees are provided by the human resources department a welcome booklet, the internal rules and regulations as well as the risk prevention and management plan of the company they are joining. An IT Charter, aimed at specifying the measures concerning the proper use of IT resources and Internet services is also given to Group employees. All personnel are made aware of the importance of their activities and their contribution to achieving the Group's Quality objectives within the framework of the quality management system.
Targeted skills development
The development of know-how and innovation is essential in Naturex's skills management policy, in light of its rapid development in growing markets.
As such, Naturex has set up a skills development process revolving around two key processes: annual assessment interviews and training management. - These assessment interviews are organised throughout the Group once a year between the employee and his/her manager using a form developed by the human resources department to measure individual performance over the previous year and set objectives for the year ahead. These interviews are an opportunity to evaluate skill development actions carried out during the year and to determine the actions to be taken or continued in order to progress further in the function or in preparation for a future change (functional or geographical mobility).
- Training management not only represents an advantage for the Group, but above all it is a tool for social advancement in the service of employees. Each manager identifies the training needs in his department at least once a year and whenever necessary, in agreement with Executive Management. These needs are identified through: . Analysis of the skills chart used to define each department's needs in terms of versatility and to identify development opportunities and the new skills the employee should acquire, and
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. Needs expressed by the personnel themselves to managers during departmental meetings, health and safety meetings, good manufacturing practices meetings, etc. In addition, anyone destined to work in the manufacturing department or scientific department receives training on health and safety rules as well as the good environmental practices applicable to each production site. The purpose of this training is to provide the personnel performing work with an impact on product quality with the skills required for their job. The HSE manager conducts this training.
Finally, through the quality management system, Naturex has set up an approach for improving its health and safety performance in the workplace with the goal of preventing and controlling the existing risks on its sites, for its own employees and for subcontractors that work at the sites.
Genuine Group cohesion
Naturex maintains a permanent link with all Group employees regardless of their geographical location, through internal communication media as well as frequent contacts.
These tools strengthen the notion of belonging to a Group with shared values and in this way stimulate employee motivation and involvement: - An in-house newsletter, published in seven languages, is distributed to all personnel. This format provides a vehicle not only for reporting on changes in the Group activities, but also for showcasing an individual employee who talks about his or her profession, experiences, etc.
- The main executives of the operational departments are frequently present at the different sites and directly contribute in this way to promoting the Group's culture.
- Targeted work meetings are organised on a regular basis at the Group's head office or at one of the main sites, thereby favouring opportunities to share experiences and progress.
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I.2 Employee diversity, a valuable asset and source of creativity
An international Group
Customer proximity is a top priority for Naturex's strategy. To this purpose, it has established production and commercial operations worldwide. Committed to strengthening its international dimension, Naturex privileges the development of its workforce in local markets. At 31 December 2012, the Group was present on all continents with 1,455 employees. France accounted for 23% of its workforce and international operations 77%. In 2011, the Group had a workforce of 1,055, (28% in France and 72% for international operations).
Geographic breakdown of Group personnel
In light of its international dimension, Naturex has signed the Global Compact initiated by the United Nations to promote corporate social responsibility.
As such, Naturex has undertaken to comply with and promote human rights principles, labour rules, the fight against corruption and protecting the environment.
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Promoting diversity and equal opportunity
Naturex’s strength resides in the diversity of its employees. Promoting diversity means taking advantage of individual skills and encouraging the sharing of best practices. This diversity contributes to greater responsiveness vis-à-vis customers while constituting a genuine source of innovation to drive growth.
Today, Naturex's operations are located in 21 countries on five continents. Naturex applies a policy of equal opportunity employment based on equitable practices of recruitment, career management and personal development of employees without discrimination. Equal opportunity, equal access to employment between workers without disabilities and disabled workers and professional gender equality are Naturex priorities in the day-to-day management of human resources.
Gender breakdown of Group personnel by region
At 31 December 2012, women represented 31% of the total workforce compared to 29% at 31 December 2011. In France, women accounted for 37% of the personnel at 31 December 2012, unchanged in relation to the end of 2011.
Gender breakdown by region:
2012 2011
Asia / Pacific region 54% 46% Asia / Pacific region 45% 55%
Americas 74% 26% Americas 76% 24%
Europe / Africa 69% 31% Europe / Africa 71% 29%
Total Group workforce Total Group workforce (%) (%) Men: 69% Women: 31% Men: 71% Women: 29%
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Employment and integration of disabled workers
At 31 December 2012, the Group employed 20 disabled workers (France: 2; Poland: 11; Italy: 5, Morocco: 1, India: 1).
Equitable compensation policy
The Group's policy is to grant, in each country, remuneration proportional to the level of skill, training, responsibilities and performance of each employee and to ensure a standard of living in line with the local legislation in terms of labour law. Naturex makes every effort to comply with local laws in each of the countries where it operates. All companies operate in countries having ratified the core conventions of the International Labour Organisation (ILO) and that possess worker protection legislation in all areas covered by the conventions.
In 2012, Group payroll amounted to €57.5 million compared to €49.1 million the previous year. Payroll for Naturex S.A. France increased from €13.5 million at 31 December 2011 to €17.6 million at 31 December 2012.
A young and multicultural workforce
The profile of Group personnel is young with 60% in the “under 30” and “30 to 40” age brackets. In France, the average age for the workforce is 32.
Group personnel by age bracket (men / women)
2012 Total workforce by age bracket (%)
> 50 years old 75% 25% 15%
40-50 years old 72% 28% 26%
30-40 years old 71% 29% 35%
< 30 years old 58% 42% 24%
Total Group workforce (%) Men: 69% Women: 31%
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2011 Total workforce by age bracket (%)
> 50 years old 83% 17% 13%
40-50 years old 81% 19% 22%
30-40 years old 72% 38% 36%
< 30 years old 58% 42% 29%
Total Group workforce (%) Men: 71% Women: 29%
A wide diversity of professions and know-how
Group workforce by department
2012
47%
36%
32%
21% 21%
15% 10% 10% 7%
1%
Administration Production / Sales Logistics Scientific Maintenance Department
Group France
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Shared responsibilities
Breakdown of the Group and France personnel by category
2012
48% 47% 41% 39%
13% 12%
Management Supervisory staff Office employees/workers
Group France
2011 53%
44% 40%
28%
19% 16%
Management Supervisory staff Office employees/workers
Group France
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I.3 Information about Naturex S.A (France)
Headcount
At 31 December 2012 Naturex S.A had 339 employees. This included 305 at the Group's head office site in Avignon with a production plant and different operating departments and 34 at the Reyssouze production site originating from the Burgundy acquisition in October 2011. For information, it is noted that Burgundy was merged into Naturex S.A on 1 January 2012 through a simplified procedure (transmission universelle de patrimoine or TUP) entailing complete transfer of all assets and liabilities.
At 31 December 2011, there were 291 employees in France.
This increase reflects recruitment by the Company in 2012 in connection with Group reorganisation measures to strengthen support functions in France following Naturex's rapid development in recent years and also to support the new organisation of operating departments, following the death of Mr. Jacques Dikansky.
The percentage of women in the workforce of Naturex S.A at 31 December 2012 remained unchanged in relation to the end of 2011 or 37% of the total French workforce, while noting men account for 50% of employees in the production/maintenance department.
The average age of employees of Naturex S.A at 31 December 2012 was 32 with an average seniority of 3.4 years.
Personnel representation
Through a collective bargaining agreement signed with trade union representatives, the duration of the terms of office of personnel’s representatives has been set at four years. New elections will be organised to renew the membership of employee representation bodies no later than June 2013.
Trade union representation
Pursuant to Law No. 2008-789 of 20 August 2008 on the Renovation of Social Democracy and Reform of the Working Time, four trade unions (CGT, CFTC, CFDT, FO) are represented in Naturex S.A.
Agreement on the organisation of working hours
An agreement for organisation of reduced work hours was signed on 20 April 2000, formalising the transition to the 35-hour work week based on the agreement for the chemistry industry to which the Company is a party. In the interest of the quality of customer service, schedules for appropriate work periods and work time arrangements have been implemented in certain departments at Naturex S.A. A company-level agreement for autonomous executives and supervisors was signed on 2 January 2007 within the framework of annualised days-per-year based working time arrangements.
Number of working hours
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In 2012, the average work week for Company employees was 35 hours for full-time employees. Part-time employees represent approximately 3% of the total personnel.
Group voluntary and statutory profit-sharing schemes
Naturex S.A. has not established any voluntary profit-sharing schemes.
Health and Safety conditions
The Occupational Health and Safety Committee (OHSC) meets on a regular basis in order to prevent any health and safety risk in the company for personnel. Risk prevention training is organised throughout the year.
Public-service initiatives
In 2012, the Company made public service payments of €19,000 to the Works Council and €32,000 to foundations.
Training
Expenditures incurred by Naturex S.A. for the training plan represent about 0.4% of the payroll for training concerning languages, safety and Quality standards (ISO standards, etc.). In 2012, 1,580 hours of training were provided which concerned approximately 90 employees.
The scope of outsourcing
The Company outsources certain activities (upkeep of green spaces, offices, plant maintenance, marketing, communications, IT, etc.). For fiscal 2012, amounts invoiced for these services totalled €3 million, up from €2.5 million in the prior period, excluding temporary personnel and intra-group charge-backs.
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II. Environmental data
II.1 A responsible worldwide environmental policy
Conservation of natural resources and respecting the environment
The raw materials used by Naturex originate exclusively from nature itself. Since it was founded, respecting the environment and the conservation of natural resources have constituted a central priority of Naturex's strategy. As such, Naturex is a committed stakeholder in the communities where it operates and its Foundation helps enrol these communities in contributing to its priority for sustainable economic, social and environmental development. The Group's industrial activities are operated and developed according to the principle of sustainable development. Naturex undertakes to comply with current legislation in all of the countries where the Group operates.
Finally, Naturex strives to share its concerns for sustainable development with all of its own stakeholders by : - Increasing employee awareness about environmental issues through regular information initiatives and training in this area; and - Sharing its ethical values with its suppliers and subcontractors for the application of the principles of sustainable development.
Applying an Environmental Management System
Naturex considers that sustainable development is an essential aspect of its activities. This priority resulted in the development of a “sustainable development charter”, an integral component of the environmental management system, with the following objectives: - Naturex encourages the implementation of environmental management systems at its production sites; - Naturex undertakes to comply with current legislation in all of the countries where the Group has locations, - Naturex undertakes not to use GMOs; and - Naturex undertakes to adopt a constructive attitude of transparency and dialogue vis-à-vis third parties and interested parties.
These objectives are set forth in an environmental policy for each Naturex Group' site destined to implement an environmental management system.
The environmental management system adopted at selected Group sites contributes to improved industrial performance while reducing the impacts of its activities on people and the environment in compliance with regulations.
The measures adopted by Naturex to establish and maintain its environmental management system are based on the principle of continuous improvement:
Planning > Implementing > Inspecting > Reviewing and Improving
The goal is to achieve increasingly higher levels of performance.
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Based on a harmonised and coherent Group approach, adapted to each site with an environmental management system, a detailed environmental analysis and customised regulatory monitoring are used to define the environmental objectives. Objectives may concern a wide range of areas: - Consumption (energy, water); - Water and atmospheric emissions; - Waste; - Reporting and self-monitoring; - Pollution prevention; - Supplier and subcontractor involvement. Naturex's Executive Management has undertaken to implement all means necessary to achieve these objectives. At present, the Avignon and Birmingham sites have an environmental management system certified ISO 14001 (Avignon certified since 2007 and Birmingham since 2008). At other sites, environmental management systems are being implemented (Switzerland, Spain, Morocco). In addition, implementation is also planned for the sites of recently acquired companies.
A well-designed organisation
A HSE (Health, Safety and Environment) policy was implemented in the Group based on the presence of fully dedicated engineer level HSE representatives for the main sites (France, Spain, New Jersey, Italy, Morocco and Switzerland) or partially dedicated at smaller scale sites in terms of manufacturing activity (United Kingdom), backed by a Group HSE Coordinator in charge of harmonising and distributing good practices. New sites acquired since October 2011 (Burgundy in France and Spain, Pektowin in Poland, Valentine in India and DBS in the United States) will also benefit from this organisation. Furthermore, the Group can rely on personnel with an understanding of the importance of environmental issues and involved in the continuous improvement process.
II.2 Strict monitoring of environmental indicators
An extensive certification programme
Naturex has initiated a programme for certification of its production sites based on internationally recognised standards including in particular the ISO 9001 (quality management), ISO 14001 (environmental management) and OHSAS 18001 (occupational health and safety management system) standards: - In France, the Avignon site: ISO 9001, ISO 14001 and OHSAS 18001; - In the United Kingdom, the Birmingham site: ISO 9001 and ISO 14001 - In Spain, the Valencia site: ISO 9001; - In Switzerland, the Burgdorf and Bischofszell sites: ISO 9001; - In Brazil, the Manaus site: ISO 9001; - In Australia, the Sydney site: ISO 9001. Each industrial site has an awareness of the importance of environmental issues to ensure the manufacturing processes do not affect the environment, to reduce waste and to prevent water and air pollution. In addition to these certifications, the Avignon, Casablanca, Burgdorf and Bischofszell sites have received European organic certification and the American "National Organic Program (N.O.P.)" certification. Finally, the Avignon and Birmingham sites have obtained the BRC (British Retail Consortium) standard certifying that quality and food safety are controlled. Consumers and authorities alike increasingly demand that our food products comply with safety and quality guarantees. For all food processing industry participants, the health safety of
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foodstuffs has become a key stake in ensuring their business continuity and obtaining new markets, especially in their exchanges with distributors. This standard not only demonstrates the Naturex teams’ commitment and effectiveness in terms of quality standards, it also represents a key competitive advantage for Naturex.
A scorecard that encourages the implementation of environmentally friendly solutions
To monitor its actions in favour of the environment based on a process of continual improvement, Naturex balanced scorecard system implemented at all its production sites incorporates selected GRI-based performance indicators (Global Reporting Initiative) and meeting extra-financial reporting requirements for environmental data now provided for under French regulations (Article 225 of the "Grenelle II Act" of 12 July 2010, and the implementation decree of 24 April 2012 .
Within the framework of its safety, security and environmental strategy and the environmental management system, efforts for improvement are focused on: - Pursuing and improving the monitoring of our environmental impacts; - Ensuring the continuous performance of treatment systems for atmospheric and liquid emissions and adapt these systems to production sites changes; - Pursuing the widespread application of recycling and recovery processes for industrial waste.
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To promote a sustainable use of resources in line with our primary objective for limiting environmental impacts, the reporting system monitors key indicators that are broken down below by production site and geographic location:
Energy consumption
In kWh 2012 2011
Europe / Africa . Primary energy source Electricity Electricity . Consumption 5,159,517 5,160,043 Avignon, France . Other energy source used Natural gas Natural gas . Consumption 3,424,531 3,104,111 . Primary energy source Natural gas Natural gas . Consumption 7,144,501 6,451,189 Reyssouze, France . Other energy source used Electricity Electricity . Consumption 3,128,490 1,669,956 . Primary energy source Natural gas Natural gas . Consumption 10,461,105 7,520,349 Valence, Spain . Other energy source used Electricity Electricity . Consumption 4,676,145 3,448,999 . Primary energy source Natural gas Natural gas . Consumption 4,523,880 4,991,583 Palafolls, Spain . Other energy source used Electricity Electricity . Consumption 2,088,202 2,293,948 . Primary energy source Natural gas Natural gas . Consumption 17,330,905 19,407,437 Milan, Italy . Other energy source used Electricity Electricity . Consumption 3,378,952 3,420,439 . Primary energy source Diesel fuel Diesel fuel . Consumption 1,723,190 1,829,716 Birmingham, United Kingdom . Other energy source used Electricity Electricity . Consumption 1,577,916 1,498,457 . Primary energy source Natural gas Natural gas . Consumption 31,484,146 30,516,930 Bischofszell, Switzerland . Other energy source used Electricity Electricity . Consumption 6,696,109 6,858,474 . Primary energy source Natural gas Natural gas . Consumption 25,196,347 29,696,567 Burgdorf, Switzerland . Other energy source used Electricity Electricity . Consumption 6,452,600 7,058,200 . Primary energy source Fuel Fuel . Consumption 19,859,400 24,664,356 Casablanca, Morocco . Other energy source used Electricity Electricity . Consumption 5,269,950 5,501,531 . Primary energy source Coal Coal . Consumption 60,761,904 47,673,942 Jaslo, Poland . Other energy source used Electricity Electricity . Consumption 6,008,950 5,279,111
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In kWh 2012 2011
Americas . Primary energy source Natural gas Natural gas South Hackensack, New Jersey - . Consumption 6,925,249 9,527,301 USA . Other energy source used Electricity Electricity . Consumption 6,394,440 6,784,388 . Primary energy source Electricity Electricity Shingle Springs, California - USA . Consumption 498,107 498,107 United States . Other energy source used - - . Consumption - - . Primary energy source Diesel fuel Diesel fuel . Consumption 4,628,400 3,691,601 Manaus, Brazil . Other energy source used Electricity Electricity . Consumption 1,703,940 1,411,860
In kWh 2012 2011
Asia / Pacific . Primary energy source Electricity Electricity . Consumption 187,212 304,295 Sydney, Australia . Other energy source used Natural gas Natural gas . Consumption 136,920 138,354 . Primary energy source Electricity - . Consumption 618,491 - Roha, India . Other energy source used - - . Consumption - -
Water consumption
3 In m 2012 2011
Europe / Africa . Quantities used 58,286 56,134 Avignon, France . Quantities discharged 43,609 42,314 . Quantities used 41,721 35,439 Reyssouze, France . Quantities discharged Not measured Not measured . Quantities used 150,810 73,650 Valence, Spain . Quantities discharged 29,280 26,839 . Quantities used 15,034 9,684 Palafolls, Spain . Quantities discharged 5,736 Not measured . Quantities used 151,378 164,845 Milan, Italy . Quantities discharged 110,847 95,000 . Quantities used 18,935 16,945 Birmingham, United Kingdom . Quantities discharged Not measured Not measured . Quantities used 212,196 306,614 Bischofszell, Switzerland . Quantities discharged Not measured Not measured . Quantities used 106,222 116,437 Burgdorf, Switzerland . Quantities discharged Not measured Not measured . Quantities used 27,896 34,382 Casablanca, Morocco . Quantities discharged Not measured Not measured . Quantities used 198,275 114,277 Jaslo, Poland . Quantities discharged 278,756 244,729
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In kWh 2012 2011
Americas South Hackensack, New Jersey - . Quantities used 79,719 111,742 USA . Quantities discharged Not measured Not measured Shingle Springs, California - USA . Quantities used 6,043 5,244 United States . Quantities discharged Not measured Not measured . Quantities used Not reported 8,000 Manaus, Brazil . Quantities discharged Not measured Not measured
In kWh 2012 2011
Asia / Pacific . Quantities used 1,280 1,045 Sydney, Australia . Quantities discharged Not measured Not measured . Quantities used 15,875 - Roha, India . Quantities discharged Not measured -
CO2 emissions
In tonnes 2012 2011
Europe / Africa
. Electricity emission factor (tCO2/MWh) 0.056 0.056 Avignon, France . CO2 emissions from electricity 288.93 288.96 . CO2 emissions from other energy sources 678.06 614.61 . Electricity emission factor (tCO2/MWh) 0.056 0.056 Reyssouze, France . CO2 emissions from electricity 175.20 93.52 . CO2 emissions from other energy sources 1,414.61 1,277.34 . Electricity emission factor (tCO2/MWh) 0.440 0.440 Valence, Spain . CO2 emissions from electricity 2,057.50 1,517.56 . CO2 emissions from other energy sources 2,071.30 1,489.03 . Electricity emission factor (tCO2/MWh) 0.440 0.440 Palafolls, Spain . CO2 emissions from electricity 918.81 1,009.34 . CO2 emissions from other energy sources 895.73 988.33 . Electricity emission factor (tCO2/MWh) 0.483 0.440 Milan, Italy . CO2 emissions from electricity 1,632.03 1,652.07 . CO2 emissions from other energy sources 2,905.80 2,905.80 . Electricity emission factor (tCO2/MWh) 0.543 0.543 Birmingham, United . CO2 emissions from electricity 856.81 813.66 Kingdom . CO2 emissions from other energy sources 540.42 540.42 . Electricity emission factor (tCO2/MWh) 0.142 0.142 Bischofszell, Switzerland . CO2 emissions from electricity 950.85 973.90 . CO2 emissions from other energy sources 6,233.86 6,042.35 . Electricity emission factor (tCO2/MWh) 0.142 0.142 Burgdorf, Switzerland . CO2 emissions from electricity 916.27 1,002.26 . CO2 emissions from other energy sources 4,988.88 5,879.92 . Electricity emission factor (tCO2/MWh) 0.809 0.809 Casablanca, Morocco . CO2 emissions from electricity 4,263.39 4,450.74 . CO2 emissions from other energy sources 5,371.15 5,371.15 . Electricity emission factor (tCO2/MWh) 1.191 1.191 Jaslo, Poland . CO2 emissions from electricity 7,156.66 6,287.42 . CO2 emissions from other energy sources 21,509.71 16,876.58
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In tonnes 2012 2011
Americas
. Electricity emission factor (tCO2/MWh) 0.782 0.782 South Hackensack, New . CO2 emissions from electricity 5,000.45 5,305.39 Jersey - USA . CO2 emissions from other energy sources 1,371.20 1,886.41 Shingle Springs, California - . Electricity emission factor (tCO2/MWh) 0.350 0.350 USA . CO2 emissions from electricity 174.34 193.84 United States . CO2 emissions from other energy sources - - . Electricity emission factor (tCO2/MWh) 0.093 0.093 Manaus, Brazil . CO2 emissions from electricity 158.47 131.30 . CO2 emissions from other energy sources 722.56 722.56
In tonnes 2012 2011
Asia / Pacific
. Electricity emission factor (tCO2/MWh) Unavailable 0.924 Sydney, Australia . CO2 emissions from electricity Unavailable 281.17 . CO2 emissions from other energy sources Unavailable - . Electricity emission factor (tCO2/MWh) Unavailable - Roha, India . CO2 emissions from electricity Unavailable - . CO2 emissions from other energy sources Unavailable -
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III. Societal information
III.1 Outsourcing and suppliers
Impact of social and environmental considerations on the company's purchasing policy
Reflecting its positioning in the value chain and the specific nature of its activity, preserving natural resources constitutes a major strategic priority for Naturex's development.
The Group's purchasing policy adheres to its health, safety and environmental policy that has been implemented through ISO 14001 certified environmental management systems.
This policy is based on our commitment to meet regulatory requirements through a continuous improvement process focusing on the following developments: - Implementing, monitoring and evaluating action plans defined following the assessment of environmental, health and safety risks; - Ensuring the participation of our suppliers and subcontractors in health, safety and environmental processes; - Maintaining a constructive attitude of transparency and dialogue vis-à-vis third parties and concerned parties.
Matters relating to purchasing processes are described in the Group's Quality Manual and general procedures for purchasing, logistics and the management of logistics flows. The Group's Purchasing/Supply Chain department evaluates and selects suppliers according to their ability to provide a product meeting the defined specifications of Naturex, particularly for suppliers of raw materials. Methods for evaluating suppliers are described in the general procedure "supplier evaluation" as well as the instructions "quality management" and "purchasing/logistics/management of flows". Naturex's eight purchasing offices located throughout the world (France, United States, Brazil, Morocco, Ivory Coast, China, India and Poland) contribute to developing relationships of proximity with local farmers and exercising effective control for the entire sourcing cycle, from the phase for selecting the raw material, cultivation up to harvesting. Partnerships are concluded locally with farmers, notably in the form of cultivation contracts with predefined specifications. In addition, audits are conducted on a regular basis to ensure a more effective control over the sourcing cycle and complete traceability for raw materials. Furthermore, in the process of selecting a raw material, Naturex systematically gives preference to sustainable and responsible cultivation methods adopted by local farmers and the preservation of biodiversity.
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Outsourcing volume and manner that the social and environmental responsibility of suppliers and subcontractors are taken into account in relations with these parties
The Group uses subcontractors and outside service providers in the conduct of its operations in a wide range of areas: transport/logistics, plant maintenance, upkeep for offices and green spaces, printing/graphic creations, media/communications, etc.
In 2012, the costs of the services outsourced by the Group amounted to €5.2 million compared to €4.9 million in the previous year.
A vendor approval form must be completed for each supplier, service provider or subcontractor to complete verifications with the employment regulatory and tax authorities of the country of origin and ensure compliance with basic rules governing lawful employment in compliance with the labour law of the country and ILO core conventions and, in particular, with respect to undeclared work or child labour.
The Group also shares with its local partners the ethical rules essential for responsible and sustainable collaboration: Naturex is a member of the United Nations Global Compact and ensures compliance with the main principles concerning human rights, labour rules, anti-corruption and protecting the environment,
Naturex is also a member of Supplier Ethical Data Exchange (SEDEX), a web-based data exchange that allows member companies to store and share ethical data on suppliers in four areas: labour standards, workplace health and safety, business integrity and environmental management.
In addition, some of our sites are in the process of being certified ISO 9001 and ISO 14001 that impose rigorous standards for verifying suppliers and subcontractors.
III.2 Regional, economic and social impact of the Group
On employment and regional development
Naturex's exponential growth over the last 12 years has contributed to job creation at all locations where the Group operates throughout the world, and particularly at its head office site in Avignon that houses both a production facility and Group support functions.
Naturex S.A employs 339 people, with 305 at the Avignon head office site, or 20% of the Group workforce. As such it is an important stakeholder and contributor to the local economy. The second largest site in terms of workforce is the regional head office for the Americas/Asia-Pacific division located in the US with 165 employees. For the other Group sites, the impact on employment of its activities is proportional to the size of the companies and the nature of the local economic environment.
On neighbouring or local populations
The Naturex-Jacques Dikansky foundation, a community engagement
Since its creation, Naturex has travelled extensively across the globe looking for and selecting the best plant raw materials for its extracts. This approach has naturally strengthened over the years its relationships with the people who produce and harvest these plants. This proximity has contributed to Naturex's awareness of the difficulties these populations face on a daily basis.
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The Naturex Foundation was created in 2008 at the initiative of the Chairman and CEO of Naturex, Jacques Dikansky, today deceased. Its mission is to improve the living conditions of the populations in the countries where Naturex sources its raw materials, in a selfless and independent manner and with an exclusively humanitarian purpose. The environment, health, education and economic development are priority areas for intervention. This initiative constitutes a long-term commitment and illustrates Naturex’s commitment to assuming its environmental and corporate responsibility based on values it has always defended. The Naturex-Jacques Dikansky foundation is involved in creating programmes with a strong human and environmental dimension. On this basis it seeks to develop active partnerships with associations that sponsor projects contributing to improved quality of life for local populations in the countries where Naturex operates. To ensure its funding resources are used to maximum benefit, Naturex-Jacques Dikansky Foundation works exclusively with associations and NGOs operating under principles of complete financial transparency. Naturex has also set up an endowment fund to allow third parties to make donations to the Foundation. The Naturex-Jacques Dikansky Foundation is managed by a board of six members including both persons from the company and outside figures. This board meets three times a year to define the Foundation’s policy and general orientations and to study projects having been submitted.
The Naturex-Jacques Dikansky Foundation supports projects in Morocco, Peru, India and Cambodia:
The Apus Boat project Since February 2013, our Foundation has supported the Apus Boat initiative, providing free dental care to the Shipibo villages located on the banks of the Ucayali River, a major tributary of the Amazon, south of the city of Pucallpa.
This initiative seeks to provide free dental care to indigenous populations living along the Ucayali River in the Amazonian forest of Peru. Dental care provided includes an exam, scaling, treatment of caries and the distribution of new toothbrushes. Several villages are located along the Ucayali River, all with limited or non-existent access to dental care. The boat was specifically designed for navigation in shallow water, making it considerably easier reach riverbanks banks otherwise more difficult to access. Each village is unique. During its last voyage, after navigating several hours' distance from the city of Pucallpa the boat was able to provide dental care to approximately 30 children in the same village over a period of a full day plus several hours the day after. New donations will thus make it possible to reach and provide care to new villages.
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Creating and monitoring agricultural micro-enterprises in Morocco Since 2009 and in association with the NGO, Agrisud, our foundation has provided opportunities to ten youth with disabilities to gain access to a professional activity.
Excluded from the formal education system, these young people have no appropriate academic structure. Ten young Moroccans sponsored by the Foundation having successfully completed their training now possess their own farms. In this way, the Foundation has contributed to the realisation of rabbit breeding or apiculture projects…
Combating early abandonment of schooling in Morocco Since 2011, the Foundation has supported the not-for-profit EMA (Enfance Maghreb Avenir) that promotes access to schooling for disadvantaged young people in Morocco .
Through this partnership, the primary school of Matar Nouaceur located near the plant of Naturex Maroc was renovated in 2011. In 2012, the Foundation renewed its partnership in this region to carry out renovation work on sports facilities of the Dakhla middle school. This establishment located near the Matar Nouaceur school opens its doors to 1,500 students every year. The goal of providing access to sports activities is to combat absenteeism resulting from insufficient motivation, the absence of team spirit and respect between students and teachers but also among the students themselves and reduce in this way the disparities between girls and boys. Through this renovation work completed in December 2012, the middle school now has a basketball court, a volleyball court, a racetrack and high jump runway, a half-size football field as well as locker rooms.
Financing for a dental office and an Internet centre in Peru With Naturex regularly going to the Ninacaca region for the sourcing of Maca extract, the Foundation finances a dental office and an Internet centre for this area.
Naturex-Jacques Dikansky Foundation supports the "Kalisayas Out Reach" project with the goal of improving the living conditions of the inhabitants of Ninacaca, a village located in the Peruvian highlands. Very isolated, the local populations face many difficulties concerning in particular access to healthcare, education and means of communications. Naturex-Jacques Dikansky Foundation contributes to maintaining the health clinic and in particular the dental care dispensary. Supplementing this initiative, the Foundation also supports the local internet centre that provides computer courses for children. The aim of these actions is to permanently improve the lives of people in Ninacaca.
These efforts and their success pave the way for other projects around the world, with the objective of strengthening Naturex’s community commitment by helping to provide the basic needs of vulnerable populations, while protecting natural resources. Other examples of initiatives by Naturex-Jacques Dikansky Foundation can be found at the website: www.fondation.naturex.com along with a link to a form for making donations.
At the NuW Excellence Awards 2012 ceremony of the Health Ingredients Europe (HIE) trade show in Frankfurt held in November 2012, Naturex received special recognition by the jury for the "Sustainability and Environment Initiative of the Year". This reward was granted for the achievements of the Naturex-Jacques Dikansky foundation within the framework of its relations in the local communities where Naturex sources its plant-based raw materials.
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IV. Identifying and managing the main risk factors
As required by regulation, Naturex Group has conducted a review of risks that could have a material adverse effect on its business, financial position or results and considers that no other material and specific risks have been identified, other than those presented below:
IV.1 Financial risks
Financial risks are described below in Note 15 to the consolidated financial statements presented in chapter 6 of this document:
Credit risk
Credit risk is a risk of financial loss for the Group in the event a client fails to meet its contractual obligations. The Group’s credit risk is limited for several reasons, and notably its extensive customer base. Accordingly, the top ten customers account for 18% of Group revenue, the top 20 account for 25% and the top 30 account for 30% compared to 18%, 25% and 31% respectively in 2011.
Liquidity risk
Liquidity risk is the risk involving a potential inability by the Group to honour its debts when they reach their term. The Group's policy regarding the management of its liquidity risk is to ensure, through a Group wide daily cash management system, that it always has sufficient funds to honour its liabilities when they reach maturity, both under normal and "difficult" conditions, without incurring losses that could harm the Group's reputation. The Company performed specific reviews of its liquidity risk and considers that it is able to honour the terms for future payments (see the full Note 15.2 to the consolidated financial statements).
Exchange rate risk
Naturex Group carries out most of its transactions in foreign currencies and therefore incurs an exchange rate risk due to exchange rate fluctuations of these currencies. Since 2010, the currency exposure has been substantially modified with the integration, in addition to the dollar (42% of the Group's revenue is billed in dollars), of the pound sterling (7%) and the Swiss franc (4%). These three currencies and the euro represent 91% of the Group's revenue. The financial debt was restructured in 2009 in line with this change (see Note 14 to the consolidated financial statements – Financial debt).
At year-end the Group had exchange derivatives (swap and forward exchange purchase) on the Swiss franc and the dollar (see the full Note 15.3 to the consolidated financial statements).
Interest rate risk
At 31 December 2012, the Group's interest rate risk was essentially linked to its variable-rate loans and bank credit facilities The Group's policy is to use financial derivatives only for cash flow hedging purposes, so that these instruments do not correspond to speculative operations (see the full Note 15.4 to the consolidated financial statements).
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IV.2 Market risks
Equity risks
At 31 December 2012, the Group held 2,357 treasury shares within the framework of its liquidity agreement. On this date, this liquidity agreement had a value of €736,007.69 (€601,658.89 recognised in the liquidity account plus a unit value of €57 for treasury shares held). Furthermore, on the same date, the Group did not hold shares of listed companies.
IV.3 Legal risks
Litigation risks
At 31 December 2012, no material litigation had been identified. As indicated in Note 14 to the consolidated financial statements, current provisions at 31 December 2012 concerned mainly provisions of €0.3 million for employee-related disputes and resulting mainly from Burgundy's addition to the Group's structure.
Risks when filing patents
The legal risks tied to Naturex’s activities are essentially related to the use of patents. The purpose of the research carried out by Naturex is to add to the Group’s manufacturing expertise and to create customised solutions for customers. In line with market practices, Naturex does not systematically file patents, preferring to safeguard the confidentiality of formulations and designs. Although Naturex monitors the filing of new patents and trademarks, it is possible that a competitor that has filed or is in the process of filing a patent may bring legal proceedings against Naturex on such matter. Litigation risks in such matters can be substantial, especially in the United States where the costs involved in the defence or challenge of patents can be high and result in substantial legal fees. Otherwise, there is no risk of dependency on a particular patent.
Regulatory risks
In light of the public health issues linked to worldwide demographic growth and the ageing population as well as increased risks of malnutrition (fat, sugar, etc.) and deficiencies (vitamins, minerals, nutrients, etc.), regulations have been substantially tightened over the last few years, primarily in the agri-food and nutraceutical markets. According to the circumstances, these regulations are aimed at reinforcing: - Information systems with regards to consumers (labelling, list of prohibited ingredients, alerts on the risks incurred, etc.); they can then contribute favourably to the replacement of synthetic ingredients and other chemical additives by natural ingredients and, in particular, specialty plant-based natural ingredients; - The systems concerning the control and the quality of the composition of an ingredient or manufacturing standards (clinical trials, ASMF files, good manufacturing practices, etc.); this could then favour the adoption of ingredients whose traceability has been perfectly verified.
The examples hereafter describe the extent of the current regulatory constraints: - Mandatory labelling of food products based on nutritional profiles, - Southampton study of the risks with synthetic colourings on hyperactivity in children and mandatory statement on the packaging, - Filing of ASMF files (Active Substance Master Files) is mandatory in Europe for "Traditional Herbal Remedies", and
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- GMP (Good Manufacturing Practice) standards imposed by the FDA (Food and Drug Administration) on the dietary supplement industry in the United States. These regulatory changes are rather favourable to Naturex because they constitute a growth lever that is favourable to speciality plant-based natural ingredients and they represent real barriers to entry for certain players who have not anticipated the tightening of these regulations and who consequently do not have the required infrastructures or suitable technical equipment. Naturex has the technical and the scientific potential required: - For many years now, Naturex has compiled ASMF files for many plant extracts, thereby authorising their use in any application, including pharmaceutical products; - Since 2007, Naturex has had a pharmaceutical site based in Italy capable of carrying out clinical trials on plant extracts, which is most certainly a competitive advantage in meeting the highly targeted demand of the worldwide pharmaceutical laboratories, in complete compliance with current regulations. The acquisition of Burgundy in October 2011 has provided Naturex with two additional certified pharmaceutical facilities in France and Spain.
IV.3 Operating, industrial and environmental risks
Risk of volatility in raw material prices
Since 2010, the sector experienced a trend of across-the-board rises in prices of agricultural commodities and certain food staples. In general, Naturex has very little exposure to the volatility of the prices of certain raw materials, such as pepper, turmeric, paprika or, more recently, carmine. Indeed, the specialty plant-based natural ingredients used in the composition of a product are extremely limited in quantity and consequently represent often between 0.1 and 1% of the manufacturing cost price. Nevertheless, the "natural" portion contained in industrial products is admittedly low in cost but represents a significant value for manufacturers in terms of quality in light of the marketing and promotion system set up around the finished product’s positioning. With nutraceutical products like dietary supplements (capsules), the share of the speciality plant-based natural ingredient constitutes the entire product though marketing and promotional costs of the finished product in particular are much higher than the cost price of the raw ingredients contained in the capsule. As such, Naturex does not have any difficulties in passing on the increase in the price of raw materials to its customers and can consequently neutralise the impact on the margin. The Company is also able to take measures to protect itself from price increases for certain raw materials by establishing contracts with the producers or farmers at the beginning of the season at a set price, on the one hand, and by proceeding in the same manner with customers, as a means for ensuring stable prices in response to risk of fluctuations. However, over time, the probability of prices increasing significantly over a significant portion of the niche raw materials remains very low.
Competitive risk
Since the integration of Natraceutical’s Ingredients Division, Naturex believes that it is the only Group of this size operating in all market segments: Food & Beverage, Nutrition & Health and Personal Care. The speciality plant-based natural ingredient market in which Naturex operates is in a still fragmented market in spite of a very strong trend of consolidation over the last 10 years.
There are two categories of participants in the speciality plant-based natural ingredient market: - A multitude of small or medium-size players, representing nearly half of the market, and
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- About 15 or so average-size independent SMEs or subsidiaries of major groups in the food processing, pharmaceutical or cosmetics industry. Few in number, these companies with substantial capital originating either from financial markets or private financing from major groups or investment funds, they are profitable in their markets. Over the years, these companies have acquired strong name recognition in their segment based on their business expertise, the notoriety of their customer portfolio, the performance of their production facilities and high capacity for innovation. This category includes the most dynamic participants, Naturex's direct or indirect competitors, which are driving the trend of concentration in the natural ingredients market. The risk of the emergence of new competitors in the market is very limited for the following reasons: - The regulatory standards in the various markets are increasingly restrictive and require a genuine internal organisation in terms of quality assurance and anticipation, thanks to very active research and development efforts. - There are substantial technological constraints in terms of business know-how (raw materials procurement, manufacturing processes, etc.) and the ability to innovate, which require considerable amounts of capital. - The size effect is a strategic stake in terms of purchasing power for raw materials procurement, but also in the context of reference listing with multinationals and the audit procedures they conduct throughout the year. - Speciality plant-based natural products meet very precise specifications that are developed by working closely with customers over often long periods of time, which therefore cannot be substituted by a product from a competitor’s portfolio.
Country risks
Naturex is an international Group with operations in 21 countries on 5 continents. Its international positions are a key advantage in the framework of its development strategy, its raw materials procurement policy, and especially the relationship of proximity that Naturex has been able to create with customers worldwide over the years. The diversity of its locations in mature markets and in developing countries makes it possible to better assess risks of all types (environmental, political, economic or financial), which could have an impact on the Group's assets and profitability, even if the production sites are not dedicated to a specific geographical region. Indeed, in light of the increased production capacities since the acquisition of Natraceutical’s Ingredients Division as well as the acquisitions of BURGUNDY (France and Spain) in October 2011 and the Pektowin (Poland) and Valentine (India) and DBS in the United States in 2012, at the filing date of this document Naturex had 15 production sites in the world, compared to five three years ago. Consequently, some sites can replace others momentarily in order to cope with a crisis situation or offset any production problems. For example, the Avignon site is capable of producing the majority of the ingredients manufactured in Morocco. Also, Naturex has taken the necessary measures to diversify its sources of raw materials procurement to prevent any shortages and to meet its commitments.
Customer credit risks
In light of the wide diversity in Naturex's customer base, comprised of worldwide flavouring specialists, local independent SMEs, subsidiaries of large well-known international and multinational groups in the food processing markets, the pharmaceutical and nutraceutical industry and the cosmetics markets, the bad debt risk is relatively diluted. As such, in 2012 the Group’s top 10 customers account for 18% of revenue, the top 20 for 25% and the top 30 for 30%.
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Risks related to production facilities
Over the years, Naturex has built a network of high-performance production facilities, primarily through acquisitions. Indeed, only the Avignon site in France and the Casablanca site in Morocco were created. Naturex now has 15 production sites located in Europe (France, Italy, Spain, United Kingdom and Switzerland), Morocco, the United States, Brazil, Australia and India. The production facilities at each site meet high quality standards and use very advanced technology and equipment. The service life of this equipment is relatively long; regular maintenance and targeted investments help perpetuate the production facilities and boost Naturex’s know-how. As such, a decline in technical production expertise seems improbable, given that: - "traditional" equipment is used to manufacture products of this type, and - the basic manufacturing know-how resides in the composition of recipes whose implementation does not pose any major problems. With regard to the risk of operating incidents in the installations due to the use of more or less inflammable or explosive solvents, Naturex’s exposure is similar to that of any company working with materials of this type. The production installation consists of a number of specialised lines per product that are independent of each other, which limits the risks of prolonged production stoppages. Naturex is insured against business interruption. In addition, as part of the environmental management system set up by the Group, a Group Health Safety and Environment (HSE) manager, in charge of coordinating the Health Safety and Environment managers of each production site, ensures that the HSE practices are complied with across all of the Group's sites and that the defined safety measures are applied (safety clothing, explosion-proof workshops, etc.).
Quality and brand image risk
Naturex products are primarily intended for food or nutraceutical consumption. Consequently there is a risk that these products may be toxic, especially due to a malfunction during their production. However, this risk is mitigated in the case of food since the final product contains an extremely low proportion of the ingredients developed by Naturex. Furthermore, since the degree of trust is quite strong amongst partners in this sector, any serious problem concerning the quality of a delivery would likely impact the brand image of the Company and of the Group. As part of the Quality Management System, Naturex has set up a strict Quality Control policy in order to: - Control the raw materials received using predefined standardised methods and check their purity through tests before they enter the production cycle, - Control the plant extracts in order to meet the strictest health and safety standards (microbiology, pesticides, heavy metals, etc.), and - Completely review finished products before delivery to ensure they comply with the applicable regulatory and legal requirements and customer-specific requirements. In addition, customers also carry out tests on finished products in their laboratories. All of the Group's production sites have a Quality Control laboratory. On each site, a Quality Management Leader coordinates the application of the Quality Management System and ensures it is improved continuously in the Company’s various departments through regularly updated documentary support, tracking indicators and scheduled audits, in order to carry out any corrective and preventive action necessary to ensure compliance with the objectives defined previously as part of the Quality policy.
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Risk of dependence on suppliers
Bolstered by its positioning as a world leader in speciality plant-based natural ingredients, Naturex has substantial procurement capabilities that give it access to a wide selection of plants and allow it to select the best species in the world. The Supply Chain, which is centralised at a Group level, has developed a very stringent purchasing policy with suppliers in more than 50 countries around the world, in order to best satisfy the quality, price and lead-time criteria expected by customers. Over the years, Naturex has developed close relations with its partners and ensures that its main suppliers are identified in order to improve the procurement process’ performance. Indeed, if Naturex's procurement requirements are low in relation to the size of the raw materials markets, it is nevertheless true that most plants only grow once a year and therefore it is important to schedule procurement based on the various harvesting campaigns throughout the world and to anticipate the supply of raw materials at least one year in advance in order to avoid the disastrous consequences of a shortage in inventory. Consequently, in addition to the anticipating and scheduling measures taken by the Group, some raw materials are covered by contracts with the identified suppliers.
Technological and environmental risks
Naturex decided a few years ago to implement an environmental management system to improve its industrial performance while reducing the impacts of its activities on man and the environment in compliance with regulations. The sustainable development commitment is tailored for all of the subsidiaries in the Naturex Group. The main risk identified on Naturex's industrial sites is the handling of inflammable liquids (solvents used in plant extractions); however, the quantities used remain well below the thresholds stipulated in the SEVESO directive. Naturex has implemented the necessary technical, human and organisational resources to control these risks and ensure the proper steps are taken in the event of an incident. Moreover, its Health, Safety and Environment Department constantly monitors technical and regulatory developments to ensure the safety and environmental procedures are continuously improved.
Dependence on key executives
Following the death of Mr. Dikansky in late September 2012, Mr. Lambert was appointed Chairman and Chief Executive Officer of Naturex. The Company has taken certain measures to limit the consequences should its executive officer become partially or completely unavailable so as not to adversely affect the Group's development in the pursuit of its strategic priorities: - With respect to operating management, an Executive Committee was formed headed by Thierry Lambert, Chairman of the Board of Directors and Chief Executive Officer of the Company, and including the most experienced executives responsible for the Group's main operating departments, and who for the most part have worked at Naturex for many years. - With respect to governance, in recent months Naturex has undertaken measures to implement changes involving: - The creation of Board committees including the Audit Committee and the Nominating and Compensation Committee tasked with formalising processes for making strategic decisions; - Expanding the Board of Directors by adding new members, and in particular, independent directors.
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Contractual risks
There are no major contracts within the Group, other than those concluded within the normal scope of business, concerning raw materials or finished product supply contracts with suppliers referenced by the Naturex Group or partnership contracts in the framework of long-term contracts (SENIFOOD in Spain, etc.). On the publication date of this document, no member of the Group was a party to a contract that could give rise to any obligation or substantial commitment for the Group as a whole, other than contracts concluded in the normal course of business.
IV.4 Other risks
There are no other legal, judicial or arbitration proceedings (including any that, to the Company's knowledge, are pending or threatened), which may have or have had during the last twelve months, a material effect on the financial position or profitability of the Company and/or Group.
IV.5 Insurance and risk management
The Group's objectives in terms of insurance and risk management are to protect its assets, prevent the consequences of the liabilities incurred vis-à-vis third parties and personnel and minimise the impact of damages on the Group’s accounts. The Group has taken out policies with top-tier insurance companies, including for civil liability , casualty and property , business interruption , environmental damage and goods in transit. The details on insurance coverage by type of risk is presented below:
Total coverage Type of risk (€ millions)
Property and business interruption 525.1 (€100 million limit per claim) Environmental damage 4.6 Goods in transit (per claim) 0.5 Business liability 16.0 Completed operations liability 16.0
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64 2012 Registration Document Chapter 3 Organisation and corporate governance
ORGANISATION AND CORPORATE GOVERNANCE
I. General information
Legal form(Art. 1 of the articles of association) French Société Anonyme (public limited company) with a Board of Directors governed by the French commercial code.
Company name (Art. 2 of the articles of association) Naturex
Corporate purpose (Art. 3 of the articles of association) The company’s purpose, in France and in all countries, is to: - manufacture, market and distribute wholesale/semi-wholesale and retail all edible products for human and animal food and provide related services, - manufacture and market all extracts intended for the cosmetic, dietary and pharmaceutical industries and all related activities, and - invest in and manage securities in all companies in France and other countries with related and/or complementary activities. It may engage in all activities that are compatible and related to and contributing to this purpose.
Head office (Art. 4 of the articles of association) The company's head office is located at: Z.A.C. Pôle technologique Agroparc - BP 1218 - 84911 Avignon Cedex 09-. It can be transferred to any location in the same département or in an adjacent département, by a simple decision by the Board of Directors, subject to ratification by the next ordinary shareholders' meeting, and anywhere else by virtue of a ruling by an extraordinary shareholders’ meeting, subject to provisions of the laws in force.
Date of incorporation and term (Art. 5 of the articles of association) The company’s term is 99 years commencing on the date it was registered in the Trade and Companies Register on 22 July 1992, unless extended or terminated in advance.
Trade and Companies Register The Company is registered with the Avignon Trade and Companies Register (RCS) under the number: 384 093 563
The Company’s APE (primary business) code is 2053 Z. It corresponds to the Chemical Industry sector.
Financial year (Art. 46 of the articles of association) From 1 January to 31 December.
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Consultation of legal documents The Company’s articles of association, minutes of shareholders’ meetings and other company documents may be consulted at the Company's head office.
Appropriation and distribution of earnings (Art. 48 of the articles of association) The profit or loss for the year is calculated as the difference between the year's income and expenses after deducting amortisation, depreciation and provisions. From this profit, less, if applicable, any previous year’s losses, at least 5% is set aside to fund the legal reserve. This deduction ceases to be mandatory when the reserve reaches one tenth of the share capital. This deduction again becomes mandatory if, for whatever reason, the reserve falls below one-tenth the share capital. Distributable income is comprised of the year's net income less any losses carried forward and appropriations to the legal reserve, plus any retained earnings. From distributable income, after an appropriation, as applicable, to the special reserve for long-term capital gains, the ordinary shareholders' meeting, acting on the Board of Directors’ proposal, has the right to deduct any amounts it deems appropriate to be allocated to retained earnings for the following year or to one or more extraordinary, general or special reserve funds. Said reserve funds can receive any appropriations decided by the shareholders’ meeting, acting on the Board of Directors’ proposal. Any remaining balance is distributed amongst all shares, redeemed or unredeemed. Furthermore, the shareholders' meeting may decide to distribute amounts deducted from available reserves. In this case, its decision must expressly indicate the reserve accounts from which the deductions are made. Nevertheless, any dividends shall first be deducted from the distributable income for the year. The revaluation adjustment cannot be distributed though may be added back in total or in part to the share capital. The Shareholders' Meeting has the right to grant each shareholder an option, for all or part of the dividend or interim dividend, for distribution in the form of cash or shares.
General meetings (Art. 30 to 45 of the articles of association) The General Meeting comprises all of the shareholders, regardless of the number of shares they hold.
Notice of meeting for shareholders' meetings
The Board of Directors calls shareholders’ meetings. Otherwise, they can be called by those designated by the French commercial code, in particular by the auditor or auditors, by an agent designated by the president of the commercial court issuing a summary ruling at the request of shareholders who own ordinary shares representing at least 5% of the share capital or, with regards to a special shareholders' meeting, one-tenth of the shares of the category concerned. Shareholders' Meetings are held at the head office or at any other location in Metropolitan France.
Shareholders’ Meetings are called and held in accordance with the provisions of French law. At least thirty-five days prior to the date of the meeting, the company publishes a notice of a meeting in the Bulletin des Annonces légales obligatoires (French publication for official legal announcements), which specifies the meeting agenda and contains the texts of the draft resolutions submitted by the Board of Directors to the meeting.
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Agenda
The agenda for the meeting is set by the person who calls the meeting or by the legal order designating the agent in charge of calling the meeting. One or more shareholders representing the share of the capital set by the legal and regulatory provisions are authorised to request that draft resolutions be added to the meeting agenda. The Works Council has the same rights. The meeting may not consider an item not on the agenda, which can only be modified in a second notice of meeting. However, in any circumstances it can revoke one or more directors and have them replaced.
Admission to the meetings – Representation of shareholders – Voting by mail
Any shareholder has the right to participate in the shareholders’ meetings or to be represented, regardless of the number of shares owned, as soon as the shares are fully paid up. Any shareholder can be represented by another shareholder holding shares of the same class or by his or her spouse. This proxy is granted for a single meeting. It may however be granted for two meetings, an ordinary and an extraordinary meeting, if they are held on the same day or within a period of fifteen days. This proxy is valid for successive meetings called with the same agenda. Any shareholder can vote by mail under the conditions set by laws and regulations in force. The company must enclose the information provided for by applicable law with any proxy or mail voting form that it sends to shareholders. If the shareholder is not a resident of France, he or she may be represented by an intermediary registered in accordance with the provisions provided for under applicable laws and regulations. In the event of separation of the legal and beneficial ownership of a share, the beneficial owner holding the voting rights can attend or be represented at the shareholders’ meeting without prejudice to the bare owner’s right to participate in all shareholders’ meetings. Owners of undivided shares are represented as stipulated in Article 14. The right to attend the shareholders meetings is evidenced by an accounting entry showing the number of shares in the name of the shareholder of record (or the intermediary of record for the account) on the third business day preceding the meeting at midnight (Paris time), either in the accounts for registered shares maintained by the company, or in the accounts for bearer shares maintained by the authorised intermediary. All shareholders of a particular category may participate in special shareholders’ meetings for this category under the above-mentioned conditions.
Holding the meeting – Officers of the meeting
The meeting is chaired by the Chairman of the Board of Directors or in his or her absence by the Vice-Chairman or by the director who is temporarily delegated the functions of chairman. Failing this, the meeting itself elects its chairman.- When the meeting is called by the auditors, an agent appointed by the court or the liquidators, it is chaired by the person or one of the persons having called it. The functions of observers (scrutateurs) with responsibility for vote counting shall be performed by the two members of the meeting who are present and accept such duties, possessing the greatest number of voting rights. The presiding officers appoint a secretary for the meeting who can be selected from outside the members of the meeting.
At each meeting, an attendance record is maintained containing the information required by regulations in force. The attendance record, duly initiated by the shareholders and proxy agents, is certified by the officers of the meeting. It is filed at the head office and must be forwarded to any shareholder who so requests.
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The presiding officers run the meeting, but their decisions may, as requested by any member of the meeting, be submitted by vote to the ultimate authority of the meeting itself.
Effects of decisions
The shareholders' meeting duly constituted and authorised accordingly to conduct proceedings shall represent all shareholders. The decisions made in accordance with the law and with the articles of association are binding on all shareholders, even those who are absent, dissenting or unable to vote. However, when the decisions of a shareholders’ meeting affect the rights of certain classes of shares, these decisions will be become definitive only after ratification by a special meeting of those shareholders whose rights are modified.
Minutes
The decisions of shareholders’ meetings are recorded in the minutes drawn up in accordance with applicable regulations.- Copies or extracts of these minutes are duly certified by the Chairman of the Board of Directors, by the director temporarily appointed to perform the functions of chairman or a director exercising the functions of chief executive officer.- These minutes must also be certified by the secretary of the meeting. In the event of the liquidation of the company, they are certified by a single liquidator.
Voting rights and quorum (Art. 37, 40 to 43 of the articles of association)
Voting rights
The voting right attached to ordinary capital or dividend shares is proportional to the share of capital they represent and each ordinary share confers a right to at least one vote. However, dual voting rights in lieu of the single vote granted to other ordinary shares, with regards to the proportion of the share capital they represent, are granted to all fully paid-up shares registered in the name of a single shareholder for at least two (2) years, with the stipulation that with regards to ordinary shares resulting or which will result from the conversion of preferred shares, the calculation of the aforementioned holding period commences on the date they were registered, in the form of preferred shares, in the name of the same holder. Furthermore, in the event of capital increases through the capitalisation of reserves, earnings or additional paid-in capital, a double voting right is granted upon issuance to registered ordinary shares freely allotted on the basis of rights conferred upon shareholders by existing ordinary shares. For other shares, double voting rights are acquired, cease or are transferred in the cases and conditions provided for by statute. Votes are cast either by show of hands or by roll call. A secret ballot can only be held based on the terms set by the meeting and at the request of members who represent, by themselves or as agents, the majority required for voting on the resolution in question. The exercise of voting rights on own shares acquired by the Company is prohibited. In addition, the following are deprived of voting rights: shares not fully paid-up, shares of potential subscribers in meetings called to vote on revoking pre-emptive subscription rights, shares of the party concerned in the procedure provided for in Article 27 and preferred shares except in special shareholders’ meetings called for the holders of this class of shares.
Quorum and majority for Ordinary Shareholders' Meetings
An ordinary shareholders' meeting makes all decisions that exceed the powers of the Board of Directors and not falling within the remit of extraordinary shareholders’ meetings. It meets at least once a year, within six months of the end of the financial year, to vote on all questions concerning the financial statements for the year. This six-month period can be extended at the request of the Board of Directors by an order of the president of the commercial court ruling on the request.
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An ordinary shareholders’ meeting can only validly conduct proceedings, after the first notice of meeting, if the shareholders present, voting by mail or represented hold at least one-fifth of the ordinary shares with voting rights. No quorum is required on the second notice of meeting. Decisions are rendered on the basis of a majority of votes held by the shareholders present, voting by mail or presented by proxy.
Quorum and majority for Extraordinary Shareholders' Meetings
Only the extraordinary shareholders’ meeting has the authority to make any changes in the provisions of the articles of association. However, it cannot increase shareholders’ commitments, except on the occasion of a legally executed reverse share split or for the trading of "fractional shares" in the event of corporate actions like capital increases or reductions. It also cannot change the company’s nationality, unless the host country has signed a special agreement with France allowing the company to acquire its nationality and transfer the head office to its territory while retaining its status as a legal entity.
Notwithstanding the exclusive authority of the extraordinary shareholders’ meeting concerning any modification of the articles of association, the Board of Directors can make modifications to the provisions concerning the amount of the share capital and the number of shares it represents, insofar as these modifications correspond materially to the result of a an increase, decrease or redemption of share capital.
Subject to the special dispensations provided for certain capital increases and transformations, an extraordinary shareholders’ meeting can validly conduct proceedings only if the shareholders present, voting by mail or represented hold at least, on the first notice of meeting, one-fourth and, on the second notice of meeting, one-fifth of the ordinary shares with voting rights. Failing this latter quorum, the second meeting may be postponed to a date no later than two months after the date for which it was called. Subject to these reservations, decisions are rendered based on a two- thirds majority of votes held by the shareholders present, voting by mail or represented by proxy. When a meeting rules on approving a contribution in kind or granting a special benefit, the quorum and majority are calculated only after deducting shares of the contributor or the beneficiary, which do not have voting rights for themselves or as proxy agent.
Special shareholders’ meetings
Special meetings are authorised to conduct proceedings only if the shareholders present, voting by mail or represented hold at least, on the first notice of meeting, one-third and, on the second notice of meeting, one-fifth of the ordinary shares with voting rights and for which a modification to the rights is being considered. If the latter quorum is not reached, the second meeting may be postponed to a date no later than two months after the date for which it was called. Decisions at these meetings are rendered based on a two-thirds majority of votes held by the shareholders present, voting by mail or represented by proxy.
Shareholders' right to information, written questions (Art. 45 of the articles of association) Shareholders have a right to information, temporary or permanent depending on the subject, in accordance with applicable laws and regulations, which ensures they possess the necessary information to have a knowledge of the company’s situation and exercise all of their rights. Starting on the day when the right to information can be exercised prior to any shareholders’ meeting, each shareholder has the right to submit questions in writing that the Board of Directors will be required to answer during the meeting.
Form and transfer of shares (Art. 12 and 13 of the articles of association) Ordinary shares may be in registered or bearer form at the choice of the shareholder. However, shares may be in bearer form only after having been fully paid up.
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Preferred shares must be registered shares and title cannot be divided between beneficial and legal ownership on a contractual basis. The company is entitled to request at any time from the entity responsible for clearing securities transactions the information permitted by law concerning the identity of holders of securities conferring, immediately or at a later date, a right to vote at Shareholders' Meetings. The company is also entitled to request, in accordance with the provisions of the French commercial code, the identity of shareholders if it believes that certain holders whose identities have been disclosed hold shares on behalf of third parties. All individuals or legal entities acting alone or in concert are required to disclose when they have acquired a number of shares or voting rights crossing above thresholds provided for by applicable regulations. The same disclosure requirement is applicable when the percentage of capital or voting rights held falls below these statutory thresholds. Shares are freely negotiable except subject to conditions to the contrary by applicable laws and regulations. Sales or transfers of shares involving third parties and the Company shall be carried out by transfer from out from one account to another in accordance with applicable regulations.
Identifiable bearer shares In accordance with Article 263-1 of the Law of 24 July 1966, the Company can use the Euroclear procedure for "identifiable bearer shares" (titres au porteur identifiable) at any time.
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II. Chairman’s Report on the preparation and organisation of the Board’s work and internal control procedures implemented by Naturex S.A
Pursuant to the provisions of Article L225-37 of the French commercial code, amended by the financial security law No. 2003-706 of 1 August 2003, the Chairman of the Board of Directors reports herein on the application of the principle of the balanced representation of men and women on the Board, the preparation and organisation of the Board's work and internal control and risk management procedures implemented by the Company and, in particular, the procedures relating to the preparation and processing of financial and accounting information for the annual and consolidated financial statements.
This report also specifies the principles and rules adopted to determine the compensation and benefits of any nature granted to the corporate officers and the special terms concerning shareholders’ participation in the General Meeting.
Furthermore, we inform you that in accordance with the provisions of Article L.225-100-3 of the French commercial code, items with a potential impact in the event of public offerings are described in the registration document (Chapter 4 – Share capital and shareholder structure).
The present report was presented to and reviewed by the Audit Committee, then approved by the Board of Directors during its meeting of 27 March 2013 and sent to the Statutory Auditors. It will be made public in accordance with the conditions provided for by statute.
II.1 Corporate governance and the preparation and organisation of the Board of Directors' work
II.1.1 Corporate governance code of reference
Pursuant to the law of 3 July 2008 and the provisions of Article L.225-37 of the French commercial code, since fiscal 2010 Naturex S.A has adopted as its reference the principles of the corporate governance code for small and mid caps of MiddleNext, the independent French association representing listed SMEs and mid caps, published in December 2009 and available at its website www.middlenext.com.
In light of Naturex S.A’s size and market capitalisation, application of the MiddleNext Code was considered more appropriate.
This code is consistent with applicable law, rules and the recommendations of the French financial market authority (Autorité des Marchés Financiers or AMF).
No recommendations were issued based on the Board of Directors' review of the "key concerns and issues" section of the MiddleNext Corporate Governance Code for small and mid caps.
This document indicates how the Company applies the Code’s recommendations and explains the reasons why the company decided not to apply certain provisions in light of its size, structure, organisation and historical operating procedures.
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II.1.2 Summary of the rules on the Board of Directors’ composition
Composition
The Company's articles of association provide for a minimum of at least three members and a maximum of eighteen, except for temporary dispensation provided for in the event of a merger.
On the date of the signature of the Chairman's report or 27 March 2013, the Company was governed by a Board of Directors with six members:
First name - Last Date of appointment / Expiration date Positions Age name Reappointment of term of office
AGM ruling on the Chairman of the Board of financial statements Thierry Lambert Directors 59 8 June 2012 for the year ending 31 and Chief Executive Officer December 2017 Director AGM ruling on the Vice President of Sales and financial statements Stéphane Ducroux Operations for the America/Asia- 40 30 June 2008 Pacific Regions and Vice Chairman for the year ending of Naturex Inc. 31 December 2013 AGM ruling on the 13 September 2011 Director financial statements Paul Lippens 60 (appointed by co-option) Executive officer of Finasucre 8 June2012 (AGM ratification) for the year ending 31 December 2014 AGM ruling on the Director financial statements Olivier Lippens 59 8 June 2012 Executive officer of Finasucre for the year ending 31 December 2017
25 February 2013 AGM ruling on the Director Hélène Martel (by co-option) financial statements 51 Massignac Chief Executive Officer of Caravelle Pending ratification for the year ending AGM of 26 June 2013 31 December 2016
Director 19 November 2012 AGM ruling on the Charles Feys (by co-option) financial statements SGD 63 Secretary General of Finasucre Pending ratification for the year ending Permanent representative of SGD AGM of 26 June 2013 31 December 2017
In accordance with the key concern and issue No. 4 of the MiddleNext Code, the experience and expertise of members of the Board of Directors are sufficiently broad and varied to permit them to form an opinion on the Chairman’s proposals, exchange points of view and ensure that the Company’s strategy is consistent with its corporate interest. Furthermore, the directors also possess particular expertise in the fields of finance and accounting.
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Appointment and renewal of directors
Directors are appointed and renewed for terms of office by shareholders through ordinary general meetings that may revoke them at any time. Legal entities appointed as directors must designate a permanent representative subject to the same conditions and obligations as individual directors appointed in their own name. An employee of the Company can be appointed as director only if his or her employment contract corresponds to an actual position. The number of directors bound to the Company by employment contracts cannot exceed one third of the total members serving on the Board.
The General Meeting of 8 June 2012, called to approve the financial statements ended 31 December 2011, approved the following resolutions for the:
- Renewal of the offices of Jacques Dikansky and Thierry Lambert as directors for terms of six years ending on the close of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017; - Ratification of the appointment of Paul Lippens, initially appointed in a temporary capacity by the Board of Directors on 13 September 2011 to replace Pierre Michel Passy, permanent representative of Edmond de Rothschild Investment Partners SAS, having resigned. In consequence, Paul Lippens will serve in this office for the remainder of his predecessors' term or until the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2014. - Appointment of Olivier Lippens as director the Company for a term of six years that will expire at the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017;
Changes to the Board of Directors in fiscal 2012, and pursuant to the death of Mr. Jacques Dikansky, were as follows :
- On 30 August 2012, the Board of Directors duly noted the resignation of Jacqueline Dikansky, and appointed by co-option Olivier Dikansky, son of Jacques Dikansky, for the remainder of her predecessors' term or until the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2015. On 25 February 2013, Olivier Dikansky tendered his resignation as director on the Board following the sale of the stake of the Dikansky family in SGD.
- On 16 October 2012, the Board of Directors approved the appointment of Thierry Lambert as Chairman of the Board of Directors, for a period corresponding to his term of office as director or until the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017.
- On 19 November 2012, in light of a vacancy on the Board resulting from the death of Jacques Dikansky, and pursuant to the favourable recommendation of the Nominating and Compensation Committee, the Board of Directors approved the co-option of SGD for the remainder of his term, or until the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017. Isabelle Caioli-Dikansky, daughter of Jacques Dikansky, was appointed as SGD's permanent representative on the Board. On 25 February 2013, in light of the purchase of the Dikansky family's holdings in SGD by the Finasucre Group, Charles Feys, Secretary General of Finasucre, was appointed by the Board as permanent representative of SGD to replace Isabelle Caioli-Dikansky.
Naturex has also undertaken to adopt reorganization and corporate governance transparency measures involving notably expanding the Board of Directors to include new members, and notably independent directors:
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- On 25 February 2013, in light of a vacancy on the Board pursuant to the resignation of Olivier Dikansky, the Board appointed Hélène Martel-Massignac by co-option for the remainder of her predecessor's term, or until the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2016. Ratification of this co-option will be submitted to the next Combined General Meeting to be held on 26 June 2013. It is noted for the record that Hélène Martel-Massignac is the Chief Executive Officer of the Caravelle Group that on 5 December 2012, acquired the 15.35% stake of Natraceutical in Naturex. As such, Hélène Martel- Massignac is consequently considered as an independent director of the Company.
- Pursuant to the subscription by France's Strategic Investment Fund (Fonds Stratégique d’Investissement or FSI) of €12 million in the OCEANE convertible bond issue of Naturex launched in January 2013, the Board of Directors granted its approval for FSI to propose a candidate of its choice to serve on the Board. The candidate proposed by FSI will be presented to the Board of Directors called to meet on 3 May 2013, pursuant to the prior recommendation of the Nominating and Compensation Committee. This choice will be submitted for approval to Naturex's shareholders at the Annual General Meeting of 26 June 2013 called to approve the financial statements for the fiscal year ending 31 December 2013.
Furthermore, it is also planned, pursuant to the proposal of the Nominating and Compensation Committee, to submit to a vote at the next General Meeting, the appointment of an independent director who must be first approved by Company's Board of Directors meeting to be held on the upcoming 3rd of May called to approve the draft resolutions for the General meeting of 26 June 2013. This proposed appointment will also be subject to approval by Naturex's shareholders at the General Meeting of 26 June 2013.
Balanced representation of men and women on the Board of Directors
Law No. 2011-103 of 27 January 2011, pertaining to balanced gender representation on boards of directors and supervisory boards and professional gender equality, was published in the Journal Officiel (the official French publication for legal notices) on 28 January 2011 and established the following principles in companies whose shares are listed for trading in a regulated market: - The respective percentages for men and women serving on the board of directors or supervisory board may not be less than 40%; - When one of the two genders is not represented on the Board of Directors on the date the law is published, at least one representative of this gender must be appointed at the next Shareholders' Meeting called to approve the appointment of directors, and - When the Board is no longer in compliance with this statutory quota (40%), the Board shall make temporary appointments to correct this situation within six months, from the date when the vacancy occurs. The Law provides that on 1 January 2014, the Board of Directors and the Supervisory Board of listed companies must meet quotas for men or woman of at least 20%, and the 40% quota must be reached by 1 January 2017. Compliance with this quota will be determined at the first Shareholders’ Meeting following this deadline. On the publication date of this document, the Company considers that it has fulfilled its obligations to comply with the transitional measures of 1 January 2014 implemented by French law and the minimum quota requirements with respect to the number of women serving on the Board before 1 January 2017. In effect, the creation of a Nominating and Compensation Committee in 2012 provides a mechanism for selecting potential candidates and issues recommendations to the Board of Directors on the appointment of new members in compliance with the corporate governance principles adopted by the Company and in compliance with statute.
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Terms of office
Naturex S.A directors are appointed for terms of is six years that expire at the end of the Shareholders’ Meeting called to approve the financial statements for the period ended and held in the year in which their term expires. Every outgoing director is eligible for re-appointment. The MiddleNext Corporate Governance Code for small and mid caps recommends that the Board ensures that the term of office established by the articles of association is adapted to the Company’s specific characteristics, within the limits set by statute. The Company does not believe it is necessary to amend the articles of association in this respect to reduce directors’ term of office since the statute and the articles of association allow the term of office of a director to be revoked, without notice or compensation. Furthermore, the Company believes that given its size and the make-up of its Board, the six-year term does not limit directors’ experience or knowledge of the Company, its markets and its activities in the context of their decision-making duties or decrease the quality of oversight.
Age limit
The number of directors having reached the age of 70 cannot exceed one-third of the members of the Board of Directors. If this limit is reached, the oldest director is considered to have automatically resigned. At present, no member of the Company’s Board is older than 70.
The average age of the current members of the Board of Directors is at present 55.
Independence of directors
The MiddleNext Code recommends that the Board of Directors includes at least two independent directors, and one independent director for Boards with five or less members. Four criteria have been retained to determine the independence of members of the Board defined as the absence of any material financial, contractual or family relationship that could compromise their free exercise of judgement and notably, Board members shall not: - Be a current employee or corporate officer (mandataire social) of the company or a company of its group or have been so within the past three years; - Be a significant customer, supplier or banker of the company or its group, or for which the company or its group accounts for a significant portion of its business; - Be the lead shareholder of the company; - Be related by close family ties to a corporate officer or a lead shareholder; - Have been an auditor of the company within the previous three years.
Accordingly, the Board of Directors, after examining the situation of each of its members with respect to the above criteria, considered that Paul and Olivier Lippens, until now designated as independent, no longer meet the criteria of the definition of the MiddleNext code in light of the increased stake of Finasucre Group for which they serve as executive officers, in the capital of SGD, Naturex's lead shareholder.
It is furthermore noted that Hélène Martel-Massignac is not eligible to be considered as an independent director in light of her position as Chief Executive Officer of Caravelle Group that holds 15.35% of Naturex's capital.
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The Board considers that it will be able to submit at the next General Meeting of 26 June 2013 proposals to appoint two independent directors, subject to approval of these members at the Board meeting to be held on 3 May 2013: - The candidate proposed by FSI (Fonds Stratégique d’Investissement) subject to the prior recommendation of the Nominating and Compensation Committee; - The candidate proposed by the Nominating and Compensation Committee.
Professional rules of conduct of directors
In accordance with the MiddleNext Code recommendations, Company directors are encouraged when appointed, to comply with a number of rules of professional conduct, with the objective of raising awareness with respect to their responsibilities as directors and consistent with the company’s interest. When taking office, each member of the Board shall become acquainted with the resulting obligations and in particular those related to holding multiple corporate offices. Each new director signs the Board’s charter. Each director must ensure that he or she obtains all necessary information before Board meetings on the items included on the agenda. Directors must also participate actively and diligently in all Board meetings and any Committees of which they are members and attend shareholders’ meetings. Finally, directors shall be bound by an obligation of strict professional confidentiality on subjects discussed during meetings. Each director must also immediately inform the Board of any conflict of interest and refrain from voting on the corresponding decision and, where applicable, resign. The absence of such disclosure constitutes recognition that there is no conflict of interest. This list of the basic obligations of Board members is completed hereafter and set forth in the Board of Directors’ charter.
Obligation to be a shareholder
In accordance with the Company’s articles of association and the Board charter, each director must hold at least one registered share. Shares held by directors that have been registered for at least two years benefit from double voting rights, in accordance with the Company's articles of association. At 31 December 2012, the shares held by the directors of Naturex S.A are as follows:
Directors NATUREX SHARES
Thierry Lambert 1,111
Stéphane Ducroux 4,845
Paul Lippens 1
Olivier Lippens 1
Formalities are in progress to record a share in registered form in the name of Hélène MARTEL MASSIGNAC, appointed as director by co-option by the Board of Directors on 25 February 2013. Hélène Martel Massignac is the Chief Executive Officer of Caravelle that directly holds 1,186,137 Naturex shares or 15.35% of its capital.
Restrictions on holding multiple corporate offices
Each member of the Board shall become acquainted with the obligations resulting from his directorship before accepting it and in particular those related to the legal regulations concerning holding multiple corporate offices.
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The MiddleNext Code recommends that a director, when he exercises an “executive” office, should not accept more than three directorships in listed companies, including foreign companies, outside of his or her own Group. The list of offices and duties exercised by directors at 31 December 2012, in accordance with the requirements of Article L. 225-21 of the French commercial code, is provided in the "Corporate Governance” chapter in the registration document.
Inside information and reporting securities transactions
In light of the privileged information they possess that is not yet made public, directors are considered as "quasi- permanent" insiders and in this capacity required to observe the strictest prudence when they plan to trade in the Company’s shares. Directors who serve as executive officers in the Company are subject to a requirement to abstain from trading as defined in article 622-1 of the AMF General Regulation. On this basis, they must refrain from trading the Company’s shares when they hold inside information. In accordance with AMF recommendations, the Company has established "closed periods” applicable to directors, executive equivalents and any persons having regular or occasional access to inside information. Consequently, trading in the Company’s shares is prohibited during the following periods: - at least 30 calendar days before the release of annual and half-yearly financial statements and, where such is the case, full quarterly statements; - at least 15 calendar days before quarterly announcements (quarterly revenue and results).
When Company directors and persons closely associated with them trade in the Company’s shares, they are required to report to the AMF (Autorité des Marchés Financiers), the French financial market authority, the transactions carried out in accordance with applicable laws and regulations (Article L. 621-18-2 a) and b) of the French Monetary and Financial Code) as soon as the amount exceeds €5,000 for the current calendar year. To that purpose, they are to send their declaration to the AMF by electronic means within five trading days following the transactions along with a copy of this declaration, at the same time, to the Secretary of the Board of Directors of the Company.
II.I.3 Board practices
Chairmanship of meetings
In compliance with the provisions of Article 21 of the articles of association, the Board of Directors selects from among its individual members a Chairman/Chairwoman and sets his/her compensation, on a proposal from the Nominating and Compensation Committee, sets the terms of his/her functions that may not exceed his/her term of office as director.
The Board may select one or more Vice Chairman whose functions will consist, exclusively in the absence of the Chairman, in chairing meetings of the Board of Directors and General Meetings.
In the absence of the Chairman and/or the Vice Chairwoman or Vice Chairmen/Chairwomen, the Board appoints one of the directors present to chair the meeting. The Board may appoint for each meeting, a Secretary that is not required to be a shareholder.
In compliance the provisions of Act 2001-420 of May 15, 2001 (New Economic Regulations Act or "NRE"), the Board of Directors issued a ruling with respect to the Chairmanship of the Board of Directors and the exercise of Executive Management. On that basis, it opted for the system of corporate governance that combines the functions of Chairman of the Board of Directors and Executive Officer and provides for the option of appointing one or more natural persons
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to assist the Chief Executive Officer (Directeur Général) with the title of Executive Vice President (Directeur Général Délégué).
On 8 June 2012, following the General Meeting, the Board of Directors appointed Thierry LAMBERT as the Chief Executive Officer of Naturex S.A, replacing Jacques DIKANSKY for the remainder of the latter's term of office, or until the end of the Annual General Meeting to be called to approve the financial statements for the fiscal year ending 31 December2017. In consequence, Thierry Lambert will exercise both the functions of Chief Executive Officer and Chairman of the Board Of Directors. No Executive Vice Presidents were appointed by the Board of Directors.
Board charter
The French commercial code and the Company’s articles of association define the main provisions related to the Board of Directors. They are completed by a Board charter in accordance with the recommendations of the MiddleNext code. Naturex’s current Board charter specifies: - The role of the Board of Directors and the list of transactions subject to prior authorisation in accordance with the law and the articles of association; - The composition of the Board and the criteria of independence for members; - members’ duties and the applicable rules of professional conduct (loyalty, confidentiality, disclosure of conflicts of interest and the duty to refrain from voting, insider information, trading in shares and closed periods when trading is banned, etc.); - The Board's procedural rules (frequency, notice of meeting, members’ information and use of videoconferencing and telecommunication technology) and the Audit Committee's procedural rules (Board of Directors meeting as Audit Committee); and - The rules for determining members’ compensation.
The Board of Directors’ meeting of 26 March 2012 revised its charter initially approved on 19 March 2004 to update it in line with the latest AMF recommendations and to integrate the membership and operating procedures of the Board meeting in the capacity of Audit Committee. During the same meeting, the Board of Directors also adopted the Audit Committee charter.
On 5 February 2013, the Board of Directors amended its Charter in order to specify the scope of duties of loyalty and confidentiality incurred by directors with respect to the Company. In particular, Company directors are prohibited from serving on the Board of Directors, Supervisory Board, Executive Board or any other body of corporate governance of a company that is a competitor of Naturex.
In order to comply with the recommendations of the MiddleNext Code, the Board Charter also specifies procedures for the assessment of the Board. This does not involve adopting an external assessment procedure that would entail too much formalism in light of the Board’s make-up. Instead priority is given to self-assessments by directors so they can provide input on the Board's compliance with operating principles and on the preparation of its work with the aim of improving the Board’s efficiency and effectiveness. As such, every year after the meeting to approve the financial statements for the past year, the Board will conduct a self-assessment focusing on the following: - Operating procedures; - Treatment of agenda items; and - Measurement of the actual contribution of each director to the Board’s work through his or her expertise and participation in the discussions. This discussion will be recorded in the meeting minutes and any areas for improvement may result, as applicable, in an update and an adjustment in the Board charter.
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During prior years, the Company did not believe it was necessary to perform an assessment of the functioning of the Board of Directors. Given its make-up, the exchanges of points of view between the directors on the various subjects addressed were sufficient for the Board meetings to run smoothly and provided a continuous self-assessment of its operation.
Concerning fiscal 2011, a review of the various documents regarding the Company’s governance (Chairman’s report on the Board’s work, the Board charter and the Audit Committee’s charter) and the subsequent exchanges as part of their approval, made it possible for the directors to analyse the Board’s work over the past year and to measure the Board’s progress in terms of its organisation and operation. This approach complies with the spirit of the MiddleNext Code’s recommendations.
The assessment of the Board as defined by the Board Charter for fiscal 2012 has been postponed until a future date in light of the recent events with respect to its members.
Notices of meeting and information for members
The notices of Board of Directors meetings are made by any written means (letter, fax or telegram) and even orally. Meetings are held at the head office or at any other venue indicated in the notice of meeting. The Board meeting agenda is sent with each notice of meeting. The Chairman of the Board of Directors is required to provide each director with all documents and information necessary to fulfil his or her duties. Consequently, no later than the day of the Board meeting, a file including the documents related to the main subjects on the agenda is given to each director: - For meetings concerning the annual or half-year financial statements: the parent and/or consolidated financial statements and notes, the management report and the management planning items and the market information documents (press release, presentation, registration document, etc.); - For other meetings: any information allowing the directors to make decisions regarding the proposed agenda. During fiscal 2012, the average period of formal notice for Board meetings was 5.1 days (compared with 10 days in 2011). The attendance rate for members of the Board of Directors was 78.5% for the 11 meetings held in 2012 compared with 74.6% for 13 meetings held in 2011. The Board of Directors meets as often as required, pursuant to meeting notices, and notably when the closing of annual half-year accounts is scheduled according to the financial communications calendar published each year in compliance with obligations that apply to companies listed on NYSE Euronext Paris and AMF recommendations. The following persons are convened to meetings of the Board of Directors: - Members of the Board; - Two members of the Works Council delegated by this body (one belonging to the technical manager and supervisor category and the other to the employee and worker category). These members can attend the Board of Directors meeting in an advisory manner. - The auditors, only for meetings that review or close the annual or interim accounts (in particular the half-year financial statements) or for any other subject that requires their presence.
Representation of members
Any director can give, in writing (e.g.; letter, fax or telegram), a proxy to another director to represent him or her at a Board meeting. Each director is limited to a single proxy for the same meeting. This option was exercised four times in fiscal 2012, compared with twice in 2011.
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Participation in meetings by videoconferencing or telecommunication means
The Company’s articles of association and the Board charter give directors the opportunity to participate and vote in Board meetings by any video conferencing or telecommunication means in accordance with applicable legal provisions. This option was exercised five times by the Company in 2012 compared with eight times in 2011.
Decision-making
Board decisions are made on the basis of a simple majority of members present or represented, with the Chairman casting the deciding vote in the case of a tie.
Board proceedings
Proceedings of the Board of Directors are valid only if at least half the members are present. The Board charter provides that directors participating in the meeting through videoconferencing or telecommunication systems, within the limits and under the conditions set down by applicable laws and regulations, are considered as present in calculating the quorum and the majority. Board proceedings are recorded in the minutes drawn up in accordance with current legal provisions, and signed by the Chairman of the meeting and a director, or when the Chairman of the meeting is unable to sign, by two directors. The minutes of the Board of Directors meetings indicate the names of the directors in attendance. Where applicable, copies or extracts of the minutes of the proceedings are certified by the Chairman of the Board of Directors.
II.1.4 Duties of the Board of Directors
Powers and authorities
The Board of Directors’ task is to determine the operating priorities of the Company and ensures they are implemented. Subject to the powers granted to shareholders' meetings and within the limits of the company's corporate purpose, the Board may address any matter pertaining to the proper management of the Company and settle all items of business relating thereto. In addition to these legal and regulatory attributes, the Board of Directors: - Manages any matters of relevant to the effective operations of the Company and settles all matters relating thereto; - Oversees the Company’s management and ensures the quality of the information provided to shareholders and the market through the financial statements or, on the occasion of major transactions, especially involving the company’s shares; - Examines financing activities, guarantees and cautions given to the Group’s various entities; - Examines any internal or external transaction likely to have a material effect on results or significantly alter the structure of the balance sheet; - Carries out the inspections and verifications it deems necessary; and - Calls shareholders’ meetings and proposes amendments to the articles of association. These powers and authorities are set forth in the Board charter.
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Board Committees
In the 2012 first half, two special committees were created to support Naturex's development and adapt its organisation to its new size following the series of acquisitions and rapid organic growth in recent years.
The purpose of these Special Committees whose work is submitted to the Board of Directors for review, is to formalise the strategic decision-making process. Audit Committee In 2012, and in accordance with the exemption provided for under Article L.823-20 of the French commercial code (code de commerce) and in light of its status as a small/mid-cap (VaMPs)1, the Company decided to create an Audit Committee and task the Board of Directors to fulfil its function. On 27 March 2013, in light of efforts undertaken in the area of transparency, governance and formalization with special committees, Naturex's Board of Directors opted to create an independent Audit Committee with its own specific areas of intervention.
The Company has referred to the "Report of the Working Group on Audit Committees" of the AMF working group2 of 22 July 2012 in defining the attributes of this Committee. In accordance with article L.823-19 of the French commercial code, the Audit Committee is responsible in particular for monitoring: - The process for producing financial information; - The efficiency and effectiveness of internal control and risk management systems; - The statutory audit of the annual and consolidated financial statements by the statutory auditors; and - The independence of the statutory auditors. In addition, the Committee issues a recommendation on statutory auditors proposed for appointment to the Shareholders’ Meeting. It reports regularly to the Board of Directors on its tasks and informs it immediately of any difficulty encountered. The Committee can take up at any time any significant financial or accounting question and formulate any opinions or recommendations to the Board in the aforementioned areas. The Board may also entrust the Committee with any other assignment it deems appropriate. The Charter of the Board of Directors meeting in the capacity of the Audit Committee of 26 March 2012 was amended on 27 March 2013 in order to take into account the independent nature of this Board Committee. In particular it sets forth the make-up, attributes and operating procedures of the Audit Committee of Naturex S.A.
1 VaMPs (Valeurs Moyennes et Petites"): small and mid-cap companies listed in market segments C and B of NYSE Euronext Paris. Naturex S.A is listed in Segment B (Mid-Caps). 2 Report of the Working Group Chaired by Olivier Poupart - Lafarge on Audit Committees, Member of the AMF Board. 2012 Registration Document 81 Chapter 3 Organisation and corporate governance
Composition of the Audit Committee
Pursuant to article L.823-19 of the French commercial code, it is up to the Board to establish the Committee’s make- up. Nevertheless, the Committee may be made up exclusively of Board members (with a minimum of three or, for small and mid caps, a minimum of two, subject to explanations thereof by the Board) whereby members of the Audit Committee must not exercise management functions within the Company. On the publication date of this document, membership of the Audit Committee was as follows - Olivier Lippens, who also serves as the Committee's Chairman; - Paul Lippens; - Hélène Martel-Massignac. In accordance with the applicable legal provisions, the directors have special financial or accounting expertise. At the present time, there are no independent directors serving on the Audit Committee.
The term of office for a Committee member does not exceed the term of his or her directorship. Unless the Committee decides otherwise, the statutory auditors attend all meetings. In addition to the statutory auditors, the Committee must be able to hear under the conditions it determines, any persons of the Company it deems useful for the performance of its duties, including Executive Management members, managers with responsibilities in finance and accounting, internal audit, internal control, cash management, management control, legal, etc. as well as, where appropriate, the line managers.
Nominating and Compensation Committee
On 30 August 2012, the Board of Directors' meeting approved the creation of the Nominating and Compensation Committee that was tasked with making recommendations and proposals to the Board on the following subjects: - The appointment of new directors, including in the event of unforeseeable vacancies; - The appointment or revocation, on proposal by the Chief Executive Officer, of any executive officer of the Company; - The appointment or revocation, on proposal by the Chairman of the Board of Directors, of the Chairman of the Board of Directors and Chief Executive Officer; - The make-up and operating of the Board of Directors and the Board committees (including appointments and revocations); - Application by the Company of the guidelines adopted for the principles of corporate governance, notably with respect to the compensation policy for executive officers. The Committee also provides the Board with its opinion on the section of the annual report devoted to shareholders information relating to these matters and the work of the Board; the definition of independent director of the Company and the list thereof that are reproduced in the Company's annual report; - All components of executive compensation including options to subscribe for or purchase shares as well as compensation and benefits of any nature (including retirement benefits and retirement service payments) paid by the Company or other Companies of the Group. The Board examines and defines rules for determining the variable portion of compensation, their coherence with the annual performance assessment of executive officers and the strategy of the Company, and ensures that these rules are then applied; - The Company's general policy with respect to options to subscribe for or purchase shares including the frequency of grants as well as all proposed stock option plans, including their beneficiaries; - The Company's general policy with respect to employee share ownership and any employee stock ownership plans that may be considered; - Directors' fees and rules governing their allocation.
Formal procedures have been drawn up that specify the composition, attributes and operating procedures of the Nominating and Compensation Committee Implemented within Naturex S.A.
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Composition of the Nominating and Compensation Committee
On the publication date of this document, membership of the Nominating and Compensation Committee was as follows: - Olivier Lippens, who also serves as the Committee's Chairman; - Olivier Lippens; - Hélène Martel-Massignac.
II.I.5 Activities of the Board of Directors in 2012
The work of the Board of Directors
The work of the Board of Directors during the meetings concerning fiscal 2012 covered, in particular:
Financial statements and management decisions
- It approved the renewal of the liquidity agreement; - It reviewed the strategic priorities for 2013 and the capital investment budget; - It approved the situation of the half-year financial statements for 2012; - It approved the annual parent and consolidated financial statements at 31 December 2012 and proposed an appropriation of net income.
Preparation of Shareholders’ Meetings
- The Board approved the text of the resolutions on the agenda of the 2012 Combined Annual Shareholders’ Meeting.
Matters relating to the capital
- It granted stock options to employees and/or corporate officers; - It recorded the capital increases resulting from the payment of dividends in the form of shares and the exercise of stock options; - It approved the issue of bonds convertible and/or exchangeable into new or existing shares (obligations à option de conversion et/ou d’échange en actions nouvelles ou existantes or OCEANE), entailing the cancellation of shareholders' pre-emptive subscription rights, making use of the authority granted to it under the thirteenth resolution of the General Meeting of 27 June 2011; - It duly noted the conversion of preferred shares into ordinary shares in connection with the sale of shares by Natraceutical and Caravelle's acquisition of an equity stake; - It duly noted that Caravelle crossed ownership disclosure thresholds.
Matters relating to acquisitions
- It examined and approved the proposed acquisition of Decas Botanical Synergies in the United States;
Matters relating to governance
- It duly noted the temporary unavailability of Mr. Dikansky as from April 2012;
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- It issued a ruling on the Chairmanship of the Board of Directors and the conduct of the Company's executive management; - It duly noted the resignation of directorships; - It appointed directors by co-option; - It set compensation for directors and exceptional remuneration for executive officers for 2013, pursuant to a proposal by the Nominating and Compensation Committee; - It amended and approved the Board Charter; - It approved the implementation of an Audit Committee and Nominating and Compensation Committee and their respective charters.
Agreements governed by Article L.225-35 and L.225-38 of the French commercial code
Details on this subject are provided in the Statutory Auditors’ special report.
The work of the Audit Committee
The Audit Committee met four times for fiscal 2012: In order to be able to form a clear and precise opinion on the subjects on the agenda, the Committee heard several managers including the Group’s CFO, European Accounting Manager and the Vice President of Management Control. Its work at these meetings focused on: - The Committee’s charter to be submitted to the Board of Directors for approval; - The change of the Committee's Chairman and the modification of the Committee's format with respect to its scope of intervention; - Examining the annual company and consolidated financial statements for fiscal 2011 and 2012; - Reviewing the financial information documents accompanying the publication of the annual company and consolidated financial statements (management report, press release, presentation for analysts and investors); - Reviewing the work on the management of the Group’s financing and cash position; - Reviewing the main risks identified; - Approving the statutory auditor's fees; and - The calendar for upcoming meetings and the action plan on implementing internal control work within the Group, - Examining 2012 third-quarter results; - Cash management and payroll tools; - Information about transfer prices; - The organization of the accounting department; - Changes in accounting method and impacts on the financial statements; - Tax planning work.
For their part, the statutory auditors presented their work on the year-end closing of the interim consolidated financial statements and the separate annual and consolidated financial statements and reported their conclusions. They also submitted their statement of independence and the list of services provided by their network and its fees. They also gave the Committee their work schedule for fiscal 2013. The minutes for these meetings were sent to the Board of Directors. For fiscal 2012, the Audit Committee did not perform any evaluations since its duties and prerogatives were until now assured by the Company's Board of Directors.
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Work of the Nominating and Compensation Committee
The Nominating and Compensation Committee met twice for fiscal 2012: In order to be able to form a clear and precise opinion on the subjects on the agenda, the Committee heard the Chief Financial Officer and the Chief Legal Officer. Its work at these meetings focused on: - the organization and working procedures of the Nominating and Compensation Committee; - The proposal for stock option grants to employees and executive officers for fiscal 2011; - Setting the remuneration of directors and executive officers for fiscal 2013; - Proposing the appointment of SGD as director; - Designating and appointing independent directors and evaluating potential candidates; - Reviewing areas of study with respect to systems for supplemental compensation for employees.
Members of the Board of Directors were provided with minutes of these meetings. Because it was only recently created, no assessment is planned of the Nominating and Compensation Committee.
II.I.6 Offices and directorships within the Group and in non-Group companies
Current corporate offices in all Group companies are established in accordance with the legal provisions established by the Act 2001-420 of May 15, 2001 (New Economic Regulations Act or "NRE") with respect to holding multiple corporate offices. The list of offices and duties exercised by directors at 31 December 2012, in accordance with the requirements of Article L. 225-21 of the French commercial code, is provided in chapter 3 on "Corporate Governance” of the registration document.
II.1.7 Principles and rules for determining compensation and benefits of any kind granted to the corporate officers
Details on the amounts of compensation of any kind received by corporate officers for fiscal 2012 are provided in the registration document, chapter 3 "Corporate governance > Compensation and benefits of executive and non- executive directors". To date, directors do not receive any remuneration for serving on the Board. The forms of remuneration and benefits granted to executive officers are presented below:
Executive officer compensation and benefits
Persons identified as executive officers in 2012 were: - Jacques Dikansky, Chairman-CEO of Naturex S.A who passed away on 30 September 2012; - Thierry lambert, Executive Vice President of Naturex S.A until 8 June 2012 and thereafter Chairman and Chief Executive Officer; - Stéphane Ducroux, director of Naturex S.A and Vice Chairman of Naturex Inc. (United States).
Fixed compensation
For fiscal 2012, Thierry Lambert, Chairman-CEO, received compensation as officer of Naturex S.A (France) and Naturex Inc. (United States).
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Benefits in kind
Benefits in kind granted to executive officers consist exclusively of the use of a company car and contributions to retirement and supplemental benefit plans. No other benefit in kind is granted.
Variable and exceptional compensation
Each year, the Board of Directors sets the maximum amount of exceptional compensation that each executive officer can receive. Up until now, and in fiscal 2012, this compensation has been contingent on achieving an operating profit in the Group's consolidated financial statements for the year under review. The amount of exceptional compensation for fiscal 2013 was set by the Company's Board of Directors, pursuant to a proposal by the Nominating and Compensation Committee. This compensation will be contingent on achieving operating and financial objectives.
Other benefits
Thierry Lambert is a beneficiary of retirement severance benefits. On 30 August 2012, the Board of Directors decided to guarantee a severance payment for Stéphane Ducroux should the latter be dismissed within a period of 18 months following a change in control or management of Naturex S.A. This severance payment equals two years of salary. This amount is not due if the dismissal is a consequence of gross or wilful misconduct of Stéphane Ducroux. Besides this benefit, within the Group there is no: - Supplemental pension plan or other social benefits specific to executive corporate officers; - Compensation that would be owed to executive officers for non-competition clauses; and
This compensation is supplemented by the following items:
Stock option plan
Executive officers are beneficiaries of stock option grants. Details on these grants are provided in the chapter “Corporate governance > Compensation and benefits of executive and non-executive directors > Principles and rules for determining director’s fees, stock options and bonus share grants in favour of corporate officers" in the registration document. Highlights of stock option plans granted by the Board in effect on the date of this document are presented below: - Strike price: average of the opening listed price of the twenty trading sessions preceding the grant date; - Term of validity: five years from the stock option grant date (except for plans allocated in 2008 and 2009 with terms of 6 years); - Exercise period: at the end of a three-year vesting period starting on the date of allocation; - Lock-in period for tax relief eligibility: four years from the grant date; - Obligation to retain the shares for two and a half years from the commencement of the exercise date before the beginning of the holding period (période de cession); - Obligation to retain in registered form a selected number of shares issued from the exercise of options by executives and non-executive directors until they cease to exercise their offices. - Automatic cancellation by operation of law in the event the employment contract or the term of office is terminated, except in the case of death or retirement.
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As an exception to the recommendations of the MiddleNext code, stock options are not linked to performance criteria and are destined to reward all employees as well as executive and non-executive directors for their contributions over the year ended. Nevertheless, stock option grants are subject to two conditions: (i) Naturex’s consolidated financial statements should show an operating profit for the past year and (ii) the Company must not have implemented a redundancy plan or a job-protection plan during the past year. The Company is currently exploring options for the adoption of performance criteria adapted to each category to personnel. The Group has not implemented any other compensation systems such as the grant of director’s fees or bonus shares.
II.I.8 Shareholders’ participation in the Shareholders’ Meeting
Procedures for participation by shareholders in meetings are set forth in Articles 30 to 45 of the Company's articles of association and described in chapter 3 “Corporate organisation and governance > General information” of the registration document.
Any shareholders, regardless of the number of shares owned, can participate in a shareholders’ meeting or be represented by their spouse or by another shareholder or vote by mail. However, in order to attend this meeting, vote by mail or be represented: a) Holders of registered shares must be registered in a custody-only account (compte nominatif pur) or a managed account (compte nominatif adiministré) on the third business day preceding the meeting at midnight, Paris time; b) Holders of bearer shares must be registered on the third business day preceding the meeting at midnight, Paris time. The registration or book entry for bearer shares will be evidenced by a participation certificate (attestation de participation) issued by the authorised intermediary maintaining the account for these shares. This participation certificate must be attached to the mail voting or proxy form or to the admission card request established in the name of the shareholder. A certificate may also be issued to bearer shareholders wishing to physically attend the meeting who have not received their admission card on the third business day preceding the meeting, at midnight, Paris time. Such persons must also ask their financial intermediary to provide them with a participation certificate to prove that they are shareholders. It should be noted that, in accordance with the applicable laws: - Shareholders can obtain the single form for voting by mail or proxy or the admission card request by sending a request by mail to their financial intermediary or to the Company. This request can only be met if received by the Company at least six days before the date of the meeting; - Votes by mail or proxy are only taken into account for forms that have been duly completed, include the participation certificate and received by the Company head office at least three days before the date of the shareholders’ meeting; - All shareholders having sent their form for voting by mail or proxy or who have requested an admission card through their financial intermediary may nevertheless sell all or a portion of their shares. For this purpose, the authorised intermediary maintaining the accounts informs the company or its agent of the sale and provides the shareholder with the required information; - Shareholders who have voted by mail will no longer have the possibility to participate directly in the meeting or to be represented; - Any shareholder can formulate questions in writing, which must be sent to the Chairman of the Board of Directors by registered letter with acknowledgement of receipt to the head office, along with a document (attestation d’inscription) certifying that shares are duly registered in a securities account, no later than four business days before the Shareholders’ Meeting. The practical details concerning the availability of preparatory documents are announced by a press release and on the Company's website.
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II.I.9 Items having a potential impact in the event of public offerings
In accordance with the provisions of Article L.225-100-3 of the French commercial code, items having a potential impact in the event of public offerings are described in the registration document (Chapter 3 “Company organisation and governance” and Chapter 4 “Share capital and the shareholder structure”). II.2 Internal control and risk management procedures implemented in the Group
As part of its continuous improvement process for internal control, Naturex relies on the reference framework for risk management and internal control and the guide applicable to small and mid cap companies published by the AMF on 22 July 2010.
II.2.1 Internal control scope, definition and objectives
Scope
The internal control procedures adopted apply to all companies included in consolidated operations and cover all Group's activities.
Definition
According to the reference framework proposed by the AMF, internal control is a company system, defined and implemented under its responsibility. This system covers all practices, procedures and actions adapted to the specific characteristics of each company which: - Contribute to the effective management of its activities and operations and the efficient use of resources; and - Enable it to properly take into account material financial, operational or compliance risks.
Objectives
The objectives of the internal control system aim in particular to ensure: - Compliance with laws and regulations; - The application of instructions and priorities set by executive management; - The effective application of internal processes notably concerning the protection of corporate assets; - The reliability of financial information; And, more generally, it contributes to the effective management of its activities and operations and the efficient use of resources. Consequently, internal control is not limited to a set of procedures or only accounting and financial processes. The definition of internal control does not cover all initiatives taken by the decision-making bodies or management (e.g.; the definition of the Company’s strategy, the determination of objectives, management decisions, risk management or performance tracking). Furthermore, internal control cannot provide an absolute guarantee that the Company’s objectives will be achieved.
II.2.2 Internal control components
In accordance with the AMF reference framework, the internal control system includes five closely related components, whose implementation is adapted to the Group’s characteristics: - An organisation with clearly defined responsibilities and adequate resources and skills and that relies on information systems, procedures or operating procedures and appropriate tools and practices;
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- Relevant and reliable information is circulated in-house so everyone can exercise their his or her responsibilities; - A risk management system that aims to list, analyse and treat the main risks identified with regard to the Company’s objectives; - Control activities proportionate to the stakes for each process and designed to ensure that necessary measures are taken with a view to controlling risks likely to affect the achievement of objectives; and - Constant monitoring of the internal control system and a regular review of its performance.
Internal control environment
Internal control and risk management in Naturex depend on the involvement of all Group participants where everyone’s role and responsibilities are clearly defined.
A centralised organisation and integrated Group management
The Group carries out its activities through Naturex S.A that at 31 December 2012 had 28 directly or indirectly affiliated legal entities.
Given its international structure (presence in 21 countries through 15 production sites and 20 sales offices at 31 December 2012), Naturex has adopted a centralised organisation. The Chairman-CEO manages the Group assisted by senior line managers and members of the Executive Committee. This management is organised around two major divisions: - An operating division, led by the Chairman-CEO, includes the scientific, manufacturing, purchasing/supply chain, marketing and sales departments. This division implements the Group strategy conveyed by the Chairman-CEO, leads the action plans and ensures the objectives of Executive Management are applied in the various operating subsidiaries. Each operating department in each subsidiary reports directly to the different specialised operational departments in this division (scientific department, manufacturing department, purchasing department, etc.); - A functional division encompassing the following support services: human resources, information systems, legal, accounting, consolidation, management control, corporate finance and cash management, financial communication and investor relations. This division is led by Executive Management for human resources and information systems and by the CFO for the other support functions. This division supports the Group’s operations and the strategy implementation. It is responsible for ensuring the IT equipment runs smoothly, producing the accounting and financial information, ensuring good governance practices are followed and coordinating the actions designed to ensure they comply with the laws and regulations as well as the internal standards and procedures. The functional services of operational subsidiaries report directly to the Chairman-CEO and the CFO who are responsible for coordination with the different services in this division.
Internal control and risk management in Naturex depend on the involvement of all Group participants where everyone’s role and responsibilities are clearly defined. This centralised organisation has proven its efficiency and relevance through the realisation of genuine synergies between the operational core area and the functional core area, especially during the integration of the 12 companies acquired over the past 12 years.
Executive Committee
Following the death of Jacques Dikansky, an Executive Committee was formally formed headed by Thierry Lambert, Chairman-CEO, comprised of the most experienced executives responsible for the Group's main operating departments, and who for the most part have worked at Naturex for many years.
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This Committee exercises an essential role in the Group's corporate governance: - It contributes to improved cooperation between the different Group departments and the decision-making process; - Covering the most important or most sensitive operational areas, it determines and monitors actions to be carried out in these areas; - It coordinates approaches to cross-functional subjects and projects; - It anticipates and prepares for organisational and strategic developments for the Company and the Group; - It assists the Chief Executive Officer in preparing decisions to be submitted to the Board of Directors' approval.
Executive Committee members: - Thierry Lambert, Chairman of the Board of Directors and Chief Executive Officer; - Stéphane Ducroux, Vice President of Sales and Operations for the America/Asia-Pacific Regions and Vice Chairman of Naturex Inc.; - Marc Roller, Chief Science Officer; - Frédéric Seguin, Chief Industrial Officer; - Serge Sabrier, Vice President of Purchasing and Supply-Chain - Maxime Angelucci, Vice President of Sales, Europe / Africa region; - Thierry Bertrand Lambert, Chief Financial Officer. Acting as a core group, these senior executives ensure the coherent implementation of the Group’s strategy in their respective departments and that the action plans are coordinated and applied in the Company, the Group and each time companies are consolidated.
A proactive human resources management policy
Human Resources are placed under the management of the Chairman-CEO. Its role is to promote, maintain and increase the skills of employees and encourage their development to ensure the Group has the people who possess the knowledge and skills needed to fulfil their responsibilities and achieve Naturex’s current and future objectives.
A powerful and secure information system
Naturex has implemented an ERP (Enterprise Resource Planning) system that provides integrated management for all of the Group’s operational processes (purchasing, sales management, inventory management, etc.) interfaced with the accounting and financial tools (general accounting, management control, cash management, consolidation, etc.). The organisation and operation of Naturex’s Information system is subject to security measures that set conditions for access to the system, the validation of data processing, backups, data storage and verification of records. This system’s implementation has helped increase reliability and secure the information production process, especially for accounting and financial information. The Information Systems Department reports to Executive Management. It coordinates the system architecture between the Group’s operational and functional divisions as well as the operating continuity of the common ERP to ensure production and the reliability of the Group’s accounting and financial information. This department is also responsible for backing up and protecting the Group data as well as preventing any system intrusions. It upgrades and adapts the accounting and financial information systems based on changes in the Group’s size and needs.
Controlled internal distribution of information
In accordance with the recommendations of the AMF’s reference framework, Naturex has a process that distributes relevant and reliable information in a timely manner to persons concerned in the Group so they can exercise their responsibilities. Naturex’s information and documentation are available in different forms:
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- All new employees are provided on their first day by the Human Resources Department a welcome booklet, the internal rules and regulations, the risk prevention and management plan of the company they are joining and information on the health-safety-environment policy, - Group employees are also provided with an IT Charter specifying measures concerning the proper use of IT resources and Internet services; - All personnel are made aware of the importance of their activities and their contribution to achieving the Group's Quality objectives within the framework of the quality management system. The quality manual developed from the Company’s quality management system formalises a number of general procedures (human resources, information systems, sales administration, research & development, purchasing- logistics, quality control, production, maintenance, etc.), technical instructions and recommendations, recording forms, memos, etc. This information is essential for effective business operations and to optimise Naturex’s quality process with its customers because it describes the sequence of the main operational and functional processes, the risk prevention actions identified and the corrective measures adopted in compliance with applicable legal and regulatory requirements. This information is accessible to all personnel from the Company server and is updated regularly. In addition, minutes are recorded of meetings of the Board of Directors and its Special Committees (Audit Committee and Nominating and Compensation Committee), formalised according to the priorities of decisions adopted and the actions to be taken so that information is passed on to the relevant operational and functional departments.
An efficient risk identification, analysis and management process
In accordance with the AMF’s reference framework, risk management is a real-time Naturex system, defined and implemented under the responsibility of Executive Management. Risk management constitutes a management driver that contributes to: - Creating and protecting the Group’s value, assets and reputation; - Securing Group decision-making and processes to promote the achievement of objectives; - Encouraging the coherence of actions with Group values, and - Ensuring that all employees have a common vision of the main risks and promoting their awareness of the risks inherent in their activity. To ensure it continues to develop and achieve its objectives, Naturex constantly strives to anticipate and manage the risks to which it is exposed through its operations. Given the multiple forms of risks the Group faces (manufacturing, environmental, quality, etc.), risk management is central to Naturex’s strategy. In order to implement this strategy, Naturex is especially committed to quality and environmental approaches seeking to identify the risks in these areas, improve its organisation and increase the reliability of existing systems:
- The application of a quality management system (QMS) by the departments of the Company’s operational division has enabled it to produce a map of processes (management process, execution process, support process) for their identification (descriptive sheets). The QMS assesses the associated risks and defines risk management responses through controls, procedures, indicators and skills. Finally, it proposes the actions plans for implementation;
- The implementation of a safety and environment management system allows Naturex to detect any irregularities in the manufacturing process and effectively manage the impact of its production on the environment;
- Naturex relies on a legal and regulatory monitoring system to comply with the requirements of its business segment and ensure it is aware as far in advance as possible of any issues for the Group and actions to be implemented.
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The Group's main risk factors are identified and analysed in Chapter 2 “Sustainable development > Identification and management of the main risk factors” of the registration document. The Company’s Executive Management prepares the description of significant risks and the different departments in the operational and functional divisions implement systems for improved preparedness and responses.
Control procedures
Control procedures are carried out throughout the Naturex organisation, at every level and in every function, whether focusing on prevention and detection, manual or computerised controls or even reporting line controls. The common information system facilitates internal control procedures in Naturex and enables all Group sites to access any information in real time. In addition, internal control relies in large part on the quality management system to formalise the procedures.
Monitoring of the internal control system
In accordance with AMF recommendations under its reference framework, the internal control system must be constantly monitored to ensure it remains relevant and adapted to Group objectives.
Executive Management
Executive Management, whether acting directly or through departments acting under its authority, is responsible for the quality of the internal control and risk management systems. It is the responsibility of Executive Management to design and implement internal control and risk management systems adapted to the Group’s size, business activity and organisation and, in particular, to define the roles and responsibilities of all. Executive Management must ensure that the Board of Directors and the Audit Committee are provided with information in a timely manner.
Board of Directors
In accordance with article L.225-100 of the French commercial code, the Board of Directors reports on risks in its management report, by providing: - A description of the main risks and uncertainties the Company and the companies included in its consolidation scope are confronted with, and - Information on the Group’s use of financial instruments (financial risks) and exposure to price, credit, liquidity and cash flow risks. The Group’s main risk factors (financial, legal and operational risks, other risks, etc.) are identified and described in the “Sustainable development” chapter of the registration document.
Audit Committee
When necessary, the Audit Committee must examine and evaluate the internal control procedures, especially those concerning the financial information used to prepare the separate and consolidated annual financial statements. It reports on its work to the Board of Directors. An Audit Committee Charter approved by the Board of Directors on 26 March 2012 was updated on 27 March 2013 to take into account the change in its status as an independent body now distinct from the Board of Directors The Audit Committee’s role and duties are described in Chapter 1 of this document.
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Statutory Auditors
The statutory auditors are not, within the framework of their legal engagement, stakeholders in the internal control and risk management systems. The auditors review these systems and issue an opinion on their relevance. In connection with their audit engagement of the financial statements, during the year they may identify significant risks and major weaknesses of the internal control system with a potential material impact on the accounting and financial information. In the present report they present their observations on the internal control procedures related to the preparation and treatment of financial and accounting information and attest that the other information required by law has been produced. The Audit Committee charter adopted on 26 March 2012 provides that Naturex’s statutory auditors are systematically present at Committee meetings. This is destined to ensure that the statutory auditing is regularly monitored and enables the Committee to examine the main areas of risk or uncertainty in the annual parent company or consolidated financial statements (including the half-yearly financial statements) identified by the statutory auditors, their audit approach and any difficulties encountered in in the performance of their engagement.
II.2.3 Internal control procedures for accounting and financial information
The internal control of financial and accounting information is organised around the following: - Uniform monthly accounting reporting; - Common accounting methods throughout the Group, and - The production of consolidated quarterly reports.
Procedures for oversight of the accounting and financial organisation
Organisation
The Finance Department brings together the following centralised functional departments:
Accounting
In light of the growth in the number of sites and legal entities within the framework of the Group's development, the accounting department has been reorganised to pool resources, optimise expertise and apply optimal internal control procedures until then rendered difficult by the geographical distance separating accounting teams.
In response, the Group accounting department has been organised into two main units: - In New Jersey managing accounting operations for the Americas; - In Avignon, managing accounting operations for Europe and the Asia-Pacific Region as well as Group consolidation and reporting teams. A local accounting presence has been maintained in selected countries to ensure administrative management (India, Poland, Morocco, Brazil).
A tax department was also created to coordinate tax-related issues for the different entities.
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Consolidation
This department centralises, analyses and controls the accounting and financial information for all Group subsidiaries. It is also in charge of the consolidation process that produces the quarterly information and the interim and annual financial statements.
Management control
This department monitors and controls the operational departments’ activities and projects to optimise the Group margins. It analyses the monthly reports submitted by all Group subsidiaries (inventories, margins, cost control, etc.) and establishes mechanisms to monitor intra-group transfer prices.
Corporate finance, cash management, credit management
This department assures centralised cash management for the different Group subsidiaries and monitors the interest rate and exchange rate hedges in the Group. It coordinates relations with banking partners and local banks in connection with obtaining financing for all of the Group’s development projects. It is also in charge of optimising the management of WCR (trade receivables, inventory levels, supplier payment terms). It also manages acquisitions under the authority of the Chief Financial Officer.
Legal
The purpose of this department is to secure the Group’s operational and functional activity with respect to the applicable laws and regulations (review the Group’s main contracts, manage litigation and disputes, prevent risks related to criminal liability, commercial law and intellectual property law). It also manages insurance coverage. It acts as the Company’s legal secretary and general counsel and coordinates with outside counsel the legal formalities specific to subsidiaries.
Financial communication
This department assures the distribution of information about the Group’s operations, strategy, financial situation and results in compliance with the legal and regulatory requirements. It is in charge of relations with market authorities, French and foreign investors, financial analysts and individual shareholders. It also monitors the Group’s market and competitive environment and regularly informs the Board of Directors of regulatory developments and market practices in terms of stock exchange law, governance, social and environmental responsibilities, internal control and financial communication.
Relations with the statutory auditors
Naturex S.A is listed on NYSE Euronext Paris (segment B) and has two statutory auditors and two alternate auditors in accordance with the law. All Group subsidiaries also have independent external auditors. During the half-yearly and annual closing of the accounts, the Statutory Auditors: - Conduct a prior review of the Group’s procedures and test internal control; - Organise a meeting prior to the closing of accounts in order to define the review programme, calendar and organisation of their assignment; - Review the financial statements sent by the Consolidation service; and - Hold a review meeting with Executive Management to summarise their work. On this basis, the statutory auditors certify the regularity and fair presentation of the separate and consolidated financial statements.
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Preparing accounting and financial information
The production of Group financial information is broken down into four levels: - Production of financial information for each company; - Verification of financial information for each company; - Production of consolidated financial information; and - Verification of consolidated financial information.
Production of the local financial information
Accounting information is recorded for each site in a specifically authorised accounting software application. All accounting documents are stamped with the date of their receipt and sent directly to the accounting department for entry. The original copies of accounting documents issued by non-company parties are retained and scanned. Documents issued by the Company are imported electronically in the accounting software when issued, through the Group’s ERP.
Verification of local financial information
In 2010 and 2011, the Group changed the accounting system of its companies so each would have the same software (except for the Russian and Brazilian subsidiaries due to local legislation). The accounting managers of the regions (Americas, Asia-Pacific, Europe/Africa/Middle East) have access to the accounting systems in read mode which facilitates technical assistance, control and analysis of accounting data.
In an initial phase, the reporting team at the Avignon head office reviews the coherence of the financial information. Every month, they are responsible for producing the reports requested by the Chief Financial Officer and issuing their comments. Monthly internal procedures consist mainly in reconciling the management and accounting information recognised to ensure the accuracy and exhaustive nature of the flows between the Group’s companies. At each closing of the accounts, a justification sheet is established for each general ledger account to support the account balance and the nature of the flow.
Subsequently, the coherence and relevance of the financial information are controlled by the Group’s Chief Financial Officer and reviewed by Executive Management. Every month all financial information is controlled and reviewed by the Chief Financial Officer who ensures the information provided is accurate by cross-checking the Group’s management data and applying and correcting the interpretation of Group standards. He also analyses the coherence and relevance of each company’s financial data through Group reports and in direct contact with the local controllers.
Finally, the independent external auditors certify the financial information both to comply with local regulations when required or when the Group wishes an independent opinion as well as for the needs of the Group’s consolidated financial statements, established according to accounting standards that differ from local standards. There is no legal connection between the various outside firms used by the different subsidiaries.
Production of consolidated financial information
The production of consolidated financial information is assured by the consolidation department that designs and implements methods, procedures and Group accounting and management guidelines. In accordance with EC Regulation No. 1606/2002 of 19 July 2002 on the application of international accounting standards, Naturex Group’s consolidated financial statements for fiscal 2012 are produced on the basis of IFRS as adopted in the European Union.
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The consolidated information is produced from data originating from Group companies. As described above, the coherence and relevance of the information collected are confirmed by the Group’s internal control procedures. This information are previously controlled in each subsidiary and then controlled internally and audited by external auditing firms.
Every month, based on the monthly reports, the consolidation department produces a consolidated income statement for Executive Management.
Each time the consolidated financial statements are published (income statement and shareholders’ equity at 31 March and 30 September for quarterly information, summary and complete financial statements respectively at 30 June and 31 December for half-yearly and annual information), the Group’s financial control department produces the appropriate financial items.
Verification of the consolidated financial information
The external and independent auditors audit the consolidated financial information on a semi-annual basis.
Financial communications process
The entire financial communications process is placed under the authority of Naturex S.A’s CFO and submitted for approval to the Chairman-CEO and the Company’s Board of Directors (half-yearly and annual information). This information is first provided to members of the Audit Committee within the framework of the interim and annual closings. The Group consolidation department produces the information required to publish the financial results that is sent to the financial communication manager. The financial communication manager prepares the financial communications materials (press releases, analyst and investor presentations, management report, registration document, etc.) in accordance with legal and regulatory requirements and the recommendations of the AMF and the market associations (MiddleNext). The Statutory auditors verify the coherence of the information with respect to the financial position and the accounts as presented in the registration document. A provisional calendar for the publication of financial information is sent to the market and AMF at the beginning of the year and posted on the Company’s website. This calendar ensures that the information can be communicated in compliance with applicable laws and regulations for financial disclosures, disclosure deadlines and the principle of equal access to information for all shareholders.
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II.2.4 Changes anticipated in 2013
Given the creation of the Audit Committee one year ago, Naturex intends to pursue is continuous improvement process commitment for internal control. The Audit Committee’s first meeting prepared a calendar for action plans to be implemented to increase its knowledge of risks (review of the Group’s main risks, etc.) and strengthen its approach to internal control and management of identified risks. This approach will draw on items addressed in the AMF reference framework for risk management and internal control procedures.
Avignon, 27 March 2013
Thierry Lambert
Chairman and Chief Executive Officer
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STATUTORY AUDITORS' REPORT on the report of the Chairman of the Board of Directors of Naturex S.A. established pursuant to Article L. 225-235 of the French commercial code
Year ending 31 December 2012
This is a free translation into English of the original report issued in the French language and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the shareholders:
In our capacity as Statutory Auditors of Naturex S.A. and in accordance with the provisions of article L.225-235 of French Commercial Code (Code de Commerce), we hereby present our report on the report prepared by the Chairman of your company in accordance with Article L225-68 of the French Commercial Code for the fiscal year ended 31 December, 2012. It is the Chairman’s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk management procedures implemented by the company and containing the other disclosures required by Article L225-68 of French Commercial Code, particularly in terms of corporate governance. It is our responsibility to:
- Report to you on the information contained in the Chairman’s report with respect to the internal control and risk management procedures relating to the preparation and processing of accounting and financial information; and
- Certify that the report contains the other information required by article L225-68 of the French Commercial Code, while specifying that we are not responsible for verifying the fairness of this other information. We performed our procedures in accordance with the relevant professional standards applicable in France.
Information concerning internal control and risk management procedures relating to the preparation and processing of financial and accounting information
These standards requires us to perform procedures to assess the fairness of the information set out in the Chairman’s report on the internal control and risk management procedures relating to the preparation and processing of financial and accounting information. These procedures notably consist in:
- Obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of financial and accounting information, on which the information presented in the Chairman’s report is based, as well as existing documentation;
- Obtaining an understanding of the work performed to prepare this information, as well as existing documentation;
- Ensuring that any material weaknesses in internal control procedures relating to the preparation and processing of financial and accounting information that might be detected in the course of our engagement have been properly disclosed in the Chairman’s report. On the basis of these procedures, we have no matters to report in connection with the information on the internal control and risk management procedures relating to the preparation and processing of financial and accounting
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information, contained in the Chairman of the Supervisory Board’s report, prepared in accordance with the provisions of article L225-68 of the French commercial code.
Other disclosures
We certify that the Chairman of the Supervisory Board's report includes the other information required by article L22568 of the French commercial code.
Statutory Auditors French original signed by:
Paris La Défense, 29 April 2013 Avignon, 29 April 2013 KPMG S.A. AREs X.PERT Audit
Jean Gatinaud Laurent Peyre
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III. Corporate governance
The information hereafter completes the Chairman’s report on the conditions for the preparation and organisation of the Board of Directors’ work and the implementation of internal control procedures.
III.1 List of corporate officers
Naturex Group complies with the applicable French law regarding the holding of multiple corporate offices (the New Economic Regulations Act 2001-420 of May 15, 2001).
Offices held in Naturex S.A
On the publication date of this document, the Company was governed by a Board of Directors with six members:
First name - Last Date of appointment / Expiration date Directorships and offices Age name Reappointment of term of office
Chairman of the Board of AGM ruling on the financial statements for Thierry Lambert Directors 59 8 June 2012 the year ending 31 and Chief Executive Officer December 2017 Director AGM ruling on the Vice President of Sales and financial statements for Stéphane Ducroux 40 30 June 2008 Operations for the America/Asia- the year ending 31 Pacific Regions and Vice Chairman December 2013 of Naturex Inc.
13 September 2011 AGM ruling on the Director financial statements for Paul Lippens 60 (appointed by co-option) Executive officer of Finasucre the year ending 31 8 June2012 (AGM ratification) December 2014 AGM ruling on the Director financial statements for Olivier Lippens 59 8 June 2012 Executive officer of Finasucre the year ending 31 December 2017 25 February 2013 Director AGM ruling on the Hélène Martel (by co-option) financial statements for Chief Executive Officer of 51 Massignac the year ending 31 Caravelle Pending ratification AGM of 26 June 2013 December 2016 Director 19 November 2012 AGM ruling on the Charles Feys (by co-option) financial statements for SGD 63 Secretary General of Finasucre Pending ratification the year ending 31 Permanent are presented of SGD AGM of 26 June 2013 December 2017
The Board of Directors' meeting to be held on 3 May 2013 will examine the proposed appointments of two new independent directors. - The candidate proposed by FSI (Fonds Stratégique d’Investissement) subject to the prior recommendation of the Nominating and Compensation Committee; - The candidate proposed by the Nominating and Compensation Committee.
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If these proposals are accepted, they will be submitted for approval to the Annual General Meeting called to approve the financial statements for the fiscal year ending 31 December 2012 to be held on 26 June 2013. The draft resolutions for the AGM will be published in the French publication for legal announcements (Bulletin des Annonces Légales Obligatoires or BALO) within the statutory deadlines and will be available for consultation at the Company's website (www.naturex.com).
Other offices and directorships in Group and non-Group companies
At 31 December 2010, the list of offices and directorships held by the Group’s directors, in accordance with the requirements of Article L. 225-21 of the French Commercial Code, is as follows:
Offices and directorships exercised by the Group’s non-executive directors
Paul Lippens, director of Naturex S.A
Paul Lippens was appointed director by co-option by the Company’s Board of Directors on 24 August 2011, following the resignation from the board of Naturex S.A of Edmond De Rothschild Investment Partners through its permanent representative, Mr. Pierre-Michel Passy. This appointment was ratified on 8 June 2012 for the remainder of the term of office of Edmond De Rothschild Investment Partners and namely until the Annual General Meeting called to approve the financial statements for the year ending 31 December 2014. Paul Lippens is a graduate of the Solvay Brussels School of Economics and Management (SBS-EM) of Université Libre de Bruxelles. Throughout his career, which began in 1977, he has held several management functions with renowned banking institutions in France and abroad.
Offices and directorships held within the last five years in non-Group companies: Company Office/Directorship Comments Finasucre Group Majority shareholding in SGD, lead Finasucre Chairman shareholder of Naturex No legal relationship with Naturex Shareholding in Finasucre Group SGD SAS Chairman Lead shareholder of Naturex Finasucre Group Sucrier Group Director No legal relationship with Naturex Finasucre Group Iscal Sugar Director No legal relationship with Naturex Finasucre Group Galactic Director No legal relationship with Naturex Finasucre Group Bundaberg Sugar (Australia) Director No legal relationship with Naturex Finasucre Group Compagnie Sucrière (D.R. Congo) Director No legal relationship with Naturex Compagnie Het Zoute Director No legal relationship with Naturex CBL – ACP Chamber of Commerce Director No legal relationship with Naturex Compagnie Immobilière d’Hardelot Director No legal relationship with Naturex
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Olivier Lippens, director of Naturex S.A
Olivier Lippens was appointed director of Naturex by the General Meeting of 8 June 2012 for a term of six years ending on the close of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017;
Olivier Lippens is a graduate of the Solvay Brussels School of Economics and Management (SBS-EM) of Université Libre de Bruxelles. Throughout his career which began in 1978, he has exercised accounting and financial responsibilities within Coopers & Lybrand in Brussels before joining the Finasucre Group.
Offices and directorships held within the last five years in non-Group companies: Company Office/Directorship Comments Finasucre Group Majority shareholding in SGD, lead Finasucre Deputy CEO shareholder of Naturex No legal relationship with Naturex Shareholding in Finasucre Group SGD SAS Director Lead shareholder of Naturex Finasucre Group ISCAL Sugar SA Deputy CEO No legal relationship with Naturex Finasucre Group Galactic SA Director No legal relationship with Naturex Finasucre Group Bundaberg Sugar Ltd. (Australia) Director No legal relationship with Naturex Finasucre Group Futerro SA Director No legal relationship with Naturex Finasucre Group Devolder SA Director No legal relationship with Naturex Finasucre Group JV KIN SA Director No legal relationship with Naturex Finasucre Group Compagnie Sucriere SCARL Director No legal relationship with Naturex Subel Vice-Chairman No legal relationship with Naturex Wulfsdonck Investment SA Deputy CEO No legal relationship with Naturex European Association of Sugar CEFS Director Producers The Belgian food industry federation FEVIA Director (Fédération de l’Industrie Alimentaire) UNIBRA SA Director No legal relationship with Naturex Royal Belgian Institute for Beet IRBAB Director Improvement (Institut Royal Belge pour l’Amélioration de la Betterave) AEDIFICA SA Director No legal relationship with Naturex Galeries Royales Saint Hubert Director No legal relationship with Naturex
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Hélène Martel-Massignac, Director of Naturex S.A
Hélène Martel-Massignac was appointed director by co-option by the Company’s Board of Directors on 25 February 2013, following Olivier Dikansky's resignation from the Board of Naturex S.A. Ratification of her appointment will be submitted for approval to the General Meeting of 26 June 2013 for the remainder of her predecessor's term of office, and namely until the end of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2016. Hélène Martel-Massignac was trained as a chartered accountant and has exercised the audit and financial management functions at prestigious firms before participating in the creation of Caravelle.
Offices and directorships held within the last five years in non-Group companies: Company Office/Directorship Comments Director and Shareholder of Naturex S.A Caravelle S.A Chief Executive Officer No legal relationship with Naturex Sopra Group Director No legal relationship with Naturex PH Finances SARL Managing Partner No legal relationship with Naturex Cooper SAS Chairman of the Supervisory Board No legal relationship with Naturex Arcole-Industries Supervisory Board member No legal relationship with Naturex Benalu Supervisory Board member No legal relationship with Naturex Lamberet Supervisory Board member No legal relationship with Naturex PX holding Chairwoman No legal relationship with Naturex Hôtel Atmosphères Chairwoman No legal relationship with Naturex
Offices and directorships held by the Group’s executive and non-executive directors
Thierry Lambert, Chairman and Chief Executive Officer of Naturex S.A
The appointment of Thierry Lambert as director was renewed by the General Meeting of 8 June 2012 for a term of six years ending on the close of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017. Also on 8 June 2012, he was appointed by the Board of Directors as the Company's Chief Executive Officer. On 16 October 2012, pursuant to the death of Jacques Dikansky, the Board of Directors approved the appointment of Mr Thierry Lambert as Chairman of the Board of Directors, for a period corresponding to his term of office as director or until the end of the Annual General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017.
Thierry Lambert has 17 years of experience in the banking sector with BNP Paribas. He was the cofounder of Naturex, created in 1992 along with Jacques Dikansky, exercising responsibility for Group's Finance Department in addition to selected operational, overseeing information systems, etc. At present, he is the Chairman-CEO of Naturex, coordinating the Group's strategy and development and chairing the Executive Committee.
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Thierry Lambert also holds other offices and directorships within the Naturex Group's subsidiaries: Company Office/Directorship Comments SCI Les Broquetons Co-Managing Partner Group company Naturex SPRL Co-Managing Partner Group company Naturex GMBH Co-Managing Partner Group company Naturex Inc. Chairman-CEO and Treasurer Group company Naturex SpA Sole director Group company Naturex Maroc S.A. Chairman-CEO of Group company Spaciotempo UK Ltd. Director Group company Naturex Trading Shanghai Co., Ltd. Chairman-CEO Group company Naturex AG Chairman Group company Naturex Spain SL Sole director Group company Naturex Ltd. Director Group company KF Specialty Ingredients Pty Ltd. Director Group company Naturex Australia Pty Ltd. Director Group company Naturex Coöperatief U.A. Director Group company Naturex Holdings Inc. Chairman-CEO and Treasurer Group company The Talin Co Ltd. Director Group company ITRAD Manager Group company Valentine Agro Pvt Ltd Director Group company Valentine Agro Pvt Ltd Director Group company Zpow Pektowin Manager Group company Naturex Ingredientes Naturales S.A. Group company Vice Chairman and Treasurer de C.V Chairman-CEO Group company Naturex Inc. (Canada) and CFO Naturex Korea Director Group company Naturex KK Director Group company
Offices and directorships held within the last five years in non-Group companies: : Company Office/Directorship Comments A French non-trading property company (Société Civile SCI Avenue de la Pinède Co-Managing Partner Immobilière) Owner of the Avignon head office Shareholding in Finasucre Group SGD SAS Director Lead shareholder of Naturex Naturex Foundation Director and Treasurer Naturex-Jacques Dikansky Foundation Naturex Fund Director and Treasurer Endowment fund of the Naturex- Jacques Dikansky Foundation Grünes Blatt AG Director Property company Owner of the Burgdorf plant
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Stéphane Ducroux, director of Naturex S.A
The appointment of Stéphane Ducroux as director was renewed by the General Meeting of 30 June 2008 and will expire at the close of the General Meeting called to approve the financial statements for the fiscal year ending 31 December 2013.
Stéphane Ducroux is a graduate of the ESC Pau Business School. He joined Naturex in 1998 within the framework of a CNSE program in New York (sales administration, logistics, accounting). In 2000, he participated in the opening of a sales office in the United Kingdom and in 2011 became Vice President of Sales for the US. Today he is Vice President of Sales and Operations for the America/Asia-Pacific Regions and also Vice Chairman of the US subsidiary, Naturex Inc.
Stéphane Ducroux also holds other offices and directorships within Naturex Group's subsidiaries: Company Office/Directorship Comments Naturex Inc. Vice-Chairman Group company Naturex Trading Shanghai Co., Ltd. Director Group company Naturex Ingredientes Naturales S.A. Group company Vice-Chairman de C.V Naturex Inc. (Canada) Vice-Chairman Group company Naturex Korea Director Group company Naturex KK Director Group company
He does not hold any offices or directorships in non-Group companies.
The company SGD, a director of Naturex, does not exercise any other offices or directorships as a legal entity.
III.2 Compensation and benefits of executive and non-executive directors
Compensation and benefits of any kind paid during 2012 by Naturex Group to each executive officer and member of the Board of Directors of Naturex S.A. (including on the part of controlled companies) within the meaning of the provisions of Article L.225-102-1 of the French commercial code are described hereafter. This presentation is also established in accordance with the AMF recommendation of 22 December 2008 concerning the compensation of executive officers of companies whose shares are admitted to trading on a regulated market (tables 1 to 10).
It is specified that the terms "non-executive directors ("mandataires sociaux non dirigeants") refers to members of Naturex's Board of Directors that do not exercise any operating responsibilities within the Group and the term "executive officer" ("mandataires sociaux dirigeants") refers to Board members exercising and operating responsibility within the Group, and namely: In 2012, those persons identified as executive officers were: - Jacques Dikansky, Chairman-CEO of Naturex S.A until his death on 30 September 2012; - Thierry Lambert, Executive Vice President of NATUREX S.A until 8 June 2012 and thereafter Chairman and Chief Executive Officer; - Stéphane Ducroux, director of Naturex S.A and Vice Chairman of Naturex Inc. (United States).
To date, directors do not receive any remuneration for serving on the Board.
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Principles and rules for determining corporate officers’ compensation
The Board of Directors set the methods and conditions for determining compensation for fiscal 2012 for the Chairman and CEO and the Executive Vice-President according to the following criteria:
Executive officer compensation
Fixed compensation For fiscal 2012, Thierry Lambert, Chairman-CEO, received compensation for his functions within Naturex S.A (France) and Naturex Inc. (United States).
For fiscal 2012, Stéphane Ducroux received compensation for his functions within Naturex Inc. (United States).
It is specified that until his death on 30 September 2012, Jacques Dikansky, then Chairman-CEO, also receive compensation for his offices exercised within Naturex S.A (France) and Naturex Inc. (United States).
Benefits in kind Benefits in kind granted to executive officers consist exclusively of use of a company car and contributions to retirement and supplemental benefit plans. No other benefit in kind is granted.
Variable and exceptional compensation Each year, the Board of Directors sets the maximum amount of exceptional compensation that each executive officer can receive. Up until now, and in fiscal 2012, this compensation has been contingent on achieving an operating profit in the Group's consolidated financial statements for the year under review. The amount of exceptional compensation for fiscal 2013 was set by the Company's Board of Directors, pursuant to a proposal by the Nominating and Compensation Committee. This compensation will be contingent on achieving operating and financial objectives.
Other benefits
Thierry Lambert is a beneficiary of retirement severance benefits. On 30 August 2012, the Board of Directors decided to guarantee a severance payment for Stéphane Ducroux should the latter be dismissed within a period of 18 months following a change in control or management of Naturex S.A. This severance payment equals two years of salary. This amount is not due if the dismissal is a consequence of gross or wilful misconduct of Stéphane Ducroux. Other than these benefits, within the Group there does not exist any: - supplemental pension plan or other social benefits specific to executive officers; - compensation that would be owed to executive officers for non-competition clauses; and
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Principles and rules for determining director’s fees, stock options and bonus shares grants in favour of corporate officers
The system of compensation is supplemented by the following:
Stock option plan Executive officers are beneficiaries of stock option grants.
Highlights of stock option plans granted by the Board in effect on the date of this document are presented below:
- Exercise price: average of the opening listed price of the twenty trading sessions preceding the grant date; - Term of validity: five years from the stock option grant date (except for plans allocated in 2008 and 2009 with terms of 6 years); - Exercise period: at the end of a three-year vesting period starting on the date of allocation; - Lock-in period for tax relief eligibility: four years from the grant date; - Obligation to retain the shares for two and a half years from the commencement of the exercise date before the beginning of the holding period (période de cession); - Obligation to retain in registered form a selected number of shares issued from the exercise of options by executives and non-executive directors until they cease to exercise their offices. - Automatic cancellation by operation of law in the event the employment contract or the term of office is terminated, except in the case of death or retirement. As an exception to the recommendations of the MiddleNext code, stock options are not linked to performance criteria and are destined to reward all employees as well as executive and non-executive directors for their contributions over the year ended. Nevertheless, stock option grants are subject to two conditions: (i) Naturex’s consolidated financial statements should show an operating profit for the past year and (ii) the Company must not have implemented a redundancy plan or a job-protection plan during the past year. The Company is currently exploring options for the adoption of performance criteria adapted to each category to personnel. Information concerning the allocation and the exercise of share subscription options in 2012 is provided hereinafter (tables 4 and 5).
The characteristics of the various stock option plans giving access to the Company's capital (tables 8 and 9) are described in Chapter 4 "Share capital and shareholder structure > Potential Capital" of this document.
The Group has not implemented any other compensation systems such as the grant of director’s fees or bonus shares.
Summary of the compensation, stock options and shares granted to each executive officer (Table 1)
The table below summarises gross compensation owed for fiscal 2012 to the executive officers as well as the valuation of the stock options during the year. In light Mr. Jacques Dikansky's death on 30 September 2012, information on his compensation for fiscal 2012 is provided for the period from 1 January to 30 September 2012.
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In €000s FY 2012 FY 2011
Jacques Dikansky, Chairman-CEO Deceased on 30 September 2012
Compensation owed for the fiscal year 520 845 (see table 2) Value of options granted for the fiscal year - 181 (see table 4) Value of bonus shares granted during the fiscal year - - (see table 6) Total 520 1,026
Thierry Lambert, Chairman-CEO Formally Executive Vice President
Compensation owed for the fiscal year 507 477 (see table 2) Value of options granted for the fiscal year 100 45 (see table 4) Value of bonus shares granted during the fiscal year - - (see table 6) Total 606 522 Stéphane Ducroux, director of Naturex S.A and Vice Chairman of Naturex Inc.
Compensation owed for the fiscal year 386 306 (see table 2) Value of options granted for the fiscal year 75 35 (see table 4) Value of bonus shares granted during the fiscal year - - (see table 6) Total 461 342
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Summary of the compensation of each executive officer (Table 2)
The table below shows the gross compensation owed and paid to the executive officers, including director’s fees and benefits in kind. In light Mr. Jacques Dikansky's death on 30 September 2012, information on his compensation for fiscal 2012 is provided for the period from 1 January to 30 September 2012.
Financial year 2012 Financial year 2011
In €000s Amounts Amounts Amounts Amounts owed paid owed paid
Jacques Dikansky, Chairman-CEO Deceased on 30 September 2012
Fixed compensation 518 518 609 609 Variable compensation, exceptional compensation* - - 235 153 Directors' fees - - - - Benefits in kind** 2 2 1 1 Total 520 520 845 763 Amounts for professional expenses 422 - 304 -
Thierry Lambert, Chairman-CEO Formally Executive Vice President
Fixed compensation 376 376 357 357 Variable compensation, exceptional compensation* 128 - 118 121 Directors' fees - - - - Benefits in kind 3 3 2 2 Total 507 379 477 480 Amounts for professional expenses 136 - 97 Stéphane Ducroux, director of Naturex S.A and Vice Chairman of Naturex Inc.
Fixed compensation 371 371 284 284
Variable compensation, exceptional compensation* 16 - 21 21
Directors' fees - - - -
Benefits in kind - - 1 1
Total 386 371 306 306
Amount for professional expenses 111 - 102 -
* Variable compensation, exceptional compensation: Each year, the Board of Directors sets the maximum amount of exceptional compensation that each executive officer can receive. This compensation is contingent an operating profit in the Group's consolidated financial statements for the year under review.
** Company car
2012 Registration Document 109 Chapter 3 Organisation and corporate governance
Director’s fees and other compensation received by non-executive corporate officers (Table 3)
No directors' fees or other gross compensation was owed or paid in the period ended 31 December 2012 to executive and non-executive directors.
Stock options to subscribe for or purchase shares granted to each executive officer during the financial year, by the issuer and by any Group company (Table 4)
Executive officer Plan No. and date Nature of Valuation of Number of Exercise Exercise options options options granted price period (for purchase of according to in the period existing shares or the method to subscribe for adopted for the new shares) consolidated financial statements Jacques Dikansky ------Plan15 20/11/2015 Thierry Lambert Subscription €12.46 8,000 €57.00 to 19 November 2012 19/11/2017 Plan15 20/11/2015 Stéphane Ducroux Subscription €12.46 6,000 €57.00 to 19 November 2012 19/11/2017 Plan15 20/11/2015 Total Subscription €12.46 14,000 €57.00 to 19 November 2012 19/11/2017
On 19 November 2012, the Board of Directors of Naturex S.A met in order to grant stock options under a new plan. Details of this grant are presented in table 8 in Chapter 4 "Share capital and shareholder structure > Potential capital > Stock option grants" of the present document.
Share subscription or purchase options exercised during the year, by each executive officer, by the issuer and by any company in the Group (Table 5)
No stock options have been exercised by executive officers in the year.
On 30 March 2013, the heirs of Jacques Dikansky exercised the options granted to the latter under stock option plans as follows:
110 2012 Registration Document Chapter 3 Organisation and corporate governance
Stock options exercised on 30 March 2013 in connection within the framework of the settlement of Jacques Dikansky's estate
Number of options Name of executive corporate officer Plan No. and date Exercise price exercised Jacques Dikansky's estate Plan 11 25,000 €25.54 Granted on 25/03/2008
Jacques Dikansky's estate Plan 12 25,000 €24.00 Granted on 13/03/2009
Jacques Dikansky's estate Plan 13 18,000 €30.12 Granted on 26/04/2010
Jacques Dikansky's estate Plan 14 18,000 €45.33 Granted on 15/04/2011
Total 86,000
Performance shares granted to each corporate officer by the issuer and any Group company (Table 6)
No performance shares (bonus shares) were granted to each executive officer by the issuer and by any capital company.
Performance shares having vested during the year for each corporate officer (Table 7)
None
The details for tables 8 and 9 are provided in chapter 4 "Changes in capital and shareholder structure > Potential capital > Stock option grants" of this document.
2012 Registration Document 111 Chapter 3 Organisation and corporate governance
Other information on executive officers (Table 10)
Executive officers Employment Supplemental Compensation or Payments relating to contract retirement plan benefits owed or non-compete clauses potentially owed on termination or a change in function
Yes No Yes No Yes No Yes No
Jacques Dikansky Chairman-CEO, deceased on 30 2012
Thierry Lambert
Chairman-CEO Appointment as director renewed by the General Meeting of 8 June 2012 for a term of six years ending on the close of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017.
Stéphane Ducroux
Director of Naturex S.A and Vice Chairman of Naturex Inc. Appointment as director by the General Meeting on 30 June 2008 for a term of six years ending on the close of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2013.
As Stéphane Ducroux has an employment contract with the legal entity, Naturex Inc. (United States), he is concerned by the AMF recommendations of 22 December 2008 and 9 February 2012 on combining employment contracts with a corporate office.
Assets belonging to executives
Senior executives created SCI La Pinède with a view to constructing a building on land next to the current head office so it can be extended in the future. Thierry Lambert is the co-managing partner of SCI La Pinède. The Naturex AG Group company rents, for use as a warehouse, part of a building located on land adjacent to the Burgdorf plant from Grünes Blatt, a real estate company in which the executive officers are shareholders. This company granted a 10-year commercial lease to Naturex AG. Thierry Lambert is director of Grünes Blatt AG. No asset belongs directly or indirectly to the executive managers or to members of their family. All of the other assets belong to the Group.
Potential conflicts of interest
To the best of the Company's knowledge, there are no potential conflicts of interest between any duties with respect to Naturex of members of the Board of Directors (executive and non-executive) and their private interests.
For information, SGD, Naturex's lead shareholder holding 21.08% of the Company's share capital on the filing date of this document, is 99.04%-held by Finasucre Group, managed by Paul and Olivier Lippens, directors of Naturex S.A. The balance is held by selected members of Naturex's Executive Committee, including Thierry Lambert, the Company's Chairman-CEO.
Paul Lippens is the Chairman of SGD SAS and Olivier Lippens and Thierry Lambert are directors.
112 2012 Registration Document Chapter 3 Organisation and corporate governance
Thierry Lambert is also the co-managing partner of SCI La Pinède, owner of the head office building of Avignon and director of Grünes Blatt AG, owner of the building of the Burgdorf plant in Switzerland.
Trading in own shares by executives and parties mentioned in Article L.621-18-2 of the French Monetary and Financial Code
In accordance with Articles L.621-18-2 of the French Monetary and Financial Code and Article 222-15-3 of the AMF’s General Regulations amended by decree on 9 March 2006 published in the Journal Officiel (French publication for legal notices) on 21 March 2006, transactions in the Company's shares on the filing date of this document are reported below. The executive officers have reported these transactions to the AMF as required by statute and regulations (Article L.621-18-2 of this code).
Disclosures by SGD
SGD has reported the acquisition of 15,716 Naturex shares at a weighted average price of €46.5006 per share over the period from 23 May to 10 July 2012:
Financial instrument Date of the transaction Place of the transactionNb of shares Unit Price Amount of the transaction Shares 23/05/2012 NYSE EURONEXT Paris 450 46,43 € 20 893,50 € Shares 23/05/2012 NYSE EURONEXT Paris 500 46,66 € 23 330,00 € Shares 24/05/2012 NYSE EURONEXT Paris 50 46,43 € 2 321,50 € Shares 24/05/2012 NYSE EURONEXT Paris 500 46,49 € 23 245,00 € Shares 24/05/2012 NYSE EURONEXT Paris 500 46,65 € 23 325,00 € Shares 24/05/2012 NYSE EURONEXT Paris 949 46,01 € 43 663,49 € Shares 28/05/2012 NYSE EURONEXT Paris 1 000 47,48 € 47 480,00 € Shares 28/05/2012 NYSE EURONEXT Paris 500 47,90 € 23 950,00 € Shares 28/05/2012 NYSE EURONEXT Paris 500 47,85 € 23 925,00 € Shares 01/06/2012 NYSE EURONEXT Paris 1 000 46,57 € 46 570,00 € Shares 01/06/2012 NYSE EURONEXT Paris 371 46,61 € 17 292,31 € Shares 04/06/2012 NYSE EURONEXT Paris 629 46,61 € 29 317,69 € Shares 05/06/2012 NYSE EURONEXT Paris 1 340 46,30 € 62 042,00 € Shares 13/06/2012 NYSE EURONEXT Paris 500 46,84 € 23 420,00 € Shares 13/06/2012 NYSE EURONEXT Paris 500 47,09 € 23 545,00 € Shares 19/06/2012 NYSE EURONEXT Paris 36 46,50 € 1 674,00 € Shares 20/06/2012 NYSE EURONEXT Paris 964 46,50 € 44 826,00 € Shares 20/06/2012 NYSE EURONEXT Paris 1 000 46,50 € 46 500,00 € Shares 21/06/2012 NYSE EURONEXT Paris 500 45,86 € 22 927,50 € Shares 21/06/2012 NYSE EURONEXT Paris 500 45,77 € 22 885,00 € Shares 21/06/2012 NYSE EURONEXT Paris 600 45,95 € 27 568,50 € Shares 21/06/2012 NYSE EURONEXT Paris 500 46,10 € 23 050,00 € Shares 26/06/2012 NYSE EURONEXT Paris 84 46,18 € 3 879,12 € Shares 27/06/2012 NYSE EURONEXT Paris 66 46,17 € 3 047,22 € Shares 27/06/2012 NYSE EURONEXT Paris 75 46,36 € 3 477,00 € Shares 27/06/2012 NYSE EURONEXT Paris 281 46,40 € 13 037,00 € Shares 27/06/2012 NYSE EURONEXT Paris 500 46,45 € 23 226,45 € Shares 27/06/2012 NYSE EURONEXT Paris 54 45,92 € 2 479,68 € Shares 27/06/2012 NYSE EURONEXT Paris 66 46,33 € 3 057,78 € Shares 28/06/2012 NYSE EURONEXT Paris 100 45,70 € 4 569,63 € Shares 05/07/2012 NYSE EURONEXT Paris 500 47,10 € 23 552,35 € Shares 05/07/2012 NYSE EURONEXT Paris 150 47,13 € 7 069,50 € Shares 05/07/2012 NYSE EURONEXT Paris 50 47,15 € 2 357,50 € Shares 10/07/2012 NYSE EURONEXT Paris 50 46,30 € 2 315,00 € Shares 10/07/2012 NYSE EURONEXT Paris 50 46,34 € 2 317,06 € Shares 10/07/2012 NYSE EURONEXT Paris 100 46,22 € 4 622,00 € Shares 10/07/2012 NYSE EURONEXT Paris 52 46,29 € 2 406,89 € Shares 10/07/2012 NYSE EURONEXT Paris 100 46,28 € 4 628,00 € Shares 10/07/2012 NYSE EURONEXT Paris 49 46,35 € 2 271,27 €
2012 Registration Document 113 Chapter 3 Organisation and corporate governance
Between 2 and 9 April 2013, SGD reported the acquisition of Naturex shares at a weighted average price of €57.1261:
Date of the Amount of the Financial Instrument Nature of operation Place of the operation Number of shares Unit Price transaction transaction Shares Acquisition 02/04/2013 Out of the market 2 000 61,0385 € 122 077,00 € Shares Acquisition 02/04/2013 NYSE EURONEXT PARIS 250 57,0900 € 14 272,50 € Shares Acquisition 03/04/2013 NYSE EURONEXT PARIS 270 56,2600 € 15 190,20 € Shares Acquisition 04/04/2013 NYSE EURONEXT PARIS 230 56,8500 € 13 075,50 € Shares Acquisition 04/04/2013 NYSE EURONEXT PARIS 6 345 56,8462 € 360 689,29 € Shares Acquisition 05/04/2013 NYSE EURONEXT PARIS 13 310 56,7301 € 755 077,33 € Shares Acquisition 08/04/2013 NYSE EURONEXT PARIS 785 57,1502 € 44 576,87 € Shares Acquisition 09/04/2013 NYSE EURONEXT PARIS 215 56,1800 € 12 078,70 €
Disclosures by Stéphane Ducroux
Stéphane Ducroux reported the sale of 2,000 Naturex shares at a price of €61.0385 per share on 2 April 2013, corresponding to the average trading price for the 20 trading sessions preceding that date:
Amount of Date of the Financial Instrument Nature of operation Place of the operation Number of shares Unit Price the transaction transaction Shares Sale 02/04/2013 Out of the market 2 000 61,0385 € 122 077,00 €
III.3 General representations with respect to executive officers
At the date of this document and to the knowledge of the Company, none of the current directors, over the course of at least the last five years: - has been convicted of fraud; - has been associated with any bankruptcy proceeding of any nature, receivership or liquidation; - has been indicted and/or subject to an official public sanction pronounced by the statutory or regulatory authorities; - has been legally disqualified from serving as members of a Board of Directors, the executive management of a company or a Supervisory Board or from participating in the management of the operations of an issuer in the last five years.
To the best of the Company's knowledge, there are no family ties between the members of the Board of Directors other than those existing between Paul Lippens and Olivier Lippens (Brothers). It is furthermore specified that family ties exist between the Chairman of the Board of Directors of the Company, Thierry Lambert and the Chief Financial Officer, Thierry Bertrand Lambert (father/son).
114 2012 Registration Document Chapter 4 Share capital and shareholder structure
SHARE CAPITAL AND SHAREHOLDER STRUCTURE
I. Information on share capital
I.1 Share capital and voting rights
Share capital
At 31 December 2011, fully paid up share capital stood at €11,558,370 for 7,705,580 shares (6,318,272 ordinary shares and 1,387,308 preferred shares) with a par value of €1.50 per share.
At 31 December 2012, fully paid up share capital stood at €11,592,808.50 for 7,728,539 ordinary shares with a par value of €1.50, in light of: - New shares created from the exercise of outstanding stock options by employees of the Company and concerning mainly the stock option plan No. 10 established on 27 March 2007; - New shares created pursuant to the payment of stock dividends after the General Meeting of 8 June 2012 adopted the option allowing for distribution of dividends in either cash or in the form of shares.
Furthermore, at 31 December 2012, the capital was comprised exclusively of ordinary shares with no remaining preferred shares outstanding. These preferred shares have been issued as consideration for the acquisition of the Natraceutical's Ingredients Division on 30 December 2009. Natraceutical proceeded with a series of disposals of ordinary shares throughout 2012 and gradually converted its preferred shares until the final disposal of the remaining capital on 5 December 2012.
On the filing date of this document, share capital amounted to €11,724,592.50 divided by 7,816,395 ordinary shares (ISIN FR0000054694) with a par value of €1.50 per share. This change in the number of ordinary shares outstanding results from the creation of 87,856 new shares issued from the exercise of stock options, including 86,000 shares from the exercise of stock options belonging to Mr. Jacques Dikansky by his heirs.
Voting rights
The voting right attached to ordinary capital or dividend shares is proportional to the share of capital they represent and each ordinary share confers a right to at least one vote. However, the Extraordinary Shareholders’ Meeting of 19 March 2001 decided to allocate a voting right double that granted to other ordinary shares, with regards to the proportion of the share capital they represent, to all fully paid- up shares registered in the name of a single shareholder for at least two years. In accordance with Article L.225-124 of the French commercial code, shares converted to bearer shares no longer benefit from double voting rights, and the same applies to shares resulting from a transfer of share ownership. It was also decided that in the event of a capital increase via the incorporation of reserves, earnings or issue premiums, dual voting rights will be attached, upon issue, to registered shares allocated free of charge to shareholders in exchange for old shares with double voting rights. No provisions exist that impose restrictions on voting rights. Concerning preferred shares, their rights and those of their holders are governed by the applicable provisions of the French Commercial Code, in particular Articles L. 228-11 et seq. 2012 Registration Document 115 Chapter 4 Share capital and shareholder structure
It is stipulated that the preferred shares benefit from the same rights as those attached to ordinary shares (rights to dividends, subscription rights) but do not carry voting rights at ordinary and extraordinary shareholder meetings while however conferring a right to vote at special shareholders' meetings. Preferred shares had been issued as consideration for the acquisition of the Natraceutical's Ingredients Division on 30 December 2009. In light of the sale by Natraceutical of its holdings into the Caravelle Group on 5 December 2012, these preferred shares were converted into ordinary shares, thus recovering their voting rights. Ordinary shares resulting from the conversion of preferred shares carry double voting rights as long as said shares have been registered on the same shareholder's account for at least two years (whether in the form of preferred shares or ordinary shares).
2012 Registration Document 116 Chapter 4 Share capital and shareholder structure
Changes in share capital FY Nature of transaction Number of Capital increase Additional paid-in Par value Number of Amount of capital shares capital shares issued 2005 Capital increase 414,865 €622,297.50 €10,662,030.50 €1.50 2,579 383 €3,869,074.50 Board meeting of 06/01/2005 2005 Capital increase through 2,743 €4,114.50 €93,262 €1.50 2,579,126 €3,873,189 share subscription warrants Board meeting of 06/01/05 2005 Capital increase through 79,000 €118,500.00 €784,470 €1.50 2,661,126 €3,991,689 shares with equity warrants 2006 Capital increase through 362 €543.00 €12,308.00 €1.50 2,661,488 €3,992,232 share subscription warrants Board meeting of 13/03/2006 2006 Capital increase through 30,747 €45,120.50 €1,045,398.00 €1.50 2,692,235 €4,038,352.50 share subscription €34 / share warrants Board meeting of 12/09/2006 2006 Capital increase 266,148 €399,222.00 €13,227,555.60 €1.50 2,958,383 €4,437,574.50
2006 Capital increase through 255 €382.50 €8,670.00 €1.50 2,958,638 €4,437,957 share subscription warrants Board meeting of 30/11/2006 2006 Capital increase following 364 €546.00 €4,317.04 €1.50 2,959,002 €4,438,503 the exercise of share subscription options 2006 Capital increase through 229 €343.50 €7,786 €1.50 2,959,231 €4,438,846.50 share subscription warrants Board meeting of 26/12/2006 2006 Capital increase following 8,041 €12,061.50 €95,366.26 €1.50 2,967,262 €4,450,908 the exercise of share subscription options 2007 Capital increase through 1,453 €2,179.50 €49,402.00 €1.50 2,968,725 €4,453,087.50 share subscription warrants Board meeting of 02/07/2007 2007 Capital increase through 18,124 €27,186.00 €616,216.00 €1.50 2,986,849 €4,480,273.50 share subscription warrants Board meeting of 31/12/2007 2007 Capital increase following 660 €990.00 €4,233.90 €1.50 2,987,509 €4,481,263.50 the exercise of share subscription options Board meeting of 31/12/2007 2008 Capital increase through 7,290 €10,935.00 €236,925.00 €1.50 2,994,799 €4,492,198.50 share subscription warrants 2008 Capital increase following 18,590 €27,885.00 €208,579.80 €1.50 3,013,389 €4,520,083.50 the exercise of share subscription options 2008 Capital increase following 1,590 €2,385.00 €18,014.70 €1.50 3,014,979 €4,522,765.50 the exercise of share subscription options 2009 Capital increase following 198 €297.00 €2,221.56 €1.50 3,015,177 €4,522,765.50 the exercise of share subscription options 2009 Capital increase through 866,863 €1,300,294.50 €15,779,318.71 €1.50 3,882,040 €5,823,060.00 share subscription warrants Board meeting of 06/03/2009
2012 Registration Document 117 Chapter 4 Share capital and shareholder structure
FY Nature of transaction Number of Capital increase Additional paid-in Par value Number of Amount of capital shares capital shares issued 2009 Capital increase through 961,557 €1,442,335.50 €29,261,703.00 €1.50 4,843,597 €7,265,395.50 the issue of ordinary shares AGM/EGM of 30/12/2009 2009 Capital increase through 1,520,403 €2,280,604.50 €46,268,273.00 €1.50 6,364,000 €9,546,000.00 the issue of preferred shares AGM/EGM of 30/12/2009 2010 Capital increase following 23,192 €34,788.00 €603,920.00 €1.50 6,387,192 €9,580,788.00 the exercise of share subscription options Board meeting of 23/08/2010 2010 Capital increase by 23,739 €35,608.50 €578,648.00 €1.50 6,410,931 €9,616,396.50 dividend paid in shares AGM/EGM of 30/06/10 2011 Capital increase by 10,809 €16,214.00 €506,503.00 €1.50 6,421,740 €9,632,610.00 dividend paid in shares AGM/EGM of 27/06/2011 2011 Capital increase following 1,283,840 €1,925,760.00 €45,640,606.00 €1.50 7,705,580 €11,558,370.00 the exercise of share subscription warrants 2012 Capital increase following 5,496 €8,244.00 €264,632.40 €1.50 7,711,076 €11,566,614.00 the exercise of share subscription options Board meeting of 29/03/2012 2012 Capital increase following 132 €198.00 €3,437.28 €1.50 7,711,208 €11,566,812.00 the exercise of share subscription options 2012 Capital increase by 16,871 €25,306.50 €637,372.94 €1.50 7,728,079 €11,592,118.50 dividend paid in shares 2012 Capital increase following 460 €690.00 €11,164.20 €1.50 7,728,539 €11,592,808.50 the exercise of share subscription options 2013 Capital increase following 230 €345.00 €5,989.20 €1.50 7,728,769 €11,593,153.50 the exercise of share subscription options 2013 Capital increase following 87,626 €131,439.00 €2,558,171.04 €1.50 7,816,395 €11,724,592.50 the exercise of share subscription options
I.2 Unissued authorised capital
The Combined Shareholders' Meeting of 27 June 2011 granted new authorisations and delegations of authority to the Company's Board of Directors with respect to capital increases. The Combined Shareholders' Meeting of 8 June 2012 renewed certain authorisations, replacing and superseding those granted by the previous meeting of 27 June 2011. The table hereafter summarises authorisations in force and delegations of authority granted to the Board of Directors by the Combined Shareholders Meeting of 27 June 2011 and 8 June 2012, with respect to capital increases.
2012 Registration Document 118 Chapter 4 Share capital and shareholder structure
Current authorisations and delegation of authorities, granted by the Combined Shareholders’ Meeting of 27 June 2011 to the Board of Directors with respect to capital increases
Type of authorisation granted AGE date Amount authorised Term of authorisation Use made of the authorisation granted Issuance of shares and/or marketable 27 June 2011 See detail hereinafter according to the 26 months securities giving access to the delegations of authority granted until 27 August 2013 Company's capital
- Delegation of authority to increase 27 June 2011 €4,000,000 26 months €1,925,760 the capital with pre-emptive + nominal amount of the additional until 27 August 2013 subscription rights maintained shares to be issued, where applicable
- Delegation of authority to increase 27 June 2011 €4,000,000 (limit included under the 26 months None the capital with pre-emptive maximum nominal amount of the until 27 August 2013 subscription rights revoked for a authorisation with pre-emptive public offering subscription rights revoked for private placement)
- Delegation of authority to increase 27 June 2011 €4,000,000 limited to 20% of the share 26 months €385,714.50 the capital with no pre-emptive capital per year (amount included until 27 August 2013 subscription rights, via private under the maximum nominal amount distribution governed by Article of the authorisation with pre-emptive L.411-2, II of the French Monetary subscription rights revoked for a public and Financial Code offering)
- Authorisation to increase the share 27 June 2011 Limited to 10% of the share capital 26 months None capital in payment of contributions (limit independent of any other until 27 August 2013 in kind of shares or marketable maximum amount provided for in securities terms of authority to increase the capital)
- Delegation of authority to increase 27 June 2011 €40,000,000 (limits independent of any 26 months None the share capital through the other maximum amounts provided for until 27 August 2013 capitalisation of reserves, earnings under other authorisations) or premiums
- Authorisation to increase the 27 June 2011 In accordance with the provisions of 26 months None number of securities to be issued Article L.225-135-1 of the French until 27 August 2013 in the event of excess demand Commercial Code and within the ceilings set by the Shareholders’ Meeting, when the Board of Directors determines there is excess demand
Authorisation to increase the share 27 June 2011 Up to 3% of the share capital on the 26 months None capital by issuing shares reserved for day of the Board of Directors’ decision until 27 August 2013 members of a Company Savings Plan
OCEANE bond issue
Making use of the delegation of authority granted to it by the General Meeting of 27 June 2011 (13th resolution), on 19 November 2012 Naturex's Board of Directors approved the principle of the issue of bonds convertible and/or exchangeable into new or existing shares (OCEANE) having a maturity date of 30 June 2019, entailing the cancellation of shareholders' pre-emptive subscription rights, by way of a private placement with qualified investors within the meaning of Article D.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier). The bond issue
2012 Registration Document 119 Chapter 4 Share capital and shareholder structure
was decided under the authority in turn delegated by the Board of Directors to the Chairman-CEO by his decision of 16 January 2013.
The nominal value of this issue amounted to €18 million divided by 257,143 OCEANE convertible bonds of €70 at par per bond, with issue premium of 21.95% in relation to Naturex's closing price in the regulated market of NYSE Euronext Paris for the trading session of 15 January 2013 and 21.69% in relation to the average closing price for the 20 trading sessions in this market preceding the issue date. This OCEANE bond issue was subject to a single delivery-versus-payment on 22 January 2013 and admitted for trading on the Euro MTF of Luxembourg Stock exchange under the ISIN code FR0011395672.
Net proceeds from the issue amounted to approximately €17.6 million.
This bond issue, coordinated by CM-CIC Securities acting as the lead manager and bookrunner, was carried out through a private placement with high-quality investors to support Naturex's next phase of expansion into promising growth markets involving significant technical and scientific components. Accordingly, France's Strategic Investment Fund (Fonds stratégique d’Investissement or FSI) subscribed for €12 million of this issue and Salvepar (Tikehau Capital Group) for €6 million. Their participation underscores a long-term commitment to and significant investment capacity to pursue Naturex's future projects.
The OCEANE convertible bonds will carry a coupon of 4.40% per annum from their issue date, payable in arrears on 22 January of each year, and be redeemable at par on 30 June 2019. They will also carry a right to an allotment for new and/or existing Naturex shares at a rate of one share per OCEANE bond subject to possible subsequent adjustments. A maximum number of 257,1431new shares may be issued from the conversion of OCEANE bonds representing a maximum rate of dilution of 3.33% based on the number of shares comprising the share capital The OCEANE bonds may also be redeemed in advance at the choice of Naturex under certain conditions. Applications for the admission of the new shares for trading on NYSE Euronext Paris will be submitted on a periodic basis and the shares will be immediately fungible with existing Naturex shares under the same ISIN code FR0000054694. Existing shares remitted pursuant to the exercise of rights for the allotment of shares will immediately be eligible for trading on the stock exchange. The issue was carried out by way of a private placement with qualified investors within the meaning of Article D. 411-1 of said Code. In consequence, a prospectus subject to approval by the French financial market authority (Autorité des Marchés Financiers or AMF) was not produced for this issue. The information memorandum drawn up in French on 16 January 2013 in connection with the admission procedure for trading on the 'Euro MTF' multilateral trading facility of the Luxembourg Stock Exchange of the OCEANE bonds is available for consultation at Naturex's website. Information on different risk factors with respect to OCEANE bonds has been disclosed in paragraph 2.2 therein and risk factors relating to the Company and its business are presented in the 2011 registration document and 2012 half-year financial report.
1 Excluding assumptions with respect to possible adjustments to the basis of conversion. 2012 Registration Document 120 Chapter 4 Share capital and shareholder structure
Current authorisations and delegation of authorities, granted by the Combined Shareholders’ Meeting of 8 June 2012 to the Board of Directors with respect to capital increases
These authorisations and delegations of authority replace and supersede those granted by the Combined Shareholders Meeting of 27 June 2011.
Type of authorisation granted AGE date Amount authorised Term of authorisation Use made of the authorisation granted Authorisation granted for the purposes 8 June 2012 Up to 10% of the share capital, on one 24 months None of cancelling shares purchased by the or more occasions, per 24-month until 8 June 2014 Company according to the provision of period Article L.225-209 of the French Commercial Code
Authorisation granted for the purposes 8 June 2012 Up to 3% of the share capital 38 months €95,850.00 of allocating Company share (combined ceiling with the until 8 August 2015 subscription and/or purchase options authorisation to grant Company shares for employees and/or company officers free of charge (bonus shares)
Authorisation granted for the purposes 8 June 2012 Up to 3% of the share capital 38 months None of allocating existing shares or new (combined ceiling with the until 8 August 2015 shares free of charge (bonus shares) to authorisation to allocate share employees and/or company officers subscription and/or purchase options)
Stock option grants
Making use of the authority granted by the General Meeting of 8 June 2012 (12th resolution), Naturex's Board of Directors granted to employees and/or officers of the Company and companies affiliated with it within the meaning of Article L. 225-180 of the French commercial code, options conferring a right to subscribe for new Naturex shares to be issued through a capital increase for a maximum aggregate amount of €96,720 corresponding to 64,480 new shares with a par value of €1.50 per share
Shareholders will be asked to renew these authorisations and delegations at the next General Meeting of 26 June 2013. The draft resolutions for the AGM will be published in the French publication for legal announcements (Bulletin des Annonces Légales Obligatoires or BALO) within the statutory deadlines and will be available for consultation at the Company's website (www.naturex.com).
I.3 Non-equity securities
No non-equity securities exist.
2012 Registration Document 121 Chapter 4 Share capital and shareholder structure
II. Analysis of capital and voting rights
II.1 Changes in the shareholder structure
The following table presents the breakdown of share capital and voting rights of Naturex S.A at 31 December 2012 and changes as from 31 December 2011 and 30 June 2011:
31 December 2012 31 December 2011 30 June 2011 Number of % of % of voting Number of % of % of voting Number of % of % of voting shares capital rights shares capital rights shares capital rights
Naturex S.A (1) 2,357 0.03% - 4,660 0.06% - 7,934 0.12% -
SGD (2) 1,624,768 21.02% 27.50% 1,605,115 20.83% 24.60% 1,024,167 15.98% 20.15% Dikansky family* 13,218 0.17% 0.28% 13,190 0.17% 0.20% 15,963 0.25% 0.31% Natra Group 2,021,424 31.53% 12.11%
Concert parties(3) 1,637,986*** 21.19% 27.78% 1,618,305 21.00% 24.80% 3,061,554 47.76% 32.57% Thierry Lambert 1,111 0.01% 0.02% 1,024 0.01% 0.02% 852 0.01% 0.02% Stéphane Ducroux 4,845 0.06% 0.10% 4,837 0.06% 0.11% 4,026 0.06% 0.13% Executive shareholders 5,996 0.07% 0.12% 5,861 0.08% 0.13% 4,878 0.07% 0.15% Natra Group 1,595,002 20.70% 3.18%
Caravelle (4) 1,186,137 15.35% 13.59% ------Free float 4,896,103 63.36% 58.51% 4,481,752 58.16% 71.89% 3,336,565 52.05% 67.28%
Total shareholdings 7,728,539 100% 100% 7,705,580 100% 100% 6,410,931 100% 100%
(1) Naturex S.A. holds treasury shares within the framework of the liquidity contract concluded with Natixis.
(2) SGD's capital is 98.79%-held by Finasucre following its acquisition of the holdings of the children of Mr. Jacques Dikansky in SGD on 22 February 2013.
(3) Jacques Dikansky, SGD and the Natra Group jointly held shares (action in concert) within the framework of a shareholders' agreement concluded on 30 December 2009. The shareholders agreement with Natraceutical and the action in concert ended on 28 October 2011 when the Natra Group crossed below the 5% voting threshold. On 22 February 2013, after the Dikansky family sold its shareholdings in SGD to Finasucre, SGD and the Dikansky family ceased to have common interests. On that basis, the shareholders agreement and action in concert became null and void.
(4) Caravelle Group acquired Natraceutical's shareholdings in Naturex on 5 December 2012.
* Pursuant to the death of Mr. Jacques Dikansky on 30 September 2012, his direct shareholdings in Naturex were accordingly transferred to his estate.
Source: Société Générale Securities Service – 31 December 2012
Capital structure In 2012, changes were made to Naturex's capital structure with the addition of Caravelle Group as a shareholder, replacing Natraceutical, and a reinforced equity position by the Finasucre Group that had acquired a stake in SGD in July 2011. The significant presence of these quality investors as shareholders confirms their long-term commitment to support Naturex's projects for development.
- Caravelle's equity investment follows the sale by Natraceutical of its stake that represented 15.35% of the share capital and 8.27% of the voting rights on 5 December 2012. Natraceutical, the Spanish group, had become a shareholder in December 2009 with a 38% stake after the acquisition by the Company of the Ingredients Division. Through this latter acquisition Naturex doubled in size and achieved a leadership position in this market. Natraceutical had indicated its intention since 2011 to gradually divest its holdings in Naturex's share capital and in recent months has significantly reduced its stake.
2012 Registration Document 122 Chapter 4 Share capital and shareholder structure
This friendly acquisition fits within the development strategy of Caravelle that has clearly demonstrated its wish to participate in pursuing the development projects of Naturex Group in line with its strategy over the last 20 years. On 25 February 2013, Hélène Martel Massignac was appointed as a director of Naturex by co option; Ratification of this appointment will be submitted to a vote of the shareholders at the General Meeting of 26 June 2013.
- The Finasucre Group strengthened its stake in SGD. In July 2011, the Finasucre Group joined SGD as a shareholder to strengthen the structure of this family holding company and provide it with the resources to support NATUREX in pursuing its external growth projects. Following Jacques Dikansky's passing and, in keeping with the spirit of the agreement concluded when Finasucre Group first became a SGD shareholder, Jacques Dikansky's children sold their entire holdings in SGD. Pursuant to the completion of this transaction on 22 February 2013, the Finasucre Group held 98.79% of SGD's share capital with the balance held by selected members of Naturex's Executive Committee. The acquisition of this share by the Finasucre Group remains consistent with its initial investment in SGD, and confirms its objective of maintaining its long-term commitment in Naturex for the implementation of its development strategy.
II.2 Changes in the shareholder structure since 31 December 2012
Between 31 December 2012 and the filing date of this document, the number of shares increased from 7,728,539 to 7,816,395 resulting from the exercise of stock options by selected beneficiaries of stock option plans, including 86,000 options exercised by the heirs of Mr. Jacques Dikansky on 30 March 2013.
Also, between 2 April and 9 April 2013, SGD acquired 23,405 NATUREX shares, including 2,000 shares purchased off market from Stéphane Ducroux, a director of Naturex. These transactions were reported to the AMF as required by statute and regulations (Article L.621-18-2 of the French Monetary and Financial Code).
2012 Registration Document 123 Chapter 4 Share capital and shareholder structure
Shareholder structure
Capital Voting rights 7,728,769 shares 8,728,023 votes
Auto-Detention 0.04%
SGD SGD 21.02% 27.50%
CARAVELLE CARAVELLE 15.35% 13.59%
Free Float Public 63.59% 58.91%
Breakdown of share capital and voting rights of Naturex S.A. on the filing date of this document breaks down: (Source: Naturex and Société Générale Securities Service – April 2013)
Employee share ownership
On the filing date of this document, there were no employee incentive or profit-sharing plans as defined by Article L.225-102 of the French Commercial Code.
Own shares held directly by the Company
On 31 December 2012, Naturex directly held 2,357 of its own shares representing 0.03% of the share capital. These shares do not carry voting rights or an entitlement to the distribution of dividends or redemption of additional paid-in capital. On 26 April 2013, Naturex directly held 11,931 own shares (0.15% of the Company's capital) within the framework of a liquidity agreement signed with Natixis in June 2009 and renewed every year based on authorisations granted by the Company's General Meeting to continue buying and selling its own shares.
Own shares indirectly held through subsidiaries
No shares of the Company are indirectly held through subsidiaries.
2012 Registration Document 124 Chapter 4 Share capital and shareholder structure
II.3 Crossing of ownership thresholds
Thresholds fixed by the articles of association
In its articles of association, the Company has not set any obligation to declare crossing above or below a capital or voting rights threshold, other than the legal thresholds.
Legal thresholds
Any natural person or legal entity acting alone or in concert who ends up holding the number of shares or voting rights exceeding the thresholds provided by current regulations (Article L.233-7 of the French Commercial Code) must comply with the disclosure obligations provided by these regulations. The same information must be disclosed when the stake in the capital or voting rights crosses below the thresholds provided by current regulations.
The crossing of the following thresholds were reported to AMF (Autorité des Marchés Financiers) in the 2012 first half: AMF declaration 212C0120 of 20 January 2012 - By letter received 20 January 2012, Natraceutical Group reported crossing above on 16 January 2012 the 5% threshold of voting rights of the Company and holding 1,595,002 Naturex shares (of which 987,308 non-voting preferred shares), representing 607,694 voting rights or 20.7% of the Company's capital and 8.77% of its voting rights.
The crossing of this threshold resulted from the conversion of 400,000 Naturex preferred shares held by NATRACEUTICAL, into ordinary shares on 13 January 2012.
AMF 212C0724 declaration of 8 June 2012 - By letter received on 4 June 2012 supplemented by a letter received 7 June 2012, SAS Odyssée Venture, acting on behalf of the fund under its management, reported, for the purpose of rectification, having crossed below, pursuant to the sale of Naturex shares on the market: . on 31 October 2011, the 5% threshold of voting rights of the Company and holding on that date for said fund 322,068 Naturex shares representing a corresponding number of voting rights or 4.18% of the capital and 5.03% of the voting rights on that date; . on 23 December 2011, the 5% threshold of voting rights of the Company and holding on that date for said fund 320,844 Naturex shares representing a corresponding number of voting rights or 4.16% of the capital and 4.91% of the voting rights. Furthermore, Odyssée Venture reported for the record holding on 4 June 2012, 320,844 Naturex shares representing a corresponding number of voting rights or 4.16% of the capital and 4.48% of the voting rights of the Company
AMF 212C1641 declaration of 10 December 2012 - By letter received on 6 December 2012, the French corporation (société anonyme) Caravelle reported having crossed above the thresholds on 5 December 2012, pursuant to the off-market purchase of Naturex shares, of 5% of the share capital and voting rights, 10% and 15% of the share capital of Naturex, and to hold on that date, 1,186,137 Naturex shares representing 609,176 voting rights, or 15.35% of the share capital and 8.38% of the voting rights of the Company. - By letter received on 7 December 2012, Caravelle reported having crossed above on 6 December 2012, pursuant to the conversion of 576,961 non-voting preferred shares into ordinary shares, the 10% threshold of voting rights of Naturex and to hold on that date 1,186,137 shares representing an equivalent number of voting rights, or 15.35% of the share capital and 14.92% of the voting rights. - Caravelle also issued a statement of intent following this acquisition.
2012 Registration Document 125 Chapter 4 Share capital and shareholder structure
AMF 212C0724 212C1702 of 18 December 2012 - By letter received 18 December 2012, Natraceutical Group reported, by way of adjustment, having crossed below on 30 March 2012, pursuant to a sale of Naturex shares on and off-market, the 20% threshold of share capital of Naturex and holding 1,365,002 Naturex shares (including 737,308 non-voting preferred shares), representing 607,694 voting rights or 17.70% of the company's capital and 8.76% of its voting rights. - By letter received on 14 December 2012, Natraceutical Group reported, by way of adjustment, having crossed below on 5 December 2012, pursuant to the sale of Naturex shares on and off-market, the thresholds of 15% and 10% of the share capital and voting rights of Naturex, and on that date, no longer holding any shares of the Company.
AMF 213C0016 declaration of 4 January 2013 - By letter received on 2 January 2013, and supplemented by a letter received on 4 January 2013, SGD, the partnership limited by shares (société en commandite par actions, "SCA"), reported having crossed above on 28 December 2012, the 25% threshold of voting rights of the Company, and to hold on that date 1,624,768 shares representing 2,400,359 voting rights, or 21.02% of the share capital and 27.53% of the voting rights of this company.
On the filing date of this document, the Company had no knowledge of the crossing of other thresholds.
II.4 Treasury shares
Description of the share buyback programme approved at the Shareholders' meeting of 8 June 2012
The Shareholders’ Meeting of 8 June 2012 authorised the Company, in its 10th ordinary resolution, to buy and sell treasury shares within the following limits:
- Maximum share of capital authorised: 10% of the number of shares comprising the share capital, with this number adjusted as required to take into account any operations to reduce or increase the capital that could take place during the duration of the programme ; - Maximum amount allocated to the programme: €77,055,800 - Maximum purchase price per share: €100.00
In the event of an equity transaction, especially a split or consolidation of shares or the allocation of free shares, the aforementioned amount shall be adjusted according to the same proportions (multiplier equal to the ratio between the number of shares comprising the share capital before the operation and the number of shares after the transaction).
The objectives of the Company's share buyback programme, as authorised by the Shareholders' Meeting of 8 June 2012, are as follows: - Support the secondary market and the Naturex share’s liquidity through an investment services provider via a liquidity contract in accordance with the code of professional conduct of the French Association of Investment Firms (Association Française des Marchés Financiers or AMAFI) recognized by the AMF; - Hold the shares thus purchased for subsequent use in exchange or as payment for any acquisitions, with the proviso that the shares acquired for this purpose cannot exceed 5% of the Company's capital; - Set aside shares to cover share purchase option plans and other forms of share grants to employees and/or Company officers of the Group under the conditions and according to the methods provided for by law, especially with respect to profit sharing, a company savings plan or the allocation of bonus shares;
2012 Registration Document 126 Chapter 4 Share capital and shareholder structure
- Set aside shares for the requirements of securities conferring entitlement to grants of Company shares within the framework of the current regulation; - Cancel any shares acquired, subject to authorisation by this Shareholders' Meeting under the 9th extraordinary resolution.
These share purchases can take place by any means, including through the acquisition of blocks of shares and at periods the Board of Directors deems fit.
These transactions can be carried out during a public share offer in compliance with Article 232-15 of the AMF General Regulations, provided the offer is settled entirely in cash and the purchase transactions are carried out as part of the ongoing implementation of the programme in progress and they are not likely to adversely affect the offer's success.
The Company reserves the right to use optional mechanisms or derivatives within the framework of the applicable regulations.
The Shareholders’ Meeting granted the Board of Directors full authority to carry out these operations, set their conditions and the methods, conclude any agreements and carry out any formalities.
This authorisation was granted for 18 months starting from the Shareholders’ Meeting of 8 June 2012. This authorisation cancels the authorisation granted to the Board of Directors by the Combined Shareholders’ Meeting of 27 June 2011.
During the previous share buyback program, the Company did not use any derivative products and to date does not hold any open positions on derivative products. The Company also did not use its authorisation to cancel any shares held.
Report on the liquidity contract
The authorisation to carry out this share buyback programme has been entrusted since June 2009 to Natixis which acts as an investment services provider (underwriter) to purchase shares for and in the name of the Company, in compliance with Articles 5 and 6 of the European Commission Regulation 2273/2003 of 22 December 2003, and in accordance with the code of professional conduct of the AMAFI (Assocation Française des Marchés Financiers), the French Association of securities industry and financial markets financial market (ex-AFEI) as recognised by the AMF. The Company files the monthly declarations with the AMF concerning the purchases and sales of shares within the framework of the liquidity contract, distributes reports every six months on the liquidity contract and publishes them on its website. Regarding the liquidity contract entrusted by Naturex to Natixis, at 30 June 2012, the liquidity account held the following: - 12,028 Naturex shares - €106,273.45
It should be noted that when the contract was established, the liquidity account held the following: - 923 Naturex shares - €277,801.85
On 16 February 2012, the Company contributed an additional €300,000 to the liquidity contract. Indeed, the quality of Naturex’s results over the past few years, the successive capital increases and the Group’s acquisition policy have had a very significant impact on the share’s underlying liquidity. Furthermore, the presence of investors in the capital who actively manage their investment has substantially increased the trading volume in the share’s market since 18 months.
2012 Registration Document 127 Chapter 4 Share capital and shareholder structure
In this context, Natixis’ valuation of the liquidity mechanism indicated a need to increase available funds to reduce the Naturex share’s volatility while providing it optimal liquidity.
On 31 December 2012, the liquidity account held the following: - 2,357 Naturex shares - €601,658.69
III. Potential capital
III.1 Stock option grants
The Combined Shareholders' Meeting of 8 June 2012 authorised the Board of Directors, pursuant to Articles L. 225- 177 to L. 255-185 of the French commercial code, to grant, on one or more occasions, options to subscribe for new shares or purchase existing shares of the Company, for the benefit of salaried employees or selected employees thereof and/or officers, as governed by Article L. 225-185 of the French commercial code, of the Company or companies directly or indirectly related to it within the meaning of Article L. 225-180 of the French commercial code. The shareholders’ meeting decided that the total number of options that will be opened cannot confer the right to subscribe to or purchase a number of shares representing more than 3% of the existing share capital on the day of the first allocation.
The Board of Directors shall determine the subscription price for new shares or the purchase price for existing shares, on the day the options are allocated, which may not be less than the minimum price established by the applicable existing regulations.
The Combined Shareholders' Meeting of 8 June 2012 duly noted that no option can be granted (i) during a period of ten trading days preceding and following the date on which the annual consolidated financial statements are made public, (ii) during the period between the date when the Company becomes aware of information which, if made public, could have a significant impact on the Company’s share price, and the ten trading days after this information is made public and (iii) less than twenty trading days after detaching a coupon giving the right to dividends or to an increase in capital.
This authorisation is valid for a period of 38 months starting on 8 June 2012. On the date this document was filed, the Company had not used the previous authorisation granted by the Combined Shareholders' meeting of 27 June 2011.
On the filing date of this document, the Company had not used this new authorisation.
On this filing date, in light of the options that have expired in the different plans in effect, the maximum dilution resulting from the various share subscription plans would be 2.17%.
2012 Registration Document 128 Chapter 4 Share capital and shareholder structure
Stock option plan highlights (Table 8- AMF recommendation of 22 December 2008)
Highlights of stock option plans in effect on 31 December 2012 implemented by the Board of Directors pursuant to decisions by Shareholders’ Meetings of 14 June 2006, 30 June 2007, 30 June 2008, 30 June 2009 and 30 June 2010, are presented below:
Plan 10 Plan 11 Plan 12 Plan 13 Plan 14 Plan 15
Board of Directors grant date 27/03/2007 25/03/2008 13/03/2009 26/04/2010 15/04/2011 19/11/2012
Date of the Shareholders Meeting 14/06/2006 30/06/2007 30/06/2008 30/06/2009 30/06/2010 08/06/2012 authorising the grants
Strike price (€) 49.65 27.54 24.00 30.12 45.33 57.00 Exercise commencement date 28/03/2010 26/03/2011 14/03/2012 27/04/2013 16/04/2014 20/11/2015
Expiry date 27/03/2012 25/03/2014 13/03/2015 26/04/2015 15/04/2016 19/11/2017
Total number 23,929 47,362 53,650 52,150 57,094 64,480 of options granted
Of which to the top 10 employee beneficiaries 4,560 5,600 10,500 12,200 12,000 16,100
Of which to corporate officers 13,000 33,000 33,000 26,000 26,000 14,000
Jacques Dikansky 10,000 25,000 25,000 18,000 18,000 -
Thierry Lambert 1,500 4,500 4,500 4,500 4,500 8,000
Stéphane Ducroux 1,500 3,500 3,500 3,500 3,500 6,000
Total number of beneficiaries 48 59 64 78 195 277
Of which to corporate officers 3 3 3 3 3 2
Number of expired options 18,433 4,842 3,438 4,820 3,524 - Number of options 5,496 362 230 - - - subscribed
Of which by corporate officers ------Number of outstanding 0 42,158 49,982 47,330 53,570 64,480 options
As the expiry date of Plan No. 10 was 27 March 2012, it had consequently fully lapsed on the publication date of this document.
2012 Registration Document 129 Chapter 4 Share capital and shareholder structure
Between 31 December 2012 and the filing date of the registration document, options were exercised on a number of occasions including notably by the heirs of Mr. Dikansky on 30 March 2013 for different stock option plans for which he was a beneficiary.
Highlights of stock option plans in effect on the filing date of this document:
Plan 11 Plan 12 Plan 13 Plan 14 Plan 15
Board of Directors grant date 25/03/2008 13/03/2009 26/04/2010 15/04/2011 19/11/2012
Date of the Shareholders Meeting 30/06/2007 30/06/2008 30/06/2009 30/06/2010 08/06/2012 authorising the grants
Strike price (€) 27.54 24.00 30.12 45.33 57.00 Exercise commencement date 26/03/2011 14/03/2012 27/04/2013 16/04/2014 20/11/2015
Expiry date 25/03/2014 13/03/2015 26/04/2015 15/04/2016 19/11/2017
Total number 47,362 53,650 52,150 57,094 64,480 of options granted
Of which to the top 10 employee beneficiaries 5,600 10,500 12,200 12,000 16,100
Of which to corporate officers 33,000 33,000 26,000 26,000 14,000
Jacques Dikansky 25,000 25,000 18,000 18,000 -
Thierry Lambert 4,500 4,500 4,500 4,500 8,000
Stéphane Ducroux 3,500 3,500 3,500 3,500 6,000
Total number of beneficiaries 59 64 78 195 277
Of which corporate officers 3 3 3 3 2
Number of expired options 4,842 3,438 4,820 3,656 - Number of options 26,718 25,730 18,000 18,000 - subscribed
Of which by corporate officers 25,000 25,000 18,000 18,000 - Number of outstanding 15,802 24,482 29,330 35,438 64,480 options
2012 Registration Document 130 Chapter 4 Share capital and shareholder structure
Options granted to corporate officers and to the 10 non-officer salaried employees receiving the highest grants from 1 January 2012 to the filing date of the registration document (Table 9-AMF recommendation of 22 December 2008)
Stock options granted to and exercised by officers Total number of options Price (€) Plan Expiry date granted/shares subscribed
Options granted over the period from 1 January 2012 to the filing date of this 14,000 57.00 15 19/11/2017 document to corporate officers by the issuer and Group company
25,000 27.54 11 25/03/2014
25,000 24.00 12 13/03/2015 Options exercised over the period from 1 January to the filing date of this document by corporate officers of the issuer and of any Group company 18,000 30.12 13 26/04/2015
18,000 45.33 14 15/04/2016
Options to subscribe for or purchase shares granted to and exercised by the top Total number of options Average Plan Expiry date ten non-corporate officer employee beneficiaries granted/share weighted subscribed price (€)
Options granted over the period from 1 January 2012 to the filing date of this document by the issuer and by any qualified companies, to the ten employees of 16,100 57.00 15 19/11/2017 the issuer and qualifying companies included under the plan, receiving the highest number
500 27.54 11 25/03/2014 Options held on the issuer and the aforementioned companies exercised, over the period from 1 January 2012 to the filing date of this document, by the ten employees of the issuer and of these companies, having subscribed for the highest number 500 24.00 12 13/03/2015
Since the date of the filing of this document by the Company, the exercise of no options has been recorded.
2012 Registration Document 131 Chapter 4 Share capital and shareholder structure
IV. Shareholder information
Naturex has been listed since October 1996 on NYSE Euronext in Paris, Segment B
Number of shares comprising the capital on the filing date of this document: 7,816,395 ordinary shares (ISIN FR0000054694)
Naturex is a component of the CAC Small and Gaïa indexes.
Naturex is eligible for the "long only" Deferred Settlement Service (SRD).
In December 2011, Naturex implemented a level 1 sponsored American Depositary Receipt (ADR) programme. Naturex’ ADRs are traded over-the-counter in the United States under the symbol NTUXY.
SYMBOL: NRX - Reuters: NATU.PA - Bloomberg: NRX:FP - DR Symbol: NTUXY
Share price and trading activity trends
Price (in €) Trading volume Trading volume (in number of shares) (in €millions) Average High Low Per month Per trading Monthly total closing price session FY 2008 27.33 37.49 20.15 87,728 4,087 2.38 FY 2009 25.54 32.10 18.60 87,895 4,185 2.31 FY 2010 33.21 45.00 31.26 118,373 4,967 3.83 FY 2011 48.43 61.56 37.32 241,759 11,306 12.04 January 2012 48.18 51.86 46.65 207,467 9,430 9.95 February 2012 49.65 50.69 48.32 180,621 8,601 8.96 March 2012 51.81 54.50 49.27 140,319 6,378 7.28 April 2012 49.68 54.47 47.51 231,754 12,198 11.60 May 2012 45.93 49.40 42.50 190,109 8,641 8.72 June 2012 46.78 48.50 45.40 102,901 4,900 4.80 July 2012 46.49 47.90 44.13 100,310 4,560 4.65 August 2012 49.64 53.00 46.05 106,786 4,643 5.37 September 2012 50.96 53.01 49.25 134,955 6,748 6.89 October 2012 53.06 54.35 51.6 169,216 7,357 8.99 November 2012 54.60 55.68 53.41 156,286 7,104 8.57 December 2012 56.78 58.9 53.56 247,123 13,006 13.99 FY 2012 50.24 58.9 42.50 163,987 7,809 8.31 January 2013 58.089 59.980 56.550 107,683 4,895 6.27 February 2013 60.794 62.190 58.780 117,542 5,877 7.17 March 2013 61.039 62.940 58.500 162,271 8,114 9.86
Source: NYSE Euronext Paris (monthly information, trading ranges and averages for the period)
Average monthly trading volume in 2012 amounted to 163,987 shares or capital of €8,31 million, with an average closing price of €50.24 per share.
2012 Registration Document 132 Chapter 4 Share capital and shareholder structure
At 31 December 2012, the closing price of the Naturex share was €57 for a trading volume of 2,232 shares traded par session, representing capital of €126,493.23. The market capitalisation on this date was €440.5 million.
At 26 April 2013, the closing price of the Naturex share was €56.61 for a trading volume of 8,600 shares par session, representing market capitalisation of €442.5 million.
Securities services Securities services for registered shares recorded directly in the Company's share register (nominatif pur) are assured by:
SOCIETE GENERALE SECURITIES SERVICE Service Nominatif Clientèle Emetteurs B.P. 81236 44312 Nantes Cedex 3 - France
Management of the liquidity contract Natixis Corporate Broking manages the liquidity contract.
Analyst coverage Arrowhead, Berenberg Bank, CM-CIC Securities, Davy Research, ID Midcaps, Kepler Capital Market, Natixis, Portzamparc, Société Générale.
2013 financial information schedule Financial information Results – Q1 2013 29 May 2013 2013 H1 sales 25 July 2013 General Meeting 26 June 2013 2013 first-half results 30 August 2013 Revenue – Q3 2013 5 November 2013 Results – Q3 2013 29 November 2013 Revenue – FY 2013 4 February 2014 Results – FY 2013 27 March 2014
Press releases are released at the end of the trading day.
Information for individual and institutional shareholders
Since it was listed on the stock market, Naturex has sought to foster a relationship of trust with shareholders, whether individuals or institutions, based on dialogue and transparency.
Naturex is committed to directly providing shareholders with information over the long-term on its activity, strategy, growth prospects.
2012 Registration Document 133 Chapter 4 Share capital and shareholder structure
To this purpose, all of the published financial information (press releases, registration document, financial presentations, etc.) is made available through its website www.naturex.com in French and English.
Registration document Available in French and in English, this document can be downloaded from the Naturex website. A printed version can also be obtained free of charge by contacting the Company.
Shareholders' Newsletter Published twice a year, it is available on the website and is sent to identified shareholders by Naturex.
Committed to maintaining ongoing dialogue with its individual and institutional shareholders, Naturex participates in many events and meetings throughout the year:
Information meetings and site visits Two SFAF (French Society of Financial Analysts) meetings are organised every year when the half-year and annual results are presented to the financial community (investors, analysts and financial press). Naturex also organises visits to production sites in France at its Avignon site and in Europe.
Meetings with investors Naturex participates in many investor meetings in the form of one-to-one meetings, conferences and road shows, in France and abroad (London, Frankfurt, Brussels, Amsterdam, Geneva and the United States).
The Actionaria Trade Show The year's key investor relations event, Naturex has participated in the Actionaria Trade Show in Paris since it was created. This event provides an opportunity to meet with and speak directly to individual shareholders.
2012 Registration Document 134 Chapter 5 Review of operations
REVIEW OF OPERATIONS FOR 2012 An eventful year with strong forward momentum
I. Comments on the 2012 consolidated financial statements
I.1 Annual operating highlights
Fiscal 2012 was sadly marked by the sudden illness and passing of Jacques Dikansky, Co-Founder of Naturex. Despite this, operating performances were very satisfactory in the period that also achieved a number of advances involving adjustments to its structure, organisation and industrial and commercial positioning.
Adjustments to the capital structure and a new organisation
Significant adjustments were made to the capital structure and the Group organisation: - The capital structure was strengthened by the presence of two major investors of quality that will provide stable and long-term support to the Group's future development: SGD (21.02% of Naturex's capital), 99.04%-held by Finasucre Group (Lippens family), and the Caravelle Group (15.35% of the capital of Naturex), a family group managed by Mrs. Martel; - Adjustments to the management structure, by the formalisation of an Executive Committee, the creation of a human resources department and by reinforcing teams in the different operational departments and the support functions to adapt human resources to the Group's new dimensions;
- Several adjustments were made to the Group organisation and day-to-day operating procedures by the creation of a Sales Division for Europe/Africa, the implementation of sales segmentation, the organisation of our business units, the creation of an accounting department for Europe/Africa/Asia in Avignon centralising certain functions and facilitating ordination between local entities, finalisation of a portion of the Avignon head office extension making it possible to bring all Naturex S.A. personnel together at one site.
A strengthened industrial base
Integration of Burgundy, the first acquisition of the program completed in October 2011 The first acquisition was made at the end of October 2011 in the same month as the capital increase. Naturex announced the acquisition of Burgundy Botanical Extracts, a French manufacturer and supplier of plant extracts for the nutraceutical, pharmaceutical and cosmetics industries. This acquisition strengthened Naturex's industrial base by adding two new high quality pharmaceutical production sites (France and Spain) with significant capacity for extraction, purification and drying operations. This acquisition also offered Naturex additional expertise in certain purified active ingredients and titrated extracts (raisin-seed, liquorice …), as well as an expanded offering to accelerate sales growth in the pharmaceutical and personal care product markets. The integration process, already well advanced in late December 2011, continued in the first months of 2012 and significantly contributed to reducing overhead expenses (integration of teams, complete "TUP" transfer of assets and liabilities to Naturex S.A on 1 January 2012, simplified merger of Burgundy Iberia into Naturex Spain on 26 October 2012 with retroactive effect on 1 January 2012) and completion of the industrial extension of the French site of Reyssouze.
2012 Registration Document 133 Chapter 5 Review of operations
Acquisition of Pektowin in Poland Naturex announced in January 2012 the acquisition of 100% of the capital of Pektowin, a Polish company specialised in fruit and vegetable pectins and concentrated juices. Created in 1963, Pektowin is a Polish company based in Jaslo on a ground of 20 hectares, located in south-eastern Poland, rich in fruit and vegetable crops. The company employs nearly 320 people and generated €12.5 million in revenue in fiscal 2011***, distributed as follows:
- A core business (approximately 67% of revenue) with a historical know-how and a versatile industrial tool for the production of pectins (apples and citrus) and fruit and vegetable juice concentrates (apples, red beets, black radishes, etc.); - Secondary activities (approximately 33% of revenue) dedicated mostly to the preparation of processed food products (fruit wines, canned goods, etc.), for the Polish distribution sector. The customer base from the core business is comprised of national and international actors of the Polish food industry (58% of sales) but also European (36% of sales) with a noteworthy presence in Eastern Europe, and Russian (6% of sales). The acquisition of Pektowin represents a real strategic interest for Naturex on the industrial site, allowing on the one hand to double its pectin production capacity, as a complement to the Swiss factory in Bischofszell, and on the other hand to acquire a new production tool in the field of juice concentrates. Naturex will indeed develop a full range of fruit and vegetable concentrates in order: - To integrate partly the supply of raw materials for its production facilities in fruit and vegetable powders; - To meet the needs and support the development of its new range of colours, Vegebrite ™ (new offering of "Colouring Foodstuffs"); - To offer all its customers a complete range of fruit and vegetable juice concentrates. At the same time, the commercial location of Naturex in Warsaw (Poland) and the current penetration of Pektowin in the Polish food industry will significantly strengthen the presence of the Group in Eastern Europe with a broader customer base, and encourage locally the promotion and the marketing of all its product lines. This acquisition is an important milestone in Naturex's development as a strategic opening into Eastern Europe countries which offer an excellent sales outlook for all of product ranges. To date, Pektowin's integration is proceeding well for the main activities while measures are also underway for the Group's exit of secondary activities. The installation of a specialised line for juice concentrates made it possible to launch this activity in the second half of 2012.
Acquisition of Valentine in India On 21 March 2012, Naturex announced the acquisition of Valentine, an Indian company specialised in the production of fruit and vegetable powders and natural colours for the food processing industry.
Valentine has two production sites located near Mumbai and is among the main Indian players in the fruit and vegetable powders and natural colours market. Through its expertise in formulation and spray drying processes, Valentine has been successful in winning over the years the loyalty of a high-quality customer base within the Indian food industry, comprised of local companies as well as subsidiaries of multinationals. Valentine, which has had a growth rate of 30% per year over the last two years, employs about fifty people.
2012 Registration Document 134 Chapter 5 Review of operations
This acquisition constitutes a strategic point of entry in a country with 1.2 billion inhabitants with a GDP per inhabitant of 3,700 USD ranking in consequence as the world's fourth-largest economy1. In addition, the substantial development of a young and urban middle class for which the consumption codes are largely influenced by western culture, represents genuine opportunities for growth in the Indian food industry. Carrying out this operation offers major strategic advantages to Naturex by allowing it: - To become a local producer in India in order to strengthen its penetration in a market enjoying high growth, as the image of the local producer is an important factor of success in Naturex's business. This first industrial set-up in Asia will supplement the Group's regional production centres in Europe and in the Americas, in particular for natural colours; - To ensure promotion for all of the Group's product ranges while benefiting from the existing commercial structure and to develop close relations with the Indian food industry. At the same time, Naturex set up a purchasing office, like the one created in China a few years ago, in order to better benefit from the wealth of the country's raw materials (herbs, spices, plant extracts, etc.) at the scale of the Group.
The integration of Valentine, a profitable company with a very attractive customer base, is in progress with no major problems expected.
Acquisition de Decas Botanical Synergies In September 2012, Naturex announced the acquisition of 95% of the capital of Decas Botanical Synergies (renamed Naturex DBS LLC), with the remaining 5% stake held by DBS management). This US company located in Massachusetts is specialised in Cranberry extracts and powders for nutraceuticals and pharmaceutical applications.
Naturex DBS LLC has already possessed for many years considerable expertise in developing, formulating and marketing Cranberry extracts and powders.
The completion of this acquisition provides Naturex with the opportunity to expand its range to very high quality natural ingredients with strong scientific potential (health claims, clinical trials…) and also allows it to strengthen its leadership in the segment of natural ingredients destined for the nutraceutical industry.
Naturex DBS LL benefits from the worldwide geographic network formed by Naturex's sales force as well as the Group's marketing know-how in order to maximise the commercial sales synergies and diversify the customer base.
In addition, Naturex's scientific expertise in terms of research and development and quality control will provide DBS with resources to develop new innovative high value-added solutions.
An offering of high value-added products
The acquisitions made by Naturex over the years as part of its development strategy have enabled it to enhance its product ranges and also to acquire specific knowledge and additional know-how on a plant, an extract, a production process, etc. - Accordingly, the integration of the Natraceutical’s Ingredients Division over 2010 allowed Naturex to enhance its product portfolio with a range of fruit and vegetable powders, fruit pectins, natural colourings, yeasts and Talin® (thaumatococcus daniellii). Talin® received the “Best Innovative Stevia Product 2010” award at the Malta 2010 Conference on Stevia (natural sweetener). - In the same way, the Burgundy acquisition in October 2011 provided Naturex with additional technical know-how for certain purified active principles and titrated extracts (grape seeds and liquorice). In May 2012, at the Salon
1 GDP per inhabitant in parity with purchasing power. Ranking after the United States, China and Japan. Source: Statistiques-mondiales.com
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Vitafood held in Geneva, Naturex was granted a prize in the category “Most Innovative Ingredient” for Utirose™ an active ingredient originating from the Burgundy product portfolio (a hibiscus flower extract to reduce the frequency of urinary infections) and developed and integrated within its NAT life™ range. - Also, the acquisition completed in 2012 in Poland (Pektowin) will contribute to offering a complete range of fruit and vegetable juice concentrates and developing a range of fruit and vegetable powders and natural colours by partially integrating the sourcing of raw materials. - The acquisition of Valentine in India, specialised in the production of fruit and vegetable powders and natural colours, will provide the entire Group with the benefits of local sourcing in this country for raw materials; - Finally, the acquisition in the United States of DBS, specialised in cranberry extracts, provides Naturex with the opportunity to expand its range to very high quality natural ingredients with strong scientific potential (health claims, clinical trials…) and also allows it to strengthen its leadership in the segment of natural ingredients destined for the nutraceutical industry. Decas Botanical Synergies benefits from the worldwide geographic network formed by Naturex's sales force as well as the Group's marketing know-how in order to maximise the commercial sales synergies and diversify the customer base. In addition, Naturex's scientific expertise in terms of research and development and quality control will provide DBS with resources to develop new innovative high value-added solutions.
In this way, this expanded product offering, combined with the scientific and technical expertise of Naturex teams, allows it to propose very high quality natural ingredients with significant scientific potential (health claims, clinical studies, etc.) and innovative applications adapted to customer expectations.
Robust expansion of commercial coverage
Boosted by an industrial and commercial positioning that has been strengthened since 2010 following the integration of the Ingredients Division of Natraceutical, in 2011 Naturex continued to develop its commercial network with the opening of four new commercial offices in South Korea, Japan, Canada and Mexico.
In 2012, this network was further expanded with the addition of three new locations: - In Morocco (Casablanca) to meet growing local demand and supplementing the manufacturing base operating in this country since Naturex's creation; - In Poland (Warsaw) to reap the benefits of Pektowin's current penetration of the Polish food industry and significantly strengthen the Group's presence in Eastern Europe with a broader customer base, making it possible to promote and market all the Group's product lines. - In India (Bombay), where Naturex already has an existing commercial base from the acquisition of Valentine, in order to build local relations with the food processing industry and strengthen its penetration in the rapidly growing Indian market through its local presence.
At 31 December 2012, Naturex was present on all five continents through a fully integrated sales network covering 20 countries (France, Italy, Spain, Morocco, United Kingdom, Belgium, Germany, Poland, Russia, UAE, Thailand, Japan, China, South Korea, Australia, United States, Canada, Brazil, Mexico, India).
This expanded geographical presence offers the Group major competitive strengths for: - growth in size and visibility ; - Strengthening relations with Naturex's customers throughout the world; - Developing platforms for commercial growth near the main production sites; - Penetration in selected markets through a local presence.
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I.2 Revenue analysis
An excellent year of growth in 2012
Organic growth of 18.2% at current exchange rates
€000s FY 2012 FY 2011 Change (%) Change (%) IFRS at constant exchange rates 1st quarter 73,473 64,021 +14.8% +12.6% 2nd quarter 73,684 63,904 +15.3% +9.6% 3rd quarter 75,973 63,226 +20.2% +13.4% 4th quarter 76,693 62,417 +22.9% +20.0% Annual revenue 299,823 253,568 +18.2% +13.9%
Consolidated revenue in fiscal 2012 reached €299.8 million, up 18.2% on the prior period, including a 4.3% currency effect mainly from the rise of the US dollar. Growth at constant exchange rates was 13.9%. This performance included full-year contributions from the four companies acquired by Naturex between the 2011 4th quarter and the end of the 2012 3rd quarter (Burgundy in France and Spain, Pektowin in Poland, Valentine in India and DBS in the United States) that accounted for approximately 7% of the Group's annual revenue.
The Group's positive momentum over the full year reflected both Naturex's balanced positioning in very buoyant mature markets and emerging markets with high growth potential, but also a perfectly targeted offering based on innovation and quality.
In the 2012 4th quarter, sales grew 22.9% from the same period in 2011, confirming the accelerating trend in previous quarter.
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Group growth driven by a customer-centric offering
€000s FY 2012 FY 2011* Revenue Change Change IFRS mix (%) (%) (%) constant exchange rates Food & Beverage 188,828 168,336 63.0% +12.2% +7.7% Nutrition & Health 92,295 71,144 30.8% +29.7% +22.7% Personal Care 4,797 3,240 1.6% +48.1% +42.5% Toll Manufacturing 13,903 10,848 4.6% +28.2% +42.1%
* Integration of the NAThealthy range within the Food & Beverage division
All three markets continued to register gains driven by a more segmented offering and a marketing approach fine- tuned to customer needs.
- The Food & Beverage division had revenue of €188.8 million, 1,6% 4,6% up 12.2% (7.7% at constant exchange rates), reflecting a shift in the ingredients range to a larger and more customised offering allowing for a significant number of combinations;
- Nutrition & Health grew 29.7%(22.7% at constant exchange 30,8% rates) on revenue of €92.3 million sustained by an offering with an increased focus on concepts providing differentiation based
on innovative extracts, notably through the NATactiv® and 63,0% NATlife™ ranges;
- Personal Care had revenue of nearly €5 million, a significant Food & Beverage Nutrition & Health gain on the prior year, driven by a more targeted offering for Personal Care Toll-Manufacturing cosmetic applications.
- Toll Manufacturing made up for its slower momentum in the first two quarters of the period to reach annual sales of €13.9 million, up 28.2% on 2011. This activity is expected to develop further in the coming years following the creation of a joint venture for krill extraction with Aker BioMarine, the Norwegian-based world leader in krill harvesting and specialised in the development, production and commercialisation of Omega-3 rich krill oil-based products. This joint venture, whose production plant will be based in the US, will combine Aker BioMarine's know-how with Naturex's expertise in extraction, and will guarantee increased volumes for sourcing krill oil, supplementing the current production of Naturex Spain (Valencia).
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Reaping benefits from an expanding worldwide coverage
€000s FY 2012 FY 2011 Revenue Change Change IFRS mix (%) (%) (%) constant exchange rates Europe / Africa* 142,291 128,022 47.5% +11.1% +6.4% Americas 120,892 92,708 40.3% +30.4% +22.4% Asia / Pacific* 36,640 32,837 12.2% +11.6% +20.6%
* To take into account the geographic breakdown of our Sales Divisions, countries of the Middle East region until now included in Europe/Africa have been included under the Asia/Pacific region.
The development of Naturex's worldwide geographical coverage accelerated over the last three years, with a twofold increase in the number of sales offices, has started to show results. This positioning makes it possible to both support a multinational customer base in pursuing expansion into new regions and address the needs of local customers to capitalise on the growth potential of emerging countries.
- The Europe / Africa region had revenue growth of 11.1% (+6.4% at constant exchange rates) in an economic environment that remains difficult despite improvements in the last two quarters, while noting that it was this region that most benefited from the expanded Group structure with the contributions of Burgundy (France and Spain) and Pektowin (Poland); - The Americas registered excellent growth of 30.4% (20.4% at constant exchange rates) driven by very strong continuing expansion in North America and accelerating gains in Latin America. - The Asia / Pacific region performed well on the strength of rapid advances in countries in Asia with growth of approximately 20% for the period and now accounting for 60% of sales for this region. In Australia, while sales for ingredients remained stable for the full year despite a marginal slowdown in the last two quarters from the trend of offshoring in the food industry sector, Naturex Australia expanded its nutraceutical and food and beverage additives offering.
Emerging markets in Eastern Europe, Asia, Latin America, Africa and the Middle East account for a 17.7% share of total Group revenue, up from 14.0% one year earlier, with 51.5% year-on-year growth at current exchange rates.
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I.3 Analysis of consolidated results
Change in accounting method
In June 2011, the IASB published the amended version of IAS 19. This standard whose application is mandatory for periods commencing on or after 1 January 2013 was adopted by the European Union in June 2012. Amended IAS 19 is applied with retrospective effect on previously recognised pension liabilities. Up until 30 June 2012, actuarial gains and losses were recognised by the Group in profit and loss. The impact of the early application of Amended IAS 19 concerns mainly the recognition under other comprehensive income of actuarial gains and losses previously recognised under profit and loss and is presented in further detail in Note 13 to the consolidated financial statements. See Notes 4.1 and 13 to the consolidated financial statements.
Income statement
€ millions FY FY Change IFRS 2012 2011 (%) Restated*
Revenue 299.8 253.6 +18.2%
Gross margin 175.5 148.6 +18.1%
Gross margin (%) 58.5% 58.6%
Current operating income (EBIT) 35.9 30.1 +19.3%
Current operating margin (%) 12.0% 11.9%
Other non-current operating expenses (4.4) (1.6) -
Other non-current operating income 6.1 - -
Net operating income 37.6 28.5 +31.9%
Operating margin (%) 12.5% 11.3%
Net borrowing costs (5.1) (4.8) -
Other financial income and expenses (0.9) 0.2 -
Income before tax 31.7 23.9 +32.6%
Tax expense (8.7) (8.3) 4.8%
Net income attributable to the Group 22.9 15.6 +46.8%
Net margin (%) 7.6% 6.2%
* Early adoption of IAS 19 (refer to the Consolidated financial statements and notes: Note 4.1 "Change in accounting method" and Note 13 "Employee benefits")
The positive growth momentum for revenue over 2011 continued over the 2012, under the combined effects of an enhanced product range through acquisitions and reinforced sales presence, despite a worsening economic situation, especially in Europe.
Consolidated revenue in fiscal 2012 reached €299.8 million, up 18.2% on the prior period, including a 4.3% currency effect mainly from the rise of the US dollar. Growth at constant exchange rates was 13.9%.
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Despite expenditures incurred under the acquisition program and costs linked to the integration of newly added companies, Naturex benefits from positive operating drivers, confirming the quality and strength of its business model and the relevance of its positioning both in mature markets still active and emerging markets with high growth potential. The consolidated gross margin amounts to 175.5 million, up 18.1% on 2011, and in line with growth in revenue. As a percentage of sales the gross margin remained stable at 58.5%, adversely impacted by a less favourable product mix in the 2nd half, resulting in particular from a significant seasonal effect in Poland for lower value added concentrated juices. Despite this however the product mix continued to improve from gains by high value-added differentiated products and concepts. Current operating income rose 19.3% to €35.9 million up from €30.1 million last year. The current operating margin represents 12% of revenue compared to 11.9% in 2011 despite the very low contribution to results from acquisitions and the impact of restructuring measures implemented by the Group in the period in response to the effects of rapid growth in recent years. This includes a 115.8% increase in external charges (€71 million) linked to organic growth in business, and notably transportation expenses, fees and marketing expenses relating to advertising costs and exhibitions at trade fairs, travel expenses as well as operating and maintenance costs for laboratory and production sites . Most of Naturex's development expenditures do not meet the criteria for fixed assets provided for in IAS 38, especially with regard to their future economic benefits. On that basis, €4.2 million were expensed in fiscal 2012. Staff costs of €58.4 million were up 18.7% on 2011 reflecting the strengthening of the sales structure in international markets and the integration of acquisitions, representing 19.5% of revenue in the period compared with 19.4% in the prior year. Consolidated net operating income amounted to €37.6 million, up from €28.5 million in 2011 and included: - €4.4 million in non-current operating expenses comprised mainly of: o €2.3 million in restructuring expenses related to the integration of Pektowin (€0.8 million) and Burgundy (€0.3 million); Reorganisation and miscellaneous expenses directly related to the death of the company's Chairman and Founder amounting to €1 million; o €2.1 million in acquisition-related expenses consisting mainly of acquisition fees expensed in accordance with revised IFRS 3. These include all fees linked to the acquisition program, and in particular €0.5 million for the acquisition of Pektowin (Poland) and €0.3 million for Valentine (India) and €0.8 million for DBS (USA); - €6.1 million in non-current operating income from insurance payments on policies taken out by the Group following the death of Mr. Jacques Dikansky (bank insurance and key person insurance policies). The insurance payout under the back insurance coverage was allocated to repayment of the loan.
After taking these non-current operating expenses into account, the operating margin came to 12.5%, up from 11.3% in 2011.
Net borrowing costs for 2012 amounted to €5.1 million, up from €4.8 million in the prior year. This includes mainly €5.2 million in interest and expenses from financing lines compared with €5.3 million in the 2011 and interest income of €0.2 million compared with €0.5 million in 2011. Other financial income and expenses represented a net charge of €0.9 million and concerned €5.4 million in losses on foreign exchange and €4,5 million in gains. In 2011, this item represented a net amount of €0.2 million from gains on foreign exchange exceeding losses. Net income attributable to the Group amounted to €22.9 million, up from €15.6 million in 2011, after a tax charge of €8.7 million (compared with €8.3 million in 2011). Basic net earnings per share for 2012 amounted to €2.9677 compared to €2.3144 in 2011.
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I.4 Analysis of the balance sheet
Balance sheet
Total assets at 31 December 2012 stood at €471.6 million compared to €426.1 million at 31 December 2011.
ASSETS
€ millions - IFRS 31/12/2012 31/12/2011 Restated*
Non-current assets 251.3 209.8
Goodwill 114.9 93.5
Other intangible assets 12.2 9.3
Property, plant and equipment 117.0 103.2
Financial assets 4.9 1.2
Non-current derivatives - 0.3
Deferred tax assets 2.3 2.4
Current assets 220.4 216.3
Inventories 137.2 115.2
Current derivatives 0.3 1.2
Tax receivables 1.2 0.7
Trade and other receivables 71.1 61.6
Cash and cash equivalents 10.6 37.7
TOTAL ASSETS 471.6 426.1
* Early adoption of IAS 19 (refer to the Consolidated financial statements and notes: Note 4.1 "Change in accounting method" and Note 13 "Employee benefits")
Non-current assets
The Group's non-current assets amounted to €251.3 million at year end compared to €209.9 million at 31 December 2011 and included mainly: - Goodwill of €114.9 million compared to €93.5 million at 31 December 2011. Goodwill is not amortised but is tested for impairment annually. Impairment tests were carried out on 31 December 2012. The assumptions used and rates applied to the geographical regions concerned are presented in note 7 to the consolidated financial statements.
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The change in goodwill over the period breaks down largely as follows: - €2.3 million for Pektowin (Europe region); - €5.3 million for Valentine (Asia region), including two companies Valentine Agro and Valentine Foods; - €12.7 million for DBS (Americas); - And €1.8 million in fair value adjustments for goodwill on Burgundy (Europe region). The acquisition of Burgundy generated €7.7 million in goodwill that was recognised in the annual financial statements for the period ending 31 December 2011.
Goodwill at 31 December 2012 can be broken down as follows: . €51.4 million for the Americas region including €12.6 million for the DBS acquisition and a negative translation difference of €0.8 million; . €55.9 million for the Europe-Africa-Russia region including €2.3 million from the acquisition of Pektowin, a €1.8 million from fair value adjustment of goodwill from Burgundy and €0.5 million from translation differences; . €7.5 million for the Asia region including €5.3 million for the Valentine acquisition and a negative translation difference of €0.4 million. - Other net intangible assets amounted to €12.2 million at 31 December 2012 compared with €9.3 million at 31 December 2011. Other gross intangible assets amounted to €19.1 million at 31 December 2012 compared with €14 million at 31 December 2011 and including mainly: . €1.8 million for the acquisition of a customer portfolio from distributors in connection with the acquisition of DBS United States); . €0.9 million for the acquisition of software and brands; . €1.6 million for capitalised development expenditures corresponding notably to research and development investments (the Italian ASMF project and the Spanish Senifood project described in note 18 to the consolidated financial statements); . €0.8 million for the acquisition of assets under construction. - Net property, plant and equipment amounted to €117 million at year-end compared with €103.2 million at 31 December 2011. The gross value of these assets amounted to €185.5 million compared to €160.4 million at 31 December 2012 and represented mainly capital expenditures for the Burgundy and Pektowin sites, the extension of the Avignon head office and the purchase of the building for the US head office. - Net financial assets amounted to €4.9 million at year end compared with €1.2 million at 31 December 2011. - At year end, no non-current derivative assets were recognised in the balance sheet compared with €0.3 million at 31 December 2011. The calculation of the fair value of financial assets and liabilities is presented in Note 9 to the consolidated financial statements. - €2.3 million in deferred tax assets compared with €2.5 million at 31 December 2011.
Current assets
Current assets amounted to 220.4 million compared to 216.3 million at 31 December 2011 and included mainly: - €137.2 million for net inventories compared with €115.2 million at 31 December 2011; - €138.6 million in gross inventories compared to €116.2 million at 31 December 2011. The €18.9 million increase in this line item includes €4 million for inventories resulting from acquisitions. Gross inventories also include a €0.4 million negative translation difference. - Provisions for inventories of €1.5 million compared to €1 million at 31 December 2011. - €0.3 million for current derivatives compared with €1.2 million at 31 December 2011; - €1.2 million for current tax liabilities compared with €0.7 million at 31 December 2011;
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- €71.1 million in trade and related receivables, up €9.4 million from €61.6 million at 31 December 2011, and breaking down as follows: o €52.1 million in trade receivables, up from €48.8 million at 31 December 2011; o €13.6 million in tax and social security receivables, up from €11.7 million at 31 December 2011; o €6.9 million for other receivables compared with €2.9 million at 31 December 2011. - The total provisions for the impairment of trade receivables at 31 December 2012 amounted to €1.6 million, including €1.1 million on trade receivables and €0.5 million for other receivables. - €10.6 million for cash and cash equivalents compared with €37.7 million at 31 December 2011. The change in cash and cash equivalents reflects expenses incurred after the end of fiscal 2011 on acquisitions in the period and investments relating to their integration into the Group structure.
EQUITY AND LIABILITIES
€ millions - IFRS 31/12/2012 31/12/2011 Restated*
Shareholders' equity 258.6 236.6
Non-current liabilities 86.1 103.3
Long-term financial debt 69.3 87.3
Non-current derivatives 1.6 2.3
Employee benefits 4.9 2.3
Deferred tax liabilities 10.3 11.4
Current liabilities 126.9 86.2
Current financial debt 51.0 17.6
Current derivatives 1.0 0.9
Current provisions 0.4 -
Current tax liabilities 2.8 1.6
Trade and other payables 64.5 65.2
Bank credit facilities 7.2 0.9
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 471.6 426.1
* Early adoption of IAS 19 (refer to the Consolidated financial statements and notes: Note 4.1 "Change in accounting method" and Note 13 "Employee benefits")
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Shareholders' equity
Shareholders' equity stood at €258.6 million at 31 December 2012 compared to €236.6 million at 31 December 2011 comprised of mainly: - Net income for the period of €22.9 million; - The dividend distribution of €0.8 million for the fiscal year ended 31 December 2011 paid on 30 July 2012 with an option for payment in cash or in shares; - Income from the exercise by employees of the Company of stock options and related benefits of €0.3 million; - A €0.1 million change in treasury shares held within the framework of the liquidity agreement; - Changes in other comprehensive income items (including the effective portion of changes in the fair value of cash flow hedges net of tax and translation differences).
Non-current liabilities
Non-current liabilities amounted to €86.1 million at 31 December 2012 compared to €103.3 million at 31 December 2011 and included: - €69.3 million for long-term financial debt compared with €87.3 million at 31 December 2011; - Non-current derivative liabilities of €1.6 million compared with €2.3 million at 31 December 2011. The calculation of the fair value of financial assets and liabilities is presented in Note 9 to the consolidated financial statements; - Deferred tax liabilities amounted to €10.3 million compared to €11.4 million at 31 December 2011; - Employee benefits amounting to €4.9 million and concerned at 31 December 2012 exclusively provisions for pension obligations in France, Italy, Switzerland, Australia and Poland (following the acquisition of Pektowin), compared with €2.3 million at 31 December 2011 The Group has applied in advance IAS 19 "Employee benefits" (2011) with a date for its first-time adoption of 1 January 2012 and adjusted its criteria for determining expense and income items for defined benefit obligations. The impact of the early adoption of amended IAS 19 concerns mainly the recognition under other comprehensive income of actuarial gains and losses previously recognised under profit and loss and presented in further detail in Note 13 to the consolidated financial statements.
Current liabilities
Current liabilities amounted to €126.9 million at 31 December 2012 compared to €86.2 million at 31 December 2011.
This includes, in addition to the current portion of long-term debt of €51 million compared with €17.6 million at 31 December 2011, the following items: - Current derivative instruments amounting to €1 million at year end compared with €0.9 million at 31 December 2011; - €2.8 million for current tax liabilities compared to €1.6 million at 31 December 2011; - Trade and other payables totalling €64.5 million compared to €65.2 million at 31 December 2011. - Bank credit facilities of €7.2 million compared with €0.9 million at 31 December 2011.
Breakdown of long-term debt
Gross financial debt amounted to €127.5 million at 31 December 2012 compared with €105.8 million at 31 December 2011, consisting mainly of the structured loan.
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It should be noted that at 31 December 2009, the Group set up a new structured loan. The debt, which was initially at a variable rate, was swapped for a portion at a fixed rate in 2010. Gross financial debt can be broken down as follows: . €117.9 million in debt financing at 31 December 2012 compared to €104.2 million at 31 December 2011. This increase includes the impact of repayment of €25.5 million, €38.9 million in new credit lines, €0.4 million in loans relating to companies consolidated for the first time in the period. . €1.0 million in debt on finance leases compared with €0.4 million at 31 December, that includes an additional €0.8 million and repayment of €0.2 million; . €1.4 million in debt related to equity investments and shareholder loans (partners' current accounts) compared with €0.3 million at 31 December 2011, including €1.1 million in new debt; . €7.2 million in bank credit facilities, up from €0.9 million at 31 December 2011, including additional bank facilities of €6.1 million and €0.2 million for bank facilities granted to companies acquired and consolidated for the first time in the period.
The breakdown of all gross financial debt at 31 December 2012 is as follows: - Current financial debt: €58.1 million or 45.6%; - Long-term financial debt: €69.3 million or 54.4%.
At 31 December 2012, total net financial debt (current financial debt + long-term financial debt + bank credit facilities net of cash) amounted to €116.9 million, up from €68.2 million at 31 December 2011.
The increase in net debt results mainly use of €27 million in cash assets in connection with acquisitions made in the period along with investment projects carried out at the same time for €30 million.
Net gearing (net financial debt/equity) at 31 December 2012 was 45.2%, up from 28.9% at 31 December 2011. The increase in this ratio reflects the impact of acquisitions in the period in Poland (Pektowin), India (Valentine) and the United States( DBS).
It should be noted that, Group resources were reinforced in January 2013 by the €18 million OCEANE convertible bond issue, with €12 million taken up by France's Strategic Investment Fund (Fonds stratégique d’Investissement or FSI) and €6 million by Salvepar (Tikehau Capital Group) providing a solid base to explore opportunities for new developments with confidence.
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Consolidated cash flows
€ millions - IFRS 31/12/2012 31/12/2011
Operating cash flows 51.3 42.1
Taxes paid (5.8) (4.5)
Change in WCR (30.9) (11.9)
Net cash provided by (used in) operating activities 14.6 25.6
Net cash provided by (used in) investing activities (56.6) (25.9)
Net cash provided by (used in) financing activities 8.5 20.9
Net change in cash and cash equivalents (33.6) 20.6
Closing cash and cash equivalents 3.5 36.7
Opening cash and cash equivalents 36.7 16.2
Effect of exchange rate changes on cash (0.3) (0.1)
Operating cash flows were positive with net cash provided by operating activities of €14.6 million after a negative change in working capital of €30.9 million. Net cash used in investing activities represented outflows of €56.6 million, including in particular: - €27.9 million, net of cash acquired, concerning mainly by €5.6 million for Pektowin (Poland), €6.4 million for Valentine (India) and €15 million for DBS (United States); - Gross capital expenditures of €5.1 million for intangible assets mainly for the capitalisation of development expenditures relating to the Senifood and ASMF projects, the purchase of the customer portfolio from the DBS distributor and software; - Gross capital expenditures of €25.2 million for property, plant and equipment concerning mainly installations and improvements for the Burgundy and Pektowin sites, the extension of the Avignon head office and the acquisition of the building housing the head office of NATUREX Inc. in the United States; - €3.9 million in financial investments relating to the payment of guarantee deposits; - €5.0 million on the disposal of fixed assets; - €0.5 million for the repayment of long-term investments. Net cash provided by financing activities represented inflows of €8.5 million, and included in particular: - proceeds of €0.3 million from the issuance of shares; - €0.1 million in dividends distributed to Naturex S.A shareholders; - inflows of €38.9 million from debt obtained to finance new acquisitions and fund increased working capital requirements; - €25.6 billion for the repayment of loans relating in particular to instalment dates for the structured loan, - €0.2 million of debt repayments in connection with finance leases; - €1.1 million from the net change of other financial liabilities; - €6.0 million for interest expense payments.
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Exchange rate fluctuations had a negative impact on cash of €0.3 million compared with an impact that was virtually nil in 2011. The resulting net change in cash and cash equivalents represented a decrease of €33.6 million in 2012 for a closing year-end position of €10.6 million.
II.4 Financing policy
To finance its development, Naturex signed a structured credit agreement on 30 December 2009, replacing a previous structured credit agreement dating from December 2008. This credit agreement was amended during 2012 to include an additional tranche for capital expenditure financing (tranche "CAPEX 2") for €30 million available to be drawn in 2012 and 2013. The tranches for short-term credit lines were extended until 31/12/2018 through this same amendment. This structured credit facility breaks down as follows: - 113.6 million of instalment credit lines primarily used to refinance previous loans and finance the acquisition of Natraceutical’s Ingredients Division and including: - A €20 million (revolving) tranche for short-term facilities with €18 million drawn at 31 December 2012; - A second €15 million (revolving) multi-currency tranche for short-term facilities able to be drawn in EUR, USD and CHF, with €1.5 million and €10.7 million having been drawn and at 31 December 2012. - A €20 million (revolving) tranche for CAPEX financing that was fully drawn up on 31 December 2012. - A second €30 million (revolving) tranche for CAPEX financing set up in 2012 with €8 million drawn at 31 December 2012.
The loan agreement binding the Group to its lenders contains a clause regarding compliance with two bank ratios, which are assessed every six months: (i) gearing (net financial debt / total shareholders’ equity) and (ii) a financial leverage ratio (net financial debt / EBITDA). If the Group should breach these contractual ratios and/or the majority of lenders so request, the lenders may demand the repayment of the corresponding loan. At 31 December 2012, these ratios were respected.
I.6 Capital investment policy
In 2011, capital expenditures for property, plant and equipment amounted to €14.7 million, in line with the Group's capital spending budgets of prior years. These investments concerned mainly installations and improvements for production sites, retrofitting to standards certain sites in connection with certification audits (ISO, BRC, etc.) and production and laboratory equipment maintenance. In 2012, capital expenditures for property, plant and equipment increased significantly following the consolidation of companies acquired and installations and improvements for their plant and machinery and amounting to €26 million. The main capital expenditures concerned the sites of Burgundy (France and Spain) and Pektowin (Poland), the extension of the Avignon head office with the construction of offices and new installations for the plant (new areas for formulation, warehousing, etc.), and the purchase of the building housing the head office of Naturex Inc. in the United States.
For 2013, the Group plans another phase of significant investments relating in part to adjustments to the Group structure (continuation of the extension of the Avignon head office with the creation of application labs and a pilot
2012 Registration Document 148 Chapter 5 Review of operations
facility, the continued upgrading of production sites of companies acquired and investments for joint venture for krill extraction with Aker BioMarine), and the implementation of a strategy for development through industrial projects in Asia and ramping up of our R&D efforts. Refer to detailed information on non-current assets for 2011 and 2012, including plant, property and equipment in Note 8 to the consolidated financial statements in Chapter 6 of this registration document.
I.7 Main related party transactions
Details on related party transactions are presented in Note 25 to the interim*** consolidated financial statements.
Information on executive compensation
Information concerning the total gross compensation of company officers (executives and non-executive) pertaining to 2012 and 2011, is provided in the Corporate Governance chapter of this document. Total gross compensation paid to Naturex’s management bodies amounted to €1.6 million in 2012 compared to €1.9 million in 2011. These amounts include compensation, benefits in kind and the valuation of stock options granted in the period, paid by Naturex Inc. (€1.1 million) and Naturex S.A. (€0.5 million) respectively. Members of Naturex's management bodies are not granted any long-term benefits.
Other operations with related parties
Compensation paid to the principal executive officers
Total gross compensation paid to Naturex’s management bodies amounted to €1.6 million in the 2012 compared to €1.9 million in 2011. These amounts include compensation, benefits in kind and the valuation of stock options granted in the period. It was paid by Naturex Inc. (€1.1 million) and Naturex S.A. (€0.5 million). Members of Naturex's management bodies are not granted any long-term benefits.
Concerning SGD which holds 21.02% of the capital and 27.50% of the voting rights, €68,000 in interest were paid by Naturex SA on the current account that had a balance at the end of the reporting period €1.4 million. SGD also received 3,937 Naturex shares as payment in stock dividends for a value of €0.2 million.
Other operations with related parties
Senior executives created SCI La Pinède with a view to constructing a building on land next the current head office so it can be extended in the future.
The part of the land purchased by SCI Les Broquetons (a French non-trading property company included within the Group structure) was transferred to SCI La Pinède as soon as the financing was put into place.
At 31 December 2012, €0.4 million was paid as security for the rent of the extension. No rent was paid in 2012.
The Naturex AG Group company rents, for use as a warehouse, part of a building located on land adjacent to the Burgdorf plant from Grünes Blatt, a real estate company in which the executive officers are shareholders. This company granted a 10-year commercial lease to Naturex AG.
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Grünes Blatt rents the building to Naturex AG at market conditions for a maximum of CHF 0.4 million less the amount paid by third parties who occupy part of the said building. In addition, Naturex AG has the right to build on the free part of the land any building it may require.
In the period, an annual charge of CHF 0.3 million in rent was paid.
I.8 Off-balance sheet commitments
The details of these commitments are described in note 25.2 to the consolidated financial statements presented in chapter 6 of this document.
I.9 Material contracts
Over the past two years no Group company has concluded any material contracts other than those concluded in the normal course of business. On the publication date of this document, no member of the Group was a party to a contract that could give rise to any obligation or substantial commitment for the Group as a whole, other than contracts concluded in the normal course of business.
2012 Registration Document 150 Chapter 5 Review of operations
II. Comments on the annual financial statements of NATUREX S.A
II.1 Analysis of annual results
The annual financial statements of Naturex S.A. are prepared and presented on the basis of French GAAP and notably the decisions issued by the French accounting rules committee (Comité de la Réglementation Comptable or CRC). In fiscal 2012, no changes in accounting methods were adopted by Naturex S.A.
Income statement highlights
In €m 2012 2011
Revenue 110.6 77.2
Operating income 137.3 94.7
Operating expenses 133.1 89.5
Net operating income 4.1 5.2
Financial income 9.2 9.0
Financial expenses 11.1 9.0
Net financial income (expense) (1.9) -
Exceptional income 3.4 1.5
Exceptional expenses 1.2 3.1
Net exceptional items (2.2) (1.6)
Income before tax 4.5 3.6
Income tax (1.1) (0.3)
Net income 5.5 3.9
- Revenue for 2012 amounted to €110.6 million, up from€77.2 million in the prior year. This increase reflects a significant increase in contributions from subsidiaries in Brazil, the United States and Russia.
- Payroll expenses and payroll taxes amounted to €12.3 million, up from €9.3 million in 2011 for a total workforce of 385 employees including expatriate staff and salaried employees of the Dubai and Singapore offices. The average number of personnel at year-end was 273 employees compared with 253 employees at 31 December 2011.
- Net operating income came to €4.1 million compared to €5.2 million for the prior period. This result takes into account in particular €26.8 million for other external charges compared with €20.3 million at 31 December 2011 and €4.6 million in allowances for amortisation and depreciation and provisions, compared to €2.4 million at 31 December 2011.
- Net financial expense amounted to €1.9 million for fiscal 2012 compared with an amount approaching nil in 2011. This result includes €9.2 million in financial income (interest from affiliates, foreign exchange gains and the
2012 Registration Document 151 Chapter 5 Review of operations
reversal of a provision for foreign exchange losses) and expenses of €11.1 million (interest expense and both realised and unrealised foreign exchange losses).
- Net exceptional items represented income of €2.2 million compared with a loss of €1.6 million in the prior period. This includes exceptional income of €3.4 million with €3.1 million from an insurance payout for a loan guarantee following the death of Mr. Dikansky, and exceptional expenses of €1.2 million, including mainly €0.9 million for accelerated tax depreciations and amortisations and €0.3 million from asset disposals.
- Net income came to €5.5 million, up from €3.9 million in the prior year. This result included a tax expense of €1.1 million compared with €0.3 million in 20111.
Balance sheet highlights
Total assets at 31 December 2012 stood at €383.4 million compared to €338.8 million at 31 December 2011.
ASSETS
In €m 31/12/2012 31/12/2011
Non-current assets 250.9 219.8
Intangible assets 23.0 15.3
Property, plant and equipment 18.6 7.2
Financial assets 209.4 197.2
Current assets 121.6 107.2
Inventories and work in progress 29.8 21.6
Trade receivables and related accounts 19.6 10.7
Miscellaneous receivables 71.1 51.8
Cash at bank and in hand 1.1 23.1
Accrual accounts 2.4 2.7
Translation differences (assets) 8.5 9.1
TOTAL ASSETS 383.4 338.8
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Non-current assets
- Net non-current assets totalled €250.9 million compared to €219.8 million at 31 December 2011, and included: . €23 million for intangible assets, up from €15.3 million at 31 December 2011 and consisting mainly of goodwill, concessions and patents and development expenditures; with accumulated amortisation and impairment charges of €3.2 million; . €18.6 million for property, plant and equipment, compared to €7.2 million at 31 December 2011 and consisting primarily of machinery and equipment, miscellaneous fixtures and improvements plus office and IT equipment; with accumulated depreciation and impairment charges of €16 million; . €209.4 million for financial assets compared to €197.2 million at 31 December 2011 including mainly equity investments and related receivables. The acquisitions related to equity investments in 2012 correspond to the: - Acquisition of Pektowin (Poland) in January 2012 for €5.6 million with €0.5 million in acquisition-related expenses; - Acquisition of Valentine Agro (India) in March 2012 for €4.9 million with €0.3 million in acquisition-related expenses; - Acquisition of Valentine Food (India) in March 2012 for €1.8 million. - Acquisition of ITRAD (Ivory Coast) in February 2012 for €66,000 with €8,000 in acquisition-related expenses.
The reduction in equity interests by €5.8 million is related to the simplified merger entailing the transfer of all Burgundy France's assets and liabilities in January 2012.
During the year, subsidiaries repaid €8.9 million in redeemable loans. Two new loans were granted for €3.5 million to Naturex SL (Spain) and US$19.0 million to Naturex Inc. (US).
Current assets
- Net inventories amounted to €29.8 million compared to €21.6 million at 31 December 2011. The cost of inventories is evaluated by batch at the cost price and includes purchase costs for raw materials, production or transformation costs, the appropriate share of the indirect costs based on the normal production capacity and the other costs incurred in bringing the inventories to their present location and condition. Inventories are measured at the lower of the cost and the net realisable value. A provision for impairment is recognised when the purchase cost or cost price falls below the market price At 31 December 2012, a provision of €2.2 million was recorded.
The breakdown of inventories is as follows: . €7.0 million for raw materials at 31 December 2012 compared to €5.9 million at 31 December 2011; . €24.9 million for finished and semi-finished goods at 31 December 2012 compared to €15.6 million at 31 December 2011.
- Gross trade receivables and related accounts amounted to €19.8 million at 31 December 2011, including €14.0 million with affiliated companies, compared to €11.2 million at 31 December 2011 and €5.4 million with affiliated companies. Receivables are measured at nominal value. A provision for impairment is recorded when there is a collection risk for the full or a partial amount of the receivable.
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On that basis, trade receivables and related accounts amounted to €19.6 million at 31 December 2012 after a provision of €0.2 million (0.9% of gross receivables) compared to €10.7 million at 31 December 2011, after taking into account a provision of €0.5 million (4.5% of gross receivables). All receivables included under current assets are due within one year. Receivables stated in foreign currency amounted to €8.5 million.
- Miscellaneous receivables under current assets amounted to €71.1 million compared to €51.8 million at 31 December 2011 and included in namely: . €61.6 million for receivables relating to current account balances with subsidiaries; . €0.4 million for advances to personnel; . €4.7 million for government-related, income tax and VAT receivables; . €3.0 million for other accrued income; . €1.3 million for other receivables
Cash and cash equivalents at 31 December 2012 amounted to €1.1 million, compared to €23.1 million at 31 December 2011
EQUITY AND LIABILITIES
In €M 31/12/2012 31/12/2011
Shareholders' equity 203.9 197.1
Provisions for contingencies and expenses 3.5 1.9
Borrowings and financial liabilities 125.3 112.1
Bank credit facilities 7.2 0.8
Partners' current accounts 1.4 0.3
Trade payables and related accounts 21.8 13.2
Other payables 14.4 5.4
Prepaid income 0.2 0.4
Translation differences (liabilities) 5.7 7.6
Total liabilities 176.1 139.8
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 383.4 338.8
- Shareholders' equity amounted to €203.9 million compared to €197.1 million at 31 December 2011, after income for the year of €5.5 million and additional paid-in capital of €0.9 million.
- Liabilities at 31 December 2012 amounted to €176.1 million, compared to €139.8 million at 31 December 2011 and namely: . Borrowings in financial liabilities of €125.3 million, up from €112.1 million at 31 December 2011; . Bank credit facilities of €7.2 million compared with €0.8 million at 31 December 2011; . Trade payables and related accounts of €21.8 million compared to €13.2 million at 31 December 2011; . Other current liabilities of €14.4 million compared to €5.4 million at 31 December 2011 including mainly current account balances with subsidiaries of €9.7 million, payroll tax payables of €1.8 million and accrued expenses on employee compensation of €1.3 million.
2012 Registration Document 154 Chapter 5 Review of operations
- Partners' current accounts amounted to €1.4 million compared to €0.3 million at 31 December 2011. - Prepaid expenses came to €0.2 million and concerned mainly the reclassification of sales invoices resulting from non-completion of transfer of title before the end of the reporting period. - Translation differences amounted to €8.5 million on assets and concerned mainly current account balances subsidiaries accounts and €5.7 million on liabilities and concerned loans to subsidiaries and financial instruments.
Statutory aged trial balance information for payables
Pursuant to article L.441-6-1 of the French Commercial Code and decree No. 2008-1492 of 30 December 2008, aged trial balance information for payables for Naturex S.A. is disclosed below for 31 December 2012 as compared to 2011:
31 December 2012 31 December 2011 in €000s Amount in € % Amount % Not due 9,275 42% 8,798 64% 1 to 30 days 5,167 24% 2,128 17% 31 to 60 days 3,080 24% 991 8% 61 to 90 days 1,393 6% 509 4% More than 90 days 2,922 13% 773 6% TOTAL 21,837 100% 13,197 100% Some payables past due are justified by the re-scheduling of major invoices due to late deliveries. It is specified that this table includes trade payables of both Naturex S.A. but also inter-company trade payables.
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II.3 Five-year financial highlights and other statutory disclosures
In € 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008 Capital at year end Share capital 11,592,809 11,558,370 9,616,396 9,546,000 4,522,469 Existing number of ordinary shares 7,728,539 7,705,580 6,410,931 6,364,000 3,014,979 Maximul number of future shares to be created 0 218,098 201,755 177,306 128,964
Operations and results for the financial year Revenue before tax 110,644,461 77,243,526 77,225,365 52,493,871 50,932,798 Current income 3,307,442 5,448,652 -682,228 -417,269 482 Income tax -998,305 -315,849 -1,131,267 -772,817 -1,060,802 Employee profit-sharing in respect of financial year 0 0 0 0 0 Net income 6,520,907 3,908,053 -353,331 206,903 1,328,217 Earnings distributed* 772,854 770,558 640,393 701,005 387,826
Earnings per share Net earnings per share 0.84 0.51 -0.06 0.03 0.44 Dividend attached to each share* 0.10 0.10 0.10 0.11 0.10
Payroll Average headcount 339 253 214 176 176 Total payroll expenses 12,253,628 9,341,654 7,448,710 6,269,357 5,798,724 Total social charges 5,380,063 4,174,409 3,194,899 2,700,295 2,429,328 * Subject to the approval of the dividend distribution at the General Meeting called to approve the financial statements ended 31 december 2012 II.4 Research and development
Research and development expenditures for Naturex S.A, expensed in 2012 amounted to €2.3 million compared to €2.8 million in 2011. During the preceding financial years, the Group developed two projects with serious prospects for technical success and commercial profitability through its subsidiaries in Spain and Italy, and work on these projects continued in 2012: - The Italian project involves obtaining and complying with the terms of ASMF (Active Substance Master File) in order to meet European regulations governing plant-based medication and allowing Naturex S.p.A. to continue to market certain products in this market as well as adding to its pharmacy-approved range of extracts. For this project, expenditures incurred in 2012 and capitalised amounted to €409,000;
- The Spanish Ministry of Science and Innovation has approved the Spanish Senifood project. The purpose of this project is to define specially developed food ranges adapted to the dietary needs of the elderly.. For this project, expenditures incurred in 2012 and capitalised amounted to €1.1 million.
II.5 Items classified as luxury expenditures
Expenses referred to within Article 39-4 of the French General Tax Code, as well as the corresponding tax amounted to €42,300 in 2012.
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II.6 Proposal for the appropriation of earnings and dividend distribution
2012 financial year At the shareholders' meeting of 26 June 2013 of Naturex S.A. called to approve the financial statements for the year ended 31 December 2012, a proposal will be submitted to appropriate earnings of the period of €5,533,498.01 as follows:
- Deduct from this amount €772,876.90 for the dividend; - Appropriate 5% of earnings (or €276,674.90) to the “Legal Reserve”, thereby increased from €788,053.80 to €1,064,728.70; and - Carry forward the balance of earnings (€4,483,946.21) to “Retained Earnings / (Accumulated Deficit)”, accordingly increased from €2,590,347.87 to €7,074,294.08.
On that basis, each share will be entitled to a total dividend of €0.10 and the full amount distributed will be eligible for a 40% tax basis reduction for the calculation of personal income tax provided for under Article 158-3-2° of the French General Tax Code. The dividend payment date will be 30 August 2013.
Option to receive cash or stock dividends
At the General Meeting of NATUREX S.A. of 26 June 2013, called to approve the financial statements for the year ended 31 December 2012, a proposal will be submitted for each shareholder to be given the option of receiving dividends in the form of cash or shares. The share price for stock dividends will equal 90% of the average price over the twenty trading sessions preceding the date of this shareholders meeting, less the net amount of the dividend, in accordance with the provisions of Article L.232-19 of the French Commercial Code. This option applies to the full amount of the dividend paid or €0.10 per share. Shareholders wishing to receive dividends in the form of shares will have the period between 8 July 2013 and 14 August 2013 inclusive to make this request to the financial intermediaries authorised to pay the dividend and/or the company. Consequently, any shareholder who has not opted to receive stock dividends at the end of this period will receive payment for the dividend in the form of cash. The dividend payment date for cash dividends is 30 August 2013. Shares issued for the payment of stock dividends will have a record date of 1 January 2013.
For information, Naturex has already made use of this option at the General Meeting of 8 June 2012 called to approve the financial statements for the period ended 31 December 2011. On that occasion, the shareholders of Naturex S.A were thus provided with the option of receiving dividends in the form of cash (€0.10 per share) or shares. The share price set at that time for stock dividends was €41.01, representing a 10% discount on the average closing price for the 20 trading sessions preceding the date of the shareholders meeting, less the net amount of the dividend. The exercise of that option resulted in the creation of 16,871 new ordinary shares.
II.7 Dividends paid over the last three financial periods
In euros FY FY FY 2011 2010 2009 Total dividend payout 770,558.00 640,393.10 701,005.13 Dividend per share €0.10 €0.10 €0.11
2012 Registration Document 157 Chapter 5 Review of operations
NATUREX does not have a dividend distribution policy, as the Group prefers to invest in its development and growth. The dividend distribution, involving an amount that is purely symbolic, is intended to build the loyalty of individual shareholders who have demonstrated their confidence in Naturex since its initial public offering. In recent years, Naturex has provided the option for the distribution of dividends in the form of shares that has met with shareholder interest. The dividend distribution is eligible for the 40% tax deduction provided in Article 158-3-2° of the French General Tax Code for individuals domiciled for tax purposes in France.
Treasury shares without dividends
2012 financial year The General Meeting of 26 June 2013 will be asked to authorise the Board of Directors to allocate to the "Retained earnings" that portion of the dividend that may not be distributed in the event of a change in the number of shares entitled to received dividends, and in particular, owns shares of the Company held in treasury, before the payment date of said distribution. For information, on 31 December 2012, NATUREX S.A held 2,357 treasury shares without voting rights and not entitled to dividends and 12,432 such shares at 24 April 2013.
The draft resolutions for the AGM that will be held in Paris on 26 June 2013 will be published in the French publication for legal announcements (Bulletin des Annonces Légales Obligatoires or BALO) within the statutory deadlines and will be available for consultation at the Company's website (www.naturex.com).
2012 Registration Document 158 Chapter 6 Consolidated financial statements and Notes
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES AT 31 DECEMBER 2012
Contents
CONSOLIDATED BALANCE SHEET ...... 160 CONSOLIDATED INCOME STATEMENT...... 161 STATEMENT OF COMPREHENSIVE INCOME ...... 162 STATEMENT OF CASH FLOWS ...... 163 STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS EQUITY ...... 164 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 166 NOTE 1 GENERAL INFORMATION ...... 166 NOTE 2 INFORMATION ON CONSOLIDATION ...... 169 NOTE 3 COMPLIANCE STATEMENT ...... 173 NOTE 4 SIGNIFICANT ACCOUNTING POLICIES...... 174 NOTE 5 VALUATION RULES AND METHODS ...... 178 NOTE 6 BUSINESS COMBINATIONS ...... 185 NOTE 7 GOODWILL ...... 192 NOTE 8 NON-CURRENT ASSETS ...... 193 NOTE 9 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES ...... 195 NOTE 10 INVENTORIES AND WORK IN PROGRESS ...... 196 NOTE 11 TRADE AND OTHER RECEIVABLES ...... 197 NOTE 12 FINANCIAL DEBT ...... 198 NOTE 13 EMPLOYEE BENEFITS ...... 200 NOTE 14 CURRENT PROVISIONS ...... 203 NOTE 15 FINANCIAL RISK MANAGEMENT ...... 204 NOTE 16 OPERATING SEGMENTS ...... 207 NOTE 17 STAFF COSTS ...... 209 NOTE 18 EXTERNAL EXPENSES AND DEVELOPMENT EXPENDITURES ...... 211 NOTE 19 OTHER CURRENT OPERATING EXPENSES ...... 212 NOTE 20 OTHER NON-CURRENT OPERATING EXPENSES AND INCOME ...... 212 NOTE 21 FINANCIAL EXPENSES AND INCOME ...... 213 NOTE 22 INCOME TAX ...... 213 NOTE 23 LEASES ...... 215 NOTE 24 CAPITAL MANAGEMENT ...... 215 NOTE 25 RELATED PARTIES AND OFF-BALANCE SHEET COMMITMENTS ...... 217 STATUTORY AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS ...... 219
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Consolidated balance sheet
31/12/2012 31/12/2011 01/01/2011 Notes In €000s restated* restated*
NON-CURRENT ASSETS 251,280 209,793 189,367 Goodwill 7 114,895 93,467 83,867
Other intangible assets 8 12,157 9,266 6,311
Property, plant and equipment 8 117,010 103,174 92,313
Financial assets 8 4,881 1,167 724
Non-current derivatives 9 4 343 546
Deferred tax assets 22 2,332 2,376 5,607
CURRENT ASSETS 220,352 216,321 168,665 Inventories 10 137,158 115,150 98,227
Current derivatives 9 307 1,200 267
Tax receivables 1,193 667 3,063
Trade and other receivables 11 71,063 61,642 49,648
Cash and cash equivalents 12 10,631 37,662 17,460
TOTAL ASSETS 471,632 426,114 358,032
31/12/2012 31/12/2011 01/01/2011 In €000s restated* restated*
Capital stock 11,593 11,558 9,616
Additional paid-in capital 165,511 164,594 118,447
Reserves 58,583 44,805 26,348
Income for the period 22,939 15,596 14,817
SHAREHOLDERS' EQUITY 258,625 236,554 169,229 Attributable to owners of the parent 258,213 236,180 168,403
Attributable to non-controlling interests 412 374 360
NON-CURRENT LIABILITIES 86,105 103,334 123,780 Long-term financial debt 12 69,341 87,327 108,439
Non-current derivatives 9 1,583 2,254 2,534
Employee benefits 13 4,892 2,343 1,627
Deferred tax liabilities 22 10,288 11,409 11,181
CURRENT LIABILITIES 126,902 86,227 65,023 Current financial debt 12 50,976 17,588 9,852
Current derivatives 9 1,046 893 702
Current provisions 14 378 40 632
Tax payables 2,809 1,582 1,321
Trade and other payables 64,526 65,208 51,222
Bank credit facilities 12 7,168 916 1,293
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 471,632 426,114 358,032
* Restated in accordance with Amended IAS 19 as explained in notes 4.1 and 13 herein.
160 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
CONSOLIDATED INCOME STATEMENT 2011 Notes 2012 In €000s restated*
Revenue 16 299,823 253,573
Change in finished goods and in-progress inventory 14,885 10,651
Operating grants 2,048 2,786
Other operating income 8,947 4,185
Purchases -139,183 -115,612
Payroll expenses -58,358 -49,146
External charges 18 -71,028 -61,360
Taxes other than on income -1,644 -946
Allowances for amortisation and depreciation 8 -15,158 -12,670
Other current operating expenses 19 -4,410 -1,383
INCOME FROM OPERATIONS 35,921 30,079
Other non-current operating expenses 20 -4,393 -1,578
Other non-current operating income 20 6,121 -
NET OPERATING INCOME 16 37,649 28,501
Income from cash management and cash equivalents 159 502
Gross borrowing costs -5,234 -5,302 NET BORROWING COSTS 21 -5,075 -4,800
OTHER FINANCIAL INCOME AND EXPENSES 21 -894 158
INCOME BEFORE TAX 31,679 23,859
TAX EXPENSE 22 -8,741 -8,264
NET INCOME FOR THE PERIOD 22,939 15,596
Income for the period attributable to: Company shareholders 22,901 15,587
Non-controlling interests 38 9
Earnings per share: 24.2
Basic earnings per share (in euros) 2.9677 2.3144
Diluted earnings per share (in euros) 2.8925 2.2418
* Restated in accordance with Amended IAS 19 as explained in notes 4.1 and 13 herein.
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STATEMENT OF COMPREHENSIVE INCOME
2011 2012 In €000s restated*
NET INCOME FOR THE PERIOD 22,939 15,596
Gains and losses from the translation of financial statements of foreign operations -122 3,791
Actuarial gains and losses -1,543 34
Deferred taxes on actuarial gains and losses 208 -2
Changes in fair value of hedging instruments 453 102
Deferred taxes on hedging instruments -157 -25
TOTAL COMPREHENSIVE INCOME 21,778 19,495 Attributable to Company shareholders 21,740 19,481
Attributable to non-controlling interests 38 14
* Restated in accordance with Amended IAS 19 as explained in notes 4.1 and 13 herein.
162 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
STATEMENT OF CASH FLOWS
31/12/2012 31/12/2011 In €000s restated*
Net income for the period 22,939 15,596
Adjustments for non-cash items: Net amortisation/depreciation allowances and provisions 14,985 13,297 Expenses and income related to stock options 247 180 Capital gains / (losses) on disposals (1,596) 148 Net borrowing costs 5,075 4,800 Other financial income and expenses 894 (158) Tax expense 8,741 8,266 Operating cash flow before WCR 51,284 42,129
Taxes paid (5,803) (4,549) Change in inventories (18,443) (11,827) Change in trade receivables and related accounts (6,760) (3,432) Change in trade payables and related accounts (5,718) 3,320 Net cash used in operating activities A 14,559 25,641
Acquisition of subsidiaries, net of cash acquired (27,895) (6,735) Intangible investments (5,127) (4,571) Capital expenditures (25,162) (14,431) Financial investments (3,871) (392) Disposals of fixed assets 4,954 120 Repayment of long-term investments 510 64 Net cash used in investing activities B (56,591) (25,945)
Proceeds from share issues 288 47,566 Net dividends paid to parent company shareholders (107) (118) Inflows from new borrowings 38,926 9,119 Loan reimbursements, net of derivatives (25,586) (25,224) Debt reimbursements resulting from finance leases (206) (151) Changes in other financial liabilities 1,129 (5,760) Proceeds from the sale of treasury shares - 201 Interest payments (5,970) (4,692) Net cash provided by financing activities C 8,475 20,941
Net change in cash and cash equivalents A+B+C (33,558) 20,638
Closing cash and cash equivalents 3,464 36,746 Opening cash and cash equivalents 36,746 16,166 Effect of exchange rate changes on cash -275 59 Net change in cash and cash equivalents (33,558) 20,638
The analysis of the statement of cash flows is presented in Chapter 5 "Review of operations for fiscal 2012" of this document. * Restated in accordance with Amended IAS 19 as explained in notes 4.1 and 13 herein.
2012 Registration Document 163 Chapter 6 Consolidated financial statements and Notes
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS EQUITY Attributable to equity holders of the Group Additional paid-in Net income for the Capital stock Translation Shareholders' capital Treasury shares Group reserves period differences equity Attributable to the Group (attributable to the (attributable to the in €000s Group) Group) Shareholders' equity at 1 January 2011 (reported 9,616 118,447 (201) 26,625 (894) 14,810 168,403 basis) Impact of change in accounting method, net of tax 466 466 Shareholders' equity at 1 January 2011 (restated 9,616 118,447 (201) 27,090 (894) 14,810 168,869 basis) Income (loss) for the period - - - - - 15,587 15,587
Change in translation differences - - - - 3,785 - 3,785
Changes in fair value of hedging instruments, net of tax - - - 77 - - 77
Actuarial gains and losses, net of tax 32 32
Other comprehensive income - - - 109 3,785 - 3,894
Comprehensive income for the period - - - 109 3,785 15,587 19,481
Appropriation of income - - - 14,810 - (14,810) -
Dividends paid 16 507 - (641) - - (118)
Capital increase 1,926 45,641 - - - - 47,566
Stock options exercised ------
Stock option benefits - - - 180 - - 180
Change in treasury shares - - 201 - - - 201
Non-controlling interests acquired ------
Total transactions with shareholders 1,942 46,147 201 14,349 - (14,810) 47,830 Shareholders' equity at 1 January 2012 (restated 11,558 164,594 41,549 2,891 15,587 236,180 basis) Income (loss) for the period 22,901 22,901
Change in translation differences (122) (122)
Changes in fair value of hedging instruments, net of tax 296 296
Actuarial gains and losses, net of tax (1,335) (1,335)
Other comprehensive income - - - (1,039) (122) - (1,161)
Comprehensive income for the period - - - (1,039) (122) 22,901 21,740
Appropriation of income - - - 15,587 - (15,587) -
Dividends paid 25 637 - (770) - - (107)
Capital increase ------
Stock options exercised 9 279 - - - - 288
Stock option benefits - - - 247 - - 247
Change in treasury shares - - (134) - - - (134)
Non-controlling interests acquired ------
Total transactions with shareholders 34 916 (134) 15,063 - (15,587) 293 Shareholders' equity at 31 December 2012 11,593 165,511 (134) 55,573 2,769 22,901 258,213
164 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Attributable to non-controlling interests
Attributable to non-controlling interests Shareholders' Total equity shareholders’ Total shareholders’ equity Translation Net income for Shareholders' Reserves equity (attributable to the differences the period equity in €000s Group) Shareholders' equity at 1 January 2011 (reported basis) 168,403 408 (56) 8 360 168,763
Impact of change in accounting method, net of tax 466 - 466
Shareholders' equity at 1 January 2011 (restated basis) 168,869 408 (56) 8 360 169,229
Income (loss) for the period 15,587 - - 9 9 15,596
Change in translation differences 3,785 - 5 - 5 3,791
Changes in fair value of hedging instruments, net of tax 77 - - - - 77
Actuarial gains and losses, net of tax 32 - 32
Other comprehensive income 3,894 - 5 9 5 3,900
Comprehensive income for the period 19,481 - 5 9 14 19,495
Appropriation of income - 8 - (8) - -
Dividends paid (118) - - - - (118)
Capital increase 47,566 - - - - 47,566
Stock options exercised ------
Stock option benefits 180 - - - - 180
Change in treasury shares 201 - - - - 201
Non-controlling interests acquired ------
Total transactions with shareholders 47,830 8 - (8) - 47,830
Shareholders' equity at 1 January 2012 (restated basis) 236,180 416 (51) 9 374 236,554
Income (loss) for the period 22,901 38 38 22,939
Change in translation differences (122) - 1 - 1 (122)
Changes in fair value of hedging instruments, net of tax 296 - - - - 296
Actuarial gains and losses, net of tax (1,335) - - - - (1,335)
Other comprehensive income (1,161) - 1 - 1 (1,161)
Comprehensive income for the period 21,740 - 1 38 38 21,778
Appropriation of income - 9 - (9) - -
Dividends paid (107) - - - - (107)
Capital increase ------
Stock options exercised 288 - - - - 288
Stock option benefits 247 - - - - 247
Change in treasury shares (134) - - - - (134)
Non-controlling interests acquired ------
Total transactions with shareholders 293 9 - (9) - 293 Shareholders' equity at 31 December 2012 258,213 425 (50) 38 412 258,625
2012 Registration Document 165 Chapter 6 Consolidated financial statements and Notes
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 GENERAL INFORMATION
1.1 Key events for the year
1.1.1 Acquisition of the Burgundy companies
In October 2011, Naturex acquired Burgundy Botanical Extracts, a manufacturer and supplier of plant extracts for the nutraceutical, pharmaceutical and cosmetics industries. Burgundy was consolidated by Naturex Group as of 1 October 2011.
This acquisition both strengthened the Group's industrial base with the addition of two production sites and increased its ability to meet customer needs by developing expertise in the nutraceutical, pharmaceutical and personal care markets through its complementary product portfolio (active substance master files, new botanical extracts, active ingredients). At 31 December 2011, the consolidation was substantially completed, ending with a simplified merger procedure (transmission universelle de patrimoine) entailing the transfer of all assets and liabilities from the French company to Naturex SA on 1 January 2012.
On 26 October 2012, Burgundy Iberia was merged into Naturex Spain SL through a simplified procedure with the two activities combined with retroactive effect as from 1 January 2012.
Burgundy France and Burgundy Iberia were consolidated by Naturex Group in fiscal 2012.
1.1.2 Acquisition of Pektowin
In January 2012 Naturex announced the acquisition of 100% of the capital of Pektowin, a Polish company specialised in fruit and vegetable pectins and concentrated juices.
ZPOW Pektowin SA (Pektowin) is located in Jaslo (southeast of Poland), specialised in the production of apple and citrus pectins and fruit and vegetable concentrated juices plus, to a lesser extent, in the preparation of processed foods.
This acquisition fits perfectly with the Group’s strategy to accelerate its international development, expand its product line and strengthen its industrial presence, especially in emerging countries. Furthermore it allows Naturex, not only to reinforce its manufacturing base in the pectin area, but also to take advantage of a major expansion capacity to optimise its ability to meet customer needs.
This acquisition was accompanied by the opening of a sales office in Warsaw (Poland). Naturex’s commercial location in Warsaw and Pektowin’s current penetration in the Polish food industry will significantly strengthen the Group’s presence in Eastern Europe with a broader customer base and encourage locally the promotion and the marketing of all its product lines.
The acquisition of Pektowin was finalised by the signature of 11 January 2012 when the standard conditions precedent related to the privatisation of ZPOW Pektowin SA (Pektowin) in favour of Naturex were met.
166 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Naturex immediately replaced the administrative bodies of Pektowin, marking a first step in the integration of the company consolidated by the Group as of 1 January 2012.
The acquisition price of €5.6 million resulted in a final amount for goodwill of €2.3 million at 31 December 2012.
1.1.3 Acquisition of the Valentine companies
In March 2012 Naturex announced the acquisition of Valentine, an Indian company specialised in the production of fruit and vegetable powders plus natural colours for the food processing industry.
Valentine has a workforce of 40 with two plants located near Mumbai.
In conjunction with this acquisition, Naturex established a purchasing office based in Mumbai to better take advantage of the country’s wealth of raw materials across the entire Group.
This acquisition fits perfectly with Naturex's strategy for developing in emerging countries. Naturex has in this way significantly strengthened its commercial presence in India that accounts for the major share of Valentine's revenue. This first industrial set-up in Asia will supplement the Group's regional production bases in Europe and the Americas, in particular for natural colours. With its expertise in formulation and spray drying processes, Valentine has developed over the years a loyal customer base of major names in the Indian food industry that includes both local companies and subsidiaries of multinationals.
At 31 December 2012 Valentine was wholly own by Naturex and fully consolidated by the Group as from 1 April 2012.
The acquisition price of €6 million resulted in a provisional amount for goodwill of €5.3 million at 31 December 2012.
1.1.4 Acquisition of ITRAD
Naturex acquired all the ownership interests in the Abidjan-based Ivory Coast company ITRAD, specialised in aril harvesting for the food industry for a total amount of €66,000 resulting in a provisional amount for goodwill of €102,000 at 31 December 2012.
In light of the acquisition date that was close to 30 June 2012 and the non-material nature of the operations of this company for the reporting period, ITRAD was fully consolidated starting in the second half of 2012.
1.1.5 Acquisition of Naturex DBS LLC
In September 2012 Naturex announced the acquisition of 95% of the capital of Decas Botanical Synergies (renamed Naturex DBS LLC). The remaining 5% stake is held by management of Naturex DBS LLC. Naturex DBS LLC is an American company located in Massachusetts, specialised in Cranberry extracts and powders for nutraceuticals and pharmaceutical applications.
For many years now, Naturex DBS LLC has benefited from a great deal of expertise in developing, formulating and marketing Cranberry extracts and powders.
The completion of this acquisition provides Naturex with the opportunity to expand its range to very high quality natural ingredients with strong scientific potential (health claims, clinical trials…) and also strengthens its leadership in the segment of natural ingredients for the nutraceutical industry.
Naturex DBS LL benefits from the worldwide geographic network formed by Naturex's sales force as well as the Group's marketing know-how in order to maximise the commercial sales synergies and diversify the customer base.
2012 Registration Document 167 Chapter 6 Consolidated financial statements and Notes
Naturex DBS LLC will benefit from the worldwide geographic network formed by Naturex's sales force as well as the Group's marketing know-how in order to maximise the commercial sales synergies and diversify the customer base.
Naturex DBS LLC was consolidated by Naturex as from 19 September 2012.
The acquisition price of €15.1 million resulted in provisional goodwill of € 12.6 million at 31 December 2012.
1.1.6 Rise in organic growth
Consolidated revenue in fiscal 2012 reached €299.8 million, up 18.2% on the prior period. Growth at constant exchange rates was 13.9%.
This annual performance included contributions from the five companies acquired by Naturex between the 2011 fourth quarter and the end of the 2012 third quarter (Burgundy France and Spain, Pektowin in Poland, Valentine in India, ITRAD in the Ivory Coast and Naturex DBS LLC in the United States) that accounted for 7% of Group revenue in 2012.
The Group also continued to take advantage of the commercial synergies generated from Burgundy's activities.
1.1.7 New capital structure
In December 2012, Naturex announced that Caravelle became a shareholder following the sale by Natraceutical Group of its stake that represented 15.35% of the share capital and 8.37% of the voting rights on the transaction date. The gradual divestiture by Natraceutical Group is in line with its intention announced in 2011 to divest its holdings in the capital of Naturex. At 31 December 2012, Caravelle Group held 15.35% of the share capital and 13.59% of the voting rights. Following this disposal by Natraceutical, the shares sold to Caravelle carried a voting right after being converted into ordinary shares.
This new ownership structure provides Naturex with a base for continuing its projects for development.
Following the death of Jacques Dikansky, the founder of Naturex Group, Finasucre Group, exercising its right of pre- emption, acquired the total holding of the Dikansky family in the capital of SGD.
Since July 2011 Finasucre Group has gradually increased is stake in the capital of Naturex through SGD. Following this latest acquisition, the stake of the Belgian group in SGD has reached 98.79%. SGD, Naturex's lead shareholder at 31 December 2012 held 21.02% of the share capital and 27.5% of the voting rights of Naturex SA.
168 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
1.2 Subsequent events
1.2.1 Convertible debt issue
Making use of the authority granted to it by the General Meeting of 27 June 2011, the Board of Directors approved the principle of the issue of bonds convertible and/or exchangeable into new or existing shares (OCEANE), entailing the cancellation of shareholders' pre-emptive subscription rights, by way of a private placement with qualified investors.
In accordance with the authority delegated in turn to the Chairman-CEO, the latter decided on 16 January 2013 to proceed with a €18,000,010 convertible bond issue divided by 257,143 bonds with a par value of €70 each. The corresponding issue premium represented 21.95% of the closing price of the Company's share on the regulated market of NYSE Euronext Paris at the trading session of 15 January 2013 and 21.69% in relation to the average closing price of the Company's share on the regulated market of NYSE Euronext Paris over the 20 trading sessions preceding the issue date (14 December 2012 to 15 January 2013).
This bond issue was carried out through a private placement with prestigious investors eager to support Naturex's next phase of expansion into promising innovative-based growth markets involving significant technical and scientific components.
Accordingly, France's Strategic Investment Fund (Fonds stratégique d’Investissement or FSI) subscribed for two thirds or €12 million of this issue and Salvepar (Tikehau Capital Group) for the remaining third or €6 million.
Net proceeds from the issue amounted to €17.6 million.
1.2.2 Joint venture agreement with Aker
In February 2013, Naturex announced the creation of a joint venture with Aker BioMarine, the Norwegian-based world leader in krill harvesting and specialised in the development, production and commercialisation of Omega-3 rich krill oil-based products.
This joint venture, whose production plant will be based in the US, will combine Aker BioMarine's know-how with Naturex's expertise in extraction, and will guarantee increased volumes for sourcing krill oil, supplementing the current production site of Naturex Spain SL.
NOTE 2 INFORMATION ON CONSOLIDATION
Consolidated subsidiaries and basis of consolidation
At 31 December 2012, the Group's consolidated operations included the following companies:
2012 Registration Document 169 Chapter 6 Consolidated financial statements and Notes
Controlling Ownership Company name Country Consolidation method interest (%) interest (%)
Naturex SA France N/A N/A Full consolidation KF Specialty Ingredients Pty Ltd. Australia 100% 100% Full consolidation Naturex AG Switzerland 100% 100% Full consolidation Naturex Australia Pty Ltd. Australia 100% 100% Full consolidation Naturex Coöperatief U.A Netherlands 100% 100% Full consolidation Naturex Cooperative LLC United States 100% 100% Full consolidation Naturex (South Korea) South Korea 100% 100% Full consolidation Naturex - DBS LLC United States 95% 95% Full consolidation (formerly Decas Botanical Synergies) Naturex GMBH Germany 100% 100% Full consolidation Naturex Holdings Inc. United States 100% 100% Full consolidation Naturex Inc. United States 100% 100% Full consolidation Naturex Inc. (Canada) Canada 100% 100% Full consolidation Naturex - Ingredientes Naturais Ltda Brazil 100% 100% Full consolidation Naturex Ingredientes Naturales S.A. de C.V Mexico 100% 100% Full consolidation Naturex K.K Japan 100% 100% Full consolidation Naturex LLC Russia 99% 99% Full consolidation Naturex Ltd. United Kingdom 100% 100% Full consolidation Naturex Maroc Morocco 96% 96% Full consolidation Naturex SpA Italy 100% 100% Full consolidation Naturex Spain SL Spain 100% 100% Full consolidation Naturex SPRL Belgium 100% 100% Full consolidation Naturex Trading Shanghai Co, Ltd. China 100% 100% Full consolidation ITRAD Ivory Coast 100% 100% Full consolidation Valentine Agro Private Limited India 100% 100% Full consolidation Valentine Agro Private Limited India 100% 100% Full consolidation Zpow Pektowin SA Poland 100% 100% Full consolidation Naturex UK United Kingdom 100% 100% Full consolidation SCI Les Broquetons France 100% 100% Full consolidation The Talin Co Ltd. United Kingdom 100% 100% Full consolidation Biopolis Spain 25% 25% Not consolidated
Changes in Group structure in the period
Four companies joined the Group in 2012:
- ZPOW Pektowin SA in Poland, acquired and wholly owned by Naturex SA, - Valentine in India acquired and wholly owned by Naturex SA; - ITRAD in the Ivory Coast, acquired and wholly owned by Naturex SA; - Naturex DBS LLC (formally Decas Botanical Synergies) in the United States, acquired and 95%-held by Naturex Group.
170 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Their contribution to income and shareholders' equity for the period is disclosed in Note 6.
Because the impact of these acquisitions on the Group structure is less than 25%, the Group has not produced pro forma financial statements.
2012 Registration Document 171 Chapter 6 Consolidated financial statements and Notes
2.3 Organisational structure
NATUREX S.A France
100% NATUREX Holdings Inc 100% NATUREX Inc USA USA
100% NATUREX AG 100% NATUREX Cooperative LLC Switzerland USA 0,01% 100% NATUREX Spain SL 99,99% NATUREX Coöperatief U.A Spain Netherlands
100% NATUREX Trading Shanghai Co, Ltd NATUREX Ingredientes Naturais Ltda 100% China Brasil
100% NATUREX SpA KF Specialty Ingredients Pty Ltd 100% Italy Australia
100% NATUREX Sprl NATUREX Australia Pty Ltd 100% Belgium Australia
100% NATUREX GmbH NATUREX Ltd 100% Germany United Kingdom 100% 99% NATUREX LLC The Talin Co. Ltd Russia United Kingdom
96,30% NATUREX Maroc S.A NATUREX - DBS LLC 95% Morocco (ex Decas Botanical Synergies) USA 100% ITRAD Ivory Coast
100% SCI Les Broquetons France
100% NATUREX UK Ltd United Kingdom
100% NATUREX Ingredientes Naturales SA de CV Mexico
100% NATUREX Inc Canada
100% NATUREX K.K Japan
100% NATUREX Korea
100% PEKTOWIN S.A Spzoo Poland Geographic area
100% VALENTINE Agro Private Ltd Europe / Africa India Americas 100% VALENTINE Foods Private Ltd India Asia / Pacific
172 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
2.4 Affiliates and equity investments
None of consolidated companies included in the Group structure is a shareholder or affiliate of an ad hoc entity.
2.4.1 SANAVIE
An official notice (Feuille Officielle Suisse du Commerce or FOSC) of 10 February 2012 announced, by decision of the Eastern Vaud District Court of 30 June 2011, the declaration of bankruptcy of the company.
All assets of the Company were written off in previous periods.
As Naturex Group has not taken on any commitments beyond its initial investment, this dissolution has not resulted in any additional losses for the Group.
2.4.2 BIOPOLIS
During the business combination with Natraceutical’s Ingredients Division, the Group acquired a 24.9% stake in the research and development company Biopolis SL.
Since the Group has no significant influence on Biopolis, this equity investment is shown in the AFS category of financial assets (Available For Sale), valued at fair value.
NOTE 3 COMPLIANCE STATEMENT
In compliance with EC regulation No. 1606/2002 of 19 July 2002, governing the consolidated financial statements of European companies listed on regulated markets, and given its listing in a country of the European Union, the consolidated financial statements of Naturex SA and its subsidiaries (hereinafter referred to as the “Group”) have been drawn up in accordance with the IFRS (International Financial Reporting Standards) accounting standards, as adopted within the European Union.
None of the mandatory standards and interpretations in 2012 had an impact on the annual consolidated financial statements.
Naturex’s consolidated financial statements at 31 December 2012 were drawn up in accordance with the principles governing the accounting and valuation of transactions as they are stipulated in the IFRS standards applying within the European Union. They were also drawn up in accordance with the regulations governing the presentation and content of financial statements as defined by the General Regulation of the AMF.
The Group’s consolidated financial statements at 31 December 2012, were approved by the Board of Directors’ meeting of 27 March 2013 and will be submitted to the next Annual Shareholders’ Meeting, which in theory may modify them.
2012 Registration Document 173 Chapter 6 Consolidated financial statements and Notes
NOTE 4 SIGNIFICANT ACCOUNTING POLICIES
4.1 Change in accounting methods
In June 2011, the IASB published the amended version of IAS 19. This standard whose application is mandatory for periods commencing on or after 1 January 2013 was adopted by the European Union in June 2012. Amended IAS 19 is applied with retrospective effect on previously recognised pension liabilities.
The main impacts of amended IAS 19 are as follows:
Mandatory recognition in the balance sheet of all benefit liabilities and assets without the corresponding option of being able to defer actuarial gains and losses according to corridor method. All changes in benefit liabilities and assets are immediately recognised by recording actuarial gains and losses under other comprehensive income (OCI) and past service costs through profit and loss for the period. A modification of the procedures evaluating assumptions for the expected returns of plan assets based on the discount rate. Net interest expense is defined as the interest expense or income determined by applying the discount rate to the net pension liability. In this way the notion of expected returns of plan assets is eliminated. The difference between the actual return and income from plan assets represents a remeasurement to be recognised under other comprehensive income.
Up until 30 June 2012, actuarial gains and losses were recognised by the Group in the profit and loss. The impact of the early application of Amended IAS 19 concerns mainly the recognition under other comprehensive income of actuarial gains and losses previously recognised under profit and loss and presented in further detail in Note 13.
4.2 New standards and interpretations in issue not yet adopted
With the exception of the early adoption as from 31 December 2012 of Amended IAS 19, the accounting methods applied by the Group to prepare its consolidated financial statements for the fiscal year ended 31 December 2012 are the same as those used for the consolidated financial statements of the previous period.
New standards, amendments and interpretations will come into effect for financial periods commencing on or after 1 January 2012 and therefore have not been taken into consideration in preparing these consolidated financial statements. Those of relevance for the Group are listed below. The Group has not or does not plan on applying these standards in advance:
- IFRS 10 "Consolidated financial statements, IFRS 11 "Joint arrangements", IFRS 12, "Disclosure of interests in other entities (2011): IFRS 10 introduces a single control model for determining if an investee entity must be consolidated. According to IFRS 11, even though the existence of a joint arrangement remains an important factor, it is no longer the main factor taken into account to determine its accounting treatment and consequently subsequent recognition. IFRS 12 covers within a single standard disclosure requirements for entities having interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities.
The Group will not have cause to revise its conclusions with respect to its consolidated operations and modify the recognition for certain of its entities. The Group is currently assessing the provisions for disclosure requirements under IFRS 12 compared with those currently required.
- IFRS 9 "Financial instruments" (2010), IFRS 9 "Financial instruments" (2009)
174 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
IFRS 9 (2009) introduced new provisions for the classification and measurement of financial assets. According to IFRS 9 (2009), financial assets are classified and measured based on the business model under which assets are held and the characteristics of contractual cash flows. IFRS 9 (2010) introduced additional features relating to financial liabilities. The IASB is currently working on a project seeking to modify in a limited manner the classification and measurement requirements of IFRS 9 and add new provisions dealing with the impairment of financial assets and hedge accounting. IFRS 9 (2010 and 2009) will enter into effect for periods commencing on or after 1 January 2015 for which early adoption is authorised. The Group does not anticipate adopting this standard in advance and its potential impacts have not yet been determined. - IFRS 13 "Fair value measurement" (2011) IFRS 13 provides a single framework for provisions for the measurement of fair value thus replacing provisions currently provided for under different IFRSs. Excluding limited exceptions, IFRS 13 applies when fair value measurement or disclosures thereon in financial statements are required or authorised by other IFRSs. The Group is currently re-examining its methods for determining fair value though does not anticipate any material impact. IFRS 13 will enter into effect for periods beginning on or after 1 January 2013.
4.3 Estimates and judgements
When drawing up consolidated financial statements, assumptions, estimates or assessments are sometimes needed to establish certain data shown in the financial statements, particularly when it comes to calculating provisions and carrying out impairment tests.
Underlying estimates and assumptions are based on past experience and other factors that are deemed to be plausible in light of the circumstances. They in turn serve as a basis for establishing the carrying amounts of assets and liabilities, which cannot be directly ascertained from other sources. Actual values can differ from estimated amounts.
Underlying estimates and assumptions are constantly re-examined. The impact of changes in accounting estimates is recognised during the period in question when only that period is affected, or during the period and any subsequent periods where the latter are also affected by the change.
All information on the main areas of uncertainty related to the estimates and judgements made in applying the accounting methods liable to have the most significant impacts on the amounts recognised in the financial statements, is reported in the following notes:
- Note 5.1 Valuation rules and methods – Goodwill - Note 5.4 Valuation rules and methods – Inventories - Note 5.11 Valuation rules and methods – Income tax
4.4 Seasonal effects
The exposure of Naturex’s activities to seasonal effects is very limited.
While the supply of certain raw materials is dependent on harvesting times, it is essentially spread over the full year with a slight peak in spring and at the start of summer. The supply of extracts is not affected at all by any seasonal effects.
Group sales are also globally unaffected by any seasonal effects. Certain specific product ranges are subject to seasonal effects, such as colouring agents and flavourings for drinks in the Food & Beverage Division in spring and summer, and a few of the Nutrition & Health product ranges, which record higher growth in autumn and winter.
2012 Registration Document 175 Chapter 6 Consolidated financial statements and Notes
Overall, these products offset each other and the Group’s product mix is such that it is not exposed to any marked seasonal impact. 30% To illustrate the seasonal trends that affect Naturex’s activities, the graph opposite shows quarterly revenue trends over the past three 25% years. 2 010 2 011 (*)The seasonal effect for 2012 does not take into account 20% 2 012 the acquisitions of Pektowin, Valentine, ITRAD and Naturex DBS LLC. 15% 1st quarter 2nd quarter 3rd quarter 4th quarter
4.5 Initial recognition of assets and liabilities
The closing date for all annual financial statements is 31 December. The closing date for individual financial statements of the Valentine companies, consolidated for the first time on 1 April 2012, was 31 March. For the purposes of consolidation, the closing date for the financial statements of these companies is consequently 31 December.
The consolidated financial statements include the financial statements of the parent company as well as those companies controlled by the parent at the end of the reporting period. The notion of control in this context is taken to mean the power to define and manage the financial and operational strategies of a company in order to benefit from its activities. The subsidiaries over which the group exercises control, whether directly or indirectly, are fully consolidated.
Foreign currency transactions
Transactions are booked at the historic exchange rate when they are carried out.
Gains/losses on foreign exchanges resulting from these conversions are recognised in the income statement, except for a financial liability designated as a hedge for a net investment in a foreign entity or instruments characterised as cash flow hedges recognised as other items of comprehensive income.
When the settlement of a monetary item representing a receivable or payable linked to a foreign investment is not scheduled or likely in the foreseeable future, the resulting foreign exchange gains and losses are considered to be part of the net investment in the foreign operation recognised under other comprehensive income and presented in the translation reserve.
Translation of financial statements expressed in foreign currencies
The financial statements of the Group's foreign subsidiaries are held in their functional currency.
The balance sheets of companies whose functional currency is not the consolidation currency are converted into euros at the closing exchange rate, except for shareholders' equity, which is converted at its historical exchange rate.
Income statements are translated at the average exchange rate for the period which, excluding occurrences of major currency fluctuations, generally closely corresponds to the exchange rate at the transaction date.
176 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Translation differences are recorded separately in the "Translation adjustments" line item under shareholders' equity. They include the impact of changes in exchange rates on assets and liabilities and the difference between income calculated based on the average exchange rate and income calculated based on the closing exchange rate.
Goodwill and fair value adjustments arising from the acquisition of subsidiaries whose functional currency is not the euro are considered as assets and liabilities of the subsidiary. They are therefore expressed in the subsidiary's functional currency and converted at the closing exchange rate. The closing exchange rates used are as follows:
Closing exchange rate Country Currencies 31-Dec-12 31-Dec-11 Australia EUR / AUD 1.2712 1.2723 Brazil EUR / BRL 2.7036 2.4342 Canada EUR / CAD 1.3137 1.3215 China EUR / RMB 8.2207 8.1625 South Korea EUR / KRW 1,406.2300 1,498.6900 Ivory Coast EUR / XOF 655.9570 India EUR / INR 72.5600 Japan EUR / JPY 113.6100 100.2000 Morocco EUR / MAD 11.1454 11.1505 Mexico EUR / MXN 17.1845 18.0512 Poland EUR / PLN 4.0740 Russia EUR / RUB 40.3295 41.6714 Switzerland EUR / CHF 1.2072 1.2156 UK EUR / GBP 0.8161 0.8353 USA EUR / USD 1.3194 1.2939
2012 Registration Document 177 Chapter 6 Consolidated financial statements and Notes
The average exchange rates used are as follows:
Average exchange rate Country Currencies 31-Dec-12 31-Dec-11 Australia EUR / AUD 1.2436 1.3452 Brazil EUR / BRL 2.5474 2.3094 Canada EUR / CAD 1.2910 1.3925 China EUR / RMB 8.1362 8.9270 South Korea EUR / KRW 1,406.2300 1,498.6900 Ivory Coast EUR / XOF 655.9570 India EUR / INR 69.4944 Japan EUR / JPY 101.9949 110.8108 Morocco EUR / MAD 11.1733 11.3230 Mexico EUR / MXN 17.0464 18.0512 Poland EUR / PLN 4.1694 Russia EUR / RUB 40.1561 40.9021 Switzerland EUR / CHF 1.2052 1.2376 UK EUR / GBP 0.8133 0.8738 USA EUR / USD 1.2901 1.4036 NOTE 5 VALUATION RULES AND METHODS
5.1 Goodwill
Pursuant to the revised IFRS 3 , during a business combination, the Group measures goodwill as the fair value of the counterparty transferred (including the fair value of any equity investments previously held in the acquired company) plus the amount recognised for any equity investments that do not confer control of the acquired company, less the net amount recognised (generally the fair value) of the identifiable assets acquired and liabilities assumed. All of these items are measured at the acquisition date. When the difference is negative, a profit on the acquisition at advantageous conditions is immediately recognised in the income statement.
The Group has opted to measure goodwill on a transaction-by-transaction basis by taking into account the fair value of the acquired entity, either for the full amount or its share in the identifiable net assets of the acquiree on the acquisition date Any investment not conferring control is measured either at fair value or the its share in the acquiree's net identifiable assets. For acquisitions completed prior to 1 January 2010, goodwill represents the surplus of the acquisition cost compared to the Group’s share in the amounts recognised (generally at fair value) for assets, liabilities and contingent liabilities.
Business combinations from 1 January 2010 and thereafter are recognised according to Revised IFRS 3 "Business combinations" and Amended IAS 27 "Consolidated and separate financial statements. These standards are applied on a prospective basis. The main impact of these standards on the Group's consolidated financial statements are as follows:
Acquisition-related costs are expensed on the acquisition date,
178 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Contingent consideration is recognised under equity when payment is based on the settlement of a fixed number of shares. In other cases, contingent consideration is recognised under business combination liabilities, Adjustments in the value of assets and liabilities relating to acquisitions recognised on a provisional basis (due to the absence of the results of appraisals or additional analysis) are recognised as a retrospective adjustment of goodwill if they occur within 12 months of the acquisition date. Beyond this period, impacts are recognised directly in profit or loss except where they represent the correction of errors.
Acquisition-related costs, other than those related to the issue of a debt or equity securities the Group would incur due to the business combination, were accounted for in the acquisition cost.
Goodwill is allocated to the Group’s cash generating units (CGUs).
The CGUs adopted by the Group correspond to the three operating segments described in Note 5.10:
Americas ; Europe, Africa and Russia ; Asia.
In accordance with revised IFRS 3 governing "Business combinations", goodwill is not amortised. It is subject to an impairment test as soon as there is any indication of impairment and at least once a year.
In accordance with IAS 36, the method used by the Group to test impairment of assets involves:
Establishing after tax cash flows based on the strategic plan of the CGU in question; Determining the asset’s value in use comparable to the company valuation method by discounting cash flows (DCF) according to the sector’s weighted average cost of capital (WACC); and comparing this going concern value to the asset’s carrying amount to determine whether there is impairment or not.
The discount rate used in these calculations is the WACC after capital tax.
The going concern value is determined according to the present value of projected future operating cash flows over a 5-year period plus a residual value.
In the sector of speciality plant-based natural ingredients, key assumptions used for determining value in use are of the same nature and based on the level of current operating income. These assumptions include:
The level of the market, The competitive environment, The regulatory environment, The level of capital expenditures.
Values assigned to each of these partners reflect both past experience and trends anticipated in the plan.
5.2 Intangible assets (excluding goodwill)
Research and development
Research expenditures incurred for the purposes of gaining understanding and new scientific or technical knowledge are expensed when incurred.
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Development activities imply the existence of a production plan or model for the production of new products and processes or for substantial improvements to them. Development expenditures are capitalised if and only if the costs can be measured reliably and the Group can demonstrate the technical and commercial feasibility of the product or process, the existence of likely future economic benefits and its intention as well as the availability of sufficient resources to complete the development and use or sell the asset. Expenditures recognised as assets include the costs of materials, direct labour and overheads directly attributable and necessary to prepare the asset to be used as scheduled plus the capitalised borrowing costs. Other development expenditures are expensed when incurred.
Development expenditures recorded under assets are recognised at cost, less any cumulative amortisation and impairment. Other intangible assets acquired are recognised at cost, less any cumulative amortisation and impairment. Estimated useful lives are as follows:
Fixed asset category Useful life
Customer goodwill Straight-line: 12
Software Straight-line: 3 to 5 years
Patents Straight-line: 10 to 20 years
Trademarks Straight-line: 4 to 5 years
Development expenditure Straight-line: 5 years
5.3 Property, plant and equipment
Property, plant and equipment are measured at cost, less any cumulative depreciation and impairment.
Depreciation is expensed according to the straight-line method over the estimated useful life of each tangible asset.
Estimated useful lives are as follows:
Fixed asset category Useful life
Buildings on own land Straight-line: 15 to 20 years
Buildings on the leasehold property Straight-line: 10 to 20 years
Plant, machinery and equipment Straight-line: 5 to 10 years
Other tangible assets Straight-line: up to 10 years
Leasing contracts that result in the transfer to the Group of substantially all the risks and rewards incidental to ownership of an asset are classified as finance leases.
Investment grants are recognised as deferred income and recorded in income symmetrically over the asset’s useful life.
Grants that offset costs incurred by the Group are recognised symmetrically in income over the period during which the costs are recognised.
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5.4 Inventories
The cost of inventories is evaluated by batch at the cost price and includes purchase costs for raw materials, production or transformation costs, the appropriate share of the indirect costs based on the normal production capacity and the other costs incurred in bringing the inventories to their present location and condition.
Inventories are measured at the lower of the cost and the net realisable value.
5.5 Financial instruments
5.5.1 Non-derivative financial assets
Non-derivative financial assets held by the Group include deposits and guarantees, non-consolidated securities, receivables, cash equivalents and financial assets held for sale.
Financial assets
Financial assets consist of deposits and guarantees and non-consolidated securities. They are recognised at fair value and, in the rare cases when the fair value cannot be obtained, measured at historical cost.
When there is an objective indication of impairment, significant and sustainable impairment is recognised on the income statement.
Trade and other receivables
Accounts receivable are valued at their fair value when they are first booked and then at their amortised cost, less any impairment. A provision for impairment is recognised when there is a collection risk (even partial) on receivables.
Cash and cash equivalents
Cash and cash equivalents include liquidities, bank current accounts, very short-term marketable securities readily convertible into liquidities and which are subject to an insignificant risk of changes in value.
5.5.2 Non-derivative financial liabilities
Financial liabilities include borrowings and bank overdrafts.
Except when hedged for fair value, financial liabilities are valued at amortised cost according to the effective interest rate method.
5.5.3 Derivative financial instruments and hedge accounting
The Group holds derivative financial instruments to hedge its exposure to interest and foreign exchange rates.
When the hedge is initially designated, the Group formally documents the relationship between the hedging instrument and the hedged instrument, the risk management objectives and the strategy followed when the hedge is set up, as well as the methods that will be used to assess the effectiveness of the hedging relationship. The Group assesses, when the hedging relationship is set up and continuously, if it expects the hedging instruments to be "highly
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effective" at offsetting the changes in fair value or cash flows of the hedged items over the period for which the hedge is designated.
For a cash flow hedge related to a planned transaction, it must be highly likely that the transaction will take place and this transaction must include exposure to changes in cash flow that could end up impacting the result.
Derivatives are recognised initially at fair value. After the initial recognition, derivatives are valued at fair value and the resulting variations are recognised using the methods described above.
Cash flow hedges
When a derivative is designated as a hedging instrument in a hedge of cash flow variations that can be attributed to a particular risk associated with a recognised asset or liability or with a planned transaction that is highly likely and that could impact the result, the effective portion of the changes in the fair value of the derivative is recognised in other items of comprehensive income and is shown in the hedging reserve in shareholders' equity. The amount recognised in other items of comprehensive income is removed and included in the income statement for the period during which the hedged cash flow impacts earnings; this amount is recognised on the same line of comprehensive income as the hedged item.
Any ineffective portion of the changes in the derivative’s fair value is immediately recognised in the income statement.
The Group has set up interest rate swaps to cover its risks on cash flows.
Fair value hedging
A fair value hedge covers changes in the fair value of a recognised asset or liability, or of a non-recognised firm commitment, which can impact earnings.
For hedging the fair value of existing assets and liabilities, the hedged portion of these items is valued on the balance sheet at its fair value. The change in this fair value is recognised on the income statement where it is offset by the symmetric changes in the fair value of the hedging instruments.
In order to hedge its foreign exchange risk, the Group has set up foreign exchange hedges on its borrowings in a foreign currency.
5.6 Discontinued operations, assets and liabilities held for sale
In accordance with IFRS 5, assets and liabilities held for immediate sale in their present condition, and consequently whose sale is highly probable, are shown on the balance sheet as assets and liabilities held for sale. When a group of assets is held for sale in a single transaction, the group and all related liabilities are recognised as a single unit. The sale must take place within one year of the asset or group of assets being so recognised.
The assets or group of assets held for sale are valued at the lowest price between their net carrying amount and the net fair value of the cost of the sale. Non-current assets shown on the balance sheet as held for sale are no longer depreciated once they are presented as such.
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Income from discontinued operations is presented separately from income generated by ongoing operations and their cash flows are presented on a distinct line on the cash flow statement.
5.7 Employee benefits
Post-employment benefits granted by the Group vary according to the legal obligations and the policy of each subsidiary in this matter. They include defined contribution and defined benefit schemes.
With regards to defined contribution schemes, the Group's obligations are limited to the payment of periodical contributions to outside organisations that provide the administrative and financial management for them. The expenses recognised for these plans correspond to the contributions paid during the period of reference.
A defined benefit plan represents a form of post-employment benefits distinct from a defined contribution plan. The Group's obligation for defined benefit schemes is measured separately for each plan by estimating future benefits vested by the employee for service rendered in the current and previous periods that is discounted to determine its present value. This value is then reduced by the fair value of plan assets to determine the net benefit liability (asset). Net interest expense (income) on the defined benefit liability (assets) for the period is determined by applying the discount rate used at the beginning of the period to measure the net defined benefit obligation to the net benefit liability (asset).
The discount rate equals the interest rate at year-end for AA+ rated corporate bonds with maturities close to those of the obligations of the Group and in the currency in which benefits are paid.
These calculations are performed every year by a qualified actuary using the projected unit credit method. When the calculation of the net obligation results in an asset for the Group, the corresponding amount recognised may not exceed the present value of any economic benefit available in the form of future refunds or reductions and future contributions of the plan. All minimum funding requirements applicable to Group plans are taken into account to calculate the present value of economic benefits. An economic benefit is available for the Group if it can be realised during the life of the plan or the settlement dates for plan liabilities.
Net liabilities (assets) remeasured for defined benefits include actuarial gains and losses, the return on plan assets (excluding amounts taken into account to calculate net interest on net liabilities (assets) and changes in the asset ceiling (excluding amounts taken into account in the calculation of net interest on net benefit liabilities (assets), as applicable. These are then immediately recognised by the Group under other comprehensive income and all expenses relating to defined benefit plans are recognised in the income statement for employee benefits.
When adjustments are made to plan benefits, the impact associated to past service rendered by employees is immediately recognised in profit or loss at the time of the adjustment. In the case of plan curtailments, the corresponding gain or loss is also recognised in the income statement on the curtailment date.
The Group recognises gains and losses from the settlement of a defined benefit plan at the time of the settlement. Gains or losses arising from a settlement equal the difference between the present value of the obligation for the defined benefit settled determined on the settlement date, and the consideration for the settlement, including total plan assets transferred and all payments directly made by the Group in connection with the settlement.
5.8 Provisions
A provision is booked when the Group has a current legal or implicit obligation resulting from a past event, when the obligation can be estimated in a reliable manner and when it is likely that an outflow of resources representing economic benefits will be necessary in order to settle the obligation. The amount of the provision is determined by
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discounting expected future cash flows at the pre-tax rate reflecting the market’s current assessments of the time value of money and the specific risks concerning this liability. The impact of the accretion is recognised as a financial expense.
5.9 Asset sales
The proceeds from asset sales are recognised in the income statement when substantially all the significant risks and rewards incident to ownership of the assets have been transferred to the buyer.
Consolidated revenue consists of the total sales (excluding tax) resulting from the ordinary activities of consolidated group companies, after elimination of internal transactions.
5.10 Segment information
Pursuant to IFRS 8 concerning segment information, the Group defines an operating segment as a component of an entity:
- That engages in business activities from which it may earn revenues and incur expenses, - Whose operating income is reviewed regularly by the entity's chief operating decision-maker to make decisions about allocating resources to the segment and to assess its performance, and - For which discrete financial information is available.
The internal reporting provided to Naturex's Chairman & CEO and Executive Vice-President is structured in the same way as the Group's management, which is based on the following three geographic regions:
- Americas: including Naturex Inc., Naturex Ingredientes Naturais LTDA, Naturex Inc. Canada and Naturex Ingredientes Naturales S.A de C.V, Naturex DBS LLC (formally Decas Botanical Synergies); - Europe, Africa, Russia: including companies of the Naturex SA Group, Naturex SPA, Naturex Ltd, SCI Les Broquetons, Naturex Maroc, Naturex UK Ltd, Naturex AG, Naturex SL, Naturex GMBH, Naturex SPRL, Naturex LLC, Pektowin, ITRAD; - Asia: including companies of the Group Naturex Trading Shanghai, KF Specialty Ingredients PTY LTD, Naturex Australia PTY LTD, Naturex Japon, Naturex Coree, Valentine Agro and Valentine Foods. The Group identifies and presents its operating segments based on the information reported to the Group's management.
5.11 Income tax
Income tax includes tax payable and deferred tax. Payable and deferred taxes are recognised in the income statement except when they are attached to a business combination or to items that are recognised directly as shareholders' equity or as other items in comprehensive income.
Current tax is (i) the estimated amount of the tax owed (or receivable) for the taxable profit (or loss) for a period, determined by using the income tax rates that have been adopted or practically adopted on the reporting date, and (ii) any adjustment in the amount of the tax payable for prior periods. Current tax also includes any tax liabilities generated by the declaration of dividends.
Accounting treatments or corrections carried out in the consolidation can result in a change in the results of the consolidated companies. The timing differences that appear on the balance sheet between the consolidated values and the tax values of the corresponding assets and liabilities give rise to the calculation of deferred taxes.
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In accordance with IAS 12, the Group presents deferred taxes on the consolidated balance sheet separately from the other assets and liabilities. Deferred tax assets are written to the balance sheet when it is more likely than not that they will be recovered in later years. Deferred tax assets and liabilities are not discounted.
In order to assess the Group’s ability to recover these assets, the following items in particular are taken into account:
- Forecasts of future taxable income, and - History of taxable income for prior years. Deferred tax assets and liabilities are valued using the balance sheet liability method (i.e.; using the tax rate that is expected to be applied over the period when the carrying amount of the asset or liability is recovered or settled, based on the income tax rate (and tax regulations) that have been adopted or practically adopted at the closing date, taking any future increases or decreases in the rates into account.
The valuation for deferred tax assets and liabilities reflects the tax consequences that would result from the way the company expects, on the closing date, to recover or settle the book carrying amount of these assets and liabilities.
5.12 Earnings per share
Earnings and diluted earnings per share are presented for the earnings attributable to Company shareholders.
Basic earnings per share are calculated by dividing the net income for the period attributable to shareholders by the average number of ordinary shares in circulation during the period, adjusted for treasury shares.
When calculating diluted earnings per share, the net profit attributable to shares and the average number of shares in circulation are adjusted for the effects of all the potentially dilutive ordinary shares.
5.13 Employee equity compensation
In accordance with IFRS 2 "Share-based compensation," the fair value of subscription or purchase options and offers reserved for employees concerning Group shares are valued on the day they are granted.
The value of subscription and purchase options is based on the strike price, the probability that the conditions will be met for exercising the option, the lifespan of the option, the current price of the underlying shares, the expected volatility of the share price, the expected dividends and the risk-free interest rate over the option’s lifespan. This value is recorded as a payroll expense on a straight-line basis over the period the rights are acquired with a corresponding adjustment to shareholders’ equity for plans settled in shares and employee payables for plans that are settled in cash.
NOTE 6 BUSINESS COMBINATIONS
6.1 BURGUNDY
In October 2011, the Group acquired 100% of the share capital and voting rights of Burgundy, a French company specialised in the production and commercialisation of plant extracts for the nutraceutical, pharmaceutical and cosmetic industries, itself the 100% parent of Burgundy Iberia, for a fixed price of €6 million euros fully paid in cash.
The Burgundy companies were consolidated by the Group on 1 October 2011. As of 1 January 2012 Burgundy France was fully transferred to Naturex SA and Burgundy Iberia was fully transferred to Naturex Spain SL.
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The pre-acquisition carrying amounts were determined based on the IFRS standards applicable at the acquisition date. Contingent assets and liabilities were recognised at their fair value on the acquisition date (see note 5 – methods and valuations used to determine fair value).
The definitive allocation of the acquisition price and the assets and liabilities recognised for this business combination break down as follows:
Values Carrying amounts Fair value Detailed recognised at acquired adjustments disclosures in €000s acquisition date Property, plant and equipment 3,921 1,562 (a) 5,483
Intangible assets 106 106
Long-term investments 102 102
Financial instruments - assets 59 (b) 59
Inventories 3,079 (2,042) (c) 1,037
Trade and other receivables 7,638 7,638
Deferred tax assets - 1,914 (g) 1,914
Cash and cash equivalents (748) (748)
Borrowings (7,812) (796) (d) (8,607)
Deferred tax liabilities - (251) (g) (251)
Provisions (72) (254) (e) (327)
Trade and other payables (9,791) (76) (f) (9,866)
Tax payables (46) (46)
Identifiable net assets and liabilities (3,622) 117 (3,506)
Goodwill from the acquisition 9,493
Consideration paid in cash 5,988
Net cash acquired (748)
Net cash outflow 6,736
The main fair value adjustments are described hereafter:
(a) The remeasurement of property, plant and equipment reflects €836,000 for the capitalisation of a property lease and €726,000 from the remeasurement of land of Burgundy Iberia by an independent appraiser. (b) The fair value of financial asset instruments was valued at €59,000; (c) An impairment loss of €1 million was recorded on inventory. (d) Estimated financial debt relating to restated financial leases was €796,000; (e) Provisions were remeasured in connection with a employee-related lawsuit contingency. (f) Trade payables increased €76,000 on remeasurement in light of various provisions for accrued invoices and severance payments; (g) Adjustments in value resulted in the recognition of deferred taxes, calculated according to the rates of the countries to which they relate, amounting to €778,000 in deferred tax assets and €251,000 in deferred tax
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liabilities. €1.1 million in deferred tax assets relating to loss carryforwards prior to the acquisition of Burgundy Iberia were capitalised.
The goodwill recognised at the acquisition date primarily relates to the expected synergies from the integration of these two companies with the Group’s activity in the production and distribution of specialty natural extracts.
6.2 PEKTOWIN
In January 2012, the Group acquired 100% of the capital and voting rights of the Polish company Pektowin, whose main activity is the production of fruit and vegetable concentrated juices plus the preparation of processed foods (fruit wines, tinned foods) for the Polish distribution sector, for a fixed price of €5.6 million paid in full in cash.
Before the acquisition, this company had revenue of €11.6 million in fiscal 2011 including €7.7 million (66%) relating to activities corresponding to Naturex Group's core business.
Pektowin was consolidated by the Group on 1 January 2012. For the consolidation period, Pektowin generated revenue at current exchange rates of €7.5 million and a net loss of €1 million.
The pre-acquisition carrying amounts were determined based on the IFRS standards applicable at the acquisition date. Contingent assets and liabilities were recognised at their fair value on the acquisition date (see note 5 – methods and valuations used to determine fair value).
The definitive allocation of the acquisition price and the assets and liabilities recognised for this business combination break down as follows:
Values Carrying Reclassification Fair value Detailed recognised amounts s adjustments disclosures at acquisition acquired in €000s date Property, plant and equipment 3,172 (660) (a) 2,512
Intangible assets 3 - 3
Long-term investments - - -
Inventories 3,801 32 (15) 3,817
Trade and other receivables 898 (32) (13) 853
Deferred tax assets 20 214 (b) 234
Cash and cash equivalents (47) - (47)
Borrowings (2,221) 2,221 - -
Deferred tax liabilities (4) (80) (b) (84)
Provisions (900) (900)
Trade and other payables (792) (2,245) (16) (3,053)
Tax payables (24) 24 - -
Identifiable net assets and liabilities 3,905 (570) 3,334
Goodwill from the acquisition 2,274
Consideration paid in cash 5,608
Net cash acquired (47) Net cash outflow 5,655 The main fair value adjustments are described hereafter:
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(a) Fixed assets are restated at fair value based on the measurement of an independent appraiser. An impairment loss of €544,000 was recorded for real estate. An impairment loss of €116,000 was recognised for fixed assets relating to non-strategic businesses; (b) Fair value adjustments resulted in the recognition of deferred tax assets of €214,000 and liabilities of €80,000 calculated according to the tax rate applicable in Poland.
Goodwill recognised at the acquisition date primarily relates to the expected synergies from Pektowin's integration with the Group’s activity in the production and distribution of pectins.
6.3 VALENTINE
In March 2012, Naturex acquired Valentine, an Indian company specialised in the production of fruit and vegetable powders plus natural colours for the food processing industry that before the acquisition had revenue of approximately €1.9 million on a 12 month rolling basis.
At 31 December 2012, Valentine was wholly own by Naturex. These two companies were fully consolidated by the Group on 1 April 2012. Since 1 April 2012, the Valentine companies have contributed revenue of €1.3 million and a net loss of €55,000.
The pre-acquisition carrying amounts were determined based on the IFRS standards applicable at the acquisition date. Contingent assets and liabilities were recognised at their fair value on the acquisition date (see note 5 – methods and valuations used to determine fair value).
The provisional allocation of the acquisition price and the assets and liabilities recognised for this business combination break down as follows:
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Values Carrying Fair value Detailed recognised amounts adjustments disclosures at acquisition acquired in €000s date Property, plant and equipment 1,102 98 (a) 1,200
Intangible assets - - -
Long-term investments 10 - 10
Inventories 618 (161) (b) 456
Trade and other receivables 315 (81) (c) 233
Current tax receivables - - -
Deferred tax assets 85 (d) 85
Cash and cash equivalents (395) - (395)
Borrowings (362) - (362)
Deferred tax liabilities (115) (30) (d) (145)
Provisions (4) - (4)
Trade and other payables (212) (34) (246)
Tax payables (84) - (84)
Identifiable net assets and liabilities 874 (123) 751
Goodwill from the acquisition 5,275
Consideration paid in cash 6,025
Consideration recognised as short-term financial debt -
Net cash acquired (395)
Net cash outflow 6,420
The main fair value adjustments are described hereafter: (a) €1.2 million from remeasurement of fair value of all property by an independent appraiser; (b) Inventories remeasured at fair value for €456,000 million; (c) An impairment loss of €81,000 recorded for real estate. (d) Fair value adjustments resulted in the recognition of deferred tax assets of €85,000 and liabilities of €30,000 calculated according to the tax rate applicable in India.
Goodwill for Valentine recognised at the acquisition date primarily relates to the synergies expected from the integration of these two companies with the Group’s activity in the production of natural colours and fruit and vegetable powders.
Pursuant to IFRS 3, Valentine goodwill may be revised within the 12 months following the acquisition.
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6.4 ITRAD
Naturex acquired all the ownership interests of the Abidjan-based Ivory Coast company ITRAD, specialised in aril harvesting for the food industry.
The provisional allocation of the acquisition price and the assets and liabilities recognised for this business combination break down as follows:
Values Carrying Fair value Detailed recognised amounts adjustments disclosures at acquisition acquired in €000s date Property, plant and equipment 105 (15) (a) 90
Intangible assets - -
Long-term investments 14 14
Inventories - -
Trade and other receivables 69 69
Current tax receivables - -
Deferred tax assets 20 (d) 20
Cash and cash equivalents 104 104
Borrowings (2) (2)
Deferred tax liabilities - -
Provisions (60) (36) (b) (96)
Trade and other payables (195) (30) (c) (226)
Tax payables (10) (10)
Identifiable net assets and liabilities 25 (61) (36)
Goodwill from the acquisition 102
Consideration paid in cash 66
Consideration recognised as short-term financial debt -
Net cash acquired 104
Net cash outflow (38)
The main fair value adjustments are described hereafter:
(a) €15 million for amortisation expenses recognised in connection with the acquisition in the first half of 2012; (b) €96,000 in fair value adjustments for provisions in contingency of an employee-related dispute; (c) €226,000 in fair value adjustments for trade payables; (d) €20 million in deferred tax assets on these adjustments calculated on the basis of the tax rate applicable in the Ivory Coast.
Pursuant to IFRS 3, adjustments may be made to ITRAD goodwill during a measurement period of 12 months from the acquisition date.
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6.5 NATUREX DBS LLC
In September 2012 Naturex announced the acquisition of 95% of the capital of Decas Botanical Synergies (renamed Naturex DBS LLC). The remaining 5% stake is held by management of Naturex DBS LLC. Naturex DBS LLC is a US company specialised in Cranberry extracts and powders for the nutraceuticals and pharmaceutical applications.
In light of the binding commitment to acquire the remaining 5% of the Naturex DBS LLC shares, the company was fully consolidated in accordance with the provisions of IFRS 3. In consequence, €793,000 in financial debt was recognised for the fair value of the put option to acquire the company's shares.
Naturex DBS LLC was consolidated on 19 September 2012 and contributed €2,084,000 in revenue and €1,105,000 in earnings.
The provisional allocation of the acquisition price and the assets and liabilities recognised for this business combination break down as follows:
Valeurs Valeurs Ajustements Notes comptabilisées comptables de juste détaillées à la date acquises valeur en milliers d'euros d'acquisition Immobilisations corporelles 157 157
Immobilisations incorporelles 272 272
Immobilisations financières - -
Stocks 2 097 (367) (a) 1 730
Créances clients et autres débiteurs 1 283 1 283
Créances d'impôt courant - -
Actifs d'impôts différés () 110 (b) 110
Trésorerie et équivalents de trésorerie - -
Emprunts - -
Passifs d'impôts différés - -
Provisions - -
Dettes fournisseurs et autres créditeurs (326) (326)
Dettes d'impôt exigible - -
Actifs et passifs nets identifiables 3 483 (257) 3 226
Goodwill résultant de l'acquisition 12 631
Contrepartie transférée en numéraire 15 064
Contrepartie en dette financière à court terme 793
Trésorerie acquise -
Sortie nette de trésorerie 15 064
The main fair value adjustments are described hereafter:
(a) inventories measured at fair value for €1.7 million; (b) The deferred tax asset on the fair value adjustment of inventory was calculated on the basis of the tax rate applicable in the United States.
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Pursuant to IFRS 3, adjustments may be made to Naturex DBS LLC goodwill during a measurement period of 12 months from the acquisition date.
Note 7 GOODWILL
01/01/2012 Fair value First-time Translation 31/12/2012 In €000s adjustments consolidation differences Americas 39,604 - 12,631 -807 51,429
Europe / Africa / Russia 51,196 1,835 2,376 537 55,944
Asia 2,668 5,275 -419 7,524
Total 93,467 1,835 20,282 -689 114,895
The increase in goodwill for the Americas consisted mainly in €12.6 million from the acquisition of Naturex DBS LLC.
The increase in goodwill in the period for Europe included €2.3 million from Pektowin in addition to €1.8 million in fair value adjustments to Burgundy goodwill.
The increase in goodwill for Asia consisted in €5.3 million from the acquisition of Valentine.
Goodwill is subject to annual impairment tests.
Impairment tests were carried out on 31 December 2012, based on the following assumptions:
5-year cash flows based on the 2012 actual and projections for the next 4 years. These projections are primarily indexed on past experience and adjusted for future medium- and long-term market forecasts.
In view of the international economic context at the end of the year, the Group used rates adapted to the zones concerned:
An after-tax discount rate for the Europe/Asia zone of 8.92 % for 2012 compared with 10.69% in 2011 and for the Americas zone 8.77% compared with 12.42% in 2011 , calculated each year based on the WACC (Weighted Average Cost of Capital) method;
A terminal value without a perpetuity growth rate.
The discount rates used are after-tax rates. The application of a rate before tax has no impact when calculating the value in use of CGUs.
Sensitivity to the discount rate was calculated at 31 December 2012, such that the recoverable value was equal to the carrying amount. The discount rates obtained are much higher than those used by the Group (20% for the Europe zone, 35 % for the Asia zone and 32 % for the Americas zone) and indicate an absence of risk of impairment.
Budgets are drawn up in the fourth quarter of each period in order to take into account the most up-to-date trends known, in particular during the first years of the plan. Sensitivities of the test to changes in assumptions to determine value in use of the CGUs determined at the end of 2012 are collected in the following table:
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Margin of test = Operating profit of the Discount rate + 0.5% In €000s value in use Net terminal value -0.5% Americas region 276,976 259,558 275,480
Europe / Africa / Russia region 287,697 265,145 285,730
Asia region 40,883 38,398 40,666
NOTE 8 NON-CURRENT ASSETS
8.1 Acquisitions and disposals
At 31 December 2012, gross values of fixed assets break down as follows:
First-time Disposals or Inter-account consolidations Translation 01/01/2012 Acquisitions decommissioned 31/12/2012 transfers and fair value differences assets In €000s adjustments Goodwill: 93,467 - 22,117 - - -689 114,895
Intangible assets: 13,913 -216 275 5,127 - -41 19,058
Commercial goodw ill 3,142 -221 - 1,791 -38 4,674
Softw are and brands 5,118 -1 275 907 - -3 6,295
Development expenditure 4,941 1 - 1,592 - -1 6,534
Fixed assets under construction 713 5 - 837 - 1 1,556
Property, plant and equipment: 160,379 216 3,524 25,998 -4,174 -406 185,537
Land 14,042 -10 960 735 -1,773 99 14,053
Buildings & improvements 75,051 1,352 378 7,566 -1,413 -215 82,719
Plant, equipment and machinery 58,535 2,168 1,914 5,982 -399 -280 67,920
Other tangible assets 8,517 49 270 2,154 -397 -23 10,570
Fixed assets under construction 4,234 -3,343 2 9,560 -192 13 10,274
Financial assets: 2,374 - 25 3,871 -1,348 -39 4,882
Equity securities 1,546 - - -1,206 340
Loans 14 - - 120 -19 -2 113
Deposits and guarantees 814 - 25 3,750 -123 -37 4,428 Total 270,133 - 25,941 34,995 -5,522 -1,175 324,372
The main investments concern production capacity and research and development laboratory equipment.
At 31 December 2011, gross values of fixed assets break down as follows:
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Disposals or Inter-account First-time Translation 01/01/2011 Acquisitions decommissioned 31/12/2011 transfers consolidation differences assets In €000s Goodwill: 83,867 - 7,658 - - 1,942 93,467
Intangible assets: 9,201 - 106 4,571 -79 114 13,913
Commercial goodw ill 2,523 - - 543 - 76 3,142
Softw are and brands 3,688 - 106 1,304 - 21 5,118
Development expenditure 2,762 - - 2,255 -79 3 4,941
Fixed assets under construction 228 - - 470 - 15 713
Property, plant and equipment: 138,388 - 5,921 14,653 -732 2,149 160,379
Land 11,229 - 1,317 1,334 -20 182 14,042
Buildings & improvements 67,474 651 1,861 4,202 -122 984 75,051
Plant, equipment and machinery 51,359 1,255 1,498 3,884 -270 810 58,535
Other tangible assets 6,370 33 150 2,120 -271 115 8,517
Fixed assets under construction 1,956 -1,939 1,095 3,113 -50 59 4,234
Financial assets: 1,931 - 102 393 -64 12 2,374
Equity securities 1,546 - - - - - 1,546
Loans 27 - - - -13 - 14
Deposits and guarantees 358 - 102 393 -51 12 814
Total 233,387 - 13,787 19,617 -875 4,218 270,133
8.1 Amortisation, depreciation and impairment
At 31 December 2012, amortisation, depreciation and impairment on fixed assets break down as follows:
Inter-account Disposals or Translation 01/01/2012 Allowances 31/12/2012 In €000s transfers decommissioned assets differences
Intangible assets: 4,647 - 2,315 -49 -11 6,901 Commercial goodw ill 427 - 266 -49 -8 636
Softw are and brands 2,662 - 999 - -2 3,660
Development expenditure 1,558 - 1,049 - -1 2,606
Other intangible assets ------
Property, plant and equipment: 57,206 - 12,942 -1,187 -434 68,526 Buildings & improvements 18,551 25 5,187 -733 -99 22,931
Plant, equipment and machinery 34,124 -21 6,182 -333 -319 39,634
Other tangible assets 4,530 -4 1,574 -121 -17 5,962
Financial assets: 1,206 - - -1,206 - - Equity securities 1,206 - - -1,206 - -
Total 63,059 - 15,257 -2,442 -445 75,428
194 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
At 31 December 2011, amortisation, depreciation and impairment on fixed assets broke down as follows:
Inter-account Disposals or Translation 01/01/2011 Allowances 31/12/2011 In €000s transfers decommissioned assets differences
Intangible assets: 2,891 21 1,814 -79 - 4,647 Commercial goodw ill 197 - 242 - -12 427
Softw are and brands 1,817 26 807 - 12 2,662
Development expenditure 871 - 765 -79 - 1,558
Other intangible assets 5 -5 - - - -
Property, plant and equipment: 46,075 -21 10,856 -464 760 57,206 Buildings & improvements 13,776 - 4,595 -9 189 18,551
Plant, equipment and machinery 28,739 - 5,152 -257 491 34,124
Other tangible assets 3,560 -21 1,109 -198 80 4,530
Financial assets: 1,206 - - - - 1,206 Equity securities 1,206 - - - - 1,206
Total 50,172 - 12,670 -543 759 63,059
NOTE 9 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The fair value of the Group's financial instruments is measured when it can be estimated reliably on the basis of market data with the assumption that they are not intended to be sold.
31/12/2012 31/12/2011
Carrying value Fair Carrying value Fair Accounting categories In €000s value value Loans, deposits and guarantees Loans and receivables 4,541 4,541 827 827
Equity investments, net Financial assets 340 340 340 340
Non-current asset derivatives Assets at fair value through profit and loss 4 4 343 343
Current asset derivatives Assets at fair value through profit and loss 307 307 1,200 1,200
Cash and cash equivalents Loans and receivables 10,631 10,631 37,662 37,662
Subtotal Financial assets 15,824 15,824 40,372 40,372
Guaranteed bank loans Liabilities at amortised cost 117,913 129,461 104,231 116,707
Direct financing leases Liabilities at amortised cost 963 1,057 372 416
Liabilities linked to investments Liabilities at amortised cost 1,442 1,442 313 313
Non-current liability derivatives Liabilities at fair value, hedging instruments 1,583 1,583 2,254 2,254
Current liability derivatives Liabilities at fair value, hedging instruments 1,046 1,046 893 893
Bank overdrafts Liabilities at amortised cost 7,168 7,168 916 916
Subtotal Financial liabilities 130,114 141,757 108,979 121,500
Total 114,291 125,933 68,607 81,127 Future cash flows were discounted at a rate of 8.92% compared with 10.69% in 2011.
This rate corresponds to the WACC calculated for the Europe zone since the major share of the debt was incurred in this region. Derivative instruments (level 2 fair value) and equity investments (level 3 fair value) are the only financial instruments measured at fair value.
2012 Registration Document 195 Chapter 6 Consolidated financial statements and Notes
Internal model Internal model Fair value of based on directly not based on asset class at observableLevel 2 observable Level 3 31/12/2012 In €000s Marketable securities -
Asset derivatives 311 311
Equity securities 340 340
Liability derivatives 2,629 2,629
The fair value for derivative financial instruments is as follows:
Total Assets Current Non-current Total liabilities Current Non-current In €000s assets assets liabilities liabilities
Derivatives relating to cash flow hedging 6 6 - 2,629 1,046 1,583
Interest rate derivatives - - - 2,544 952 1,592
Exchange rate derivatives 6 6 - 85 94 (9)
Derivatives relating to fair value hedging 306 302 4 - - -
Interest rate derivatives ------
Exchange rate derivatives 306 302 4 - - -
Net position at 31/12/2012 311 307 4 2,629 1,046 1,583
Net position at 31/12/2011 1,543 1,200 343 3,147 893 2,254
NOTE 10 INVENTORIES AND WORK IN PROGRESS
Inventories breakdown by type as follows:
Inter-account First-time Translation 01/01/2012 Change 31/12/2012 In €000s transfers consolidation differences Raw materials 37,317 -399 291 3,502 -298 40,412
Consumables 1,236 - 247 57 4 1,544
Finished and semi-finished goods 77,622 399 2,594 16,216 -173 96,659
Work-in-progress – goods & services - - 829 -887 57
Total inventories – gross 116,175 - 3,961 18,888 -409 138,615
Provisions -1,025 - - -444 12 -1,458
Total inventories – net 115,150 - 3,961 18,443 -397 137,158
196 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
NOTE 11 TRADE AND OTHER RECEIVABLES
Trade and other receivables break down as follows:
31/12/2012 31/12/2011 In €000s Trade receivables 52,113 48,789
Tax and social security receivables 13,647 11,728
Other receivables 6,907 2,866
Total – gross 72,666 63,383
Impairment -1,603 -1,741
Total – net 71,063 61,642
The impairment of trade and other receivables has changed as follows:
01/01/2012 Reclassification Impairment Change 31/12/2012 in €000s
Trade receivables – impairment 1,455 - -369 -2 1,085
Other receivables – impairment 286 171 96 -34 519
Total 1,741 171 -273 -36 1,603
The aging of trade receivables at the closing date breaks down as follows:
Trade receivables Impairment in €000s 31/12/2012 31/12/2011 31/12/2012 31/12/2011 Not past due 35,051 37,097 - -
1 to 30 days 11,223 7,989 - -
31 to 60 days 3,873 2,049 - -
61 to 90 days 787 759 -239 -561
More than 90 days 1,180 895 -845 -895
Total 52,113 48,789 -1,085 -1,455
2012 Registration Document 197 Chapter 6 Consolidated financial statements and Notes
NOTE 12 FINANCIAL DEBT
First-time 01/01/2012 New Repaid Change 31/12/2012 In €000s consolidation Borrow ings 104,231 38,926 362 -25,527 -79 117,913
Borrow ings related to finance leases 372 796 - -206 1 963
Liabilities linked to investments and shareholder loans 313 1,129 - - 1,442
Subtotal 104,916 40,851 362 -25,733 -78 120,317
Bank credit facilities 916 6,098 189 -36 7,168
Total financial debt – gross 105,832 46,949 551 -25,769 -78 127,485
Cash and cash equivalents 37,662 3,645 880 -31,468 -88 10,631
Total financial debt – net 68,170 43,304 -329 5,700 9 116,854
The Group's net financial debt amounted to €117 million at 31 December 2012 compared to €68 million at 31 December 2011.
The rise in net debt reflects mainly cash outflows of nearly €27 million for the acquisition of Pektowin, Valentine and Naturex DBS LLC and capital investment projects carried out in 2012 for nearly €30 million.
Gross financial debt amounted to €127 million at 31 December 2012 consisting primarily of the structured loan.
The loan agreement between the Group and its lenders contains a clause regarding compliance with the bank covenants on a half-yearly basis.
At 31 December 2012, the Group was in compliance with these ratios.
Financial debt breaks down by due date as follows:
Total Current Non-current In €000s Borrow ings and leasing 118,875 49,534 69,341
Bank credit facilities 7,168 7,168 -
Liabilities linked to investments and shareholder loans 1,442 1,442 -
Total financial debt at 31/12/2012 127,485 58,143 69,341
Total financial debt as a % at 31/12/2012 45.6% 54.4%
Total financial debt at 31/12/2011 105,832 18,505 87,327
Total financial debt as a % at 31/12/2011 17.5% 82.5%
198 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
12.1 Long-term financial debt
Non-current financial debt changed as follows:
First-time Transfers <1 01/01/2012 New Repaid Change 31/12/2012 In €000s consolidation year Borrow ings 87,140 8,793 - -27,362 68,571
Borrow ings related to finance leases 187 696 - - -113 - 770
Total non-current financial debt 87,327 9,489 - - -27,474 - 69,341
12.2 Other current financial liabilities
Other current financial liabilities changed as follows:
First-time Transfers >1 01/01/2012 New Repaid Change 31/12/2012 In €000s consolidation year Borrow ings 17,091 30,133 362 -25,527 27,362 -79 49,342
Borrow ings related to finance leases 184 99 - -206 113 1 192
Liabilities linked to investments and shareholder loans 313 1,129 - - 1,442
Total current financial debt 17,588 31,362 362 -25,733 27,474 -78 50,976
Bank credit facilities 916 6,098 189 -36 - 7,168
12.3 Bank credit facilities
31/12/2012 31/12/2011 In €000s Bank credit facilities 7,168 916
Total 7,168 916
As indicated in Note 15.2, at 31 December 2012, the Group had short-term facilities of €35 million of which €30.1 million have been drawn.
The US subsidiary has a short-term facility of US$7 million that at 31 December 2012 had not been drawn.
12.4 Cash and cash equivalents
31/12/2012 31/12/2011 In €000s Cash and cash equivalents 10,631 37,662
Marketable securities - -
Total 10,631 37,662
2012 Registration Document 199 Chapter 6 Consolidated financial statements and Notes
12.5 Breakdown of debt by currency expressed in euros
The debt broken down by currency after hedging is as follows:
Total EUR USD CHF OTHER In €000s Borrow ings and leasing 118,875 59,052 45,511 14,164 149
Bank credit facilities 7,168 6,856 105 49 158
Liabilities linked to investments and shareholder loans 1,442 1,441 1 - -
Total financial debt at 31/12/2012 127,485 67,349 45,616 14,213 307
Total financial debt as a % at 31/12/2012 52.8% 35.8% 11.1% 0.2%
Total financial debt at 31/12/2011 105,832 46,263 41,751 17,584 233
Total financial debt as a % at 31/12/2011 43.7% 39.5% 16.6% 0.2%
A €2.9 million foreign currency hedge covers a portion of the debt that was initially denominated in dollars. The change in fair value for this hedging instrument generated a financial loss of €367,000.
12.6 Breakdown of debt at fixed and variable rates
Total Fixed rate Variable rate In €000s Borrow ings and leasing 118,875 51,594 67,282
Bank credit facilities 7,168 - 7,168
Liabilities linked to investments and shareholder loans 1,442 1,442 -
Total financial debt at 31/12/2012 127,485 53,036 74,449
Total financial debt as a % at 31/12/2012 41.6% 58.4%
Total financial debt at 31/12/2011 105,832 64,279 41,553
Total financial debt as a % at 31/12/2011 60.7% 39.3%
The debt, which was initially at a variable rate, was swapped for a portion at a fixed rate in 2010.
The corresponding derivatives were taken out starting 31 March 2010 and details are provided in Notes 5.5 and 9 to the consolidated financial statements.
NOTE 13 EMPLOYEE BENEFITS
Net benefit obligations of the Group have been measured with the assistance of independent appraisers and in accordance with IAS 19. The Group's main pension plan is a defined benefit plans of its Swiss subsidiary accounting for 64% of the Group's net benefit obligations.
200 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Total Swiss plan Polish plan Other plans
First-time Dec. Dec. Dec. 31/12/2012 31/12/2011 Dec. Dec. First-time Dec. First-time consolidatio 2011 2011 2011 restated 2012 2012 consolidation 2012 consolidation n restated restated restated In €000s Fair value of plan assets (14,129) - (13,273) (14,036) (13,183) - - - (93) - (90)
Present value of obligations 19,022 964 15,616 17,179 14,899 887 900 - 956 64 717 Plan deficit (surplus) 4,892 964 2,343 3,143 1,716 887 900 - 862 64 627 The Group applied in advance IAS 19 "Employee benefits" (2011) with a date for first-time adoption of 1 January 2012 and adjusted its criteria for determining expense and income items for defined benefit obligations.
The early adoption of the amended version of IAS 19 resulted in the immediate recognition of actuarial gains and losses under other comprehensive income (OCI) without a subsequent reclassification under profit or loss.
Amended IAS 19 changes the manner for determining the return on plan assets and recognising management costs of these plans. The revision of this standard has also modified certain aspects in the measurement of obligations for defined benefit plans.
The early adoption of IAS 19 had the following impact on the balance sheet:
Impact of early Impact of early 31/12/2011 31/12/2011 01/01/2011 01/01/2011 adoption of Amended adoption of Amended Prior reported basis Restated basis Prior reported basis Restated basis In €000s IAS 19 IAS 19 Deferred tax assets 2,480 -104 2,376 5,716 -109 5,607
Reserves 44,307 498 44,805 25,882 466 26,348
Income for the period 15,628 -32 15,596 14,817 - 14,817 Employee benefits 2,913 -570 2,343 2,202 -575 1,627 The early adoption of IAS 19 had the following impact on the balance sheet:
Impact of early 2011 2011 adoption of Amended Prior reported basis Restated basis In €000s IAS 19 Payroll expenses -49,112 -34 -49,146
Tax expense -8,266 2 -8,264
The impact of the change in accounting method on earnings per share in both the reporting and the comparative period was not significant.
Benefit obligations were measured by an actuary on 31 December 2012.
The change in Group structure concerned mainly the first-time consolidation for Poland.
2012 Registration Document 201 Chapter 6 Consolidated financial statements and Notes
The change in the discounted value of defined benefit commitments breaks down as follows:
31/12/2012 31/12/2011 In €000s restated Discounted value of obligations at 1 January 15,616 10,018
First-time consolidation 964
Plan benefit payments (1,880) (885)
Service costs 740 514
Plan adjustments - 4,435 Actuarial losses / (gains) recognised under 2,581 578 other comprehensive income Employee contributions 387 378
Finance costs 427 280
Effect of exchange rate fluctuations 188 299
Present value of obligations 19,022 15,616
The change in the fair value of the plan assets breaks down as follows:
31/12/2012 31/12/2011 In €000s restated Fair value of plan assets at 1 January 13,273 8,386
Contributions paid to the plan 387 378
Plan benefit payments (1,371) (890)
Plan adjustments - 3,917 Actuarial losses / (gains) recognised under 1,037 612 other comprehensive income
Employee contributions 387 378
Financial income 325 245
Effect of exchange rate fluctuations 92 249
Fair value of plan assets 14,129 13,273
The expense recognised as income breaks down as follows:
202 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
31/12/2012 31/12/2011 In €000s restated Service costs (157) 660
Financial expenses (income) 102 35
Expenses recognised in income (54) 695 Actuarial losses / (gains) 1,544 (34) recognised under other Effect of exchange rate fluctuations 97 50
Change in total benefit obligations 1,586 711
The main actuarial assumptions retained at the closing date are as follows:
31/12/2012 31/12/2011 In €000s Discount rate (CHF) 1.85% 2.85%
Discount rate (EUR zone) 3.21% 4.60%
Discount rate (PLN) 4.00% 5.50% from 1.5% to 6% according to from 2% to 6% according to Salary escalation rate occupational categories and age occupational categories and age brackets brackets The mortality assumptions are based on published statistics and mortality tables.
For the EUR discount rate, the Bloomberg 15-year AA corporate bond rate was used for benefit obligations in France and Italy and for the CHF discount rate a 15-year AA corporate bond rate is used for Swiss benefit obligations.
The portfolio of Swiss assets is comprised of bonds (33%), shares (24%), property (15%) and miscellaneous (28%).
The calculation of defined benefit obligations is sensitive to the assumptions indicated above. A 0.25% increase or decrease in the percentage of the respective assumptions would have the following impacts on the defined benefit obligations at the end of the reporting period for the main Swiss obligation.
In €000s Increase Decrease
Sensitivity + 0.25% - 0.25% Discount rate 681 (631)
Salary escalation rate (73) 75
Pension benefits revaluation rate (449) 469
Interest rate (109) 112
NOTE 14 CURRENT PROVISIONS
First-time 01/01/2012 Reclassification Allowance Used Change 31/12/2012 In €000s consolidation Other provisions 40 40 296 129 -125 -1 378
Total provisions 40 40 296 129 -125 -1 378
2012 Registration Document 203 Chapter 6 Consolidated financial statements and Notes
No significant contingent liabilities were identified at 31 December 2012.
Current provisions concerned mainly contingencies for personnel-related disputes of €260,000 for Burgundy and €35,000 for ITRAD pursuant to their first-time consolidation.
NOTE 15 FINANCIAL RISK MANAGEMENT
The main risks likely to have a direct impact on the Group’s financial statements are set out and assessed below:
- Credit risk - Liquidity risk - Exchange risk - Interest rate risk The Group’s exposure to non-financial risks is reviewed in the management report of the registration document.
15.1 Credit risk
Credit risk is a risk of financial loss for the Group in the event a client fails to meet its contractual obligations.
The Group’s credit risk is limited for several reasons, and notably its extensive customer base. Accordingly, for the reporting period, the top 10 customers accounted for 18% of Group revenue, the top 20 accounted for 25% and the top 30 accounted for 30% compared to 18%, 25% and 31% respectively in 2011.
15.2 Liquidity risk
Liquidity risk is the risk that the Group may fail to honour its debts when they reach their term.
The Group's policy regarding the management of its liquidity risk is to ensure, through a Group wide daily cash management system, that it always has sufficient funds to honour its liabilities when they reach maturity, both under normal and "difficult" conditions, without incurring losses that could harm the Group's reputation.
The company performed specific reviews of its liquidity risk and considers that it is able to honour the terms for future payments.
The structured loan set in place on 30 December 2009 includes authorisations for four short-term tranches:
- a €20 million Capex 1 (Euros) tranche used in full with €4 million having been repaid, - a €30 million Capex 2 (Euros) tranche with €8 million drawn at 31 December 2012, - a €20 million revolving 1 (Euros) tranche with €18 million drawn at 31 December 2012, - and a €15 million revolving 2 (multi-currency) tranche able to be drawn in EUR, USD and CHF, with €1.5 million having been drawn and €10.6 million at 31 December 2012. The US subsidiary has a short-term facility of US$7 million that at 31 December 2012 had not been drawn.
The Group's overdraft facilities and outstanding loans at year-end are presented in Note 12.3.
The loan agreement binding the Group to its lenders contains a clause regarding compliance with two bank ratios, which are assessed every six months: These consist of a gearing ratio defined as the ratio of net financial debt to total shareholders’ equity and a financial leverage ratio defined as the ratio of net financial debt to EBITDA.
If the Group should breach these contractual ratios and/or the majority of lenders so request, the lenders may accordingly demand the repayment of the corresponding loan.
204 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
At 31 December 2012, these ratios were respected.
Carrying Expected cash Less than Between More than In €000s value flows 1 year 2 and 5 years 5 years Borrowings 117,913 -129,461 -54,174 -75,204 -82
Finance leases liabilities 963 -1,057 -211 -672 -173
Bank overdrafts 7,168 -7,168 -7,168 - -
Total at 31/12/2012 126,043 -137,685 -61,553 -75,877 -256
Carrying Expected cash Less than Between More than In €000s value flows 1 year 2 and 5 years 5 years Borrowings 104,231 -116,707 -19,137 -97,309 -262
Finance leases liabilities 372 -416 -206 -210 -
Bank overdrafts 916 -916 -916 - -
Total at 31/12/2011 105,519 -118,039 -20,259 -97,518 -262
Carrying Expected cash Less than Between More than In €000s value flows 1 year 2 and 5 years 5 years Interest rate derivatives (liabilities) at 31/12/2012 2,544 -2,793 -1,169 -1,623 -2
Interest rate derivatives (liabilities) at 31/12/2011 3,111 -3,483 -571 -2,904 -8
15.3 Exchange rate risk
Naturex Group carries out most of its transactions in foreign currencies and therefore incurs an exchange rate risk due to exchange rate fluctuations of these currencies. Since 2010, the currency exposure has been substantially modified by integrating, in addition to the dollar (42% of the Group's revenue is billed in dollars), the pound sterling (7%) and the Swiss franc (4%). These three currencies and the euro represent 91% of the Group's revenue. The financial debt was restructured in 2009 in line with this change (see Note 14 – Financial debt).
At year-end the Group had exchange derivatives (swap and forward exchange purchase) on the Swiss franc and the dollar.
Following the strong variations in the Swiss franc during the year, the Group hedged part of its exposure in this currency.
31/12/2012 31/12/2011 In €000s
Exchange rate derivatives (USD) 306 1,535
Exchange rate derivatives (CHF) (80) (15)
Exchange rate derivatives (PLN) - (13)
Fair value of exchange rate derivatives - assets 226 1,507 /(liabilities) Sensitivity tests indicated that, a 1% drop in the dollar at year-end would have generated a €474,000 expense and a €47,000 increase in shareholders’ equity.
2012 Registration Document 205 Chapter 6 Consolidated financial statements and Notes
A 1% drop in the pound sterling at year-end would not have affected financial income and would have generated a €102,000 increase in shareholders’ equity.
A 1% drop in the Swiss franc at year-end would have generated a €141,000 expense and a €92,000 decrease in shareholders’ equity.
Financial assets and liabilities in foreign currencies break down as follows:
In €000s EUR USD CHF GBP OTHER Total Financial liabilities 67,349 45,616 14,213 - 307 127,485
Other borrowings 58,164 45,511 14,089 - 149 117,913
Lease debt 888 - 75 - - 963
Bank overdrafts 6,856 105 49 - 158 7,168
Partners' current accounts 15 1 - - - 16
Investment-related payables 1,426 - - - - 1,426
Financial assets 5,361 3,694 534 801 5,120 15,510
Loans - 110 - - - 110
Deposits and guarantees 2,447 1,321 377 - 283 4,428
Equity investments 340 340
Cash and cash equivalents 2,574 2,262 157 801 4,837 10,631
Net position before hedging 61,988 41,923 13,678 -801 -4,813 111,975
Off-balance sheet: -113,641 - - - - -113,641 Securities pledged in connection with a structured loan
Net position after hedging 175,629 41,923 13,678 -801 -4,813 225,616
15.4 Interest rate risk
At 31 December 2012, the Group's interest rate risk was essentially linked to its variable-rate loans and bank credit facilities
The Group's policy is to not use financial derivatives solely for hedging its financial flows, since these instruments do not correspond to speculative operations.
The Group is not exposed to any amounts above those listed below:
206 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Less than Between More than Total In €000s 1 year 2 and 5 years 5 years Financial liabilities 35,391 38,925 133 74,449
Bonds - - - -
Other borrowings 28,224 38,925 133 67,282
Bank overdrafts 7,168 - - 7,168
Net position before hedging 35,391 38,925 133 74,449
Off-balance sheet: Securities pledged in connection with a -113,641 -113,641 structured loan Net position after hedging -78,250 38,925 133 -39,192
A 100 basis point drop in interest rates would result in a €744,000 drop in financial income.
At the date of closing, the main characteristics in terms of rates were as follows:
31/12/2012 31/12/2011 In €000s Fixed-rate instruments: 2,544 3,111
Financial assets - -
Financial liabilities 2,544 3,111
Variable-rate instruments: - -
Financial assets - -
Financial liabilities - -
NOTE 16 OPERATING SEGMENTS
The operating segments are defined in Note 5.10.
The figures for each operating segment are set out below:
2012 Registration Document 207 Chapter 6 Consolidated financial statements and Notes
At 31 December 2012
Inter-segment Americas Europe, Africa Asia / Pacific All segments Restatements Consolidated In €000s eliminations Revenue 120,449 161,568 17,805 299,823 - - 299,823
Inter-segment revenue 11,935 162,667 7,206 181,807 - -181,807 -
Allow ances for amortisation and depreciation -2,009 -12,296 -381 -14,685 -473 -15,158
Segments' operating income 8,401 31,605 826 40,832 -2,584 -599 37,649
Financial income -5,970 - - -5,970
Tax -8,741 - - -8,741
Net income 22,939 - - 22,939
At 31 December 2011
Inter-segment Americas Europe, Africa Asia / Pacific All segments Restatements Consolidated In €000s eliminations Revenue 93,725 145,414 14,434 253,573 - - 253,573
Inter-segment revenue 9,956 113,203 5,204 128,363 - -128,363 -
Allow ances for amortisation and depreciation -1,699 -10,215 -213 -12,127 -543 - -12,670
Segments' operating income 8,755 19,724 1,020 29,500 -935 -63 28,501
Financial income - - - -4,641 - - -4,641
Tax - - - -8,264 - - -8,264 Net income - - - 15,596 - - 15,596
At 31 December 2012
Americas Europe, Africa Asia / Pacific All segments In €000s Total assets 135,400 315,356 20,876 471,632
Total acquisitions of intangible investments 1,561 3,325 241 5,127
Total acquisitions of property, plant and equipment 6,569 18,909 519 25,998
Total liabilities 18,855 189,859 4,294 213,007
At 31 December 2011
Americas Europe / Africa Asia / Pacific All segments In €000s Total assets 106,417 307,798 11,900 426,114
Total acquisitions of intangible investments 476 4,027 67 4,571
Total acquisitions of property, plant and equipment 2,035 12,381 236 14,653
Total liabilities 17,150 168,670 3,741 189,561
No customers account for more than 10% of Group revenues.
208 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Revenues by business break down as follows:
Percentage of Percentage of Percentage of 2011 2011 2012 revenue mix revenue mix revenue mix Adjusted Reported In €000s 2012 2011 2011 Food & Beverage 188,828 63% 168,336 66% 153,411 61%
Nutrition & Health 92,295 31% 71,144 28% 84,496 33%
Personal Care 4,797 2% 3,240 1% 3,008 1%
Toll & Miscellaneous 13,904 5% 10,848 4% 12,652 5%
Total 299,823 100% 253,567 100% 253,567 100%
The breakdown of revenue over 2011 was restated in order to take into account the integration of the NATHealthy range, for which the products are primarily intended for the food industry, in the Food & Beverage activity.
NOTE 17 STAFF COSTS
17.1 Number of employees
Number of employees 31/12/2012 31/12/2011
Total Americas 231 210
Total Europe & Africa 1,130 792
Total Asia / Pacific 94 53
Total Group 1,455 1,055
17.2 Stock options
Options were valued using the Black and Scholes valuation model and recognised in accordance with IFRS 2 as expenses amounting to €247,000 for the year under review.
Employee benefits derived from stock options grants were calculated using the Euribor rate in effect on the date the plan was implemented. Volatility reflects the yearly average of the 20 trading sessions preceding the grant date. The maturity period corresponds to the average time between the grant date and the exercise date, namely 4 years. Options may not be exercised during the three year period following the grant date. Since the dividend paid by Naturex is very low, no assumptions were made concerning it.
2012 Registration Document 209 Chapter 6 Consolidated financial statements and Notes
Highlights of the different stock option plans are presented in the table below:
Plan 11 Plan 12 Plan 13 Plan 14 Plan 15
Shareholders' Meeting date 30/06/2007 30/06/2008 30/06/2009 30/06/2010 08/06/2012
Board of Directors' meeting date 25/03/2008 13/03/2009 26/04/2010 15/04/2011 19/11/2012
Type of option Subscription Subscription Subscription Subscription Subscription
Inception date to exercise options 26/03/2011 14/03/2012 27/04/2013 16/04/2014 20/11/2015
Expiry date 25/03/2014 13/03/2015 26/04/2015 15/04/2016 19/11/2017
Subscription or purchase price 27.54 24.00 30.12 45.33 57.00
Weighted average fair value at valuation date 23.85 20.89 30.12 45.58 53.94
Risk free rate 2.5% 2.2% 1.0% 2.1% 0.6%
Volatility 33.6% 22.0% 17.0% 22.8% 30.7%
Total number of options granted: 47,362 53,650 52,150 57,094 64,480
Of which to corporate officers 33,000 33,000 26,000 26,000 14,000 Of which to employees 14,362 20,650 26,150 31,094 50,480
including the 10 employee beneficiaries granted the largest amount 5,600 10,500 12,200 12,000 16,100
Number of shares subscribed or cancelled at 31/12/2011 4,610 2,942 3,274 1,092 - Number of shares exercised during the period 362 230 - - - Number of shares cancelled during the period 232 496 1,546 2,432 -
Outstanding subscription or purchase options 42,158 49,982 47,330 53,570 64,480
210 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
NOTE 18 EXTERNAL EXPENSES AND DEVELOPMENT EXPENDITURES
2012 2011 In €000s Non-stock purchases 22,086 17,009
Subcontracting 2,213 3,471
Leasing 5,666 4,577
Maintenance 4,959 4,944
Insurance 2,295 2,070
Fees 8,359 6,912
Advertising, trade fairs, exhibitions 1,938 1,737
Shipping costs 14,710 13,333
Travel 5,724 4,685
Telecommunications 1,436 1,286
Miscellaneous 1,643 1,336
Total 71,028 61,360
Most of Naturex's development expenditures do not satisfy the criteria for fixed assets set forth in IAS 38, especially with regard to their future economic benefits. The amount of these expenditures that were accordingly expensed in the period amounted to €4.2 million.
However, over the course of the year, expenditures linked to projects with significant potential in terms of technical success and commercial profitability were capitalised.
The projects concern mainly the Italian and Spanish companies:
The Italian project involves obtaining and complying with the terms of ASMF (Active Substance Master File) in order to meet European regulations governing plant-based medication and allowing Naturex S.p.A. to continue to market certain products in this market as well as adding to its pharmacy-approved range of extracts. €409,000 of project expenses were incurred and capitalised in 2012.
The Spanish Ministry of Science and Innovation has approved the Spanish Senifood project. The purpose of this project is to define specially developed ranges for the elderly in order to offer food that is adapted to them. €1.1 million of project expenses were incurred and capitalised for the period.
2012 Registration Document 211 Chapter 6 Consolidated financial statements and Notes
NOTE 19 OTHER CURRENT OPERATING EXPENSES
2012 2011 In €000s Impairment on current assets 784 922
Disposals of fixed assets 2,284 126
Other expenses 1,342 335
Total 4,410 1,383
NOTE 20 OTHER NON-CURRENT OPERATING EXPENSES AND INCOME
Non-current operating items break down as follows:
2012 2011 In €000s Reorganisations -2,269 -503
Revaluation of benefits of Sw iss personnel - -509
Additions to the Group structure -2,123 -566
Other non-current operating expenses -4,393 -1,578
"Key man" policy insurance premium 6,121
Other non-current operating income 6,121 -
Expenses related to external growth consist mainly in acquisition-related costs of €475,000 for Pektowin, €329,000 for Valentine companies and €824,000 for Naturex DBS LLC;
Restructuring expenses correspond mainly to €310,000 and €802,000 respectively for reorganisation measures in connection with the integration Burgundy and Pektowin; Reorganisation expenses amounting to €1 million linked to the death of Jacques Dikansky were recognised.
Other non-current operating income included mainly an insurance payment for a "key man" policy for €3 million taken out in favour of Naturex S.A and insurance premium collected by banks allocated to the repayment of the loan.
212 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
NOTE 21 FINANCIAL EXPENSES AND INCOME
21.1 Cost of net financial debt
2012 2011 In €000s Financial income 159 502
Interest and related expenses -5,234 -5,302
Net borrowing costs -5,075 -4,800
21.2 Other financial income and expenses
2012 2011 In €000s Foreign exchange losses -5,415 -5,950
Foreign exchange gains 4,520 6,108
Other financial income and expenses -894 158
NOTE 22 INCOME TAX
Breakdown of deferred taxes/taxes payable in the income statement
2,012 2,011 in €000s Current tax 6,915 6,023
Deferred tax 1,825 2,243
Total taxes 8,741 8,266
2012 Registration Document 213 Chapter 6 Consolidated financial statements and Notes
Reconciliation between the theoretical and actual tax expense
2012 2011 in €000s Net income 22,939 15,628
Tax recognised (8,741) (8,266)
Net earnings before income tax 31,679 23,893
Theoretical tax 10,560 7,964
Impact of local tax rates (1,871) (50)
Impact of tax losses not previously recognised as assets 240
Impact of permanent differences (189) 351
Tax recognised 8,741 8,266
The tax rate for the Group over the period was 27.6%, compared to 34.6% in fiscal 2011.
The reduction in the effective tax rate is mainly due to the decrease in the local tax rates of two companies (in Switzerland and the UK) making the largest contributions to pre-tax income. The tax rates observed for these companies were respectively 19% and 24.5%.
Breakdown of recognised deferred tax assets and liabilities
31/12/2012 31/12/2011
in €000s Assets Liabilities Assets Liabilities Provisions (IAS 19) 675 - 292 -
Intangible assets 65 (4,067) 37 (3,605)
Property, plant and equipment 1,151 (6,382) 963 (6,884)
Provisions and other financial liabilities 3,527 - 1,656 -
Loss carryforw ards 1,684 - 477 -
Other timing differences 181 (5,654) 538 (3,156)
Financial instruments 687 178 991 (241)
Tax assets (liabilities) 7,969 (15,925) 4,956 (13,885)
Offset (5,637) 5,637 (2,476) 2,476
Net tax assets (liabilities) 2,332 (10,288) 2,480 (11,409)
214 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
Deferred tax assets are recognised in light of the likelihood of their recoverability. In the absence of prospects for recovery in the short-term, certain tax losses were not recognised as deferred tax assets. These tax losses amounting to €2.4 million are mainly in Poland.
NOTE 23 LEASES
23.1 Finance leases
Gross value Gross value Net value Net value In €000s at 31/12/2011 at 31/12/2012 at 31/12/2011 at 31/12/2012 Value of fixed assets 571 1,208 262 939
23.2 Operating leases
The terms for operating leases that cannot be cancelled are as follows:
2012 2011 In €000s Less than 1 year 706 943
1 to 5 years 1,781 2,698
More than 5 years 6,128 9,379
These amounts primarily correspond to leases for warehouses or factories, signed several years ago.
No transfers of land ownership are planned.
The Group has determined that the land lease is an operating lease. The rent paid to the owner for the building is increased on a regular basis according to the level of rents in the market and the Group does not incur any risk linked to the residual value of the building. The Group has therefore considered that the owner retains almost all of the risks and benefits related to the building, and has concluded that the building contracts are operating leases.
NOTE 24 CAPITAL MANAGEMENT
The Group's policy is to maintain a solid capital base to retain the trust of investors, creditors and the market and support the future development of operations.
Note 24.1 Capital management
Ordinary and preferred shares
At 31 December 2012, the share capital consisted of 7,729,000 shares compared to 7,706,000 at 31 December 2011 with all shares having a par value of €1.50.
This increase corresponds to the distribution of 16,900 dividends in newly created shares and the exercise of 6;000 stock options.
All of the shares issued were fully paid up.
2012 Registration Document 215 Chapter 6 Consolidated financial statements and Notes
Holders of ordinary shares have the right to any dividends decided upon and benefit from one vote per share at shareholders’ meetings.
Holders of preferred shares also have the right to any dividends decided upon, but do not benefit from a voting right at the shareholders’ meetings.
Translation reserve
The translation reserve includes all gains/losses on foreign currency conversions following the translation of the financial statements of foreign operations, as well as the translation of liabilities recognised as investments in a foreign subsidiary.
Treasury shares
The reserve for treasury shares includes the costs of shares of the company held by the Group. At 31 December 2012, the Group held 2,357 shares of the company through a liquidity agreement managed by an independent services provider.
Information on the liquidity agreement is presented in Section 4 "Changes in share capital" of this report.
24.2 Diluted earnings per share
2012 2011 restated
Net income attributable to the Group (in €000s) 22,901 15,587
Average number of shares comprising the capital 7,716,836 6,734,593
Earnings per share 2.9677 2.3144
Number of outstanding options exercisable 200,460 218,098
Diluted earnings per share 2.8925 2.2418
For FY 2011, the shareholders' meeting approved the payment of a dividend of €0.10 per share, with shareholders having the option of receiving all or part of their dividend in cash or in the form of shares with a discount of 10% on the share’s market price.
In 2011, the dividend paid for FY 2010 was €0.10 per share.
216 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
NOTE 25 RELATED PARTIES AND OFF-BALANCE SHEET COMMITMENTS
25.1 Related parties
Compensation paid to the principal executive officers
The total gross compensation paid to Naturex’s management bodies amounted to €1,587,000 in the 2012 compared to €1,889,000 in 2011. This compensation includes all remuneration, benefits in kind and stock options allocated over the year paid by Naturex Inc. (€1,117,000) and Naturex S.A. (€470,000) respectively. Members of Naturex's management bodies are not granted any long-term benefits.
Other operations with related parties
Concerning SGD which holds 21.02% of the capital and 27.50% of the voting rights, €68,000 in interest were paid by Naturex SA on the current account balance over the reporting period that at 31 December 2012 amounted to €1,426,000.
It also received 3,937 shares as payment for the dividend for a value of €0.2 million.
Senior executives created SCI La Pinède with a view to constructing a building on land next the current head office so it can be extended in the future.
The part of the land purchased by SCI Broquetons (Group company) was transferred to SCI La Pinède as soon as the financing was put into place.
At 31 December 2012, €330,000 was paid as security for the rent of the extension. No rent was paid in 2012.
The Naturex AG Group company rents, for use as a warehouse, part of a building located on land adjacent to the Burgdorf plant from Grünes Blatt, a real estate company in which the executive officers are shareholders. This company has granted a commercial lease to Naturex AG for a 10-year term.
Grünes Blatt rents the building to Naturex AG at market conditions for a maximum of CHF 400,000 less the amount paid by third parties who occupy part of the said building. In addition, Naturex AG has the right to build on the free part of the land any building it may require.
In the period, an annual charge of CHF 253,000 in rent was paid.
2012 Registration Document 217 Chapter 6 Consolidated financial statements and Notes
25.2 Off-balance sheet commitments
Commitments received 31/12/2012 31/12/2011 In €000s
Commitments related to Group financing
Credit risk 32,195 39,910
Commitments relating to Group operating activities
Guarantee related to the transport of alcohol Unlimited Unlimited
Commitments given 31/12/2012 31/12/2011 In €000s
Commitments related to Group financing
Guarantees for subsidiaries' commitments 6,426 6,453
Pledging of securities and/or business assets in connection w ith the structured loan agreement 113,641 98,957
Pledging of business assets and property mortgages in connection w ith loans - 850 taken out by companies before their integration into the Group
Commitments relating to Group operating activities -
Guarantees for customs 969 1,077
Guarantees for trade payables 241 31
Guarantees in connection w ith research and development projects 240 -
Investment undertaking of Naturex SA in Pektow in 2,455 -
218 2012 Registration Document Chapter 6 Consolidated financial statements and Notes
STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal year ended 31 December 2012
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English-speaking readers. The Statutory Auditors’ Report includes information specifically required by French law in such reports, whether qualified or not. This information is presented below the opinion on the financial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures. This report also includes information relating to the specific verification of information given in the Group management report and in the documents addressed to shareholders. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the shareholders,
In accordance with the terms of our appointment at your shareholders’ meeting, we hereby submit our report for the year ended 31 December 2012 regarding:
- our examination of the accompanying consolidated financial statements of Naturex S.A.,
- the basis of our assessments, and
- the specific procedures and disclosures required by law. The Board of Directors has approved the consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
1. Opinion on the consolidated financial statements We conducted our audit in accordance with professional auditing standards applicable in France. Those standards require that we plan and perform our audit to obtain reasonable assurance that the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis or by other selection methods, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used, the significant estimates made and the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group at year-end and of the results of its operations for the year then ended in accordance with IFRS as adopted for use in the European Union. Without qualifying the opinion expressed above, we draw your attention as an emphasis of matter to notes 4.1 and 13 to the financial statements presenting a change in accounting method concerning employee benefits resulting from the early adoption of amended IAS 19.
2. Basis of our assessments Pursuant to the provisions of article L.823-9 of the French Commercial Code regarding the basis of our assessments, we draw your attention to the following matters:
2012 Registration Document 219 Chapter 6 Consolidated financial statements and Notes
At each year-end, the company systematically carries out a goodwill impairment test using the methods described in Note 5.1 to the financial statements. We have examined how these impairment tests are performed as well as the cash flow forecasts and assumptions used and we have verified that note 5.1 to the financial statements discloses appropriate information. The assessments on these matters were made in the context of our audit of the consolidated financial statements taken as a whole and therefore helped us form our opinion expressed in the first part of this report.
3. Specific procedures and disclosures In accordance with professional standards applicable in France, we have also performed the specific procedures required by law regarding the group information given in the management report. We have no matters to report regarding its fair presentation and consistency with the consolidated financial statements.
Paris La Défense, 29 April 2013 Avignon, 29 April 2013
French original signed by:
KPMG S.A. AREs X.PERT Audit Jean Gatinaud Laurent Peyre
Translation disclaimer: This document is a free translation of the French language version of the consolidated financial statements for the twelve-month period ended 31 December 2012 as published in the original French registration document for 2012 and produced for the convenience of English speaking readers. In the event of any ambiguity or conflict between statements or other items contained herein and the original French version, the relevant statement or item of the French version shall prevail. While all possible care has been taken to ensure that this translation is an accurate representation of the original French document, in all matters of information, views or opinions expressed therein, only the original language version of the document in French is legally binding. As such, this translation may not be relied upon to sustain any legal claim, nor be used as the basis of any legal opinion and Naturex expressly disclaims all liability for any inaccuracy herein
220 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NATUREX S.A. ANNUAL FINANCIAL STATEMENTS AND NOTES AT 31 DECEMBER 2012
BALANCE SHEET ...... 224 INCOME STATEMENT ...... 225 NOTES TO THE SEPARATE ANNUAL FINANCIAL STATEMENTS ...... 226 NOTE 1 GENERAL INFORMATION ...... 226 NOTE 2 INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT ...... 228 NOTE 3 FINANCIAL ASSETS ...... 232 NOTE 4 NOTE 4 INVENTORIES AND WORK IN PROGRESS ...... 234 NOTE 5 RECEIVABLES ...... 234 NOTE 6 OTHER RECEIVABLES ...... 235 NOTE 7 CASH AND CASH EQUIVALENTS ...... 235 NOTE 8 ACCRUAL ACCOUNTS ...... 236 NOTE 9 NATURE OF TRANSLATION DIFFERENCES ...... 236 NOTE 10 SHAREHOLDERS' EQUITY ...... 236 NOTE 11 PROVISIONS FOR CONTINGENCIES AND EXPENSES ...... 238 NOTE 12 FINANCIAL DEBT ...... 239 NOTE 13 TRADE PAYABLES AND RELATED ACCOUNTS ...... 240 NOTE 14 OTHER PAYABLES ...... 240 NOTE 15 PREPAID INCOME ...... 240 NOTE 16 REVENUE...... 240 NOTE 17 OTHER INCOME ...... 241 NOTE 18 NET FINANCIAL INCOME / (EXPENSE) ...... 241 NOTE 19 NET EXCEPTIONAL INCOME / (LOSS) ...... 242 NOTE 20 TAX INCOME /(EXPENSES) ...... 242 NOTE 21 AVERAGE HEADCOUNT AND STATUTORY TRAINING BENEFITS ...... 243 NOTE 22 COMMITMENTS ...... 243 NOTE 23 BREAKDOWN OF CAPITAL ...... 244 NOTE 24 EXECUTIVE COMPENSATION ...... 244 NOTE 25 CHANGES IN FUTURE TAX LIABILITIES ...... 245 NOTE 26 NOTE 26 – RESEARCH AND DEVELOPMENT EXPENDITURES ...... 245 NOTE 27 RELATED PARTY TRANSACTIONS ...... 245 STATUTORY AUDITORS' REPORT ON THE ANNUAL FINANCIAL STATEMENTS ...... 246 Year ended 31 December 2012 ...... 246 STATUTORY AUDITORS' REPORT ON REGULATED AGREEMENTS AND COMMITMENTS...... 248
2012 Registration Document 223 Chapter 7 Naturex S.A. annual financial statements and notes
BALANCE SHEET 31/12/2012 31/12/2011 Depr., amort. & Gross value Net value In €000s prov.
NON-CURRENT ASSETS 270,091 19,178 250,913 219,783 Intangible assets 26,149 3,178 22,971 15,315 Property, plant and equipment 34,567 16,000 18,567 7,245 Financial assets 209,375 - 209,375 197,223
CURRENT ASSETS 123,909 2,342 121,567 107,206 Inventories and work in progress 31,908 2,157 29,752 21,583 Trade receivables and related accounts 19,819 186 19,633 10,727 Miscellaneous receivables 71,097 - 71,097 51,810 Cash at bank and in hand 1,085 - 1,085 23,086
Accrual accounts 2,365 2,365 2,696 Translation differences (assets) 8,518 8,518 9,067
TOTAL ASSETS 404,884 21,520 383,364 338,751
EQUITY AND LIABILITIES
Notes 31/12/2012 31/12/2011 In €000s
Capital stock 11,593 11,558 Additional paid-in capital 179,285 178,368 Legal reserve 788 593 Statutory reserves 885 885 Tax-based reserves 28 28 Retained earnings 2,590 -352 Annual profit or loss 5,533 3,908 Investment grants 245 - Tax-based provisions 2,913 2,082 TOTAL SHAREHOLDERS’ EQUITY 10 203,861 197,071
11 PROVISIONS FOR CONTINGENCIES AND EXPENSES 3,452 1,885
Borrowings and financial liabilities 12 125,270 112,100 Current bank facilities 7,167 768 Partners' current accounts 1,441 312 Trade payables and related accounts 13 21,837 13,197 Other payables 14 14,430 5,414 Prepaid income 15 195 367 Translation differences (liabilities) 9 5,711 7,637 TOTAL LIABILITIES 176,050 139,795
TOTAL EQUITY AND LIABILITIES 383,364 338,751
224 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
INCOME STATEMENT
Note 31/12/2012 31/12/2011 in €000s
Revenue 16 110,644 77,244
Carriage charges invoiced 275 223
Change in finished goods and in-progress inventory 5,523 -547
Capitalised production 629 510
Other operating income 17 20,205 17,261 OPERATING INCOME 137,278 94,691
Purchases 82,400 52,180
Other external charges 26,780 20,292
Taxes other than on income 1,151 931
Payroll expenses 12,254 9,342
Payroll taxes 5,380 4,174
Amortisation/depreciation allowances and provisions 4,636 2,408
Other expenses 541 196 OPERATING EXPENSES 133,141 89,523
NET OPERATING INCOME 4,136 5,167
Financial income 9,231 9,029
Financial expenses 11,126 9,030 NET FINANCIAL INCOME / (EXPENSE) 18 -1,895 -
Exceptional income 3,432 1,477
Exceptional expenses 1,217 3,052 NET EXCEPTIONAL ITEMS 19 2,215 -1,575
INCOME BEFORE TAX 4,456 3,592
Income tax 20 -1,078 -316 NET INCOME 5,533 3,908
225 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTES TO THE SEPARATE ANNUAL FINANCIAL STATEMENTS
NOTE 1 GENERAL INFORMATION
1.1 Annual operating highlights
Continuing organic growth Revenue registered strong sales in the period of €110.6 million, up from €77.2 million in 2011. This rise reflects organic growth by the Group driven in particular by stronger performances in Brazil and the US compared with more sluggish trends in the European market. On that basis, net income after tax rose to €5.5 million, benefiting in particular from an improvement in net exceptional items.
Other highlights Simplified merger of Burgundy In October 2011, Naturex acquired for €6 million Burgundy Botanical Extracts, a French manufacturer and supplier of plant extracts for the nutraceutical, pharmaceutical and cosmetics industries. This acquisition both strengthened the Group's industrial base by the addition of two new production sites and increased its ability to meet customer needs by developing expertise in the nutraceutical, pharmaceutical and personal care markets through its portfolio of complementary products (active substance master files, new botanical extracts, active ingredients). In connection with this business combination, financed entirely by cash, acquisition-related costs were recognised totalling €512,000. At 31 December 2011, the consolidation was substantially completed, ending with a simplified merger procedure (transmission universelle de patrimoine) entailing the transfer of all assets and liabilities from this French company to Naturex SA on 1 January 2012.
Pektowin acquisition In January 2012 Naturex announced the acquisition of 100% of the capital of Pektowin, a Polish company specialised in fruit and vegetable pectins and concentrated juices. The acquisition of Pektowin was finalised by the signature of 11 January 2012 when the standard conditions precedent related to the privatisation of ZPOW Pektowin SA (Pektowin) in favour of Naturex were met. ZPOW Pektowin SA (Pektowin) is a Polish company located in Jaslo (southeast of Poland), specialised in the production of apple and citrus pectins and fruit and vegetable concentrated juices plus, to a lesser extent, the preparation of processed foods. This acquisition fits perfectly with the Group’s strategy that consists in accelerating its international development, expanding its product line and strengthening its industrial base, especially in emerging countries.
2012 Registration Document 226 Chapter 7 Naturex S.A. annual financial statements and notes
This acquisition was accompanied by the opening of a sales office in Warsaw (Poland). As a first step in the integration process of this company, Naturex immediately replaced Pektowin's corporate governance bodies. The acquisition price amounted to €5.6 million.
Valentine acquisition In March 2012 Naturex announced the acquisition of Valentine, an Indian company specialised in the production of fruit and vegetable powders plus natural colours for the food processing industry. Valentine is comprised of Valentine Agro Private Ltd. and Valentine Foods Private Ltd. This Indian company was created in 1994 and is specialised in the production of natural colours and fruit and vegetable powders. Valentine has a workforce of 40 employees with two plants located near Mumbai. In conjunction with this acquisition, Naturex has established a purchasing office in order to take better advantage of the country’s wealth of raw materials across the entire Group. This acquisition fits perfectly with Naturex's strategy for developing in emerging countries. Naturex has in this way significantly strengthened its commercial presence in India that accounts for the major share of Valentine's revenue.
ITRAD acquisition Naturex finalised its acquisition of the total ownership interests of the Abidjan-based Ivory Coast company ITRAD, specialised in aril harvesting for the food industry for a total amount of €66,000.
Derecognition of Sanavie shares An official notice (Feuille Officielle Suisse du Commerce or FOSC) of 10 February 2012 announced, by decision of the Eastern Vaud District Court of 30 June 2011, that the company was declared bankrupt effective as of said date. Because the full amount of the assets of this company had been written down in previous periods, the derecognition of this investment had no impact on the financial statements at 31 December 2012.
1.2 Subsequent events
Convertible debt issue On 17 January 2013, Naturex announced a €18 million convertible bond issue for private investors with a term of approximately six and a half years. The face value of this issue amounted to €18 million divided by 257,143 OCEANE convertible bonds of €70 at par per bond, with issue premium of 21.95% in relation to Naturex's closing price in the regulated market of NYSE Euronext Paris for the trading session of 15 January 2013 and 21.69% in relation to the average closing price for the 20 trading sessions in this market preceding the issue date.
227 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Change in the capital structure Following the death of the company's chief executive, on 22 February 2013, Jacques Dikansky's children sold the full amount of their stake in the capital in SGD to the Finasucre Group. Following this transaction, Finasucre Group held 98.79% of SGD's capital. This transaction led to changes in Naturex's Board of Directors with the appointment of Charles Feys, Secretary General of Finasucre Group, in replacement of Isabelle Dikansky, and the resignation of Olivier Dikansky from his office as director. Following these changes in the composition of the Board of Directors, Hélène Martel-Massignac, Chief Executive Officer of Caravelle was appointed as director by co-optation.
1.3 Basis of preparation and statement of compliance
The annual financial statements are prepared and presented on the basis of French GAAP and notably the decisions issued by the French accounting rules committee (Comité de la Réglementation Comptable or CRC). In fiscal 2012, no changes in accounting methods were adopted by Naturex S.A.
NOTE 2 INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
2.1 Accounting method
Property, plant and equipment and intangible assets are measured at the purchase price. When criteria for recognising development expenditures as assets are met, they are capitalised. Other research and development expenditures are expensed in the period in which they are incurred. When there is evidence of a loss in value, an impairment test is carried out to compare the net carrying amounts of the fixed asset with its present value. If the present value is substantially lower than the net carrying amounts, an impairment charge is recognised to reduce the assets' value to the present value. Pursuant to recommendation No. 2006-12 of 24 October 2006 of the French standard setter (Conseil National de la Comptabilité), the initial depreciation schedule remains unchanged. On that basis, the allowance for depreciation for the period is recognised for the amount that would have been applied if no impairment had been recognised and the resulting reversal of the provision for impairment and the corresponding allowances for depreciation are recognised as exceptional income.
228 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
2.2 Acquisitions and disposals
Disposal or Burgundy 01/01/2012 Reclassifications Acquisitions retirement of 31/12/2012 In €000s merger (TUP) assets Start-up costs, research and development expenditures 260 63 60 383
Concessions, patents and similar rights 3,226 231 35 816 4,308
Purchased goodw ill 13,206 6,279 19,485
Other intangible assets 490 490
Intangible assets under construction 378 1,106 1,484
Intangible assets 17,559 6,572 35 1,983 - 26,149
Buildings fixtures and fittings 71 1,037 1,108
Land 261 60 261 60
Plant, machinery and equipment 7,228 3,813 1,952 1,673 74 14,592
Sundry fittings and installations 6,792 211 212 1,097 8,311
Vehicles 680 38 280 62 936
Office and computer equipment 1,463 134 28 286 1,911
Furniture 206 39 5 250
Property, plant, and equipment under construction 640 1,833 -2,227 7,153 7,399 Property, plant and equipment 17,341 7,165 -35 10,492 397 34,567 Total 34,900 13,737 - 12,475 397 60,716
Goodwill is largely comprised of: Commercial goodwill of €10,307,000 arising from the acquisition of the "Actifs innovants" (Innovative Active Ingredients) division of Berkem. This business consists of plant extracts for the pharmaceutical, nutraceutical, cosmetic and food industries based on product lines that have been clinically tested and marketed such as Svetol®, the widely acclaimed green coffee extract destined for the market of slimming products. Goodwill of €2,065,000 in connection with a partnership agreement with Scalime Nutrition. The purpose of this agreement is to accelerate the marketing, commercial and technical development of polyphenolic extracts. Burgundy goodwill pursuant to the merger effective 1 January 2012. This merger was carried out at the net carrying amount with a merger loss of €6,254,000 (mali de fusion) recognised and allocated in full to goodwill. Intangible assets in progress consist of development expenditures (€427,000) and the purchase of software (€1,055,000). Tangible assets in progress concern the project for the extension of the head office (€6,420,000) and production installations at the Reyssouse site (€430,000).
229 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
2.3 Amortisation/depreciation of fixed assets
Nature Method Duration
Softw are Straight-line 4 years Patents Straight-line 20 years R&D expenditures Straight-line 5 years Purchased goodw ill Unamortised - Buildings on leasehold property Straight-line 10 years Machinery and equipment Straight-line 7 years Laboratory equipment Straight-line 5 years Fixtures and fittings Straight-line 10 years Vehicles Straight-line 4 years Office and computer equipment Straight-line 4 and 5 years Furniture Straight-line 7 years
2.4 Amortisation, depreciation and impairment
At 31 December 2012, amortisation, depreciation and impairment on fixed assets broke down as follows:
Burgundy Disposal or Allowances for the Provisions for 01/01/2012 merger retirement of 31/12/2012 period the period In €000s (TUP) assets Start-up costs, research and development expenditures 171 61 233
Concessions, patents and similar rights 1,584 137 736 2,456
Purchased goodw ill - -
Other intangible assets 490 490
Total intangible assets 2,244 137 797 - - 3,178
Buildings fixtures and fittings 71 739 21 830
Plant, machinery and equipment 4,817 2,620 1,213 36 8,614
Sundry fittings and installations 3,808 132 693 4,632
Vehicles 380 22 158 62 497
Office and computer equipment 910 81 280 1,271
Furniture 111 22 22 155
Total property, plant and equipment 10,097 3,615 2,386 - 98 16,000
TOTAL 12,341 3,751 3,183 - 98 19,178
230 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
2.5 Assets held under leases
Allowances for amortisation and depreciation
Balance sheet line items Initial cost Net value for the period accumulated
Land 38,000 - - 38,000
Buildings 538,595 26,930 127,916 410,679
Machinery and equipment 398,165 56,881 99,541 298,623
Other tangible assets 157,058 48,397 97,244 59,814
Total 1,131,818 132,207 324,702 807,116
Lease payments due Residual Amount assumed Balance sheet line items More than 1 purchase More than 5 in the period Up to 1 year and less than 5 Total price years years
Land - - 38,000 38,000 - -
Buildings 61,807 247,228 44,821 353,857 1 61,807
Machinery and equipment 65,665 262,661 16,416 344,743 1 65,665
Other tangible assets 49,580 9,360 - 58,939 - 49,580
Total 177,052 519,249 99,238 795,539 2 177,052
Lease agreements originate mainly from the consolidation of the Burgundy financial statements following the simplified merger involving the transfer of all assets and liabilities in early 2012.
231 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTE 3 FINANCIAL ASSETS
3.1 Acquisitions, provisions and disposals
Disposals / Translation 01/01/2012 Acquisitions 31/12/2012 In €000s Reclassifications Decreases differences
Majority equity investments 125,619 - 13,245 5,800 - 133,064
Sanavie 420 - 420 - -
Investment-related receivables 65,612 - 18,970 8,857 2,803 72,921
Financial instruments (foreign exchange hedges) 5,876 - - 2,571 424 2,881
Deposits and guarantees 116 - 392 - 509
Financial assets 197,644 - 32,607 17,649 3,227 209,375
Reversals Reversals (provisions Translation 01/01/2012 (unused 31/12/2012 used in the differences provisions) In €000s Allowances period) Sanavie 420 - -420 - - -
Total provisions 420 - -420 - - -
Acquisitions related to equity investments break down as follows: Acquisition of Pektowin (Poland) in January 2012 for € 5.6 million with € 474,000 in acquisition-related expenses; Acquisition of Valentine Agro (India) in March 2012 for € 4.2 million with € 328,000 in acquisition-related expenses; Acquisition of Valentine Food (India) in March 2012 for € 1.8 million; Acquisition of ITRAD (Ivory Coast) in February 2012 for € 66,000 with € 8,000 in acquisition-related expenses The reduction in equity interests by €5.8 million is related to the simplified merger entailing the transfer of all Burgundy France's assets and liabilities in January 2012. During the year, subsidiaries repaid €8.9 million in redeemable loans. Two new loans were granted of €3.5 million for Naturex SL and US$19 million for Naturex Inc. The impact of foreign exchange fluctuations on loans denominated in foreign currency generated a translation differences €2.8 million in the period. As indicated in Note 1.1, Sanavie shares for a gross value of €420,000 were written off with a net carrying value at nil. A foreign currency hedge was concluded in 2010 to hedge the exposure of US-dollar denominated debt. The company opted to recognise the hedge agreement as a loan in the initial currency and the debt in the swapped currency. The amortisation over the year amounted to €2.6 million.
232 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
3.2 Measurement of equity investments– Impairment.
Equity securities are measured at cost including acquisition fees. Impairment can be recognised if the carrying amount of a security is greater than its value in use determined in reference to the percentage of equity, the subsidiary's development prospects and revenue. Development prospects are determined in reference to past experience and various other factors. In consequence, actual results may differ from estimates used to measure the value of the company's portfolio of equity investments.
3.3 Subsidiaries and associates
Capital Investment- Subsidiaries Gross value Ownership reserves and Net income / Guarantees Provisions related Share capital Revenue of securities interest (%) retained (loss) and sureties In €000s receivables earnings Naturex Holdings Inc. United States 52,380 - 55,288 100% 54,622 -898 - 3,490
Naturex Maroc Morocco 6,245 - - 96.34% 2,211 8,727 975 11,359 1,880
SCI Les Broquetons France 580 - - 100% 495 214 204 475 -
Naturex SpA Italy 8,422 - - 100% 1,200 5,686 910 29,117 -
Naturex SL Spain 12,114 - 3,500 100% 11,414 676 2,540 30,361 -
Naturex AG Sw itzerland 38,793 - 14,089 100% 12,664 20,471 5,018 62,162 - United Naturex U.K. 148 - - 100% 123 382 3 - - Kingdom Naturex Trading Shanghai China 600 - 45 100% 682 262 621 6,370 -
Naturex SPRL Belgium 100 - - 100% 100 -321 -127 7,530 -
Naturex GMBH Germany 150 - - 100% 150 25 192 9,800 -
Naturex LLC Russia 100 - - 99% 37 679 376 5,785 -
Naturex K.K. Japan 44 - - 100% 44 -64 -420 1,032 -
Naturex Corée South Korea 65 - - 100% 71 -83 -164 87 -
Naturex Inc. Canada Canada 73 - - 100% 76 445 67 6,381 - Naturex Ingredientes Naturales Mexico 3 - - 100% 3 -71 -146 561 - S.A. de C.V Zpow Pektow in SA Poland 6,082 100% 8,908 -4,635 -1,483 8,466 1,055
Valentine Agro Private Limited India 5,276 92% 365 1,382 -273 1,148
Valentine Agro Private Limited India 1,812 100% 1 36 52 180
ITRAD Ivory Coast 75 100% 9 16 -18 668 Total 133,064 - 72,921
233 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTE 4 NOTE 4 INVENTORIES AND WORK IN PROGRESS
4.1 Accounting method
The cost of inventories is evaluated by batch at the cost price and includes purchase costs for raw materials, production or transformation costs, the appropriate share of the indirect costs based on the normal production capacity and the other costs incurred in bringing the inventories to their present location and condition. Inventories are measured at the lower of the cost and the net realisable value. A provision for impairment is recognised when the purchase cost or cost price falls below the market price
4.2 Breakdown by type of inventory
31/12/2012 31/12/2011 In €000s
Raw materials 6,976 5,948
Finished and semi-finished goods 24,932 15,635
Provision for inventory losses 2,157
Total 29,752 21,583
The provision for inventory at year-end amounted to €2,157,000. This provision was mainly for inventory from Burgundy originating from the transfer of its assets and liabilities through the simplified merger procedure. Changes in provisions on inventory break down accordingly:
Burgundy 01/01/2012 Allowances Reversals 31/12/2012 In €000s merger (TUP)
Provision for inventory losses - 1,619 1,140 602 2,157
- 1,619 1,140 602 2,157
NOTE 5 RECEIVABLES Receivables are measured at nominal value. A provision for impairment is recorded when there is a collection risk for the full or a partial amount of the receivable. All receivables included under current assets are due within one year.
234 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
31/12/2012 31/12/2011 In €000s Gross trade receivables 19,819 11,178 Of which affiliated undertakings 13,957 5,401
Provisions -186 -451
Net trade receivables 19,633 10,727
Receivables stated in foreign currency amounted to €8,534,000. Changes in provisions for receivables break down accordingly:
Reversals Burgundy 01/01/2012 Allowances 31/12/2012 merger (TUP) (provisions (unused In €000s used) provisions) Accounts receivable 451 103 312 352 328 186 451 103 312 352 328 186
NOTE 6 OTHER RECEIVABLES
31/12/2012 31/12/2011 In €000s
Advances to subsidiaries 61,604 48,360
Income tax receivables 3,268 2,105
Advances to employees 382 269
Deductible VAT 533 350
VAT receivables 934 379
Credit notes receivable 31 139
Other accrued income 3,027 105
Other receivables 1,319 104
Total 71,097 51,810
NOTE 7 CASH AND CASH EQUIVALENTS Naturex did not purchase or sell any OEIC (SICAV) holdings in the period.
235 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTE 8 ACCRUAL ACCOUNTS
31/12/2012 31/12/2011 In €000s
Financing expenses 1,301 1,420
Operating expenses (excl. production) 929 875
Investment expenses - 243
Production expenses 136 159
Total 2,365 2,696
Financial expenses correspond to issuance fees for the restructured loan redeemable over the loan period.
NOTE 9 NATURE OF TRANSLATION DIFFERENCES
Assets Liabilities In €000s
Trade receivables 172 230
Trade payables 7 145
Borrow ings 5,461 170
Financial instruments 310
Loans to subsidiaries 1,067 4,850
Subsidiaries current account balances 1,812 6
Total 8,518 5,711
NOTE 10 SHAREHOLDERS' EQUITY
10.1 Changes in equity
The share capital is divided into 7,728,539 fully-paid up shares with a par value of €1.50.
236 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Earnings Equity capital Net income 01/01/2012 appropriation Dividends Misc. 31/12/2012 transactions 2012 In €000s 2011 Capital 11,558 34 11,593
Additional paid-in capital 178,017 916 178,934
Merger premium 351 - 351
Legal reserve 593 195 - 788
Restricted reserves 28 - 28
Statutory reserves 885 - 885
Retained earnings -352 2,942 1 2,590
Investment grants - 245 245 Accelerated tax depreciations and 2,082 831 2,913 amortisations Income / (loss) 3,908 -3,137 -771 5,533 5,533
197,071 - 952 -771 5,533 1,076 203,861
10.2 Capital grants
Investment grants of €245,000 consist of grants for investments by the Company in wastewater treatment facilities. Of this amount, €3,000 was recognised in the income statement in 2012.
10.3 Tax-based provisions
Tax-based provisions relate to the accelerated depreciation of acquisition-related costs for equity investments over a five-year period.
Highlights of the different stock option plans are presented in the table below:
237 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Plan 11 Plan 12 Plan 13 Plan 14 Plan 15
Shareholders' Meeting date 30/06/2007 30/06/2008 30/06/2009 30/06/2010 08/06/2012 Board of Directors' meeting date 25/03/2008 13/03/2009 26/04/2010 15/04/2011 19/11/2012 Type of option Subscription Subscription Subscription Subscription Subscription Inception date to exercise options 26/03/2011 14/03/2012 27/04/2013 16/04/2014 20/11/2015 Expiry date 25/03/2014 13/03/2015 26/04/2015 15/04/2016 19/11/2017 Subscription or purchase price 27.54 € 24.00 € 30.12 € 45.33 € 57.00 € Total number of options granted 47,362 53,650 52,150 57,094 64,480 Of which to corporate officers 33,000 33,000 26,000 26,000 14,000 Of which to employees 14,362 20,650 26,150 31,094 50,480 Of which to the top 10 employee beneficiaries 5,600 10,500 12,200 12,000 29,100 Total number of beneficiaries 48 64 78 195 278 Of which to corporate officers 3 3 3 3 2 Number of expired options 4,842 3,438 4,820 3,524 - Number of options subscribed 362 230 - - - Of which by corporate officers - - - - - Number of outstanding options 42,158 49,982 47,330 53,570 64,480
NOTE 11 PROVISIONS FOR CONTINGENCIES AND EXPENSES
11.1 Accounting method
Provisions for contingencies and expenses are recorded to cover litigation, disputes, guarantee commitments and risks related to the company's normal operating activities expected to result in an outflow of economic resources. Non-euro denominated payables and receivables are recorded at fair value in euros according to the exchange rate on the transaction date and recognised in the balance sheet at the year-end exchange rate. The resulting translation differences for payables and receivables in non-Euro currencies based on this year-end rate is recorded in the balance sheet under "translation differences" heading after factoring in hedging transactions . A provision for foreign exchange losses is recorded for the portion not offset by gains. Retirement severance liabilities are calculated by independent actuaries in accordance with the terms of the collective bargaining agreement of the French chemical industry (Union des Industries Chimiques) and the French national accounting board (CNC) of 1 April 2003. For this purpose, the projected unit credit method is used that takes into account estimated years of service at retirement, final salaries, life expectancy and staff turnover, based on actuarial assumptions. The present value of the benefit obligation is calculated by applying the appropriate discount rate. This obligation is partially financed through payments into a group life insurance policy with the corresponding assets measured at fair value.
The main assumptions used for calculating projected benefit obligations are as follows: - future compensation calculated on the basis of current compensation and an annual salary escalation rate of 2% to 6% according to the occupational category and age bracket (including long-term inflation); - A discount rate of 3.21 %; - An average payroll tax rate of 42%; and - And employee turnover rate determined by age bracket.
238 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Benefit obligations are not recognised and are included under off-balance sheet commitments. At 31 December 2012, the present value of projected benefit obligation amounted to €286,000 and the fair value of fund assets amounted to €93,000 representing a net liability of €192,000. No specific benefit plans exist for company executives.
11.2 Change in provisions
Burgundy Reversals Change of 01/01/2012 merger Allowances Other 31/12/2012 (provisions (unused method In €000s (TUP) used) provisions) Foreign exchange losses (1) 1,885 3,427 1,885 - - 3,427
Other - 25 - 25
1,885 25 3,427 - 1,885 - - 3,452
(1) Unrealised foreign exchange losses from the remeasurement of payables and receivables denominated in currencies other than the euro.
NOTE 12 FINANCIAL DEBT
Total < 1 year 2 to 5 years > 5 years In €000s
Borrow ings 114,672 49,205 65,392 75
Accrued interest not yet due 27 27 - -
Investment-related payables 9,441 1,441 - 8,000
Financial instruments (foreign exchange hedges) 2,571 2,571
Bank credit facilities 7,167 7,167
Total financial liabilities at 31/12/2012 133,879 60,412 65,392 8,075
Total financial liabilities at 31/12/2011 113,180 19,443 85,737 8,000
Interest rate and foreign exchange risks are hedged through interest rate derivatives and loans granted to subsidiaries at interest rates and maturities that match the underlying liability. The residual exposure to foreign exchange risk concerns 1.1% of foreign currency denominated payables and the interest rate risk is fully hedged.
239 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTE 13 TRADE PAYABLES AND RELATED ACCOUNTS
31/12/2012 31/12/2011 In €000s Trade payables 21,426 12,749 Of which affiliated undertakings 4,790 1,149 Invoices not yet received 411 448
Total 21,837 13,197
Trade payables in foreign currency amounted to €6,780,000 at 31 December 2012. All payables are due in less than one year.
NOTE 14 OTHER PAYABLES Other payables with maturities of less than one year break down as follows:
31/12/2012 31/12/2011 In €000s
Subsidiaries' current accounts 9,658 1,869
Payables to social security agencies 1,793 1,325 Including accrued expenses 865 668
Accrued employee compensation 1,343 1,010
Accrued operating expenses 776 690
Government payables 657 388 Including accrued expenses 565 307 Accrued production expenses 149 92
Accrued financial expenses 15 11
Investments - 10
Miscellaneous 38 19
Total 14,430 5,414
NOTE 15 PREPAID INCOME Sales invoices for €195,000 were reclassified as prepaid income as the transfer of title had not been completed by the end of the reporting period.
NOTE 16 REVENUE The proceeds from asset sales are recognised in the income statement when substantially all the significant risks and rewards incident to ownership of the assets have been transferred to the buyer.
240 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Revenue by geographic area breaks down as follows:
2012 2011 In €000s
United States 40,283 26,592
Other countries 54,481 38,056
France 15,881 12,595
Revenue 110,644 77,244
NOTE 17 OTHER INCOME Services rendered and charged back by the parent company to subsidiaries have increased significantly to support their rapid development. Furthermore, in fiscal 2012, the company received a €3 million insurance payment for a "key man" policy as compensation for loss of profits pursuant to the death of its chief executive. On this basis, "other income" increased significantly in the period.
NOTE 18 NET FINANCIAL INCOME / (EXPENSE)
2012 2011 in €000s Financial income 9,231 9,029 Interest income from affiliates 3,842 3,403 Foreign exchange gains 3,358 2,244
Reversal of provision for foreign exchange losses 1,885 2,111
Reversal of provision for equity investments - 835 Miscellaneous 147 436
Charges 11,126 9,030 Borrow ing costs 3,879 4,432 Foreign exchange losses 2,891 2,069 Provisions for foreign exchange losses 3,427 1,885 Provision for equity investments - Interest expense on affiliates 389 211 Miscellaneous 541 433
Net financial income (expense) -1,895 -1
241 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTE 19 NET EXCEPTIONAL INCOME / (LOSS)
Exceptional Exceptional In €000s income expenses Accelerated tax depreciations and 50 880 amortisations Asset disposals 305 299
Miscellaneous 3,077 38
Total 3,432 1,217
Miscellaneous exceptional income corresponds to an insurance payment received by the banks to guarantee repayment of a loan in the event of the death of a chief executive officer. On this basis, and pursuant to the death of Mr. Dikansky, the banking syndicate formed for the structured loan received €3,073,000 as an accelerated repayment of the debt. Asset disposals concerned mainly the sale of land for €260,000.
NOTE 20 TAX INCOME /(EXPENSES)
In €000s Income Expenses
Research tax credit 991
Income from French tax sharing provisions 102
Corporate sponsorship tax credit 34
French family tax credit (CIF) -
Tax charge of the period 15
Total 1,126 15
SCI les Broquetons is included in the French tax group of Naturex SA. The tax sharing agreement providing for the sharing of taxes between a parent company and subsidiaries in France (intégration fiscale) stipulates that Naturex incurs the tax on income for the entire tax group generating a tax receivable in its favour on the SCI (société civile immobilière) a French non-trading property company, equal to the amount that would be owed by the subsidiary if taxed separately. In application of this principle, Naturex recognised an income of €102,000 from this tax sharing arrangement corresponding to income payable by the SCI.
Loss French tax- Profit before Taxes carryforwards to sharing Net income tax payable In €000s be applied provisions Profit or loss before exceptional items -759 813 -917 -102 437 Tax credits -991 Exceptional profit or loss 5,215 119 5,096 Total 4,456 -59 -917 -102 5,533 We have intentionally presented in this table the "key man" insurance policy payment of €3 million (recognised in other income) as an exceptional item in order to determine the one-time tax expense of the period.
242 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
In the period, the Group recognised insurance payments of €3 million under a "key -man" policy in other income and a payment of €3,073,000 for a policy taken out in favour of banks to guarantee the repayment of tranche A1 of its restructured loan under exceptional income. The exceptional impact of these two insurance pay-outs increased the tax expense for the period by €405,000 and the future tax expense by €1,619,000.
NOTE 21 AVERAGE HEADCOUNT AND STATUTORY TRAINING BENEFITS For fiscal 2012, the average number of employees was 339. At 31 December 2012, there were 385 employees (including expatriate staff and employees of the Dubai office) breaking down as follows:
Category Headcount
Managers 183
Supervisory staff 54
Office staff and plant w orkers 138
Other 10
Total 385
The total accumulated number of "individual training rights" (Droit individuel à la Formation or DIF) to which employees are entitled under French law amounted to 18,108 hours.
NOTE 22 COMMITMENTS
22.1 Commitments given
Commitments given 31/12/2012 31/12/2011 in €000s
Commitments related to company financing activities
Guarantees w ith banks on behalf of subsidiaries 6,426 6,452 Pledging of securities and/or business assets in connection w ith the 113,641 98,957 structured loan agreement Commitments related to company operating activities
Retirement severance benefit obligations 192 74 Guarantee in favour of Naturex SL in connection w ith an R&D project 240 240 Investment undertaking of Naturex SA in Pektow in 2,455
Two commitments were given pursuant to the acquisition of Pektowin in January2012 summarised as follows: Maintain the primary activity of the Company for at least three years from the acquisition completion date;
243 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Invest a minimum of PLN 10 million over three years from the acquisition completion date. These investments necessary for the company's activity consist mainly in modernising existing production facilities, supplying new manufacturing equipment and strengthening the company's integration and development within the production resources of Naturex Group.
22.2 Commitments received
Commitments received 31/12/2012 31/12/2011 in €000s
Commitments related to company financing activities
Credit lines 26,889 35,000
Commitments related to company operating activities
Guarantee related to the transport of alcohol Unlimited Unlimited
22.3 Interest rate derivative commitments
Interest rate risk derivatives are not recognised on the balance sheet. The mark-to-mark valuation of these instruments at year-end amounted to €2.5 million.
NOTE 23 BREAKDOWN OF CAPITAL
Number of shares held Voting rights at Shareholders 31/12/2012 31/12/2012
SGD 21.02% 27.50%
Caravelle 15.35% 13.59%
Dikansky family 0.17% 0.28%
Thierry Lambert 0.01% 0.02%
Stéphane Ducroux 0.06% 0.10%
Treasury shares 0.03% 0.00%
Free float 63.35% 58.51%
Following the death of Mr. Dikansky, the shares were transferred to the estate of the Dikansky family. Reference is made to these shares for information purposes only. On the date of this report, the holdings of the Dikansky family in SGD have been sold to the Finasucre Group.
NOTE 24 EXECUTIVE COMPENSATION Growth compensation of company executive officers amounted to €470,000. Detailed information on executive compensation is presented in Chapter III of the Group's management report.
244 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
NOTE 25 CHANGES IN FUTURE TAX LIABILITIES Timing differences with respect to taxes break down as follows:
In €000s 31/12/2012 Social solidarity contribution 203 Unrealised foreign exchange gains 619 Insurance income -4,859 Loss carryforw ard 915
Total -3,122 The corresponding tax liability is €1,041,000.
At 31 December 2012, Group tax receivables broke down as follows:
In €000s 31/12/2011 Change 31/12/2012 Tax credits -2,105 -1,163 -3,268 Taxes ow ed in countries other than 11 11 22 France Total -2,094 -1,152 -3,246
NOTE 26 NOTE 26 – RESEARCH AND DEVELOPMENT EXPENDITURES Research and development expenditures expense in the period amounted to €2.3 million.
NOTE 27 RELATED PARTY TRANSACTIONS Decree No. 2009-267 dated 9 March 2009 imposes disclosure requirements in France about transactions with related parties not included at normal market conditions. No material agreements of this nature were concluded in the period.
245 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
STATUTORY AUDITORS' REPORT ON THE ANNUAL FINANCIAL STATEMENTS
Year ended 31 December 2012
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English-speaking readers. The Statutory Auditors’ Report includes information specifically required by French law in such reports, whether qualified or not. This information is presented below the opinion on the financial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures. This report also includes information relating to the specific verification of information given in the Group management report and in the documents addressed to shareholders. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the shareholders: In accordance with the terms of our appointment at your shareholders’ meeting, we hereby submit our report for the year ended 31 December 2012 regarding:
- our examination of the accompanying annual financial statements of Naturex S.A.;
- The justification of our assessments; and
- The specific procedures and disclosures required by law. These annual financial statements have been approved by the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit.
1. Opinion on the annual financial statements We conducted our audit in accordance with professional auditing standards applicable in France. Those standards require that we plan and perform our audit to obtain reasonable assurance that the annual financial statements are free from material misstatement. An audit includes examining, on a test basis or by other selection methods, evidence supporting the amounts and disclosures in the annual financial statements. An audit also includes assessing the accounting principles used, the significant estimates made and the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion, the annual financial statements give a true and fair view of the financial position and the assets and liabilities of the company as at 31 December 2012 and the results of its operations for the year ended in accordance with French accounting standards.
2. Basis of our assessments Pursuant to the provisions of article L.823-9 of the French Commercial Code regarding the basis of our assessments, we draw your attention to the following matters: Note 3.2 hereto describes the accounting rules and methods used for measuring equity investments. As part of our assessment of the accounting principles, rules and policies applied by your company, we verified the appropriateness of the accounting policies specified above and the disclosures in the notes to the financial statements, and verified that they were applied correctly.
246 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
These assessments were made as part of our audit of the annual financial statements taken as a whole and therefore contributed to the opinion we expressed in the first part of this report.
3. Specific procedures and disclosures We also performed the specific procedures and disclosures required by law in accordance with professional standards applicable in France.
We have no matters to report in connection with the fair presentation and consistency with the financial statements of the information given in the report of the Board of Directors and the documents addressed to the shareholders in respect to the financial position and the financial statements.
Regarding the information provided in accordance with the provisions of article L.225-102-1 of the French Commercial Code on compensation and benefits paid to corporate officers as well as commitments incurred in their favour, we have verified their consistency with the accounts or with the data used to prepare these financial statements, and when necessary, with any information obtained by your company from companies controlling your company or controlled by your company. Based on this work, we attest the accuracy and fair presentation of this information.
In addition, as required by law, we have ensured that the management report includes the mandatory disclosures on the identity of owners of share capital and voting rights in the company.
Paris-La Défense, 29 April 2013 Avignon, 29 April 2013
French original signed by:
KPMG S.A. AREs X.PERT Audit
Jean Gatinaud Laurent Peyre
247 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
STATUTORY AUDITORS' REPORT ON REGULATED AGREEMENTS AND COMMITMENTS
Annual general meeting called to approve the financial statements for the year ended 31 December 2012
This is a free translation into English of the Statutory Auditors’ report on regulated agreements and commitments issued in French and is provided solely for the convenience of English speaking readers. This report on regulated agreements and regulated commitments should be read in conjunction with, and is construed in accordance with, French law and professional auditing standards applicable in France. It should be understood that the agreements reported on are only those provided by the French Commercial Code and the report does not apply to those related party agreements described in IAS 24 or other equivalent accounting standards.
To the Shareholders,
In our capacity as your company’s statutory auditors, we hereby present our report on regulated agreements and commitments.
The terms of our engagement require us to communicate to you, based on information provided to us, the principal terms and conditions of those agreements and commitments brought to our attention or that we may have discovered during the course of our audit, without expressing an opinion on their utility and merits or identifying such other agreements and commitments, if any. According to the terms of article R. 225-31 of the French commercial code, it is your responsibility to assess the merits of concluding these agreements and commitments before approving them.
Furthermore, our role is also to provide you with the information provided for by Article R. 225-31 of the French Commercial Code regarding the execution, during the past year, of the agreements and commitments already approved by the shareholders’ meeting, if any.
We performed procedures we deemed necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie nationale des Commissaires aux Comptes) relating to this engagement. These procedures consisted in verifying that the information provided to us was consistent with the relevant source documents.
I. Agreements and commitments subject to approval by the shareholders' meeting
Agreements and commitments approved in the period ended Pursuant to Article L. 225-40 of the French Commercial Code, we have been advised of the following agreements and commitments previously authorised by your Board of Directors.
248 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Agreement for the provision of administrative, accounting and legal services to Grünes Blatt AG
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: As authorised by the Board of Directors’ meeting of 29 March 2012, an administrative, accounting and legal services agreement was concluded on 29 March 2012 between Naturex S.A. and Grünes Blatt AG., whereby Naturex S.A. provides the latter selected administrative services for a fixed charge of €250 a month. . Terms and conditions: Naturex S.A. charged Grünes Blatt AG €2,250 for these services in the period.
Loan agreement concluded between Naturex S.A. and Naturex Inc. in favour of the latter
. Related parties: Jacques Dikansky, Thierry Lambert and Stéphane Ducroux . Nature and purpose: As authorised by the Board of Directors’ meeting of 30 August 2012, Naturex S.A. granted to its subisdiary, Naturex Inc., a loan agreement for USD 19,000,000 to finance the acquisition of Decas Botanicals Synergies LLC repayable on 31 December 2022. The loan incurs interest based on the LIBOR (London Interbank Offered Rate) plus a margin of 2%. . Terms and conditions: interest paid on this loan in fiscal 2012 amounted to €112,270.
Severance benefit guarantee for Stéphane Ducroux
. Nature and purpose: On 30 August 2012, the Board of Directors decided to guarantee a severance payment for Stéphane Ducroux should the latter be dismissed within a period of 18 months following a change in control or management of Naturex S.A. . Terms and conditions: This service payment equals two years of salary. This amount is not due if the dismissal is a consequence of gross or wilful misconduct of Stéphane Ducroux.
249 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Agreements and commitments not previously authorised
Pursuant to Article L. 225-42 of the French commercial code, we have been advised of the following agreements and commitments that were not previously authorised by your Board of Directors.
It is our responsibility to inform you of the circumstances for which the authorisation procedure was not followed. The following three agreements did not receive prior authorisation as the time required for their execution was not sufficient.
Loan agreement concluded between Naturex S.A. and Burgundy Botanical Extracts Iberica, S.A. in favour of the latter
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: On 28 February 2012 Naturex S.A. and Burgundy Botanical Extracts Iberica, S.A. concluded a €2.4 million equity loan agreement in favour of the latter repayable on 31 December 2012. . Terms and conditions: interest of 3.5% paid on this loan in fiscal 2012 amounted to €6,904.
Amendment to the loan agreement concluded between Naturex S.A. and Naturex Trading (Shanghai) Co. Ltd in favour of the latter
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: An amendment to the loan agreement of 31 August 2009 between Naturex S.A. and Burgundy Botanical Extracts Iberica, S.A. in favour of the latter was concluded on 30 August 2012. This amendment extended the initial term of the €42,000 loan from 5 to 8 years. . Terms and conditions: interest of 1.96% paid on this loan in fiscal 2012 amounted to €2,539.
Loan agreement concluded between Naturex S.A. and Naturex (South Korea) in favour of the latter
. Related party: Thierry Lambert . Nature and purpose: On 30 October 2012, Naturex S.A. and Naturex (South Korea) concluded a USD 200,000 loan agreement in favour of the latter repayable on 5 November 2013. The loan incurs interest based on the LIBOR plus a margin of 1%. . Terms and conditions: No interest payments were received on this loan in fiscal 2012. The following two agreements did not receive prior authorisation as the required quorum was not able to be met.
Agreement for the provision of administrative services to SGD S.C.A.
. Related parties: Jacques Dikansky, Thierry Lambert and Paul Lippens
250 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
. Nature and purpose: Pursuant to the proposal of the Board of Directors’ meeting of 26 March 2012, an administrative services agreement was concluded on 29 March 2012 between Naturex S.A. and SGD S.C.A., whereby Naturex S.A. provides the latter selected administrative services for a fixed charge of €250 per month. Expenses that may be incurred by Naturex S.A. in connection with this agreement are not reimbursed by SGD S.C.A. . Terms and conditions: Naturex S.A. charged SGD S.C.A. €2,250 for services rendered in the period.
Agreement for the provision of administrative services to SCI Avenue La Pinède
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: Pursuant to the proposal of the Board of Directors’ meeting of 26 March 2012, an administrative services agreement was concluded on 29 March 2012 between Naturex S.A. and the French non-trading property company (société civile immobilière) SCI Avenue La Pinède, whereby Naturex S.A. provides the latter selected administrative services for a fixed charge of €250 per month. Expenses that may be incurred by Naturex S.A. in connection with this agreement are not reimbursed by SCI Avenue La Pinède. . Terms and conditions: Naturex S.A. charged SCI La Pinède €2,250 for services rendered in the period.
251 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
II. Agreements and commitments already approved by the shareholders' meeting
Agreements and commitments authorised in prior periods that remained in force during the period ended
Pursuant to article 225-30 of the French Commercial Code, we have been informed that the following agreements and commitments, previously approved by shareholders’ meetings of prior years, remained in force during the year.
Group services agreement . With the following companies: SCI Les Broquetons, Naturex Inc, Naturex SpA, Naturex Maroc S.A., Naturex Trading Shanghaï Co Ltd, Naturex SL, Naturex A.G., Naturex Ltd, Naturex Ingredientes Naturais Ltda, KF Speciality Ingredients Pty Ltd, Naturex Cooperative LLC, Naturex SPRL, Naturex GmbH, Naturex Australia Pty Ltd, Naturex Inc (Canada), Naturex Ingredientes Naturales SA de CV, Naturex (South Korea), Naturex K.K, Pektowin S.A. Spzoo. . Related parties: Jacques Dikansky, Thierry Lambert and Stéphane Ducroux . Nature and purpose: As authorised by the Board of Directors’ meeting of 26 April 2010, a "management support services agreement" was signed on 3 May 2010 between Naturex S.A. and its subsidiaries (direct or indirect), by virtue of which Naturex S.A. will provide them with a certain number of services and assistance in a number of various (human resources, legal affairs, finance, research and development, marketing, etc.). Compensation for these services may be broken down as follows:
- Financial guarantee: 0.8% of the guaranteed amount; - Recruitment services: fixed amount per recruitment; - Other services: Salaries of employees providing the service plus a margin of 5% and other costs incurred for services rendered at a mark-up of 8%. . Terms and conditions: Naturex S.A. charged its subsidiaries €14,339,202 for services rendered under this agreement in the period.
Group cash management agreement
With the following companies: SCI Les Broquetons, Naturex SpA, Naturex A.G., Naturex Ltd, Naturex KF Speciality Ingredients Pty Ltd, Naturex SPRL, Naturex GmbH, Naturex Australia Pty Ltd, Naturex Inc, Naturex Inc (Canada), Naturex Ingredientes Naturales SA de CV, Naturex (South Korea), Naturex K.K, Burgundy Iberia S.A.U, Naturex Holdings Inc, Naturex Cooperative LLC, Naturex SL, Naturex Coöperatief U.A, Pektowin S.A. Spzoo. . Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: as authorised by the Board of Directors' meeting of 26 April 2010, a "Group Cash Management" agreement was concluded on 3 May 2010 between Naturex S.A. and its subsidiaries (direct or indirect) whereby Naturex S.A. provides centralised cash management services on their behalf. Under the terms of this agreement, the daily cash position is subject to an interest rate of 3.5%. . Terms and conditions: interest paid/received by Naturex S.A. for fiscal 2012 was:
252 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
- interest paid: €228,620; - interest received: €1,697,745.
Loan granted by Naturex A.G. to Naturex S.A.
. Nature and purpose: A loan agreement and amendment thereto executed on 31 October 2010 between Naturex S.A. and Naturex A.G. whereby Naturex A.G. grants a long-term loan to Naturex S.A. The funds for this €8 million loan originate from the conversion of the current account balance of treasury advances by Naturex A.G. to Naturex S.A. on the agreement date. Repayable on 31 October 2013, this loan may be prepaid or its term be extended by mutual agreement. The loan incurs interest at the EURIBOR plus a margin of 1%. . Related parties: Jacques Dikansky and Thierry Lambert . Terms and conditions interest paid on this loan in fiscal 2012 amounted to €160,438.
Leasing of offices from SCI Les Broquetons
. Nature and purpose: Naturex S.A. leases from SCI Les Broquetons, located at the same address, the premises where it exercises business activities. . Terms and conditions: For fiscal 2012, your company paid rent of €475,119 under this lease.
Loans granted by Naturex S.A. to Naturex A.G., Naturex Holdings Inc. and Naturex Inc.
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: Loan agreements were executed on 30 September 2009 by Naturex S .A. in favour of the following direct or indirect subsidiaries:
- Naturex A.G., - Naturex Holdings Inc., - Naturex Inc. The loans granted to Naturex A.G. and Naturex Inc. are repayable on 31 December 2016 and the loan granted to Naturex Holdings Inc. repayable on 30 November 2016.
These loans incur interest based on LIBOR plus a margin set annually. . Terms and conditions: At 31 December 2012, the loans granted by Naturex S.A. to it subsidiaries as well as interest received in fiscal 2012 at LIBOR plus 1% breakdown as follows:
- Loan granted to Naturex A.G.: CHF 21,260,000; interest received: €381,527,
253 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
- Loan granted to Naturex Holdings Inc.: USD 35,753,476; interest received: €1,078,001, - Loan granted to Naturex Inc.: USD 7,440,510; interest received: €224,338.
Addendum No. 2 to the multi-currency credit facility of 16 December 2009
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: As authorised by the Board of Directors’ meeting of 2 February 2011, an addendum to the multi-currency credit facility agreement of 16 December 2009 concluded with a banking syndicate was executed on 15 April 2011. This addendum renews the guarantees initially granted by Naturex Holdings Inc. for the full amount of Naturex Inc. shares or securities, as security for the additional financing for the acquisition of a real estate complex in Valence and an additional €15 million tranche for a revolving credit. . Terms and conditions The net carrying amount of Naturex Inc. shares recognised by Naturex Holdings Inc. amounted to USD 65,719,329 at 31 December 2012.
Agreement to sublet the head office expansion to SCI Avenue la Pinède
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: As authorised by the Board of Directors’ meeting of 8 September 2011, a sublease agreement was executed on 29 March 2012 between Naturex S.A. and SCI Avenue La Pinède, whereby SCI Avenue La Pinède will rent the building corresponding to the expansion of Naturex S.A.’s head office. In accordance with article 1 of this sublease agreement, Naturex S.A. will incur the expenses for the premises. . Terms and conditions: This lease is for a fixed term of nine years. The annual amount for lease payments was set at €700,000. As provided for article 3 of the sublease agreement, lease payments are due as from the completion date of the construction work of the building or 1 January 2013. In consequence, no lease payments were made in fiscal 2012. Furthermore, at 31 December 2012, fixed assets in progress concerning installations for the premises amounted to €6,420,214.
Security bond for Naturex Spain S.L.
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: Within the framework of the “Estrategias de microencapsulacion de l’alimentacion functional” project carried out by the Spanish subsidiary Naturex S.L., Naturex S.A. provided a guarantee for its subsidiary Naturex Spain S.L., as authorised by the Board of Directors’ meeting of 13 September 2011. . Terms and conditions: This guarantee was for €240,112.37.
254 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Addendum No. 3 to the multi-currency credit facility of 16 December 2009
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: As authorised by the Board of Directors’ meeting of 7 December 2011, an addendum to the multi-currency credit facility agreement of 16 December 2009 concluded with a banking syndicate was executed on 12 January 2012. This addendum renews the guarantees initially granted by Naturex Holdings Inc. for the full amount of Naturex Inc. shares or securities, as security for the revolving tranches whose term was extended by Addendum No 3 and the extension of the guarantee of obligations on the additional Capex 2 tranche. . Terms and conditions: The net carrying amount of Naturex Inc. shares recognised by Naturex Holdings Inc. amounted to USD 65,719,329 at 31 December 2012.
Sale of land to SCI Les Brocquetons
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: As authorised by the Board of Directors’ meeting of 8 September 2011, a land sale contract was executed on 29 March 2012 between Naturex S.A. and SCI Les Broquetons whereby SCI Les Broquetons will purchase a parcel of land destined for parking spaces for Naturex S.A. as part of the head office expansion. . Terms and conditions: This land was sold at its net carrying value or €311,713.48.
255 2012 Registration Document Chapter 7 Naturex S.A. annual financial statements and notes
Agreements and commitments approved in the period ended
We have furthermore been informed of the following agreements and commitments, previously approved by the shareholders' meeting of 8 June 2012, following the Auditors' special report of 26 April 2012.
Letter of financial support to Burgundy Botanical Extracts Iberica S.A.U.
. Related parties: Jacques Dikansky and Thierry Lambert . Nature and purpose: As authorised by the Board of Directors' meeting of 26 January 2012, Naturex S.A. executed a letter of financial support in favour of its subsidiary, Burgundy Botanical Extracts Iberica S.A.U., to permit the latter to continue its operating activity under normal conditions until its merger into Naturex Spain S.L. in October 2012.
Paris-La Défense, 29 April 2013 Avignon, 29 April 2013
French original signed by: KPMG S.A. AREs X.PERT Audit
Jean Gatinaud Laurent Peyre
Translation disclaimer: This document is a free translation of the French language version of the separate annual financial statements of Naturex S.A. for the twelve-month period ended 31 December 2012 as published in the original French registration document for 2012 and produced for the convenience of English speaking readers. In the event of any ambiguity or conflict between statements or other items contained herein and the original French version, the relevant statement or item of the French version shall prevail. While all possible care has been taken to ensure that this translation is an accurate representation of the original French document, in all matters of information, views or opinions expressed therein, only the original language version of the document in French is legally binding. As such, this translation may not be relied upon to sustain any legal claim, nor be used as the basis of any legal opinion and Naturex expressly disclaims all liability for any inaccuracy herein
256 2012 Registration Document Chapter 8 Recent developments and outlook
RECENT DEVELOPMENTS AND OUTLOOK 2013, a new phase in Naturex's development
On 26 April 2013, Naturex published its first-quarter results for the new year.
Naturex began the year with a very promising start based on solid organic growth. Commercial teams worldwide remained focused on proposing customers innovative solutions specifically adapted to their needs, supported by the scientific expertise of our R&D, technological know-how and an ability to select raw materials in accordance with sustainable and fair trade sourcing practices.
I. Strong start for 2013
Consolidated revenue for the 2013 first quarter amounted to €83.2 million, up 13.2% compared to last year's same period.
€000s Q12013 Q12012 Change (%) Change (%) IFRS at constant exchange rates Unaudited data Revenue 83,196 73,473 +13.2% +14.4%
At constant exchange rates, sales in the quarter grew 14.4%. This included organic growth of 12.5% and 1.9% from recent acquisitions consisting mainly of contributions by Valentine (India) as from 1 April 2012 and Decas Botanical Synergies (US) as from 19 September 2012. The negative currency effect of 1.2% reflects primarily the US dollar's decline in the period.
Strong momentum for Nutrition & Health
€000s Q12013 Q12012 Revenue Change Change IFRS mix (%) (%) Unaudited data (%) constant exchange rates Food & Beverage 46,719 47,828 56.2% -2.3% -1.1% Nutrition & Health 29,238 22,026 35.1% +32.7% +33.7% Personal Care 1,464 1,293 1.8% +13.3% +14.4% Toll Manufacturing 5,773 2,326 6.9% +148.2% +148.5%
All three markets registered sequential sales growth, (vs. Q4 2012) whereas trends in relation to last year's first quarter were more uneven: - The Food & Beverage division had revenue of €46.7 million, down 1.1% at constant exchange rates, reflecting its significant exposure to European markets still marked by a climate of economic gloom and also the slowdown of the distribution activity in Australia.
2012 Registration Document 257 Chapter 8 Recent developments and outlook
- Nutrition & Health achieved strong growth of 33.7% at constant exchange rates to reach revenue of €29.2 million, boosted in particular by strong performance of the NATlife™ range of innovative extracts with proven clinical benefits; - Personal Care, still in an initial development phase, posted continuing gains with revenue of €1.5 million, up 14.4% at constant exchange rates. The Group's scientific, marketing and sales teams are focused on transforming the range of natural ingredients into a more innovative offering, notably through a selection of premium African plants with potential for numerous combinations for cosmetics market applications; - Toll Manufacturing revenue increased in the quarter by a multiple of nearly 2.5 to €5.8 million.
Positive momentum in all geographic regions
€000s Q12013 Q12012 Revenue Change Change IFRS mix (%) (%) Unaudited data (%) constant exchange rates Europe/Africa 40,288 36,554 48.4% +10.2% +10.3% Americas 33,431 27,871 40.2% +20.0% +22.4% Asia/Pacific 9,475 9,048 11.4% +4.7% +6.2%
To take into account the geographic breakdown of our Sales Divisions, countries of the Middle East region previously included in Europe/Africa are henceforth presented within the Asia/Pacific region. The revenue breakdown by geographic region for the 2012*** first quarter in consequence takes into account this new presentation.
All geographic regions delivered good growth despite disparities between markets. Markets in Western Europe are thus adversely affected by a depressed economic climate and the wait-and-see position of manufacturers with respect to new product developments while North America and emerging countries continue to progress at a steady pace. - Europe / Africa had revenue of €40.3 million, up 10.3% at constant exchange rates from last year's first quarter, driven in particular by growing momentum for toll manufacturing as well as good resilience of selected countries; - The Americas, with €33.4 million in revenue, were bolstered both by the success in North America of the NATlife™ range and continuing steady gains in Latin America; - The Asia / Pacific region registered moderate growth of 6.2% at constant exchange rates to €9.5 million, largely due to the slowdown for the distribution of ingredients in Australia caused by local developments affecting the food industry sector specific to this market. Asian countries, that accounted for nearly 50% of the quarter's sales, delivered excellent performances. In this context, the positive momentum of emerging countries that accounted for 15.6% of the quarter's sales of the Group was confirmed.
258 2012 Registration Document Chapter 8 Recent developments and outlook
II. 2013 challenges and outlook
For 2013, Naturex is planning for a new phase in terms of operating performance as well as strategy and development.
Anticipating market trends
With an underlying economic environment comparable to 2012, disparities in performances between the different geographical regions may be expected again in 2013: - Growth in European markets has come to a virtual standstill, aggravated by the absence of new product launches ; - Trends in North American are supported by Forte croissance Naturalité et Santé more favourable conditions; démographique mondiale . Le vieillissement de la population accélère - Emerging countries that are continuing to . +2 milliards de personnes en 2030, la demande pour des produits naturels à develop at a sustained pace, are fully benefiting principalement dans les pays émergents effet santé from a growing middle-class with an increasing . Hausse du niveau de vie et urbanisation . Les consommateurs sont de plus en plus grandissante entraînent une hausse de la concernés par la composition des produits interest in natural ingredients. consommation des produits transformés (clean label, palm oil free…)
Naturex's key challenge in this context will be to Développement durable Innovation anticipate the major trends in each of its business et nouvelles applications segments to take advantage of all value added . Préservation des ressources naturelles . Conquête de nouveaux marchés de la part et de la biodiversité des industriels growth opportunities and outperform our markets by proposing a differentiated offering based on a . Sourcing éco-responsable, respect des . Innovation et développement de nouveaux populations locales, traçabilité, contrôle produits/concepts alliant R&D, nutrition et targeted marketing and commercial approach. Qualité santé
Pursuing a more selective external growth strategy
We must pursue a more targeted and selective strategy of acquisitions, except for cases of transformational acquisitions that might arise involving key market participants. Nevertheless, in light of the size effect of the Group and a market still highly fragmented, the Produits relative weight of external growth within the context of overall development will inevitably be Marchés matures Innovation lower. Pays émergents Sciences As a result, external growth will no longer have the same role as in the 12 year period ended
Zone during which Naturex doubled in size on three Technologie géographique consecutive occasions through a series of acquisitions. Naturex's priority will be in consequence to focus Accès marché Savoir-Faire Positionnement Expertise on achieving differentiation from the additional value and growth opportunities provided by a Activités new acquisition (ingredients, technology or
2012 Registration Document 259 Chapter 8 Recent developments and outlook
additional scientific expertise, emerging markets to be developed, etc.).
The Group's financial base has been furthermore strengthened by an €18 million OCEANE convertible bond issue, with €12 million taken up by France's Strategic Investment Fund (Fonds stratégique d’Investissement or FSI) and €6 million by Salvepar (Tikehau Capital) that will provide concrete support for pursuing its future development projects.
Building momentum for organic growth
Organic growth in 2013 will be driven by growing contributions from acquisitions already completed and performances by sales offices opened over the last three years that are now fully operational, particularly in emerging countries, and above all, through an increasingly targeted and innovative offering. Furthermore, research and development will continue to exercise a key role in accelerating our growth by driving innovation and optimising our product mix through promising value-added solutions. In effect, our significant sourcing capacity with a worldwide network of purchasing offices (France, the United States, Brazil, Morocco, Ivory Coast, China, India, Poland) constitutes a significant competitive advantage for achieving innovation by creating integrated channels for crop management or the organisation of plant harvesting based on a sustainable development process with a permanent commitment to preserving biodiversity.
While Naturex has not issued forecasts for fiscal 2013, it remains nevertheless confident in its ability to generate positive organic growth.
260 2012 Registration Document Chapter 9 Responsibility for the Registration Document and Auditing of the Financial Statements
RESPONSIBILITY FOR THE REGISTRATION DOCUMENT AND AUDITORS
I. Person responsible for the Registration Document
Chairman and Chief Executive Officer Thierry Lambert Renewal of his appointment as director by the General Meeting of 8 June 2012 for a term of six years ending on the close of the General Meeting that will be called to approve the financial statements for the fiscal year ending 31 December 2017. Appointment by the Board of Directors on 16 October 2012 as Chairman of the Board of Directors for the duration of his term as director.
Responsibility statement “I hereby certify, after having taken all reasonable measures in this regard, that to the best of my knowledge the information contained in this registration document provides a true and fair picture of the Company’s existing situation, and has no omissions likely to alter its import. I also certify that to the best of my knowledge, the financial statements have been prepared in accordance with the applicable financial reporting standards and give a true and fair view of the assets and liabilities, financial position and results of the operations of the Company and the undertakings included in the consolidation taken as a whole, and that the management report for the period (included herein in chapters1 2) Sustainable development, 3) Organisation et and corporate governance, 4) Share capital and shareholder structure, 5) Review of operations for 2012 and 8) Recent developments and outlook) faithfully presents business trends, the results and financial position of the Company and the undertakings included in the consolidation taken as a whole and a description of the main risks and uncertainties. I have obtained a letter from the statutory auditors confirming the completion of their engagement whereby, in compliance with accounting doctrine and professional standards applicable in France, they verified information on the financial position and financial statements presented in this document and which they have reviewed in its entirety. This letter does not contain any observations. The statutory auditors have issued reports on the historical information presented in this document reproduced on pages 223 and 248that contain an emphasis of matter paragraph on page 223 of the report on the consolidated financial statements concerning a change in accounting method: "(…) Without qualifying the opinion expressed above, we draw your attention as an emphasis of matter to notes 4.1 and 13 to the financial statements presenting a change in accounting method concerning employee benefits resulting from the early adoption of amended IAS 19." The statutory auditors' reports on the financial information incorporated by reference for fiscal 2011 reproduced on pages 193 and 215 of the original French language version of the registration document filed with the AMF (No. D.12- 0424) on 26 April 2012, and on the financial information incorporated by reference for fiscal 2010 reproduced on pages 179 and 200 of the original French language version of the registration document for fiscal 2010 filed with the AMF (D.11-0389) on 28 April 2011, do not contain any audit observations.
29 April 2013
Thierry Lambert Chairman and Chief Executive Officer
1 Disclosures required under articles L.225-100, L.225-100-2, L225-100-3 and L.225-211 subsection 2 of the French commercial code.
2012 Registration Document 261 Chapter 9 Responsibility for the Registration Document and Auditing of the Financial Statements
II. Statutory Auditors
Statutory Auditors KPMG S.A. ARES X. PERT AUDIT Represented by Jean Gatinaud Represented by Laurent Peyre
Immeuble le Palatin - 3 cours du triangle 26 boulevard Saint Roch - BP 278 92939 Paris – La Défense Cedex 84 011 Avignon
Current term: 6 years Current term: 6 years
Expiry date of current term: Annual Ordinary Expiry date of current term: Annual Ordinary Shareholders' Meeting called in 2016 to approve the Shareholders' Meeting called in 2014 to approve the financial statements for the fiscal year ending on 31 financial statements for the fiscal year ending on 31 December 2015. December 2013.
Alternate Auditors Raymond Crosnier Olivier Rousset
1 rue de la Pellerine 26 boulevard Saint Roch - BP 278 35 300 Fougères 84011 Avignon Cedex 9
Current term: 6 years Current term: 6 years
Expiry date of current term: Annual Ordinary Expiry date of current term: Annual Ordinary Shareholders' Meeting called in 2016 to approve the Shareholders' Meeting called in 2014 to approve the financial statements for the fiscal year ending on 31 financial statements for the fiscal year ending on 31 December 2015. December 2013.
262 2012 Registration Document Chapter 9 Responsibility for the Registration Document and Auditing of the Financial Statements
III. Information policy
Responsibility for financial information Thierry Bertrand Lambert Chief Financial Officer Tel: +33 (0)4 90 23 96 89 E-mail: [email protected]
Financial communications / Investor Relations: Carole Alexandre Tel: +33 (0)4 90 23 96 89 E-mail: [email protected]
The memorandum and the articles of association of Naturex S.A. as well as all of the legal documents and the historical financial information for prior periods may be consulted at the Company's head office: Pôle Technologique d’Agroparc – BP 1218 – 84 911 Avignon Cedex 09 – France
All press leases and documents published by Naturex Group are also available to public at the websitewww.naturex.com .
2012 Registration Document 263 Chapter 10 Table of cross-references
TABLE OF CROSS-REFERENCES WITH DISCLOSURE REQUIREMENTS OF COMMISSION REGULATION (EC) NO. 809/2004
For the convenience of readers of the annual financial report filed as a registration document the following table provides cross-references with the main information headings provided for by Appendix 1 of Commission Regulation (EC) No. 809/2004 (Prospectus Directive). Information not applicable to Naturex is indicated by N/A. Headings of Appendix 1 of EC Regulation No. 809/2004 Page No. in this registration document 1. Persons responsible 1.1 Persons responsible for information given in the registration document 267-269 1.2 Responsibility statement 267 2. Statutory auditors 2.1 Presentation of the statutory auditors 268 2.2 Statutory auditors having resigned, been removed or not reappointed N/A 3. Selected financial information 3.1 Selected historical financial information 5-6, 166-171, 230-231 3.2 Selected financial information for interim periods N/A comparative data from the same period in the prior financial year 4. Risk factors 4.1 Specific business-related risks 59-63 4.2 Industrial and environmental risks 61, 62 4.3 Market risks 57-58, 211-214 4.4 Legal risks 58, 59 4.5 Insurance and risk management 64 5. Information about the issuer 5.1 History and development of the Company and the Group 2-3, 137-141, 172-174, 232-233 5.2 Investments 154-155, 200, 235 5.2.1 Principal investments for each financial year for the period covered by the historical 154 financial information up to the date of the registration document 154 5.2.2 Principal investments in progress 5.2.3 Information concerning the issuer's principal future investments on which its 155 management bodies have already made firm commitments 6. Business overview 6.1 Principal activities 7-20 6.2 Principal markets 16-20, 21-34 6.3 Exceptional factors having had an influence on the Company's activity 137-141, 172-174, 232-234 6.4 Dependency of the Company on patents or licences, industrial, commercial or financial contracts or new manufacturing processes N/A 6.4 Competitive position of the Company 32-34 7. Organisational structure 7.1 Group organisation 4, 178 7.2 List of subsidiaries 175 177, 239
2012 Registration Document 264 Chapter 10 Table of cross-references
Headings of Appendix 1 of EC Regulation No. 809/2004 Page No. in this registration document 8. Property, plants and equipment 8.1 Information regarding any existing or planned material tangible fixed assets, 200-202 including leased properties Environmental issues that may affect the issuer’s utilisation of tangible fixed assets 46-52 9. Operating and financial review 9.1 Financial condition 137-164 9.2 Operating results 145-146 10. Capital resources 10.1 Information concerning the issuer’s capital resources 170-171, 242 10.2 Sources and amounts of the issuer's cash flows 153, 169 Information on the borrowing requirements and funding structure of the issuer 154, 205-206 Information regarding any restrictions on the use of capital resources N/A 10.5 Information regarding the anticipated sources of funds needed to fulfil commitments 121-122, 154, 205-207 with respect to investment decisions 11. Research and development, patents and licenses 162, 218, 251 12. Trend information 12.1 Significant recent trends in production, sales and inventory, and costs and selling prices 21-29, 137-141, 263-264 since the end of the last financial year to the date of the registration document 21-29, 263-266 12.2 Information on any known trends or events that are reasonably likely to have a material effect on the issuer's prospects 13. Profit forecasts or estimates N/A 14. Administrative, management, and supervisory bodies and senior management 14.1 Members of the administrative, management and supervisory bodies 72, 100 14.2 Conflicts of interest within administrative, management and supervisory bodies 112-113 15. Remuneration and benefits 15.1 Total remuneration paid 105-112 15.2 Total amounts set aside or accrued 105-112 16. Board practices 16.1 Date of expiration of current terms of office 72, 100 16.2 Information about members of the administrative, management or supervisory bodies' N/A service contracts 81-82 16.3 Information about the issuer’s audit committee and remuneration committee 71 16.4 A statement as to whether or not the issuer complies with its country’s of incorporation corporate governance regime(s) 17. Employees 17.1 Number of employees and breakdown of persons employed by main category of 39-45 activity and geographic location 13-133 17.2 Shareholdings and stock options N/A 17.3 Any arrangements for involving the employees in the capital of the issuer
2012 Registration Document 265 Chapter 10 Table of cross-references
Headings of Appendix 1 of EC Regulation No. 809/2004 Page No. in this registration document 18. Major shareholders 18.1 Holdings and changes thereto subject to disclosure obligations 124-129 18.2 Voting rights 117-118, 124-126 18.3 Information concerning the control of the issuer 124-125 18.4 Any arrangements relating to changes in control N/A 19. Related party transactions 155-156, 224, 251 20. Financial information concerning the issuer’s assets and liabilities, financial position and profits and losses 20.1 Historical financial information 2-3, 166-224, 230-251 20.2 Pro forma financial information N/A 20.3 Financial statements 166-171 20.4 Auditing of historical annual financial information 226-227, 252-253 20.5 Age of latest financial information 165, 229 20.6 Interim and other financial information N/A 20.7 Dividend policy 163-164 20.8 Legal and arbitration proceedings 63 20.9 Significant change in the issuer’s financial or trading position N/A 21. Additional information 21.1 Share capital 117-133 21.1.1. The amount of issued capital, and for each class of share capital 117
(a) the number of shares authorised; (b) the number of shares issued and fully paid and issued but not fully paid; 117
(c) the par value per share, or that the shares have no par value; and 117 (d) a reconciliation of the number of shares outstanding at the beginning and end of the year. If more than 10% of capital has been paid for with assets other than cash within the period covered 117, 120 by the historical financial information, state that fact.;
21.1.2.If there are shares not representing capital, state the number and main characteristics of 123 such shares.;
21.1.3. The number, book value and face value of shares in the issuer held by or on behalf of the issuer itself or by subsidiaries of the issuer; 126 21.1.4. The amount of any convertible securities, exchangeable securities or securities with warrants, with an indication of the conditions governing and the procedures for conversion, 130-133 exchange or subscription; 21.1.5. Information about and terms of any acquisition rights and/or obligations over authorised 120-123 but unissued capital or an undertaking to increase the capital;
21.1.6. Information about any capital of any member of the group which is under option or agreed conditionally or unconditionally to be put under option and details of such options including the identity of those persons to whom such options relate; 121-122 21.1.7.A history of share capital, highlighting information about any changes, for the period covered by the historical financial information. 119-120
2012 Registration Document 266 Chapter 10 Table of cross-references
Headings of Appendix 1 of EC Regulation No. 809/2004 Page No. in this registration document 21.2 Memorandum and Articles of Association 21.2.1. A description of the issuer’s objects and purposes and where they can be found in the 78-79 memorandum and articles of association. 21.2.2. A summary of any provisions of the issuer's articles of association, statutes, charter or 68,117-118 bylaws with respect to the members of the administrative, management and supervisory bodies.
21.2.3. A description of the rights, preferences and restrictions attaching to each class of the N/A existing shares
21.2.4. A description of what action is necessary to change the rights of holders of the shares, indicating where the conditions are more significant than is required by law. 66-69 21.2.5. A description of the conditions governing the manner in which annual general meetings and extraordinary general meetings of shareholders are called including the conditions of admission. 21.2.6. A brief description of any provision of the issuer's articles of association, statutes, charter or N/A bylaws that would have an effect of delaying, deferring or preventing a change in control of the issuer. 127-128 21.2.7. An indication of the articles of association, statutes, charter or bylaw provisions, if any, governing the ownership threshold above which shareholder ownership must be disclosed. 21.2.8. A description of the conditions imposed by the memorandum and articles of association 127 statutes, charter or bylaw governing changes in the capital, where such conditions are more stringent than is required by law. N/A 22. Material contracts N/A 23. Third party information, statements by experts and declarations of interest N/A 24. Documents on display 269, 278-282 25. Information on holdings 4, 175-179
2012 Registration Document 267 Chapter 10 Table of cross-references
TABLE OF CROSS-REFERENCES WITH THE REQUIRED DISCLOSURES IN THE ANNUAL FINANCIAL REPORT AND THE MANAGEMENT REPORT
Annual financial report
This Registration Document includes all of the items in the Annual Financial Report mentioned in Articles L.451-1-2 I of the French Monetary and Financial Code and 222-3 of the AMF General Regulation. The following table of cross-references refers to excerpts from the Registration Document corresponding to the various sections of the Annual Financial Report.
Items required by articles L.451-1-1 of the French Monetary and Financial Code Pages and 222-3 of the AMF General Regulations 1. Consolidated financial statements of the Group 165 2. Annual financial statements of the Company 229 3. Management report See below 4. Annual financial report responsibility statement 267 5. Statutory Auditors’ Report 226 and 252 6. Statutory Auditors’ fees 277 7. Chairman's report on the make-up, preparation and organisation of the work of the Board of Directors and 71-97 internal control and risk management procedures 8. Statutory Auditors' Report on the Chairman's report on the Board 98-99
2012 Registration Document 268 Chapter 10 Table of cross-references
Management report
The Management Report for fiscal 2012 reporting on items mentioned below is included in this registration document. This report was approved by the Board of Directors of Naturex S.A on 27 March 2013.
Disclosures required by the French Commercial Code, the French Monetary and Financial Code, the Pages French General Tax Code and the AMF General Regulation Analysis of changes in the business development, results and financial position of the Company for the 157-64 period ended (L.225-100 and L.232-1 of the French commercial code) Analysis of changes in the business development, results and financial position of the Group for the period 137-133 ended (L.225-100-2 and L.233-26 of the French commercial code) Results of subsidiaries and controlled companies by division (L.223-6 of the French commercial code) 214, 239 Trend forecasts and outlook (L.232-1 and L.233-6 of the French commercial code) 263-266 Research and development activities (L.232-1 and L.233-26 of the French commercial code) 162, 186, 218, 251 Acquisition of holdings in companies having their registered office in France (L.233-6 of the French 137, 172, 192, commercial code) 193, 232 Information on environmental issues and environmental impacts of the business activity (L.225-100, L.225- 46-56, 62 102-1 and R.225-105 of the French commercial code) Information on employee issues and social consequences of the business activity (L.225-100, L.225-102-1 36-45 and R.225-104 of the French commercial code) Description of the main risks and uncertainties (L.225-100 and L.225-100-2 of the French commercial code) 57 to 64 Group financial risk management policy (L.225-100 and L.225-100-2 of the French commercial code) 57, 211-214 Group exposure to price, credit, liquidity and cash flow risks (L.225-100 and L.225-100-2 of the French 211 to 214 commercial code) Summary of authorizations in force granted by the General Meeting to the Board of Directors for capital 121-123 increases and uses made of these authorizations during the year (L.225-100 of the French commercial code) Factors having a potential impact in the event of public share offers (article L.225-100-3 of the French 100-115, 117-133 commercial code) Employee stock ownership on the last day of the year (L.225-102 of the French commercial code) 126 Aged trial balance information for payables (L.441-6-1 of the French commercial code) 161 Five-year financial highlights (R.225-102 of the French commercial code) 162 Shareholders holding more than 5% of the capital; treasury shares (L.233-13 of the French commercial 124-128 code) Summary of trading in own shares of the Company by executives (L.621-18-2 of the French monetary and 113-115 financial code and 223-26 and the AMF General Regulation) Total remuneration and benefits of any kind paid to executive officers (L.225-102-1 of the French 105-112 commercial code) Offices and responsibilities exercised in any company by each executive officer during the year (L.225-102- 100-105 1 of the French commercial code) Information on trading in own shares (L.225-211 of the French commercial code) 128-130 Amount of dividends distributed for the last three years (243 bis of the French general tax code) 163 Changes in the presentation of annual financial statements (L.232-6 of the French commercial code) 180
2012 Registration Document 269 Chapter 11 Appendices to the Registration Document
APPENDICES TO THE REGISTRATION DOCUMENT
I. Fees to Statutory Auditors and member firms of their network______271 II. Annual information document ______272
270 2012 Registration Document Chapter 11 Appendices to the Registration Document
I. Fees due Statutory Auditors and member firms of their network
Fees for statutory Auditors and members of their network paid Naturex Group for fiscal 2012, compared with fiscal 2011, break down as follows 31/12/2012 31/12/2011 In thousand euros KPMG and affiliates ARES X PERT Other KPMG and affiliates ARES X PERT Other Euros % Euros % Euros % Euros % Euros % Euros % Audit assignment a Certification and review of individual and consolidated financial statements Consolidating company 361 64% 108 100% - - 310 54% 103 95% - - Fully consolidated companies 192 34% - - 239 78% 195 34% - - 201 73%
b Other assignment Consolidating company ------40 7% 5 5% - - Fully consolidated companies ------
Subtotal of audit assignment (1) 553 98% 108 100% 239 78% 545 95% 108 100% 201 73% Other services c Legal, fiscal and social Consolidating company ------Fully consolidated companies 14 1% - - 68 22% 26 5% - - 73 27% d Other services Consolidating company ------Fully consolidated companies ------1 0%
Subtotal of other services (2) 14 2% - - 68 22% 26 5% - - 74 27%
Total (1) + (2) 567 100% 108 100% 306 100% 571 100% 108 100% 274 100%
2012 Registration Document 271 Chapter 11 Appendices to the Registration Document
II. Annual information document
This annual information document has been published in accordance with article 451-1-1 of the French monetary and financial code and article 222-7 of the AMF General Regulation. This document lists information published or made available to the public between 1 January 2012 and the filing date of the registration document in compliance with French legal and regulatory disclosure obligations.
II.1 Regulated information
Press releases on financial statements, result and revenue
Publication date Nature of the information 25/01/2012 An excellent year of growth in 2011 Annual sales objective achieved +12.3% organic growth at constant structure and currency 28/03/2012 2011 annual results: An excellent year of growth 26/04/2012 Q1 2012 revenue – A very good start to the year 22/05/2012 Good operating performance for Q1 2012 25/07/2012 H1 2012 revenue – A very positive trend for the first half 30/08/2012 Solid half-year results 05/11/2012 2012 third-quarter revenue – Accelerating growth 29/11/2012 Solid operating performances for 2012 nine-month period 11/02/2013 2012 annual revenue – Excellent full-year performance 27/03/2013 Excellent performances in 2012 26/04/2013 Q1 2013 revenue – Strong start to the year
Corporate actions (acquisitions, disposals, etc.)
Publication date Nature of the information 06/03/2012 Definitive completion of the acquisition of Pektowin 21/03/2012 NATUREX gains a foothold in India: Acquisition of Valentine, an Indian producer of fruit and vegetable powders and natural colours 18/09/2012 Acquisition of Decas Botanical Synergies, the global leader in Cranberry nutraceuticals 06/12/2012 Caravelle acquires an equity stake in Naturex
Availability of documents
Publication date Nature of the information 27/04/2012 Availability of the 2011 Registration Document 16/05/2012 Notification of the availability of documents relating to the General Meeting of 8 June 2012 30/08/2012 Availability of the 2012 interim financial report
272 2012 Registration Document Chapter 11 Appendices to the Registration Document
II.2 Permanent information
Financial reports and prospectuses
Publication date Nature of the information 27/04/2012 2011 registration document 30/08/2012 2012 interim financial report 17/01/2013 Information memorandum / OCEANE convertible bond issue
Presentations
Publication date Nature of the information 03/04/2012 Presentation of 2011 annual results 12/09/2012 Presentation of 2011 interim results 27/02/2013 Presentation of 2012 annual results
Other press releases
Publication date Nature of the information 10/01/2012 2012 financial communications agenda and upcoming events 20/01/2012 Modification of the publication date for 2011 revenue 13/04/2012 Naturex announces the temporary unavailability of Jacques Dikansky, Chairman-CEO 04/05/2012 Ordinary and Extraordinary General Meeting of 8 June 2012 11/06/2012 Information on Naturex's corporate governance and operational management 11/06/2012 Announcement of the AGM/EGM of 8 June 2012: 01/10/2012 Announcement of the death of Mr. Jacques Dikansky, Founder of Naturex 18/10/2012 Decisions of the Board of Directors 20/11/2012 Naturex participates in the Actionaria trade show on 23 and 24 November 2012 27/11/2012 Naturex wins the Deloitte Technology Fast 50 1st prize in the SMEs category for 5 years of strong growth 16/01/2013 Naturex strengthens financial resources to pursue expansion through acquisitions 17/01/2013 Naturex strengthens financial resources to pursue expansion through acquisitions 25/02/2013 The Finasucre Group acquires the Dikansky family's holdings in SGD
Purchase of own shares / liquidity agreement
Publication date Nature of the information 04/01/2012 Half-year report on the liquidity agreement 22/02/2012 Additional contribution to the liquidity agreement 06/07/2012 Half-year report on the liquidity agreement 07/01/2013 Half-year report on the liquidity agreement – 31 December 2012
Disclosures on share capital and voting rights
2012 Registration Document 273 Chapter 11 Appendices to the Registration Document
Publication date Nature of the information 04/01/2012 Monthly disclosure on share capital and voting rights – December 2011 18/01/2012 Monthly disclosure on share capital and voting rights – 17 January 2012 03/02/2012 Monthly disclosure on share capital and voting rights – January 2012 05/03/2012 Monthly disclosure on share capital and voting rights – February 2012 10/04/2012 Monthly disclosure on share capital and voting rights – March 2012 04/05/2012 Monthly disclosure on share capital and voting rights – April 2012 06/06/2012 Monthly disclosure on share capital and voting rights – May 2012 06/07/2012 Monthly disclosure on share capital and voting rights – June 2012 15/09/2012 Monthly disclosure on share capital and voting rights – July 2012 17/09/2012 Monthly disclosure on share capital and voting rights – August 2012 05/10/2013 Monthly disclosure on share capital and voting rights – September 2012 08/11/2012 Monthly disclosure on share capital and voting rights – October 2012 08/12/2013 Monthly disclosure on share capital and voting rights – November 2012 07/01/2013 Monthly disclosure on share capital and voting rights – December 2012 07/02/2013 Monthly disclosure on share capital and voting rights – January 2013 07/03/2013 Monthly disclosure on share capital and voting rights – February 2013 29/04/2013 Monthly disclosure on share capital and voting rights – March 2013
II.3 Other publications
Shareholders newsletter
Publication date Nature of the information 23/11/2012 Shareholders newsletter – November 2012
Shareholders Meetings
Publication date Nature of the information 04/05/2012 Preliminary notice (avis de réunion) of the AGM/EGM of 8 June 2012 16/05/2012 Second notice (avis de convocation) of the AGM/EGM of 8 June 2012 Report to the Board of Directors to the AGM/EGM of 8 June 2012 Presentation of the reasons for the draft resolutions Meeting information notice for the AGM/EGM of 8 June 2012 Form for voting by mail or proxy Request for documents and information Statutory Auditors' report on the 2012 annual financial statements of Naturex S.A. Statutory Auditors' report on the 2012 consolidated financial statements of Naturex S.A. Statutory Auditors' report on the Chairman' report on internal control Statutory Auditor' report on regulated agreements and commitments Presentation of resolutions submitted to the AGM/EGM of 8 June 2012
274 2012 Registration Document Chapter 11 Appendices to the Registration Document
Publications in the Bulletin of Obligatory Legal Notices (Bulletin des Annonces Légales Obligatoires or BALO
Publication date Nature of the information 02/04/2012 Preliminary notice of the AGM/EGM of 8 June 2012 04/05/2012 Preliminary notice of the AGM/EGM of 8 June 2012 16/05/2012 Second notice of the AGM/EGM of 8 June 2012 24/08/2012 Declaration of voting rights as of 8 June 2012 (AGM) 24/08/2012 Approval of the definitive 2012 annual financial statements
Filings with the Registrar of the Avignon Commercial Court
Publication date Nature of the information September 2012 - 2011 annual financial statements of NATUREX S.A. - Statutory Auditor' report on the annual financial statements - 2011 consolidated financial statements - Statutory Auditors' report on the consolidated financial statements - Management report of the Company and the Group - Statutory Auditors' special report on regulated agreements and commitments - Chairman’s Report on the preparation and organisation of the Board’s work and internal control procedures implemented by Naturex
2012 Registration Document 275 Chapter 11 Appendices to the Registration Document
II.4 Dissemination of regulated information
In compliance with the Transparency Directive on the harmonisation of obligations for the disclosure, dissemination and storage of regulated information about issuers whose securities are admitted to trading on a regulated market, adopted by the AMF on 20 January 2007, NATUREX selected Actusnews Wire as its primary information provider for the dissemination of regulated information officially recognised by the AMF. Through this primary information provider, NATUREX'S financial information is disseminated throughout the European Union both to financial market professionals and press agencies as well as the websites of the main European financial media.
Availability of information
In electronic form All regulated and periodic information is published online in French and English at the websites of Naturex (www.naturex.com), its primary information provider for electronic dissemination (www.actusnews.com) and NYSE Euronext Paris (www.euronext.fr). Official mandatory legal notices are available at the website of the Bulletin des annonces Légales Obligatoires (BALO): http://balo.journal-officiel.gouv.fr/. Annual financial statements filed with the Registrar of the Avignon Commercial Court are available at the website http://www.infogreffe.fr. Archives of regulated information published by Naturex are available at the official website (www.info-financiere.fr) for central storage of regulated information of listed companies designated by the AMF: http://www.info-financiere.fr/search.php?action=search&by=societe&q=NATUREX&x=5&y=9
Printed versions All of the documents mentioned in this annual information document may be obtained free on request by contacting the Company:
NATUREX S.A. Service Actionnaires Pôle Technologique d’Agroparc – BP 1218 – 84 911 Avignon Cedex 09 – France Tel: +33 (0)4 90 23 96 89 E-mail: [email protected]
276 2012 Registration Document
NATUREX S.A Agroparc Site – BP 1218 – 84 911 Avignon Cedex 9 – France
SA (Limited Company) with capital of €11,724,592.50 - Avignon Company Registry B384 093 563
Tel: 33 (0)4 90 23 96 89 – Fax : 33 (0)4 90 23 73 40 – Email: [email protected] Website: www.naturex.com