ANNUAL REPORT 2020
CONTENTS
THE SEMAPA GROUP 4 MISSION, STRATEGIC PRINCIPLES AND VALUES 6 WHO WE ARE 8 WHAT WE DO 9 WHERE WE ARE 10 LEADING INDICATORS OF THE GROUP 12 MESSAGE FROM THE CHAIRMAN AND CEO 16 CORPORATE BODIES 20 BOARD OF DIRECTORS 21
MANAGEMENT REPORT 22 1. OVERVIEW OF SEMAPA GROUP OPERATIONS 26 2. PERFORMANCE OF SEMAPA SHARES 30 3. PERFORMANCE OF THE SEMAPA GROUP BUSINESS UNITS 32 4. SEMAPA GROUP – FINANCIAL AREA 50 5. SUSTAINABILITY IN THE BUSINESS UNITS 52 6. INNOVATION, RESEARCH AND DEVELOPMENT 55 7. HUMAN CAPITAL AND TALENT 57 8. INVOLVEMENT IN THE COMMUNITY 60 9. OUTLOOK 61 10. EVENTS AFTER THE BALANCE SHEET DATE 64 11. ACKNOWLEDGEMENTS 65 12. PROPOSED ALLOCATION OF PROFITS 66
CORPORATE GOVENANCE REPORT 68 PART I INFORMATION ON CAPITAL STRUCTURE, 72 ORGANIZATION AND CORPORATE GOVERNANCE PART II ASSESSMENT OF CORPORATE GOVERNANCE 115 ANNEX I DISCLOSURES REQUIRED BY ARTICLE 447 OF THE COMPANIES CODE 124 ANNEX II REMUNERATION POLICY STATEMENT 126 ANNEX III DECLARATION REQUIRED UNDER ARTICLE 245.1 C) 133 OF THE SECURITIES CODE
CONSOLIDATED FINANCIAL STATEMENTS 134 CONSOLIDATED INCOME STATEMENT 136 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 137 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 138 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 139 CONSOLIDATED STATEMENT OF CASH FLOWS 140 CONTENTS TO THE CONSOLIDATED FINANCIAL STATEMENTS 141
2 ANNUAL REPORT 2020
STATUTORY AUDIT REPORT 256 CONSOLIDATED FINANCIAL STATEMENTS
REPORT AND OPINION OF THE AUDIT BOARD 266 CONSOLIDATED FINANCIAL STATEMENTS
SEPARATE FINANCIAL STATEMENTS 272 SEPARATE INCOME STATEMENT 274 SEPARATE STATEMENT OF COMPREHENSIVE INCOME 275 SEPARATE STATEMENT OF FINANCIAL POSITION 276 SEPARATE STATEMENT OF CHANGES IN EQUITY 277 SEPARATE STATEMENT OF CASH FLOWS 278 CONTENTS TO THE SEPARATE FINANCIAL STATEMENTS 279
STATUTORY AUDIT REPORT 330 SEPARATE FINANCIAL STATEMENTS
REPORT AND OPINION OF THE AUDIT BOARD 338 SEPARATE FINANCIAL STATEMENTS
(translation from the original text in Portuguese)
3 THE SEMAPA GROUP THE SEMAPA GROUP MISSION, STRATEGIC PRINCIPLES AND VALUES
MISSION To be a benchmark for investment management in key sectors of the Portuguese and international economy, aware of the principles of sustainable development and capable of balancing the requirements of creating returns for shareholders with an attractive project for professionals and a deep social and environmental conscience.
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STRATEGIC PRINCIPLES To achieve growth with added value for shareholders, with a view to sustainable development with a firm social conscience To maintain high standards of environmental responsibility and promote development of local communities To develop its Human Resources, providing them with attractive career opportunities To be ready for business opportunities and to make acquisitions with the potential for generating value
SEMAPA VALUES Social and environmental awareness Excellence, competence, innovation and entrepreneurship Discretion Respect, trust, collaboration and justice Integrity, ethics and honesty
7 WHO WE ARE
One of the biggest Portuguese industrial groups with presence in 4 continents
Portfolio that includes Pulp and Paper, Cement and Other Building Materials, Environment and Venture Capital
Listed in Euronext Lisbon (PSI20) since 1995
Queiroz Pereira family - reference investor
Professional, experienced and diversified Management
8 ANNUAL REPORT 2020
WHAT WE DO
NAVIGATOR
PULP AND PAPER
69.35%
SEMAPA SECIL
NEXT CEMENT AND OTHER VENTURE BUILDING CAPITAL MATERIALS
% Share Capital 100% 99.998%
ETSA
ENVIRONMENT
99.99%
9 WHERE WE ARE PORTUGAL
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08 03 10 11
09 12 04
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16 13 22 01 23 24 14 06
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20 21 07
10 ANNUAL REPORT 2020
PORTUGAL
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09 12 04
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16 13 22 01 23 24 14 06
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20 21 07 HOLDING CEMENT ENVIRONMENT Semapa Secil ETSA
01. Lisbon Office 08. Terneuzen Terminal 22. Coruche Factory 09. Vigo Terminal 23. Santo Antão do Tojal Factory 10. Maceira-Liz Factory 11. Maceira Lime Factory PULP AND PAPER 12. Cibra-Pataias Factory VENTURE CAPITAL Navigator 13. Lisbon Office Semapa Next 14. Secil-Outão Factory 02. Aveiro Factory 15. Gabès Factory 24. Lisbon Office 03. Figueira da Foz Factory 16. Funchal Terminal 04. Vila Velha de Rodão 17. Sibline Factory Tissue Factory 18. Praia Terminal 05. Lisbon Office 19. Lobito Factory 06. Setúbal Factory 20. Adrianópolis PR Factory 07. Maputo Office 21. Pomerode SC Factory
11 LEADING INDICATORS OF THE GROUP
ENVIRONMENT 31.4 REVENUE CEMENT 450.8 1,867.4 REVENUE million euros EXTERNAL -16.2% 2019: 2,228.5 million euros 1,867.4 million euros
A A AN O EAN A 6%
PULP AND PAPER A R A PORTU AL 1,385.2 11% 28% Present in over
RE ENUE 20 countries A ER A Strong 11% 1,867.4 million euros international presence
RE T O EUROPE EN RON ENT OL N 44% 10.1 0.1
E ENT EBITDA 123.6 E T A 419.3 419.3 million euros million euros -13.9% 2019: 486.8 million euros
PULP AN PAPER 285.5
NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS EBITDA MARGIN 106.6 22.5% million euros 2019: 21.8% -14.1% 2019: 124.1 million euros
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NET DEBT OL N ENTO 263.6 + IFRS 16 510,7
EN RON ENT NET E T 1,295.9 1.4 R million euros -16.2% 1,295.9 2019: 1,545.8 million euros million euros E ENT 297.8
PULP AN PAPER 733.1
HOLDINGS INTEREST-BEARING 263.4 NET DEBT ENVIRONMENT INTERESTBEARING -0.5 NET DEBT 1,215.5 PULP AND PAPER million euros 1,215.5 680.0 -17.3% million euros 2019: 1,470.7 million euros CEMENT 272.6
EN RON ENT OL N 2.1 0.0
E ENT INVESTMENT 26.1 IN TANGIBLE FIXED ASSETS N E T ENT PULP AN PAPER 108.9 108.9 80.6 million euros million euros -46.3% 2019: 202.9 million euros
13 LEADING INDICATORS OF THE GROUP
2019 2020 % CERTIFIED 74% 2018 72% WOOD 2017 63% 54% 74% 2019: 72% Navigator
% OF CERTIFIED WOOD RECEIVED IN NAVIGATOR’S INDUSTRIAL COMPLEXES
EN RON ENT OL N 280 28 KG CO2 PER T/ CEMENTITIOUS No. OF EMPLOYEES
N 5,926 -7.4% 2019: 6,093 (-167) O E PLO EE vs. 1990 emissions 5,926 Secil
Product No. Capacity
BEKP 3 1.55 MtAD E ENT PULP AN PAPER Pulp 2,386 3,232 UWF Paper 2 1.57 Mt
Cement 8 9.75 Mt
RENEWABLE ENERGY CONSUMPTION ACCIDENT SEVERITY (% total energy consumption) RATE No. HOURS OF TRAINING/ EMPLOYEE 50% 335.5 -34% 2019: 285.3 vs. 2019 hours of training
ACCIDENT FREQUENCY RATE 9.1 2019: 7.9
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BUSINESS INDICATORS
Million Euros 2016 2017 2018 2019 2020
Income Statement Revenue 2,074.6 2,164.7 2,198.0 2,228.5 1,867.4 EBITDA 489.1 500.7 548.5 486.8 419.3 EBITDA margin (%) 23.6% 23.1% 25.0% 21.8% 22.5% Operational results 244.5 272.3 313.7 241.0 199.2 EBIT margin (%) 11.8% 12.6% 14.3% 10.8% 10.7% Profit for the year 189.3 193.6 201.2 162.7 142.2 Attributable to Semapa's Shareholders 114.9 124.1 132.6 124.1 106.6 Per share Closing market price, Eur/share 13.400 17.795 13.100 13.720 9.000 Dividends per share, Eur (paid in n+1) 0.450 0.512 0.512 0.125 0.512 Basic earnings per share, Eur 1.418 1.538 1.643 1.540 1.333 Cash Flow Cash Flow 433.9 422.1 436.0 408.6 362.4 Investments Capital Expenditures 186.1 144.0 243.2 202.9 108.9 Balance Sheet Consolidated shareholders' equity 817.3 843.4 890.4 960.9 948.8 Total equity 1,227.1 1,221.9 1,257.6 1,261.7 1,208.0 Interest‐bearing net debt 1,779.7 1,673.7 1,551.6 1,470.7 1,215.5 Interest‐bearing net debt + IFRS 16 1,779.7 1,673.7 1,551.6 1,545.8 1,295.9
Note: 2020 dividends per share refers to the proposed allocation of profit presented in this report to be paid in 2021
15 MESSAGE FROM THE CHAIRMAN AND CEO
Dear Shareholders,
2020 will be remembered as one of the most challenging of our lives, the year we struggled to cope with the pandemic crisis, which brought us to the interaction of man with nature and the way this interaction comes back to us. In fact, an unexpected event, such as the passage of a virus from animal to man, has highlighted our global and collective vulnerability and is a warning of the importance of sustainability in general and the relationship between man and the environment in particular. Clearly, 2020 was a year that will bring significant changes in the way we live and how we relate to our environment and society. JOSÉ FAY This crisis has also highlighted the importance of finding a new balance between the resilience and the efficiency of CHAIRMAN OF THE BOARD organizations, as it has revealed that the most sophisticated OF DIRECTORS and optimized models of efficiency can leave little room for manoeuvring in the response to and the overcoming of an unexpected global adversity. Became evident the importance of having supply chains close by and of endowing companies with sound and resilient financial cost structures that enables them to overcome any crises.
But crises are also and always opportunities that allow us to demonstrate the best in us. These are times when we can reinvent ourselves and become even stronger, and this is the positive side that needs to be emphasized. In the case of the Semapa Group, the challenges experienced in 2020 that affected all the subsidiaries, each of them in its own way, served to confirm the fact that we are a business group of reference and resulted in our strengthening as an organization.
Firstly, the extraordinary character of our people and teams JOÃO CASTELLO was demonstrated in their total dedication and remarkable BRANCO sense of commitment. They quickly adapted to the need to work remotely, and those who had to keep the factories CHAIRMAN OF THE EXECUTIVE running and could not do so remotely were also able to BOARD (CEO) adapt to the new times and comply with the necessary safety rules, making it possible for the spread of the virus to always be under control, so that there was never any situation of significant severity.
16 ANNUAL REPORT 2020
We also knew how to organize at all levels, setting up quarter, there was a gradual recovery in demand for UWF monitoring groups in the areas of health, business evolution paper, which continued to rise until the end of the year, and communication; we reviewed budgets and objectives demonstrating its diversity of uses and versatility in relation and set priorities, achieving efficient financial management, to other types of printing and writing paper and confirming which allowed us to find solutions to reduce operating costs the importance of Navigator’s strategy of diversification and and optimize the management of cash flow and our financial differentiation, which stands out positively among the other structure. companies in the sector.
The ability demonstrated by our people and teams, in As far as the pulp market is concerned, 2020 was marked combination with the diversification of our business and the by circa 25% increase in sales volume compared to organizational measures that we were able to adopt, allowed 2019, totalling 394,000 tonnes, which resulted from the the Group to obtain very significant results, in view of the commitment to greater diversification to destinations context in which we live, as attested by the main economic outside Europe, immediately taking advantage of the market and financial indicators, with special emphasis on a turnover opportunities that were emerging. of 1,867 million euros, about 16% lower than the previous year, a consolidated EBITDA value of 419 million euros and a The tissue segment was also very important in making net result attributable to Semapa shareholders of 107 million a positive contribution Navigator’s results, which euros. Both of these were 14% below 2019 values, but in a demonstrated the importance of this strategic commitment to year as atypical as 2020, they cannot fail to be considered diversification in this segment, with sales of 106,000 tonnes, highly positive results. a significant increase of 10% compared to the previous year, corresponding to an increase of 7% in turnover, which came In 2020 the consolidated net debt + IFRS 16 was reduced by to 141 million euros. 250 million euros to a value of 1,296 million euros, a result of the strong generation of free cash flow that totalled 345 Thus, in an extremely adverse market environment, million euros, which was 67% higher than that obtained in Navigator demonstrated very remarkable resilience, 2019. This allowed us to continue the strategy of reducing the the result of the effort and dedication of its teams, the level of indebtedness we have been following in recent years commitment that has been made in the diversification and and to increase the financial soundness and low risk profile differentiation of its products and in the resilience of its of the Group, this despite maintaining a high consolidated business model, resulting in an EBITDA of 286 million euros, capex level of 109 million euros. which seemed impossible to achieve at the height of the pandemic crisis in April/May 2020. In relation to the results of Semapa’s subsidiaries, the following should be highlighted: In the Cement and Other Building Materials segment, the effect of the pandemic in the various geographies where Navigator was particularly affected by the pandemic crisis, Secil operates was diverse, with special emphasis on the due to the abrupt fall in UWF paper consumption in the positive growth in turnover in Portugal by 4.8% and in Brazil 2nd quarter of the year, causing a very sharp reduction in by 19.4% (calculated on the basis of the local currency), more the volume of orders. Accordingly, the paper machines in than offsetting the negative results obtained in Tunisia and the factories of Setúbal and Figueira da Foz had to be shut Lebanon, which resulted from the economic and financial down, a step that had never been taken before in the history crisis these countries, especially Lebanon, are going through. of this company. However, beginning at the end of the 2nd
17 Secil’s turnover was 451 million euros, about 12% below With regard to Semapa Next, the Group’s Venture Capital the previous year, a result of the strong foreign exchange business unit, in addition to monitoring the companies in its devaluation against the euro of some currencies in the portfolio and the investment funds in which it is investing, different countries where Secil operates and the fact that there are two new innovation initiatives: (1) the Pathfinder Lebanon was classified as a hyperinflationary economy. partnership with Techstars, in which Semapa Next will organize two Global Business Challenges to identify startups Secil’s EBITDA had an excellent performance, totalling 123.6 with accelerated growth potential; and (2) active participation million euros, an increase of 16.4 million euros compared in the Global Sustainability Challenge, with the aim of finding to the previous year (up 15.3%). This resulted from the and helping startups that are developing technologies in positive developments in Portugal and Brazil and included the area of supply chain, with special emphasis on data & capital gains from the disposal of assets (7 million euros) automation and new materials. and sales of excess CO2 emission credits, which were higher than in the same period of the previous year by about 3 As mentioned above, the pandemic has further reinforced million euros. Net results attributable to shareholders were the priority of the sustainability of the company’s activity in 46.5 million euros, which compared very favourably with a global vision, which has been a strong commitment of the the 2019 value of about 18 million euros. Group as a whole for years. A Sustainability Commission has been set up, led by the CEO of ETSA, Afonso Lobato de Faria, These Secil results – in addition to being very indicative which integrates staff members from Semapa and each of of the resilience that this company has demonstrated in the subsidiaries with the aim of systematizing and promoting the face of the pandemic crisis and an evidence of the sustainability issues throughout the Group. strong commitment of its teams and the organizational measures immediately implemented throughout the Group The challenge we face in pursuing the activity of the Group in 2020 – are also a consequence of the company’s work Companies is the creation of a sustainable value for society on operational improvement it has been carrying out in as a whole, doing our part to leave future generations with the last years: The Return Program, which was launched a better planet, and our concern to be at the forefront in in 2017. the fight against climate change: committing to maintain a high level of environmental investment, some of it without a In the Environment segment, it should be noted that ETSA financial return; developing a policy for the insertion of our was not as greatly affected by the pandemic crisis, because activities in local communities; and developing the personal it was considered to be a company providing an essential and professional advancement of our employees. public service, due to the activity it carries out. Therefore, its turnover continued growing in line with the trend Thus, in 2020 Navigator continued the execution of of recent years, amounting to 31.4 million euros, which investments with the objective of achieving carbon represented an increase of about 3.7% compared to the neutrality in 2035, which will entail an overall value of 154 previous year. This was also explained by the improvement million euros. Investments of 55 million euros have already of price conditions in the market for fats and meals, the been made, the most relevant being the new biomass boiler increase in services rendered and the control of the main at the Figueira da Foz plant, which went into operation at cost items. This increase in turnover brought the EBITDA up the end of 2020 and will reduce fossil CO2 emissions by 81% to 10.1 million euros, which represented a growth of 30.3% in this plant. compared to 2019.
18 ANNUAL REPORT 2020
Secil is also implementing the Clean Cement Line (CCL) Project for the implementation of a clean cement line, aimed at increasing energy efficiency, reducing CO2 emissions and In this difficult year we generating electricity. reaffirm our gratitude With regard to ETSA, an investment project is underway to remove the protein from a wastewater flow, thus reducing its for all the collaboration, organic load, while simultaneously recovering the protein. support and understanding Lastly, but certainly most importantly, we continue to invest in our people, their well-being and the on going advancement extended to us by all our of their talent and professional careers. employees, customers From the outset, our first concern immediately after the outbreak of the pandemic was to ensure the safety of all and suppliers, financial employees, implementing contingency plans in all companies, with the establishment of the telework regime whenever institutions, regulatory and possible and establishing strict rules of hygiene and safety in the manufacturing centres so that those who had to remain supervisory authorities, the in person to work could do so safely. This also entailed the performance of around 12,000 screening tests, the Group’s corporate bodies, distribution of masks and cleaning equipment for everyone, the periodic disinfection of the facilities and the development our shareholders, as well of a permanent information policy that allowed us to create a behavioural culture appropriate to the moment of crisis we as all the local populations are experiencing. of the areas where we have In addition to the specific aspects related to the pandemic, in 2020 we continued with a set of initiatives aimed at valuing our factories and where we our people, in which we would like to highlight the annual Talent Review, Succession Plans, mobility policy, a new operate. leadership model to be implemented in 2021, with a special focus on the culture and development of all employees, and the continuation of the Semapa News and Semapa Talks We conclude with a message of hope on the one hand and a communication programmes. message of certainty on the other. Hope in believing that we are already in the home stretch of this pandemic and that we will soon be able to return to normal interaction between everyone and to the freedom of movement that we so desire. The message of certainty is that we know that we are on the right track and that we have the right people to overcome the challenges of the future.
19 CORPORATE BODIES
BOARD OF DIRECTORS GENERAL MEETING CHAIRMAN CHAIRMAN José Antônio do Prado Fay Francisco Xavier Zea Mantero
FULL MEMBERS SECRETARY João Nuno de Sottomayor Pinto de Castello Branco Luís Nuno Pessoa Ferreira Gaspar Ricardo Miguel dos Santos Pacheco Pires Vítor Paulo Paranhos Pereira António Pedro de Carvalho Viana Baptista AUDIT BOARD Carlos Eduardo Coelho Alves CHAIRMAN Filipa Mendes de Almeida de Queiroz Pereira José Manuel de Oliveira Vitorino Francisco José Melo e Castro Guedes Lua Mónica Mendes de Almeida de Queiroz Pereira FULL MEMBERS Mafalda Mendes de Almeida de Queiroz Pereira Gonçalo Nuno Palha Gaio Picão Caldeira Vítor Manuel Galvão Rocha Novais Gonçalves Maria da Graça Torres Ferreira da Cunha Gonçalves
ALTERNATE MEMBER Ana Isabel Moraes Nobre de Amaral Marques Tavares da EXECUTIVE BOARD Mata CHAIRMAN (CEO) João Nuno de Sottomayor Pinto de Castello Branco STATUTORY AUDITOR FULL MEMBER FULL MEMBERS KPMG & Associados - Sociedade de Revisores Oficiais Ricardo Miguel dos Santos Pacheco Pires (CIO) de Contas, S.A., represented by Paulo Alexandre Martins Vítor Paulo Paranhos Pereira (CFO) Quintas Paixão
ALTERNATE MEMBER REMUNERATION COMMITTEE Vítor Manuel da Cunha Ribeirinho João do Passo Vicente Ribeiro João Rodrigo Appleton Moreira Rato José Gonçalo Ferreira Maury COMPANY SECRETARY FULL MEMBER Rui Tiago Trindade Ramos Gouveia
ALTERNATE MEMBER Joana Esperança Fernandes Lopes Luís
20 ANNUAL REPORT 2020
BOARD OF DIRECTORS
JOSÉ FAY JOÃO CASTELLO BRANCO (CEO) RICARDO PIRES (CIO)
VÍTOR PARANHOS PEREIRA ANTÓNIO VIANA BAPTISTA CARLOS ALVES (CFO)
FILIPA QUEIROZ PEREIRA FRANCISCO GUEDES LUA QUEIROZ PEREIRA
MAFALDA QUEIROZ PEREIRA VÍTOR NOVAIS GONÇALVES
21 MANAGEMENT REPORT MANAGEMENT REPORT CONTENTS
1 OVERVIEW OF SEMAPA GROUP OPERATIONS 26
2 PERFORMANCE OF SEMAPA SHARES 30
3 PERFORMANCE OF THE SEMAPA GROUP BUSINESS UNITS 32 3.1 Pulp and Paper Business Unit 32 3.2 Cement and Other Building Materials Business Unit 38 3.3 Environment Business Unit 47 3.4 Venture Capital Business Unit 49
4 SEMAPA GROUP – FINANCIAL AREA 50 4.1 Indebtedness 50 4.2 Financial Results 51 4.3 Risk Management 51 4.4 Dividends 51 4.5 Net Profit 51
24 ANNUAL REPORT 2020
5 SUSTAINABILITY IN THE BUSINESS UNITS 52
6 INNOVATION, RESEARCH AND DEVELOPMENT 55
7 HUMAN CAPITAL AND TALENT 57
8 INVOLVEMENT IN THE COMMUNITY 60
9 OUTLOOK 61
10 EVENTS AFTER THE BALANCE SHEET DATE 64
11 ACKNOWLEDGEMENTS 65
12 PROPOSED ALLOCATION OF PROFITS 66
25 1. OVERVIEW OF SEMAPA GROUP OPERATIONS
LEADING BUSINESS INDICATORS
IFRS - accrued amounts (million euros) 2020 2019 Var.
Revenue 1,867.4 2,228.5 -16.2% EBITDA 419.3 486.8 -13.9% EBITDA margin (%) 22.5% 21.8% 0.6 p.p. Depreciation, amortisation and impairment losses (214.7) (241.8) 11.2% Provisions (5.5) (4.1) -34.4% EBIT 199.2 241.0 -17.3% EBIT margin (%) 10.7% 10.8% -0.1 p.p. Net financial results (58.9) (54.4) -8.4% Net monetary position 13.9 - - Profit before taxes 154.3 186.6 -17.3% Income taxes (12.0) (23.9) 49.8% Net profit for the period 142.2 162.7 -12.6% Attributable to Semapa shareholders 106.6 124.1 -14.1% Attributable to non-controlling interests (NCI) 35.7 38.6 -7.7% Cash flow 362.4 408.6 -11.3% Free Cash Flow 345.4 207.2 66.7% 31/12/2020 31/12/2019 Dec20 vs. Dec19 Equity (before NCI) 948.8 960.9 -1.3% Interest-bearing net debt 1,215.1 1,470.7 -17.3% Lease liabilities (IFRS 16) 80.3 75.2 6.9% Total 1,295.9 1,545.8 -16.2%
REVENUE
At year-end 2020 the Semapa Group recorded consolidated revenue of 1,867.4 million euros (-16.2% from the same period in the previous year). Exports and foreign sales in 2020 amounted to 1,335.4 million euros, accounting for 71.5% of revenue.
451.0 31.4 -0.4 1,867.4
1,385.4
▲ 2020 20 -17.9% -11.7% +3.7% +33.7% -16.2% PULP AND PAPER CEMENT ENVIRONMENT HOLDINGS 2020 AND ELIMINATIONS
MILLION EUROS 1,687.9 511.0 30.3 -0.6 2,228.5 2019
26 ANNUAL REPORT 2020
PULP AND PAPER: 1,385.4 MILLION EUROS ▼ 17.9%
Navigator revenue totalled 1,385.4 million euros, paper sales accounting for around 68% of the revenue (vs. 71% year on year), pulp sales 11% (vs. 10%), tissue sales 10% (vs. 8%), and energy sales also around 10% (vs. 10%). The period featured a significant drop in global paper consumption as a result of the Covid-19 pandemic, mainly in the second quarter, with a notable recovery recorded in the third and fourth quarters, especially in Europe. The Company was able to make up for the decline in UWF sales by further diversifying its business, with growth in pulp and tissue sales.
CEMENT: 451.0 MILLION EUROS ▼ 11.7%
In 2020, Secil’s accumulated revenue amounted to 451.0 million euros, 11.7%, less than that in 2019, representing a drop of 60 million euros.
This negative variation occurs mainly due to the strong exchange rate depreciation against the Euro of some of the currencies of the countries where Secil operates (particularly the Brazilian real and the Lebanese pound), and to the fact that Lebanon was classified as a hyperinflationary economy in 2020, with the IAS 29 accounting standard being applied. The combined effect of the exchange rates variation of the currencies of the various countries and the implementation of IAS 29 had a negative effect of about 93.2 million euros on Secil’s revenue in the year.
ENVIRONMENT: 31.4 MILLION EUROS ▲ 3.7%
ETSA recorded revenue of approximately 31.4 million euros in 2020, up by around 3.7% against the previous year.
EBITDA
EBITDA in 2020 amounted to 419.3 million euros (vs. 486.8 million euros in 2019). The consolidated margin stood at 22.5%, 0.6 p.p. above that in the previous year.
123.6 10.1 0.1 419.3
285.5
▲ 2020 20 -23.3% +15.3% +30.3% +183% -13.9% PULP AND PAPER CEMENT ENVIRONMENT HOLDINGS 2020 AND ELIMINATIONS
MILLION EUROS 372.1 107.2 7.8 -0.2 486.8 2019
PULP AND PAPER: 285.5 MILLION EUROS ▼ 23.3%
EBITDA for the year totalled 285.5 million euros, -23.3% compared to 2019, in a context of much lower pulp price in euros (-22%), smaller paper volumes due to the pandemic (-12%), and lower paper prices (-7%). The margin stood at 20.6%, 1.4 p.p. lower than that of 2019.
CEMENT: 123.6 MILLION EUROS ▲ 15.3%
EBITDA reached 123.6 million euros, which corresponds to an increase of 16.4 million euros, compared to the previous year (+15.3%), as a result of the positive evolution in Portugal and Brazil. Note that in 2020 Secil obtained capital gains on the sale of assets (+7 million euros), and the sale of surplus CO2 licenses amounted to approximately 3 million euros more than those sold in the same period of the previous year. EBITDA margin stood at 27.4%, up by around 6.4 p.p. on the margin in 2019.
27 ENVIRONMENT: 10.1 MILLION EUROS ▲ 30.3%
EBITDA for ETSA totalled approximately 10.1 million euros in 2020, representing a growth of about 30.3% compared to 2019, essentially due to a higher revenue, which in turn reflects an improvement in fat and meal price conditions on the market combined with the control of the main cost items. EBITDA margin stood at 32.2%, up by around 6.6 p.p. on the margin in 2019.
NET PROFIT ATTRIBUTABLE TO SEMAPA SHAREHOLDERS
Net profit attributable to Semapa shareholders stood at 106.6 million euros, down by 14.1% in relation to the previous year.
5.4 -14.0 46.5 106.6
68.7
▲ 2020 20 -37.4% +163.3% +42.5% -97.7% -14.1% PULP AND PAPER CEMENT ENVIRONMENT HOLDINGS 2020 AND ELIMINATIONS
MILLION EUROS 109.7 17.7 3.8 -7.1 124.1 2019
PULP AND PAPER: 68.7 MILLION EUROS ▼ 37.4%
Net profit attributable to Semapa shareholders in the Pulp and Paper business unit was 68.7 million euros, which represented a decrease of 37.4% against 2019 (109.7 million euros).
CEMENT: 46.5 MILLION EUROS ▲ 163.3%
Net profit attributable to Semapa shareholders in the Cement and Other Building Materials business unit was 46.5 million euros, well above the 17.7 million euros in 2019.
ENVIRONMENT: 5.4 MILLION EUROS ▲ 42.5%
Net profit attributable to Semapa shareholders of the Environment business unit totalled approximately 5.4 million euros in 2020, representing an increase of about 42.5% in comparison with 2019.
INTEREST-BEARING NET DEBT 263.4 1,215.5
272.6 -0.5
680.0
▲ 2020 20 -4.9% -23.9% -108% -32.8% -17.3% PULP AND PAPER CEMENT ENVIRONMENT HOLDINGS 2020 AND ELIMINATIONS
MILLION EUROS 715.3 358.0 5.7 391.7 1,470.7 2019
28 ANNUAL REPORT 2020
On 31 December 2020, consolidated net debt stood at 1,215.5 million euros, representing a reduction of around 255.1 million euros over the figure ascertained at the close of 2019. Including the effect of IFRS 16, net debt would have been 1,295.9 million euros, 250 million euros below the figure at the end of 2019.
BREAKDOWN BY BUSINESS SEGMENTS
IFRS - accrued amounts Pulp and Paper Cement Environment Holdings Consolidated (million euros) 2020 20/19 2020 20/19 2020 20/19 2020 20/19 2020
Revenue - External 1,385.2 -17.9% 450.8 -11.7% 31.4 3.7% - - 1,867.4 Revenue 1,385.4 -17.9% 451.0 -11.7% 31.4 3.7% (0.4) 33.7% 1,867.4 EBITDA 285.5 -23.3% 123.6 15.3% 10.1 30.3% 0.1 183.0% 419.3 EBITDA margin (%) 20.6% -1.4 p.p. 27.4% 6.4 p.p. 32.2% 6.6 p.p. 0.0 p.p. 22.5% Depreciation, amortisation and (158.0) -2.8% (53.1) 37.3% (3.1) -3.0% (0.4) -19.3% (214.7) impairment losses Provisions (2.3) <-1000% (3.1) 22.8% - 100.0% - - (5.5) EBIT 125.2 -42.7% 67.4 265.0% 7.0 48.5% (0.3) 47.0% 199.2 EBIT margin (%) 9.0% -3.9 p.p. 14.9% 11.3 p.p. 22.2% 6.7 p.p. 0.0 p.p. 10.7% Net financial results (14.7) 22.3% (33.5) -38.7% (0.3) 19.9% (10.5) 4.7% (58.9) Net monetary position - 13.9 - - 13.9 Profit before taxes 110.5 -44.6% 47.8 942.8% 6.7 53.5% (10.8) 6.6% 154.3 Income taxes (12.3) 70.8% 4.9 -66.2% (1.3) -123.3% (3.2) -172.8% (12.0) Net profit for the period 98.1 -37.6% 52.7 500.0% 5.4 42.5% (14.0) -97.7% 142.2 Attributable to Semapa 68.7 -37.4% 46.5 163.3% 5.4 42.5% (14.0) -97.7% 106.6 shareholders Attributable to non- 29.5 -38.0% 6.2 169.6% 0.0 43.2% - - 35.7 controlling interests (NCI) Cash flow 258.5 -16.9% 108.9 11.7% 8.5 24.5% (13.6) -101.8% 362.4 Free Cash Flow 233.5 25.8% 118.8 269.2% 6.8 15.7% (13.7) 16.7% 345.4 Interest-bearing net debt 680.0 272.6 (0.5) 263.4 1,215.5 Lease liabilities (IFRS 16) 53.1 25.2 1.9 0.2 80.3 Total 733.1 297.8 1.4 263.6 1,295.9
Notes Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.
SUMMARY TABLE OF OPERATING INDICATORS
Unit 2020 2019 Var.
Pulp and Paper BEKP Sales (pulp) 1,000 t 394 314 25.6% UWF Sales (paper) 1,000 t 1,276 1,447 -11.8% Total sales of tissue 1,000 t 106 96 10.8% Cement Sales of Grey cement 1,000 t 4,652 5,060 -8.1% Sales of Ready-mix 1,000 m3 1,803 1,743 3.4% Environment Collection of raw materials - Animal waste (categories 1, 2 and 3) 1,000 t 121.4 122.1 -0.6%
29 2. PERFORMANCE OF SEMAPA SHARES
The year 2020 is inevitably marked by the Covid-19 pandemic and its effects on the global economy, including the historic collapse of stock markets worldwide at the end of the 1st quarter. Following the initial shock, most countries took rapid action to mitigate the impact of the economic crisis caused by the pandemic. It should be highlighted the key role played by the main central banks, which acted rapidly with sound commitment to the purpose in question.
In the second quarter the stock markets reacted favourably to the set of tax and monetary incentives adopted, with most stock market indices recovering, although differently between regions and sectors of activity, and insufficiently to cancel out the strong falls recorded in the previous quarter. The summer months were marked by some investor optimism and gains in stock exchanges. However, in September stock market sentiment changed due to the increase in the number of people infected with the virus and the weak economic activity recovery, leading to the fall in the main international stock market indices and interrupting the recovery that had begun in April. At the end of the year, optimism returned to the markets, which reacted positively to the good news, including the start of the vaccination process against Covid-19 and the hope it brings to a resolution of the pandemic crisis, the signing of the Brexit trade agreement and the fiscal stimulus plans approved in Europe and the US, and the prospect of interest rates remaining at historic lows for a relatively long time.
Thus, in a year marked by historic stock market crashes and some highly volatile sessions, many of the world’s stock indexes ended the year with accumulated losses. However, the recovery of prices at the end of the year allowed for the reduction or even cancellation of double-digit price drops. The good performance of the main Frankfurt stock exchange index and the Dow Jones is worthy of note, both closing the period with 3.5% and 7.2% gains, respectively.
In this context, the value of Semapa shares in the period depreciated 34.4%, alongside the weak performance on the PSI20 (-6.1%) and the EFB (-2.3%) indexes, mostly driven by the performance of Navigator share price, that in turn was in line with the stock market evolution of the Pulp and Paper sector globally.
ARE PR E UANT T
00 VAR. PERIOD SEMAPA 000 000 -34.4% 00 00 000
00 1 00 000
2 00 AVERAGE DAILY VOLUME 00 000 82,906 00 00 000
0 00 3 00 000
00 2 4 00 000 SHARE PRICE 5 00 02-01: eur 13.86 00 000 31-12: eur 9 00 6 200 000
00 00 000
00 0 JAN-20 FEB-20 MAR-20 APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20
1 Presentation of 2019 Results 4 Ex-dividend date 2 Presentation of Results: Q1 2020 5 Presentation of Results: H1 2020 3 Announcement of 2019 dividend payment 6 Presentation of Results of the First 9 Months of 2020
30 ANNUAL REPORT 2020
VAR. PERIOD EFB -2.3%
VAR. PERIOD PSI20 -6.1%
VAR. PERIOD SEMAPA -34.4%
BASIS 100: 31/12/2019
DEC-19 JAN-20 FEB-20 MAR-20 APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20
EFB – Euronext Family Business Index Note: Closing prices
31 3. PERFORMANCE OF THE SEMAPA GROUP BUSINESS UNITS
3.1 PAPER AND PULP BUSINESS UNIT
RE ENUE E T A 2020 2020 74% 68%
% of consolidated total % of consolidated total
HIGHLIGHTS IN 2020 (VS. 2019) REVENUE
• In 2020, revenue amounted to 1,385.4 million euros, 17.9% 1,687.9 below the previous year, with an increase in the sales 1,385.4 volumes of pulp and tissue attenuating lower paper prices and volumes.
-17.9% ▼
LL ON EURO 2019 2020
REVENUELEADING BREAKDOWNBUSINESS INDICATORSBY SEGMENT 143.7 0.4 1,385.4 141.1 155.5 944.6
▲ 2020 20 -21.1% -5.8% +6.9% -10.6% -99% -17.9% UWF PAPER BEKP PULP TISSUE ENERGY OTHERS AND 2020 ELIMINATIONS
MILLION EUROS 1,197.6 165.1 132.0 160.8 32.4 1,687.9 2019
32 ANNUAL REPORT 2020
• EBITDA amounted to 285.5 million euros. EBITDA margin EBITDA went from 22.0% in 2019 to 20.6% in 2020. EBITDA MG 372.1 22.0% 285.5 20.6%
-23.3% ▼
LL ON EURO 2019 2020
LEADING BUSINESS INDICATORS
IFRS - accrued amounts (million euros) 2020 2019 Var.
Revenue 1,385.4 1,687.9 -17.9% EBITDA 285.5 372.1 -23.3% EBITDA margin (%) 20.6% 22.0% -1.4 p.p. Depreciation, amortisation and impairment losses (158.0) (153.8) -2.8% Provisions (2.3) 0.0 <-1000% EBIT 125.2 218.3 -42.7% EBIT margin (%) 9.0% 12.9% -3.9 p.p. Net financial results (14.7) (18.9) 22.3% Profit before taxes 110.5 199.4 -44.6% Income taxes (12.3) (42.2) 70.8% Net profit for the period 98.1 157.2 -37.6% Attributable to Navigator shareholders 98.1 157.2 -37.6% Attributable to non-controlling interests (NCI) 0.0 (0.0) 324.3% Cash flow 258.5 311.0 -16.9% Free Cash Flow 233.5 185.6 25.8% 31/12/2020 31/12/2019 Equity (before NCI) 806.6 818.9 Interest-bearing net debt 680.0 715.3 Lease liabilities (IFRS 16) 53.1 46.8 Total 733.1 762.1
Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.
OVERVIEW OF PAPER AND PULP
The period featured a significant drop in global paper consumption as a result of the Covid-19 pandemic, mainly in the second quarter, with a notable recovery recorded in the third and fourth quarters, especially in Europe. Navigator was able to make up for the decline in UWF sales by further diversifying its business, with growth in pulp and tissue sales.
The global demand for UWF is estimated to be -13% YTD in November, a drop that is less than that in the other segments of printing and writing papers, since the demand for coated paper was 17% lower and that of mechanical paper fell by 21%. In Europe, the estimated cumulative drop is 12% and in the United States the figures point to a drop of around 19%.
33 After the particularly adverse months of April and May, there was a gradual recovery in demand for paper from June onwards, a trend that was confirmed throughout the third and fourth quarters as the economies reopened, particularly in the European markets. All UWF formats show signs of recovery, and the reels recorded a more resilient behaviour since the start of the pandemic.
In this context, Navigator managed its UWF paper production over the course of the year in order to keep up with the fall in demand and to control stock levels. After a production adjustment in the most critical months, the Company increased its paper production again from July, after which all its machines have been working at full capacity.
At the close of the second quarter, Navigator launched a wide range of innovative initiatives to support its distributors and sales forces in different geographies in Europe and the rest of the world, which have made it possible to significantly further increase the order book. This major commercial effort made it possible to register a good level in the order book over the course of the second half of the year and resulted in a gain in market share in Europe for Navigator (+1.2 p.p. vs. 2019), an especially expressive gain of 2.6 p.p. when comparing the change between the 1st and 2nd halves of 2020.
As a result of these initiatives in support of distributors and after a careful stock management, the Company ended the year with a level of stocks at the factories below the 2019 average (-1.1 days), and a comfortable 30-day order book, in line with that of the close of previous years.
in 1,000 t 2020 2019 Var.
UWF Output 1,296 1,441 -10.1% Figueira da Foz 649 719 Setúbal 646 722 UWF Sales 1,276 1,447 -11.8% FOEX – A4- BCopy Eur/t 836 903 -7.4%
UWF sales for the year totalled 1,276 thousand tonnes, about 12% lower year on year. Revenue of UWF business was negatively affected by the fall in paper price, down by approximately 21% to 944.6 million euros. Navigator’s selling price accompanied the PIX, the average price outside Europe being negatively influenced by variations in the exchange rate and by developments in the product and market mixes.
Year-on-year sales price performance reflects the adjustment that started in the second half of 2019, and continued throughout 2020, negatively affected by the pandemic and low pulp prices. The A4 paper benchmark adjusted downwards by 7% YoY to an average price of 836 EUR/t, compared to 903 EUR/t in 2019, falling 8.3% over the 12-month period.
The global pulp market proved to be quite resilient to the adverse context of less activity due to the pandemic. Global demand for hardwood pulp is estimated to have grown 8% YoY (YTD November), driven by the 16% growth in China.
Hardwood pulp was sustained by the robust demand for final products, especially in China, where growth in tissue, UWF and package paper surpassed expectations, especially in the second half of 2020. The demand for hardwood pulp also benefitted from its use to replace softwood pulp, due to the large difference in prices between the two fibres (the price of long fibre pulp being abnormally greater than the price of short fibre). Finally, given the low price of hardwood pulp (virgin) and the increasingly scarce supply of good quality recycled fibre, which has also been affected by the pandemic, there has been a move to replace recycled fibre with virgin fibre/pulp, another major factor in explaining the strong growth in demand this year.
34 ANNUAL REPORT 2020
Additionally, the supply of pulp suffered constraints in the fourth quarter due to planned maintenance shutdowns carried out by a large number of producers, which ended up being more extended than usual as a result of the safety precautions required by the pandemic.
The net price of pulp continued its downward trend over the course of the year, reaching the low point in this price cycle in the summer. There was a recovery in the prices on the international markets in the second half of the year, with substantial increases being announced for both short and long fibre pulp in various geographies, including Europe, beginning in Q1 2021.
Thus, over the course of 2020, the gross benchmark price of BHKP pulp in Europe in USD remained at 680 USD/t, 20% below the average price of 855 USD/t registered in 2019. The price of BHKP pulp in euros fell by about 22%, standing at 596 EUR/t vs. 762 EUR/t, and the recent depreciation of the USD against the Euro in the second half penalised PIX in euros and, consequently, the profit of European pulp producers.
In 2020, Navigator managed to record a market sales volume of pulp that was significantly higher than the previous year (approximately +25% in tonnes). This growth was fostered by a greater diversification of sales to destinations outside of Europe, taking advantage of opportunities in the Tissue and Packaging segments and greater availability of pulp to market arising from less paper production in the second quarter.
However, the strong increase in volumes sold was not enough to mitigate the impact of the reduction in the average pulp selling price in the period, so revenue totalled 156 million euros, compared to 165 million euros in 2019 (-6%).
in 1,000 t 2020 2019 Var.
BEKP Output 1,364 1,426 -4.3% Aveiro 324 350 Figueira da Foz 573 586 Setúbal 468 490 BEKP Sales 394 314 25.6% Foex – BHKP Usd/t 680 855 -20.4% Foex – BHKP Eur/t 596 762 -21.8%
The tissue business evolved favourably in 2020, with sales in volume amounting to 106 thousand tonnes, which represents an increase of around 10% over the previous year.
Navigator’s tissue business was able to react positively to the opportunity provided by the peak in demand triggered by Covid-19 for the At Home products. This good performance compensated for drop in the Away from Home segment, which was affected by the Covid-19 pandemic. These products are largely directed to HORECA channels (Hotels, Restaurants and Cafés) and to companies, which were heavily affected by the lockdown measures implemented from mid-March. In the summer, this impact was particularly relevant due to the strong reduction of tourists in the Iberian Peninsula where Navigator places most of its sales to this segment.
The demand for tissue products was quite resilient and grew, even in an environment of economic downturn and during a pandemic. The demand for tissue in 2020, therefore, grew by 1.8% in Europe, despite the overall reduction in the Away from Home segment.
Navigator has made considerable industrial and commercial efforts during the year to meet the increased demand for At-Home products, having managed to increase sales of finished products by about 8%.
35 Consequently, Navigator’s tissue revenue grew around 7% to 141 million euros. The relative share of finished products fell slightly in relation to the previous year, recording 76% vs. 78%.
in 1,000 t 2020 2019 Var.
Reels Output 112.7 102.3 10.2% Output of finished products 79.5 72.8 9.2% Sales of reels and goods 25.9 21.1 22.5% Sales of finished products 80.1 74.5 7.5% Total sales of tissue 106.0 95.7 10.8%
In 2020, power sales totalled about 144 million euros, which represents a reduction of 10.6% year on year, even though total volume of sales in MWh registered marginal growth. The drop in the power sales in relation to 2019 was due essentially to the combination of the following factors:
(i) Various cogeneration assets became subject to a less favourable tariff system during the year, under the terms of Ministerial Order 140/2012 of 14 May, specifically the renewable cogeneration at the Setúbal pulp plant (TG3) in January, the combined-cycle natural gas cogeneration plant at Setúbal in April, and the renewable cogeneration at the Figueira pulp plant (TG4) in July;
(ii) The reduction in sales volumes at renewable cogeneration facilities deriving from lower production levels of pulp and paper due to the pandemic, especially in April and May. In addition, the natural gas combined-cycle plant at Setúbal operated with only one of the two gas generator groups in May;
(iii) A sharp drop in Brent 603 prices—used as the index for the sale of electrical energy—which fell from an average price of 67 USD/bbl in 2019 to 49 USD/bbl in 2020.
It should be noted that in the fourth quarter the new biomass boiler went into operation at the Figueira da Foz industrial complex, replacing the existing boiler and natural gas turbine that supply energy to the paper machines.
2020 was marked by a major overall cost control effort. It should be noted that extended team work has been put into reducing significantly specific consumption by taking advantage of the reduction in production rates, despite the instability arising from these shutdowns and changes in the pace of operations, and into the renegotiation of contracts for raw materials and consumables.
A significant containment in fixed costs could be observed over the year. These costs stood at around 47 million euros below the level recorded year on year (-15%), with a positive evolution in all fixed costs, but most especially by the reduction in operational costs, and particularly by the costs of corporate areas.
Therefore, the EBITDA for the year totalled 285.5 million euros, -23.3% compared to 2019, in a context of much lower pulp price in euros (-22%), smaller paper volumes due to the pandemic (-12%), and lower paper prices (-7%). EBITDA margin stood at 20.6%, 1.4 p.p. lower than that of 2019.
Navigator and the Government of Mozambique continue to work under the terms of the MoU signed in 2018, namely on conditions precedent in particular logistics matters related to the Macuze port. Wood harvesting operations were initiated on the Portucel Moçambique plantation in Manica, for export from the Beira port, which, among other objectives, will put Mozambique on the world map of this forestry-based industry. Three shiploads are currently planned for delivery in 2021, representing around 100,000 m3 of wood. In light of these developments, Navigator has revised its forecasts regarding the Mozambican market of eucalyptus wood, assessing the value of the forests in Manica and Zambézia at about 16.7 million euros.
36 ANNUAL REPORT 2020
The financial results amounted to -14.7 million euros (vs. -18.9 million euros in 2019), up by 4.2 million euros year on year, resulting from the positive variation of 1.6 million euros in foreign exchange hedging, a very positive variation of 3.3 million euros in interest on debts from the State, a 0.9 million euros variation in the current amount still to be received from the sale of the pellets business in 2018 and the receipt of 1.2 million euros in interest on amounts received in the course of the anti- dumping proceedings in the US.
On the other hand, the interest earned on financial investments continued its negative trend (-2.1 million euros) in comparison with the quite positive amounts earned in the same period of the previous year, and due to the negative impact of Covid-19 on the performance of the financial markets, despite the recovery underway. The costs of financing operations increased in turn by 1.2 million euros due to the increase in gross debt resulting from the contracting of surplus liquidity in the period to deal with the crisis, in spite of the year-on-year decrease of the average cost of funding.
It should be mentioned the effective tax rate reduction, resulting from a favourable resolution of the litigation with the State. Net profit in 2020 attributable to Navigator’s shareholders was 98.1 million euros.
In a year as adverse as 2020, Navigator once again demonstrated its strong capacity to generate cash flow, recording free cash flow of 233.5 million euros, the highest amount since 2014, comparing with 186 million euros in 2019. It should be noted that the year began with a Free Cash Flow generation of 15 million euros in the first quarter and that it was after the first impact of the pandemic that strong growth was evident: 99 million euros in the second quarter, 56 million euros in the third quarter, and 63 million euros in the fourth quarter. This was made possible by managing working capital very efficiently, combined with a strong capacity to collect customer balances and a careful supplier management policy, under which it extended payment periods in association with financial solutions offered to support the liquidity of its partners. There was also a generalised reduction in stocks, as well as a reduction in the amount of investments, another determinant factor.
Navigator decided to significantly review the investment plan projected for 2020, which was reduced from an estimated amount of 158 million euros to approximately 81 million euros. This amount includes mainly investments for the maintenance of production capacity and improved efficiencies. This also includes around 25 million euros in environmental projects, in particular the new biomass boiler in Figueira da Foz (22.2 million euros) and around 17 million euros in asset reconditioning projects.
37 3.2 CEMENT AND OTHER BUILDING MATERIALS BUSINESS UNIT
RE ENUE E T A 2020 2020 24% 29%
% of consolidated total % of consolidated total
HIGHLIGHTS IN 2020 (VS. 2019) REVENUE
• In 2020, Secil's accumulated revenue amounted to 451.0 511.0 million euros, 11.7% less than that in 2019, representing a 451.0 drop of 60 million euros.
• This negative change was due primarily to the strong exchange rate depreciation of some currencies against the Euro in the countries where Secil operates (particularly the Brazilian real and the Lebanese pound), and to the fact that Lebanon was classified as a hyperinflationary economy in 2020, resulting in the application of the IAS 29 -11.7% ▼ accounting standard. The combined effect of the variations in the exchange rates of the currencies of the various LL ON EURO countries and the implementation of IAS 29 had a negative 2019 2020 effect of about 93.2 million euros on Secil's revenue in the year.
REVENUE BREAKDOWN BY COUNTRY 44.0 4.2 451.0 16.4 76.2
310.1
▲ 2020 20 +4.8% -10.6% -73.9% -23.2% -55.4% -11.7% PORTUGAL BRAZIL LEBANON TUNISIA OTHERS 2020
MILLION EUROS 295.9 85.3 63.0 57.4 9.4 511.0 2019
Note: Others includes Angola and Others.
38 ANNUAL REPORT 2020
• EBITDA reached 123.6 million euros, which corresponds EBITDA to an increase of 16.4 million euros, compared to that EBITDA MG registered in the previous year (+15.3%), as a result of the 123.6 27.4% positive evolution in Portugal and Brazil. 107.2 21.0%
• It is worth mentioning that in 2020 Secil obtained capital gains on the sale of assets (+7 million euros), and the sale
of surplus CO2 licenses amounted to circa 3 million euros more than those sold in the same period of the previous year.
15.3% ▲
LL ON EURO 2019 2020
EBITDA BREAKDOWN BY COUNTRY
11.9 -0.8 123.6 20.8 3.2
88.5
▲ 2020 20 +45.4% +27.1% -79.7% -23.4% +47.7% +15.3% PORTUGAL BRAZIL LEBANON TUNISIA OTHERS 2020
MILLION EUROS 60.9 16.3 16.0 15.5 -1.5 107.2 2019
Note: Others includes Angola and Others.
Secil’s net financial results deteriorated from the same period in the previous year, from -24.1 million euros to -33.5 million euros. The negative effect resulted above all from adverse exchange rate differences (-13.7 million euros), mainly due to the depreciation of the Brazilian real on accounts receivable and payable in foreign currency for intra-group loans.
In 2020, because the Lebanese economy was considered hyperinflationary (three-year cumulative inflation rates exceeding 100%), the IAS 29 accounting standard was applied. The application of this standard, combined with the strong monetary devaluation of the Lebanese pound, from 1,507.5 USD-LBP to 8,400 USD-LBP led to Secil’s recognition of a Net Monetary Position gain of 13.9 million euros in its results.
Net profit attributable to Secil shareholders in 2020 totalled 46.5 million euros vis-à-vis 17.7 million euros in the previous year.
Secil recorded an investment value of 26.1 million euros in 2020, reflecting a decrease in the value of the investment compared to the previous year (42.6 million euros). This amount mainly includes investments related to the cement segment, with emphasis on investments of 6 million euros made in Brazil, which essentially include the crusher and conveyor belt.
39 LEADING BUSINESS INDICATORS
IFRS - accrued amounts (million euros) 2020 2019 Var.
Revenue 451.0 511.0 -11.7% EBITDA 123.6 107.2 15.3% EBITDA margin (%) 27.4% 21.0% 6.4 p.p. Depreciation, amortisation and impairment losses (53.1) (84.6) 37.3% Provisions (3.1) (4.1) 22.8% EBIT 67.4 18.5 265.0% EBIT margin (%) 14.9% 3.6% 11.3 p.p. Net financial results (33.5) (24.1) -38.7% Net monetary position 13.9 - - Profit before taxes 47.8 (5.7) 942.8% Income taxes 4.9 14.5 -66.2% Net profit for the period 52.7 8.8 500.0% Attributable to Secil shareholders 46.5 17.7 163.3% Attributable to non-controlling interests (NCI) 6.2 (8.9) 169.6% Cash flow 108.9 97.5 11.7% Free Cash Flow 118.8 32.2 269.2% 31/12/2020 31/12/2019 Equity (before NCI) 330.9 377.5 Interest-bearing net debt 272.6 358.0 Lease liabilities (IFRS 16) 25.2 26.4 Total 297.8 384.4
Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.
LEADING OPERATING INDICATORS in 1,000 t 2020 2019 Var.
Annual cement production capacity 9,750 9,750 0.0% Production Clinker 4,301 4,499 -4.4% Cement 4,990 5,360 -6.9% Sales Cement and Clinker Grey cement 4,652 5,060 -8.1% White cement 65 70 -8.2% Clinker 504 279 80.5% Other Building Materials Aggregates 3,048 3,605 -15.4% Precast 157 162 -3.0% Mortars 208 193 7.4% Hydraulic lime 17 16 5.5% in 1,000 m3 Ready-mix 1,803 1,743 3.4%
Note: Volumes excluding inter-segment sales.
40 ANNUAL REPORT 2020
PORTUGAL
REVENUE EBITDA EBITDA MG 310.1 295.9
88.5 60.9 28.5% 20.6%
4.8% ▲ 45.4% ▲
LL ON EURO LL ON EURO 2019 2020 2019 2020
KEY OPERATING INDICATORS
Unit 2020 2019 Var.
Clinker Production 1,000 t 1,778 1,815 -2.0% Cement Production 1,000 t 1,974 1,945 1.5% Cement and Clinker Sales* Internal Market 1,000 t 1,474 1,378 7.0% Exports** 1,000 t 678 864 -21.5% Total 1,000 t 2,152 2,242 -4.0% Ready-mix Sales* 1,000 m3 1,463 1,297 12.8% Aggregates Sales* 1,000 t 4,550 4,344 4.7% Mortars Sales* 1,000 t 235 224 5.0% Precast Sales* 1,000 t 122 126 -3.2%
Note: * - Sales volumes concern total sales of each business unit, do not exclude intragroup values. ** - Includes Terminal sales in the Netherlands, Cape Verde and Spain.
In Portugal, in accordance with estimates of AICCOPN and AECOPS, the construction sector should present a growth of 4.3% in GFCF. Cement consumption in Portugal during 2020 was marked by positive year-on-year monthly variations, and it is estimated that in cumulative terms, the market grew about 8.5% compared the same period of the previous year. The impact of the Covid-19 pandemic was felt only slightly in Portugal, since virtually all facilities maintained regular operations.
Revenue of combined operations in Portugal stood at 310.1 million euros, 4.8% more in relation to the same period in 2019.
Revenue in the Cement business unit in Portugal fell slightly (-1.4 million euros) from the same period in the previous year, due to lower sales volumes to the external market. The surplus supply in Europe, the Mediterranean and West Africa continued to drive strong competition. In this context, cement export revenue decreased around 8%, despite the increase in quantities sold (+4.6%).
On the other hand, Cement internal market revenue increased around 3.1% compared to 2019. This development is explained by the combined effect of the increase in quantities sold (+6.3%) and the variation in average selling prices.
41 In the other business segments with operations based in Portugal (Ready-mix concrete, Aggregates, Mortars and Precast), revenue in 2020 amounted to 142.1 million euros, up by 12.3% year on year.
This growth occurred in all areas of building materials, benefiting from greater building dynamics, and it was higher in the Concrete business unit, which recorded 7.8% more sales volume.
EBITDA of total operations in Portugal increased by 45.4%, standing at 88.5 million euros vs. 60.9 million euros registered in 2019.
EBITDA of the Cement business unit increased 58.4% vis-à-vis the previous year. The increase in sales volumes on the internal market together with the reduction in variable costs, namely energy costs, and capital gains obtained from the sale of financial investments (+5.2 million euros) contributed positively to this variation, as did the sale of surplus CO2 licenses, which amounted to approximately 3 million euros more year on year.
EBITDA of other building material business units increased by 10.6%. The upward variation was the result of the increase in revenue, despite the rise in variable production costs due to lower availability of ashes in the Concrete segment, and also the recording of capital gains on the sale of fixed assets (land) in the Pre-cast and Aggregates segment, which together represented 1.2 million euros.
BRAZIL
REVENUE (EUR) EBITDA (EUR) EBITDA MG 85.3 76.2
20.8 16.3 27.2% 19.1%
-10.6% ▼ 27.1% ▲
LL ON EURO LL ON EURO 2019 2020 2019 2020
REVENUE (BRL) EBITDA (BRL) EBITDA MG 450
377
122 72 27.2% 19.1%
19.4% ▲ 69.7% ▲
LL ON RL LL ON RL 2019 2020 2019 2020
Note: Average exchange rate EUR-BRL 2019 = 4.4149 / Average exchange rate EUR-BRL 2020 = 5.8978
42 ANNUAL REPORT 2020
KEY OPERATING INDICATORS
Unit 2020 2019 Var.
Clinker Production 1,000 t 1,077 1,081 -0.4% Cement Production 1,000 t 1,586 1,458 8.8% Cement and Clinker Sales* Internal Market 1,000 t 1,560 1,442 8.1% Exports 1,000 t 32 16 92.1% Total 1,000 t 1,591 1,459 9.1% Ready-mix Sales* 1,000 m3 180 232 -22.6%
Note: * - Sales volumes concern total sales of each business unit, do not exclude intragroup values.
According to SNIC estimates (Sector Report - December 2020), cement consumption in Brazil in 2020 increased by 10.7% over that in 2019.
Revenue of combined operations in the country stood at 76.2 million euros in 2020, down by 10.6% from revenue recorded in the same period in 2019. However, discounting the effect of the exchange rate devaluation of the Real against the Euro, with a negative impact of around 25.6 million euros, revenue would have been higher by 16.5 million euros (+19%).
Cement sales to the internal market increased by 8.1% in comparison with 2019, with average sales prices falling 14.5% (contrary to the variation in local currency, which was positive by around 17%).
The EBITDA of activities in Brazil totalled 20.8 million euros, which compares with the 16.3 million euros recorded year on year (i.e. 27.1% increase). It should be noted that EBITDA for 2019 included a gain of 3.4 million euros from sales tax refunds. If we exclude this effect, and the very unfavourable exchange rate effect (-7 million euros), EBITDA would have increased by 114%, reflecting the good performance of commercial activity and the reduction in production costs.
LEBANON
REVENUE (EUR) EBITDA (EUR) EBITDA MG 63.0
16.0 16.4 25.3% 3.2 19.7%
-73.9% ▼ -79.7% ▼
LL ON EURO LL ON EURO 2019 2020 2019 2020
43 REVENUE (LBP) EBITDA (LBP) EBITDA MG 169,301
106,338
26,931 33,396 19.7% 25.3%
59.2% ▲ 24% ▲
LL ON L P LL ON L P 2019 2020 2019 2020
Note: Average exchange rate EUR-LBP 2019 = 1,687.6 / Average exchange rate EUR-LBP 2020 = 10,307.6
KEY OPERATING INDICATORS
Unit 2020 2019 Var.
Clinker Production 1,000 t 742 652 13.8% Cement Production 1,000 t 705 809 -12.8% Cement and Clinker Sales* Internal Market 1,000 t 740 801 -7.6% Exports 1,000 t 171 0 ----- Total 1,000 t 911 801 13.8% Ready-mix Sales* 1,000 m3 51 81 -37.2% Precast Sales* 1,000 t 35 32 10.5%
Note: * - Sales volumes concern total sales of each business unit, do not exclude intragroup values. Lebanon is plunged in a serious social and economic-financial crisis. Despite the efforts made by political forces to stabilise the situation, the outbreak of the Covid-19 pandemic and the explosion in the Beirut port in August aggravated further an already precarious situation. The effects of the pandemic were felt sharply from mid-March onwards, with the publication of a presidential decree banning industrial activities, excluding the food industry.
In this context, cement consumption was expected to continue to decrease. However, the magnitude of the reduction exceeded all expectations. In fact, cement consumption in 2020 is estimated to have dropped 37% in relation to 2019, which had already declined 32% vis-à-vis 2018.
Therefore, the revenue of all operations in Lebanon fell by 73.9% to 16.4 million euros, in contrast to 63 million euros in the previous year. This change is the result of the sharp foreign exchange depreciation (the Lebanese pound ended the year at 8,400 LBP per 1 USD, versus 1,507.5 LBP per 1 USD in the beginning of the year), and of the application of IAS 29 (hyperinflation), which had an overall effect of 64.4 million euros. This decrease was partially offset by the sharp rise in the average selling price of cement in local currency, consequence of the inflationary environment the country is going through, plus the increase in export of clinker from Lebanon to external markets.
Cement sales to the internal market decreased 6.9% over the previous year, and revenue was down by 73.0%, mainly due to the high foreign exchange rate devaluation of the Lebanese pound, the effects of which were partially offset by the price increases in local currency.
Concrete revenue dropped significantly year on year (-84.9%), due to the monetary devaluation and the reduction in volumes sold (-37.2%), reflecting the fact that the construction sector was one of the most impacted by the current crisis.
44 ANNUAL REPORT 2020
EBITDA from operations in Lebanon stood at 3.2 million euros, down by 79.7% in relation to the previous year. The decrease is mainly due to lower quantities sold, the impact of the exchange rate devaluation of the Lebanese pound recorded on purchases of goods and services in foreign currency, partially offset by the increase in average sales prices in the local currency and measures to contain fixed and variable costs.
TUNISIA
REVENUE (EUR) EBITDA (EUR) EBITDA MG 57.4
44.0
15.5 27.0% 11.9 27.0%
-23.2% ▼ -23.4% ▼
LL ON EURO LL ON EURO 2019 2020 2019 2020
REVENUE (TND) EBITDA (TND) EBITDA MG 188
141
51 27.0% 38 27.0%
-25.2% ▼ -25.3% ▼
LL ON TN LL ON TN 2019 2020 2019 2020
Note: Average exchange rate EUR-TND 2019 = 3.2820 / Average exchange rate EUR-TND 2020 = 3.1998
KEY OPERATING INDICATORS
Unit 2020 2019 Var.
Clinker Production 1,000 t 705 951 -25.9% Cement and Lime Production 1,000 t 656 1,041 -37.0% Cement and Clinker Sales* Internal Market 1,000 t 567 805 -29.5% Exports 1,000 t 226 364 -37.9% Total 1,000 t 793 1,169 -32.1% Ready-mix Sales* 1,000 m3 109 133 -18.1% Precast Sales* 1,000 t 0 4 -100.0%
Note: * - Sales volumes concern total sales of each business unit, do not exclude intragroup values.
45 Tunisia is still facing significant challenges, including high external and fiscal deficits, rising debt and insufficient growth to reduce unemployment. Some social unrest and pressure from union claims continue. Government deficit is reflected in public works and the real estate sector faces challenges due to difficulties in obtaining funding (in connection with the fragility of the banking sector), which impacts construction output.
The measures imposed by the government to contain the Covid-19 pandemic from spreading practically paralysed the country’s economic activity from mid-March to early May, and construction activity was no exception.
In this context, it is estimated that the internal cement market was down by approximately 10% in relation to 2019. The cement market is still subject to strong competition, due to excess installed capacity.
Revenue for combined operations in Tunisia showed a negative year-on-year variation of 23.2%, totalling 44.0 million euros and benefitted from a positive impact of the appreciation of the Tunisian dinar against the Euro by 1.1 million euros.
Revenue of the Cement business decreased around 24.7% to 39.1 million euros, reflecting the decline in cement sales in the internal market (-30.3%), and in the external market (-44.4%). The positive variation in average sales prices in euros on the internal market (+5.5%) made it possible to mitigate the decrease in revenue.
Subsequently, the EBITDA from operations in Tunisia amounted to 11.9 million euros, which, compared to the 15.5 million euro figure in 2019, fell 23.4%. The positive effects of the reduction of fixed and variable costs (in particular lower solid fuel costs) must be underscored.
ANGOLA AND OTHERS
KEY OPERATING INDICATORS
Unit 2020 2019 Var.
Cement Production 1,000 t 67 107 -37.6% Cement and Clinker Sales* 1,000 t 68 107 -36.5%
Note: * - Sales volumes concern total sales of each business unit, do not exclude intragroup values.
It is estimated that, according to the latest figures available, the Angolan cement market was down by 28% compared to 2019. The efforts to contain the spread of the coronavirus may have contributed to the worsening of the economic situation, which had already been affected by the drop in oil prices since the beginning of the year.
In this context, the volume of cement sold fell 36.5% in comparison to sales in 2019. In a context of strong inflation and significant depreciation of the Kwanza vis-à-vis the Euro, Secil has been implementing a strict price policy that can help it tackle significant increase in costs in the national currency and those arising from necessary imports. Under these conditions, the price of cement in local currency increased by about 16.8% year on year, partially offsetting the fall in quantities sold.
Consequently, revenue totalled 4.2 million euros, i.e. 55.4% below that of the previous year, and was strongly affected by the currency depreciation, which had a negative effect of 2.7 million euros.
EBITDA in 2020 amounted to a negative figure of 0.8 million euros, which despite all else, in contrast with the negative 1.5 million euros recorded over the same period in the previous year, represents a favourable trend.
46 ANNUAL REPORT 2020
3.3 ENVIRONMENT BUSINESS UNIT
RE ENUE E T A 2020 2020 2% 2%
% of consolidated total % of consolidated total
HIGHLIGHTS IN 2020 (VS. 2019) REVENUE
• ETSA recorded revenue of approximately 31.4 million 30.3 31.4 euros in 2020, up by around 3.7% against the previous year.
3.7% ▲
LL ON EURO 2019 2020
EBITDA EBITDA MG • EBITDA for ETSA totalled approximately 10.1 million euros 10.1 in 2020, representing a growth of about 30.3% compared 32.2% to 2019, essentially due to a higher revenue, which in turn 7.8 reflects an improvement in fat and meal price conditions 25.7% on the market and tightly managed costs under the main items.
30.3% ▲
LL ON EURO 2019 2020
47 LEADING BUSINESS INDICATORS
IFRS - accrued amounts (million euros) 2020 2019 Var.
Revenue 31.4 30.3 3.7% EBITDA 10.1 7.8 30.3% EBITDA margin (%) 32.2% 25.7% 6.6 p.p. Depreciation, amortisation and impairment losses (3.1) (3.0) -3.0% Provisions - (0.0) 100.0% EBIT 7.0 4.7 48.5% EBIT margin (%) 22.2% 15.5% 6.7 p.p. Net financial results (0.3) (0.3) 19.9% Profit before taxes 6.7 4.4 53.5% Income taxes (1.3) (0.6) -123.3% Net profit for the period 5.4 3.8 42.5% Attributable to ETSA shareholders 5.4 3.8 42.5% Attributable to non-controlling interests (NCI) - - - Cash flow 8.5 6.8 24.5% Free Cash Flow 6.8 5.9 15.7% 31/12/2020 31/12/2019 Equity (before NCI) 78.7 73.9 Interest-bearing net debt -0.5 5.7 Lease liabilities (IFRS 16) 1.9 1.7 Total 1.4 7.4
Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.
KEY OPERATING INDICATORS
Unit 2020 2019 Var.
Collection of raw materials - Animal waste (categories 1, 2 and 3) 1,000 t 121.4 122.1 -0.6% Sales - Animal fats and used food oil 1,000 t 10.3 18.6 -44.5% Sales - Meal (categories 2 and 3) 1,000 t 21.6 22.1 -2.4%
OVERVIEW OF THE ENVIRONMENT ACTIVITY
ETSA revenues were around 31.4 million euros in 2020, which was about 3.7% higher than in the previous year.
This variation resulted from growth of about 10.7% in consolidated services rendered, essentially due to (i) a 4.1% increase in quantities of Class I received, (ii) a 1.0% increase in quantities of Class II received, (iii) a 12.8% increase in quantities of blood collected and (iv) a 4.3% increase in quantities received through the services for collection of animals on farms.
Sales fell by 1.6% face in relation to the previous year, essentially due to (i) the 8.3% drop in sales of Class 3 meal, (ii) the 20.6% drop in sales of Class 3 fat, a difference explained basically by the sales of stock in 2019, (iii) the 39.9% drop in amounts sold of Class I fat, and (iii) the 26.3% drop in sales of used cooking oils. This effect was partially offset (i) by the 5.4% increase in the quantities of blood meal sold and (ii) by the 10.3% increase in the quantities of fish sold.
48 ANNUAL REPORT 2020
The aforementioned reduction in quantities sold was partly offset by the following: (i) the increase in selling prices for Class 3 meal, essentially due to the increased price of substitute products such as soy meal, (ii) the increase in selling prices of Class 3 fat, essentially due to the increased price of substitute products such as soy oil and palm oil, and (iii) the increase in the quantities and average price of farm animal collection services, the latter being basically explained by the mix of types involved in the service.
EBITDA for ETSA totalled approximately 10.1 million euros in 2020, representing a growth of about 30.3% in comparison with 2019, largely due to a higher revenue and tightly managed costs under the main items, including (i) the lowering of costs for thermal fuels, due to increased process efficiency and the drop in the corresponding purchase price, and (ii) the lower cost of energy and fluids, supported by the reduction in the fleet costs with diesel. EBITDA margin stood at 32.2%, up by around 6.6 p.p. over the margin for the same period of 2019.
Financial results improved by about 19.9% in relation to previous year, mostly due to the reduction in average debt.
The combined impact of these factors resulted in a Net profit attributable to the ETSA shareholders in 2020 of approximately 5.4 million euros, an increase of around 42.5% compared to the previous year.
ETSA recorded an investment value of 2.1 million euros in 2020.
3.4 VENTURE CAPITAL BUSINESS UNIT
In 2020, Semapa Next, the Group’s venture capital business unit, made its first direct investment, participating in the investment round of DefinedCrowd Series B, a company dedicated to improving the performance of artificial intelligence systems through the collection, structuring and enrichment of data and whose customers portfolio include Amazon, Apple and Microsoft, among others.
Also in this period, Semapa Next concluded its second acceleration program in partnership with Techstars, supporting and investing in ten start-ups from all over the world that benefited from the Group’s know-how and expertise to accelerate and scale their ideas.
Additionally, we also highlight innovation initiatives, namely the Pathfinder partnership with Techstars and the active participation (with the Semapa Group) in the Global Sustainability Challenge aimed at finding and helping start-ups that are developing technologies in the supply chain area, with special emphasis on data & automation and new materials.
49 4. SEMAPA GROUP – FINANCIAL AREA
4.1 INDEBTEDNESS
NET DEBT
1,471 2 1,216
2 715 680 2 2 2 358 392 273 263 5.7 -0.5
-35 -85 -6.2 -128 -255 PULP AND PAPER CEMENT ENVIRONMENT HOLDINGS SEMAPA
LL ON EURO 2019 2020 NET DEBT + IFRS16
On 31 December 2020, consolidated net debt stood at 1,215.5 million euros, representing a reduction of around 255.1 million euros over the figure ascertained at the close of 2019. Including the effect of IFRS 16, net debt would have been 1,295.9 million euros, 250 million euros below the figure at the end of 2019.
In the context of the Covid-19 crisis, the Group was still very focused on optimising cash generation, with particular emphasis on actively reducing costs and on optimising the working capital and Capex, which generated Free Cash Flow of 345.4 million euros (vs. 207.2 million euros in 2019). The following are the changes in net debt compared to year-end 2019 by business unit:
• Pulp and paper: -35.2 million euros, resulting from an efficient management of the working capital and capex, including investments of about 80.6 million euros and the distribution of 99 million euros in reserves in January and 99 million euros in December. The partial reimbursement made to Navigator in the USA for anti-dumping payments (17.6 million euros) is worth highlighting, which resulted from decisions made by US authorities;
• Cement: -85.4 million euros, including the refund of 19.7 million euros in supplementary payments to Semapa, the release of operating working capital, investments made of approximately 26.1 million euros, the result of sale of financial investments of 9.5 million euros and the foreign exchange rate devaluation of the Brazilian real, which did not offset the negative effect of the Lebanese pound depreciation that reduced the amount in euros of the cash position;
• Environment: -6.2 million euros, in spite of the difficulty in collecting the amounts billed to the Government; and,
• Holdings: -128.3 million euros, resulting namely from reserves received from Navigator (138.7 million euros) and supplementary payments from Secil (19.7 million euros) and the payment of dividends (10.0 million euros), plus the acquisition of own shares (7.0 million euros).
On 31 December 2020, total consolidated cash amounted to 444.8 million euros, in addition to 777 million euros in contracted and unused credit lines for the Group, thus ensuring strong liquidity in this uncertain moment.
50 ANNUAL REPORT 2020
4.2 FINANCIAL RESULTS
In 2020 financial results amounted to a negative figure of 58.9 million euros, representing a deterioration by 8.4% in relation to the figure recorded in the previous year.
The following factors that affected the variation in the financial results stand out:
• Unfavourable foreign exchange differences decreased 25.0 million euros compared to 2019 (-30.3 million euros in 2020 vs. -5.3 million euros in 2019). This item essentially records the effects of exchange rate variations in the loans in USD and Euros of Secil Brazil, due to the depreciation of the Brazilian real against the referred currencies, as well as the strong depreciation of the Lebanese pound;
• Gains from derivative instruments recorded a positive variation of 14.8 million euros compared to 2019 due to the effect of derivatives associated with Secil Brazil’s loans mentioned above;
• The year 2019 contained an impairment in the amount of 4.1 million euros, under IFRS 9, on cash and equivalents of Lebanon which reflected the rating and the risk of the Lebanese financial system.
4.3 RISK MANAGEMENT
Details of risk management may be consulted in the relevant section of the Notes to the Consolidated Financial Statements of the Semapa Group.
4.4 DIVIDENDS
In June 2020 Semapa distributed dividends with a total value of 10.0 million euros, corresponding to 0.125 euros per share.
On 9 January 2020 Navigator distributed free reserves with a total value of 99.1 million euros, corresponding to gross figure of 0.1394 euros/share. Additionally, at the end of November, the Company held an Extraordinary General Meeting to approve the proposal to pay reserves recorded as retained profit. This amount totalled 99.1 million euros, equivalent to 0.1394/share, which was paid on 10 December 2020. Thus, the total amount paid to its shareholders in 2020 was 0.2788 euros gross per share, or about 198.2 million euros.
In June 2020, ETSA paid dividends totalling 0.6 million euros.
4.5 NET PROFIT
Net profit attributable to Semapa shareholders was 106.6 million euros, which represents a decrease of 17.5 million euros compared to the previous year. The Net Profit variation of 2020 is due essentially to the combined effect of the following factors:
• Reduction in EBITDA of 67.5 million euros: an improvement in EBITDA from Cement and Other Building Materials (+16.4 million euros) and Environment (+2.3 million euros), which did not manage to offset the reduction of 86.6 million euros from the Pulp and Paper business segment;
• A reduction in depreciation, amortisation and impairment losses of 27.2 million euros;
• Provisions increase of 1.4 million euros;
• A deterioration in net financial results by about 4.5 million euros, reflecting in particular the negative exchange rate effects on Secil (Brazilian real);
• Gain of 13.9 million euros in the net monetary position that stems from the fact that Lebanon’s economy was considered hyperinflationary in 2020 (cumulative inflation rate over three years exceeds 100%). The gain results from the implementation of the IAS 29 accounting standard combined with the strong depreciation of the Lebanese pound, from 1,507.5 USD-LBP to 8,400 USD-LBP;
• Decrease of about 11.9 million euros in income taxes.
51 5. SUSTAINABILITY IN THE BUSINESS UNITS
Without prejudice of the Sustainability Report which will be published, it should be underscored that sustainability is a fundamental pillar of Semapa Group operations.
The Semapa Group is governed by a set of Criteria for Sustainable Action that are described in its Letter of Commitment. All companies in the Group subscribe to and undertake to comply with this Letter, in addition to each of them adhering to other commitments, such as the United Nations Global Compact (Semapa), the Charter of Principles of the BCSD - Business Council for Sustainable Development Portugal - (Navigator and Secil), and Letter of Commitments of the Global Cement and Concrete Association (Secil).
Semapa has its own Sustainability Governance structure, thereby seeking to reinforce the work that its subsidiaries already perform and to lend more coherence to Group activities.
With sustainability management functions from the strategical viewpoint at the Group level, the Sustainability Committee is responsible for the development and execution of sustainability initiatives. At the operational level, the Committee is made up of a set of Working Groups, where the various sustainability transversal themes are developed, focusing on aggregating and aligning the efforts from all Group companies.
These groups aim at enhancing synergies between Semapa Group companies through collaboration in joint projects and initiatives in each of these areas. Each group functions independently under the leadership of their coordinators.
More than just sharing best practices in the Group, the Working Groups aim to develop joint guidelines for the various priority areas in order to establish Semapa’s positioning in relation to them.
PAPER AND PULP BUSINESS UNIT
In 2020, Navigator finished developing the 2030 Responsible Agenda, which seeks to respond to the material issues for the future of the Company that were drawn from the vast process of listening to stakeholders and in the internal reflection carried out. This Agenda is part of the 2030 Sustainability Roadmap, a set of commitments, objectives and targets to be achieved for the key issues that Navigator has elected for the period 2020-2030.
In 2020, Navigator continued to work towards achieving the goal of carbon neutrality at its industrial plants by 2035, a commitment it made in 2019, that anticipates national and European targets by 15 years. To achieve this, Navigator has drawn up a Roadmap to Carbon Neutrality, which is governed by four objectives: to achieve 100% electricity production from renewable sources; to reduce fossil CO2 emissions by replacing technologies; to cut specific energy consumption by 10% until 2025 (based on the 2015 figures); and to offset non-eliminable emissions.
The completion of the new biomass boiler in Figueira da Foz was another meaningful step in this strategy. From the moment it went into operation at the end of 2020, the new equipment made it possible to shut down natural gas boilers and combined cycle power plants. In addition, by as early as 2021, it will help reduce annual fossil CO2 emissions by about 200 thousand tonnes - equivalent to 32% of Navigator’s emissions and more than a third of the way towards its target in 2035.
Thanks to the new boiler, which involved an investment of 55 million euros (included in an overall investment of 154 million euros, divided between the Setúbal, Figueira da Foz, and Aveiro plants), the Figueira da Foz unit is now 100% renewable when it comes to producing electricity.
The year 2020 is also marked by the attribution, for the second consecutive time, of the CDP A Rating (Disclosure Insight Action, formerly Carbon Disclosure Project), which is achieved by only 3% of the companies that this international non-profit entity rates every year worldwide.
52 ANNUAL REPORT 2020
Emission reduction, lower climate risks and the low-carbon economy developed by Navigator are why CDP placed the Company among the 300 world leaders in the fight against climate change.
FORESTRY AND TIMBER SUPPLY
The year 2020, with all of its particularities, set a record for forestation in the history of Navigator’s forestry operations over the past decades, with a total of 3,767 hectares of installed area.
The Company intends to lead by example within the European strategy for decarbonisation, the fight against climate change, the defence of biodiversity and economic recovery, by planting more resilient and productive forests, an essential carbon sink, with intervention in the protection of soil, water and services in the ecosystems.
The global managed area, from North to South of the country, decreased this year by less than 1%, totalling 107,370 hectares (55% owned and the rest leased), mainly as a result of lease contracts that came to an end and were not immediately renewed.
Continuing with Navigator’s commitment to encourage certification of its raw materials supplied by domestic producers and to increase the amount of certified wood delivered to its plants, in 2020 this figure had risen from 72 to 74 percent, imports included.
Navigator’s management model is certified since 2007 and the wood produced on land owned or managed by it is 100% certified by the FSC® and PEFC™ systems thanks to the best practices used.
Although only a small part of the total area in Portugal is certified forest management (about 14% of the total), the Company continues to value the purchase of domestic certified wood, which accounted for 61% (1,419,311 cubic meters) of the total domestic raw material purchased this year, compared to 51.5% in 2019.
The number of suppliers of wood from FSC® and/or PEFC™ certified forests accounted for 72% of the total.
Navigator has an active forest defence policy. Since the commitment to prevention is decisive for preventing fire hazards, different types of intervention carried out in the year - maintenance of paths and fire breaks, clearing of undergrowth, reduction of the fuel load and creation of buffer zones - have made the forest stands more resilient to fire. In 2020 Navigator invested 4.3 million euros in prevention and fire-fighting actions, 200 thousand euros more than in the previous year.
This year, AFOCELCA (a complementary support and wild fire fighting group, made up of Navigator and Altri) relied on the efforts of more than 400 operatives, present in all District Commands of Rescue Operations during the most critical period, and an operational structure on the ground with 3 helicopters, 3 helicopter brigades, 17 first responder units, 29 semi-heavy combat units and 6 teams of tracked machines. Furthermore, 48 experts from Navigator’s Forestry Management Division helped to monitor and manage occurrences.
CEMENT AND OTHER BUILDING MATERIALS BUSINESS UNIT
Sustainability is integrated in Secil’s various management levels, so that the industrial operation is articulated with environmental protection and social responsibility. After the materiality process was concluded, Secil began to devise a plan for the future, in line with the Climate Ambition Statement of the Global Cement and Concrete Association (GCCA), and established a set of 10 commitments it hopes to meet by 2030.
This Plan addresses further the carbon neutrality roadmap of Cembureau - the European Cement Association - and the 2050 Carbon Neutrality Roadmap of Portugal, and it seeks to address the material issues raised by its stakeholders, in addition to the areas on which the sector is focusing overall, laid down in the Commitments Letter of the Global Cement and Concrete Association (GCCA), while providing support to the fulfilment the UN Sustainable Development Goals. Secil is currently working on the Group’s targets, based on the commitments in the different locations to set internal sustainability objectives that it will include in its strategic outlook for 2025 and prepare a roadmap with clear set target for 2030.
53 Secil has a number of quality, environmental and safety certifications in various units of its operations and is aligned with international and national guidelines and commitments in sustainability matters, issued by institutions such as Cembureau - European Cement Association, GCCA - Global Cement and Concrete Association, ATIC - Technical Association of the Cement Industry, GRACE - Action and Reflection Group for Corporate Citizenship and BCSD Portugal, of which Secil is an associate member.
As a result of these alignments, Secil is carrying out investments and developing projects to reduce the carbon intensity of its activity and to incorporate circular economy into its business model, using innovative equipment and technologies and research and development of innovative solutions for the use of concrete. On the one hand, the goal is to reduce the carbon intensity of clinker production, with greater use of alternative fuels to replace fossil fuels, improve energy efficiency, and promote greater use of renewable energy sources. On the other hand, it is necessary to increase the production rate of compound cements by incorporating secondary raw materials with less carbon and producing concrete with less cement incorporated.
Efficient management of natural resources, improved energy efficiency, replacement of fossil fuels by alternative fuels, incorporating secondary raw materials into its production process, and promoting biodiversity in the environmental recovery of quarries where it operates are some of the best practices that Secil has been consistently pursuing over the years on the road to sustainability.
ENVIRONMENT BUSINESS UNIT
The year 2020 is marked by the announcement of ETSA’s Carbon Roadmap in which ETSA outlined a plan to reduce CO2 emissions by 15% until 2025, which requires an investment of about 2 million euros, of which we highlight:
• Replacing fuel oil with natural gas burners (28% reduction of CO2 emissions);
• Installation of three photovoltaic panel plants (for 20% of electricity produced by renewable sources);
• Installation of wood chip drying system (reducing fuel consumption by around 20%);
• Optimisation of burning process and improvement of the heat recovery in the biomass boiler of Coruche (10% reduction in fuel consumption);
• Replacement of three trucks with new LNG models and the use of gigaliner trucks (5% reduction in CO2 emissions).
ETSA’s operations focus on the recycling of food industry by-products, thus avoiding having to deposit them in a landfill and contributing to circular economy (food loss and waste control).
These activities are conducted with state-of-the-art technologies to ensure that the environment is protected and resources are used rationally, such as fuel and water. ETSA uses biomass as thermal fuel in all of its plants, replacing fossil fuels, and it has invested continuously in the optimisation of its steam production processes. In Coruche investment is being made to improve thermal and environmental performance. To optimise the continuous combustion process of its biomass boiler installed in the plant in Loures, the installation of equipment for the dehydration of biomass is underway, which will result in lower consumption of this fuel and, consequently, reduce CO2 emissions.
ETSA is also investing in the implementation of new industry technologies with 4.0 Industry that will allow for better control of processes and operations and, ultimately, to optimize the use of raw materials and fuels. Several ETSA companies hold ISCC certification, which guarantees sustainability and the reduction of greenhouse gas emissions in the biodiesel production process.
Furthermore, ETSA has entered into cooperation protocols with QUERCUS – Associação Nacional de Conservação da Natureza and ZERO – Associação Sistema Terrestre Sustentável for environmental protection and sustainability.
54 ANNUAL REPORT 2020
6. INNOVATION, RESEARCH AND DEVELOPMENT
Semapa focuses on sustained innovation and research and development addressed at ensuring new profit thresholds for the business, while helping to improve the efficiency of processes and to produce innovative products with less impact. This alignment is common to all of the Group’s business segments, which have their own R&D areas to ensure the production of scientific and technological knowledge and guarantee competitiveness in the different sectors.
At Navigator, this was the first year of implementation of the Strategic Plan 2020-2024 of the RAIZ - Instituto de Investigação da Floresta e do Papel (Forest and Paper Research Institute), the private, non-profit research centre, mostly funded by Navigator. The budget of 5.6 million euros was fully executed. In spite of the difficulties caused by Covid-19, the key targets for the year were met, and 15% of the targets were postponed to 2021.
Since field work in the forest was limited by the lockdown, the year involved greater focus on Navigator’s core business - Forestry, Industry, Product -, all the while monitoring and investing in short and medium-term topics of the future, such as climate change, new fibre uses (including packaging), and bio-economy and bioproducts.
The year 2020 was also one of recognition of RAIZ, as a result of several dissemination projects approved and the launch of a new platform for sharing scientific knowledge about national forest ecosystems (Florestas.pt).
Among the new product research carried out by RAIZ in 2020, Amoos AquactiveTM, a tissue paper with soap, is worth mentioning. It seeks to help consumers in their personal and surface hygiene routines. Developed under the HIGIA project under the programme Portugal 2020, it allowed the Company to launch a product that combines the power of soap with the high resistance and absorption of paper in order to simplify the daily cleaning and hygiene tasks, of the utmost importance in the current health emergency situation.
Secil, on the other hand, is responding to the challenges of decarbonisation and circular economy by finding innovative solutions for producing Clinker with less carbon emissions, maintaining the strength and durability characteristics of this intermediate product in the manufacturing of cement. Lowering the carbon incorporated in Clinker and reducing specific energy consumption per tonne produced is possible by incorporating, in the final cooling phase, new materials - such as clays or fly ash, which are calcined by the Clinker at high temperature, without consuming more energy or producing more CO2 emissions.
In this process, products from other industrial sectors, such as clay or ashes from thermal power plants, are being used, thus reinforcing the circularity of the economy and reducing the environmental impacts of other end-of-life treatments.
Secil has conducted very satisfactory tests to product viability, from lab to concrete mortar uses. This project also has the economic advantage of requiring very little investment in the current facilities, which can produce both Low Carbon Clinker and traditional Clinker, simultaneously.
In 2020, ETSA maintained its focus on Research and Development, starting new lines of work and deepening existing ones, thus leading to a strengthening of its partnership relationship with various entities of the National Scientific and Technological System and Collaborative Laboratories, particularly in the field of Biotechnology, Chemical Technology and Agri-Food.
55 The first Research and Development project led by ETSA and financed by the Programme Portugal 2020, the MOREPEP project has reached its conclusion and a long session for announcing the Results was held in July 2020. This project resulted in excellent outputs, not only for the publication of several scientific papers, submission of a patent application and hiring of new employees, but also because it generated innovative knowledge that materialised in the submission and approval of an industrialisation project, Productive Innovation, also financed by Portugal 2020.
This year all of the necessary documentation for the building and industrial operations licenses have been submitted. This new industrial unit, called ETSAProHy, will materialise in the implementation of an innovative technological process developed at ETSA to produce three new animal feed products of high added value for the animal feed markets. Following this line of action still, ETSA is working on the upgrade of this product to be used in human feed.
Furthermore in 2020, in order to create a pipeline of innovative products in its business unit, ETSA created and strengthened new lines of innovation work related to the production of new proteins and fats for animal feed, either from insects or from fish by-products.
Additionally, we highlight innovation initiatives across the whole Group, namely the Pathfinder partnership with Techstars and the active participation in the Global Sustainability Challenge with the objective of finding and helping start-ups that are developing technologies in the supply chain area, with special emphasis on data & automation and new materials.
56 ANNUAL REPORT 2020
7. HUMAN CAPITAL AND TALENT
Human Capital is one of Semapa Group’s most important assets, with a universe of almost 6 thousand employees. Therefore, their development and growth have for long been a priority of the Group companies. Investment in training and capacity building are Semapa’s tools for preparing its employees for the businesses’ current and future needs. Similarly, the design and planning of their careers, the definition of short- and medium-term objectives, and performance assessment are the way to manage the progress of employees, according to their aspirations and in line with the Group’s needs.
This topic is dealt with by the Group’s Talent Committee, the holding Company’s entity where policies, projects, and initiatives concerning the Semapa Group’s Talent Management are addressed and discussed. This is a purpose that strengthens the position of the Semapa Group for attracting, developing, compensating and retaining, at all times, the best professionals in the knowledge areas it needs, enabling it to offer experiences / career paths in the various companies that make up the Semapa Group.
In this context, the following are some of the key initiatives conducted in 2020.
TALENT MANAGEMENT
In order to enhance the knowledge of the Group’s potential and talent at the level of 1st line managers of the holding Company and subsidiaries, as well as other critical positions, two structural initiatives were carried out with all of the Group’s companies, which will be monitored in the years to come:
• Mapping of the Directors with the compilation of the relevant professional information, using the 9 Box methodology;
• Annual Talent Review, when the Talent Committee of Semapa, together with the CEOs of the Group, analysed the information and projected the progress of every Director of the individual companies.
SUCCESSION PLANS
Still in 2020, a plan of potential successors to the key management positions of the Group was drawn up. This structuring initiative allows the Group to ensure that it has the Managers it needs to guarantee the future of the critical areas in each of the Group’s companies.
This is an initiative that is meant to be incorporated in the Group’s Talent Management Model, with annual updates and concrete development actions that are appropriate for the project’s main objective: to generate successors and ensure the future of the Group’s governance.
DEVELOPMENT
After the Leadership Development Exercise (Assessment) that began in 2019 and was completed in 2020, each of the Group Executives received a Report that described their strengths and areas for improvement. These latter were in some cases taken into account in the definition of the Individual Objectives for 2020.
The Leadership Development Exercise also produced a report by company, to help analyse possible areas of development of competences in each company.
57 Also in the context of Employee development and in addition to the personal training provided, it should be noted that customized training was provided during the year to the Semapa Group and several conferences were held as part of the Semapa Talks initiative, namely:
• “1st SingularityU Portugal’s Online Custom Program”, a management training programme designed and customised for the Semapa group that lasted for 4 days;
• Minnie Freudenthal: In the area of Neuroscience;
• Institute of Molecular Medicine: Covid-19 and near-term outlook;
• Arash Aazami: The Future of Energy: trends, flow economy, when everything is digitally connected (in partnership with SingularityU Portugal).
WAGE POLICIES
In order to have remuneration practices that are in line with the market and are sufficiently robust to ensure at all times a solid value offer as an employer, the Group conducted a Salary Benchmark study and analysed Long Term Compensation Models, both focused on executive positions.
The two allowed Semapa to adjust some aspects of its Variable Remuneration Model for Executive Directors which was implemented in 2020. This opened the way for applying the same model to Senior Staff and Employees in 2021.
GROUP CULTURE AND MOTIVATION
Concerning Group culture and motivation, it is important to highlight four initiatives conducted in 2020 that reinforce the Group’s culture and values:
• The 2020 Semapa Meeting, this year in digital format, brought together more than three hundred Senior Managers and highlighted Group’s Values. It was also a meeting to get to know the main projects in every company, contributing to reinforce the pride of belonging to the Group;
• Development of a Mobility Policy for the Semapa Group, sponsored by the Holding Company and developed jointly with the Human Resources Departments of the Group’s companies. This instrument will enable Employees to easily access opportunities that arise in any of the companies and thus develop their professional career in the Group;
• Leadership Model for the Semapa Group, a tool developed in 2020 and to be implemented in 2021, with the participation of all the Human Resource Departments of the companies that integrate the Group. The Model is intended to be a guide to leadership behaviour for all team leaders;
• Semapa News, a communication tool that materialised in a video dedicated this year to the Social Responsibility initiatives developed by the companies in 2020, knowledge that was thus aggregated and is available to all companies.
58 ANNUAL REPORT 2020
HEALTH, SAFETY AND WELL-BEING AT WORK
It should be noted that the Semapa Group’s main concern in the year regarding health, safety and welfare at work was to ensure the best safety conditions for its employees, given the current pandemic situation.
Consequently, the year featured the appointment of the Covid-19 Monitoring Committee, that, in coordination with the Group companies, prepared the Contingency Plan for the pandemic and it made the most appropriate decisions at each moment.
The implementation of the teleworking regime, alternate work schedules and teams at workplaces to reduce the concentration of employees in buildings, testing in all situations where found appropriate, permanent and updated communication with all employees on matters concerning the Covid-19 pandemic, were some of the measures implemented to address the pandemic situation.
In brief, 2020 was marked by the Covid-19 pandemic and the priority of guaranteeing the safety of all Employees. With this focus, the new forms of working and the new routines implemented allowed us to maintain proximity between and with the teams and to keep track of conditions of each of our Employees, while we moved forward with the development of Semapa’s Talent Management strategy, building solid foundations to continue in 2021.
The total number of employees of the Semapa Group stabilised slightly below 6 thousand employees, at 5,926 at the end of December 2020, as shown in the following table:
31/12/2020 31/12/2019 Var.
Pulp and Paper 3,232 3,280 -48 Cement 2,386 2,512 -126 Environment 280 272 8 Holdings 28 29 -1 Total 5,926 6,093 -167
59 8. INVOLVEMENT IN THE COMMUNITY
The promotion of sustainable development of the neighbouring communities is one of the strategic principles that guide the Semapa Group’s activities, reinforced by the pandemic context. The Group has been aware at all times that sustainable growth depends on the well-being of its employees, and on the support and ties it builds with the communities around its production and commercial activities.
The Group is, accordingly, involved in a wide array of initiatives designed in the last instance to improve the quality of life of the communities around its plants and facilities, and to preserve the environment.
In 2020, the total investment in the Semapa Group’s community amounted to around 1.4 million euros. The following were some of the numerous initiatives and projects supported by the Semapa Group:
• Support granted by Semapa to projects developed by the João Lobo Antunes Institute of Molecular Medicine (iMM) for the fight against Covid-19. This aid granted included the purchase of equipment, material and resources, first to improve the installed capacity to carry out diagnostic tests, and then to develop the scientific projects that will enhance the knowledge of this disease and help to anticipate new waves of the epidemic;
• Digital radiology equipment co-donated by Navigator to the Figueira da Foz hospital and recurrent donations of a variety of protective material to the Setúbal and Aveiro hospitals;
• Masks and protective clothing donated by Secil to the Hospital Center of Setúbal (S. Bernardo Hospital and Santiago do Outão Orthopaedic Hospital) and to the Voluntary Firefighters of Setúbal. Additionally, Secil decided to process in advance the payment of the annual donations it has made since 2003 to around 80 associations of the municipality of Setúbal. In this context, it was also included the Parish Council of Maceira in Leiria, with whom Secil has maintained, for many years, a collaboration and financing protocol;
• Support to the Fundação Nossa Senhora do Bom Sucesso: A foundation that delivers health care to disadvantaged individuals, especially in maternal and child healthcare. Performs about 16,000 consultations annually, benefiting about 6,400 users, who cannot afford to pay for the care and who would not have access to them in any other way;
• Support to the Associação Salvador: Association that works in the area of motor disability, promoting the inclusion of people with disability and developing projects that meet their needs;
• Internationally, Portucel Moçambique continued to pursue the activities in the Social Development Program in 2020, in the three areas of food security, income generation and welfare support, with a range of initiatives which already impact around 7 thousand households, in the areas where the forestry project is implemented in the provinces of Manica and Zambézia, having invested over 6 million euros since 2015;
• The conservation of biodiversity and the defence of environmental sustainability have continued to inspire the policy of Navigator, a forest-based Company. Some actions are focused on sharing knowledge, such as support for investment in multifunctional forestry projects and training programs for improving forestry, while others are characterized by their eminently social impact, such as the concession of land for livestock grazing (since for most local shepherds this is their source of income) and to local beekeepers;
• In 2020 Secil turned 90 years and decided to celebrate the occasion in a different way, through volunteering in the community, calling its employees to help develop Secil’s Volunteer Policy. Published in October 2020, this policy will be an instrument for implementing corporate volunteering, giving employees the opportunity to volunteer up to 2 hours of their weekly working time to programmed initiatives, and travel and food allowances and an identification kit are provided;
• Establishing support and incentive protocols signed with institutions working in the fields of social inclusion, sports and culture, with programs in the local communities around the Group’s facilities.
60 ANNUAL REPORT 2020
9. OUTLOOK
The IMF’s World Economic Outlook Update (WEO), published in January 2021, estimates that the real drop in world GDP in 2020 will be 3.5%, (4.4% as estimated in October), followed by an increase of 5.5% in 2021 (5.2% in October’s estimates) and 4.2% in 2022. The Euro Zone is expected to drop by around 7.2% in 2020 (-8.3% in October), followed by growth of 4.2% in 2021 (5.2% in October) and 3.6% in 2022.
The Portuguese economy contracted 7.6% in 2020 vs. 2.5% increase in 2019, reflecting the significantly negative effects of the Covid-19 pandemic on economic activity. The Bank of Portugal (Projections for the Portuguese economy – March 2021) estimates that GDP growth in 2021 will be 3.9%, maintaining the projection of December 2020. The IMF’s most recent projections remain those published in October and which expected real GDP to decline 10% in 2020, followed by 6.5% growth in 2021.
Although some factors of uncertainty will have dissipated by the end of 2020, including the signing of the Brexit trade agreement and the election of the new US President, the outlook for economic growth remains uncertain, as several risk factors remain, including the progress of the pandemic. In the context of the public health crisis, the new waves (including new variants of SARS-Cov-2) requiring aggressive containment measures, the effectiveness and speed of the large-scale vaccination programmes, and the availability of effective therapies to treat the virus will set the pace of economic recovery.
The response of economic agents to public health protection measures and the impact of support measures are also wrapped in uncertainty. The monetary, fiscal and prudential policies that were decisive in mitigating the effects of the pandemic will continue to be paramount for the recovery dynamics of the economies.
The Bank of Portugal points out the challenges facing the Portuguese economy in the coming years stemming from the increase in public and private sector debt levels and credit risk, highlighting the key role of national and supranational policies in the recovery and resilience of the national economy.
PULP AND PAPER
The pulp business in 2020 was characterised by extremely low levels in the prices of short fibre, particularly in Europe, as well as by a differentiation between regions (especially in regard to China) and by the large gap between short and long fibre, factors that created a positive pressure on the price of hardwood pulp in Europe at the close of the year, and which resulted in several announcements of price increases for January 2021.
At the moment, the stocks at the pulp producers are close to or below normal levels, especially for short fibre, which have been impacted by the postponement of maintenance shutdowns from the first to the second half of 2020 or even to 2021 (due to the pandemic), by significant unplanned shutdowns in softwood pulp, and by closures of capacity, also for softwood pulp, in North America (~0.7Mt/y). The new capacity for short fibre expected in the market at the end of 2021 should only make its impact in 2022, so the capacity use rates estimated for 2021 should remain close to those of 2020.
A high level of uncertainty persists in the paper business regarding the duration, extent and impact of the current lockdowns on European countries and the potential new wave in the international markets. The impacts on the global economy and Navigator’s key markets, as well as on the activity of the graphic and office paper sectors may result in a reduction of paper orders.
The tissue business substantially improved its industrial performance, with the consolidation of operations in Aveiro and a robust performance in Vila Velha de Ródão. On the commercial end, demand in the At Home segment evolved quite positively in the year, which more than offset a challenging context and reduced demand in the Away From Home business, due to the lockdowns decreed and the contraction of tourism. The At Home business is expected to stabilise in 2021, which will still be a challenging year for the Away From Home segment, and Navigator intends to continue improving the efficiency of its operations in Aveiro and optimising its specific consumption.
61 CEMENT AND OTHER BUILDING MATERIALS
According to the AICCOPN + AECOPS Construction Outlook in January 2021, similar to what was observed in 2020, it is expected that activity in the construction sector will continue in line with the previous year, notwithstanding the fact that the year 2021 is still subject to a high degree of uncertainty due to the effects of the pandemic outbreak. These entities forecast a range of production growth in gross value terms in the construction sector between 1.2% and 3.2%, which represents an average value of +2.2%, slightly below 2.5% growth estimated for 2020.
According to the World Economic Outlook Update (WEO), published in January 2021, the IMF expects the GDP of Brazil to decline in 2020 by 4.5% (-5.8% according to the projections in October), followed by 3.6% increase in 2021 (2.8% in the October projections) and 2.6% in 2022.
In Lebanon, the political and economic environment has faced much uncertainty since the last quarter of 2019, leaving the country plunged in a serious economic and social crisis. The measures implemented to contain the pandemic, which brought the country to almost a complete halt, and the explosion in the Beirut port only made matters worse.
Displaying one of the World’s highest foreign debts, the country announced in March its first default after several months of declining foreign currency reserves and a strong depreciation of the Lebanese pound in the parallel market. Negotiations with the IMF have been going on since May following the request for external assistance, but no agreement has been reached so far.
According to the latest IMF estimates (World Economic Outlook, IMF October 2020) the scenario for the Lebanese economy is recession with a 25.0% drop in the GDP and 85.5% inflation rate.
With regard to Tunisia, the most recent forecasts published by the IMF (World Economic Outlook, IMF October 2020) expect the Tunisian gross domestic product to decrease by 7.0% in 2020, followed by growth of 4.0% in 2021. Projected levels of inflation are 5.8% and 5.3% in 2020 and 2021, respectively.
Tunisia has already found itself in financial hardship and social instability, and the pandemic has increased uncertainty as to the country’s progress. The measures adopted by the government to contain the spread of the pandemic—curfews from 17 March and a nationwide declaration of quarantine on 20 March—virtually paralysed the country’s economic activity until early May, and the construction activity was no exception.
The outlook for Angola (World Economic Outlook, IMF October 2020) hints at a decline in real GDP of 4.0%, followed by a 3.2% increase in 2021. Projected levels of inflation are 21.0% and 20.6% in 2020 and 2021, respectively.
The efforts to contain the spread of the coronavirus may have contributed to the worsening of the economic situation, which had already been disrupted by the drop in oil prices since the beginning of the year.
62 ANNUAL REPORT 2020
ENVIRONMENT
The crisis caused by the Covid-19 pandemic has significantly altered the economic landscape in Portugal, as in Europe and the rest of the world, with consequences difficult to predict for several markets. However, one can say that the food market where the ETSA moves, given its nature, is less affected by the health crisis when compared to other sectors of activity (although it was also impacted by developments in the tourism sector).
With the vaccination plan currently underway, 2021 should be a year of economic recovery in Portugal, but this does not mean that the country will regain its pre-pandemic economy very soon. In this regard, the awaited recovery of the purchasing power of the Portuguese over the course of 2021 would likely result in a slight increase in the amount of raw material collected and therefore in the amount of finished products sold.
The current crisis also presents several short term opportunities that include: (i) concentrating on the horizontal expansion of its production and destination markets (exports accounted for around 46.7% of total sales on 31 December 2020), (ii) identifying new opportunities for vertical growth, channelling its investments to improving operational efficiency, extracting maximum value from the channels operated and retaining the loyalty of the main conventional and alternative collection centres, and (iii) focus on sustained innovation and research and development addressed at ensuring new profit thresholds for the business.
VENTURE CAPITAL
The venture capital market has been and will continue to be impacted by the Covid-19 pandemic, but a trend of increasing innovation in sectors that were impacted the most by the crisis will continue to mark this activity in 2021. The market should continue to be very active, both in volume of transactions and in new business opportunities in Portugal and worldwide.
In addition to these developments and the ongoing monitoring of the portfolio, it should be noted the decision to strengthen the investment capacity of Semapa Next to 100 million euros, with an execution target over the next three years, as well as the launch of the investment strategy in growth equity in addition to the venture capital strategy.
63 10. EVENTS AFTER THE BALANCE SHEET DATE
GENERAL AND VOLUNTARY TENDER OFFER OF SEMAPA SHARES BY SODIM
On 18 February 2021, according to the Preliminary Announcement published on Semapa’s website, Sodim launched a general and voluntary tender offer in cash on Semapa shares.
Sodim is the controlling shareholder of Semapa, holding, directly and indirectly, 71.906% of Semapa’s share capital and 73.167% of Semapa’s voting rights.
Through this offer Sodim intends to acquire the remaining shares issued by Semapa (which are validly accepted and which are not held by Sodim or Cimo - Gestão de Participações, SGPS, S.A.).
For the offer to be launched it must be previously registered with the Securities Market Commission (“CMVM”) against consideration of € 11.40 (eleven euros and forty cents) per share.
The price offer was € 11.40 (eleven euros and forty cents) per share to be paid in cash, less any (gross) amount that may be attributed to each share, whether by way of dividend, advance profits, distribution of reserves or otherwise, such deduction to be made as from the moment which the right to the amount in question has been detached from the shares and if such moment occurs prior to the settlement of the offer.
The consideration represents a premium of 20.0% in relation to the last closing price of the shares on 18 February 2021, and 37.2% in relation to the weighted average price of the shares on the Euronext Lisbon regulated market in the six months immediately preceding the date of publication of the preliminary announcement. Further information on the justification of the consideration for the offer will be included in the prospectus and the launch of the offer announcement, which will be disclosed to the public after the offer has been approved by the CMVM.
To consider the offer a success Sodim must hold, as a result of the offer, a minimum of 90% of Semapa’s voting rights. Sodim may decide, at its own discretion, to waive the described success requirement within 24 hours after the results of the offer are known.
Thus, should Sodim decide to maintain the condition for success until the end of the offer and it is not met, all acceptance orders issued during the offer will not be executed and the shareholders will not be able to sell their shares in the offer.
We also note that, in legal terms, Sodim is not prohibited from purchasing Semapa shares on the market once the preliminary announcement is published and until the conclusion of the offer.
Semapa’s Board of Directors issued a report on the opportunity and terms and conditions of the offer on 5 March 2021.
ANTI-DUMPING TAX
On 19 January 2021, the Department of Commerce (DoC) confirmed to the subsidiary Navigator, the final rate to be applied to the sale of certain paper products in the US market relative to the 3rd review period (“POR3”). The final rate has not changed compared to the preliminary rate, and was set at 6.75%.
The rate now confirmed is in line with Navigator’s estimates and it means that from now on the rate payable on sales of uncoated paper in the United States of America will be 6.75% until the final figure of the POR4 has been estimated, which is should be the case in April 2021.
64 ANNUAL REPORT 2020
11. ACKNOWLEDGEMENTS
We wish to express our thanks to the following, for their important contribution to our results:
• Our Shareholders, who have accompanied our progress and whose trust we believe we continue to deserve;
• Our Employees, whose efforts and dedication have made possible the Company’s dynamism and development;
• The support and understanding of our Customers and Suppliers, who have acted as partners in our project;
• The cooperation of the Financial Institutions, and the Regulatory and Supervisory Authorities;
• The collaboration of the Audit Board, the General Meeting and the governing Committees that exist within the Company.
65 12. PROPOSED ALLOCATION OF PROFITS
Considering that the Company needs to maintain a financial structure compatible with the sustained growth of the Group it manages in the various Business Units in which it operates, and
Considering that the Company’s independence from the financial sector involves preserving consolidated levels of short, medium and long-term debt which allow it to maintain sound solvency indicators,
It is proposed that the Net Profit for the period in the individual accounts, determined under the IFRS rules, in the amount of 106,588,079.31 euros (one hundred and six million, five hundred and eighty-eight thousand and seventy-nine euros and thirty- one cents) be allocated as follows:
Dividends on shares in circulation 40,893,118.98 euros* (0.512 euros per share)
Free reserves 65,694,960.33 euros
* Excluding own treasury shares held; 1,400,627 own shares were considered; on the payment date, if this amount is changed, the total dividends payable may be adjusted, while the amount payable per share will remain unchanged.
Lisbon, 06 April 2021
BOARD OF DIRECTORS
CHAIRMAN José Antônio do Prado Fay
MEMBERS João Nuno de Sottomayor Pinto de Castello Branco Ricardo Miguel dos Santos Pacheco Pires Vítor Paulo Paranhos Pereira António Pedro de Carvalho Viana Baptista Carlos Eduardo Coelho Alves Filipa Mendes de Almeida de Queiroz Pereira Francisco José Melo e Castro Guedes Lua Mónica Mendes de Almeida de Queiroz Pereira Mafalda Mendes de Almeida de Queiroz Pereira Vítor Manuel Galvão Rocha Novais Gonçalves
66 ANNUAL REPORT 2020
DEFINITIONS
EBITDA = EBIT + Depreciation, amortisation and impairment losses + Provisions
EBIT = Operating profit
Operating profit = Earnings before taxes, financial results and results of associates and joint ventures as presented in the Income Statement in IFRS format
Cash-flow = Net profit for the period + Depreciation, amortisation and impairment losses + Provisions
Free Cash Flow = Variation in interest-bearing net debt + Variation in foreign exchange denominated debt + Dividends (paid- received) + Purchase of own shares
Interest-bearing net debt = Non-current interest-bearing debt (net of loan issue charges) + Current interest-bearing debt (including debts to shareholders) – Cash and cash equivalents
DISCLAIMER
This document contains statements that relate to the future and are subject to risks and uncertainties that can lead to actual results differing from those provided in these statements. Such risks and uncertainties are due to factors beyond Semapa’s control and predictability, such as macroeconomic conditions, credit markets, currency fluctuations and legislative and regulatory changes. Statements about the future made in this document concern only the document and on the date of its publication, therefore Semapa does not assume any obligation to update them. This document is a translation of a text originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.
67 CORPORATE GOVERNANCE REPORT CORPORATE GOVERNANCE REPORT CONTENTS
PART I - INFORMATION ON CAPITAL STRUCTURE, ORGANIZATION AND CORPORATE GOVERNANCE 72
A. CAPITAL STRUCTURE 72 I. Capital structure 72 II. Holdings of Shares and Bonds 73
B. CORPORATE BOARDS AND COMMITTEES 74 I. General Meeting 74 II. Management and Supervision 75 III. Auditing 95 IV. Statutory Auditor 100 V. External Auditor 100
C. INTERNAL ORGANIZATION 102 I. Articles of Association 102 II. Notification of Irregularities (Whistleblowing) 102 III. Internal control and risk management 103 IV. Investor Support 106 V. Website (59 to 65) 107
D. REMUNERATION 107 I. Powers to determine remuneration 107 II. The Remuneration Committee 107 III. Remuneration structure 108 IV. Disclosure of remuneration 110 V. Agreements with remuneration implications 111 VI. Stock or stock option plans 112
E. RELATED PARTY TRANSACTIONS CONFLICTS OF INTEREST 112 I. Control Mechanisms and Procedures 112 II. Details of transactions 114
70 ANNUAL REPORT 2020
PART II ASSESSMENT OF CORPORATE GOVERNANCE 115 1. Identification of the Corporate Governance Code adopted 115 2. Analysis of compliance with the adopted Corporate 115 3. Additional Information 123
ANNEX I DISCLOSURES REQUIRED BY ARTICLE 447 OF THE COMPANIES CODE 124
ANNEX II REMUNERATION POLICY STATEMENT 126
ANNEX III DECLARATION REQUIRED UNDER ARTICLE 245.1 C) 133 OF THE SECURITIES CODE
71 PART I INFORMATION ON CAPITAL STRUCTURE, ORGANIZATION AND CORPORATE GOVERNANCE
A. CAPITAL STRUCTURE
I. CAPITAL STRUCTURE
1. Capital structure (share capital, number of shares, distribution of capital between shareholders, etc.), including indication of shares not admitted to trading, different classes of shares, the rights and obligations attaching to these and the percentage of share capital that they represent (Article 245-A.1 a)).
Semapa has a share capital of 81,270,000 Euros, represented by a total of 81,270,000 shares without nominal value. All shares are ordinary shares and have the same rights and obligations attached to them, and are admitted for trading.
A breakdown of the capital structure, indicating shareholders with qualifying holdings, is provided in the table in item 7. below.
2. Any restrictions on the transfer of shares, such as clauses on consent for disposal, or limits on the ownership of shares (Article 245-A.1 b)).
Semapa has no restrictions of any kind on the transferability or ownership of its shares.
3. Number of own shares, corresponding percentage of share capital and percentage of voting rights which would correspond to own shares (Article 245-A.1 a)).
On 31 December 2020, Semapa held 1,400,627 own shares, corresponding to 1.723% of its share capital. If the voting rights were not suspended, the percentage of voting rights would be the same as the percentage of the total capital.
4. Significant agreements to which the company is party and which take effect, are amended or terminate in the event of a change in the control of the company as a result of a takeover bid, together with the respective effects, unless, due to its nature, disclosure of such agreements would be seriously detrimental to the company, except if the company is specifically required to disclose such information by other mandatory provision of law (Article 245-A.1 j)).
Semapa is not a party to any important loan agreement, debt instruments or other to which the company is a party and which take effect, alter or terminate upon a change of control of the company as a result of a takeover bid.
Semapa has not adopted any mechanisms that imply payments or assumption of fees in the case of the change of control or in the composition of the managing body, and which are likely to harm the free transferability of shares and a shareholder assessment of the performance of the members of the managing body.
5. Rules applicable to the renewal or revocation of defensive measures, in particular those providing for limits on the number of votes which can be held or cast by a single shareholder individually or in a concerted manner with other shareholders.
There are no defensive measures in place in the company, namely any limiting shareholder’s exercisable voting rights.
72 ANNUAL REPORT 2020
6. Shareholders’ Agreements known to the company or which might lead to restrictions on the transfer of securities or voting rights (Article 245-A.1 g)).
The Company is only aware of the ongoing and open coordination of the exercise of voting rights mentioned in item 7. below, resulting in the allocation to Sodim, SGPS, S.A. on 31 December 2020 of 73.972% of non-suspended voting right, above the 73.167% arising from the direct and indirect holdings.
II. HOLDINGS OF SHARES AND BONDS
7. Identification of persons and organizations who, directly or indirectly, own qualifying holdings (Article 245-A.1 c) and d) and Article 16), detailing the percentage of the share capital and votes imputable and the respective grounds.
The owners of qualifying holdings in Semapa on 31 December 2020 are identified in the following table:
Number % share capital % non-suspended Entity of Shares and voting rights voting rights
A - Sodim, SGPS, S.A. 19,478,903 23.968% 24.388% Directors of Sodim: Filipa Mendes de Almeida de Queiroz Pereira 5,488 0.007% 0.007% Mafalda Mendes de Almeida de Queiroz Pereira 5,888 0.007% 0.007% Lua Mónica Mendes de Almeida de Queiroz Pereira 5,888 0.007% 0.007% Cimo - Gestão de Participações, SGPS, S.A. 38,959,431 47.938% 48.779% Sociedade Agrícola da Quinta da Vialonga, S.A. 625,199 0.769% 0.783% Total: 59,080,797 72.697% 73.972% B - Bestinver Gestión, S.A., S.G.I.I.C. - - - Bestinver Global, F.P. 362,428 0.446% 0.454% Bestinver Plan Mixto, F.P. 91,556 0.113% 0.115% Bestinver Mixto, F.I. 97,233 0.120% 0.122% Bestinver Bolsa, F.I. 1,095,302 1.348% 1.371% Bestinfond, F.I. 1,016,934 1.251% 1.273% Bestvalue, F.I. 278,356 0.343% 0.349% Bestinver Empleo II, F.P. 1,963 0.002% 0.002% Bestinver Consolidacion EPSV 1,568 0.002% 0.002% Bestinver Futuro EPSV 8,776 0.011% 0.011% Bestinver Empleo III, F.P. 1,506 0.002% 0.002% Bestinver Hedge Value Fund, F.I.L. 932,756 1.148% 1.168% Bestinver Empleo, F.P. 11,068 0.014% 0.014% Bestinver Iberian SICAV 89,830 0.111% 0.112% Bestinver Bestinfund SICAV 40,613 0.050% 0.051% Bestinver Crecimiento EPSV 2,162 0.003% 0.003% Total: 4,032,051 4.961% 5.048% C - Norges Bank (the Central Bank of Norway) 1,699,613 2.091% 2.128%
The voting rights relating to the companies in group A are allocated on the basis of (i) direct ownership of the shares; (ii) the open coordination of the exercise of voting rights, which means that the voting rights held by these companies taken together in Semapa are allocated to each of them, as explained next, and (iii) the existence of, direct and indirect, controlling relationships of Sodim, SGPS, S.A. also described ahead, and (iv) the ownership of shares by members of the Board of Directors of the company above mentioned.
73 The allocation to Sodim by virtue of the open coordination of the exercise of voting rights, under the terms in which they have been announced, according to Article 20. 1 c) and h) of the Securities Code, matches the part identified by the letter A in the table above.
The allocation to Sodim by virtue of the controlling relationship, in accordance with Article 20. 1 b) of the Securities Code, was on 31 December 2020 as follows:
% share capital % non-suspended Entity Allocation No. shares and voting rights voting rights
Sodim, SGPS, S.A. 19,478,903 23.968% 24.388% Cimo - Gestão de Participações, SGPS, S.A. 100% owned by Sodim 38,959,431 47.938% 48.779% Total: 58,438,334 71.906% 73.167%
In relation to the companies in groups B and C, voting rights are allocated on the basis of direct and indirect ownership of shares, by virtue of domain relations.
8. Indication of the number of shares and bonds held by members of the management and supervisory bodies.
This information is provided in Annex I to this Report.
9. Special powers of the management board, in particular concerning resolutions to increase capital (Article 245-A.1 i)), indicating, with regard to these, the date on which they were granted, the period during which such powers may be exercised, the upper limit for the increase in share capital, shares already issued under the powers granted and the form taken by these powers.
In the terms of the Articles of Association, the Board of Directors has no powers to resolve on increases to the share capital.
10. Information on the existence of significant dealings of a commercial nature between qualifying shareholders and the company.
All transactions taking place in 2020 between the company and qualifying shareholders are described in Note 10.4 of the Annex to the consolidated accounts and Note 10.2 of the annex to the individual financial statements. In 2020, pursuant to the Regulation on Conflict of Interests and Transactions with Related Parties and under the terms and conditions set out therein at each moment, as described in paragraphs 89 and following of this report, there were no significant dealings of a commercial nature between qualifying shareholders and the company.
B. CORPORATE BOARDS AND COMMITTEES
I. GENERAL MEETING
A) COMPOSITION OF THE GENERAL MEETING
11. Officers of the General Meeting and their term of office (starting and ending dates).
The officers of the General Meeting are:
CHAIRMAN: Francisco Xavier Zea Mantero (term of office from 24/05/2018 to 31/12/2021) SECRETARY: Luís Nuno Pessoa Ferreira Gaspar (term of office from 24/05/2018 to 31/12/2021)
B) EXERCISE OF VOTING RIGHTS
12. Any restrictions on voting rights, such as limitations on the exercise of voting rights based on the ownership of a given number or percentage of shares, time limits for exercising voting rights, or systems for detaching voting rights from ownership rights (Article 245-A.1 f));
Under Semapa’s Articles of Association, each share in the Company carries one vote.
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Despite the existence of time limits established in Semapa’s Articles of Association for attendance of the General Meeting, the mandatory legal rules on this matter apply, such as Article 23-C of the Securities Code. The time limit established by the Articles of Association for exercise of postal rights is the day prior to the General Meeting.
The Articles of Association make no provision for electronic voting. Nevertheless, the Board of Directors might regulate on alternative ways to vote besides paper format, as long as authenticity and confidentiality of the votes are also guaranteed until the moment of the voting.
Although the Board of Directors never used this capacity, the Chairman of the General Meeting has always accepted electronic votes as long as they are received under comparable conditions as the vote by mail, in what regards the deadline, comprehensibility, the guarantee of authenticity, confidentiality and other formal issues.
Considering the adverse context resulting from the Covid-19 pandemic outbreak, and as stated in the respective notice, shareholders were encouraged to exercise their voting rights at the company’s Annual General Meeting held in 2020 preferably by electronic mail.
To exercise the right to vote by electronic mail shareholders should send by e-mail a statement addressed to the Chairman of the General Meeting in PDF format, duly signed - in accordance with the signature on the relevant valid identification document, a copy of which must accompany said statement - expressing the wish to vote, and the declarations of vote, one for each item on the Agenda, in PDF format, with the indication in the title of the document of the agenda item for which it is intended.
Still in the context of the pandemic, and taking into account the Recommendations regarding the conduct of General Meetings of 20 March 2020, issued under the cooperation between the Securities Market Commission (CMVM), the Portuguese Institute of Corporate Governance (IPCG) and the Association of Issuing Companies of Listed Securities on Market (AEM), the company has implemented the appropriate means for the shareholders to attend the 2020 Annual General Meeting, which was held exclusively by telematic means, as provided by Article 377 (6)(b) of the Companies Code.
To attend the meeting, shareholders had to declare their willingness to participate by providing an e-mail address to which the company sent the instructions for the remote session, and which was used to verify the identity of each shareholder on the electronic platform used.
There are no systems for detaching voting rights from ownership rights.
13. Indication of the maximum percentage of the voting rights which can be exercised by a single shareholder or by shareholders connected in any of the forms envisaged in Article 20.1
There are no rules in the Articles of Association which lay down that voting rights are not counted if in excess of a given number, when cast by a single shareholder or shareholders related to him.
14. Identification of shareholder resolutions which, under the Articles of Association, can only be adopted with a qualified majority, in addition to those provided for in law, and details of the majorities required.
The Company has established no quorums for constituting meetings or adopting resolutions different from those provided for on a supplementary basis in law.
II. MANAGEMENT AND SUPERVISION
A) COMPOSITION
15. Identification of the governance model adopted.
The company has adopted the governance model provided for in Article 278 (1) (a) (Board of Directors and Audit Board) and in Article 413 (1) (b) (Audit Board and Statutory Auditor), of the Companies Code.
75 16. Rules in the Articles of Association on procedural and material requirements applicable to the appointment and substitution of members, as the case may be, of the Board of Directors, the Executive Board of Directors and the General and Supervisory Board (Article 245-A.1 h)). Policy of diversity.
Currently, Semapa’s Articles of Association set no special rules on the appointment and replacement of directors, and the general supplementary rules contained in the Companies Code therefore apply here, i.e. shareholders have the power to appoint the directors (and the supervisory body). The company does, however, disclose on the company’s website (https:// www.semapa.pt/index.php/en/investidores/governo/principiosdiversidade) its Principles of Diversity, which lay down the profile requirements and criteria for new members of the governing bodies.
These Principles of Diversity are a formal recognition by the company of the benefits of diversity in its governing bodies, particularly for ensuring greater balance in its composition, boosting the performance of each member and, together, of each body, improving the quality of decision-making processes and contributing to its sustainable development.
Accordingly and to promote corporate diversity, in addition to the individual features, such as competence, independence, integrity, availability and expertise, the company also acknowledged the importance of other requirements and criteria of diversity, such as diversity in gender, qualifications and professional expertise, inclusion of members of different ages and life experiences or geographical origins.
The following analysis highlights a fairly reasonable level of diversity:
Diversity factor Parameter %
< 50 30.77% Age 50-65 46.15% >65 23.08% Female 23.08% Gender Male 76.92% Econ./Manag. 53.85% Engineering 23.08% Education Applied Mathematics 7.69% Non graduate 15.38% Professional experience abroad 46.15% Professional background Different sectors of the group 100%
The Talent Committee is endowed with consultative powers in matters of appointment of the corporate bodies, with competencies to support the identification of future members of the governing bodies and to assess the appropriate profile, knowledge and their curricula, and should foster transparent selection methods and ensure that the applications chosen present the highest degree of merit, are best suited to the demands of the functions to be carried out, and will best promote suitable diversity in the company, including gender diversity.
The company thus finds that all objectives arising from the adoption of the diversity policy have been met, as can be verified in practice.
Finally, to reinforce the gender diversity promotion measures, the Company adopted in 2020 the 2021 Plan for Equality, reflecting changes to the 2020 Plan for Equality adopted in 2019. Semapa communicated the Plan to the CMVM, and also published it in the website of Semapa.
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17. Composition, as the case may be, of the Board of Directors, the Executive Board of Directors and the General and Supervisory Board, detailing the provisions of the Articles of Association concerning the minimum and maximum number of directors, duration of term of office, number of full members, the date when first appointed and the end of their terms of office for each member.
The Company’s Articles of Association (Article 11.1) stipulate that the Board of Directors comprises three to fifteen directors appointed each for a four-year term.
We indicate below the date of first appointment of each member, together with the date on which their term of office expires:
Members of the Board of Directors Date of first appointment and end date of term of office
Heinz-Peter Elstrodt 2019-2020 José Antônio do Prado Fay 2018-2021 João Nuno de Sottomayor Pinto de Castello Branco 2015-2021 José Miguel Pereira Gens Paredes 2006-2020 Ricardo Miguel dos Santos Pacheco Pires 2014-2021 Vítor Paulo Paranhos Pereira 2014-2021 António Pedro de Carvalho Viana-Baptista 2010-2021 Carlos Eduardo Coelho Alves 2015-2021 Filipa Mendes de Almeida de Queiroz Pereira 2018-2021 Francisco José Melo e Castro Guedes 2001-2021 Lua Mónica Mendes de Almeida de Queiroz Pereira 2018-2021 Mafalda Mendes de Almeida de Queiroz Pereira 2018-2021 Vítor Manuel Galvão Rocha Novais Gonçalves 2010-2021
The company appointed on 30 July 2020 the Director José Antônio do Prado Fay as Chairman of the Board of Directors of the company, with effect from the same date and until the end of the current term of office, due to the resignation of Heinz-Peter Elstrodt from is duties.
José Miguel Pereira Gens Paredes terminated his duties as Member of the Board of Directors and Member of the Executive Board, by resignation with effect from 29 February 2020.
Vítor Paulo Paranhos Pereira, on the other hand, assumed executive duties on 1 March 2020.
18. Distinction between executive and non-executive members of the Board of Directors and, in relation to non-executive directors, identification of those who can be regarded as independent or, if applicable, identification of the independent members of the General and Supervisory Board.
The executive members of the Board of Directors are those who belong to the Executive Board, as per paragraph 28 below, the others being non-executive members.
During the fiscal year of 2020, the company’s Board of Directors had (i) thirteen members, until February 29, (ii) twelve members, from that date until August 31, and (iii) eleven members, from that date until December 31, and three thereof were members of the Executive Board in the year. Since the number of non-executive directors in 2020 represented between 73% and 77% of the members of the Board of Directors, we consider this proportion to be appropriate considering the size of the company and the complexity of the risks inherent to its activity, and sufficient to undertake efficiently the duties to which they are assigned. This judgment on the suitability of the proportion took into account, in particular, the size of the Executive Board and the powers assigned to it by the Board of Directors, the company’s activities and its nature as a holding company, the stability of the shareholder structure, the diversity of skills and the availability of the non-executive members for the performance of their duties, which through close cooperation with the Chairman of the Board of Directors, guarantee the capacity to monitor, supervise and assess the activity of the executive members of the Board of Directors.
77 On the basis of the criteria laid down by the corporate governance code adopted, Carlos Eduardo Coelho Alves may be classified as an independent non-executive director, as he is not associated with any group with specific interests in the Company, nor is he under any circumstance likely to affect the impartiality of his analyses or decisions.
On the other hand, Director Francisco José Melo e Castro Guedes was not classified as independent as he is member of the Board of Directors since 2001. Directors Heinz-Peter Elstrodt, Filipa Mendes de Almeida de Queiroz Pereira, Mafalda Mendes de Almeida de Queiroz Pereira, Lua Mónica Mendes de Almeida de Queiroz Pereira and José Antônio do Prado Fay were not classified as independent in the light of the criteria referred, since they were also members of the Board of Directors of companies owning qualified holdings in Semapa in 2020. Director Vitor Manuel Galvão Rocha Novais Gonçalves was not classified as independent in the light of the above-mentioned applicable criteria, since he is director of a company with controlling relationships with Semapa, and receives remuneration for his duties. Director António Pedro de Carvalho Viana- Baptista is not an independent director by virtue of the commercial ties existing between the company and the entity in which he holds management functions. Finally, Director Vítor Paulo Paranhos Pereira - by reference to the period during which he did not perform executive duties - was also not considered independent since in 2020 he held management functions in participated companies or in the companies with controlling relationships with Sodim, SGPS, S.A.
Thus, in the course of the 2020 financial year, the Board included only one non-executive director who fulfilled the independence requirements laid down by the corporate governance code adopted, which the company finds adequate and consistent with a fully independent performance of the Board of Directors and sufficient to guarantee the real capacity to supervise, assess and monitor the activity of the other members of the Board of Directors.
In effect, considering the profile, age, background and professional experience and, above all, independent judgement and the integrity demonstrated by the members of the Board of Directors, the company finds that the current proportion between non- independent and independent non-executive directors, established through formal criteria of assessment of independence, is perfectly adjusted to the nature and size of the company, considering, in particular, that it is a family-owned company, with a stable capital structure, and taking into account the complex inherent risks of its business.
19. Professional qualifications and other relevant biographical details of each of the members, as the case may be, of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors.
HEINZ-PETER ELSTRODT
Heinz-Peter Elstrodt has a degree in Business Administration and Industrial Engineering by the University of Karlsruhe and a PhD in Economics by the University of Augsburg. He worked from 1983 until 2015 at McKinsey & Co., Inc., having served as Chairman for Latin America from 2004. He is a Guest Lecturer at the London Business School since 2016, where he teaches family business management. Within this context, Heinz-Peter Elstrodt has lent support to several family businesses in the process of passing down these businesses to the following generation and in the professionalisation of management, with acknowledged experience and knowledge in the areas of corporate governance, financial planning, and leadership development and strategy in family businesses. He was a member of the Board of Directors of Camargo Corrêa S.A. (Brazil) in 2016 and 2017 and of Lojas Renner S.A. (Brazil) from 2016 to 2019. From 2019 to 2020, he held office as Chairman of the Board of Directors of Semapa and other related companies in the group.
JOSÉ ANTÔNIO DO PRADO FAY
José Antônio do Prado Fay has a degree in Mechanical Engineering from the Rio de Janeiro Federal University and he attended a specific post-graduate course in Equipment Engineering at Coppe\Petrobras (Coordination of Graduate Studies and Engineering Research). He initiated his professional activity at Copesul in 1978, where he was manager of the engineering sector until 1986. From 1986 to 1988 he was Head of the Engineering and Maintenance Division at Petroquímica Triunfo, S.A. From 1988 to 2000 he held several management functions at Bounge Group, in the areas of Engineering and Consumption Goods Business. He was in charge of the Commercial and Marketing department at Electrolux from 2000 to 2003 and from 2003 to 2007 he served as Chairman of Batavo, S.A., which was incorporated in Perdigão, S.A. in 2006, acting as Chairman of that company from 2008. He was Chairman of Brasil Foods S.A. from 2007 to 2013. He is a member of the Board of Directors of Camil, S.A. since 2013. He is Senior advisor at the Warburg Pincus fund and was Senior advisor at Mckinsey & Co. until 2020. Since 2020 he has held office as Chairman of the Board of Directors of Semapa and other related companies, and as member of the Boards of Directors of São Salvador Alimentos, S.A. and Superbac Biotechnology Solutions.
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JOÃO NUNO DE SOTTOMAYOR PINTO DE CASTELLO BRANCO
João Castello Branco is CEO of Semapa since July 2015, and is Chairman of the Board of Directors of The Navigator Company and Secil since the end of 2018. Since 2019 he is Chairman of the Board of Business Council for Sustainable Development (BCSD) Portugal and is member of the Executive Committee of the World Business Council for Sustainable Development (WBCSD). He is also member of the General Board of AEM Associação Portuguesa de Emitentes. Previously and after finishing his degree, he worked at the engine development centre of Renault, in France. He joined McKinsey in 1991, where he held positions in several industries, both in Portugal and in Spain, and was Managing Partner of the firm’s Iberia office until July 2015. João Castello Branco is a graduate in mechanical engineering by Instituto Superior Técnico and holds a master degree in management by INSEAD.
JOSÉ MIGUEL PEREIRA GENS PAREDES
José Miguel Paredes holds a degree in Economics from Universidade Católica Portuguesa and initiated his professional activity in 1985, at Direcção Geral de Concorrência e Preços (Portuguese Competition Authority). In the following years, he worked at the Rodoviária Nacional, Trader Interbiz, Cosec (Credit Insurance Company) in the External Credit Department, Generale Bank in the Commercial Department and Treasury / Foreign Exchange Trading Room, in Portugal, and United Distillers in the Financial Department in Portugal. In 1994, he became Financial Director of Semapa and some of the other related companies in the group. He was Executive Director of Enersis, a renewable energy company owned by the Semapa group. From 2004 to 2018 he was Semapas investor relations officer and he has held office as Executive Director of Semapa since 2006. In 2008 José Miguel Paredes was appointed Director of ETSA and he is Chairman of the Board of Directors since 2010. He also became Director of The Navigator Company and Secil in 2011 and 2012, respectively. In 2018 he was appointed Director of Sonagi. He left the Semapa group and Sonagi in February 2020.
RICARDO MIGUEL DOS SANTOS PACHECO PIRES
Ricardo Pires holds a degree in Business Administration and Management from Universidade Católica Portuguesa, and is specialised in Corporate Finance from ISCTE. He also has an MBA in Corporate Management from Universidade Nova de Lisboa. He began his career in the field of management consulting, from 1999 to 2002 for BDO Binder and later for GTE Consultores. From 2002 to 2008 he held several positions in the Corporate Finance Board at ES Investment, where he developed different M&A and capital market projects in the Energy, Paper and Pulp and Food & Beverages sectors. He has worked for Semapa since 2008, first as Director of Strategic Planning and New Business and afterwards, from 2011, as Chief of Staff of the Chairman of the Board of Directors. In 2014 he was appointed Executive Director of Semapa, and he also holds positions in other related companies. Since 2015, he has held positions in the board of The Navigator Company and Secil. He has been CEO of Semapa Next since 2017 and took over in March 2020 duties as Chairman of the Board of Directors in the ETSA group.
VÍTOR PAULO PARANHOS PEREIRA
Vitor Paranhos Pereira holds a degree in Economics by Universidade Católica Portuguesa and attended AESE (Universidade de Navarra). He began working in 1982 at the company Gaspar Marques Campos Correia & Cª. Lda. as Financial Director until 1987. From 1987 to 1989 he was Deputy Financial Director of the Instituto do Comércio Externo de Portugal (ICEP). Vítor Paranhos Pereira joined the group in 1989 as Financial Director of Sodim, and in 2009 he was appointed as member of the Board of Directors of that company until May 2018. He also holds directorships in several companies related to Sodim, namely Hotel Ritz since 1998. From 2001 to 2016, he was Director of the Hotel Villa Magna. He has held office as Director of Sonagi since 1995. From 2006 to 2015 he was Chairman of the Audit Board of the Associação da Hotelaria de Portugal (AHP) and in April 2019 he was appointed as Chairman of the General Meeting of this organisation. From 2007 to 2016 he has been Chairman of the General Meeting of the Associação Portuguesa de Fundos de Investimento, Pensões e Patrimónios (APPFIPP). He has served as member of the Audit Board of Eurovida Companhia de Seguros, S.A. and Popular Seguros Companhia de Seguros, S.A. from 2009 to 2018. In 2014 he was appointed member of the Board of Directors of Semapa. He was appointed director of Refundos in 2005, where he has served as Chairman of the Board of Directors from 2018 to May 2020. He has held office as Executive Director of Semapa and other related companies since March 2020, and since February and March 2020 he has also held management positions at Secil and The Navigator Company, respectively.
79 ANTÓNIO PEDRO DE CARVALHO VIANA-BAPTISTA
António Viana Baptista has a degree in Economy, a post-graduate degree in European Economy and holds an MBA (INSEAD). From 1984 to 1991, he was Principal Partner at Mckinsey & Co. Between 1991 and 1998, he was Director of the Banco Português de Investimento. Between 1998 and 2008, he held positions at Telefonica S.A., as Chairman of Telefonica Internacional from 1998 to 2002, Chairman of Telefonica Moviles S.A. from 2002 to 2006, and Chairman of Telefonica España from 2006 to 2008, and he was also Director of Telefonica S.A. and Portugal Telecom, representing Telefonica. From 2011 to 2016 he was CEO of Crédit Suisse AG for Spain and Portugal. He held office as non-Executive Director of Jasper Inc, California until 2016 and of Abertis, S.A. from 2017 to 2018. At present, he is non-executive Director of Jerónimo Martins, S.A. (where he also acted as member of the Audit Committee from 2010 to 2015) and of Atento, S.A., in addition to performing duties as Director of Alter Venture Partners G.P., SARL. He has been non-executive Director of Semapa since 2010.
CARLOS EDUARDO COELHO ALVES
Carlos Alves has a degree in mechanical engineering from Instituto Superior Técnico and he is an Expert Industrial Manager by the Portuguese Association of Engineers. He began working as lecturer of Machine Components I and II at Instituto Superior Técnico and he was a Trainee Expert of the Works Monitoring Division at Laboratório Nacional de Engenharia Civil in Lisbon. He was an engineer of technical services at Cometna Companhia Metalúrgica Nacional, SARL, and later director in charge of manufacturing and managing director of Cobrascom S.A. (In Rio de Janeiro, Brazil). Between 1989 and 2009, he held directorship positions in Semapa, Sodim and other related companies. He was also CEO of Secil and CMP between 1994 and 2009, and held management positions at Portucel (currently The Navigator Company), Soporcel, and Enersis, where he was Chairman of the Board of Directors. He was Chairman of ATIC - Associação Técnica da Indústria do Cimento between 2004 and 2009 and member of the Cembureau Steering Committee between 2004 and 2009. He has been non-executive director of Semapa since November 2015 and non-executive director of Secil since October 2020.
FILIPA MENDES DE ALMEIDA DE QUEIROZ PEREIRA
Filipa Queiroz Pereira has a degree in Applied Mathematics from Universidade Lusíada and a post-graduate degree in Information Systems from Harvard Extension School. She completed executive programmes at INSEAD, London Business School, Harvard Business School and at Singularity University and has been involved in IT consultancy and real estate activities. She has been a director of Sodim (the controlling company of Semapa) since 2014, also integrating, since 2018, the Board of Directors of Semapa and Hotel Ritz.
FRANCISCO JOSÉ MELO E CASTRO GUEDES
Francisco Guedes has a degree in Economic and Financial Sciences and holds an MBA from INSEAD. He initiated his professional career in 1971 at the Companhia União Fabril. He performed military service from 1972 to 1975. In the following years, in 1976 he was Financial Director of Companhia Rio Moju and from 1977 to 1987 at the Anglo-American Corporation (in Brazil), holding office as Executive Director, the Holding’s Financial Director, Director in charge of all (non-gold) mining and industrial companies in Brazil and Financial Director of Mineração Morro Velho. Between 1988 and 1989 Francisco Guedes he was in charge of the Ricardo Schedel brokerage. In 1990, he was manager of the Aroeira project at Formentur, and in the following years he was director and manager at Anglo American Corporation Portugal, Nacional C.I.T.C., Nutrinveste and Sociedade Ponto Verde. Between 2009 and 2015 he was Director of The Navigator Company. From 2001 until June 2020 he occupied management positions at Secil, having also carried out executive positions from 2001 to 2014 at Semapa and other group companies.
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LUA MÓNICA MENDES DE ALMEIDA DE QUEIROZ PEREIRA
After completing her Secondary Education, Lua Queiroz Pereira attended several international schools of management, namely Insead, where she obtained a certificate in Global Management, London Business School, Singularity University and Harvard Business School, where she completed courses for executives. In the past she was a business manager linked to equestrianism. She has been a director of Sodim (the controlling company of Semapa) since 2014, also integrating, since 2018, the Board of Directors of Semapa and Semapa Next, a venture capital company of the group.
MAFALDA MENDES DE ALMEIDA DE QUEIROZ PEREIRA
Mafalda Queiroz Pereira completed her Secondary Education, together with technical courses in Wood Carving and Carpentry by Fundação Ricardo Espírito Santo and in Interior Architecture by SENAI (Brazil). She completed executive programmes at Insead, at London Business School and Harvard Business School and has been involved in the development of projects in real estate. She has been a director of Sodim (the controlling company of Semapa) since 2014, also integrating, since 2018, the Board of Directors of Semapa and Sonagi, company dedicated to the real estate management and operation.
VÍTOR MANUEL GALVÃO ROCHA NOVAIS GONÇALVES
Vítor Novais Gonçalves has a Business and Administration Degree by ISC-HEC, in Brussels, and more than 30 years of professional experience with senior positions in Consumer Goods, Telecom and Financial sectors. He began his professional activity in 1984 at Unilever as Management Trainee and later as Product Manager and Market Manager. Between 1989 and 1992, he was Business Manager in the Venture Capital Area at Citibank Portugal and later he was Corporate Finance Head and member of the Management Committee. Between 1992 and 2000, in the financial area of Group José de Mello, he held board positions in several companies and, among others, was General Manager of Companhia de Seguros Império. Between 2001 and 2009, at SGC Group he was Director of SGC Comunicações, being responsible for International Business Development. He is presently Director of Zoom Investment, Semapa and The Navigator Company, among others.
20. Habitual and significant family, professional or business ties between members, as the case may be, of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors with shareholders to whom a qualifying holding greater than 2% of the voting rights may be allocated.
Besides the directorships held by several Directors in companies which own qualifying holdings in Semapa, namely Sodim and subsidiaries, as described in paragraph 26 below, and the direct and indirect shareholdings of Filipa Mendes de Almeida de Queiroz Pereira, Mafalda Mendes de Almeida de Queiroz Pereira and Lua Mónica Mendes de Almeida de Queiroz Pereira, as heirs to the undivided estate of Pedro Mendonça de Queiroz Pereira in Sodim and Vialonga, there are no habitual or significant family, professional or business ties between members of the Board of Directors and shareholders in Semapa which own qualifying holdings.
81 21. Organizational or functional charts showing the division of powers between the different corporate boards, committees and/or company departments, including information on delegated powers, in particular with regard to delegation of the day- to-day management of the company.
The following simplified chart shows the organization of Semapa’s different bodies, committees and departments:
GENERAL REMUNERATION COMMITTEE MEETING
CONTROL AND RISK COMMITTEE STATUTORY AUDITOR/ AUDIT BOARD OF INDEPENDENT BOARD DIRECTORS AUDITOR TALENT COMMITTEE
CORPORATE GOVERNANCE COMMITTEE
EXECUTIVE BOARD INVESTOR SUPPORT OFFICE / MARKET RALATIONS REPRESENTATIVE
COMPANY SECRETARY
PLANNING ACCOUNTS LEGAL FINANCIAL TAX AND STRATEGIC AND TAX DEPARTMENT DEPARTMENT DEPARTMENT DEVELOPMENT DEPARTMENT DEPARTMENT
The management of the company is centred on the relationship between the Board of Directors and the Executive Board.
The two bodies were coordinated and kept in contact through the close cooperation between the Chairman of the Board and the executive team and, in particular with the CEO, João Castello Branco, through the availability of the members of the Executive Board to convey all relevant or urgent or requested information on the day-to-day management of the Company, to the non-executive directors, in order to keep them abreast of the Companys life at all times. In addition, meetings of the Board of Directors are called for all strategic decisions regarded as especially important, even if they fall within the scope of the general powers delegated.
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Information requested by the other members of corporate boards is also provided in good time and in an appropriate form by the members of the Executive Board.
In order to assure that information is communicated on a regular basis, the Chief Executive Officer also provides the notices and minutes of meetings of the Executive Board to the Chairman of the Audit Board. The remaining committees and corporate governing bodies also ensure information flows in a timely and appropriate manner and in accordance with their respective operating regulations, by delivering notices and minutes in the necessary and appropriate terms for the other bodies and committees to exercise their legal and statutory powers.
Until 31 December 2020, although duties and responsibilities are not rigidly compartmentalised within the Executive Board, the distribution of functions was as follows:
1st Strategic planning and investment policy, management control, corporate governance, human resources, and talent management, which are the responsibility of the CEO, João Nuno de Sottomayor Pinto de Castello Branco.
2nd Financial, accounting and audit, tax and legal affairs, which are the responsibility of the Director Vítor Paulo Paranhos Pereira
3rd Strategic development and IT, which are the responsibility of the Director Ricardo Miguel dos Santos Pacheco Pires.
Financial, accounting and audit, tax and legal affairs, as well as management planning and control, were the responsibility of Director José Miguel Pereira Gens Paredes until 29 February 2020.
Regarding strategic planning and Investments Policy, and without prejudice to the mentioned office, this is an area that naturally entails more intervention on behalf of the non-executive members and that counts on the substantial involvement of the Chairman of the Board. Non-executive directors should participate in the definition, by the managing body, of the strategy, main policies, business structure and decisions that should be deemed strategic for the company due to their amount or risk, as well as in the assessment of the accomplishment of these actions.
As regards the definition of strategic planning and main policies, the company sought to incorporate and put into practice the Strategic Principles established by the company, which are as follows: i. To achieve growth with added value for shareholders, with a view to sustainable development with a firm social conscience; ii. Promote the development of the communities with which it is related; iii. To develop its Human Resources, providing them with attractive career opportunities in accordance with the ambition and skills demonstrated; and iv. To be ready for business opportunities and to make acquisitions with the potential for generating value.
Based on the aforementioned Strategic Principles, the company has set four Pillars for Sustainability, which together establish the strategic drivers of the company’s performance in this area and of the holding group:
1st Value creation in the business: based on sustainable economic performance and the creation of value for its shareholders, on improving the performance of operations in the various business areas throughout its value chain, on implementing a strategy for the development of non-financial metrics for sustainability, on a management approach founded on the principles of ethics, honesty and integrity, and on a focus on sustained innovation and on research and development of more efficient processes and innovative products.
2nd Valorisation of people: by developing several talent and career management programs, whereby the company lends special emphasis to the way its values (published at https://www.semapa.pt/index.php/en/grupo/missao) are experienced and put into practice, and giving special relevance to the health, safety, and well-being of its employees.
83 3rd Protection of the planet: in view of the existing challenges associated with protecting the planet, the company and the group companies recognise their fundamental role in minimising environmental impacts by adapting their activities and aligning with the European strategy towards a green economy.
4th Involvement with the community: by carrying out activities related to social responsibility with the neighbouring communities, aimed at improving their quality of life and preserving the surrounding environment.
In the scope of sustainability, an ad hoc committee has been set up, with various working groups to address specific matters, which has developed its activity under the supervision of the Executive Board and transversally involving all the group’s companies. As a result of this activity, the company publishes its “Sustainability Report” every year which, from a consolidated perspective, and in response to the legal requirements introduced by Decree Law No. 89/2017 of July 28, provides a detailed analysis of the company’s approach and commitment to sustainability issues. Consequently, by adhering to and fulfilling the aforementioned strategic principles and according to the provisions in the aforementioned report, the company guarantees its long-term success, and with a significant contribution to the community at large.
Regarding the powers of the Executive Board, broad management powers are delegated to the Executive Board, which are largely detailed in the respective act of delegation, and only limited with regard to the matters indicated in article 407(4) of the Companies Code. Powers are specifically delegated for the following: a) To negotiate and resolve to enter into any commercial or civil contract, by public or private act, on the terms and conditions it deems most appropriate, and to take all decisions it sees fit in the performance of these contracts; b) To resolve to issue, sign, draw, accept, endorse, guarantee, protest or carry out any other act in connection with the use of bills or credit instruments; c) To resolve on all routine banking operations, with Portuguese or foreign financial institutions, namely opening, consulting and establishing the form of effecting movements in bank accounts, in all the legally admissible forms; d) To negotiate and resolve to contract and amend loan agreements, with financial institutions or other entities, including the provision of the respective guarantees in cases where the law permits such delegation, all on the terms it sees fit; e) To resolve to acquire, dispose of and encumber assets of all kinds, on the terms and conditions it sees fit, negotiating and resolving on the conclusion for such purposes, by public or private document, of any contractual instrument, and carrying out any accessory or complementary acts which may be necessary for the performance of these contracts; f) To take all decisions and carry out all acts in connection with the exercise by the company of its position as shareholder, namely by appointing its representatives at the General Meetings of companies in which it has holdings and adopting unanimous resolutions in writing; g) To draft the company reports, balance sheets, financial statements and proposals for allocation of profits; h) To take all steps necessary or appropriate in connection with the company’s industrial relations with its employees, namely contracting, dismissing, transferring, defining terms of employment and pay, and revising and amending the same; i) To resolve on representation of the company before any court or mediation or arbitration body, taking all decisions as may be necessary or appropriate in connection with any proceedings pending before the same or to bring the same, and namely to desist, confess or settle; j) To appoint attorneys for the company within the powers delegated to it;
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k) To take all steps necessary or appropriate in connection with existing or planned issues of bonds and commercial paper, including the actual decision to issue; and l) In general, to carry out all acts of day-to-day management in the company, except for those which cannot be delegated under Article 407 (4) of the Companies Code.
The Executive Board is barred from resolving on the following: a) Selection of the Chairman of the Board of Directors; b) Co-option of directors; c) Requests for the call of a General Meeting; d) Annual reports and accounts; e) Provision of warranties and personal or real security by the company; f) Change in registered offices and increases in share capital; and g) Plans for merger, break-up or transformation of the company.
Some of the company’s regular procedures that have always been the practice in the company were standardised, in order to guarantee intervention by the Board of Directors in strategic decisions according to its amounts, high risk or special characteristics.
In the case of the Audit Board, which has the powers established in law and which are further described in item 38 of this report, there are no delegated powers or special areas of responsibility for individual members.
Among other duties, one of the main purposes of the Control and Risk Committee is to detect and control all relevant risks in the Company’s affairs, and the Committee enjoys full powers to pursue this aim, as set out in item 29 of this Report.
The Corporate Governance Committee exists to monitor, on a permanent basis, compliance by the company with corporate governance requirements established in law, regulation and the Articles of Association, and to exercise the other powers detailed in item 29 of this Report.
The Talent Committee makes recommendations and is heard in matters of appointments and evaluations, as described in item 29 of this report.
The functions of the Investor Support Office are detailed in item 56 of this report.
The Company Secretary is appointed by the Board of Directors and has the powers defined in law.
Until the entry into force of Law no. 50/2020, of 25 August, the Remuneration Committee drew up every year - including in 2020 - the remuneration policy statement for its directors and auditors, being obliged, from that date, to draw up a remuneration policy for its directors and auditors. This committee is also responsible for conducting analyses and determining the remuneration of directors, in close collaboration with the Talent Committee.
The Legal Department provides the company with legal advice and is responsible by legal compliance to assure that procedures and proceedings comply with the relevant legislation. The Financial Division is primarily engaged in financial management and planning. The Accounts and Tax Department is mainly responsible for rendering the Company’s accounts and complying with its tax obligations. The Tax directorate, on the other hand, provides tax advice, ensuring compliance with the applicable legislation and preventing unlawful fiscal planning. The Planning and Strategic Development Department is responsible for the group’s planning, budgeting, and business control processes, and must also look into new investments and the group’s strategic planning and development.
85 The governing bodies and internal committees mentioned above are required to exchange between them, in accordance with the legal statutory requirements, all necessary information and documents for the exercise of legal and statutory duties of such bodies and committees, the respective directorates and services helping with drawing up, processing and disseminating such information in an appropriate, strict and timely manner. According to these regulations and other applicable rules, these governing bodies and committees draw up complete minutes of their meetings.
The regulations of the Board of Directors and the audit body also establish, in particular, mechanisms that ensure, within the limits of the legislation and applicable regulations, access of members to employees of the company and all information that is necessary for assessing the Company’s performance, status and development prospects, including without limitation, minutes, documentation supporting the decisions taken, notices and files of the meetings of the Board of Directors and its Executive Board, without prejudice to having access to other documents or persons to request clarifications.
Note that the rules of procedure of the Board of Directors, the Control and Risk Committee and the Audit Board were reviewed in 2020, after the publication of Law No. 50/2020 of August 25 and the 2018 IPCG Corporate Governance Code as amended in 2020.
B) FUNCTIONING
22. Existence of the rules of procedure of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be, and place where these may be consulted.
The Board of Directors has rules of procedure which are published on the company website (https://www.semapa.pt/sites/ default/files/participacoes/Regulamento_CA%20EN.pdf) where they may be consulted.
23. Number of meetings held and attendance record of each member of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be.
The Board of Directors met 12 times in 2020, and attendance by each member (physical attendances or through telematic means) was as follows:
Members present and Members of the Board of Directors Members present (%) represented (%)
Heinz-Peter Elstrodt 100 100 José Antônio do Prado Fay 100 100 João Nuno de Sottomayor Pinto de Castello Branco 100 100 José Miguel Pereira Gens Paredes 100 100 Ricardo Miguel dos Santos Pacheco Pires 100 100 Vítor Paulo Paranhos Pereira 100 100 António Pedro de Carvalho Viana-Baptista 100 100 Carlos Eduardo Coelho Alves 100 100 Filipa Mendes de Almeida de Queiroz Pereira 100 100 Francisco José Melo e Castro Guedes 100 100 Lua Mónica Mendes de Almeida de Queiroz Pereira 100 100 Mafalda Mendes de Almeida de Queiroz Pereira 100 100 Vítor Manuel Galvão Rocha Novais Gonçalves 100 100
The table above specifies the proportion of meetings attended by the directors in the period during which they performed duties.
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24. Indication of the company bodies empowered to assess the performance of executive directors.
The Remuneration Committee determines how the system will work and prepares the framework for the assessment of the executive directors. It is also responsible for the final check to the performance factors and their impact in terms of remuneration, as well as guaranteeing overall coherence.
However, assessment in the strict sense, as the specific appraisal of individual performance, is the responsibility of the team supervisor, as is the case of the members of the Executive Board, and of the Chairman of the Board of Directors, as for the Chief Executive Officer, and in both cases with the participation of other non-executive directors whom the supervisor deems appropriate to involve. The Talent Committee has also been involved in this process since it was set up. It is composed by 5 non-executive members of the Board of Directors, who oversee the board performance evaluation system and the distribution of the company’s remuneration, which means that the Board of Directors does not need to be involved in the assessment of the executive directors.
Consequently, in 2020 and in relation to the 2019 financial year, the Talent Committee gave its opinion on the individual performance proposals for the members of the Executive Board issued by the respective CEO, and the performance proposals of the Chairman of the Board of Directors for the CEO, communicating his opinion to the Remuneration Committee.
In accordance with the Regulations of the Board of Directors and the Regulations of the Talent Committee, the Board of Directors, for its part, assisted by the Talent Committee, shall annually evaluate its performance as well as the performance of its committees and executive directors, taking into account the implementation of the company’s strategic and budget plans, risk management, the internal functioning and the contribution of each member to these objectives, as well as the relationship with the company’s other bodies and committees. The Talent Committee monitors the overall assessment of the Board of Directors’ performance, as provided by its regulation.
The assessment of the performance of the executive directors and the self-assessment of the performance of the Board of Directors and its committees in 2019 were conducted in 2020, and the relevant performances in the 2020 financial year will be assessed in 2021, as described above.
25. Predetermined criteria for assessing the performance of executive directors.
The criteria for assessing the performance of executive directors are the criteria defined in item 2 of chapter VI of the Remuneration Policy Statement for setting the variable remuneration component. Such criteria are met through a system of KPIs, which include quantitative and qualitative, individual and collective, components. EBITDA, net earnings and cash flow are the quantitative elements jointly considered.
26. Availability of each of the members of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be, indicating office held simultaneously in other companies, inside and outside the group, and other relevant activities carried on by the members of these bodies during the period.
The members of the Board of Directors have the appropriate time available to perform the duties entrusted to them, and the other activities carried on by the executive members during the period, outside the business group to which Semapa belongs, are negligible when compared to performance of their duties in the companies and other companies in the same business group.
87 Besides the activities mentioned under item 19, the members of the Board of Directors occupy the positions detailed below:
JOSÉ ANTÔNIO DO PRADO FAY
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: CAMIL ALIMENTOS, S.A. Director CIMIGEST, SGPS, S.A. Chairman of the Board of Directors1 CIMO – Gestão de Participações, SGPS S.A. Chairman of the Board of Directors 2 SÃO SALVADOR ALIMENTOS S. A. Director3 SECIL - Companhia Geral de Cal e Cimento, S.A. Director4 SODIM, SGPS, S.A. Chairman of the Board of Directors5 SUPERBAC Biotechnology Solutions Director6 SUPREMO CIMENTOS, S.A. Director7
JOÃO NUNO DE SOTTOMAYOR PINTO DE CASTELLO BRANCO
Office held in other companies belonging to the same group as Semapa: APHELION, S.A. Chairman of the Board of Directors SEMAPA NEXT, S.A. Chairman of the Board of Directors
Office held in other companies: AEM - Ass. de Emp. Emitentes de Valores Cotados em Mercado Member of the General Board BCSD - Conselho Empresarial para o Desenvolvimento Sustentável Chairman CELPA Associação da Indústria Papeleira President of the General Council, in representation of Navigator Paper Figueira, S.A.8 CEPI Confederation of European Paper Industries Member of the Board in representation of CELPA Associação da Indústria Papeleira9 CIMIGEST, SGPS, S.A. Director10 FOREST SOLUTIONS GROUP Co-Chair11 FÓRUM PARA A COMPETITIVIDADE Member of the Governing Board THE NAVIGATOR COMPANY, S.A. Chairman of the Board of Directors SECIL - Companhia Geral de Cal e Cimento, S.A. Chairman of the Board of Directors SODIM, SGPS, S.A. Director WBCSD - World Business Council of Sustainable Development Member of the Executive Board
RICARDO MIGUEL DOS SANTOS PACHECO PIRES
Office held in other companies belonging to the same group as Semapa: ABAPOR - Comércio e Indústria de Carnes, S.A. Chairman of the Board of Directors12 APHELION, S.A. Director BIOLOGICAL - Gestão de Resíduos Industriais, Lda. Manager13
1 Start of the term of office on 01 August 2020. Company incorporated in Sodim, SGPS, S.A. on 03 September 2020. 2 Start of the term of office on 31 July 2020. 3 Start of the term of office on 25 November 2020. 4 In office until 31 August 2020. 5 Start of the term of office on 01 August 2020. 6 Start of the term of office on 10 March 2020. 7 In office until 01 September 2020. 8 In office until 15 June 2020. 9 In office until 15 June 2020. 10 Company incorporated in Sodim, SGPS, S.A. on 03 September 2020. 11 In office until April 2020. 12 Start of the term of office on 01 March 2020. 13 Start of the term of office on 01 March 2020.
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ETSA LOG, S.A. Chairman of the Board of Directors14 ETSA - Investimentos, SGPS, S.A. Chairman of the Board of Directors15 I.T.S. - Indústria Transformadora de Subprodutos, S.A. Chairman of the Board of Directors16 SEBOL - Comércio e Indústria de Sebo, S.A. Chairman of the Board of Directors17 SEMAPA Inversiones, S.L. Director18 SEMAPA NEXT, S.A. Managing Director
Office held in other companies: CIMIGEST, SGPS, S.A. Director19 CIMO Gestão de Participações, SGPS S.A. Director PYRUS AGRICULTURAL LLC Director PYRUS INVESTMENTS LLC Director PYRUS REAL ESTATE LLC Director SECIL - Companhia Geral de Cal e Cimento, S.A. Director SODIM, SGPS, S.A. Director THE NAVIGATOR COMPANY, S.A. Director UPSIS, S.A. Director
VÍTOR PAULO PARANHOS PEREIRA
Office held in other companies belonging to the same group as Semapa: APHELION, S.A. Director20 CELCIMO, S.L. Chairman of the Board of Directors21 SEMAPA Inversiones, S.L. Chairman of the Board of Directors22
Office held in other companies: ANTASOBRAL - Sociedade Agropecuária, S.A. Director CAPITAL HOTELS BV Director23 CAPITAL HOTELS - Sociedade de Investimentos e Gestão, S.A. Director CIMO – Gestão de Participações, SGPS S.A. Director24 GALERIAS RITZ, S.A. Chairman of the Board of Directors HOTEL RITZ, S.A. Director PARQUE RITZ, S.A. Chairman of the Board of Directors REFUNDOS – Sociedade Gestora de Fundos de Investimento Imobiliário, S.A. Chairman of the Board of Directors25 SECIL - Companhia Geral de Cal e Cimento, S.A. Director26 SODIM, SGPS, S.A. Director27 SOCIEDADE AGRÍCOLA da HERDADE dos FIDALGOS, Unip., Lda Manager SONAGI, SGPS, S.A. Chairman of the Board of Directors28 SONAGI Imobiliária, S.A. Chairman of the Board of Directors THE NAVIGATOR COMPANY, S.A. Director29 ASSOCIAÇÃO DA HOTELARIA DE PORTUGAL Chairman of the General Meeting
14 Start of the term of office on 01 March 2020. 15 Start of the term of office on 01 March 2020. 16 Start of the term of office on 01 March 2020. 17 Start of the term of office on 01 March 2020. 18 Start of the term of office on 28 August 2020. 19 Company incorporated in Sodim, SGPS, S.A. on 03 September 2020. 20 Start of the term of office on 01 March 2020. 21 Start of the term of office on 01 March 2020. 22 Start of the term of office on 28 August 2020. 23 Company incorporated into Capital Hotels - Sociedade de Investimentos e Gestão, S.A., on 23 September 2020. 24 Start of the term of office on 31 July 2020. 25 In office until 18 May 2020. 26 Start of the term of office on 28 February 2020. 27 Start of the term of office on 01 March 2020. 28 Served as Director until 3 June 2020, having taken office as Chairman after that date. 29 Start of the term of office on 01 March 2020.
89 ANTÓNIO PEDRO DE CARVALHO VIANA-BAPTISTA
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: ALTER VENTURE PARTNERS G.P., SARL Director ATENTO, S.A. Director JERÓNIMO MARTINS SGPS, S.A. Director
CARLOS EDUARDO COELHO ALVES
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa.
Office held in other companies: SECIL - Companhia Geral de Cal e Cimento, S.A. Director30
FILIPA MENDES DE ALMEIDA DE QUEIROZ PEREIRA
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: ABSTRACTREASON, LDA. Manager BESTWEB, LDA. Manager CAPITAL HOTELS Sociedade de Investimento e Gestão S.A. Chairman of the Board of Directors CIMIGEST, SGPS, S.A. Director31 CIMO Gestão de Participações, SGPS S.A. Director32 FUNDAÇÃO NOSSA SENHORA DO BOM SUCESSO President of the General Council HOTEL RITZ, S.A. Director LAGUM, LDA. Manager SODIM, SGPS, S.A. Director REALTRAJE, LDA. Manager REPRESENTAÇÕES CARVALHAL, S.A. Director
FRANCISCO JOSÉ MELO E CASTRO GUEDES
Office held in other companies belonging to the same group as Semapa: CELCIMO, S.L. Director SEMAPA Inversiones, S.L. Chairman of the Board of Directors33
Office held in other companies: CIMENTS DE SIBLINE S.A.L. Director SECIL – Companhia Geral de Cal e Cimento, S.A. Director34
30 Start of the term of office on 01 October 2020. 31 Company incorporated in Sodim, SGPS, S.A. on 03 September 2020. 32 Start of the term of office on 31 July 2020. 33 In office until 28 August 2020. 34 In office until 30 June 2020.
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LUA MÓNICA MENDES DE ALMEIDA DE QUEIROZ PEREIRA
Office held in other companies belonging to the same group as Semapa: SEMAPA NEXT, S.A Director
Office held in other companies: CIMIGEST, SGPS, S.A. Director35 CIMO Gestão de Participações, SGPS S.A. Director36 ECOLUA, LDA. Manager37 ECO MALHADA, Lda. Manager SODIM, SGPS, S.A. Director REPRESENTAÇÕES CARVALHAL, S.A. Director
MAFALDA MENDES DE ALMEIDA DE QUEIROZ PEREIRA
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: CIMIGEST, SGPS, S.A. Director38 CIMO Gestão de Participações, SGPS S.A. Director39 MONTE DA PRAIA RECURSOS NATURAIS, S.A. Director40 SOCIEDADE AGRÍCOLA da HERDADE dos FIDALGOS, Unip., Lda Manager SODIM, SGPS, S.A. Director SONAGI, SGPS, S.A. Director REPRESENTAÇÕES CARVALHAL, S.A. Chairman of the Board of Directors
VÍTOR MANUEL GALVÃO ROCHA NOVAIS GONÇALVES
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: BELDEVELOPMENT, S.A. Director EXTRASEARCH, SGPS, S.A. Director EUROMIDLANDS - Sociedade Imobiliária, Lda. Manager MAGALHÃES E GONÇALVES Consultoria e Gestão, Lda. Manager PRUDENTARBÍTRIO, Lda. Manager41 QUALQUER PONTO Sociedade Imobiliária, S.A. Director42 QUALQUER PONTO Sociedade Imobiliária, Lda. Manager43 QUALQUER PRUMO Sociedade Imobiliária, Lda. Manager TERRAPONDERADA, Lda. Manager THE NAVIGATOR COMPANY, S.A. Director VANGUARDINTEGRAL, Lda. Manager VRES – Vision Real Estate Solutions, S.A. Director ZOOM INVESTMENT, SGPS, S.A. Director ZOOM INVESTMENT TURISMO, S.A. Director 2FOR VENTURE, SGPS, Lda. Manager
35 Company incorporated in Sodim, SGPS, S.A. on 03 September 2020. 36 Start of the term of office on 31 July 2020. 37 Company dissolved on 02 January 2020. 38 Company incorporated in Sodim, SGPS, S.A. on 03 September 2020. 39 Start of the term of office on 31 July 2020. 40 Start of the term of office on 02 December 2020. 41 Start of the term of office on 19 November 2020. 42 In office until 05 May 2020. 43 Start of the term of office on 19 November 2020.
91 According to the regulation of the Board of Directors, the directors of the Executive Board may not perform executive functions in entities outside of the Company’s group, unless the activity of such entities is found to be ancillary or complementary to the group’s activity or is not very time-consuming, the executive directors not being able to perform duties in other companies that do not fulfil the aforementioned criteria.
The same regulation provides that the directors who are not part of the Executive Board may perform management functions (either executive or not) in entities outside of the company’s group, where such companies do not carry out activities that compete with that of the company or of directly or indirectly participated companies, and the Chairman of the Board of Directors must be notified before the start of such functions. The non-executive directors of the company do not perform duties in other companies which do not meet the requirements mentioned above.
C) COMMITTEES BELONGING TO THE MANAGEMENT OR SUPERVISORY BODIES AND MANAGING DIRECTORS
27. Identification of committees set up by the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be, and place where the rules of procedure may be consulted
The following committees exist in the company within the Board of Directors: Executive Board, Control and Risk Committee, Corporate Governance Committee and Talent Committee.
The Control and Risk Committee, the Corporate Governance Committee and the Talent Committee have rules of procedure, which are published on the company website (https://www.semapa.pt/index.php/en/investidores/governo/estatutos), where they may be looked up.
Given its nature, composition and origin from the Board of Directors, which has its own regulation on autonomous functioning and specific rules on the organisation and functioning of its Executive Board, the CGC does not have an autonomous regulation. Consequently, the following operating rules provided by said regulation and the act delegating power shall apply: a) The Executive Board shall meet when convened by the Chairman or any other two members; b) The members of the Executive Board may be represented by another member, and each person may not represent more than one member; c) The Chief Executive Officer has a casting vote; d) Absent members may cast written votes, and e) The Chief Executive Officer is particularly responsible for reporting and communicating with the Board of Directors.
28. Composition, if applicable, of the executive board and/or identification of the managing director(s).
The following were the members of the Executive Board in 2020:
• João Nuno de Sottomayor Pinto de Castello Branco, who chairs the board; • José Miguel Pereira Gens Paredes; • Vítor Paulo Paranhos Pereira, and • Ricardo Miguel dos Santos Pacheco Pires.
As mentioned above, and with regard to changes that occurred in 2020, José Miguel Paredes served as executive director until 29 February.
João Castello Branco, José Miguel Paredes, and Ricardo Pires were appointed members of the Executive Board by resolution of the Board of Directors on 05 June 2018, and Vítor Paranhos Pereira was appointed executive director by resolution of the Board of Directors on 31 January 2020, with effect from 01 March 2020.
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29. Indication of the powers of each of the committees created and summary of the activities carried on the exercise of these responsibilities.
EXECUTIVE BOARD:
The powers of the Executive Board are described in item 21 of this report.
The Executive Board is the company’s executive body, which has performed its duties in the scope of the powers entrusted to it by the Board of Directors. The Board meets on a regular basis and whenever necessary in the light of ongoing business and monitoring of the company’s activity. In 2020 it held 42 meetings. These meetings are attended by the members of the Executive Board, as well as the Company Secretary, Rui Gouveia. When the matters to be discussed so require, non-executive directors, directors of the group’s companies and some of the Company’s managers may also take part in the meetings.
CONTROL AND RISK COMMITTEE:
In view of implementing its purpose to detect and control all relevant risks in the company’s affairs, in particular financial risks, the Control and Risk Committee has the following responsibilities and powers: a) To monitor the Company’s business affairs, with integrated and permanent analysis of the risks associated with these affairs; b) To propose and follow through the implementation of specific measures and procedures relating to the control and reduction of the Company’s business risks, with a view to perfecting the internal control system, including in particular the risk management function; c) To check implementation of the adjustments to the internal control management system, and in particular to the risk management function, proposed by the Audit Board; d) To propose the discussion, alteration and introduction of new procedures to improve the detection, control and management of risks inherent to the company’s operations.
The Control and Risk Committee shall prepare for approval by the Board of Directors the company’s risk policy for each fiscal year, which shall identify, without limiting: a) The main risks to which the company is subject in the development of its activities and limits on risk-taking for the company; b) The likelihood of such relevant risks and their impact on the company’s operations; c) The necessary tools and measures for the mitigation of the risks identified as relevant for the company’s activities.
The Control and Risk Committee met six times in 2020 and on 31 December 2020 it included Carlos Eduardo Coelho Alves, the Chairman, and Vítor Paulo Paranhos Pereira and Margarida Isabel Feijão Antunes Rebocho, Members, being Carlos Alves and Vítor Paranhos Pereira also directors of the company. It should be noted that in 2020 the following changes occurred in the composition of this committee: José Miguel Pereira Gens Paredes and Gonçalo de Castro Salazar Leite, having resigned as Members, in 14 January 2020 and 19 March 2020, respectively, and the appointment on 20 March 2020 of Vítor Paranhos Pereira and Margarida Rebocho, to replace the former.
This committee conducted the activities, ensured the monitoring and made all the verifications corresponding to its duties, and held joint meetings with the members of the Audit Board, with the support of the Financial Department and the Accounts and Tax Department.
93 CORPORATE GOVERNANCE COMMITTEE:
The Corporate Governance Committee monitors on a continuous basis the Company’s compliance with the provisions of the law, regulations and articles of association applicable to corporate governance and it is responsible for critical analysis of the company’s practices and procedures in the field of corporate governance and for proposing for debate, altering and introducing new procedures designed to improve the structure and governance of the Company. The Corporate Governance Committee is also required to assess annually corporate governance and submit to the Board of Directors any proposals as it sees fit.
The Corporate Governance Committee met three times in the financial year 2020. Until 30 July 2020, the members of the Corporate Governance Committee were Francisco José Melo and Castro Guedes, the Chairman, Heinz-Peter Elstrodt, and Rui Tiago Trindade Ramos Gouveia, Members, and company director, Chairman of the Board of Directors and Secretary, respectively. Following the resignation of Heinz-Peter Elstrodt as member of Corporate Governance Committee, José Antônio do Prado Fay, Chairman of the Board of Directors of the company, was appointed member of the Corporate Governance Committee on 30 July 2020.
The Corporate Governance Committee conducted its oversight and corporate governance assessment activities throughout the financial year. It also participated actively in the drafting of the Annual Report on Corporate Governance, for which it obtained the necessary information, particularly through its member Rui Gouveia, who is the Legal Director of the company, and ongoing contact and attendance of several meetings by the Chief Executive Officer and a member of the Legal Department.
TALENT COMMITTEE:
The Talent Committee functions in compliance with the provisions of its regulations and is expected to perform the following duties in relation to the governing bodies: a) Concerning appointments:
i. Assisting the Board of Directors in identifying and assessing the suitability of the profile, knowledge and curriculum of members of the governing bodies to be appointed, namely, the appointment by co-option to perform the duties of a member of the Board of Directors of the company, and the nomination of directors who will perform executive duties;
ii. Provide the terms of reference available and foster, to the extent of its powers, transparent selection processes that include effective mechanisms of identification of potential candidates, and that those chosen for proposal are those who present a higher degree of merit, who are best suited to the demands of the functions to be carried out, and who will best promote, within the organisation, a suitable diversity, including gender diversity; and
iii. Whenever deemed appropriate, to know and monitor the processes of selection of potential candidates for the performance of executive management duties in subsidiaries of the group, in cases where the company intends to present the respective elective proposal. b) Concerning evaluation:
i. Monitor the management performance assessment system and the allocation of the company’s remuneration;
ii. To issue an opinion on the proposals for the annual individual assessment of the performance of the members of the Executive Board, issued by the respective Chairman and on the assessment of the later issued by the Chairman of the Board of Directors; and
iii. Monitor the overall assessment of the performance of the Board of Directors as a body, taking into account compliance with the company’s strategic plan and budget, risk management, its internal functioning and the contribution of each member to this end.
The Commission is also responsible for talent management: (I) monitor and issue recommendations on internal policies and procedures relating to the group’s talent management; and (ii) periodically assess the need and availability of talent in the group and recommend appropriate actions to ensure the group’s ability to meet the arising challenges.
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The Talent Committee met fifteen times in the financial year 2020. Until 30 July 2020, the members of the Talent Committee were Heinz-Peter Elstrodt, Chairman, Carlos Eduardo Coelho Alves, Filipa Mendes de Almeida de Queiroz Pereira, José Antônio do Prado Fay, Lua Mónica Mendes de Almeida de Queiroz Pereira and Mafalda Mendes de Almeida de Queiroz Pereira, as Members, all of whom are non-executive directors of the company. Following the resignation of Heinz-Peter Elstrodt, as Chairman of the Talent Committee, José Antônio do Prado Fay replaced him as Chairman of the Committee on 30 July 2020.
The remuneration process, which is overseen by the Talent Committee, is the duty of the company’s Remuneration Committee, set up under Article 399 of the Commercial Companies Code, with powers, namely, to prepare the statement on the remuneration policy of directors - after Law no. 50/2020 of 25 August entered into force and to analyse and fix the remuneration of the directors.
III. AUDITING
A) COMPOSITION
30. Identification of the supervisory body corresponding to the model adopted.
The Company’s affairs are supervised by the Audit Board and the Statutory Auditor, in accordance with Article 413.1 b) of the Companies Code.
31. Composition, as applicable, of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, indicating the minimum and maximum numbers of members and duration of their term of office, as established in the Articles of Association, number of full members, date of first appointment and end date of the term of office of each member; reference may be made to the item in the report where this information is contained in accordance with paragraph 17.
As established in the Articles of Association, the Audit Board consists of three to five full members, one of whom serves as Chairman with a casting vote, and of one or two alternate members, depending on whether there are three or more full members, all holding office for four-year terms.
Members of the Audit Board Date of first appointment and end date of term of office
José Manuel Oliveira Vitorino (Chairman) 2014-2021 Gonçalo Nuno Palha Gaio Picão Caldeira (Full member) 2006-2021 Maria da Graça Torres Ferreira da Cunha Gonçalves (Full member) 2018-2021 Ana Isabel Moraes Nobre de Amaral Marques (Alternate member) 2016-2021
The company considers that it has a sufficient number of members of the Audit Board for its size and the complexity of the risks inherent in its activity, thus ensuring the efficient performance of its duties. This judgment on the suitability of the proportion took into account, in particular, the company’s activities and its nature as a holding company, the stability of the shareholder structure, the diversity of skills and the availability of the members of the Audit Board for the performance of their duties, namely, through close collaboration with the other bodies and committees of the company and the External Auditor and the Statutory Auditor.
32. Identification, as applicable, of the members of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs who are deemed independent, in accordance with Article 414.5 of the Companies Code; reference may be made to the item in the report where this information is contained in accordance with paragraph 18.
The members of the audit board, José Manuel Oliveira Vitorino (Chairman) and Maria da Graça Torres Ferreira da Cunha Gonçalves are deemed independent by Semapa, in accordance with criteria laid down in Article 414.5 of the Companies Code. The former is currently in his second term and the latter in her first term in office.
Following the appointment of Gonçalo Nuno Palha Gaio Picão Caldeira by the Annual General Meeting on 24 May 2018 for a fourth term as member of the Audit Board, he became a non-independent member of this governing body, in accordance with Article 414 (5b) of the Portuguese Commercial Companies Code.
95 33. Professional qualifications, as applicable, of each of the members of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs and other relevant biographical details; reference may be made to the item in the report where this information is contained in accordance with paragraph 21.
JOSÉ MANUEL OLIVEIRA VITORINO
José Manuel Vitorino has a degree in Corporate Organisation and Management by Instituto Superior de Economia of Lisbon University. He is a qualified Statutory Auditor and certified by the executive training programme of Universidade Nova de Lisboa. He was an Assistant Professor at the School of Economics of Coimbra University until 1980, after which he joined PricewaterhouseCoopers and performed functions in auditing and financial consultancy, in national and foreign companies and groups, and in projects by taking part in international teams. He had performed Partner duties for several years when he left PricewaterhouseCoopers in 2013, after reaching the default retirement age. He was the Chairman of the Audit Board of Novo Banco, S.A. until 2017 and currently is member of the Audit Board of ANA Aeroportos de Portugal, S.A. He is a member of the Audit Board of The Navigator Company since 2015, and of Semapa and Secil since 2016, and became Chairman of these supervisory bodies in 2018.
GONÇALO NUNO PALHA GAIO PICÃO CALDEIRA
Gonçalo Picão Caldeira has a degree in Law and joined the Portuguese Bar Association in 1991, after completing a legal internship. He holds an MBA from Universidade Nova de Lisboa and attended a course in real estate management and evaluation from ISEG. Gonçalo Caldeira has performed management and property development functions in family-owned companies since 2004. He collaborated previously with BCP Group (1992-1998) and Sorel Group (October 1998 to March 2002). He also worked for Semapa from April 2002 to February 2004. He has been a member of the Audit Board of Semapa since 2006, and of The Navigator Company and Secil since 2007 and 2013, respectively.
MARIA DA GRAÇA TORRES FERREIRA DA CUNHA GONÇALVES
Maria da Graça da Cunha Gonçalves holds a Degree in Business Organisation and Management from Instituto de Ciências do Trabalho e da Empresa (ISCTE), obtained in 1978. She is a qualified Statutory Auditor. She performed duties in General and Cost Accounting and Planning and Financial Analysis at Magnetic Peripherals Inc. Portugal (Control Data Corporation) until 1985, and Financial Analyst at Shell Portuguesa, S.A. from 1985 to 1989. She served as CFO, from 1989 to 1995 at United Distillers Comp. Velha, Lda. and at ITT Automotive Europe GmbH. She was Back Office Director at Pernod Ricard Portugal from 1995 to 2015. She is a member of the Audit Board of Semapa, The Navigator Company and Secil since 2018.
B) FUNCTIONING
34. Existence and place where the rules of procedure may be consulted for the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, as the case may be; reference may be made to the item in the report where this information is contained in accordance with paragraph 22.
The Audit Board has rules of procedure which are published on the company website (https://www.semapa.pt/sites/default/ files/participacoes/Regulamento_CF_EN.pdf), where they are made available.
35. Number of meetings held and rate of attendance at meetings of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, as the case may be; reference may be made to the item in the report where this information is contained in accordance with paragraph 23.
In the financial year 2020, the Audit Board met 20 times, with members present at all meetings (physical presence or through telematic means) for the period during which they performed duties.
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36. Availability of each of the members of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, as the case may be, indicating office held simultaneously in other companies, inside and outside the group, and other relevant activities carried on by the members of these bodies during the period; reference may be made to the item in the report where this information is contained in accordance with paragraph 26.
The members of the Audit Board have the appropriate time available to perform the duties entrusted to them.
Besides the activities mentioned under item 33., the members of the Audit Board perform the duties detailed below:
JOSÉ MANUEL OLIVEIRA VITORINO
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: ANA Aeroportos de Portugal, S.A. Member of the Audit Board SECIL – Companhia Geral de Cal e Cimento, S.A. Chairman of the Audit Board THE NAVIGATOR COMPANY, S.A. Chairman of the Audit Board
GONÇALO NUNO PALHA GAIO PICÃO CALDEIRA
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: LINHA DO HORIZONTE Investimentos Imobiliários, Lda. Manager LOFTMANIA Gestão Imobiliária, Lda. Manager SECIL – Companhia Geral de Cal e Cimento, S.A. Member of the Audit Board THE NAVIGATOR COMPANY, S.A. Member of the Audit Board
MARIA DA GRAÇA TORRES FERREIRA DA CUNHA GONÇALVES
Office held in other companies belonging to the same group as Semapa: No office held in other companies belonging to the same group as Semapa
Office held in other companies: SECIL – Companhia Geral de Cal e Cimento, S.A. Member of the Audit Board THE NAVIGATOR COMPANY, S.A. Member of the Audit Board
C) POWERS AND RESPONSIBILITIES
37. Description of the procedures and criteria applicable to the work of the supervisory body for the purposes of contracting additional services from the external auditor.
The Audit Board analyses the non-audit services and the proposals submitted by the external auditor and the Statutory Auditor for provision of the same as transmitted to them by the directors, seeking to safeguard, essentially, that the independence and impartiality of the external auditor and the Statutory Auditor needed for the provision of audit services is not undermined and that the additional services are provided to a high standard of quality and independence.
Note that such analysis by the Audit Board is conducted following the rules laid down in the new Regulation of the Register of Auditors, as adopted by Law no. 140/2015 of 7 September, and the internal procedures established to guarantee that the new legal provisions are fulfilled.
97 38. Other duties of the supervisory bodies and, if applicable, of the Committee for Financial Affairs.
As stated above, the Audit Board has the duties established in law, in particular those stated in Article 420 of the Companies Code, as well as those indicated in the Rules of Procedure of the Audit Board, which include: a) To supervise the management of the company, including, in this regard, an annual assessment of the budget, the internal operation of the Board of Directors and its committees, and the relation between the different corporate bodies and committees of the company; b) To ensure compliance with the law and the articles of association; c) To check that books, accounting records and the respective supporting documents are in order; d) To verify, when it deems to be appropriate and as it sees fit, the state of cash and inventories of any type of goods or assets belonging to the company or received by the same as security, deposit or on another basis; e) To verify the accuracy of financial reporting; f) To verify that the accounting policies and valuation criteria adopted by the Company lead to a correct valuation of the company’s assets and results; g) To draw up an annual report on its audit activities and to issue its opinion on the report, accounts and motions submitted by the Directors; h) To convene the General Meeting when the Chairman of the Meeting fails to do so; i) To evaluate and issue its opinion on the strategic lines and the risk policy prior to their final approval by the Board of Directors; j) To supervise and assess the effectiveness of the internal control system, understanding the risk management, compliance and internal audit functions, if any, proposing the adjustments deemed to be necessary; k) To issue its opinion on the work plans and resources allocated to the internal control system, including the risk management, compliance and internal audit functions, if any, proposing the adjustments deemed to be necessary; l) To receive reports of irregularities (whistleblowing) submitted by shareholders, collaborators or others; m) To contract the provision of services by experts who assist one or more of its members in the exercise of their functions, which experts shall be contracted and remunerated in line with the importance of the matters entrusted to them and the economic situation of the company; n) To supervise the appropriateness of the procedure for preparation and disclosure of financial information by the Board of Directors, including the adequacy of the accounting policies, estimates, evaluations, relevant disclosures and a consistent implementation thereof in each year, that shall be fully documented and communicated; o) To select the statutory audit firms to be proposed to the General Meeting and justifiably recommend its preference for such firm and propose the respective fees; the selection process shall begin with invitations addressed by the company to audit firms identified as reference in the provisioning of statutory audit services, which, in turn, submit their bids for the internal analysis of the company, in accordance with the following selection criteria:
i. Quality of the bids received;
ii. Knowledge of the sectors in which the Semapa Group operates;
iii. Technical quality and seniority of the experts that make up the proposed teams; and
iv. Financial conditions presented by each entity.
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p) To propose to the General Meeting the dismissal of the statutory auditor or the termination of the services provision agreement whenever there are justifiable grounds for that purpose; q) To supervise the auditing of the company’s financial statements and reports; r) To confirm if the disclosed report on the corporate governance structure and practices includes the information listed in Article 245‐A of the Portuguese Securities Code; s) To supervise the independence of the statutory auditor, namely with regard to the provision of additional services, and assess yearly the work carried out by the statutory auditor and its suitability for the performance of the tasks assigned to it; t) To issue a previous and binding opinion on the Regulation on Conflicts of Interests and Related Party Transactions to be drawn up and approved by the Board of Directors or, in the absence of such Regulation, on the definition by the Board as to whether the transactions the company carries out with related parties are conducted within the scope of the company's current activity and under market conditions; u) To issue, within a reasonable time, a prior opinion on any business with related parties that is not carried out within the scope of the company’s current activity and under market conditions; v) To check that related party transactions carried out by the company are conducted within the scope of the company's current activity and under market conditions; w) To monitor the process for preparation and disclosure of the financial information and submit recommendations or proposals to ensure their integrity; x) To supervise the effectiveness of the internal quality control and risk management systems and, if applicable, of the internal audit, with regard to the procedure for preparing and disclosing financial information, while preserving its independence; y) To monitor the statutory audit of annual individual and consolidated accounts, namely the execution thereof; z) To check and monitor the audit firm's independence in the exercise of its statutory audit activity or in the provision of other legally permitted services, as defined in the applicable law and regulations, by means of (i) the statement, during the audit firm’s selection process, ensuring that the company has an internal mechanism guaranteeing independence and prevention of conflicts of interest, which it implements, (ii) the proof provided regularly by the audit firm that such internal mechanisms are adequate and comply with the applicable laws and regulations; (iii) by obtaining an annual declaration of its independence; (iv) the annual reporting on the separate audit services that have been provided; (v) the reasoned proposal on the possible extension of the statutory audit firm's functions beyond the maximum legal period, with consideration of the respective conditions of independence and the advantages and costs associated with its replacement, (vi) the communication by the audit firm regarding the exceeding of the 6 fees threshold, and (vii) the joint analysis of possible threats to its independence, and on the application of mitigation safeguards; aa) To check that the proposals for the provision of non-audit services submitted by the audit firm do not fall within the scope of the non-audit services that are not permitted and ensure that the requirements for their delivery are met, including the assessment with regard to the maintenance of independence and the prevention of conflicts of interest and the adequacy of the services to be provided; under the terms and for the purposes of this subparagraph, non-audit services which as such are not allowed under the applicable laws and regulations in this area, in particular Article 77(8) of the Statutes of the Association of Statutory Auditors (approved by Law 140/2015, of 7 September), may not be provided; and ab) To perform any other duties established in law or the articles of association.
99 The Audit Board is also the main point of contact with the External Auditor and the Statutory Auditor, with direct access to and knowledge of his work. The company believes that this direct supervision by the Audit Board is possible, without interference from the Board of Directors, in relation to the work carried on by the External Auditor and the Statutory Auditor, provided that it does not undermine a prompt and adequate information of the management body, which has ultimate responsibility for the company’s affairs and financial statements. Complying with this principle, the External Auditor and Statutory Auditor’s reports are addressed to the Audit Board and discussed at joint meetings of this board with a member of the Board of Directors, whom the Audit Board informs about the findings of the accounts audit, and the Audit Board ensures that the necessary conditions are in place in the Company for the provision of audit services. The Audit Board is further in charge of suggesting and monitoring, with the support of the Company’s internal services, the External Auditor and Statutory Auditor’s pay.
The Statutory Auditor also cooperates with the Audit Board to provide, immediately and in accordance with applicable legal and regulatory terms, information on irregularities relevant to the performance of the Audit Board’s duties that it has detected, as well as any difficulties arising from the performance of his duties.
Pursuant to the rules of procedure of the Audit Board, the Statutory Auditor and the company shall maintain permanent and adequate channels of communication, namely through regular meetings with the management, the Audit Board and the services and departments with responsibilities in the areas concerned and with the consequent discussion and analysis of all information that may be pertinent in the exercise of the corresponding activity.
IV. STATUTORY AUDITOR
39. Identification of the statutory audit firm and the partner and statutory auditor representing the same.
STATUTORY AUDITOR
Full: KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. represented by Paulo Alexandre Martins Quintas Paixão (ROC)
Alternate: Vitor Manuel da Cunha Ribeirinho (ROC)
40. Indication of the consecutive number of years for which the statutory audit firm has held office in the company and/or group.
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. has held office with the company since 2018.
41. Description of other services provided by the statutory auditor to the company.
In addition to legal auditing services, KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. has provided the Company with other authorised services.
V. EXTERNAL AUDITOR
42. Identification of the external auditor appointed for the purposes of Article 8 and the partner and statutory auditor representing such firm in the discharge of these duties, together with their respective registration number with the Securities Market Commission.
The company’s external auditor and its representative are indicated in item 39., and KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. is registered with the Securities Market Commission under number 20161489.
43. Indication of the consecutive number of years for which the external auditor and the respective partner and statutory auditor representing the same in the discharge of these duties has held office in the company and/or group.
The external auditor is the statutory auditor KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A., represented by partner Paulo Alexandre Martins Quintas Paixão (ROC), both having held office with the Company since 2018.
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44. Policy on rotation of the external auditor and the respective partner and statutory auditor representing the same in the carrying out of these duties, and the respective frequency of rotation.
The Regulation of the Register of Auditors, as adopted by Law no. 140/2015 of 7 September, entered into force on 1 January 2016, and governs the new applicable laws that require the rotation of the auditors in companies of interest for society, like Semapa, while, previously, the company had no policy that required the rotation of the External Auditor, the Statutory Auditor or their representative.
In compliance with the new legal framework, and considering that PricewaterhouseCoopers & Associados – SROC, Lda. reached the maximum time limit of its functions as statutory auditors, in 2017 the Audit Board carried out, with the support of the administrations and services of the Semapa group companies involved, the process of selection of the statutory auditors for the 2018-2021 term, which was open to several entities. The bids submitted were analysed and assessed by the Audit Board according to the criteria laid down in the selection process.
As a result of the selection process, the Audit Board recommended and put forward to the shareholders the selection of KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A. as external auditor, and the proposal was adopted by the shareholders at the General Meeting.
45. Indication of the body responsible for assessing the external auditor and the intervals at which this assessment is conducted.
As part of its supervisory work and auditing of the Company’s accounts, the Audit Board assesses the external auditor and the Statutory Auditor on an ongoing basis, particularly under the preparation of its Report and Opinion on the annual accounts.
46. Identification of work, other than audit work, carried out by the external auditor for the company and/or companies in a controlling relationship with it, and indication of the internal procedures for approval of the contracting of these services and indication of the reasons for contracting them.
The services delivered by the external auditor and the Statutory Auditor other than audit work have always been approved by the Audit Board, in compliance with the applicable laws and internal procedures set up for this purpose.
These services consist essentially of support services to safeguard compliance with legal or contractual obligations laid down in the new legal framework provided by the new Regulation of the Register of Auditors in force in Portugal and abroad, and are approved by the Audit Board. The Board of Directors and the Audit Board consider that the occasional contracting of these services is justified by the External Auditor and Statutory Auditor’s accrued experience in the sectors in which the company operates and by the quality of their work, in addition to the careful definition of the scope of services required at the contracting stage, and to the fact that the Audit Board is supported by the analysis and internal opinions of the services.
In the framework of the provision of tax consultancy services and services other than auditing, our auditors have set strict internal rules to guarantee their independence, and these rules have been adopted in the provision of these services and monitored by the Company, in particular by the Audit Board and the Control and Risk Committee.
101 47. Indication of the annual remuneration paid by the company and/or controlled, controlling or group entities to the auditor and other individuals or organizations belonging to the same network, specifying the percentage relating to the following services:
Group entities Company (including the company itself) Services
Amount Percentage Amount Percentage
Value of auditing services 49,323.00 74.9% 833,756.00 89.6% Value of reliability assurance services 16,500.00 25.1% 88,402.00 9.5% Value of tax consultancy services - - - - Value of other services other than auditing services - - 8,228.00 0.9% Total: 65,823.00 100.00% 930,386.00 100.00% NOTE: Amounts in Euros
In 2020, services other than audit services contracted by the Company or controlling entities from the External Auditor or the Statutory Auditor, including by entities belonging to the same corporate group or service network, represented 10.4% of the total services provided.
C. INTERNAL ORGANIZATION
I. ARTICLES OF ASSOCIATION
48. Rules applicable to amendment of the articles of association (Article 245-A.1 h)).
There are no specific rules at Semapa on the amendment of the Articles of Association, and the general supplementary rules contained in the Companies Code therefore apply here.
II. NOTIFICATION OF IRREGULARITIES (WHISTLEBLOWING)
49. Whistleblowing - procedures and policy
The company has a set of Regulations on Notification of Irregularities, which govern the Company’s procedures that employees can use to report irregularities allegedly taking place within the Company.
These regulations lay down the general duty to report alleged irregularities, requiring that such reports are made to the Audit Board, and also provide for an alternative solution in the event of conflicts of interests on the part of the Audit Board regarding to the report in question.
The Audit Board, which may be assisted for these purposes by the Control and Risk Committee, shall investigate all facts necessary for assessment of the alleged irregularity. We further note that, in the event of conflict of interest regarding an irregularity committed by a member of the Audit Board, a copy of the Report must also be sent to the Chairman of the Board of Directors.
This process ends with the report being filed or submitted to the Board of Directors or the Executive Board, depending on whether a Company officer is implicated or not, a proposal for application of the measures most appropriate in light of the irregularity in question.
The regulations also contain other provisions designed to safeguard the confidentiality of the disclosure and non-prejudicial treatment of the employee reporting the irregularity, as well as rules on providing information on the regulations throughout the Company.
The internal regulations of the company’s bodies and committees also provide for the adoption and compliance with that regulation.
Access to the Regulations on Notification of Irregularities is reserved.
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The Company also has a set of Principles of Professional Conduct, approved by the Board of Directors on 30 December 2002. This document establishes ethical principles and rules applicable to Company staff and officers.
In particular, this document establishes the duty of diligence, requiring professionalism, zeal and responsibility, the duty of loyalty, which in relation to the principles of honesty and integrity is especially geared to safeguard conflict of interest situations, and the duty of confidentiality, in relation to the treatment of relevant information.
The document also establishes duties of corporate social responsibility, namely of environmental conservation and protection of all shareholders, ensuring that information is fairly disclosed, and all shareholders treated equally and fairly.
The Ethical Principles were changed in late 2018 to include expressly the commitment to respect and promote the Human Rights, and combat money laundering and corruption.
With the entering into force of Law no. 73/2017, of 16 August, amending Article 127 of the Labour Code, which set forth the employer’s duty to adopt good conduct codes to prevent and combat sexual harassment at work in companies with seven or more employees, on 1 October 2017 Semapa adopted a Good Conduct Code that contains specific rules aimed at reinforcing the prevention and combat against any type of harassment at work, without prejudice to any other regulations applicable.
III. INTERNAL CONTROL AND RISK MANAGEMENT
50. People, bodies or committees responsible for internal audits and/or implementation of internal control systems.
Although the Company has no specific independent structure for internal audits, the internal control - which comprises the risk management and compliance functions - is conducted by the Board of Directors and through an internal committee with special responsibilities in this area - the Control and Risk Committee - the Audit Board and the External Auditor and Statutory Auditor being responsible for oversight and monitoring of the internal control system, including of the efficiency of these systems. These bodies and the Control and Risk Committee shall also identify and propose all necessary changes. The Audit Board has the knowledge and the chance to deliver an opinion on the activities performed by the Control and Risk Committee and Semapa’s departments in this framework, on the resources allocated to the internal control system, and may propose the adjustments deemed necessary in this context, and is the recipient, where available, of the reports and opinions made by these services when they concern matters related to financial reporting, identification or resolution of conflicts of interest and detection of potential illegalities and irregularities.
Additionally, the corporate universe represented by most of the group’s workers, and which concerns the holding’s main subsidiaries, The Navigator Company and Secil, is covered by separate auditing systems with organisational units having special auditing responsibilities. The company thus considers that these internal control systems, implemented by the bodies and Committees mentioned before, are suitable for the company’s specificities and size and the complexity of the risks from its activity.
Thus, the decision not to have a special department in this area is due to Semapa’s simplified administrative structure as a holding company and the way risk control is carried out in the company’s group.
51. Description of the lines of command in this area in relation to other bodies or committees; an organizational chart may be used to provide this information
The lines of command are shown in the organisational chart in item 21 of this Report, and the responsibilities of the bodies and committees involved are better described in item 54.
52. Existence of other departments with responsibilities in the field of risk control.
Non-existence of other departments with responsibilities in the field of risk control.
103 53. Identification of the main risks (economic, financial and legal) to which the company is exposed in the course of its business.
Chapter 11 of the notes to the consolidated financial statements provides a detailed analysis of all strategic and operational risks, including economic and legal. The financial risks have been identified and detailed in Chapter 8.1 of the notes to the consolidated financial statements.
Strategic risks include portfolio risk, reputational capital risk, investment decision making risk, business risk, talent risk, legal and regulatory risk, external shock risk, exchange rate risk, access to finance risk, fraud risk, raw material access risk, cybersecurity risk, and the risk of environmental disasters.
Operational risks include, among others, raw material supply, sales price, product demand, competition, environmental legislation, and the cost of energy.
Financial risks include exchange rate, interest rate, liquidity and credit risks.
The aforementioned strategic risks for Semapa and the Group, which have been identified following the work started in 2018 and which has been consolidated since 2019, are duly mapped, and extensively described in the referred chapter 11 of the notes to the financial statements. They are monitored in the year and addressed in a risk report that must be adopted every year by the Board of Directors.
The risk report identifies and characterises the main risks to which the company and the group are subject, the various risk contexts in which each company operates (global, regional, national, internal), the metrics for impact assessment and the likelihood that they will occur, the risk monitoring and follow-up procedures, and the measures to be adopted for their mitigation, with the approval of a plan of activities and concrete measures to be implemented the following year.
We must also mention that 2020 was a year undoubtedly marked by the pandemic crisis caused by the Coronavirus (COVID-19) and the consequences thereof, a scenario unprecedented in recent history and which swept the world across the board, with impacts on the Group’s internal context, where significant efforts were made by both Semapa and its subsidiaries to adapt their internal processes and their relations with the outside world, and to optimize fixed and variable costs.
At the governance level, a Crisis Management Office was set up to monitor, anticipate and minimise the impacts of the Covid-19 pandemic on the Group’s various companies and plants. Four Steering Groups were thus set up in this context: i) Preservation of Employee Health and containment of the Pandemic, ii) Communication, iii) Business Development and Continuity Plans and iv) Financial (contingency) Plan.
At the operational level, the Contingency Plans implemented at the Group’s plants helped to maintain normal operations in this adverse environment.
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54. Description of the process of identification, assessment, monitoring, control and risk management.
The main purpose of the Control and Risk Committee is to detect and control all relevant risks in the Company’s affairs, in particular financial and legal risks, and the Committee is vested with the powers set out in items 21 and 29 of this Report.
In addition to the important role played by the Audit Board in this field, internal procedures for risk control are also particularly important in each of the Company’s main subsidiaries. The nature of the risks and the degree of exposure vary from company to company, and each subsidiary therefore has its own independent system for controlling the risks which it is subject to.
The external audit to Semapa and the companies controlled by it was conducted by KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. until the end of the year 2020. The company’s External and Statutory Auditor checks, in particular, the application of remuneration policies and systems, and the effectiveness and workings of internal control procedures through the information and documents provided by the Company, and in particular by the Remuneration Committee and the Control and Risk Committee. The respective conclusions are reported by the External and Statutory Auditor to the Audit Board, which then reports the shortcomings detected, if any.
The implemented internal control systems, including the risk management function, have proven to be effective, and no situations have so far arisen which have not been anticipated, duly guarded against or expressly accepted in advance as controlled risks. As stated above, in addition to its own powers in this field and in order to safeguard against the acceptance of excessive risks by the Company, the Board of Directors created the Control and Risk Committee which, in accordance with the responsibilities defined by the Board of Directors, is responsible for assuring internal control and risk management.
The Audit Board in turn is responsible for overseeing and assessing every year the effectiveness of the internal control system, including the risk management and compliance functions, proposing adjustments to the existing system whenever necessary, while the Control and Risk Committee is responsible for implementing these adjustments. Finally, it should be noted that this system is monitored and overseen at all times by the Board of Directors, which has ultimate responsibility for the company’s internal activities.
In this context, the company approved the Risk Management System (Risk Policy) at a meeting of the Board of Directors held at the beginning of 2019. This system, which results every year in a Risk Report, namely, sets the objectives and thresholds in issues of risk-taking and identifies the likelihood of such risks occurring and their impacts, which provides for the assessment of the degree of internal compliance and the performance of the risk management system, and addresses changes to the previous risk framework. It also approved the instruments and measures to be adopted with a view to their mitigation, providing the follow-up procedures for monitoring these risks. The 2019 Risk Report was adopted at a meeting of the Board of Directors in March 2020, and the 2020 Risk Report was adopted at the Board Meeting in March 2021. Its content is described in paragraph 53. above.
The Audit Board, which plays a particularly important role in this area, with all the powers resulting directly from the law and from the Audit Board’s Regulations, has been informed of, provided its opinion on, and assessed the aforementioned Risk Policy, and has also followed up on the monitoring of these risks at the meetings that the Audit Board with the Control and Risk Committee and the Executive Board hold in the year, and until the respective annual Risk Report is issued.
The strategic lines of action were assessed by the Audit Board in 2019. Since then the Board of Directors has not approved any new strategic guidelines. Whenever new strategic guidelines are approved, the Audit Board will evaluate and comment on them prior to their final approval by the Board of Directors.
The Audit Board also oversaw the progress of the work carried out by the Control and Risk Committee in 2020. In this context, the Audit Board, in conjunction with the Control and Risk Committee and, where necessary, with the company’s management, has been implementing mechanisms and procedures for periodic control to ensure that the risks that the company runs are consistent with the objectives set by the management body, having held regular meetings with the other corporate bodies and committees with powers in this area and having requested inspections and clarifications whenever necessary and appropriate.
105 55. Main elements of the internal control and risk management systems implemented in the company with regard to the process of disclosure of financial information (Article 245-A.1 m)).
The disclosure of financial information is the responsibility of the market relations officer and, where applicable, it falls to the Audit Board, the Control and Risk Committee and the External and Statutory Auditor to assess the quality, reliability and completeness of the financial information approved by the Company’s Board of Directors and drawn up by the Financial and Accounts and Tax departments.
The process of preparing financial information is subject to an internal control system and to rules, which are designed to assure that the accounting policies adopted by the company are properly and consistently applied and that the estimates and judgements used in preparing this information are reasonable.
With regard to internal control procedures for the process of disclosing financial information, the Company has implemented rules, which are intended to assure that disclosures are made in good time and to mitigate the risk of unevenness in the information provided to the market.
IV. INVESTOR SUPPORT
56. Office responsible for investor support, composition, functions, information provided and contact details
The investor support service is provided by an office reporting to the Financial Director of the company, Susana Coutinho. This office is adequately staffed and enjoys swift access to all bodies, committees and departments of the Company, and where necessary and according to the procedures laid down and the limits provided by law, of the Group’s companies, in order to ensure an effective response to requests, and also to produce, process and transmit relevant information to shareholders, investors and other stakeholders, as well as to financial analysts and to the market in general, in due time and without any inequality, pursuant to applicable legal and regulatory terms.
Susana Coutinho can be contacted through the email address [email protected] or on the company’s general telephone numbers (+351 21 318 47 00). All public information regarding the company can be accessed by these means. It should be noted, in any case, that the information most frequently requested by investors is available at the company’s website at https://www.semapa.pt/index.php/en, and it generally concerns information about the Semapa group, the company’s business, corporate governance and financial information.
57. Market relations officer.
The market relations officer is Susana Coutinho.
58. Information on the number of enquiries received in the period or pending from previous periods, and enquiry response times.
Semapa receives various types of enquiries, which are normally answered within 24 hours of receipt, although some enquiries, because of their breadth, scope or complexity, necessarily take longer to process. There are also specific times of the year when Semapa receives more enquiries, in particular in the run-up to General Meetings and the payment of dividends, when response times may sometimes be longer. There are no enquiries pending from previous years.
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V. WEBSITE (59 TO 65)
Description Internet address
59. Semapa Website https://www.semapa.pt/en 60. Address where information is provided on the company’s name, public https://www.semapa.pt/index.php/en/frmcontacto company status, registered office and other data required by Article 171 of the Companies Code. 61. Address where the articles of association and rules of procedures of company https://www.semapa.pt/index.php/en/investidores/ boards and/or committees can be consulted. governo/estatutos 62. Address where information is provided on the identity of company officers, market relations officer, the Investor Support Office or equivalent structure, https://www.semapa.pt/index.php/en/investidores/ respective powers and responsibilities and contact details. governo/os https://www.semapa.pt/en/frmcontacto 63. Address for consultation of financial statements and reports, which must be accessible for no less than five years, together with the six-monthly corporate https://www.semapa.pt/index.php/en/investidores/ diary, disclosed at the start of each semester, including, amongst other things, informacao/demonstracoes General Meetings, disclosure of annual, half-yearly and, if applicable, quarterly https://www.semapa.pt/en/investidores/calendario accounts. 64. Address where notice of general meetings is posted, together with all https://www.semapa.pt/index.php/en/investidores/ preparatory information and subsequent information related to meetings. assembleia/ags/AG2020-05-29 65. Address for consultation of historical archives, with resolutions adopted at https://www.semapa.pt/index.php/en/investidores/ the company’s General Meetings, the share capital represented and the results of assembleias votes, for the past three years.
D. REMUNERATION
I. POWERS TO DETERMINE REMUNERATION
66. Indication of powers to set the remuneration of company officers, members of the executive board or managing director and the company managers.
Powers to determine the remuneration of the Board of Directors and the Audit Board lie with the Remuneration Committee.
Powers to determine the remuneration of company managers lie with the Board of Directors.
II. THE REMUNERATION COMMITTEE
67. Composition of the remuneration committee, including identification of individuals or organizations contracted to provide support, and declaration regarding the independence of each member and adviser.
The Remuneration Committee comprises José Gonçalo Ferreira Maury, João Rodrigo Appleton Moreira Rato and João Rodrigo Appleton Moreira Rato, and does not subcontract auxiliary staff. The company may decide freely to hire the services it deems necessary or appropriate, within budget parameters, a right that has been exercised in the past, in which case it must ensure that the services are provided independently and that the respective providers do not provide other services to the company, or to others in controlling or group relationship, without the express authorization of the committee. The company considers the Remuneration Committee to be independent of the Board, since all of its members are independent.
José Maury resigned in 2014 from office at Egon Zehnder, an HR services company which over the years supported Semapa and other related companies in procurement procedures. The aforementioned resignation in our view has not undermined the independence of this member of the Committee.
107 The Remuneration Committee provides all information or clarifications to the shareholders of the company in the respective Annual General Meetings or in any other general meeting if its agenda includes a matter related to the remuneration of the members of the corporate bodies and committees or if the shareholders require its presence, through the presence of at least one of its members. This was the case at the Annual General Meeting held on 29 May 2020, which all members attended by telematic means, with the exception of José Maury, whose absence was duly justified.
68. Expertise and experience of the members of the remuneration committee in the field of remuneration policy.
One of the members of the Remuneration Committee, José Maury, has vast knowledge and experience in matters of remuneration policy and he was a partner of the company Egon Zehnder for a number of years, which is a leading recruitment company, involving thorough knowledge of assessment procedures and criteria and related remuneration packages.
III. REMUNERATION STRUCTURE
69. Description of the remuneration policy for members of the management and supervisory bodies as referred to in Article 2 of Law no. 28/2009, of 19 June.
The remuneration policy for members of the management and supervisory bodies for 2020 fiscal year is set out in the Remuneration Policy Statement issued by the Remuneration Committee, approved at the Annual General Meeting of 29 May 2020, corresponding to Annex II of this Report, and there is no deviation from the procedures for the application of the approved remuneration policy.
Due to the publication of Law no. 50/2020 of August 25, the Remuneration Committee will submit for approval a new Remuneration Policy to the company’s Annual General Meeting to be held in 2021, drawn up under the terms of Article 26-C of the Securities Code. This Remuneration Policy will be submitted to the General Meeting at least every four years and whenever there is a material change in the current remuneration policy.
The company considers that it only makes sense to issue its remuneration report after a remuneration policy has been drafted under the terms of Article 26-C of the Securities Code, and on which it can express an opinion. Thus, at the Annual General Meeting to be held in 2022, the Board of Directors will submit to the shareholders a remunerations report based on the Remuneration Policy for the year 2021, pursuant to Article 245-C of the Securities Code.
70. Information on how remuneration is structured in order to align the interests of members of the management body with the long term interests of the company, and on how it is based on performance assessment and discourages excessive risk- taking.
The way in which remuneration of company officers is structured and how it was based on the directors’ performance in 2020 follows clearly the Remuneration Policy Statement of the Remuneration Committee, specifically items 1 and 6 of chapter VI, to which we make reference.
Following such principles, to determine precisely the variable remuneration component, a set of KPIs are applied, for which EBITDA, net earnings and cash flow are the quantitative elements considered, as mentioned in item 25 above.
The effect of the alignment of the interests in the long-term results, to some extent, from the fact that, in the financial year in question, one of the KPIs of EBITDA is linked to the medium-term plan, albeit in a form that is more limited than that arising from Semapa’s de facto situation in relation to the significant stability of the Executive Board’s members. Such stability is naturally linked to longer time lines, including in the wage component, as future results influence future remunerations for which expectations exist.
The same is true for excessive risk-taking. The company has no separate remuneration mechanism aimed specifically at that. Risk is an intrinsic characteristic of any act of management and, as such, it is unavoidably and continuously considered in all management decisions. A quantitative or qualitative assessment of risk as good or bad cannot be made autonomously, but only in the light of its impact on Company’s performance over the time. It is thus confused with long-term interests, and consequently benefits from the aforementioned incentives to overall alignment over time.
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Furthermore, since the Talent Committee was set up, there is now one more organisational unit with specific responsibilities of monitoring the management performance assessment system and the allocation of the company’s remuneration.
71. Reference, if applicable to the existence of a variable remuneration component and information on any impact on this from performance assessments.
The remuneration of executive directors includes a variable component, which depends on a performance assessment, as described in the Remuneration Policy Statement, in particular in item 2. of chapter VI. The performance assessment under the variable remuneration for the year in question, in its individual and qualitative component, accounted for approximately 50% of that remuneration component. The weight of this component in 2020 was 35%.
In the case of non-executive directors, it should be noted that although it is only a fixed part, it can be differentiated according to the accumulation of increased responsibilities.
There are no upper limits to remuneration, notwithstanding the limit set by the articles of association on directors’ participation in the profits for the year and no mechanism is in place to allow the company to request the reimbursement of variable remuneration paid.
The remuneration of the members of the Audit Board includes no variable component.
72. Deferred payment of the variable component of remuneration, indicating the deferral period.
Payment of the variable component of remuneration is not deferred at the company, notwithstanding the fact that the assessment of 2019 fiscal year, conducted in 2020, included a specific indicator - one of the components of EBITDA is not measured in relation to the fiscal year, rather that a theoretical EBITDA determined by reference to the medium-term plan - which assesses sustainable performance in the medium term.
73. Criteria applied in allocating variable remuneration in shares and on the continued holding by executive directors of these shares, on any contracts concluded with regard to these shares, specifically hedging or transferring risk, the respective limits and the respective proportion represented of total annual remuneration.
At Semapa, the variable remuneration has no component consisting of shares.
74. Criteria applied in allocating variable remuneration on options and indication of the deferral period and the price for exercising options.
At Semapa, the variable remuneration has no component consisting of options.
75. Main parameters and grounds for any annual bonus system and any other non-cash benefits.
The criteria for setting annual bonuses are those related to the variable remuneration, as described in item 2. of chapter VI of the Remuneration Policy Statement, and in item 25. above, and no other non-cash benefits are allocated.
76. Main features of complementary or early retirement schemes for directors and the date of approval by the General Meeting, on an individual basis.
There are no complementary or early retirement schemes for directors currently in place in the company. Nevertheless, Frederico José da Cunha Mendonça e Meneses receives a monthly pension, because he exercised an option under the expiry of a past pension scheme for directors.
109 At present, this is the only pension which Semapa pays. It is a lifetime monthly pension paid 12 months per year, for which the following is provided: (i) the transferability of half of its value to the surviving spouse or minor or disabled children and (ii) mandatory deduction from this pension either the value of remunerated services later delivered to Semapa or controlled companies, or the value of pensions that the beneficiary is entitled to receive from the national Social Insurance scheme related to the same period of service. Semapa’s liability with this pension is as mentioned in Note 7.3 to the Consolidated Financial Statements and Note 7.2 to the Individual Financial Statements.
IV. DISCLOSURE OF REMUNERATION
77. Indication of the annual remuneration earned from the company, on an aggregate and individual basis, by the members of the company’s management body, including fixed and variable remuneration and, in relation to the latter, reference to the different components.
Below we indicate the remuneration earned in 2020, paid by Semapa to the members of the Company’s management body, distinguishing between fixed and variable remuneration, though the variable remuneration was paid in 2020 but refers to the performance of 2019, but without a breakdown of the different components of the latter, insofar as it is set as a whole, taking into account the factors described in the Remuneration Policy Statement issued by the Remuneration Committee, without identifying components.
Fixed Remuneration Variable Remuneration
Board of Directors Relative Relative Amount Amount percentage percentage
António Pedro de Carvalho Viana-Baptista 128,305.13 100% -─ -─ Carlos Eduardo Coelho Alves 77,825.00 100% -─ -─ Filipa Mendes de Almeida de Queiroz Pereira 77,825.00 100% -─ -─ Francisco José de Melo e Castro Guedes 77,825.00 100% -─ -─ Heinz-Peter Elstrodt 275,148.90 100% -─ -─ João Nuno de Sottomayor Pinto de Castello Branco 761,199.25 58.19% 546,953.00 41.81% José Miguel Pereira Gens Paredes 129,816.51 25.39% 381,541.00 74.61% José Antônio do Prado Fay 243,524.20 100% -─ -─ Lua Mónica Mendes de Almeida de Queiroz Pereira 77,825.00 100% -─ -─ Mafalda Mendes de Almeida de Queiroz Pereira 77,825.00 100% -─ -─ Paulo Miguel Garcês Ventura -─ -─ 143,449.00 100% Ricardo Miguel dos Santos Pacheco Pires 315,969.50 40.60% 462,202.00 59.40% Vítor Manuel Galvão Rocha Novais Gonçalves 77,825.00 100% -─ -─ Vítor Paulo Paranhos Pereira 289,444.50 100% -─ -─ Total 2,610,357.99 -─ 1,534,145.00 -─ NOTE: Amounts in Euros
The table above specifies the annual amount paid to the members of the Board of Directors during the performance of their duties.
78. Amounts paid on any basis by other controlled, controlling or group companies or companies under common control.
It should be clarified that the amounts referred to in this item do not relate only to companies controlled by Semapa. They also include amounts over which Semapa and its officers have no control, as they are the concern of its shareholders, the shareholders of shareholders and other companies controlled by shareholders, where a controlling relationship is involved.
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The following directors earned remunerations in other controlling or controlled companies or companies under common control: Directors Filipa Mendes de Almeida de Queiroz Pereira (70,750.00 Euros), Heinz-Peter Elstrodt (98,672.26 Euros), Lua Mónica Mendes de Almeida de Queiroz Pereira (70,750.00 Euros), Mafalda Mendes de Almeida de Queiroz Pereira (70,750.00 Euros), Vítor Manuel Galvão Rocha Novais Gonçalves (96,145.14 Euros), and Vítor Paulo Paranhos Pereira (168,101.00 Euros). It should be noted that the members of the Board of Directors did not receive remuneration in other companies in a group relationship.
79. Remuneration paid in the form of profit sharing and/or payment of bonuses, and the grounds on which these bonuses and/or profit sharing were granted.
The amount of the remuneration paid by Semapa in the form of profit-sharing and/or payment of bonuses corresponds to the variable remuneration referred to in item 77. of this report, which amounts were determined by the Remuneration Committee based on the actual application of the criteria described in item 2 of chapter VI of the Remuneration Policy Statement.
80. Compensation paid or owing to former executive directors in relation to termination of their directorships during the period.
No compensation was paid or is due to former executive directors for termination of their directorships.
81. Indication of the annual remuneration earned, on an aggregate and individual basis, by the members of the company’s supervisory body, for the purposes of Law 28/2009, of 19 June.
Fixed Remuneration Variable Remuneration
Audit Board Relative Amount Amount Relative percentage percentage
José Manuel Oliveira Vitorino 22,000.00 100% - - Gonçalo Nuno Palha Gaio Picão Caldeira 15,999.97 100% - - Maria da Graça Torres Ferreira da Cunha 15,999.97 100% - - Total 53,999.94 - - -
NOTE: Amounts in Euros
82. Indication of remuneration earned in the reporting period by the Chairman of the General Meeting.
In 2020, the Chairman of the General Meeting earned a fixed remuneration of 4,000 euros.
V. AGREEMENTS WITH REMUNERATION IMPLICATIONS
83. Contractual limits for compensation payable for the unfair dismissal of directors and the respective relationship with the variable remuneration component;
Semapa has no contract with directors limiting or otherwise altering the supplementary legal rules on fair or unfair termination; the Remuneration Policy Statement approved by Semapa’s Remuneration Committee provides that, where directors resign, the supplementary legal rules will apply in this respect.
Therefore, considering the absence of individual contracts with directors in this regard and the provisions of the abovementioned Remuneration Policy Statement, where the removal of a director is not due to serious breach of their duties nor to their unfitness for the normal exercise of their functions, the company is obliged to pay compensation in accordance with the general terms of the law, although such compensation shall not exceed the value of the remuneration they would presumably have received through to the end of their term of office.
111 Dismissal before the expiry of the mandate does not entitle the director, either directly or indirectly, to compensation beyond the statutory amounts.
84. Reference to the existence and description of agreements between the company and directors or managers, as defined by article 248-B.3 of the Securities Code, which provide for compensation in the event of resignation, dismissal without due cause or termination of employment contract as a result of a change of control of the company, indicating the amounts involved (article 245.-A.1 l)).
There are also no agreements between the company and the company officers or managers providing for compensation in the event of resignation, unfair dismissal or redundancy as the result of a takeover.
VI. STOCK OR STOCK OPTION PLANS
85. Identification of plan and beneficiaries.
The company has no stock or stock option plans.
86. Description of plan (terms of allocation, non-transfer of share clauses, criteria on the price of shares and the price of exercising options, the period during which the options may be exercised, the characteristics of the shares to be distributed, the existence of incentives to purchase shares and/or exercise options)
Not applicable.
87. Stock option rights allocated to company employees and staff.
Not applicable.
88. Control mechanisms in an employee ownership scheme insofar as voting rights are not directly exercised by employees (Article 245-A.1 e)).
There is no employee ownership scheme in Semapa.
E. RELATED PARTY TRANSACTIONS CONFLICTS OF INTEREST
I. CONTROL MECHANISMS AND PROCEDURES
89. Procedures implemented by the company for controlling related party transactions (reference is made for this purpose to the concept deriving from IAS 24) and Conflicts of Interest.
The company has a Regulation of Conflicts of interests and related party transactions, which establishes the rules that govern conflicts of interest and related party transactions to which the company is a party, in addition to the internal mechanisms that the company has in place to ensure compliance with the international accounting standard (IAS) 24 (Related Party Disclosures). It is applicable without prejudice to the Company’s obligations and of its Directors concerning Inside Information, the legal framework of company business with directors and the internal Regulation on the Reporting of Irregularities and other relevant legislation. These regulations were amended due to the changes arising from Law 50/2020 of August 25 and by resolution of the Board of Directors of December 16, 2020, with a favourable and binding opinion of the Audit Board, and now they include the applicable legal and regulatory framework in force on this matter.
This regulation is available on the company’s website.
According to the Regulation on Conflicts of interests and related party transactions, the transactions between the company and related parties, qualified as such in accordance with the international accounting standards adopted under Regulation (EC) no. 1606/2002 of the European Council and Parliament of July 19, namely IAS 24 (Related Party Disclosures), are subject to the following approval procedures:
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The following transactions are approved by the Executive Board: a) Loans granted to the company by shareholder companies with a value of less than or equal to one hundred million euros; b) Transactions under the taxation regime for company group, with a value of less than or equal to one hundred million euros; c) Transactions with controlled companies that consolidate accounts with the company, with an individual or accumulated annual value of less than or equal to two percent of the controlled company’s revenue, assessed according to the latest approved annual accounts; d) Loans to controlled companies that have consolidated accounts with the company and, thus, holds their debt, (i) with a maturity of less than six months, (ii) individual or cumulative annual value of less than one fifth of the controlled company’s revenue, assessed according to the latest approved annual accounts and not exceeding one hundred million euros and (iii) as long as the controlled company ensures credit lines for the reimbursement of the operation, and e) All other transactions with an individual or cumulative annual amount of less than or equal to one million euros.
Transactions that (i) do not fall within the scope of the previous sub-paragraphs, or (ii) fall within these sub-paragraphs but are not carried out as part of the company’s current business, are adopted by resolution of the Board of Directors preceded by the Audit Board’s approval.
Under the terms of the aforementioned regulation, only transactions carried out under market conditions and in full respect of the justified interest of the company shall be permitted.
Concerning reporting, oversight and approval of transactions with related parties, the regulation provides that:
• The Board of Directors must be informed biannually of the resolutions concerning related party transactions which they were not a party to.
• The Audit Board must be informed of the transactions that the company carries out for the purpose of verifying the compliance of the transactions with the regime described above and with the applicable laws and regulations, and the related parties may not participate in such verification;
• The Directors of the company who intervene in the formalisation of related party transactions must ensure that such transactions are previously submitted to the regime provided herein and in the applicable laws and regulation, and
• The Executive Board is responsible for monitoring the formalisation and the execution of resolutions concerning Related Party Transactions.
The company will disclose the transactions which are required to be disclosed under the laws and applicable regulations, in particular because they have not met any of the requirements legally provided for and according to their respective amount, under the terms and by the date provided in the applicable legislation and regulations.
The regulation will not apply to the transactions that are considered exempt by the applicable laws and regulations.
Until the amendments to the Regulations on Conflicts of Interest and Related Party Transactions were adopted on 16 December 2020, the rules and criteria applicable to the transactions between the Company and Related Parties were in force, and differed from those that currently apply as follows:
• It was up to the Board of Directors, with a favourable opinion from the Audit Board, to approve only those transactions that should not be approved by the Executive Board (the latter corresponding to the items indicated above, and whose approval continues to be the Executive Board’s responsibility);
113 • The Board of Directors informed the Audit Board, at least every six months, of all transactions that had taken place with related parties, irrespective of whether or not explicit consent of the Audit Board was required, and
• Disclosure of related party transactions was not regulated, nor were the applicable exemptions.
Concerning the procedures applicable to conflicts of interest, the regulation provides for a conflict situation where the decision-maker or someone taking part in a decision (Director) is in a position that, in objective terms, may compromise his independence and influence in his judgement interests distinct from the Company’s interests, either financial or other, own or other, and for the appropriate prevention, identification and resolution, the Director must: a) Report the existence of, real or potential, conflict of interest to their superiors, or, in the case of a member of a collegial body, to the body in question in the terms of the relevant rules of procedure; and b) Refrain from interfering or participating in a decision whenever there is a situation of conflict of interest, and have noted such impediment in the minutes or other written document where the decision is laid down, without prejudice to the duty to provide all information and clarification which the relevant company body and its members may request.
Furthermore, all rules of procedures of the governing bodies and internal committees include provisions on conflicts of interest aligned with the rules described before.
90. Indication of transactions subject to control during reporting period
In 2020, there were the related party transactions that have been identified in the information on related party transactions in Note 10.4 of the Annex to the consolidated accounts and Note 10.2 of the Annex to the individual financial statements, which were analysed and approved in line with the new Regulation on Conflicts of Interests and Related Party Transactions, as per provisions in force at the time.
The related party transactions in 2020 occurred before 16 December 2020, on which date the Regulation of Conflicts of interests and related party transactions was amended. Thus, and according to the regulations previously in effect, the Board of Directors informed the Audit Board, at least every six months, about the approvals of all transactions carried out.
91. Description of the procedures and criteria applicable to intervention by the supervisory body for the purposes of prior assessment of transactions to be carried out between the company and qualifying shareholders or related entities, under Article 20 of the Securities Code.
The procedures and criteria are as described in items 89. and 90. above.
II. DETAILS OF TRANSACTIONS
92. Indication of the place in the financial reports and account where information is available on related party transactions, in accordance with IAS 24, or, alternatively, reproduction of this information.
Information on related party transactions is contained in Note 10.4 of the Annex to the consolidated financial statements and Note 10.2 of the Annex to the individual financial statements.
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PART II ASSESSMENT OF CORPORATE GOVERNANCE
1. IDENTIFICATION OF THE CORPORATE GOVERNANCE CODE ADOPTED
Semapa adopted the Corporate Governance Code of the Portuguese Corporate Governance Institute (IPCG), revised in 2020, in conformity with the Regulation of the Portuguese Securities Market Commission (CMVM Regulation no. 4/2013).
The Code adopted is disclosed by the IPCG and may be consulted on the website.
2. ANALYSIS OF COMPLIANCE WITH THE ADOPTED CORPORATE GOVERNANCE CODE
The following table indicates the recommendations adopted and not adopted. For the recommendations adopted, we indicate only the place in the report where detailed information is contained. For recommendations not adopted, information is provided below the table on the respective grounds for non-adoption and any alternative measures taken.
# Adoption Text Reference
I. GENERAL PROVISIONS General Principle Corporate Governance should promote and enhance the performance of companies, as well as of the capital markets, and strengthen the trust of investors, employees and the general public in the quality and transparency of management and supervision, as well as in the sustained development of the companies. I.1 Company’s relationship with investors and disclosure Principle: Companies, in particular its directors, should treat shareholders and other investors equitably, namely by ensuring mechanisms and procedures are in place for the suitable management and disclosure of information. I.1.1 Adopted The Company should establish mechanisms to ensure the timely disclosure of Part I, item 21 information to its governing bodies, shareholders, investors and other stakeholders, Part I, items 55 to 65 financial analysts, and to the markets in general. I.2 Diversity in the composition and functioning of the company’s governing bodies Principle: I.2.A - Companies ensure diversity in the composition of its governing bodies, and the adoption of requirements based on individual merit, in the appointment procedures that are exclusively within the powers of the shareholders. I.2.B - Companies should be provided with clear and transparent decision structures and ensure a maximum effectiveness of the functioning of their governing bodies and commissions. I.2.C - Companies ensure that the functioning of their bodies and committees is duly recorded, namely in minutes, to allow an understanding not only of the meaning of the decisions taken, but also of their grounds and opinions expressed by their members. I.2.1 Adopted Companies should establish standards and requirements regarding the profile of Part I, item 16 new members of their governing bodies, which are suitable according to the roles to be carried out. Besides individual attributes (such as competence, independence, integrity, availability, and experience), these profiles should take into consideration general diversity requirements, with particular attention to gender diversity, which may contribute to a better performance of the governing body and to the balance of its composition. I.2.2 Adopted The company’s managing and supervisory boards, as well as their committees, Part I, items 21, 22, 27, should have internal regulations — namely regulating the performance of their duties, 29, 34 and 61 their Chairmanship, periodicity of meetings, their functioning and the duties of their members — which shall be fully disclosed on the company’s website, and minutes of the meetings of each of these bodies should be carried out. I.2.3 Adopted The composition and the number of annual meetings of the managing and Part I, items 23, 29 and supervisory bodies, as well as of their committees, should be disclosed on the 35 company’s website.
115 # Adoption Text Reference
I.2.4 Adopted A policy for the communication of irregularities (whistleblowing) should be Part I, item 49 adopted that guarantees the suitable means of communication and treatment of those irregularities, with the safeguarding of the confidentiality of the information transmitted and the identity of its provider, whenever such confidentiality is requested. I.3 Relationships between the company bodies Principle: Members of the company’s boards, especially directors, should create, considering the duties of each of the boards, the appropriate conditions to ensure balanced and efficient measures to allow for the different governing bodies of the company to act in a harmonious and coordinated way, in possession of the suitable amount of information in order to carry out their respective duties. I.3.1 Adopted The bylaws, or other equivalent means adopted by the company, should establish Part I, item 21 mechanisms that, within the limits of applicable laws, permanently ensure the members of the managing and supervisory boards are provided with access to all the information and company’s collaborators, in order to appraise the performance, current situation and perspectives for further developments of the company, namely including minutes, documents supporting decisions that have been taken, calls for meetings, and the archive of the meetings of the managing board, without impairing the access to any other documents or people that may be requested for information. I.3.2 Adopted Each of the company’s boards and committees should ensure the timely and suitable Part I, items 21 and 29 flow of information, especially regarding the respective calls for meetings and minutes, necessary for the exercise of the competences, determined by law and the bylaws, of each of the remaining boards and committees. I.4 Conflicts of interest Principle: The existence of current or potential conflicts of interest, between members of the company’s boards or committees and the company, should be prevented. The non-interference of the conflicted member in the decision process should be guaranteed. I.4.1 Adopted The members of the managing and supervisory boards and the internal committees Part I, item 89 are bound by internal regulation or equivalent to inform the respective board or committee whenever there are facts that may constitute or give rise to a conflict between their interests and the company’s interest. I.4.2 Adopted Procedures should be adopted to guarantee that the member in conflict does not Part I, item 89 interfere in the decision-making process, without prejudice to the duty to provide information and other clarifications that the board, the committee or their respective members may request. I.5 Related party transactions Principle: Due to the potential risks that they may hold, transactions with related parties should be justified by the interest of the company and carried out under market conditions, subject to principles of transparency and adequate supervision. I.5.1 Adopted The managing body should disclose in the corporate governance report or by other Part I, items 38, 89 to 91 means publicly available the internal procedure for verifying transactions with related parties. I.5.2 Not applicable. The managing body should report to the supervisory body the results of the internal Recommendation not procedure for verifying transactions with related parties, including the transactions applicable under the under analysis, at least every six months. Interpretative Note no. 3 2018 on the IPCG Corporate Governance Code as amended in 2020.
II. SHAREHOLDERS AND GENERAL MEETINGS Principles: II.A - As an instrument for the efficient functioning of the company and the fulfilment of the corporate purpose of the company, the suitable involvement of the shareholders in matters of corporate governance is a positive factor for the company’s governance. II.B - The company should stimulate the personal participation of shareholders in general meetings, which is a space for communication by the shareholders with the company’s boards and committees and also of reflection about the company itself. II.C - The company should implement adequate means for the participation and remote voting by shareholders in meetings.
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II.1 Adopted The company should not set an excessively high number of shares to confer voting Part I, items 12 and 13 rights, and it should make its choice clear in the corporate governance report every time its choice entails a diversion from the general rule: that each share has a corresponding vote. II.2 Adopted The company should not adopt mechanisms that make decision making by its Part I, item 14 shareholders (resolutions) more difficult, specifically, by setting a quorum higher than that established by law. II.3 Adopted The company should implement adequate means for the remote participation by Part I, item 12 shareholders in the general meeting, which should be proportionate to its size. II.4 Adopted The company should also implement adequate means for the exercise of remote Part I, item 12 voting, including by correspondence and electronic means. II.5 Not applicable. The bylaws, which specify the limitation of the number of votes that can be held Part I, items 5 and 13 or exercised by a sole shareholder, individually or in coordination with other shareholders, should equally provide that, at least every 5 years, the amendment or maintenance of this rule will be subject to a shareholder resolution — without increased quorum in comparison to the legally established — and in that resolution, all votes cast will be counted without observation of the imposed limits. II.6 Adopted The company should not adopt mechanisms that imply payments or assumption of Part I, items 4 and 84 fees in the case of the transfer of control or the change in the composition of the managing body, and which are likely to harm the free transferability of shares and a shareholder assessment of the performance of the members of the managing body.
III. NON-EXECUTIVE MANAGEMENT, MONITORING AND SUPERVISION Principles: III.A - The members of governing bodies who possess non-executive management duties or monitoring and supervisory duties should, in an effective and judicious manner, carry out monitoring duties and incentivise executive management for the full accomplishment of the corporate purpose, and such performance should be complemented by committees for areas that are central to corporate governance. III.B - The composition of the supervisory body and the non-executive directors should provide the company with a balanced and suitable diversity of skills, knowledge, and professional experience. III.C - The supervisory body should carry out a permanent oversight of the company’s managing body, also in a preventive perspective, following the company’s activity and, in particular, the decisions of fundamental importance. III.1 Not adopted Without prejudice to question the legal powers of the chair of the managing body, if Explanation of he or she is not independent, the independent directors should appoint a coordinator Recommendations not from amongst them, namely, to: (i) act, when necessary, as an interlocutor near adopted below the chair of the board of directors and other directors, (ii) make sure there are the necessary conditions and means to carry out their functions, and (iii) coordinate the independent directors in the assessment of the performance of the managing body, as established in recommendation V.1.1. III.2 Adopted The number of non-executive members in the managing body, as well as the Part I, items 18 and 31 number of members of the supervisory body and the number of the members of the committee for financial matters should be suitable for the size of the company and the complexity of the risks intrinsic to its activity, but sufficient to ensure, with efficiency, the duties which they have been attributed. The judgment on the suitability should be included in the corporate governance report. III.3 Adopted In any case, the number of non-executive directors should be higher than the number Part I, item 18 of executive directors.
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III.4 Not adopted Each company should include a number of non-executive directors that corresponds Explanation of to no less than one third, but always plural, who satisfy the legal requirements of Recommendations not independence. For the purposes of this recommendation, an independent person is adopted below one who is not associated with any specific group of interest of the company, nor under any circumstance likely to affect his/her impartiality of analysis or decision, namely due to: I. Having carried out functions in any of the company’s bodies for more than twelve years, either on a consecutive or non-consecutive basis; II. Having been a prior staff member of the company or of a company which is considered to be in a controlling or group relationship with the company in the last three years; III. Having, in the last three years, provided services or established a significant business relationship with the company or a company which is considered to be in a controlling or group relationship, either directly or as a shareholder, director, manager or officer of the legal person; IV. Having been a beneficiary of remuneration paid by the company or by a company which is considered to be in a controlling or group relationship other than the remuneration resulting from the exercise of a director’s duties; V. Having lived in a non-marital partnership or having been the spouse, relative or any first degree next of kin up to and including the third degree of collateral affinity of company directors or of natural persons with direct or indirect qualifying holdings; VI. Having been a qualified holder or representative of a shareholder of qualifying holding.
III.5 Not applicable. The provisions of (i) of recommendation III.4 does not inhibit the qualification of a new Part I, item 18 director as independent if, between the termination of his/her functions in any of the company’s bodies and the new appointment, a period of 3 years has elapsed (cooling- off period). III.6 Adopted The supervisory body, in observance of the powers conferred to it by law, should Part I, items 38 and 54 assess and give its opinion on the strategic lines and the risk policy prior to its final approval by the management body. III.7 Adopted Companies should have specialised committees, separately or cumulatively, Part I, items 16, 21, 27 on matters related to corporate governance, appointments, and performance and 29 assessment. In the event that the remuneration committee provided for in article 399 of the Commercial Companies Code has been created and should this not be prohibited by law, this recommendation may be fulfilled by conferring competence on such committee in the aforementioned matters.
IV. EXECUTIVE MANAGEMENT Principles: IV.A - As way of increasing the efficiency and the quality of the managing body’s performance and the suitable flow of information in the board, the daily management of the company should be carried out by directors with qualifications, powers and experience suitable for the role. The executive board is responsible for the management of the company, pursuing the company’s objectives and aiming to contribute towards the company’s sustainable development. IV.B - In determining the number of executive directors, it should be taken into account, besides the costs and the desirable agility in the functioning of the executive board, the size of the company, the complexity of its activity, and its geographical spread. IV.1 Adopted The managing body should approve, by internal regulation or equivalent, the rules Part I, items 26 and 27 regarding the action of the executive directors applicable to their performance of executive functions in entities outside of the group. IV.2 Adopted The managing body should ensure that the company acts consistently with its Part I, item 21 objects and does not delegate powers, namely, in what regards: i) the definition of the strategy and main policies of the company; ii) the organisation and coordination of the business structure; iii) matters that should be considered strategic in virtue of the amounts involved, the risk, or special characteristics. IV.3 Adopted In the annual report, the managing body explains in what terms the strategy and Part I, item 21 the main policies defined seek to ensure the long-term success of the company and which are the main contributions resulting therein for the community at large.
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V. EVALUATION OF PERFORMANCE, REMUNERATION AND APPOINTMENT V.1 Annual evaluation of performance Principle: The company should promote the assessment of performance of the executive board and of its members individually, and also the assessment of the overall performance of the managing body and its specialized committees. V.1.1 Adopted The managing body should annually evaluate its performance as well as the Part I, items 24 and 25 performance of its committees and executive directors, taking into account the accomplishment of the company’s strategic plans and budget plans, the risk management, the internal functioning and the contribution of each member of the body to these objectives, as well as the relationship with the company’s other bodies and committees. V.2 Remuneration Principle: V.2.A. The remuneration policy of the members of the managing and supervisory boards should allow the company to attract qualified professionals at an economically justifiable cost in relation to its financial situation, induce the alignment of the member’s interests with those of the company’s shareholders — taking into account the wealth effectively created by the company, its financial situation and the market’s — and constitute a factor of development of a culture of professionalization, sustainability, promotion of merit and transparency within the company. V.2.B. - Directors should receive remuneration: i) that suitably remunerates the responsibility taken, the availability and the expertise placed at the disposal of the company; ii) that guarantees a performance aligned with the long-term interests of the shareholders and promotes the sustainable performance of the company; and iii) that rewards performance. V.2.1 Adopted The company should create a remuneration committee, the composition of Part I, items 66 and 67 which should ensure its independence from the management, which may be the remuneration committee appointed under the terms of article 399 of the Commercial Companies Code. V.2.2 Adopted The remuneration is to be set by the remuneration committee or by the general Part I, items 29 and 66 meeting, at the proposal of the remuneration committee. and Annex II V.2.3 Not adopted For each term of office, the remuneration committee or the general meeting, on Explanation of a proposal from that committee, should also approve the maximum amount of all recommendations not compensations payable to any member of a board or committee of the company due adopted below to the respective termination of office. The said situation as well as the amounts should be disclosed in the corporate governance report or in the remuneration report. V.2.4 Adopted In order to provide information or clarifications to shareholders, the chair or, in case Part I, item 67 of his/her impediment, another member of the remuneration committee should be present at the annual general meeting, as well as at any other, whenever the respective agenda includes a matter linked with the remuneration of the members of the company’s boards and committees or, if such presence has been requested by the shareholders. V.2.5 Adopted Within the company’s budgetary limitations, the remuneration committee should Part I, item 67 be able to decide, freely, on the hiring, by the company, of necessary or convenient consulting services to carry out the committee’s duties. V.2.6 Adopted The remuneration committee should ensure that the services are provided Part I, item 67 independently and that the respective providers do not provide other services to the company, or to others in controlling or group relationship, without the express authorization of the committee. V.2.7 Adopted Taking into account the alignment of interests between the company and the Part I, items 70 and 71 executive directors, a part of their remuneration should be of a variable nature, reflecting the sustained performance of the company, and not stimulating the assumption of excessive risks. V.2.8 Not adopted A significant part of the variable component should be partially deferred in time, for Explanation of a period of no less than three years, being necessarily connected to the confirmation recommendations not of the sustainability of the performance, in the terms defined by a company’s internal adopted below regulation. V.2.9 Not applicable. When variable remuneration includes the allocation of options or other instruments Part I, items 73 and 74 directly or indirectly dependent on the value of shares, the start of the exercise period should be deferred in time for a period of no less than three years. V.2.10 Adopted The remuneration of non-executive directors should not include components Part I, item 71 dependent on the performance of the company or on its value.
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V.3 APPOINTMENTS Principle: Regardless of the manner of appointment, the profile, the knowledge, and the curriculum of the members of the company’s governing bodies, and of the executive staff, should be suited to the functions carried out. V.3.1 Adopted The company should, in terms that it considers suitable, but in a demonstrable Part I, item 16 form, promote that proposals for the appointment of the members of the company’s governing bodies are accompanied by a justification in regard to the suitability of the profile, the skills and the curriculum vitae to the duties to be carried out.
V.3.2 Not adopted The overview and support to the appointment of members of senior management Explanation of should be attributed to a nomination committee, unless this is not justified by the recommendations not company’s size. adopted below
V.3.3 Not adopted This nomination committee includes a majority of non-executive, independent Explanation of members. recommendations not adopted below
V.3.4 Adopted The nomination committee should make its terms of reference available, and should Part I, item 29 foster, to the extent of its powers, transparent selection processes that include effective mechanisms of identification of potential candidates, and that those chosen for proposal are those who present a higher degree of merit, who are best suited to the demands of the functions to be carried out, and who will best promote, within the organisation, a suitable diversity, including gender diversity.
VI. INTERNAL CONTROL Principle: Based on its mid and long-term strategies, the company should establish a system of risk management and control, and of internal audit, which allow for the anticipation and minimization of risks inherent to the company’s activity. VI.1 Adopted The managing body should debate and approve the company’s strategic plan and risk Part I, items 29 and 54 policy, which should include the establishment of limits on risk-taking. VI.2 Adopted The supervisory board should be internally organised, implementing mechanisms Part I, item 54 and procedures of periodic control that seek to guarantee that risks which are effectively incurred by the company are consistent with the company’s objectives, as set by the managing body. VI.3 Adopted The internal control systems, comprising the functions of risk management, Part I, items 38, 50 and compliance, and internal audit should be structured in terms adequate to the size 54 of the company and the complexity of the inherent risks of the company’s activity. The supervisory body should evaluate them and, within its competence to supervise the effectiveness of this system, propose adjustments where they are deemed to be necessary. VI.4 Adopted The supervisory body should provide its view on the work plans and resources Part I, items 38 and 50 allocated to the services of the internal control system, including the risk management, compliance and internal audit functions, and may propose the adjustments deemed to be necessary. VI.5 Adopted The supervisory body should be the recipient of the reports prepared by the internal Part I, item 50 control services, including the risk management functions, compliance and internal audit, at least regarding matters related to the approval of accounts, the identification and resolution of conflicts of interest, and the detection of potential irregularities. VI.6 Adopted Based on its risk policy, the company should establish a risk management function, Part I, items 53 and 54 identifying (i) the main risks it is subject to in carrying out its activity; (ii) the probability of occurrence of those risks and their respective impact; (iii) the devices and measures to adopt towards their mitigation; and (iv) the monitoring procedures, aiming at their accompaniment. VI.7 Adopted The company should establish procedures for the supervision, periodic evaluation, Part I, item 54 and adjustment of the internal control system, including an annual evaluation of the level of internal compliance and the performance of that system, as well as the perspectives for amendments of the risk structure previously defined.
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VII. FINANCIAL STATEMENTS AND ACCOUNTING VII.1 Financial information Principles: VII.A - The supervisory body should, with independence and in a diligent manner, ensure that the managing body complies with its duties when choosing appropriate accounting policies and standards for the company, and when establishing suitable systems of financial reporting, risk management, internal control, and internal audit. VII.B - The supervisory body should promote an adequate coordination between the internal audit and the statutory audit of accounts. VII.1.1 Adopted The supervisory body’s internal regulation should impose the obligation to supervise Part I, item 38 the suitability of the preparation process and the disclosure of financial information by the managing body, including suitable accounting policies, estimates, judgements, relevant disclosure and its consistent application between financial years, in a duly documented and communicated form. VII.2 Statutory audit of accounts and supervision Principle: The supervisory body should establish and monitor clear and transparent formal procedures on the form of selection of the company’s statutory auditor and on their relationship with the company, as well as on the supervision of compliance, by the auditor with rules regarding independence imposed by law and professional regulations. VII.2.1 Adopted By internal regulations, the supervisory body should define, according to the Part I, item 38 applicable legal regime, the monitoring procedures aimed at ensuring the independence of the statutory audit. VII.2.2 Adopted The supervisory body should be the main interlocutor of the statutory auditor in the Part I, item 38 company and the first recipient of the respective reports, having the powers, namely, to propose the respective remuneration and to ensure that adequate conditions for the provision of services are ensured within the company. VII.2.3 Adopted The supervisory body should annually assess the services provided by the statutory Part I, item 38 auditor, their independence and their suitability in carrying out their functions, and propose their dismissal or the termination of their service contract by the competent body when this is justified for due cause.
EXPLANATION OF RECOMMENDATIONS NOT ADOPTED BELOW
RECOMMENDATION III.1.
This recommendation states that “Without prejudice to question the legal powers of the chair of the managing body, if he or she is not independent, the independent directors should appoint a coordinator from amongst them, namely, to: (i) act, when necessary, as an interlocutor near the chair of the board of directors and other directors, (ii) make sure there are the necessary conditions and means to carry out their functions, and (iii) coordinate the independent directors in the assessment of the performance of the managing body, as established in recommendation V.1.1.”
Given the size and specificities of the company, namely its family nature and concentration of its capital structure, and the total number of non-executive directors and, among them, independent directors, as well as the characteristics and position of the Chairman of the Board of Directors, the company considers that the appointment of a coordinator would be inappropriate and would only aim at the mere formal fulfilment of this recommendation, which the company would not adhere to.
In effect, as has been highlighted in this report, the company has several rules and procedures that provide for close and regular contact between members of the Board of Directors, namely between the chairman and the directors, and provides the conditions and necessary means for the performance of their functions.
This recommendation has therefore not been adopted by the company, although all of its objectives have been met.
121 RECOMMENDATION III.4.
This recommendation states that “Each company should include a number of non-executive directors that corresponds to no less than one third, but always plural, who satisfy the legal requirements of independence. (…).”
In the course of the 2020 financial year, as best described in paragraph 18 of this Report, the Board of Directors included only one non-executive director who fulfilled the independence requirement. Consequently, the recommended threshold of one third was not met and recommendation III.4 was not complied with.
However, the company finds that the proportion of independent directors mentioned is adequate and consistent with a fully independent performance of the Board of Directors and sufficient to ensure the effective supervision, evaluation and oversight of the activity of the other members of the management body.
In effect, considering the profile, age, background and professional experience and, above all, independent judgement and the integrity demonstrated by the members of the Board of Directors, the company finds that the current proportion between dependent and independent non-executive directors, established through formal criteria of assessment of independence, is perfectly adjusted to the nature and size of the company, considering, in particular, that it is a family-owned company, with a stable capital structure, and taking into account the complex inherent risks of its business.
In conclusion, there is real independence of the board, thus meeting the objectives proposed by this recommendation.
RECOMMENDATION V.2.3.
This recommendation states that “For each term of office, the remuneration committee or the general meeting, on a proposal from that committee, should also approve the maximum amount of all compensations payable to any member of a board or committee of the company due to the respective termination of office. The said situation as well as the amounts should be disclosed in the corporate governance report or in the remuneration report.”
This recommendation is not met because, although it falls within their competence, the Remuneration Committee has not set the maximum amount of all compensation to be paid to the member of any corporate body or committee of the company due to termination of office.
In fact, the Remuneration Committee has never, to date, felt the need to set for itself the aforementioned cap, regardless of the form of termination of employment in question. The specific circumstance to which this limitation relates is not a common one, and when it happens, sensitivity and specificity are always so vast that it cannot fail to impose a case-by-case evaluation, even if it is integrated into the general remuneratory and historically weighted scheme.
However, note that where the removal of a director is not due to serious breach of their duties nor to their unfitness for the normal exercise of their functions, the company is obliged to pay compensation in accordance with the general terms of the law, although such compensation shall not exceed the value of the remuneration they would presumably have received through to the end of their term of office.
As for the resignations in 2020 fiscal year, and described in this report, there were no payments arising from the termination of these functions.
RECOMMENDATION V.2.8.
This recommendation states that “A significant part of the variable component should be partially deferred in time, for a period of no less than three years, being necessarily connected to the confirmation of the sustainability of the performance, in the terms defined by a company’s internal regulation.”
The justification for not adopting this recommendation can be found in the remuneration policy statement in force, Annex II hereto, which states in particular that:
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“Literature sustains profusely the deferral to a later time of the payment of the variable part of remuneration, which will enable the establishment of a direct link between remuneration and the impact of management on the company over a longer period.
We find the principle generally good, but there are two facts that prevent us from adopting that option for the time being, notwithstanding a specific indicator assessing the medium-term sustainable performance, as mentioned in paragraph 2 in this chapter. The first fact is historical, meaning the practice that has been followed successfully for years without the element of deferral, and the second are prior history of stability of staff in management positions of the company that, inevitably, binds them to a medium and long-term commitment that earnings will continue to condition their remuneration.”
Therefore, this recommendation is not adopted by the company, without prejudice to the underlying substance, which is guarantee to a greater extent than if such recommendation were implemented.
It should also be noted that the consolidated result of the Semapa exercise has always been repeatedly and consistently very positive, evidencing the sustainability of performance that the Recommendation seeks to caution. It follows from this background that the possible partial deferral, for a period of not less than three years, of the variable remuneration component, would not have had an impact on the right to the variable component by the directors of Semapa.
However, it is important to clarify that Semapa is analysing the model for the deferred payment of the variable part of remuneration with a view to its possible implementation.
RECOMMENDATION V.3.2
Recommendation V.3.2 states that “The overview and support to the appointment of members of senior management should be attributed to a nomination committee, unless this is not justified by the company’s size.”
Semapa must be regarded individually as a holding company with a simplified administrative structure and a small number of Departments and employees, which is why the size of the company does not justify the appointment of a committee for monitoring and supporting the appointment of holders of management positions.
Considering the size of Semapa this task falls under the Executive Board, although the Talent Committee may present recommendations on the Group’s managers.
RECOMMENDATION V.3.3.
Recommendation V.3.3 states that “This committee includes a majority of non-executive, independent members”, referring to the internal committee for the assessment of the performance.
Semapa’s Talent Committee consists entirely of non-executive directors, but only one director is independent. The members of the committee were appointed with an emphasis on the diversity in profiles (age, gender, qualifications, experience and professional backgrounds), while ensuring unbiased analysis and decision capability and proven integrity.
The company considers that this diversity of profiles, combined with the fact that the Talent Committee uses, whenever necessary, market studies and analysis of comparable situations within the group, is enough to ensure that its analyses are aligned with the best practices and strengthen independent and unbiased decision making.
3. ADDITIONAL INFORMATION
There are no other disclosures or additional information which would be relevant to an understanding to the governance model and practices adopted.
123 ANNEX I DISCLOSURES REQUIRED BY ARTICLE 447 OF THE COMPANIES CODE
(with regard to the financial year of 2020)
1. Securities issued by the company and held by company officers, in the sense defined in paragraphs 1 and 2 of Article 447 of the Companies Code:
• Filipa Mendes de Almeida de Queiroz Pereira ‐ 5,488 company shares;
• Mafalda Mendes de Almeida de Queiroz Pereira - 5,888 company shares, and
• Lua Mónica Mendes de Almeida de Queiroz Pereira - 5,888 company shares.
2. Securities issued by companies controlled by or belonging to the same group as Semapa held by company officers, in the sense defined in paragraphs 1 and 2 of Article 447 of the Companies Code:
• Undivided estate of Maria Rita de Carvalhosa Mendes de Almeida de Queiroz Pereira, with company directors Filipa Mendes de Almeida de Queiroz Pereira, Mafalda Mendes de Almeida de Queiroz Pereira and Lua Mónica Mendes de Almeida de Queiroz Pereira as parties concerned - 1,000 shares in The Navigator Company, S.A.
• Filipa Mendes de Almeida de Queiroz Pereira ‐ 139,800 shares in Sodim, SGPS, S.A.
• Mafalda Mendes de Almeida de Queiroz Pereira - 139,800 shares in Sodim, SGPS, S.A.
• Lua Mónica Mendes de Almeida de Queiroz Pereira - 139,800 shares in Sodim, SGPS, S.A.
• Undivided estate of Pedro Mendonça de Queiroz Pereira, with company directors Filipa Mendes de Almeida de Queiroz Pereira, Mafalda Mendes de Almeida de Queiroz Pereira and Lua Mónica Mendes de Almeida de Queiroz Pereira as parties concerned - 134,422 shares in Sodim, SGPS, S.A.
3. Securities issued by the company and controlled companies held by companies in which directors and auditors hold corporate office:
• Cimo – Gestão de Participações, SGPS, S.A. 38,959,431 shares in the company, 1,000 shares in Secil Companhia Geral de Cal e Cimento, S.A. and 5,000 shares in ETSA Investimentos, SGPS, S.A.
• Sodim, SGPS, S.A. - 19.478.903 shares in the company
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4. Acquisition, disposal, encumbrance or pledge of securities issued by the company, controlled companies or companies in the same group by company officers and the companies referred to in 3:
In 2020, SODIM, SGPS, S.A. purchased the following shares in the company: • On 28 February, 20,000 shares for 11.151 euros per share; • On 2 March, 45,000 shares for 11.121 euros per share; • On 4 March, 25,000 shares for 11.551 euros per share; • On 5 March, 27,269 shares for 11.394 euros per share; • On 6 March, 47,500 shares for 10.993 euros per share; • On 9 March, 50,000 shares for 10.319 euros per share; and • On 29 May, 826,389 shares for 8.45 euros per share.
5. Transactions in own shares:
In 2020, Semapa purchased on 20 February, 577,290 shares representing the share capital, at the average price of 12.160 euros.
The purchase of the shares identified before left Semapa owning 1,400,627 own shares, corresponding to 1.723% of its share capital.
In 2020 Semapa did not dispose of any shares in its own capital.
125 ANNEX II REMUNERATION POLICY STATEMENT
Law 28/2009, of 19 June – repealed with effect from the entry into force of Law no. 50/2020, of 25 August –, required the Remuneration Committee to submit each year for the approval of the Annual General Meeting of Shareholders a statement on the remuneration policy for directors and auditors. A proposal was accordingly submitted to shareholders in 2020 at the Annual General Meeting held on 29 May 2020, resulting in approval of a remuneration policy statement as transcribed below:
"REMUNERATION POLICY STATEMENT OF THE DIRECTORS AND AUDITORS OF SEMAPA
I. INTRODUCTION
The Remuneration Committee of Semapa has been drawing up the remuneration policy statement since 2007, originally in the context of a recommendation from the CMVM, from 2009 according to Law no. 28/2009 of 19 June, and more recently in line with the recommendations of the 2018 Corporate Governance Code of the Portuguese Corporate Governance Institute.
Although the Committee finds that statement stability during the entire mandate period is a good policy, the changes to the legal recommendations followed by Semapa have dictated some changes which, although relevant, have not changed the essence of the options followed.
As is made clear by the several options and explanations that stand out in the text, the end result sought was a reconciliation, on the one hand, of new trends of management remuneration options and, on the other hand, the weight of history, previous options and the specific features of the company.
II. LEGAL FRAMEWORK AND RECOMMENDATIONS
The framework of this statement is the Law 28/2009 of 19 June mentioned before and the recommendations of the Portuguese Corporate Governance Institute.
In addition to rules on the frequency with which the statement must be issued and approved and on disclosure of its content, this law also stipulates that this content should include information on: a) Arrangements for aligning the interests of members of the management body with those of the company; b) Criteria for setting the variable component of remuneration; c) The existence of share or share option pay schemes for members of the management and supervisory bodies; d) The possibility of the variable component of remuneration, if any, being paid, wholly or in part, after the accounts have been finalized for the entire term of office; e) Rules limiting variable limitation in the event of the company’s results revealing significant deterioration in the company’s performance in the last period for which accounts are closed or when such deterioration may be expected in the period underway.
The current recommendations of the Portuguese Corporate Governance Institute make the following requirements:
126 ANNUAL REPORT 2020
V.2.2. The remuneration committee should approve, at the start of each term of office, execute, and annually confirm the company’s remuneration policy for the members of its boards and committees, including the respective fixed components. As to executive directors or directors periodically invested with executive duties, in the case of the existence of a variable component of remuneration, the committee should also approve, execute, and confirm the respective criteria of attribution and measurement, the limitation mechanisms, the mechanisms for deferral of payment, and the remuneration mechanisms based on the allocation of options and shares of the company.
V.2.3. The statement on the remuneration policy for the management and supervisory bodies referred to in Article 2 of Law No. 28/2009 of 19 June, shall also contain the following:
i. The total remuneration amount itemised by each of its components, the relative proportion of fixed and variable remuneration, an explanation of how the total remuneration complies with the company’s remuneration policy, including how it contributes to the company’s performance in the long run, and information about how the performance requirements were applied;
ii. The remunerations from companies that belong to the same group;
iii. The number of shares and options on shares granted or offered, and the main conditions for the exercise of those rights, including the price and the exercise date and any change to such conditions;
iv. Information on the possibility to request the reimbursement of variable remuneration;
v. Information on any deviation from the procedures for the application of the approved remuneration policies, including an explanation of the nature of the exceptional circumstances and the indication of the specific elements subject to derogation;
vi. Information on the enforceability or non-enforceability of payments claimed in regard to the termination of office by directors.
III. RULES DERIVING FROM LAW AND THE ARTICLES OF ASSOCIATION
Any system for setting remuneration will inevitably have to consider the legal rules, as well as any private rules which may be established in the articles of association.
The legal rules for the directors are basically established in Article 399 of the Companies Code, from which it follows that:
• Powers to fix the remuneration lie with the general meeting of shareholders of a committee appointed by the same.
• The remuneration is to be fixed in accordance with the duties performed and the company’s state of affairs.
• Remuneration may be fixed, or may consist in part of a percentage of the profits for the period, but the maximum percentage to be allocated to the directors must be authorized by a clause in the articles of association, and shall not apply to distribution of reserves or any part of the profits for the period which could not, under the law, be distributed to shareholders.
For the members of the Audit Board and the officers of the General Meeting, the law lays down that the remuneration shall consist of a fixed sum, which shall be determined in the same way by the general meeting of shareholders or by a committee appointed by the same, taking into account the duties performed and the state of the company’s affairs.
Semapa’s articles of association contain a specific clause, number seventeen, dealing only with the directors and governing also retirement provision. We transcribe the relevant passages:
“2 – The remuneration of the directors […] is fixed by a Remuneration Committee comprising an uneven number of members, elected by the General Meeting.
127 3 –The remuneration may consist of a fixed part and a variable part, which shall include a share in profits, which share in profits shall not exceed five per cent of the net profits of the previous period, for the directors as a whole.”
This is the formal framework to be observed in defining remuneration policy.
IV. HISTORICAL FEATURES
Semapa paid directors variable remuneration for the first time in 2002, and has continued to do so ever since, albeit following different formalities. In some years the payment was made through the deliberate appropriation of earnings directly by the General Meeting and in others the shareholders made no decisions concerning the payable amounts, which were set by the Remuneration Committee in line with the legal, regulatory framework and according to this statement.
The procedure adopted in recent years, and one that has prevailed, entails having the respective amount, and the amounts of the variable remuneration of other staff, expressly included in the proposed distribution of Earnings to be voted by the shareholders.
It should be noted that the appropriation of a percentage of earnings laid down in the Articles of Association is not applied directly, but rather as an indicator and as a statutory limit of amounts which are determined in a more involving process, taking into account the factors set out in the remuneration policy statement in force and the KPIs mentioned below.
Since the incorporation of the company, members of the Audit Board have received fixed monthly remuneration. In the case of the officers of the General Meeting, since remuneration for these officers was first instituted it has been set on the basis of the number of meetings actually held.
V. GENERAL PRINCIPLES
The general principles to be observed when setting the remuneration of the company officers are essentially those which in very general terms derive from the law: on the one hand, the duties performed and on the other the state of the company’s affairs. If we add to these the general market terms for similar situations, we find that these appear to be the three main general principles: a) Duties performed.
It is necessary to consider the duties performed by each company officer not only in the formal sense, but also in the broader sense of the work carried out and the associated responsibilities. Not all the executive directors are in the same position, and the same is also true, for example, for the members of the audit board. Duties have to be assessed in the broadest sense, taking into account criteria as varied as, for example, responsibility, time dedicated, or the added value to the company resulting from a given type of intervention or representation of a given institution.
The fact that time is spent by the officer on duties in other controlled companies also cannot be taken out of the equation, due, on the one hand, to the added responsibility this represents, and, on the other hand, to the existence of another source of income.
It should be noted that Semapa’s experience has shown that the directors of this company, contrary to what is often observed in other companies of the same type, have not always been neatly split into executive and non-executive. There are a number of directors with delegated powers and who are generally referred to as executive directors, but some of the directors without delegated powers have been closely involved in the life of the company in a variety of ways. b) The state of the company’s affairs.
This criterion must also be understood and interpreted with caution. The size of the company and the inevitable complexity of the related management responsibilities are clearly relevant aspects of the state of affairs, understood in the broadest sense. There are implications here for the need to remunerate a responsibility which is greater in larger companies with complex business models and for the capacity to remunerate management duties appropriately.
128 ANNUAL REPORT 2020
c) Market criteria.
It is unavoidably necessary to match supply to demand when setting any level of payment, and the officers of a corporation are no exception. Only respect for market practices makes it possible to retain professionals of a calibre required for the complexity of the duties performed and the responsibilities shouldered, thereby assuring not only their own interests but essentially those of the company, and the generation of value of all its shareholders. In the case of Semapa, in view of its characteristics and size, the market criteria to be considered are those prevailing internationally, as well as those to be observed in Portugal.
VI. COMPLIANCE WITH LEGAL REQUIREMENTS AND RECOMMENDATIONS
Having described the historical background and the general principles adopted, we shall now consider the principles with the relevant legal requirements.
1. Article 2 a) of Law 28/2009. Alignment of interests.
The first requirement that Law 28/2009 regards as essential in terms of the information in this statement is for a description of the procedures which assure that the directors’ interests are aligned with those of the company.
We believe that the remuneration system adopted in Semapa is successful in assuring such alignment. Firstly, because the remuneration sets out to be fair and equitable in the light of the principles set out, and secondly because it links the directors to results by means of a variable remuneration component which is set primarily in the light of these results.
2. Article 2 b) of Law 28/2009. Criteria for the variable component.
The second requirement established by the law is for information on the criteria used to determine the variable component.
The variable component of remuneration is based on the target amount applied to each director and is paid according to the individual’s performance and performance of the company that meet the expectations and the criteria set previously. The target amount is weighted by the aforementioned principles - market, specific functions, state of the company -, in particular comparable market circumstances in positions equivalent in function. Another important factor taken into account when setting the targets is Semapa’s option not to provide any share or share acquisition option plans.
Actual performance compared to the expectations and goals, which determine target variations is weighed against a set of quantitative and qualitative KPIs of the company’s performance and of the relevant director, which include in particular EBITDA, net revenue and cash flow. One of the EBITDA components is not assessed for the year, but for a theoretical EBITDA established by reference to the medium term plan. An approach was introduced through this specific indicator which already takes into account the company’s medium term performance.
3. Article 2 c) of Law 28/2009. Share or option plans.
The decision whether or not to provide share or option plans is structural in nature. The existence of such a plan is not a simple add-on to an existing remuneration system, but rather an underlying to change to the existing system, at least in terms of the variable remuneration.
Although a remuneration system of this type is not incompatible with the company’s articles of association, we feel that the wording of the relevant provisions in the articles and the historical background to the existing system argue in favour of maintaining a remuneration system without any share or option component.
This is not to say that we see no merits in including a share or option component in directors’ remuneration, nor that we would not be receptive to restructuring directors’ remuneration to incorporate such a plan. However, such a component is not essential in order to promote the principles we defend and, as we have said, we do not believe that this was the fundamental intention of the company’s shareholders.
129 4. Article 2 d) of Law 28/2009. Date of payment of variable remuneration.
Literature sustains profusely the deferral to a later time of the payment of the variable part of remuneration, which will enable the establishment of a direct link between remuneration and the impact of management on the company over a longer period.
We find the principle generally good, but there are two facts that prevent us from adopting that option for the time being, notwithstanding a specific indicator assessing the medium term sustainable performance, as mentioned in paragraph 2 in this chapter. The first fact is historical, meaning the practice that has been followed successfully for years without the element of deferral, and the second are prior history of stability of staff in management positions of the company that, inevitably, binds them to a medium and long term commitment that earnings will continue to condition their remuneration.
5. Article 2 e) of Law 28/2009. Procedures limiting variable remuneration.
Procedures of this kind are designed to limit variable remuneration in the event of the results showing a significant deterioration in the company’s performance in the last reporting period or when such deterioration may be expected in the period underway.
This type of provision also reflects a concern that good performance in the short term, which may boost directors’ remuneration, could be achieved at the cost of future performance.
For obvious reasons, the arguments presented above also apply here. It should also be noted that a system of this kind would have little practical effect if not combined with significant deferral of remuneration, which is not proposed for Semapa.
6. Recommendations V.2.2. and V.2.3 - Approval of the Remunerations Policy.
Recommendation V.2.2 provides for the approval of the remuneration policy of the members of the governing bodies at the beginning of their term, implemented and reviewed annually, a practice that is taken up by Semapa. This recommendation and the following then go on to identifying a set of topics to be included in the statement. Some matters mentioned therein have been included in other paragraphs of this statement, while others are included in the Corporate Governance Report that the company publishes every year. For streamlining and simplifying reading for stakeholders, reference will be made herein to all matters, referring to other paragraphs in this statement where necessary and repeating the information found in the corporate governance report, where duplication of information is deemed necessary.
The remunerations specified in this statement refer to the past and not the future.
Concerning fixed remunerations, this committee believes that it is responsible for setting the remunerations, without prejudice to the shareholder participation principle.
The variable component, which this committee is also responsible for setting, is awarded and calculated according to the criteria laid down in paragraph 2 of Chapter VI of this statement. The only mechanism that sets a cap on remuneration is that which results from the fact that the quantitative part of the variable component depends on the KPIs being minimally met. As mentioned before, there is no deferral of payment of the variable remuneration in this company, nor remuneration mechanisms based on stock or acquisition options of the company’s own shares.
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(i) The following is the total remuneration of the governing bodies, itemised by different components and the fixed and variable part of remuneration, for 2019, the variable remuneration having been paid in 2019, but concerns performance in 2018:
Fixed Remuneration Variable Remuneration
Board of Directors Relative Relative Amount Amount percentage percentage
António Pedro de Carvalho Viana-Baptista 128,305.13 100% - -─ Carlos Eduardo Coelho Alves 77,825.00 100% - -─ Filipa Mendes de Almeida de Queiroz Pereira 77,825.00 100% - -─ Francisco José de Melo e Castro Guedes 77,825.00 100% - -─ Heinz-Peter Elstrodt 347,414.31 100% - -─ João Nuno de Sottomayor Pinto de Castello Branco 761,199.25 52.50% 688,622.85 47.50% José Miguel Pereira Gens Paredes 315,969.50 35.75% 567,863.64 64.25% José Antônio do Prado Fay 128,816.00 100% - -─ Lua Mónica Mendes de Almeida de Queiroz Pereira 77,825.00 100% - -─ Mafalda Mendes de Almeida de Queiroz Pereira 77,825.00 100% - -─ Paulo Miguel Garcês Ventura 192,012.60 27.24% 512,810.56 72.76% Ricardo Miguel dos Santos Pacheco Pires 315,969.50 36.17% 557,559.56 63.83% Vítor Manuel Galvão Rocha Novais Gonçalves 77,825.00 100% - -─ Vítor Paulo Paranhos Pereira 128,305.13 100% - -─ Total 2,784,941.42 -─ 2,326,856.61 -─
NOTE: Figures in Euros
Fixed Remuneration Variable Remuneration
Audit Board Relative Relative Amount Amount percentage percentage
José Manuel Oliveira Vitorino 22,000.00 100% - - Gonçalo Nuno Palha Gaio Picão Caldeira 15,999.97 100% - - Maria da Graça Torres Ferreira da Cunha 15,999.97 100% - - Total 53,999.94 - - -
NOTE: Figures in Euros
The Chairman of the General Meeting only earned a fixed remuneration of 3,000 euros.
Total values were set according to the fulfilment of the principles mentioned before in Chapter V of this statement. On how the remuneration policy contributes to the long-term performance, see paragraphs 1, 2 and 4 of Chapter VI. Performance criteria mentioned in paragraph 2 of Chapter VI was applied mathematically for its quantitative part, and using value assessments conducted by hierarchical superiors and weighed by the Remuneration Committee.
(ii) Governing bodies are not remunerated in other companies belonging to the same group as Semapa. Note that the group relationship is used in its technical/legal sense, which explains why some events identified in the corporate governance report of Semapa for controlling companies or companies under common control have not been mentioned.
131 (iii) The company has no stock or stock acquisition plans, as outlined in paragraph 3 of Chapter VI.
(iv) There is no mechanism allowing the company to demand refund of the variable remuneration paid.
(v) There is no removal of the approved remuneration policy implementation procedure.
(vi) There are no agreements, and no such provisions have been defined by this Committee, on payments by Semapa relating to dismissal or termination of Directors’ duties. This fact is the natural result of the particular situations existing in the company, and not a position of principle taken by this Committee against the existence of agreements of this nature. Only the supplementary legal rule in this matter apply here, established in the Companies Code, which regulates the payment to the Directors of any amounts in case of termination of duties before the end of the term of office.
VII. SPECIFIC OPTIONS
The specific options for the remuneration policy we propose may therefore be summarized as follows:
1. The remuneration of the executive members of the Board of Directors, as mentioned in paragraph a) of Chapter V, shall comprise a fixed and variable component.
2. The remuneration of non-executive directors shall comprise only a fixed component that may vary due to the piling on of added functions and responsibilities.
3. The fixed component of the remuneration of directors shall consist of an annual amount payable in the year or of a predetermined amount for each meeting of the Board of Directors attended.
4. The procedure for awarding variable remunerations to the executive Directors of the Board, accompanied by the Talent Committee, shall comply with the criteria proposed by the Remuneration Committee, and such remuneration shall not exceed five per cent of the consolidated net profits (IFRS format) as provided by the Articles of Association.
5. In setting all remuneration, including in particular the distribution of the total amount allocated to the variable remuneration of the Board of Directors, the general principles established above shall be observed: the duties performed, the state of the company’s affairs and market criteria.
6. The remuneration of the members of the Audit Board and the officers of the General Meeting shall comprise a fixed component only.
7. The fixed remunerations of the members of the Audit Board shall consist in all cases of a fixed annual amount paid in the year.
8. The fixed remuneration of the officers of the General Meeting shall consist in all cases of a predetermined amount for each meeting, the remuneration for second and subsequent meetings being lower than that for the first general meeting of the year.
Lisbon, 26 March 2020
The Remuneration Committee José Gonçalo Ferreira Maury João Rodrigo Appleton Moreira Rato João do Passo Vicente Ribeiro"
132 ANNUAL REPORT 2020
ANNEX III DECLARATION REQUIRED UNDER ARTICLE 245(1)(C) OF THE SECURITIES CODE
Article 246.1 c) of the Securities Code requires that each of the persons responsible for issuers make a number of statements, as described in this article. In the case of Semapa, a standard statement has been adopted, worded as follows:
I hereby declare, under the terms and for the purposes of Article 245.1 c) of the Securities Code that, to the best of my knowledge, the management report, annual accounts, legal accounts certificate and other financial statements of Semapa Sociedade de Investimento e Gestão, SGPS, S.A., for the financial year of 2020, were drawn up in accordance with the relevant accounting rules, and provide a true and fair view of the assets and liabilities, financial affairs and profit or loss of said company and other companies included in the consolidated accounts, and that the management report contains a faithful account of the business, performance and position of said company and other companies included in the consolidated accounts, describing the main risks and uncertainties which they face.
Considering that the members of the Audit Board and the Statutory Auditor sign an equivalent declaration in relation to the documents for which they are responsible, a separate declaration with the above text was signed by the directors only, as it was deemed that only the Company officers fall within the concept of “persons responsible for the issuer”. As required by this rule, we provide below a list of the names of the people signing the declaration and their functions in the company:
Name Function
José Antônio do Prado Fay Chairman of the Board of Directors João Nuno de Sottomayor Pinto de Castello Branco Member of the Board of Directors Ricardo Miguel dos Santos Pacheco Pires Member of the Board of Directors Vítor Paulo Paranhos Pereira Member of the Board of Directors António Pedro de Carvalho Viana-Baptista Member of the Board of Directors Carlos Eduardo Coelho Alves Member of the Board of Directors Filipa Mendes de Almeida de Queiroz Pereira Member of the Board of Directors Francisco José Melo e Castro Guedes Member of the Board of Directors Lua Mónica Mendes de Almeida de Queiroz Pereira Member of the Board of Directors Mafalda Mendes de Almeida de Queiroz Pereira Member of the Board of Directors Vítor Manuel Galvão Rocha Novais Gonçalves Member of the Board of Directors
133 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT
Amounts in Euro Note 2020 2019
Revenue 2.1 1,867,370,709 2,228,540,107 Other operating income 2.2 98,888,960 99,893,242 Changes in the fair value of biological assets 3.7 16,814,610 12,155,274 Costs of goods sold and materials consumed 4.1.3 (711,172,799) (879,007,442) Variation in production 4.1.4 (31,009,753) 1,133,891 Supplies and services 2.3 (547,553,328) (652,127,457) Payroll costs 7.1 (217,298,957) (240,748,321) Other operating expenses 2.3 (56,731,506) (82,993,995) Net provisions 9.1 (5,453,390) (4,058,529) Depreciation, amortisation and impairment losses in non-financial assets 3.6 (214,630,502) (241,828,617) Operating results 199,224,044 240,958,153 Group share of (loss) / gains of associated companies and joint ventures 10.3 1,490,686 1,719,099 Financial income and gains 5.11 21,646,417 9,290,079 Financial expenses and losses 5.11 (82,049,680) (65,375,118) Net monetary position (gains / (losses)) 1.2 13,940,475 - Profit before tax 154,251,942 186,592,213 Income tax 6.1 (12,003,086) (23,889,129) Net profit for the period 142,248,856 162,703,084
Attributable to Semapa's Shareholders 106,588,079 124,053,720 Attributable to non-controlling interests 5.6 35,660,777 38,649,364 Earnings per share Basic earnings per share, Euro 5.3 1.333 1.540 Diluted earnings per share, Euro 5.3 1.333 1.540
The Accompanying notes form an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Amounts in Euro Note 2020 2019
Net profit for the period without non-controlling interests 142,248,856 162,703,084
Items that may be reclassified to the income statement
Derivative financial instruments Fair value changes 6.2 (499,123) (783,216) Tax on items above 136,092 215,384 Currency translation differences (140,526,161) 9,283,777
Other comprehensive income for the period (3,280,385) 3,095,330 Hyperinflationary economies (Lebanon) 3,780,252 -
Items that may not be reclassified to the income statement Remeasurements of post-employment benefits Remeasurements 7.3.11 (9,822,581) (15,257,474) Tax on items above 7.3.11 138,256 470,363
Total other comprehensive income (net of taxes) (150,073,650) (2,975,836) Total comprehensive income for the period (7,824,794) 159,727,248
Attributable to: Semapa's Shareholders 3,044,911 124,075,610 Non-controlling interests (10,869,705) 35,651,638 (7,824,794) 159,727,248
The Accompanying notes form an integral part of these consolidated financial statements.
137
- - - - - Total Total CONSOLIDATED STATEMENT OF FINANCIAL POSITION 70,685 3,780,254 (2,975,836) (2,182,026) (9,983,672) (7,023,383) (7,824,794) 162,703,084 159,727,248 (41,267,948) (93,448,367) (18,771,349) 142,248,856 (32,690,726) (45,917,527) (155,669,690) (150,073,650) 1,257,590,681 1,261,718,924 1,261,718,924 1,207,976,603
- - - -
Amounts in Euro Note 2020 2019 - - - - -
70,686
ASSETS interests (845,498) interests 1,850,482 controlling 38,649,364 37,803,866 - controlling controlling 35,660,777 367,236,794 300,848,910 - (93,448,367) (10,814,069)
Non-current assets 300,848,910 259,154,345 (46,515,098) (32,690,726) (10,854,321) (30,840,244) (104,262,436) Non
Goodwill 3.1 331,146,928 Non 345,172,676
- - - - Intangible assets 3.2 313,145,496 310,157,999 - - - (1) Total Property, plant and equipment 3.3 1,802,961,376 2,025,009,116 Total 1,929,772 Right-of-use assets 3.5 81,006,516 75,664,260 3,029,527 (9,983,672) (7,023,383) (2,130,338) (2,182,026) (7,957,280) 960,870,014 106,588,079 948,822,258 890,353,887 124,053,720 121,923,382 960,870,014 (15,077,283) (41,267,948) (51,407,254)
Biological assets 3.7 148,584,452 131,769,841 (103,558,552)
Investment in associated companies and joint ventures 10.3 3,117,099 5,454,286
------Investment properties 3.9 371,260 373,673 Other financial investments 8.3 9,403,561 4,066,072 Net profit Net Net profit Net (9,983,672) Receivables and other non-current assets 4.2 37,194,260 (2,743,510) 64,466,459 124,053,720 106,588,079 106,588,079 106,588,079 132,554,337 124,053,720 124,053,720 124,053,720 (88,542,879) (41,267,948) of the period of of the period of (114,070,048) (124,053,720) Deferred tax assets 6.2 73,621,270 89,970,779 (132,554,337)
------2,800,552,218 3,052,105,161 ------Current assets 429,769 earnings earnings Retained Retained Retained Retained 1,929,772 5,098,854 1,929,772 2,743,510 Inventories 4.1.1 236,543,966 306,397,256 5,098,854 (6,598,857) 18,496,568 (6,598,857) (8,183,944) (7,957,280) (8,183,944) (5,213,770) Receivables and other current assets 4.2 331,854,764 369,233,838
Income tax 6.1 13,126,350
27,040,393
------
Cash and cash equivalents 5.9 444,755,259 259,241,194 (1) Other 1,026,280,339 961,912,681 Other reserves reserves 88,542,879 Non-current assets held for sale 3.8 4,162,459 88,542,879
7,809,209 868,632,110 114,070,048 114,070,048 982,702,158 780,089,232 868,632,110
1,030,442,798 969,721,890
------Total assets 3,830,995,016 4,021,827,051 Legal Legal
reserve EQUITY AND LIABILITIES reserve 16,695,625 16,695,625 16,695,625 16,695,625 Capital and reserves
Share capital 5.2 81,270,000 81,270,000
------Treasury shares 5.2 (15,946,363) (8,922,980) Translation reserve 5.5 (218,994,285) (122,926,540) reserves reserves (891,950) (891,950) Fair value value Fair (316,799) (316,799) Fair value value Fair (3,030,775) (3,922,725) Fair value reserves 5.5 (3,922,725) (3,030,775) (2,713,976) (3,030,775) Legal reserve 5.5 16,695,625 16,695,625
------Other reserves 5.5 982,702,158 868,632,110 ------Retained earnings 5.5 429,769 5,098,854 reserve reserve
Net profit for the period 106,588,079 124,053,720 6,370,405 6,370,405 Translation Translation (96,067,745) (96,067,745)
(122,926,540) (218,994,285) statements. Equity attributable to Semapa's Shareholders 948,822,258 960,870,014 (129,296,945) (122,926,540)
Non-controlling interests 5.6 259,154,345 300,848,910
------
Total Equity 1,207,976,603 1,261,718,924
shares shares
financial
Treasury Non-current liabilities Treasury (7,023,383) (8,922,980) (7,023,383) (2,182,026) (6,740,954) (2,182,026) (8,922,980) Interest-bearing liabilities 5.7 1,199,559,876 1,396,732,169 (15,946,363)
EQUITY
Lease liabilities 5.8 67,729,016
62,744,733
------
Pensions and other post-employment benefits 7.3.6 14,511,206 IN
9,495,358 Share Share capital consolidated capital Deferred tax liabilities 6.2 231,285,380 243,892,373 81,270,000 81,270,000 Provisions 9.1 50,940,318 52,086,093 81,270,000 81,270,000 these Payables and other current liabilities 4.3 30,234,239 30,837,585
of
1,594,260,035 1,795,788,311 5.5 5.4 5.2 5.6 5.6 CHANGES 5.5 5.4 5.2 5.6 5.6
Note Current liabilities Note part
Interest-bearing liabilities 5.7 460,926,030 333,187,172 OF
Lease liabilities 5.8 12,410,630 12,406,557
integral
Payables and other current liabilities 4.3 503,814,326 562,177,462
interests
an
Income tax 6.1 51,607,392 56,548,625
period controlling
period
taxes) - controlling - 1,028,758,378 964,319,816 economies
of of taxes) of the form the
non period:
period:
non
Total liabilities 2,623,018,413 2,760,108,127
controlling to
for -
for
to
STATEMENT the
the
non 2019 2020
for
for Total equity and liabilities 3,830,995,016 4,021,827,051 notes
shareholders shareholders
to
2019 shares 2020 shares
income (net income
income (net income
profit reserves profit with
Hyperinflationary subsidiaries reserves
subsidiaries
-
The Accompanying notes form an integral part of these consolidated financial statements.
December by
by January
treasury January
treasury the period the
other
the period the
Euro other Euro 31 December
of 2018 paid of paid of 2019 of
employees
to paid employees for
of 1 paid of 31 for to of 1
of
to
to as
as as as movements
comprehensive
comprehensive comprehensive transactions operations movements comprehensive with transactions
Accompanying profit profit
Transfer Dividends Bonus Transfer Dividends Bonus
Amounts in Amounts Equity Net Other Total Application - - - Acquisition Dividends interests Acquisitions/Disposals Total Other Equity Amounts in Amounts Equity Net Other Total Application - - - Acquisition Dividends interests Other (Lebanon) Total Other Equity CONSOLIDATED The
138
ANNUAL REPORT 2020
- - - - - Total Total 70,685 3,780,254 (2,975,836) (2,182,026) (9,983,672) (7,023,383) (7,824,794) 162,703,084 159,727,248 (93,448,367) (41,267,948) (18,771,349) 142,248,856 (32,690,726) (45,917,527) (155,669,690) (150,073,650) 1,257,590,681 1,261,718,924 1,261,718,924 1,207,976,603
- - - -
- - - - - 70,686 interests (845,498) interests 1,850,482 controlling controlling 38,649,364 37,803,866 - controlling controlling 35,660,777 367,236,794 300,848,910 - (93,448,367) (10,814,069) 300,848,910 259,154,345 (32,690,726) (46,515,098) (10,854,321) (30,840,244) (104,262,436) Non Non
------(1) Total Total 1,929,772 3,029,527 (9,983,672) (7,023,383) (2,130,338) (2,182,026) (7,957,280) 960,870,014 106,588,079 948,822,258 890,353,887 124,053,720 121,923,382 960,870,014 (15,077,283) (41,267,948) (51,407,254) (103,558,552)
------Net profit Net Net profit Net (9,983,672) (2,743,510) 124,053,720 106,588,079 106,588,079 106,588,079 132,554,337 124,053,720 124,053,720 124,053,720 (88,542,879) (41,267,948) of the period of of the period of (114,070,048) (124,053,720) (132,554,337)
------429,769 earnings earnings Retained Retained Retained Retained 1,929,772 5,098,854 1,929,772 2,743,510 5,098,854 (6,598,857) 18,496,568 (6,598,857) (8,183,944) (7,957,280) (8,183,944) (5,213,770)
------(1) Other Other reserves reserves 88,542,879 88,542,879 868,632,110 114,070,048 114,070,048 982,702,158 780,089,232 868,632,110
------Legal Legal reserve reserve 16,695,625 16,695,625 16,695,625 16,695,625
------reserves reserves (891,950) (891,950) Fair value value Fair (316,799) (316,799) Fair value value Fair (3,030,775) (3,922,725) (2,713,976) (3,030,775)
------reserve reserve 6,370,405 6,370,405 Translation Translation (96,067,745) (96,067,745) (122,926,540) (218,994,285) statements. (129,296,945) (122,926,540)
------
shares shares financial
Treasury Treasury (7,023,383) (8,922,980) (7,023,383) (2,182,026) (6,740,954) (2,182,026) (8,922,980) (15,946,363)
EQUITY
------IN
Share Share capital consolidated capital
81,270,000 81,270,000 81,270,000 81,270,000 these
of
5.5 5.4 5.2 5.6 5.6 5.5 5.4 5.2 5.6 5.6 CHANGES
Note Note part
OF
integral
interests
an
period controlling
period
taxes) - controlling - economies
of of taxes) of the form the
non
period:
period:
non
controlling to for -
for
to
STATEMENT the
the
non 2019 2020
for
for notes
shareholders shareholders
to
2019 shares 2020 shares
income (net income
income (net income
profit reserves profit with
Hyperinflationary subsidiaries reserves
subsidiaries
-
December by
by January
treasury January
treasury the period the
other
the period the
Euro other Euro 31 December
of 2018 paid of paid
of 2019 of
employees
to paid employees for
of 1 paid of 31 for to of 1
of
to
to as
as as as movements
comprehensive
comprehensive comprehensive transactions operations movements comprehensive with transactions
Accompanying profit profit
Transfer Dividends Bonus Transfer Dividends Bonus
Amounts in Amounts Equity Net Other Total Application - - - Acquisition Dividends interests Acquisitions/Disposals Total Other Equity Amounts in Amounts Equity Net Other Total Application - - - Acquisition Dividends interests Other (Lebanon) Total Other Equity CONSOLIDATED The
139 CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts in Euro Note 2020 2019
CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers 2,081,001,182 2,386,865,531 Payments to suppliers (1,413,698,283) (1,581,829,973) Payments to employees (169,502,371) (202,679,063) Cash flows from operations 497,800,528 602,356,495
Income tax received / (paid) 11,834,059 (44,447,387) Other receipts / (payments) relating to operating activities (11,289,690) (69,899,262) Cash flows from operating activities (1) 498,344,897 488,009,846 CASH FLOWS FROM INVESTING ACTIVITIES Inflows: Financial investments 9,680,823 412,026 Property, plant and equipment 2,191,595 2,480,743 Intangible assets - 138,474 Interest and similar income 5,256,803 3,988,672 Group share of (loss) / gains of associated companies and joint ventures - 772,090 Other assets - 267,104 17,901,311 8,266,721 Outflows: Financial investments (6,404,087) (22,125,420) Property, plant and equipment (116,754,827) (223,086,299) Intangible assets (4,611,698) (3,506,739) Other assets (211,548) - (127,982,160) (248,718,458) Cash flows from investing activities (2) (110,080,849) (240,451,737)
FINANCING ACTIVITIES Inflows: Interest-bearing liabilities 2,064,031,284 3,610,912,198 Other financing activities - 41,359,096 2,064,031,284 3,652,271,294 Outflows: Interest-bearing liabilities (2,095,936,529) (3,643,078,158) Amortisation of lease agreements 5.1 (19,200,860) (14,585,261) Interest and similar expense 5.1 (49,446,871) (53,476,721) Dividends 5.4 (70,416,811) (105,613,553) Acquisition of treasury shares 5.2 (7,023,383) (2,182,026) Other financing activities (1,371,910) (630,979) (2,243,396,364) (3,819,566,698) Cash flows from financing activities (3) (179,365,080) (167,295,404) CHANGE IN CASH AND CASH EQUIVALENTS (1)+(2)+(3) 208,898,968 80,262,706 Effect of exchange differences (23,318,886) (513,685) Effect of hyperinflation on Cash and Cash Equivalents (297,787) - CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 5.9 259,241,194 183,248,977 Impairment 231,770 (3,756,804)
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5.9 444,755,259 259,241,194
The Accompanying notes form an integral part of these consolidated financial statements.
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ANNUAL REPORT 2020
1 INTRODUCTION...... 143 1.1 THE SEMAPA GROUP...... 143 1.2 RELEVANT EVENTS OF THE PERIOD...... 143 1.3 SUBSEQUENT EVENTS...... 147 1.4 BASIS FOR PREPARATION...... 147 1.5 NEW IFRS ADOPTED AND TO BE ADOPTED...... 152 1.6 MAIN ESTIMATES AND JUDGEMENTS...... 156 2 OPERATIONAL PERFORMANCE...... 158 2.1 REVENUE AND SEGMENT REPORTING...... 158 2.2 OTHER OPERATING INCOME...... 164 2.3 OTHER OPERATING EXPENSES...... 165 3 INVESTMENTS...... 167 3.1 GOODWILL...... 167 3.2 INTANGIBLE ASSETS...... 169 3.3 PROPERTY, PLANT AND EQUIPMENT...... 173 3.4 GOVERNMENT GRANTS...... 176 3.5 RIGHT-OF-USE ASSETS...... 177 3.6 DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES...... 179 3.7 BIOLOGICAL ASSETS...... 179 3.8 NON-CURRENT ASSETS HELD FOR SALE...... 182 3.9 INVESTMENT PROPERTIES...... 182 4 WORKING CAPITAL...... 183 4.1 INVENTORIES...... 183 4.2 RECEIVABLES AND OTHER CURRENT ASSETS...... 185 4.3 PAYABLES AND OTHER CURRENT LIABILITIES...... 187 5 CAPITAL STRUCTURE...... 188 5.1 CAPITAL MANAGEMENT...... 188 5.2 SHARE CAPITAL AND THEASURY SHARES...... 188 5.3 EARNINGS PER SHARE...... 189 5.4 DIVIDENDS...... 190 5.5 RESERVES AND RETAINED EARNINGS...... 190 5.6 NON-CONTROLLING INTERESTS...... 191 5.7 INTEREST-BEARING LIABILITIES...... 193 5.8 LEASE LIABILITIES...... 196 5.9 CASH AND CASH EQUIVALENTS...... 196 5.10 CASH FLOWS FROM FINANCING ACTIVITIES...... 197 5.11 NET FINANCIAL RESULTS...... 197 6 INCOME TAX...... 199 6.1 INCOME TAX FOR THE PERIOD...... 199 6.2 DEFERRED TAXES...... 201
141 7 PAYROLL ...... 205 7.1 SHORT-TERM EMPLOYEE BENEFITS...... 205 7.2 REMUNERATION OF CORPORATE BODIES...... 206 7.3 POST-EMPLOYMENT BENEFITS...... 206 8 FINANCIAL INSTRUMENTS...... 213 8.1 FINANCIAL RISK MANAGEMENT...... 215 8.2 DERIVATIVE FINANCIAL INSTRUMENTS...... 221 8.3 OTHER FINANCIAL INVESTMENTS...... 225 8.4 FINANCIAL ASSETS AND LIABILITIES...... 226 9 PROVISIONS, COMMITMENTS AND CONTINGENCIES...... 228 9.1 PROVISIONS...... 228 9.2 COMMITMENTS...... 230 9.3 CONTINGENT ASSETS AND LIABILITIES...... 231 10 GROUP STRUCTURE...... 233 10.1 CHANGES IN THE CONSOLIDATION PERIMETER...... 233 10.2 CHANGES IN THE CONSOLIDATION PERIMETER...... 237 10.3 INVESTMENT IN ASSOCIATED COMPANIES AND JOINT-VENTURES...... 237 10.4 TRANSACTIONS WITH RELATED PARTIES...... 238 11 RISK MANAGEMENT...... 240 11.1 STRATEGIC RISKS...... 240 11.2 OPERATIONAL RISKS...... 243 12 NOTE ADDED FOR TRANSLATION...... 255
142 ANNUAL REPORT 2020
1 INTRODUCTION
The following symbols are used in the presentation of the Notes to the financial statements:
ACCOUNTING POLICIES This symbol indicates the disclosure of accounting policies specifically applicable to the items in the respective Note.
MAIN ESTIMATES AND JUDGEMENTS This symbol indicates the disclosure of the estimates and/or judgements made regarding the items in the respective Note. The most significant estimates and judgements are presented in Note 1.6.
REFERENCE This symbol indicates a reference to another Note or another section of the Financial Statements were more information about the items disclosed is presented.
1.1 THE SEMAPA GROUP
The SEMAPA Group (Group) comprises Semapa — Sociedade de Investimento e Gestão, SGPS, S.A. (“Semapa”) and its subsidiaries. Semapa, located at Av Fontes Pereira de Melo, 14, 10º Piso, Lisboa, was incorporated on 21 June 1991 and its corporate purpose is to manage holdings in other companies as an indirect form of performing economic activities. The Company has been listed on Euronext Lisbon since 1995 with ISIN PTSEM0AM0004.
Company: Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. Head Office: Av. Fontes Pereira de Melo, 14, 10º Piso, Lisboa | Portugal Legal Form: Public Limited Company Share Capital: Euro 81,270,000 N.I.P.C.: 502 593 130
Semapa leads an Enterprise Group with activities in three distinct business segments: pulp and paper, cement and derivatives, and environment, developed respectively through its subsidiaries The Navigator Company (former Portucel, S.A. named in the present document as Navigator or Navigator Group), Secil – Companhia Geral de Cal e Cimento, S.A. (“Secil” or “Secil Group”) and ETSA – Investimentos, SGPS, S.A. ("ETSA" or "ETSA Group").
Semapa also holds a venture capital business unit, carried out through its subsidiary Semapa Next, S.A., whose objective is to promote investments in startups and venture capital funds with high growth potential.
A more detailed description of the Group activity in each business line is disclosed in Note 2.1 – Revenue and segment reporting.
Semapa is included in the consolidation perimeter of Sodim — SGPS, S.A., which is its parent company and the final controlling entity.
1.2 RELEVANT EVENTS OF THE PERIOD
CORONAVIRUS
Activity in 2020 reflected the effects of the COVID-19 pandemic, namely the different periods of lock down implemented in several geographies where the Semapa Group operates. Its impact on operational activity was diverse in the different business segments and different geographies, with greater impact on the Pulp and Paper segment, with less impact on the Cement and Derivatives business in Portugal and Brazil, and improvement in the Environment.
143
A Crisis ana ement ice as set p to monitor, anticipate and miti ate the impact o the C I pandemic, oth in terms o health and in economic and inancial terms, in the Gro p s vario s companies and ind strial sites. o r onitorin Gro ps ere set p ) Preservation o mplo ees ealth and Containin the pidemic, ) Comm nication, ) siness vol tion and Contin it Plans and ) inancial (Contin enc ) Plan.
In an adverse environment, the contin enc plans in place at the Gro p s vario s ind strial nits ere activated to eep operations r nnin . In vie o the impact o the clos re on demand, the s sidiar avi ator temporaril s spended prod ction at some o its paper machines et een late April and earl l , as a preventive meas re a ainst the acc m lation o stoc s in the val e chain, and so mana ed to preserve its or in capital.
ollo in the meas res implemented the Gro p ith the o ective o miti atin the impacts o the evol tion o the pandemic, the period as mar ed the positive development o most prod ction e pendit re. here as also a stron containment o i ed costs, ith a positive evol tion o Pa roll costs and operatin costs.
he Gro p c rrentl sho s a solid ree cash lo eneration and a stren thened inancial position, and it is the oard o Directors’ elie that, iven its inancial and li idit position, it ill overcome the ne ative impacts o this crisis, itho t compromisin the oin concern principle applied in the preparation o these consolidated inancial statements.
Semapa has anal sed the impact o the C I pandemic on its inancial position, per ormance and Gro p cash lo s
RECOVERABILITY OF GOODWILL AND BRANDS
he Gro p anal sed hether there ere si ns o impairment arisin rom the impacts o C I . Considerin the lo er impact o the pandemic in the Cement and erivatives se ments and improvement in the nvironment, on ecem er , no si ns o impairment ere identi ied.
In the P lp and Paper se ment, despite the si ni icant declines that occ rred, oth in the lo al cons mption o paper and in p lp and paper prices, ased on t re per ormance estimates, ased on pro ections o G P ro th and in lation in Port al, accordin to the I and anco de Port al, no impairments ere identi ied on ood ill and rands, ith a s stantial ap compared to the oo val e o assets associated ith that se ment ( ote . ).
RECOVERABILITY, USEFUL LIFE AND DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
he ro p assessed the e istence o si ns o impairment on its tan i le i ed assets. Considerin the per ormance o the Gro p s siness se ments and t re prospects, despite the temporar s spension mentioned a ove in the s sidiar avi ator, hich res lted in an impact o appro imatel ro . million in prod ction stoppa e costs, hich are re lected in the res lts or the period, no si ns o impairment ere identi ied on tan i le i ed assets.
BIOLOGICAL ASSETS
hen calc latin the air val e o orests, the disco nted cash lo s method is sed, ein the disco nt rate, ro th period and price some o the e ass mptions that ma e s ect to chan e d e to the C I pandemic. In this re ard, d rin the irst months, the c t o plans ere as e pected and no si ni icant impacts at the operational level ere oreseen that co ld a ect the air val e model.
e ardin the disco nt rates, the Gro p presents in ote . a sensitivit anal sis that allo s assessin the impact o a possi le chan e in the disco nt rate, considerin the c rrent disco nt rate as the oard o irectors est estimate in this matter.
INVENTORIES
Given the impacts on demand, the Gro p considers that in vie o the mar ps char ed d rin the pandemic, the net realisa le val e o its inventories is hi her than the oo val e and has concl ded that no ad stments to the oo val es are re ired.
144
ANNUAL REPORT 2020
RECOVERABILITY OF TRADE AND OTHER RECEIVABLES
ir e t osses re recor e se o t e si i ie o e ro i e or i recor i e ecte osses ti t rit t e e ro t e i cts o o t e co so i te st te e t o i ci ositio re o co si eri t t si i ic t rt o its s es re eit er i s re or e te co ere co ter s
e ert e ess t e ro erio ic ssesses t e e ecte cre it osses t e i cts o i ci ssets e s re t ortise cost t is re r t e ro ssesse t e c rre t e os re to cre it ris t e ote ti i ct o t re eco o ic orec sts co c e t t t e i ct o t is co o e t is s
ACTUARIAL ASSUMPTIONS
e ro ssesse t e isco t r te ic e to t e e i e e e it or e o ees ot er ost e o e t e e its s res t o t is ssess e t se o t e ct ri st s o Dece er e eci e to re ce t e isco t r te i t e er se e t i t e e e t se e t i or er to re ect t e ecre se i re ere ce i terest r tes ote t e ro rese ts se siti it sis t t o s ssessi t e i ct o ossi e c e i t e isco t r te
CURRENCY IMPACT
e e ro e e o s cti ities o tsi e ort t ro its s si i ries i t e er e e t Deri ti es se e ts is t s e ose to t e orei e c e ris o o er ti cti ities e o i te i c rre cies ot er t its ctio c rre c
e i it tio s c se t e e ic rtic r re r i o e e t o eo e i cte t e eco o e cert i t to t e r ets ccor i t ere s si i ic t e c e r te i ct ri e i t e e e t Deri ti es se e t res ti ro t e co ersio o ssets i i ities e o i te i orei c rre c reco ise i e it er t e c rre c tr s tio reser e ote s e s orei e c e i cts res ti ro t e o er tio o t e s si i ries ic re reco ise i t e i co e st te e t
LIQUIDITY
e ro c rre t s co ort e i i it ositio s res t o si i ic t i cre se i its s ort ter ssets c re e e t o or i c it s o Dece er t e ro s co tr cte se cre it i es o ti to ro i te ro i io ote
e ro s ee or i i co ti e to or t oro it i its re c e i its o er tio co erci i cost e icie c c s o oc tio e ecti e i i it e e t to e s re it re i s oi co cer t e e t o its e o ees t s o e ote t t s o Dece er t e ro is i co i ce it t e e oti te co e ts t e s et r i o t ese co e ts is co ort e
GOVERNMENT GRANTS
e ort ese o er e t s i e e te se er e ce tio te or r e s res to s ort or ers co ies ecte t e D e ic it ie to i t i i o s iti ti cor or te crisis sit tio s
e e e its i t e i co e st te e t i t e i ro e e t o c s o s risi ro t e r ts recei e esse ti t e s si i r i tor i o te to ro i io
LEBANON | IAS 29 - HYPERINFLATION
t e st rter o e o s co si ere eri tio r eco o er t e ter s o — i ci e orti i eri tio r co o ies se o t e i tio recor e o er t e st t ree e rs ct s o Dece er t e cc te i tio r te o er t e st t ree e rs e cee s ic is o ecti e tit ti e co itio t t e s to co si er i itio to t e e iste ce o ot er co itio s i o i t t e o is s o Dece er eri tio r eco o
145
IPC Inflation rate * To date, the IPC was not yet available as of 31/12/2020
—
shareholders’
BALANCE SHEET
Amounts in Euro 31/12/2020
Total Assets 20,801,193
Equity attributable to Semapa’ s Shareholders 8,765,829 Total Equity 17,171,066
Total Liabilities 3,630,127
Total equity and liabilities 20,801,193
146
ANNUAL REPORT 2020
S
m s her o e a d e e ses e o e ar os o a s losses o o roll eres s mpa e e p e pe
s o e e er he e al e o he asse s a d l a l es o he ore o era o e a o he ro s o sol da ed a al s a e e s a o s o ro ll o ro ll o
S S S
e ee a ar a d r l o e he ollo e e s o rred h h d d o e r se o ad s e s o he o sol da ed a al s a e e s o
S S S S S
e r ar od or ed he ar e a d he o s e o o la h a e eral a d ol ar l o er or he ord ar shares re rese he share a al o e a a h h does o e hold he la h o he er s s e o se eral o d o s des r ed he rel ar a o e e l shed o ha da e od l d he ra he o he er s r or re s ra o
ord o he a ore e o ed rel ar a o e e s od s e o re ardless o he res l s o he l s o er o a a he s ess a es o e a a a d he o rolled e es h he s o e o he r res e e or ora e r ose a d a s lar a er o hose ha ha e ee de elo ed ord l h s ra sa o ll ha e o d re a o e a a a d s s s d ar es ar lar re ard he r loa a ree e s
a ar he e ar e o o er e o o r ed o he s s d ar a a or he al ra e o e a l ed o he sale o er a a er rod s he or he h rd er od o re e he al ra e s ha ed ro he rel ar ra e a
he ra e o o r ed s l e h a a or s es a es a d ea s ha ro o o he ra e a a le o sales o oa ed a er ll e l res l s are de er ed or he al ra e or he h h s e e ed o o r r l
S S
S SS S S
hese o sol da ed a al s a e e s ere a ro ed he oard o re ors o r l o e er he are s ll s e o a ro al he e eral Shareholders’ Meeting, a orda e h he or ese o er al le sla o
The Group’s senior management, which are the members of the Board of Directors who sign this report, de lare ha o he es o he r o led e he or a o o a ed here as re ared o or h he a l a le a o s a dards ro d a r e a d a r e o he asse s a d l a l es he a al os o a d res l s o he o anies included in the Group’s o sol da o s o e
he o sol da ed a al s a e e s or he er od e ded e e er ere re ared a orda e h er a o al a al e or a dards ss ed he er a o al o oard a d er re a o s ss ed he er a o al a al e or er re a o s o ee e e e a ar a d as ado ed he ro ea o
147
S S S
The notes to the consolidated financial statements ha e been prepared on a going concern basis from the boo s and accounting records of the companies included in the consolidation perimeter ote and based on historical cost, e cept for biological assets ote and for financial instruments measured at fair alue through profit or loss or at fair alue through other comprehensi e income ote , in which deri ati e financial instruments are included ote The liabilit for ension and other post emplo ment benefits is recognised at its present alue less the respecti e asset
These financial statements are comparable in all material aspects with those of the pre ious period of
S S S
S S S
Subsidiaries are all entities including structured entities o er which the Group has control The Group controls an entit when it is e posed to, or has rights to, the ariable returns generated as a result of its in ol ement with the entit , and has the abilit to affect those ariable returns through the power it e ercises o er the entity’s rele ant acti ities
Shareholder’s equity and net profit/(loss) of these companies, corresponding to the third part in estment in such companies, are presented under the caption on controlling interests, respecti el in the onsolidated Statement of inancial osition, in a separate component of shareholder’s equity, and in the Consolidated Income Statement ompanies included in the consolidated financial statements are detailed in ote
The purchase method is used in recording the ac uisition of subsidiaries The cost of an ac uisition is measured at the fair alue of the assets transferred, the e uit instruments issued and liabilities incurred or assumed on the ac uisition date
The identifiable assets ac uired and the liabilities and contingent liabilities underta en in a business combination are initiall measured at fair alue at ac uisition date, regardless of the e istence of non controlling interests The e cess of the ac uisition cost, regarding the fair value of the Group’s share of identifiable assets and liabilities acquired, is recorded as Goodwill when the Group ac uires control, as described in ote
Subsidiaries are consolidated using the full consolidation method with effect from the date that control is transferred to the Group n the ac uisition of additional share capital of controlled entities, the e cess between the proportion of ac uired net assets and respecti e ac uisition cost is directl recognised in uit under the caption etained earnings ote
hen, at the date of ac uisition of the control, the Group alread holds a pre iousl ac uired interest, the fair alue of such interest contributes to the determination of goodwill or badwill
hen the control ac uired is less than , in the application of the purchase method, non controlling interests can be measured at fair alue or at the ratio of the fair alue of the assets and liabilities ac uired, being that option defined according to each transaction
n the case of disposals of interests, resulting in a loss of control o er a subsidiar , an remaining interest is re alued to the mar et alue at the date of sale, and the gain or loss resulting from such re aluation, is recorded against income, as well as the gain or loss resulting from such disposal
Subse uent transactions in the disposal or ac uisition of non controlling interests, which do not impl a change in control, do not result in the recognition of gains, losses or Goodwill n difference between the transaction alue and the boo alue is recognised in uit , in ther e uit instruments
The ac uisition cost is subse uentl ad usted when the ac uisition attribution price is contingent upon the occurrence of specific e ents agreed with the seller shareholder e g fair alue of ac uired assets
148
ANNUAL REPORT 2020
ny contingent payments to be transferred by the Group are recognised at fair value at the acquisition date If the underta en obligation constitutes a financial liability, subsequent changes in fair value are recognised in profit and loss If the underta en obligation constitutes an equity instrument, there is no change in the initial estimation
he negative profit/ (loss) generated in each period by subsidiaries with non controlling interests are allocated to the percentage held by them, regardless of whether they assume a negative balance
If the acquisition cost is below the fair value of the net assets of the subsidiary acquired ( adwill), the difference is recognised directly in the Income statement, under the caption ther operating income ransaction costs directly attributable are immediately recorded in profit and loss
Intercompany transactions, balances, unrealised gains on transactions and dividends distributed between Group companies are eliminated nrealised losses are also eliminated, e cept where the transaction displays evidence of impairment of a transferred asset
Subsidiaries’ accounting policies have been changed whenever necessary so as to ensure consistency with the policies adopted by the Group
SS S
ssociated companies are all the entities over which the Group has significant influence but does not have control, generally applied in the case of investments representing between and of the voting rights Investments in associated companies are equity accounted
In accordance with the equity accounting method, financial investments are recorded at their acquisition cost, ad usted by the amount corresponding to the Group’s share of changes in the associated companies’ shareholders’ equity (including net income/ (loss)) and by dividends received
he difference between the acquisition cost and the fair value of the associate’s identifiable assets, liabilities and contingent liabilities on the acquisition date, if positive, are recognised as Goodwill and recorded under the caption Investments in associated companies If these differences are negative, they are recorded as income for the year under the caption Group share of (loss)/gains of associated companies ransaction costs directly attributable are immediately recorded in profit and loss
n evaluation of investments occurs when there are signs that the asset could be impaired, and any identified impairment losses are recorded under the same caption hen the impairment losses recognised in prior years no longer e ist, they are reversed
hen the Group’s share in the associate’s losses is equal to or e ceeds its investment in the associate, the Group ceases to recognise additional losses, except where it has assumed liability or made payments in the associate’s name. Unrealised gains on transactions with associated companies are eliminated to the extent of the Group’s share in the associate. Unrealised losses are also eliminated, e cept if the transaction reveals evidence of impairment of a transferred asset
Associate’s accounting policies are changed whenever necessary to ensure consistency with the policies adopted by the Group Investments in associated companies are disclosed in ote
S
oint ventures are classified as oint operations or oint ventures, depending on the contractual rights and obligations of each investor oint ventures are accounted and measured using the equity method
Joint operations are accounted in the Group’s consolidated financial statements, based on the share of jointly held assets and liabilities, as well as the income from the oint operation, and e penses incurred ointly ssets, liabilities, income and e penses should be accounted for in accordance with the applicable I S
ointly controlled entity is a oint venture involving the establishment of a company, partnership or other entity in which the Group has an interest
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Jointly controlled entities are included in the consolidated financial statements under the equity method, according to which financial investments are recorded at their acquisition cost, adjusted by the amount corresponding to the Group’s interest in changes in shareholders’ equity (including net income and dividends received.
hen the share of loss attributable to the Group is equivalent or exceeds the value of the financial holding in joint ventures, the Group recognises additional losses if it has assumed obligations or if it has made payments for the joint ventures.
Unrealised gains and losses between the Group and its joint ventures are eliminated in proportion to the Group’s interest in joint ventures. Unrealised losses are also eliminated unless the transaction gives additional evidence of impairment of the transferred asset.
he accounting policies of joint ventures are amended, when necessary, to ensure that they are applied consistently with those of the Group.
S S S S S
he items included in the financial statements of each of the Group entities included in the consolidation perimeter are measured using the currency of the economic environment in which the entity operates (functional currency . hese consolidated financial statements are presented in uro.
All the Group’s assets and liabilities denominated in currencies other than the reporting currency have been translated to uro using the exchange rates ruling at the statement of financial position date ( ote . . . he currency differences arising from differences between the exchange rates ruling at the transaction date and those ruling on collection, payment or at the statement of financial position dates, are recorded as income and expenses in the period ( ote . .
he income captions of foreign transactions are translated at the average rate for the period. he differences arising from the application of this rate, as compared with the balance prior to the conversion, are reflected under the urrency translation reserve caption in shareholders’ equity (Note 5.5). Whenever a foreign entity is sold, the accumulated exchange difference is recognised in the consolidated income statement as part of the gain or loss on the sale.
or foreign operations in hyperinflationary economies, the financial statements in local currency are restated in terms of the measuring unit current at the statement of financial position date to reflect the impact of inflation before translation into the Group s presentation currency. AS — inancial eporting in yperinflationary conomies requires that amounts not yet expressed in terms of the measuring unit current at the financial position date are restated by applying a general price index, leading to a potential gain or loss on the monetary position. he standard also requires that all items in the statement of cash flows are expressed in terms of the measuring unit current at the balance sheet date.
hen the Group s presentation currency is not hyperinflationary, AS — he ffects of hanges in oreign xchange ates requires comparative amounts to be those that were presented in previous financial statements, with the gain or loss on the net monetary position relating to price changes in prior periods being recognised directly in quity.
urthermore, the Group assesses the boo value of non current assets in accordance with AS — mpairment of Assets, so that the restated amount is reduced to the recoverable amount, ensuring that the boo value reflects the economic value of the assets.
he profit and loss and financial position of foreign operations in hyperinflationary economies are translated at the closing rate at the date of the financial position. n the case of ebanon, the Group uses the exchange rate applicable to dividends and capital repatriation, because it is the rate at which, at the date of the financial position, the investment in the foreign operation will be recovered.
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s of ecember and , the exchange rates used for the translation of assets and liabilities expressed in currencies other than uro are detailed as follo s
a a a a
e a a e a a N ( unisian inar) ( anish rone) verage exchange rate verage exchange rate . . .5 . 5 . . for the period for the period xchange rate for the end xchange rate for the end . . 5 ( .5 ) . . 5 . of the period of the period N ( ebanese pound) ( ungarian forint) verage exchange rate verage exchange rate , . , . (5 . ) 5 . 5. ( . ) for the period for the period xchange rate for the end xchange rate for the end , . , .5 (5 . ) . .5 ( . ) of the period of the period ( merican dollar) ( ustralian dollar) verage exchange rate verage exchange rate . . 5 ( . ) . 5 . ( . ) for the period for the period xchange rate for the end xchange rate for the end . . ( . ) .5 .5 5 . of the period of the period ( o ambican G ( ertling pound) metical) verage exchange rate verage exchange rate . . 5 ( . ) . . ( . ) for the period for the period xchange rate for the end xchange rate for the end . . 5 (5. ) . . ( . ) of the period of the period N ( olish loti) ( ra ilian real) verage exchange rate verage exchange rate . . ( . ) 5. . ( .5 ) for the period for the period xchange rate for the end xchange rate for the end .55 . 5 ( . ) . .5 ( . ) of the period of the period ( edish rona) ( oroccan dirham) verage exchange rate verage exchange rate . .5 . . . ( . ) for the period for the period xchange rate for the end xchange rate for the end . . . 5 . 5 . 5 ( .5 ) of the period of the period ( ech oruna) N (Nor ay roner) verage exchange rate verage exchange rate . 55 5. ( . ) . . ( . ) for the period for the period xchange rate for the end xchange rate for the end . 5. ( . ) . . ( . 5 ) of the period of the period ( iss franc) ( ngolan an a) verage exchange rate verage exchange rate . 5 . 5 . . . ( . ) for the period for the period xchange rate for the end xchange rate for the end . . 5 . . 5 . ( 5. 5 ) of the period of the period ( ur ish lira) N ( exican peso) verage exchange rate verage exchange rate . 5 . ( . ) .5 .55 ( . ) for the period for the period xchange rate for the end xchange rate for the end . . ( . ) . . ( 5. ) of the period of the period ( outh frican rand) ( irham) verage exchange rate verage exchange rate . 55 . ( . ) . . ( . ) for the period for the period xchange rate for the end xchange rate for the end . 5. ( . ) .5 5 . 5 ( . ) of the period of the period ( ussian roubles) ( anadian dollar) verage exchange rate verage exchange rate . . 5 ( . ) .5 . 5 ( . ) for the period for the period xchange rate for the end xchange rate for the end . . 5 ( . 5 ) .5 . 5 ( . ) of the period of the period
151
S
S S S S
me me S a a s a ame me s me me s n arch , the nternational ccounting tandards oard ( oard) issued a comprehensive set of concepts for e e e es e financial reporting, the revised onceptual rame or for inancial eporting ( onceptual rame or ), hich aim is ep a ame to update, in existing tandards, references to, and quotes from, the existing version of the onceptual rame or or S S a a s the version that as replaced in so that they refer to the revised onceptual rame or .
he revised onceptual rame or has an effective date of anuary for companies that use the onceptual rame or to develop accounting policies hen no tandard applies to a particular transaction.
e a e a n ctober , the nternational ccounting tandards oard has issued amendments to its definition of ame me s S material to ma e it easier for companies to ma e materiality judgements. a S he mendments consist of (a) replacing the term ‘could influence’ ith ‘could reasonably be expected to influence’; (b) including the concept of ‘obscuring information’ alongside the concepts of ‘omitting’ and ‘misstating’ information in the definition of material; (c) clarifying that the ‘users’ referred to are the primary users of general purpose financial statements referred to in the onceptual rame or and (d) aligning the definition of material across publications.
he amended definition of material therefore states that ‘Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements ma e on the basis of those financial statements, hich provide financial information about a specific reporting entity’.
e es a e n eptember , the issued amendments to , and . he amendments modify some e ma e m specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the me me s S reform. dditionally, the amendments require companies to provide additional information to investors about their S a S hedging relationships hich are directly affected by these uncertainties.
he mendments provide exceptions so that entities ould apply hedge accounting requirements assuming that the interest rate benchmar on hich the hedged ris or hedged cash flo s of the hedged item or cash flo s of the hedging instrument are based is not altered as a result of the reform. he proposed exceptions apply only to the hedge accounting requirements and the mendments do not provide relief from any other consequences arising from interest rate benchmar reform.
he mendments are limited in scope. f a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified by the mendments, then discontinuation of hedge accounting is still required. he mendments are mandatory to all hedging relationships to hich the exceptions are applicable.
he amendments have an effective date of annual periods beginning on or after anuary . he amendments ould be applied retrospectively to those hedging relationships that existed at the beginning of the reporting period in hich the entity first applies the mendments and to the gain or loss recognised in other comprehensive income that existed at the beginning of the reporting period in hich an entity first applies the mendments (i.e. even if the
reporting period is not an annual period).
e a n ctober , the issued the amendments to its definition of a business. s ess ame me s S he mendments clarify that to be considered a business, an acquired set of activities and assets must include, at a s ess minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. m a s hey also clarify that a set of activities and assets can qualify as a business ithout including all of the inputs and processes needed to create outputs, or including the outputs themselves, by replacing the term ‘ability to create outputs’ with ‘ability to contribute to the creation of outputs’.
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me me S a a s a ame me s It is no longer necessary to assess whether mar et participants are capable of replacing any missing inputs or
processes (for e ample by integrating the ac uired activities and assets) and continuing to produce outputs. he mendments focus on whether ac uired inputs and ac uired substantive processes, together, significantly contribute to the ability to create outputs.
he mendments shall be applied to transactions for which the ac uisition date is on or after the beginning of the first annual reporting period beginning on or after anuary , with earlier application permitted. If entities apply the mendments earlier, they shall disclose that fact.
he above standards, amendments and interpretations had no impact on the financial statements.
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S S S S
me me e e a e S a a s a ame me s e se e pea e p as p e app ea e a e e In ay , the International ccounting tandards oard ( oard) issued I anuary ess s elated ent oncessions, which amended I eases. me me S If certain conditions are met, the mendment would permit lessees, as a practical e pedient, not to assess whether particular I related rent concessions are lease modifications. Instead, lessees that apply the practical e pedient would account for those rent concessions as if they were not lease modifications, so that, for e ample, the amount of rent forgiven on or before une is ta en to income the same year that the concession is granted, instead of being allocated over the duration of the contract as would be the case were the practical e pedient not allowed.
he mendment shall be applied for annual reporting periods beginning on or after une . arlier application is permitted, including in financial statements not yet authorised for publication on ay .
e es a e In ugust , the I issued Interest ate enchmar eform— hase , which amends anuary e ma e m – I inancial Instruments, I inancial Instruments ecognition and easurement, ase I inancial Instruments isclosures, I Insurance ontracts and I eases. me me s S S S S he ob ective of the mendments is to assist entities with providing useful information to a S users of financial statements and to support preparers in applying I tandards when changes are made to contractual cash flows or hedging relationships, as a result of the transition from an I benchmar rate to alternative benchmar rates, in the conte t of the ongoing ris free rate reform (‘IBOR reform’).
he mendments are the results of the second phase of the I pro ect that deals with the accounting implications of the I reform, which originated the Interest ate enchmar eform ( mendments to I , I and I ) issued by the I on eptember . hey complement the first phase of the pro ect which dealt with pre replacement accounting implications of the I reform and which have been issued by the I in . he mendments shall be applied retrospectively for annual periods beginning on or after anuary , with earlier application permitted.
e s e I has issued tension of the emporary emption from pplying I ( mendments anuary emp a emp to I ) ( the mendments ) on une . m pp S he ob ective of the mendments is to e tend the e piry date of the temporary e emption ame me s S from applying I by two years (i.e. from to ) in order to align the effective dates of I inancial Instruments with I Insurance ontracts.
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I B e o r me me o I – re e o of r eme o r f o o f e o er e rre o rre . e me me m o romo e o e e o of re reme o e – om e e erm e e er e eme of f o o e or o er e er e eme e o e f e rre ( o e e e or o e e e o e e r) or o rre . e me me e r f o o e f o re reme for e om e e o er o e .
me me effe e for er o r .
I e I B e Refere e o e o e r me or m e r me me o I R B e om o . e me me e I R re refere e o o version of the Board’s o e r me or for Re or refere e o e e er o e r .
e me me e e o e om o for e o e o or f er e e of e f r re or er o e o or f er r . r er o erm e f e me me or e r er e o e e me me m e me me o Refere e o e o e
r me or I R r e r .
I e I B e ro er me — ro ee efore I e e r — e m e me me o I ro er me . e me me o ro e from e o of em of ro er e me ro ee from e em ro e e r e o e o o o o e e r for o e e of o er m er e e m eme . I e e o re o e o e e ro ee rof or o .
e me me e e re ro e e for er o e o or f er r e r er o erm e .
— I e I B e O ero o r — o of f o r m e r me me o I ro o o e e o e e . e o e e of e me me o r f e re reme of I o o ero o r re r e e me of e er o r e o e o of mee e o o er e o r e ee e e o om e ef e e e o e re e e er .
e me me e e for er o e o or f er r e r er o erm e .
155
n a the B iss ed nn a rove ents to tandards – an ar ontainin the fo o in a end ents to s a er it an entit that is a s sidiar asso iate or oint vent re ho e o es a first ti e ado ter ater than its arent and e e ts to a ara ra h a of irst ti e do tion of nternationa inan ia e ortin tandards to eas re the ative translation differences using the amounts reported by the parent, based on the parent’s date of transition to s
arif that the referen e to fees in the er ent test in des on fees aid or re eived et een the orro er and the ender in din fees aid or re eived either the orro er or ender on the other’s eha f re ove the otentia onf sion re ardin the treat ent of ease in entives a in eases as as i strated in strative a e a o an in and d re ove the re ire ent in ara ra h of ri t re for entities to e de ash f o s for ta ation hen eas rin fair va e a in
he end ents sha e a ied for ann a eriods e innin on or after an ar ith ear ier a i ation er itted
– he B iss ed on a a standard that s erseded and o ete an ar refor ed the treat ent of ins ran e ontra ts
he standard introd es si nifi ant han es to the a in hi h the erfor an e of ins ran e ontra ts is eas red and resented ith vario s i a ts a so at the eve of the finan ia osition he standard e e ted to e effe tive for ann a eriods e innin on or
after an ar
he re aration of onso idated finan ia state ents re ires the se of esti ates and d e ents that affe t the a o nts of in o e e enses assets liabilities and disclosures at the date of the consolidated financial position. To that end, the Board’s esti ates and d e ents are ased on
• the est infor ation and no ed e of rrent events and in ertain ases on the re orts of inde endent e erts
• the a tions that the ro onsiders it a have to ta e in the f t re and
• on the date on hi h the o erations are rea ised the o t o e o d differ fro those esti ates
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eco erability of good ill and brands . – ood ill . – ntangible assets
ncertainty o er ncome Ta Treatments . – ncome ta for the period . – eferred ta es
ctuarial assumptions . – mployee benefits
air alue of biological assets . – Biological assets
ecognition of pro isions . – ro isions
eco erability, useful life and depreciation of property, plant and . – roperty, plant and e uipment e uipment
157
entity’s
Semapa’s Executive Committee and the different subsidiaries are the main responsible for the Group's operational decisions,
Group’s – –
A significant portion of the Group’s own BEKP production is consumed in the production of UWF and tissue paper in Aveiro. Sal
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he Cement and derivatives segment is led by Secil Companhia Geral de Cal e Cimento, S.A., which has a strong presence in the cement industry, being a business group with several operations in Portugal and in several countries around the world Secil Group .
he main product mar eted by the Secil Group is cement. he sale of ready mixed concrete, aggregates, mortars and precast concrete constitutes a verticalisation of the cement segment allowing the Group to obtain synergies.
Secil Group has cement plants in Portugal, Secil ut o, aceira i and Cibra Pataias, and the cement is sold in its various forms in bul or bagged, on pallets or big bags through the different trading hubs owned by the Group. he Secil Group also owns other factories located in Bra il, unisia, ebanon and Angola.
A significant factor in the mar eting of cement is the transportation cost, which is why the Secil Group maintains a private wharf in Secil ut o, a sea terminal in Spain and a sea terminal in the etherlands.
With regards to cement derivatives , the ready mixed concrete represents the greatest weight in the Group's revenue, with the Secil Group owning several production and mar eting centres in Portugal, Spain, unisia, ebanon and Bra il.
Secil Group has also the licence to exploit several uarries, from which it extracts materials for incorporation in cement production or commercialisation as aggregates.
he Environment segment is led by E SA nvestimentos, S.G.P.S., S.A., whose operating activities in Portugal and Spain refer mainly to the rendering of services associated with the cumulative recovery of animal by products and food products containing animal origin substances, and the sale of the products resulting from this recovery for incorporation in the production of fertilisers, animal feed and biodiesel E SA Group .
he activities developed by the E SA Group play a very important role in the defence of the population and the environment, providing new life to products that would otherwise be directed to landfills or undifferentiated waste treatment centres.
he main activities developed by the Group are
• collection, pac aging, sorting, unpac ing and upgrading of animal by products categories , and , other foodstuffs and waste oils, from collection sites such as slaughterhouses, cutting plants, butchers, municipal mar ets and modern retail
• the sale of animal fats, meal and used coo ing oil.
E SA Group develops its activity through the transformation units located in Coruche and oures, and the collection networ is assured by its own road fleet, duly certified by the Portuguese ational Authority for Food and Animal ealth ire o Geral de Alimenta o e eterin ria GA .
his segment refers to the management activities of the Semapa Group, that is, the services rendered by Semapa to its subsidiaries in various areas such as strategic planning, legal, financial, accounting, tax, talent management, among others, while incurring in payroll expenses and the contracting of specialised services.
Since , the new venture capital unit has been included in this segment, which is not yet reflected in the Group's financial information.
evenue is presented by operating segment and by geographic area, based on the country of destination of the goods and services sold by the Group.
159
evenue recognition in each operating segment is described as follows
Commercial contracts with customers refer essentially to the sale of goods such as paper, pulp, tissue and energy, and to an extent limited to the transportation of those goods, when applicable.
Paper revenue refers to sales made through etail Stores B C or Commercial istributors B B which include large distributors, wholesalers or commercial operators. evenue is recognised at a specific time, when control is transferred in accordance with the agreed incoterm, at the amount of the performance obligation satisfied, and the price of the transaction is a fixed amount invoiced based on uantities sold, less cash discounts and uantity discounts, which are reliably estimated.
Pulp revenue results from sales to international paper producers. evenue is recognised at a specific time, by the amount of the performance obligation satisfied, the price of the transaction corresponding to a fixed amount invoiced on the basis of uantities sold, less cash discounts and uantity discounts, which are reliably determinable. n the export side, the transfer of control of the products occurs in general when there is a transfer of control to the customer, according to the ncoterms negotiated.
issue revenue results from sales of tissue paper produced for the private label of modern national and international retail chains. evenue is recognised at a specific time by the amount of the performance obligation satisfied, and the price of the transaction corresp onds to a fixed amount invoiced according to the uantities sold. evenue is recognised against the delivery of the product, at which time the transfer of control over the product is deemed to ta e place.
Energy revenue results from the valuation of the energy produced and delivered to the national electricity system, according to the metering, valued at the tariff defined in the contract for a year period in progress. A significant part of Secil Group revenue relates to the sale of grey cement, in bul or bagged, in pallets or pac ets. he form of cement pac aging and delivery point depends on the si e of the customer.
Secil Group's main customers are industrial companies in the area of concrete, prefabricated and civil construction and consortia associated with the construction of highly complex technical wor s such as dams and bridges. he sale of bagged cement to the end consumer is residual and is assured through local resellers.
Secil supplies its products in its factories and trading hubs and ensures transport to the customer's premises by subcontracting the transport, in which case there are two performance obligations, to which Secil allocates the transaction price based on the sales price.
evenue is recognised at a specific time, when the control is transferred, by the amount of the performance obligation satisfied. he transaction price results from the price lists in force ad usted by cash discounts and uantity discounts, granted to customers, depending on whether they are resellers or industrial customers, as described in the general terms and conditions of sale. For large customers and specific pro ects the prices and discount conditions are fixed by contract, on an individual basis.
he discounts granted are a variable component of the price which is considered in determining the revenue recorded on the date of delivery of the product to the customer, which corresponds to the date of transfer of control of the products.
n the export side, the transfer of control of the products generally ta es place when there is a transfer of control to the customer, according to the ncoterms negotiated.
he aterials business line concerns cement derivatives ready mixed concrete, aggregates, mortars and prefabricated concrete. evenue from aterials is recognised, at a specific moment, on the date of delivery of the product to the customer, even if t he contract involves phased deliveries, due to the different phases of the wor and uantities to be moved.
evenue is recognised by the amount of the performance obligation satisfied, the price of the transaction corresponding to a fixed amount invoiced on the basis of uantities sold, less cash discounts and uantity discounts, which are reliably estimated.
With regards to mortars, the rental of site e uipment for the storage, mixing and application of mortars corresponds to a sep arate performance obligation with a stand alone sales price less any discounts granted.
Prefabricated concrete essentially refers to the mar eting of standard prefabricated materials, and there is no production of prefabricated materials at the specific re uest of customers. n this business area the Group recognises the revenue of all products with the delivery of the product to the customer.
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evenue recorded by the Environment segment refers to the sale of products and the rendering of services.
Product sales are mainly lard, tallow, animal fat, flour for the feed industry , and oils for the biodiesel mar et . evenue is recognised, at a specific moment, when the products are delivered to the customer's premises or location designated by the customer, at which time the transfer of control to the customer is considered to occur.
he main customers are national and international animal feed producers. he services rendered by the E SA Group refer mainly to the following • collection and treatment of Category and material from farmed and domestic animal carcases, in accordance with the contract with GA irec o Geral de Alimenta o e eterin ria, as well as from slaughterhouses and other conventional collection centres and • pac ing in refrigerated e uipment, collection, transport, sorting and unpac ing of Category materials meat and fish and other foodstuffs fresh or fro en , in bul or pac aged, in the networ of modern retail shops and town mar ets.
• evenue recognition is made on a monthly basis for services rendered on a regular and uniform basis to the modern retail networ . As for the contract with GA , revenue is recognised for each service rendered, as calculated on a monthly basis.
When aggregating the Group's operating segments, the Board of irectors defined as reportable segments those that correspond to each of the business areas developed by the Group Pulp and Paper, Cements and erivatives, and Environment, consistent with the way the Semapa Group's management team monitors and analyses performance.
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Instituto de Emprego e Formação Profissional
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* Range corresponding to Portugal, Brazil, Tunisia, Lebanon and Angola geographies
* Range corresponding to Portugal, Brazil, Tunisia, Lebanon and Angola geographies
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–
Group’s (CGU’s)
169
G s o ou s r s or r o o sur o C o s po s s o o s
o o o r C ss o o s r o Group urop U o ss o s r ( U ) or o s ss o C ss o o s o os s r s o ss or o s o r su s u r or o o o r o s u o ss o s ur sur o p p r o
ss o o s r o r or s ss s Group s o r s o ro p o r sur r u ( ) r u o ss o o s s s o s oo u su r s s o s r p r p r oss s r o s or ss o o s Group o us s op r o s
o r o s s r o s s o u ss o s ( o – s o r urr s) s s us o s o sur oo u o os o s o ss o s r sur us r u s s
o o Co so o Group r o s s s p s s u r r op r p s s ss o s o s r or r u o r p or u r o s r p s s sur r pur s pr u os s o s o r op r o r su ro r o o o or o r r ( so r o s r u r ) s s spos o ss o s
o o s r or u r r r o su p o o r o s o o r su ro pur s o o o s o o r ss ss o s ro s o o su p o or ro p r oss s r or o o s r o us op r o r s o o r r s r us ss o o Group r or s s p r s r sur sur r u o u s o u s u os ss p r oss s r s r o su o or s o s r us u s sur p r Group u rr s ou p r s s o r s or r r r s s o p r
op p s s r o r o s s ss s o p o o p op o ss s o s r s or o us or o r s o p s s o o s r u r s r s r p s s r r or s os s urr
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–
*Local currency | Explicit period
–
171
* The value of these brands is subject to exchange rate adjustment.
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– – – – – –
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asset’s
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a es t e e ete s t s s sa s st e ts t a s e s a te s a e ate a st e t a es t e e ete s t s s sa s st e ts t a s e s a te s a e ate a st e t e t e at a e es a es t e e ete e e at t e e s sa s a e t sses st e ts t a s e s a te s a e ate a st e t a es t e e ete e e at t e e te s sa s a e t sses te st e ts t a s e s a te s a e ate a st e t e t e at a e es
s e e e est e ts ess e est e ts ass ate t e e e t e ts a t a t se e ate t t e a e s ess se e t e e t e st t t e e ass e at t e e a a a t a se e a e e ts t e t ess at t e a at s s s a es a a t ts a e te t
— a a e t e at a es as a e t t e a a state e ts t e e a ese s s a es e e t a s at t t e s ese tat e as e e e te s e e e t e a at t s sta a a a et a t e t a t a e e t t a ease t e ss a t e t a t a e e t a a ate e e at s e e e t e et a e e t a t a e e t e at t t e e a ese s s a es t e s s ate a a state e ts a ts t
a t e a t st e ts t a s e s a te s e e esse t a t t e t a s e est e ts ess t t e e a te s e t a t a e e t a e e e t e at t e t e t e e e a a a e t e te e se
a a a a es a s e t e ate t t e a s t st t t e assets e e a ta se
s e e e a t e e a e e t a t a e e t e as ate a
175
–
–
Of a financial nature 13,768,052 18,562,558 Of a fiscal nature 21,463,620 24,214,014
176 ANNUAL REPORT 2020
177
178
ANNUAL REPORT 2020
Group’s biological
Group’s
179
ssu p io s corr spo i g o a ur o ass s b i g alu r co si r
• ro uc i i o or s s
• oo sal s pric r is a ac i ar l ss cos o ar s i g r s or o l as a co c ssio la r pla i g a ra spor pla i g a ai a c cos s cos i r i l asi g or s la
• iscou ra or corr spo i g o o a Group i corpora s ir ris i o o l s cas lo s is ris r i corpora i o iscou ra i oul b o
s alu s calcula i accor a c i p c rac io o ir pro uc io s corr spo o ollo i g u ur pro uc io p c a io s
ucal p us or ugal o ial u ur o oo rac io s ssc ucal p us o a bi u o ial u ur o oo rac io s ssc a i or ugal o ial u ur o oo rac io s o i or ugal o ial u ur o pi rac io s o a a or a or ugal o ial u ur o cor rac io s
o c r i g ucal p us os r l a biological ass i i a cial s a s Group rac i ssc o oo ro i s o a plor or s s c b r ssc
i io all as o c b r a c b r i r ar o a ou s o biological ass s os prop r is r s ric a or pl g as guara or liabili i s or r ar o r rsibl co i s r la o ac uisi io o biological ass s a ii r ar o go r subsi i s r la o biological ass s r cog is i Group s co soli a i a cial s a s
Group co si rs iscou ra us i or ugal a or ar pric o oo as os sig i ica ariabl s a g s i assu p io s a i pl alua io pr cia io o s ass s
alua io o or s r ass s i or ugal alua io o or s r ass s i or ugal
180
ANNUAL REPORT 2020
ucal p us or ugal i or ugal or oa or ugal r sp ci s or ugal ucal p us o a bi u
i r gar o o a bi u pro c a iga or a o a bica Go r co i u o or u r r s o o sig i a l o co i io s pr c i par icular o logis ical issu s r la i g o or o acu public s a s a a o o b r or co c ssio ol r sai i oul s ar co s ruc io o por i ir uar r o i a p c s ar up a i irs uar r o
sub c o la a or s lop progra co i u s o b i pl a go r i i ia i i u i g ro orl a goal is o pro o s all a iu scal sus ai abl co rcial or s pla a io s a r s ora io o gra ar as i abou a a i g b pla i ca paig a ca paig alr a s ar i arg o a
or uc l o a bi u pla s a ac i rol i lopi g a i pl i g progra pro i i g a ra g o suppor i i g or s r o l suppl i g clo pla s a subsi is pric s a acc ss o ra a rials a o o a r a ar s i or uc l o a bi u ill a a op io o purc as oo
or also s ar o ar s i g i b r ro or uc l o a bi u s pla a io s i a ica or por ro or o ira ic ill a i possibl a o gs o r goals o pu o a bi u o orl ap or is or s bas i us r o li ri s o s ips ar sc ul or r pr s i g appro i a l o oo i o s lop s Group as r is i s assu p io s r gar i g ucal p us ar i o a bi u a i g alu or s s i a ica a a b ia a uro
oggi g Gro pla a io s r c a g s i air alu
The amounts shown as “Other changes in fair value” correspond to actual costs of forest asset management foreseen and i curr i p rio c a g s i g ral ass ss assu p io s pric o oo a cos o capi al a c a g s i p c a io s i r la io o a ual o l
os s o ass s a ag or s r ruc ur i a ariabl r s pair i o a bi u pro c a g s i p c a io s ric o oo os o capi al ra aria io s i o r sp ci s pac o ir s ra spor logis ics cos s r c a g s i p c a io s
181
on current assets or discontinued operations are classified as held for sale if its value is realisa le through a sale transaction rather than through its continuing use
This is considered to e the case onl when i the sale is highl pro a le and the asset is availa le for immediate sale in its present condition ii the roup has assumed a commitment to sell and iii it is e pected that the sale will ta e place within a period of months
easurement and rom the moment propert plant and e uipment is classified as non current assets held for sale the are measured at presentation the lower of oo value or at fair value less costs to sell and their depreciation ceases hen the fair value less costs to sell is lower than the oo value the difference is recognised in the income statement
isposals ains or losses on disposals of non current assets determined the difference etween the sale price and the respective net oo value are recognised in the income statement as Other operating income ote or Other operating e penses ote
s of ecem er assets held for sale amounting to uro uro essentiall correspond to and of the ement and derivatives segment
n the su sidiar ecil recorded an impairment of uro ote corresponding to industrial e uipment recognised as ssets held for ale
The roup classifies the assets held for the purpose of capital appreciation and or the generation of rental income as investments properties in the consolidated financial statements
easurement n investment propert is initiall measured its ac uisition or production cost including the transaction costs that are directl attri uta le to it fter initial recognition investment properties are measured at cost less accumulated amortisation and impairment losses
u se uent e penditure is capitalised onl when it is pro a le that it will result in future economic enefits to the entit comparing to those considered in the initial recognition
Opening alance isposals mortisation and impairment losses
These assets consist essentiall of land and uildings held for rental and or capital valuation purposes and are not related to the roup s operating activit nor do the have an future use determined
182
ANNUAL REPORT 2020
oods and raw oods and raw materials are valued at the lower of their purchase cost or their net realisa le value The purchase cost materials includes ancillar costs and it is determined using the weighted average cost as the valuation method
inished and inished and intermediate products and wor in progress are valued at the lower of their production cost which includes intermediate incorporated raw materials la our and general manufacturing costs ased on a normal production capacit level and their products and net realisa le value wor ing progress The net realisa le value corresponds to the estimated selling price after deducting estimated completion and selling costs The difference etween production cost and net realisa le value if lower is recorded as an operational cost
–
aw materials oods u products and waste inished and intermediate products roducts and wor in progress Total
–
ortugal est of urope merica ortugal est of urope merica frica sia ortugal
183
The amount related to ortugal from ulp and aper segment includes uro ecem er uro relating to inventories for which invoices have alread een issued ut whose control has not een transferred to customers
s of ecem er and ecem er there are no inventories in which ownership is restricted and or pledged as collateral for lia ilities
Opening alance urchases losing alance
Opening alance d ustments losing alance
ncreases eversals change rate ad ustment perinflationar economies harge off
nventor impairment and reversals recorded in and refer mainl to other movements to the stoc of and Tissue paper n the roup reversed impairments on inventories arising mainl from the sale of uro and Tissue uro paper waste ote
n — inancial eporting in perinflationar conomies was applied to the financial statements of the e anese su sidiaries efore translation to the roup s presentation currenc as referred in ote s of ecem er the application of the aforementioned h perinflation standard had an impact on nventories of uro ote s of ecem er the value of inventories relating to the e anese su sidiaries in the roup s consolidated financial statements amounts to uro
184
ANNUAL REPORT 2020
185
186
ANNUAL REPORT 2020
Instituto do Ambiente
Programa de Desenvolvimento da Empresa Catarinense (PRODEC) Programa Paraná Competitivo
187
incremental costs, is deducted from the shareholders’ equity attributable to the holders of the parent company’s capital
shareholders’ company’s
188
ANNUAL REPORT 2020
s of ecember and , emapa s shareholders are detailed as follo s
hares ithout nominal alue
imo est o de articipa es, , , , , , odim, , , , , , estin er esti n, , , , , , imi est, , , , or es an the entral an of or ay , , , , ociedade r cola da uinta da ialon a, , , reasury shares , , , ther shareholders ith less than interest , , , ,
he mo ement in treasury shares, in and , ere as follo s
reasury shares held at the be innin of the period , , , , , , cquisition of shares by emapa , , , , , , isposals in the period
he basic earnin s per share are determined based on the di ision of profits or losses attributable to the ordinary shareholders of emapa by the ei hted a era e number of common shares outstandin durin the period
or the purpose of calculatin diluted earnin s per share, emapa ad usts the profits or losses attributable to ordinary equity holders, as ell as the ei hted a era e number of outstandin shares for the purposes of all potential diluti e common shares
otal number of issued shares , , , , era e treasury shares in the portfolio , , ,
189
i idends per share presented are calculated based on the number of shares outstandin on the rant date
ppro al at the emapa nnual hareholders eetin of the payment of di idends relatin to ay , , the net profit on an indi idual basis in accordance ith ppro al at the emapa nnual hareholders eetin of the payment of di idends relatin to pril , , the net profit on an indi idual basis in accordance ith
he difference bet een the amount of di idends paid included in the consolidated statement of cash flo s uro , , and the amount attributed in , refers to payments of di idends to non controllin interests attributed in , hich ere settled by subsidiaries at the be innin of
air alue reser e refers to the accumulated chan e in fair alue of deri ati e financial instruments classified as hed in instruments ote , and financial in estments measured at fair alue throu h other comprehensi e income ote , net of deferred ta es
han es relatin to deri ati es are reclassified to profit or loss for the period ote as hed ed instruments affect profit or loss for the period he chan e in fair alue of financial in estments recorded under this item is not recycled to profit or loss
he currency translation reser e corresponds to the cumulati e amount related to the roup s appropriation of e chan e rate differences resultin from the translation of the financial statements of the subsidiaries and associated companies operatin outside the uro one, mainly in ra il, unisia, ebanon, n ola, o ambique, the nited tates of merica, it erland and nited in dom
he ortu uese ommercial ompany la prescribes that at least of annual net profit must be transferred to the le al reser e, until this is equal to at least of the share capital his reser e cannot be distributed, unless in the e ent of the Company’s indin up o e er, it may be used to absorb losses after the other reser es ha e been e hausted or it can be incorporated into the issued capital
he le al reser e is constituted by its ma imum amount in the periods presented
190
ANNUAL REPORT 2020
s ap on o spon s o s s a a a o s on o s a o s a ons o app op a on o p o year’s a n n s an o mo m n s pa o a an o spon n o a s on a o as y s a s s no s a o
a a o a nan a ns m n s
mpa o an a y n y s o an a s s as o o s
a an a n s an na an s o n m an o a o am an m a n s
n a a on n s s as ss n a y n y
• s on a a on o a an a a a ns o o an o n a on o nan a s a m n s o s s a s a o an op a n n a on n o C m n an a s s m n
• s on a a on o an s o n a a ns o o an o n a on o nan a s a m n s o s s a s C m n n an o m on n o C m n s an a s s m n a a s an op a n n anon o
p an pap a a o Company a ns o n s a o a o s a ap o o am C m n an a s Compan a a Ca C m n o o s C m n s a s n s a o os o a Compan a C m n o o o o C m n s n a as o a as a a a a n onm n n s m n os
191
e a a r r s e a ree e s – er a a a e r ra r e e ry s s e s are a a e s s ary r e a e s e s r e s r ase e r s res ry r e a e s a y er r e a a a rease r s s r rres e a a a a a e
e r ary rre a re e s s r e er r e a a a a e s are er e a a r a y re e e Company’s s are a a a e ar a e as re e e re e e r e Moçambique’s s are a a
e s r s e s are a a re re s y e y e a a r a y as e ye se e a e re a e ear s e ere a e ee e re s y s s r e y a e ere a e r ary ere e e s are a a r e a e as s are re
e re r a e ere are r s r e r eres s a s a y res r e e y s a y a ess r se asse s a se e a es e r
s s s sa s e s ra s a reser e a a s r e s ar a a s a sses er e e s e y e r r e er y er a ary e es e a e s ra s a reser e a a s r e s ar a a s a sses er e e s e y e r r e er
e e rease r eres s e a a er se e r res s r e a s y e s s ary a a r reas ry s ares re rese s s are a a
e a es a a e r eres s as e as e r a a e r s s ar es s a r eres s are s se e a es e e s a
192
ANNUAL REPORT 2020
n e es bea in iabi i ies n e es bea in iabi i ies in u es on s Comme ia ape ban oans an o e inan in . ni ia measu emen ai a ue ne o ansa ion os s in u e
ubsequen measu emen amo ise os usin e e e i e in e es a e me o
e i e en e be een e epaymen amoun an e ini ia measu emen amoun is e o nise in e n ome a emen o e e eb pe io un e n e es e penses on o e oans in o e e inan ia esu s
ai a ue e boo a ue o s o e m in e es bea in iabi i ies o oans on a e a a iab e in e es a es a e ose o ei ai a ue
e ai a ue o in e es bea in iabi i ies a a e emune a e a a i e a e is is ose in o e inan ia asse s an iabi i ies
esen a ion n u en iabi i ies un ess e oup as an un on i iona i o e e e se emen o e iabi i y o a eas mon s a e e epo in a e
i en a easu y mana emen is pe o me au onomous y by ea business se men as is ose in o e inan ia is Mana emen e in o ma ion on in e es bea in iabi i ies a is is ose in is o e o o s a s u u e
e oup as se e a omme ia pape p o ammes ne o ia e a eemen s i i issues i on a ua ma u i y be o one yea an i a e o in na u e a e o en ma e e e e oup e pe s o e en ese oans o o e i assi ies em as non u en iabi i ies
on oans Comme ia pape an oans oans e a e a es
o e m s a e o e oans o e e in e es bea in eb s
193
e in e es bea in iabi i ies main y in u es in en i es om C n ia pa a o n es imen o e Com io e no e o u a as pa o a numbe o esea an e e opmen p o e s i in u es e in en i e un e e in es men a eemen en e e in o i e a i a o oup subsi ia y o e ons u ion o e ne issue p an in ei o is a eemen omp ises a inan ia in en i e in e o m o a epayab e an up o a ma imum amoun o u o i ou in e es paymen i a a e pe io o o yea s i e as epaymen appenin in
a i a o p i i e a i a o u us n e e o u ibo M a i a o ep embe n e e o u ibo M a i a o Ma n e e o u ibo M a i a o anua y i e a i a o u us n e e o u ibo M a i a o e embe n e e o u ibo M e i May i e e i anua y i e e i obe i e e i eb ua y i e e i une i e e i e embe i e e i May n e e o u ibo M e i p i i e emapa o embe n e e o u ibo M emapa une i e
s o e embe oans in e o m o Comme ia ape e e e ai e as o o s
u p an ape se men eb ua y i e p i i e eb ua y n e e o u ibo M p i n e e o u ibo M Ma n e e o u ibo M Cemen an e i a i es se men p i i e n i onmen se men obe n e e o u ibo M o embe n e e o u ibo M o in s obe i e eb ua y i e u us n e e o u ibo M May n e e o u ibo M
194
ANNUAL REPORT 2020
s o e embe oans in e o m o Comme ia ape e e e ai e as o o s
u p an ape se men i e n e e o u ibo M n e e o u ibo M i e Cemen an e i a i es se men n a i e n e e o u ibo M i e n e e o u ibo M n e e o u ibo M u p an ape se men n e e o u ibo M n e e o u ibo M o in s n e e o u ibo M n e e o u ibo M i e i e n e e o u ibo M n e e o u ibo M
u p an ape a iba e a e u p an ape i e a e Cemen an e i a i es a iab e a e Cemen an e i a i es i e a e n i onmen a iab e a e o in s a iab e a e o in s i e a e
o yea s o yea s o yea s o yea s bo e yea s
o e ain ypes o inan in ope a ions e e a e ommi men s o main ain e ain inan ia a ios i in p e ious y ne o ia e imi s e e is in o enan s a e auses o C oss e au a i assu e a i e p e e ne s ip ause auses e a e o Group’s a i i ies main enan e inan ia a ios main y e eb n e es o e a e n eb e ness an inan ia au onomy an fulfilment of regular financial contracts’ obligations (operational, legal and tax obligations), common in loan agreements an u y no n in e ma e e en onsi e in e impa o e a op ion o
i iona y as o e embe an e oup omp y i e inan ia a ios imi s impose un e i s inan in on a s
195
nitial measurement t t e start date of t e lease, t e Group recognises lease liabilities measured at t e present alue of future lease pa ments, ic include fixed pa ments less an lease incenti es, ariable lease pa ments, and amounts expected to be paid as residual alue
ease pa ments also include t e exercise price of call or rene al options reasonabl certain to be exercised b t e Group or lease termination penalt pa ments if t e lease term reflects t e Group s option to terminate t e agreement
n calculating t e present alue of future lease pa ments, t e Group uses its incremental financing rate if t e implied interest rate on t e lease transaction is not easil determinable ubse uent ubse uentl , t e alue of t e lease liabilities is increased b t e interest amount ( ote et inancial esults) and measurement decreased b t e lease pa ments
s of ecember and , lease liabilities comprised t e follo ing
ulp and paper , , , , , , , , ement and deri ati es , , , , , , , , n ironment , , , , , , oldings , , , ,
nal sis of lease liabilities b maturit is presented in ote i uidit ris
as and cas e ui alents include cas , ban accounts and ot er s ort term in estments it an initial maturit of up to mont s, ic can be mobilised immediatel it out an significant ris in alue fluctuations or cas flo statement purposes, t is caption also includes ban o erdrafts, ic are presented in t e statement of financial position as a current liabilit , under t e caption nterest bearing liabilities ( ote )
as , , , ort term ban deposits , , , , t er s ort term in estments , , , , mpairment from t e adoption ( , , ) ( , , )
n and , t e amount presented under t er s ort terms in estments corresponds to amounts in ested b t e subsidiar a igator in a portfolio of s ort term financial assets, ig l li uid and issuers it appropriate rating
196
ANNUAL REPORT 2020
e mo ements under mpairments in are detailed as follo s
ebanon , , ( , , ) t er ( , , ) ( , )
s of ecember and , t ere are no significant balances of cas and cas e ui alents t at are sub ect to restrictions on use b t e Group companies
n and , t e mo ements in liabilities for financing acti ities are detailed as follo s
nterest bearing liabilites ( ote ) ond loans , , ( , , ) , , ommercial paper , , , , , , an loans , , ( , , ) ( , , ) , , arges it t e issue of loans ( , , ) ( , ) , , ( , , ) t er interest bearing liabilites , , ( , , ) , , ease liabilities ( ote ) , , ( , , ) , , , , , ,
nterest bearing liabilites ( ote ) ond loans , , ( , , ) , , ommercial paper , , ( , , ) , , an loans , , , , , , arges it t e issue of loans ( , , ) , , ( , , ) ( , , ) t er interest bearing liabilites , , , , , , ease liabilities ( ote ) , , ( , , ) , , , , , ,
orro ing costs relating to loans are generall recognised as financial costs, in accordance it t e accrual accounting principle
e emapa Group classifies as inancial ncome t e income and gains resulting from cas flo management acti ities suc as i) interest earned on surplus cas and ii) c anges in t e fair alue of deri ati e financial instruments negotiated to edge interest and exc ange rate ris s on loans, irrespecti e of t e formal designation of t e edge
197
n and , et financial results are detailed as follo s
nterest paid on debt securities and ban debt ( , , ) ( , , ) nterest paid on ot er borro ings ( , ) ( , ) ommissions on loans and expenses it credit facilities ( , , ) ( , , ) nterest paid on lease liabilities ( , , ) ( , , ) inancial discount of pro isions ( , ) ( , ) nfa orable exc ange rate differences ( , , ) ( , , ) osses on edging deri ati es ( , , ) ( , , ) t er financial expenses and losses , , ( , , )
nterest earned on financial assets at amortised cost , , , , Gains from trading deri ati es , , , air alue gains from ot er financial in estments , ( , ) t er financial income and gains , , ( , )
e amount reflected in nfa ourable exc ange rate differences deri es, essentiall , from t e exc ange rate ariation in financing in and uro, eld b t e ra ilian subsidiaries of ecil, upremo and argem, due to t e de aluation of t e ra ilian eal against t ese currencies, as ell as t e strong de aluation occurred in t e ebanese ound, as described in ote and
198
ANNUAL REPORT 2020
urrent income tax is calculated based on net profit, ad usted in conformit it tax legislation in force at t e consolidated statement of financial position date
ccording to t e legislation in force, t e gains and losses relating to associated companies and oint entures, resulting from t e application of t e e uit met od, are deducted from or added to, respecti el , to t e net profit for t e period for t e purpose of calculating taxable income i idends are considered, en determining t e taxable income, in t e ear in ic t e are recei ed, if t e financial in estments are eld for less t an one ear or if t e represent less t an of t e s are capital
emapa Group is sub ect to t e pecial ax egime for Groups of ompanies ( G Regime Especial de Tributação de Grupos de Sociedades), comprising companies in ic t e s are olding is e ual to or more t an and ic meet t e conditions laid do n in rticle and follo ing of t e orporate ncome ax ode ( ode)
ompanies included it in t e pecial ax egime for Groups of ompanies, calculate and recognise corporate income tax ( ) as t oug t e ere taxed on an indi idual basis iabilities are recognised as due to t e dominant entit of t e tax business Group, currentl emapa, G , , ic is responsible for t e Group’s o erall clearance and pa ment of t e corporate income tax ere t ere are gains on t e use of t is regime, t ese are recorded in t e dominant entit financial statements
n t e periods presented, t e tax business group led b emapa comprises t e ecil and Groups, as ell as all t e subsidiaries t at meet t e legal re uirements of t e orporate ncome ax ode e companies t at comprise e a igator Group integrate t e pecial ax egime for Groups of ompanies led b e a igator ompan , n , a tax business group as also establis ed in pain, ic includes t e t ree subsidiaries of t e group based in t at countr , eld b more t an , and os ues do tl ntico, is t e dominant compan in t e tax business group
e Group recognises liabilities for additional settlements that may result from tax authorities’ revisions of the different countries ere t e Group operates en t e final result of t ese situations is different from t e amounts initiall recorded, t e differences ill a e an impact on income tax in t e period in ic t e occur
n ortugal, annual income statements are sub ect to re ie and possible ad ustment b t e tax aut orities for a period of ears o e er, if tax losses are presented, t e ma be sub ect to re ie b t e tax aut orities for a period of ears n ot er countries in ic t e Group operates, t ese periods are different, usuall ig er
e oard of irectors considers t at an corrections to t ose declarations as a result of re ie s inspections b t e tax aut orities ill not a e a significant impact in t e consolidated financial statements as of ecember , alt oug t e ears up to and including a e alread been re ie ed
e amount of estimated assets and liabilities recorded on account of tax proceedings arises from an assessment made b t e Group, at t e date of t e onsolidated tatement of inancial osition, regarding potential differences of interpretation against t e ortuguese ax ut orities, considering t e de elopments in tax matters
199
ith respect to the measurement of uncertain tax positions the Group ta es into consideration the provisions of – “Uncertainty over income tax treatments”, namely the measurement of ris s and uncertainties in definin the est estimate of expenditure re uired to settle the o li ation y ei htin all possi le results controlled y the ompany and their related pro a ilities
mounts in uro urrent tax ariation of uncertain tax positions in the period eferred tax ote
n and the caption ariation in uncertain tax positions reflects a series of reversals of tax provisions as a result of the closure of some tax inspection processes and court decisions favoura le to the Group
ncome tax treatment unicipal surchar e tate surchar e on taxa le income et een uro uro and uro tate surchar e on taxa le income et een uro and uro tate surchar e on taxa le income a ove uro ra il nominal rate unisia nominal rate e anon nominal rate n ola nominal rate
mounts in uro
xpected tax at nominal rate tate surchar e ifferences a ax for prior periods ecovera le tax losses on recovera le tax losses ncrease of additional tax lia ilities eversal of additional tax lia ilities ffect of the reconciliation of nominal rates of the different countries ax enefits yperinflationary economies ther tax ad ustments
a his amount concerns mainly ffect of applyin the e uity method ote Gains losses for tax purposes Gains losses for accountin purposes mpairment and taxed provisions ax enefits eduction of impairment and taxed provisions ntra roup results su ect to taxation ost employement enefits et financial expenses from prior periods ther
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ANNUAL REPORT 2020
mo nts in ro or orate ncome tax , , , , mo nts en in re ayment tax rocee in s eci e in avo r o the ro , , , , or orate ncome tax , , , , itional tax lia ilities , , , ,
mo nts in ro ncome tax or the erio , , , , xchan e rate a stment , , ayments on acco nts, ecial ayments on acco nts an itional ayments on acco nt , , , , ithhol in tax recovera le , , , , ncome tax recovera le rom rior erio s , , ,
–
mo nts in ro ncreases , , , eversals , , , , rans ers , , har e o , , ,
s o ecem er an ecem er , the a itional tax assessments that are alrea y ai an conteste , not reco nise in assets, re er to the avi ator ro an are s mmarise as ollo s
re ate cor orate income tax , , , , re ate cor orate income tax , , , , tate s rchar e , , , , tate s rchar e , , , , tate s rchar e , , , , cor orate income tax avi ator iss e o, , , re ate cor orate income tax , ,
e erre tax is calc late on the asis o the inancial osition, on tem orary i erences et een the oo val es o assets an lia ilities an their res ective tax ase he income tax rate ex ecte to e in orce in the erio in hich the tem orary i erences ill reverse is se in calc latin e erre tax e erre tax assets are reco nise henever there is a reasona le li elihoo that t re taxa le ro its ill e enerate a ainst hich they can e o set e erre tax assets are revise erio ically an ecrease , henever it is li ely that tax losses ill not e se
201
e erre taxes are recor e as an income or ex ense or the year, exce t here they res lt rom amo nts recor e irectly n er shareholders’ equity, situation in which deferred tax is also recorded under the same ca tion ax ene its attri te to the ro re ar in its investment ro ects are reco nise thro h the income statement as there is s icient taxa le income to allo its se
he e erre tax assets recor e or re orta le tax losses ith res ect to ecem er an , are lly relate to the s si iary ar em om anhia e inera o, , a s si iary o the ro hea artere in ra il that o ns the ne ement lant ilt y the ro in rian olis, tate o aran s the c rrent ra ilian tax le islation oes not im ose any time limit or its se a ainst t re taxa le ro its, mana ement is convince that, in accor ance ith the me i m term siness lan, the ro ect ill enerate taxa le ro its that ill e o set y the tax losses acc m late in these irst years o start
itionally, it sho l e note that the tax e reciation o ar em om anhia e inera o, , is more accelerate than the economic e reciation, eneratin a si ni icant ne ative im act on the tax res lt o that s si iary
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ANNUAL REPORT 2020
ax losses carried forward , , , , , , , , axed ro isions , , , , , , , , armonisation of de reciation criteria , , , , , , , , ensions and other ost em loyments enefits , , , , , , , , inancial instruments , , , , , , eferred accountin ains on inter rou , , , , , , transactions n estment su sidies , , , , , air alue of usiness com inations , , , , , on entional ca ital remuneration , , , , , , , ther tem orary differences , , , , , , , , , , ,
, , , , , , , , , , , , , d ustment of ro erty, lant and equi ment , , , , , , , ensions and other ost em loyments enefits , , , , , , inancial instruments , , , , , , ax incenti es , , , , , , , armonisation of de reciation criteria , , , , , , , , , , eferred accountin losses on inter rou , , , , , transactions aluation of iolo ical assets , , , , , , air alue of intan i le assets rands , , , , , , , , air alue of ro erty, lant and equi ment , , , , , , air alue of usiness com inations , , , , , , , , y erinflationary economies , , , , , ther tem orary differences , , , , ,
, , , , , , , , , , , ,
ax losses carried forward , , , , , , , , axed ro isions , , , , , , , armonisation of de reciation criteria , , , , , , , , , ensions and other ost em loyments enefits , , , , , , , , inancial instruments , , , , , eferred accountin ains on inter rou , , , , , , , transactions n estment su sidies , , , , , air alue of usiness com inations , , , , , on entional ca ital remuneration , , , , , , , , ther tem orary differences , , , , , , , , , d ustment of ro erty, lant and equi ment , , , , , , ensions and other ost em loyments enefits , , , , , , , , , inancial instruments , , , , , ax incenti es , , , , , , , armonisation of de reciation criteria , , , , , , , , , eferred accountin losses on inter rou , , , , , , , transactions aluation of iolo ical assets , , , , , , air alue of intan i le assets rands , , , , , , , , air alue of ro erty, lant and equi ment , , , , , , air alue of usiness com inations , , , , , , , , ther tem orary differences , , , , , , , ,
203
ax losses of the ema a ax rou , , , , , , ax losses of com anies outside of ema a , da , , , lorimar, , da , , , , ade ritas, da , , ecil n ola, , , , , ecil o ito , , , , , , , , ilonor, , , , , oime, , , , ar is ton , , ecil rasil artici a es, , , , , u remo imentos, , , , , ema a n ersiones , , , , ortucel o am ique , , , , , , , , , a , , , , , , a entures , , , a i ator nternational radin , , a i ator frica , , out the uture ssential ils , , , ementos ecil , , , , ema a ax rou in ain , , , ,
ax losses of the ema a ax rou , , , , , , ax losses of com anies outside of ema a , da , , , lorimar, , da , , , , , ade ritas, da , , ecil n ola, , , , , ecil o ito , , , , , , ilonor, , , , , oime, , , , , ar is ton , , ecil rasil artici a es, , , , , u remo imentos, , , , , ein ar , , , , , ema a n ersiones , , , , ortucel o am ique , , , , , , , , , a , , , , , a i ator nternational radin , , a i ator frica , , out the uture ssential ils , , , , , , , , ,
204
ANNUAL REPORT 2020
–
n accordance with current legislation, employees are entitled to 22 working days leave, annually, as well as to a month’s holiday allowance, entitlement to which is acquired in the year recedin its ayment
ccordin to the current erformance ana ement ystem Sistema de Gestão de Desempenho , em loyees ha e the ri ht to a onus, ased on annually defined o ecti es he entitlement of this onus is usually acquired in the year recedin its ayment
hese lia ilities are recorded in the year in which the m loyees acquire the res ecti e ri ht, irres ecti e of the date of ayment, whilst the alance aya le at the date of the consolidated statement of financial osition is shown under the ca tion aya les and other current lia ilities
he enefits arisin from termination of em loyment are reco nised when the rou can no lon er withdraw the offer of such enefits or in which the rou reco nises the cost of restructurin under the ro isions recordin enefits due o er months after the end of the re ortin eriod are discounted to their resent alue
tatutory odies remuneration , , , , ther remunerations , , , , ost em loyment enefits , , , , ther ayroll costs , , , ,
ocial security contri utions , , , , nsurance , , , , ocial welfare costs , , , , om ensations , , , , ther ayroll costs , , , ,
he decrease in com ensation arises from the ina ility to terminate contracts as a result of oinin the sim lified lay off mechanism his led to the re ersal, in , of the estimates reco nised in re ious years
ul and a er , , ement and deri ati es , , n ironment oldin s and others
205
oard o ire tors , , , , udit oard , , emuneration ommittee 2 , 2 , eneral eeting oard , ,
ll details o the remuneration poli y o the oard mem ers o emapa s management are detailed in the ompany s orporate overnan e eport, art e tion
ith respe t to post employment ene its and as des ri ed in ote , as o e em er 2 2 , the amount o lia ilities related to post employment ene it plans, related to one oard em er o the avigator roup, amounted to uro , e em er 2 uro , n addition, three o the urrent dire tors o the su sidiary avigator were parti ipants in avigator rands, s pension plans, as employees o the ompany, e ore oining management positions
s o e em er 2 2 and 2 , or the mem ers o the oard o ire tors o emapa, there were no i additional lia ilities related to other long term ene its, ii termination ene its, iii share ased payments, iv any outstanding alan es
ome o the Group’s su sidiaries have assumed the ommitment to make payments to their mployees in the orm o omplementary retirement pensions, disa ility, early retirement and survivors’ pensions, having onstituted de ined ene it plans
he roup has set up autonomous ension unds as a means o unding part o its lia ilities ased on the pro e ted unit redit method, the roup re ognises the osts with the granting o these ene its and when servi es are rendered y the employees ordingly, the Group’s total lia ility is estimated at least every si months at the date o the interim and annual inan ial statements, or ea h plan separately y an independent and spe ialised entity
he al ulated lia ility is presented in the onsolidated statement o inan ial position, a ter dedu ting the air value o the unds set up, under the aption ensions and other post employment ene its
tuarial deviations resulting rom hanges in the value o estimated lia ilities, as a onse uen e o hanges in the inan ial and demographi assumptions used and e perien e gains, added to the di erential etween the a tual return on und assets and the estimated share o net interest, are designated as remeasurements and re orded dire tly in the tatement o omprehensive in ome, under retained earnings
he net interest orresponds to the appli ation o the dis ount rate to the value o net lia ilities value o the lia ilities dedu ted o und asset’s air value and is re ognised under the aption ayroll osts
he gains and losses generated y a urtailment or settlement o a de ined ene it plan are re ognised in the in ome statement when the urtailment or settlement o urs urtailment o urs when there is a material redu tion in the num er o employees
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ANNUAL REPORT 2020
osts or past ia i ities resu ti ro t e i p e e tatio o a e p a or i reases i e e its attri ute are re o ise i e iate i t e i o e state e t or t e perio
o e o t e Group’s su si iaries ave assu e o it e ts re ar i o tri uti to a e i e o tri utio p a it a per e ta e o t e beneficiaries’ salary, i or er to provi e retire e t isa i it a survivors’ pe sio s
or t is purpose e sio u s ere set up to apita ise t ose o tri utio s to i e p o ees a sti a e vo u tar o tri utio s ut or i t e Group oes ot assu e a a itio a o tri utio ia i ities or a pre i e retur ere ore t e o tri utio s a e are re or e as e pe ses i t e i o e state e t i t e perio to i t e re ate re ar ess o t eir sett e e t ate
– e Group as ia i ities it post e p o e t e e it p a s or a re u e roup o e p o ees o ave ose to ai tai t e e i e e e it p a or o ave ose to ai tai a sa e uar ause t e atter o o i t e o versio o t eir p a i to a e i e o tri utio a
e e t t e sa e uar ause ives t e e p o ee t e optio at t e ti e o retire e t to pa a pe sio i a or a e it t e provisio s ai o o t e e i e e e it a or t ose o oose to a tivate t e a e uar ause t e a u u ate a a e i t e e i e o tri utio a Conta i e use to i a e t e ia i it o t e e i e e e it a s o e e er t o e i e o tri utio p a s ere i or e overi e p o ees
e i a its su si iaries i et o ustrias e et o repara o i e tos a eira a eto a eira a o iet es i e ts e Ga s ave assu e t e o it e t to pa t eir e p o ees a ou ts a o o p e e tar o a e isa i it ear retire e t and survivor’s pe sio s a a retire e t su si
e ia i ities arisi ro t ese p a s are uara tee i epe e t u s a i istere t ir parties or overe i sura e po i ies ese p a s are va ue ever si o t s at t e ates o osi o t e i teri a a ua i a ia state e ts spe ia ise a i epe e t e tities usi t e pro e te u it re it et o
The liabilities of Secil’s retired employees in 31 December 1987 (date of incorporation of the Pension Fund) are uara tee ire t e i i i ar t e ia i it assu e e i arti a a are uara tee ire t t is e tit
ese p a s are a so va ue ever si o t s spe ia ise a i epe e t e tities usi t e et o or a u ati apita overa e orrespo i to si e pre iu s o t e i e iate i e a uities i t e va uatio o t e ia i ities to urre t pe sio ers a t e pro e te u it re it et o or va ui ia i ities re ati to urre t e p o ees
e su si iar i e tos a eira a provi es to t eir retire e p o ees a ea t are s e e i supp e e ts t e o i ia ea t servi es t rou a i sura e o tra t
207
–
The subsidiary Societ des iments de Gab s (Tunisia) assumed the commitment to its employees to pay an old a e retirement and disability subsidy, accordin to the terms of the General abour reement, rticle o , representin (i) 3 months of the last salary if the or er has less than 3 years’ service to the company, and (ii) months of the last salary, if the or er has 3 years or more service to the company
Secil assumed ith its employees hired prior to anuary 1 anuary 11, the responsibility for the payment of a subsidy on death of current employee, of an amount e ual to 3 months of the last salary earned, or 1 month in the case of former employees of P imentos aceira e Patais, S
Secil and P Plans include all or ers ho, as of 31 December 9, had an open ended employment contract (and ho ( pplicable to ere covered by the defined benefits plan in force in the companies) and ho have opted for the transition to these Plans Secil, P and Secil and all the or ers admitted under an a reement ithout term, as from 1 anuary 1 , also bein applicable to the members of the oard of Directors rands) nibet o and Secil ritas nclude all employees ho as of 31 December 9 had an open ended employment contract n ( pplicable to the case of nibet o, under the T bet een P and F T S , and all or ers admitted under a contract ithout term, nibet o, Secil as from 1 anuary 1 , ith the e ception of nibet o mployees ho are covered by the T entered into bet een ritas, etomadeira, P and F , ho continue to benefit from the defined benefit Plan The plan is applicable to members of the oard imentos adeira, of Directors rimade) etomadeira ncludes all employees ho as of 31 December 1 had an open ended employment contract concluded under the T entered into bet een P and F T S , and all employees hired under an open ended contract as from 1 anuary 11 The plan is applicable to members of the oard of Directors
imentos adeira and rimade nclude all employees ho as of 1 anuary 1 and 1 uly 1 , for imentos adeira and rimade, respectively, had an open ended employment contract and to all employees admitted under an open ended contract as from the aforementioned dates The plan is applicable to members of the oard of Directors
Secil has assumed the commitment to pay their mployees bonuses to those ho attain years of service, hich are paid in the year that the employee reaches the number of years of service ithin the company
The Group s e posure to ris is limited to the number of e istin beneficiaries and ill tend to decrease, since there are no defined benefit plans available to ne employees in the Group The most si nificant ris s to hich the Group is e posed throu h defined benefit plans include
• is of chan e in lon evity of participants
• ar et rate ris rate chan es affects the rate used to discount liabilities (technical interest rate) hich is based on yield curves of hi hly rated bonds ith maturities similar to the maturity dates of the liabilities and the fi ed rate of return on assets
• is of chan e in the rate of ro th of a es and pensions
The financin level of the fund may vary dependin on the ris s listed and on the profitability of the fund s financial assets Despite the fund s conservative profile (consistin mostly of fi ed income assets), the verification of the aforementioned ris s may lead to the need for additional contributions to the fund considerin the nature of the defined benefit
The Group aims to eep a 9 level of liability covera e
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ANNUAL REPORT 2020
a e r y e e s r a e ree a ay sa y a e r a y a e a e r ra e e a eres ra e e e se e e a eres ra e er se e s e s s r ra e e e se e e s s r ra e er se e s e a a e s s re ers y ra e er e a a s e e a a ay e s
e r s ers e e a eres ra e a e e e e a e r ra e as e s s a ar a es e a a a es r e e e e a s
s e e er a e rease er e a e s e s ra es se a a e e s a es res a rease a es a r a e y r e e er a e rease er e a e s e s ra e se res a rease a es a r a e y r
e a es re e e e s a e s a e e a a s a e er e e ar es e e e e e a s r e e r are e a e as s
r a es r as ser es e r er e yees e re e yees ar e a e e e s s a a s re s ra e es eser e a er e a es ea are ass s a e e re e a ea ser e a ar a es * Overfunding due to the change to a defined contribution plan
209
r a es r as
ser es e r er e yees e re e yees ar e a e e e s s a a s re s ra e es eser e a er e a es ea are ass s a e e re e a ea ser e a ar a es * Overfunding due to the change to a defined contribution plan
rese a e a es a r a e a asse s a reser e a
e s s a s e s s ass e y e r e s s a s a a s re e re e a ea ea are ass s a e ser e a ar e s s ass e y e r
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ANNUAL REPORT 2020
e s s a s e s s ass e y e r e s s a s a a s re e re e a ea ea are ass s a e ser e a ar e s s ass e y e r
e s s ary a a r a e s e y r re s a es a re r s e a a es e ers a a e e e e a r e er e a s s y r e
e a era e e e e ra e s s a er s e y e e e s s years r e e e se e a s a years r e a a er se e a s
a e ra e a s e r r e er eres e e e a asse s e s s a e re e s a er
r a e r s e e e e e a s rese e a e as r s r e er ere y rea se y e r s s s ar es a r s ere a e y e ar a s
e e e e r s r e e re r er e e a er a rs e r a y e funds’ asse s
s ares e y r er y er reas ry es e s
211
un s s n n nds s nd u s f f u s f s ss s fu d n d s d n s s n n u d s d f ns d d n f n n s n
ns ns ssu d u ns ns u n us fund nsu n s n nd d ss s n n s d n u ns d f n d n u n ns
ns ns ssu d u ns ns u n us fund nsu n s n nd d ss s n n s d n u ns d f n d n u n ns
s n n f s ns ns ssu d u ns ns u n us fund n nd d ss s n
s n n f s ns ns ssu d u ns ns u n us fund n nd d ss s n
u n d nd d s d s s f n f u n ds n n d s n n f s s s s d n d un d d n n s s n un su s dd n s d d n n s s un f fu u n f s f s n n s s d s su n n s d n ns n
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ANNUAL REPORT 2020
s d n n d s d nd nd n n s s su s d s d n fu f n f ns und n n d nds n s f n d s su s d s n ud d s u n f d d nds n f n s n f ns n d nd s f s n d s n s
The ability of Semapa’s su s d s funds d nd n n s s f s nd n nd n s n n s s s f d s u n nd f n n s u u
u s s n n f us s s n s s n f n n s n d s ff s n Group’s f n n f n s n n s und n n n n n f d n nd n su s d s n d n s d d f s nd n d s s nd n
u d s s n n s n d s ff s ss d s s s n n s nd n s s
d n u nd s n s n f n n f s s s s d n n d n u n s n u us s d n u d s n f n n s f s n d fu u s s f u n d n su s s s n n und s nd ss n s ss n s s s n u n s ss s n f n
u s s f s s s d n n f d nd n f u s f d nd u s ns f n f u f n s n n n u s n u s
u nd u s n u d n u s s s d n u n n n u u s n n n s u s ds f u s s f n d n ns u n s n s su s s n f n nu f s nd s ss ss n s d n s
u n s n n s n f n nd d s s n du u n n s n s d n nd u s s f fu nd f s s d n s s n n nu d s f s n n f n f n n su s s n s s s ss s d n un s n nd n n f n n n s countries’ n s u d n n Semapa’s ns d d s n f f n n s n
s n n s s s u n su f ns d d s u nd s s s n u d n f f s n u n n s n n u n
s n n ns d d u n s f n n s s u us f d f n n ns u n s n d n s su d u s f s n s ss d fu u s s nd u s s nd un s nd d n n d n u n s n u n un d s n u n n u s s n n u n s fun n u n d d n s f d
n ds s n d u ds d s d f n n s f fu u ns n u n s n n u n s f n n ns u n s
213
Valuation/(devaluation) over the previous year 9.23% 5.67% 7.12% (3.95%) 36.34% (0.48%) 40.8% Valuation/(devaluation) over the previous year 2.03% 1.39% 3.40% (0.99%) 26.63% (3.78%) 33.6%
Amounts in Foreign Currency ash an cash e ui alents ecei ables ther assets nterest bearin liabilities ayables
Impact of +10% in the foreign exchange rate (5,867,713) (799,501) (126,991) 568 (122) (126,226) 8,773,215 Impact of -10% in the foreign exchange rate 7,171,650 977,168 155,211 (695) 149 154,276 (10,722,818)
merican ollar Sterlin oun olish loty S e ish rona Tur ish lira S iss franc ra ilian eal
Amounts in Foreign Currency ash an cash e ui alents ecei ables ther assets nterest bearin liabilities ayables
114,899,187 9,159,053 953,855 (4,981) 23,619 1,294,128 (133,239,685) Impact of +10% in the foreign exchange rate (10,445,381) (832,641) (86,714) 453 (2,147) (117,648) 12,112,699 Impact of -10% in the foreign exchange rate 12,766,576 1,017,673 105,984 (553) 2,624 143,792 (14,804,409)
Valuation/(devaluation) over the previous year 33.49% 1.58% 508.66% 3.5% 45.75% 14.23% Valuation/(devaluation) over the previous year 14.28% 0.44% 510.78% (2.5%) 64.26% 16.04%
Amounts in Foreign Currency ash an cash e ui alents ecei ables ther assets nterest bearin liabilities ayables
Impact of +10% in the foreign exchange rate (9,505) (5,382) (576) 1,697,162 232,326 (206) Impact o10% in the foreign exchange rate 11,617 6,578 704 (2,074,309) (283,954) 252
Amounts in Foreign Currency ash an cash e ui alents ecei ables ther assets nterest bearin liabilities ayables
(196,551) 86,803 (11,460) (14,445,959) (2,785,362) 2,594 Impact of +10% in the foreign exchange rate 17,868 (7,891) 1,042 1,313,269 253,215 (236) Impact of -10% in the foreign exchange rate (21,839) 9,645 (1,273) (1,605,107) (309,485) 288
214
ANNUAL REPORT 2020
si nificant share of the Group’s financial liabilities cost are in e e to short term reference interest rates hich are re ie e more than once a year enerally e ery si months for me ium an lon term ebt ence chan es in interest rates can ha e an impact on the Group’s income statement
The interest rate ris mana ement strate y is perio ically re ie e by the Group Gi en the current le el of interest rates the Group has focuse on contractin fi e rate ebt
here the oar consi ers appropriate the Group relies on the use of eri ati e financial instruments ote namely interest rate s aps to mana e the interest rate ris an these tools aim to fi the interest rate on loans it obtains ithin certain parameters consi ere appropriate by the Group s ris mana ement policies
Semapa carries out sensiti ity analysis in or er to assess the impact on the income statement an e uity cause by an increase or ecrease in mar et interest rates consi erin all other factors unchan e This is a mere illustrati e analysis since chan es in mar et rates rarely occur separately
The sensiti ity analysis is base on the follo in assumptions
han es in mar et interest rates affect interest income an e penses arisin from financial instruments sub ect to floatin rates
han es in mar et interest rates affect the fair alue of eri ati e financial instruments as ell as other financial assets or liabilities
han es in fair alue of eri ati e financial instruments an other financial assets an liabilities are measure iscountin future cash flo s from net present alues ith mar et interest rates at year en
n er these assumptions the impact of a increase in mar et interest rates for all currencies in hich the Group has interest bearin liabilities an assets an eri ati e financial instruments as of ecember an is as follo s
mpact on profit before ta increase ecrease
215
r o s o pos o p o r s r r s r r pos o p o r s r r s ss s s r s o o s
o urr r o urr ss s urr s s u s o urr r s r s r s urr r s r s r s
o urr r o urr ss s urr s s u s o urr r s r s r s urr r s r s r s
Group s u r s o s
sur s s u o r o po ur s ppropr o r r s s o us r s r op r s
rou o r s u o s o r s s or ou u r s u u
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ANNUAL REPORT 2020
s o o s o r p p r o s r s s s r s ru s r s
s o o s o r p p r o s r s s o r urr s r s ru s r s
o r u ur o r s r s r u r s o p o s s o – r s r s
r r s o s u p p p r r s ro
Group ss ss s o prosp s s p r oss s sso s ss s sur or s os r u rou o r o pr s o s o or s o s ru s o Group
s s s Group r o s s p r oss s o r r sp ur o o s ru s su o s r s s r r s s r o o ss ss o u or o s s o ou r so suppor or o u or r oo or o
r por r r s sso s ru s o r s s s r o o Group sur s p r r sp o s ru ou u o p r oss s
s s s or u o o s p r s o o o o s us s o or us o r s o po s or o o s o po s o Group s ss s s s o s u o r r o ss s s o po s o us r
217
the customers’
deterioration in the ability of the Navigator Group’s customers to meet their obligations, leading entities providing credit
218 ANNUAL REPORT 2020
s of ecember and , rade receivables sho ed the follo ing ageing structure, considering the due dates for the open balances, before impairment charges
Not overdue , , , , , , , , , , to days , , , , , , , , , , to days , , , , , , , , , to days , , , , , , , , to days , , , , , days to days , , , , above days , , , , , , , , , itigation doubtful debts , , , , , , , , mpairment , , , , , , , , ,
he amounts sho n above correspond to the amounts outstanding according to the contracted due dates espite some delays in the settlement of those amounts, that does not result, in accordance with the Group’s available information, in the identification of impairment losses other than the ones considered through the respective losses hese are calculated based on the information periodically collected on the financial behaviour of the Group’s customers, hich allo , in con unction ith the e perience obtained in the client portfolio analysis and ith the history of credit defaults, in the part not attributable to the insurance company, to define the amount of losses to be recognised in the period
he analysis of the ageing of receivables already overdue is as follo s
ccount receivables overdue but not impaired verdue belo months , , , , , , , , verdue above months , , , , , , ,
ccount receivables overdue and impaired verdue belo months , , verdue above months , , , ,
n accordance ith the above mentioned, it should be noted that the Group adopted a policy of credit insurance for a significant part of the accounts receivable from costumers. Thus, it is considered that the effective Group’s exposure to the credit risk has been mitigated and is ithin acceptable levels
219 The table below represents the ualit of the Group’s credit risk, as of ecember and , for financial assets ash and cash e uivalents and erivative financial instruments , whose counterparts are financial institutions
mounts in uro , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ther , , , ,
The caption thers comprise short term investments in n ola and o ambi ue financial institutions, on which it was not possible to obtain the ratin s with reference to the presented dates.
The maximum exposure to the credit risk in the onsolidated financial position as of ecember and is detailed as follows
mounts in uro ther financial investments ote . , , , , eceivables and other non current assets ote . , , , , eceivables and other current assets ote . , , , , erivative financial instruments ote . , , , , ash and cash e uivalents ote . , , , ,
– han es due to ncreases , , , , , , , eversals , , , , , xchan e rate ad ustment , , , , har e off , , , d ustments and transfers , , ,
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r u o r s ru s s u u r p o s o r urr s o p o s o r urr ss s o pos
or o – s ru s Group os o o u o pp ou r u r s o – s ru s u r s r r s o s urr ro pro
r p o s o s r s or r s us Group s s o s rs o s rou r s ru s su s r s r s ps r s r o rs or r s o o rs
ou r s ru s o r r pr s o o s ru s o o u s s ru s or pp ru s r u r s s ru s o o u s s ru s r r or o so os o r r u s r u r r o s r su s o r o op r o s or upp s r s o or u o r o or r s o pur s o r r s or s o s ro s s urr s o r r por urr
r s ru s us or purpos s ss s s ru s pro u u u o o s s ou
or r o r s o r s r s Group rs o s o
os r s o s r r or r o os o r r u o r o s r s r u r r or o r o pr s o or r r s o s r o or oss r s r ro s r or r pro or oss
u u ou s u r r ss o pro or oss p r o s s o s or p or s s s s p or oss orr spo o o po o r s r s ps r r r s r o s u r p o r su s o o r u ur r s o r su s r o o o o ss or s or prop r p u p pr ous s oss s rr u r u sur o os o ss
s ru ur s or s so or o o r s r r r u r o r o s s u u s oss s o u r r o o s p s u ur r s o r u u s oss s u u r u su s o r o o s r s o s r o s o s
221
(GBP). Since the Group’s financial statements are translated into Euro, it is exposed to an econo
222
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hene er possi le, the fair alue of deri ati es is estimated, ased on uoted instruments. n the a sence of mar et prices, the fair alue of deri ati es is estimated ased on the discounted cash flo method and option aluation models, in accordance ith the assumptions enerall used in the mar et.
e contracts settlements ( , , ) , , ( , , ) ( , , ) , , , , han e in fair alue in profit , , ( , , ) , , , ( , , ) ( , , ) and loss ( ote . ) han e in fair alue in other comprehensi e ( , ) ( , ) ( , ) ( , ) income ( ote . ) Exchan e rate ad ustment ( , ) ( , ) ( , ) , ( , )
Exchan e rate for ards (future sales) , , S , ( ) , Exchan e rate for ards (future sales) , , GBP ( , ) ( , ) nterest rate s aps (S P s) , , Euro ( , , ) ( , , ) B P Pulp , , S ( , ) ( , ) orei n exchan e for ards , , S , , , , orei n exchan e for ards , , GBP ( , ) ( , ) orei n exchan e for ards , ( ) ( ) ross currenc interest rate s ap , , S , , , , uture purchase of licenses , , Euro , , on eli era le or ard ( ) , , Euro , , , ,
Exchan e rate for ards (future sales) , , S , , ( , ) , , Exchan e rate for ards (future sales) , , GBP , ( , ) , nterest rate s aps (S P s) , , Euro ( , , ) ( , , ) on eli era le or ard ( ) ( , , ) B , , B P Pulp , , Euro , , orei n exchan e for ards , , S , , orei n exchan e for ards , , GBP ( , ) ( , ) ross currenc interest rate s ap , , S , ( , ) , nterest rate s aps (S P s) , , S ( , ) ( , ) on eli era le or ard ( ) , , Euro , ,
223
n this context, durin the last uarter of , the Group contracted se eral financial structures to co er the portion of the net forei n exchan e exposure of estimated sales in S for , hich is estimated at a out S , , . he deri ati e financial instruments are ero ost ollar, in an amount of S , , and GBP , , , hich expire on ecem er .
lread durin anuar , the roup concluded the contractin of deri ati e financial instruments ac uirin S , , in ero ost ollar, thus uaranteein total co era e of the estimated alue of exposure for .
urin the last uarter of , the Group made a partial amortisation of , , , related to the a i ator ond loan, also performin the settlement of the associated S
s in the pre ious ear, the Group periodicall monitors its exposure to the price of B P pulp. urin the fourth uarter, the Group opted to ac uire a financial instrument to hed e the pulp price, contractin a s ap to fix the price of , tons of pulp for the next months, ended ecem er .
n cto er , the Bra ilian su sidiar ar em undertoo the follo in external financin in the amount
• in Euro e ui alent to B , , ith maturit in cto er , ith a sin le repa ment at maturit . n the same date, a cross currenc interest rate s ap contract as entered into ith the purpose of hed in the exchan e rate exposure. his deri ati e allo ed ar em to set the nominal alue of the financin in B and the pa ment of interest at the nter an eposit ( ) rate plus a spread, full replicatin the amortisation plan of the financin in E .
• of Euro , , ith maturit in cto er , ith a sin le repa ment at maturit . n the same date, a on deli era le or ard in the total amount of Euro , , due in cto er .
• of S , , ith maturit in ecem er , ith a sin le repa ment at maturit . n the same date, a cross currenc interest rate s ap contract as entered into ith the purpose of hed in the exchan e rate exposure. his deri ati e allo ed ar em to set the nominal alue of the financin in B and the pa ment of interest at the nter an eposit ( ) rate plus a spread, full replicatin the amortisation plan of the financin in S .
n e ruar , the su sidiar ar em, contracted an external financin in the amount of S , , maturin in e ruar , ith a sin le repa ment at maturit . n the same date, a cross currenc interest rate s ap contract as entered into ith the purpose of hed in the exchan e rate exposure. his deri ati e allo ed ar em to set the nominal alue of the financin in B and the pa ment of interest at the nter an eposit ( ) rate plus a spread, full replicatin the amortisation plan of the financin in S .
n cto er , the su sidiar Supremo, contracted an external financin in the amount of S , , maturin in ecem er , ith a sin le repa ment at maturit . n the same date, a cross currenc interest rate s ap contract as entered into ith the purpose of hed in the exchan e rate exposure. his deri ati e allo ed Supremo to fix the nominal alue of the financin in B and to pa interest at the rate plus a spread, full replicatin the repa ment plan of this financin in S .
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ANNUAL REPORT 2020
n arch , the su sidiar Supremo contracted t o external financin s in the amount of approximatel
• Euro , , ith maturit in arch , ith a sin le repa ment at maturit . on eli era le or ard contract as si ned on the same date. his deri ati e allo ed the Supremo to fix the nominal alue of the financin in B and the respecti e interest.
• of S , , ith maturit in arch . n the same date, a cross currenc interest rate s ap contract as entered into ith the purpose of hed in the exchan e rate exposure. his deri ati e allo ed Supremo to fix the nominal alue of the financin in B and to pa interest at the rate plus a spread, full replicatin the repa ment plan of this financin in S .
n ul , the su sidiar Supremo, contracted an external financin in the amount of Euro , , maturin in ul , ith a sin le repa ment at maturit . on eli era le or ard contract as si ned on the same date. his deri ati e allo ed the Supremo to fix the nominal alue of the financin in B and the respecti e interest.
n , Secil undertoo a ond loan of Euro , , , ith full repa ment at par in pril , ith interest paid semi annuall in arrears. n cto er , an interest rate hed e deri ati e as contracted throu h an interest rate s ap ( S) ith a nominal alue of Euro , , , e innin on cto er and maturin on pril .
his ote includes e uit instruments held the Group relatin to companies o er hich it has no control or si nificant influence. inancial in estments are measured at fair alue throu h profit or loss hen the Group holds them for tradin purposes. he Group records the remainin financial in estments as financial assets at fair alue throu h other comprehensi e income.
efined ro d , , echstar orporate , , , , lter enture Partners und , , , , rmilar enture , , or nline, S , , n isi le, S , ,
he su sidiar Semapa ext, S. ., the Semapa Group s enture capital usiness unit currentl holds the follo in in estments
• an n estment in the orth merican echstars to support and accelerate lo al startups from is on. his partnership as implemented throu h an annual acceleration pro ramme, initiall lastin ears, ith the rd ear of the pro ramme ( ) ein cancelled due to the pandemic.
• a shareholdin in the uxem our fund lter enture apital und S S , a fund hose strate is to in est in start ups to ether ith some of the most prominent funds in Silicon alle , ha in committed ith an in estment of up to S million. nder the terms of the partnership si ned et een the t o entities, Semapa ext in ested, durin the financial ear, an amount of S , , ( S , , ).
225
• a shareholdin in the Portu uese fund rmilar enture Partners ech ransfer und, hose oal is to support usiness pro ects de eloped ased on hi h technolo created in the national academic en ironment, ha in assumed a commitment to in est up to Euro . million. Semapa ext in ested, durin , an amount of Euro , ( Euro , ).
• n , Semapa ext made an in estment in the amount of S , , in the compan efined ro d, hich operates in the field of rtificial ntelli ence and achine earnin .
he financial instruments included in each caption of the statement of financial position are classified as follo s
ecem er ther financial in estments . , , , , , , ecei a les and other current assets . , , , , , , , , , ash and cash e ui alents . , , , , ecem er ther financial in estments . , , , , , , ecei a les and other current assets . , , , , , , , , , , ash and cash e ui alents . , , , ,
ecem er nterest earin lia ilities . , , , , , , ease lia ilities . , , , , Pa a les and other current lia ilities . , , , , , , , , , ecem er nterest earin lia ilities . , , , , , , ease lia ilities . , , , , Pa a les and other current lia ilities . , , , , , , , , , ,
he fair alue of financial instruments is classified in accordance ith the fair alue hierarch of S air alue measurement
e el air alue is ased on acti e mar ets uotations, at the reportin date. e el air alue is determined usin aluation models, hose main inputs of the models used are o ser a le in the mar et e el air alue is determined usin aluation models, hose main inputs are not o ser a le in the mar et.
226
ANNUAL REPORT 2020
he fair alue of these lia ilities is calculated usin the discounted cash flo method at the reportin date, usin a discount rate in accordance ith the characteristics of each loan, elon in to le el of the fair alue hierarch of S .
he ompan considers that the oo alue of loans at aria le rates, as ell as financial assets and lia ilities measured at amortised cost in the remainin captions ( ote . . ), is close to their fair alue.
227
eco nition and initial Pro isions are reco nised hen the Group has a le al or constructi e o li ation as a result of past measurement e ents, it is pro a le that an outflo of resources ill e re uired to settle the o li ation, and a relia le estimate can e made of the amount of the o li ation. apitalisation of he Group incurs expenditures and assumes lia ilities of an en ironmental nature. ccordin l , expenditures on expenditures e uipment and operatin techni ues that ensure compliance ith applica le le islation and re ulations (as ell as on landscape reco er and reduction of en ironmental impacts to le els that do not exceed those representin a ia le application of the est a aila le technolo ies, on those related to minimisin ener consumption, atmospheric emissions, the production of aste and noise) are capitalised hen intended to ser e the Group s usiness acti it in a sustaina le a , and relate to future economic enefits allo in to extend its useful life, increase capacit or impro e the safet or efficienc of other assets held the Group. Su se uent Pro isions are re ie ed on statement of financial position date and are ad usted so as to reflect the est estimate at that measurement date.
andscape reco er pro isions are re measured accordin to the effect of the time alue of mone , a ainst the caption inancial discount of pro isions in ote . et financial results and consumed the expenses made the Group ith the reco er , at the date the occur.
Some of the Group s companies are responsi le for the en ironmental and landscape reco er of the uarries affected the exploration, in accordance ith applica le le islation.
eha ilitation or s mainl includes cleanin and re ularisation of areas for reco er , modellin and preparation of the land, transport and spreadin of re ected materials for landfill, fertilisation, execution of the eneral plan for coatin ith h dro so in and plantation, and maintenance and conser ation of the areas reco ered after implantation.
hese pro isions ere made in accordance ith the ris assessments carried out internall the Group ith the support of its le al ad isors, ased on the li elihood of the decision ein fa oura le or unfa oura le to the Group.
he alances of additional lia ilities for the Group’s uncertaint o er income tax are disclosed in ote . ncome tax.
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ANNUAL REPORT 2020
o or r u r os s o urr r r s o u rr p s s u s pr p r p s o s sur p u o u ur s o s s ou o pr s u
u u s s s r o or o o p o s ou u ur s ou p r o o o sso s o s s p rsp s r s o s ro urr r u o s
u rr s os r o s u o s o poss osur o op r o s Group s r u s p sp s s o u os o o s or s purpos r o s pro s o u r p o ro s o s
r s s rs s p r r r o r us s ou s r s rs us s r s s rs s p r o r o o s o r o r us s ou s r s rs us s
s o r s p o u s ou o uro r uro orr spo o u rr s o uous pro r ss r o s ru o o r sp s r rs o u rr s p o o p u o
ro us ou o uro uro r r o r o u rr s p r o r p s rr ou os s r s r r s so o r s r or u r ss s or s p r o r s ou o
ou pr s u s pro s o s o o r r s s r o s o r ur r so u o o r su ou o s o s p r u r or s o r s ru ur pro ss s o p s o s so s ur o u r s s o o r u pos o s ssu s s o o rs
r pro s o s u uro r o o u pro s r por o r o u or u o u Go r o o u s or u o rs o r r r s o s pro op o p s s s o s up o or s r s o ppro r s u r supp o u o u or pro u o o u p us oo ps or por ppro o o s p r r s o s o o
229
ou or u o rs o s o Go r pro or s or o o r ss r o o s o rr ou s u r s o poss o p r s o u o or o r s o s o o s r urr o o s su s r or r s pro s o uro or pr s u o os s o urr r o o s ssu u r or u o u rs o s Go r o o u ou o uro
or o r s or or u u s u or s s o o o s o os or os s r p s or s r o s r o o or o s or u u s o r s u o o s r o ur rr o ss o oor o s o r r o o ursos ur s p r r o o ss o oor o s o ro o ss o oor o s o r o ss o oor o s o or us o s r o pro u s r or s o s u p
u r s o or u u s u or s r r o o pro s o pr s su s r or r r orpor o or p r o r pr p p r p r so r s o u r ou o uro s
ur s o s rop r p u p u ur u p oo r supp r s o u o r
or Group s o o r o u r s o s o uro o o uro o r s
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ANNUAL REPORT 2020
or o r o o ru r s o pr s o p s r o p r o s pr or o pr s o o r r r spo s o u u pr or o p pp o o u u o r u s p o s pr ous p or u u s u or s r o p r u s or p o s ss ss s r o or p r o s o s supp o o r ou s r p u o s r o s s s s s p s s r r r o pursu o ru ro o o r o p s pos o r r or o su p s s
r or o p r o r u r r sur s r o s s r spo s or r o r ou o uro orr spo o ou o orpor o prop r p r su ro u o orr o s r o s r o o oss ru s r su o op r o s rr ou opor s s o pro o r s u o o or o s ou
s o r spo s or ou s s o o s
ro s o r our orpor o orpor o orpor o p s s ro s o o r our orpor o orpor o
r r orpor o pro s o our s o o s o our o or Group Group r r u s o
o o rs s r o p o s s r our o o o r or r p o r ous ou s ou o uro s ou s r r us s s s o Group r s pr s o o o s r or u pr o s pr s o s r o u o u o or o su o rs
On 24 May 2014 the Court denied the Navigator Company Group’s proposal to present testimony evidence, alternatively proposing r su ss o s u or o p Group pp s s s o u o uous pr s r our su s u o r or o p Group’s s o s r o p r s ppo p r s p r p r r por s ssu o u r u r r or o p r s r o o o s p r s our r or r o pro or p o s o p r r por
o o s or o p r u r p r s su r r p r por s o r r r sp
r r s ss o s oo p u p r s os r u s p r o our s s o
231
nder the licensing proceeding no 40 04 related to the ne etu al s paper mill pro ect, the etu al City Council issued a settlement note to Navigator regarding an in rastructure enhancement and maintenance ee (“TMUE") amounting to uro 1,1 , 0, ith hich the company disagrees
his situation regards the amount collected under this levy in the licensing process mentioned a ove, or the construction o a ne paper mill in the industrial site o Mitrena, et al Navigator disagrees ith the amount charged and illed an administrative claim against it on 2 e ruary 200 re uest no 24 0 , ollo ed y an appeal in Court against the re ection o the claim on 2 Octo er 200 On Octo er 2012, this claim had an adverse decision, and on 1 Novem er 2012 an appeal to the dministrative upreme Court as per ormed, hich has rought do n the action to Central dministrative Court C on 4 uly 201 , pending decision
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ANNUAL REPORT 2020
( )
Shareholder’s equity and net profit/ (loss) of these companies, corresponding to the third ( )
T T
T T Group’s ( )
T ( )
( ) ( ) T
E ( )
Subsidiaries’ accounting policies have been
233
ntercompany transactions, balances, unrealised gains on transactions and dividends distributed bet een Group companies are eliminated nrealised losses are also eliminated, e cept here the transaction displays evidence of impairment of a transferred asset
n the case of disposals of interests, resulting in a loss of control over a subsidiary, any remaining interest is revalued to the mar et value at the date of sale, and the gain or loss resulting from such revaluation, is recorded against income, as ell as the gain or loss resulting from such disposal
Subsequent transactions of disposal or acquisition of shares ith non controlling interests ith no impact in control ta e place, no gain, loss or good ill is determined, and the differences bet een the transaction cost and the boo value of the share acquired are recognised in quity he negative profits generated in each period by subsidiaries ith non controlling interests are allocated to the percentage held by them, regardless of hether they assume a negative balance
Semapa ortugal Seinpar nvestments, he etherlands Semapa nversiones S Spain elcimo, S Spain Semapa e t, S ortugal phelion, S ortugal
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he avigator ompany, S ortugal avigator rands , S ortugal avigator arques ndustriais, S ortugal avigator roducts ecnology, S ortugal avigator aper igueira, S ortugal mprem dia , reland ai nstituto de nvestiga o da loresta e apel ortugal ai entures , S ortugal bout the uture ssential ils, S ortugal nerpulp – ogera o nerg tica de asta, S ortugal avigator ulp igueira, S ortugal ma acia ngenharia e anuten o ndustrial, ortugal ma Set bal ngenharia e anuten o ndustrial, ortugal ma igueira da o ngenharia e anuten o ndustrial, ortugal avigator ulp Set bal, S ortugal avigator ulp veiro, S ortugal avigator issue veiro, S ortugal avigator issue d o , S ortugal avigator issue b rica, S Spain ortucel o ambique Sociedade de esenvolvimento lorestal e ndustrial, da o ambique avigator nternacional olding SG S, S ortugal avigator inancial Services Sp o o oland avigator orest ortugal, S ortugal ucaliptus and, S ortugal Sociedade de inhos da erdade de spirra rodu o e omerciali a o de inhos, S ortugal Gavi o Sociedade de a a e urismo, S ortugal focelca grupamento complementar de empresas para protec o contra inc ndios, ortugal iveiros lian a mpresa rodutora de lantas, S ortugal tlantic orests, S ortugal osques do tlantico, S Spain avigator frica, S taly avigator aper Set bal, S (a) ortugal avigator orth merica nc S avigator aper orld, S (a) ortugal avigator frique du ord orocco avigator spa a, S Spain avigator etherlands, he etherlands avigator rance, rance avigator aper ompany , td avigator talia, S taly avigator eutschland, Gmb Germany avigator aper ustria, Gmb ustria avigator aper oland S o o oland avigator urasia ur ey avigator us ompany, ussia avigator aper e ico e ico avigator iddle ast rading ubai avigator gypt, gypt avigator nternational Gmb Germany avigator articipa es olding ,SG S, S ortugal mprem dia orretores de Seguros, S ortugal avigator bastecimento de adeira, ortugal (a) ompanies merged in
235
– – – –
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ANNUAL REPORT 2020
–
When the Group’s share in the associate or joint venture’s losses is equal to or exceeds its investment in the associate, the Group Group’s
237
han e in the perimeter , , isposals , , hare o pro its , , , , ividends , , , xchan e rate adjustment
odim, G , , , , imi est, G , , imo G , , , , , Grupo ete rete oc r e o ar as, , ve Gest o m iental, , , , , enriques, da , , ona i mo ili ria, ormer imilon a, , otel it , , , ona i, G , , , , e undos, G , , , oti icar , ociedade r cola da erdade dos idal os, da nerto rande , , inorit shareholders o iment de i line , , , da , , , em ers o overnin odies , ther shareholders o su sidiaries , , , , , , , , , , , , ,
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ANNUAL REPORT 2020
odim, G , , imi est G , , imo G , , , on apar, G ,
ve Gest o m iental, , , , , , , , , Grupo ete rete oc r e o ar as, , , ona i mo ili ria, ormer imilon a, , , , otel it , , , e undos, G , , , oc r cola erdade dos idal os, da , est e , da , , aldas, opes, lmeida ssociados , , , da , , , , , os nt nio do rado a , , etras riativas, nipessoal, da , , a amente onsultoria e mpreend , da , , ther , , ,
he alances and transactions ith hareholders relate essentiall to short term treasur operations that ear interest at mar et rates
n previous ears, lease a reements ere si ned et een emapa and ona i mo ili ria, relatin to the lease o several o ice loors in the uildin hich it o ns and operates the headquarters o emapa, G , , at v ontes ereira de elo, no , in is on
n connection ith the identi ication o the related parties, or the purposes o inancial reportin , , and ete rete, ere also re erred to as related parties, ecause the are associated companies o the su sidiar ecil, to hich the Group acquires aste and alternative uels, in the irst case, and sto a e in car o handlin or ships, in the second
s mentioned in ote inancial investments, in the Group, throu h its su sidiar emapa ext, , entered into an a reement to per orm an investment o million in the lter enture artners und , entit in hich a mem er o the executive team is also a non executive oard mem er o emapa
he remuneration o the Company’s e mana ement personnel is detailed in ote – emuneration o corporate odies
239
s an onom a n mapa s pos o s s n n o s a y an a a s mpa on a o s ass s p o man o mapa as a o n ompany s a so os y n o s s o s s s a s
o s an n o s an s o s s n mapa p omo s a onomy an a o n a y amon s s s a s s om na on o man an a onomy s n pos o a s o s s a mpa no on y a o s s s a s an a so sp a o o n an o ompan s n o p
a n s mana m n n mapa n oo a s n o s s mana m n an on o sys ms as on s p a s an m o o o a n s s as C an o o p o omm n a ons o Co o Co po a o nan Código de Governo das Sociedades ss y ns o o s Co po a o nan C an o s s a Comm ss on C Comissão de Mercado de Valores Mobiliários o p as op s s mon o n mo o omp on s ss on an app o a o m a on m as s s ona y as s n s n a o s y s n a o s s o m y mon o n o s s a may a s s n an s p ons
n s on s taking policy approved by Semapa’s Board of o s n s a a y o s a mapa s n o a p n o o a s s n ss o s an s a y s po y s a so a n ma n ma a op s o mapa ns n ons s n y o s mana m n an on o sys m
o nan mo n n ms o s mon o n an mana m n s a s o mapa s s n n ma n o s s an a o a on o spons y o n p ay s n s mana m n an on o sys m Con o an s Comm a spons o on o n an mon o n s s o a sys m a ma s poss o p omo mon o an a a s am o an s n an n ssa y m as s o s m a on
n o a on s mpo an o so a po a an onom mpa s o C pan m o o o s a n a s no y poss o sp y ama a o pan m s s on o ma s s mpa on p o on an ons mp on n on m on ns ons an o nm n s an on s o o s pop a on mapa as a so mpa y s s na o o an an n a n y a n a mpa s on s a o n s o a y o n s an ons anno n o y p ans o s ppo o y o onom s may p s n n n s m n oppo n s
n mapa on n o onso a s s mana m n an on o sys m an mp m n a s s o n a s a n as s o ma y
y a as n o y ma y o n an ons n s o pan m s s a s y Co ona s C an np n s na o n n s o y an a n o
o p s n na n onm n as a so n mpa y pan m an mapa an s s s a s a ma s n an o s o a ap n na p o ss s an a ons o s o an o op m s an a a os s Con n n y p ans n p a a o p s a o s n s a n s a a o p op a ons nn n n s a s n onm n
o nan a C s s ana m n as s p o mon o an pa an m a mpa o C pan m n o p s a o s ompan s an n s a s s o on o n o ps s a s a on o mp oy s a an Con a n n an m Comm n a on s n ss o on an Con n y ans an nan a Con n n y an
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ANNUAL REPORT 2020
n a st dy as carried o t ic res lted in minor ad stments to t e names of some op isks in order to s pport t eir perception in t e internal and e ternal conte ts n t e co rse of t e risks considered strategic for t e ro p in t is financial year ere monitored as follo s
Semapa s mission is to be a benc mark in investment ent re capital investment management in core sectors of t e economy ermanent analysis of investment opport nities in aintaining a diversified portfolio of financial different companies and sectors investments is vital to mitigate t e level of dependence on certain sectors or activities ic in adverse conte t lan for monitoring t e f ndamental variables of scenarios may negatively impact t e ro p s operating e isting b sinesses and financial performance ngoing monitoring of t e level of indebtedness to ens re investment capacity
romotion of t e diversification of t e subsidiaries’ activities e ro p is e posed to different markets t at operate mplementation of meas res to make companies more in a competitive environment aintaining t e efficient t an competitors cons mption levels of t e ro p s prod cts in markets ere it operates and t e efficiency of t e cost pansion of t e b siness into markets it greater str ct re necessary for its prod ction are a constant s pport and gro t potential c allenge and re ires ongoing monitoring iversification of prod ction and marketing of ne by anges in t ese components may res lt in a prod cts significant red ction in t rnover and respective res lts generated as ell as negatively impact t e operating and financial performance of t e ro p e maintenance and contin ed strengt ening of t e evelopment of o n and oint comm nication plans ro p s rep tation capital is essential to increase t e it its s bsidiaries general perception of t e market and ot er stake olders regarding its rep tation and to mitigate ngagement it t e comm nities in ic t e t e risk of impact prod ced by potential negative s bsidiaries are present events bot in its operating and financial performance and in t e val ation of its assets Strengt ening of t e positioning and commitment to environmental s stainability matters
romotion of an organisational climate based on strong val es and et ical principles e ob ective of generating val e t ro g t e nalysis and monitoring by centralised team of t e management investment and divestit re of interests in ma or investment decisions of t e ro p and its s bsidiaries s o ld be g aranteed by a strong and s bsidiaries efficient investment management process policy and government resence of a governance model it delegation of po ers and definition of t e investment decision poor investment decision making str ct re may making process res lt in an inability to ma imise t e val e of t e e isting portfolio and val e creation efinition of generic financial and non financial criteria for organic and inorganic investment aintaining and strengt ening an effective people aintenance of a talent management area of t e monitoring and management system is cr cial to ens re ro p connected it its s bsidiaries proper implementation of t e ro p s strategy istence of attractive and competitive rem neration imitations on t e ability to retain people and policies for key f nctions strengt en kno ledge and skills in critical areas of t e b siness may eopardise differentiation against istence of man reso rce development and talent competitors as ell as condition t e implementation management policy and scope of t e strategies set for t e ro p dentification and mapping of critical man reso rces of t e ro p
issemination of t e Group’s c lt re and val es
241 e Group is e posed o e e ire or u uese o i ori o e a i i a d de i i io o a re u a or a d e a ra e or o e e e a a re u a or a e da b e subsidiaries si i i a par o i s i dus ria si es is o a ed i or u uese erri or
a es a a o ur i e e a ra e or i e i p e e a io o ore res ri i e easures o a is a e iro e a abour or e o o i a ure a e a i e i pa e Group s opera io a a d i a ia per or a e e Group opera es i a oba o e i e por s o s a a a sis a d o i ori o e a ou i or a si i i a ei i i s ur o er a roe o o i o e bo a e e e o e eo rap ies ere e Group opera es as e as a a e prese e o si i i a or disrup i e a es i e oba e e e er a e iro e i serious ad erse e e s o ar e s de a d pri es produ io a ors e er o i e p a s e i a s a d ra a eria s or peop e a e a i e i pa e Group s opera i a d i a ia sura e po i ies a d o ra s ade ua e o e per or a e opera io s o e subsidiaries
e o o i a a d i ras ru ures prepared or re o e or i ue o i s si e e Group i era s per a e i a is e e o ood orpora e o er a e pra i es ide ra e o e i ies a d peop e bo e er a a d i er a a d is ere ore e posed o si ua io s or is e e o a ode o e i s i e ri a d o du e e s a a e a i e a e i s repu a io a d or ead o ai ure o repor or osses i i s i a ia is e e o i er a audi depar e s a e e e o posi io subsidiaries
is e e o po i ies a d a ua s o pro edures a e e e o i s subsidiaries e Group is a i e i se ors ere a ess o ra er a e resear a d di ersi i a io o eo rap ies a eria s is a ri i a ariab e o ai ai i s busi ess or e a uisi io o ra a eria s
e redu io o e ra a eria a ai ab e i e oi o i ori o o ra a eria reser es a d do es i a d i er a io a ar e s i s a ai abi i a s o e e s pri es a are e o o i a i pra i ab e i e e os s ru ure or res ri io s o i s a ess b re u a or or e a e or e e a e a i e i pa e opera io a a d i a ia per or a e o e Group e Group s produ io pro esses depe d o s s e s o a io o respo sibi i ies i e ie d o se uri o i are esse ia o e ai e a e o i s a i i i or a io a a e e s s e s
errup io s i s s e s se uri brea es or is e e o ber se uri po i ies a d s ra e ies e e s eadi o e oss o da a a e a i e i p e e ed i e subsidiaries i pa e Group s opera io s e pose o ide ia i or a io a d ead o opera io a proper a d obus so are a ai ab e o suppor a i or a io repu a io a da a e a is a d ed b e oard o ire ors
e Group arries ou i s a i i a are o i s is e e o a e a e e e er ro e Group e iro e a respo sibi i a d e pri ip es o or a sus ai ab e a io sus ai ab e de e op e is e e o re u ar audi s o i dus ria si es a d e Group s opera io s are arried ou rou i dus ria es i o e er e p a s a i i ies a are pro e o e e s a a a e a i pa o e e iro e er e pro e io a d a io p a s a ai ab e i e e e o a ide s e i e i ood o a serious e iro e a e e o urri due o auses i er a or e er a o i s ppropria e i sura e o er po i ies opera io s a ead o si i i a osses ro a i a ia repu a io a s a opera io a a d is e e o o i ori pro esses a d e iro e a perspe i e o p ia e i re u a or a d e iro e a ob i a io s
ai e a e p a s a ai ab e or a ories ores areas a d uarries a ai ab e
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ANNUAL REPORT 2020
e Group is a i e i e pu p a d paper e e a d deri a i es a d e iro e a se ors i are sub e o se era ris s a a a e a si i i a e e o i s a i i ies opera i resu s as o s a d i a ia posi io
e opera io a ris a ors a a sed i is ap er a be s ru ured as o o s
is s re a i o e pu p a d paper se e s
is s re a i o e e e a d deri a i es se e
is s re a i o e e iro e se e
is s re a i o e e ire Group
s o e e ber e a i a or Group a a ed arou d ousa d e ares dis ribu ed a ross ai a d or u a e ores a d Ga i ia pai i arou d a a e e i s i u i ipa i ies i or u a a d a a e e i s dis ribu ed a ross u i ipa i ies i Ga i ia pai i a orda e i e pri ip es e pressed i i s ores r o i u a p us a d areas u der o oi a ores a io i is sor o spe ies o up o is area a e e u a p us obu us spe ies dee ed o a e e per e ibre or i ua i papers or e re ai der a d i addi io o o ser a io areas a a ou or abou o e o a area u der a a e e pi e a d or oa ores s are a o e ar es pri a e o ed a io a produ ers
s a pio eer i or u a i pro o i er i ied ores a a e e os o i s ores r asse s o a ed i or u a are er i ied b ores e ards ip ou i a d b ro ra e or e dorse e o ores er i i a io s e es re o i io a a a e e o ese areas is arried ou i a e iro e a e o o i a a d so ia respo sib e a o o i a s ri a d i er a io a re o ised ri eria
e Group as a arded e ri o a d use a d be e i Direitos de Uso e Aproveitamento de Terra i o a bi ue o a ed i e pro i es o a i a a d a be ia o prisi abou o o i uous p o s a d a p a i per i or up o e ares ade a ai ab e u der e es e ree e si ed i e o a bi a Go er e o i arou d ousa d e ares a e bee p a ed e a ree e a so pro ides or e o s ru io o a i dus ria produ io u i ea o produ e pu p a d e era io o e e ri e er i a ou r u e o a bi a Go er e a d or u e o a bi ue si ed a e ora du o ders a di o rou i e a reed o a se o pre edi o di io s re uired o pro eed i e i es e a e a d par i u ar o a o is i a a ure i i be i p e e ed i o p ases e irs p ase e ores base i be i reased o appro i a e e ares i i uara ee e supp o a u i o be bui or e produ io o eu a p us ood ips or e por abou i io o s per ear i a es i a ed addi io a i es e o i io
pub i s a e e s ade a e e d o o e ber e or o essio o der said i ou d s ar o s ru io o e por i ird uar er o i a e pe ed s ar up da e i e irs uar er o e Go er e a d e reside o e epub i o o a bi ue a e ade s a e e s rei or i e s ra e i i por a e o e or o a u e or a be ia a d or e ou r
a i a or a d e Go er e o o a bi ue a e bee or i u der e er s o e o si ed i a e o e e e o a d a d de e op e a i ad a ed e irs ores e e op e pro ra e i o a bi ue a o er e i i ia i e i u di ro e or d a e oa is o pro o e s a a d ediu s a e sus ai ab e o er ia ores p a a io s a d e res ora io o de raded areas i abou a a i bee p a ed i e a pai a d e a pai a read s ar ed i e ar e o a or u e o a bi ue p a s a a i e ro e i de e opi a d i p e e i e pro ra e pro idi a ra e o suppor de i i e ores r ode supp i o ed p a s a subsidised pri es a d a ess o ra a eria s a d o o a er a ar es i e or u e o a bi ue i a e a op io o pur ase e ood
243 or a so s ar ed o ar es i i ber ro or u e o a bi ue s p a a io s i a i a or e por ro e or o eira i i a e i possib e a o s o er oa s o pu o a bi ue o e or d ap or is ores based i dus r e o e de i eries o s ips are s edu ed or represe i appro i a e o ood ie o ese de e op e s e Group as re ised i s assu p io s re ardi e eu a p us ar e i o a bi ue a i a ued e ores s i a i a a d a be ia a abou uro i io
e ai ris a or rea e i e eu a p us ores s ies i e o produ i i o or u uese ores a d i e or d ide de a d or er i ied produ s o sideri a o a s a propor io o e ores s are er i ied is e pe ed a is o pe i i e pressure i re ai i e u ure s a e a p e a e e d o e ores r area a a ed b e a i a or Group represe ed ear 3% of Portugal’s total forested area, 36% of all certified Portuguese forests according i s a dards a d o a er i ied or u uese ores s a ordi i s a dards e er e ess is area as e o ed i a er posi i e a as a resu a o o ers o e e or o pro o e er i ied ores a a e e i or u a u der a e i rea er i e si b e o pa ro o ards is e or as bee i reasi e area o er i ied ores i or u a be ee a d bo ia ro a o a a d ro a o a
s e io ed e Group i i ia ed i a pro e ai i o pro o e ores er i i a io i areas o ed b pri a e o ers see i o uara ee a b eu a p us ood pro essed b e Group i be pro ided b par ers i a er i ied a i i o ood ro a io a sour es e udi se su i ie a read a e ro proper ies a ad eir ores a a e e er i ied s ou d a so be o ed a i i is i i ia i e e Group as see a si i i a i rease o supp iers o e e ber i e u ber o ood supp ier ai o us od er i i a io represe i a s ep ur er o e de e op e o a supplier’s por o io i er i i a ed a a e e ores proper ies
e o pa o siders e a e e o produ i i a d a i e ores a a e e as a s ra e i a is o de e op e u ber o i i ia i es a e ere ore bee de e oped o e oura e ood ores a a e e pra i es i a ie o i pro i e produ i i o ird par ores areas is e or i as bee par ia de e oped rou sso ia o da d s ria ape eira represe i e ai i dus ria roups i e se or i e e or u a ip o ro ra i ad i e irs a pai o e i pa duba ro ra der is i i ia i e arries ou a i s o e pe se e er i isa io o e p o s o a d o ed b pri a e i di idua s o app o e pro ra e a d o ea up eir eu a p us ores proper ies is easure e po eri produ i i a so e ab es a redu io i e ris o i d ire b redu i e ue oad o e p o s i pa i o a duri a d o ore a a i is a so s ud i e i p e e a io o a addi io a pro ra e ep a ar i ai s o pro ide dire i a ia suppor o o ers i e rep a i o eir eu a p us ores p o s
s a resu o e o a era e e e s o ores a a e e i or u a e a io a ores s a so a e ris s re a ed o e i pa o rura ires a d p a ea ur er ore e re u a or e iro e as s ro o di io ed pro essio a ores r a i i eadi o a o i ued de rease i e e e s o ores r i er e io a s a e ose eadi i di a or is e e o u io o i ued redu io o ores ed or re ores ed areas i our ou r e sus ai abi i o a e ire se or based o a ar e u ber o s a supp iers o ser i es a d produ s is depe de o e a i i e e s re ard ess o e spe ies a our ou r as o bee ab e o e sure is o pro ises e sus ai abi i o is busi ess e or i is esse ia o e sure e i er e io s i rura areas a redu e ris a d pro o e produ i i a d i o e i re io s o e ou r ere e ores is a si i i a o po e o e i o e o a a i ies
e o bi a io o a ese a ors i re e ears i ou a s ra e i easures o e a e i e i dus r as or ed e i por o ra a eria a pro ess o di io i e pro i abi i o e i dus r
e a i a or Group’s a i i is e posed o ris s re a ed o ires i rura areas i udi • es ru io o urre a d u ure ood i e or be o i o e a i a or Group as e as o ird par ies • reasi os s o ores r a d subse ue a d prepara io or p a a io
is respe e a er i i e Group a a es i s ood a ds is e ro i e or i i a i is ris
o e di ere a a e e easures u der a e b e Group e s ri o p ia e i biodi ersi ru es a proper p a i o e ores a i i ies o be i p e e ed a d e o s ru io a d ai e a e o roads a d a ess roads o ea o e areas u der de e op e are par i u ar re e a i i i a i e ire ris
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ANNUAL REPORT 2020
n addition, t e Group as a s are in t e focelca grouping – an econo ic interest grouping et een t e a igator Group and t e Group, ose ission is to pro ide assistance in t e fight against forest fires at the grouped companies’ properties, in strict coordination and colla oration it t e ational i il Protection ut orit P – Autoridade Nacional de Protecção Civil is grouping anages an annual udget of a out uro 3 illion, it out pu lic funds, and as created an efficient and fle i le structure ic i ple ents practices ai ed at reducing protection costs and ini ising t e da age caused forest fires to t e co panies, ic o n and anage ore t an t ousand ectares of forests in Portugal
e Group as also a researc institute, , ose acti it is focused on 3 ain areas pplied esearc , onsulting and raining n t e forestr researc area, see s • o i pro e t e producti it of eucal ptus forests • o en ance t e ualit of t e fi re produced fro t at ood • o i ple ent a sustained forestr anage ent progra fro an econo ic, en iron ental and social perspecti es • o foster practices and processes ai ed at reducing ood production costs
elf suppl of ood for P pulp production is onl a out % of t e Group s needs erefore, t ere is a regular need for t e co pan to purc ase ood in t e do estic ar et insufficient , using t e panis ar et and t e non uropean outside t e erian Peninsula ar ets, ainl ra il, rugua it added cost to t e do estic ar et for transportation reasons, since t e ood is c eaper at t e origin
e suppl of ood fro international ar ets, na el eucal ptus, is su ect to price ariations ainl due to t e e c ange rate effect, ic conse uentl as repercussions on t e production cost of a igator and P pulp co panies n addition, t e olatilit of t e logistic costs of transporting ood to t e plants also as i pacts essentiall due to fuel prices used, t e oil price, less scarcit of large s ips it out opti isation of returns and fluctuation of ariti e freig t
e realisation of ne forest plantations is su ect to t e aut orisation of t e co petent entities and to a polic of area increase restrictions, ic a li it t e national production potential, alt oug t ere are an initiati es to elp forest producers, a ong t e t e support in ood certification to eet t e co ercial de and for certified products paper and pulp , and to increase t e producti it of t e e isting areas, for a greater a aila ilit of ra aterial in t e do estic ar et, t e use of i ports ill al a s e an una oida le need in t e s ort ediu long ter
ue to insufficient uantities of do estic ood production, in particular certified ood, t e o pan is re uired to increase t e a ount of i ported ood, eit er fro pain or fro ot er ore distant ar ets, in order to ensure unrestricted supplies to t e plants o er t e ne t decade s
t s ould e noted t at, since ood is one of t e ain pulp production costs, an increase in t e cost of 3 of eucal ptus ood consu ed in t e pulp production P al a s represents a negati e i pact on t e co pan s operating results
n 3 ece er , a % increase in t e cost per 3 of eucal ptus ood consu ed in P pulp production ould a e ad a negati e i pact in t e a igator Group’s operating results of appro i atel uro , , 3 ece er uro 3 , ,
or ot er ra aterials, including c e icals, t e ain ris identified is t e scarcit of products under t e gro ing de and for t ese products in e erging ar ets, particularl in sia and ar ets suppl ing t e , ic can create occasional i alances of suppl and de and
n t is regard, t e a igator Group, toget er it t e ltri Group, esta lis ed in a o ple entar Grouping of o panies Pulp e , – intended for t e oint ac uisition of c e ical products, enefiting fro econo ies of scale and t us itigating t is ris
e Group see s to itigate t ese ris s t roug proacti e sourcing, identif ing sources of suppl geograp icall dispersed, ilst see ing to secure long ter suppl contracts t at ensure olu e, price and ualit le els consistent it its re uire ents
245
s of ecem er , a orsening in the price of chemica products ou d ha e represented a negati e impact on the Group s operating resu ts of around uro , , ecem er uro , ,
ina , another resource re uired for the production process is ater s ater is a finite resource and gi en its re e ance to the pu p and paper production process, the Group has ta en on a specia concern for its preser ation and, o er the ast fe ears, in estments ha e een made to reduce the use of this important resource t the same time, as a resu t of in estments in the imp ementation of s in the production processes and in impro ing the efficienc of its aste ater treatment p ants , it as a so possi e to significant impro e the ua it of the eff uent returned to the recei ing en ironment et een and there as a reduction of more than in the specific use of ater cu ic meters used for the production of one ton of product and, in the same period, there as a reduction of more than in the oad emitted for the ast ma orit of the parameters monitored, hich trans ates into the minimisation of the Group s en ironmenta impact
he increase in competition, caused an im a ance of supp and demand in the pu p, or issue paper mar ets ma ha e a significant impact on prices and, as a consequence, in the Navigator Group’s performance. The market prices of BEKP pulp, U and issue paper are defined in the or d g o a mar et in perfect competition and ha e a significant impact on the Group’s re enues and on its profita i it c ica f uctuations in pu p, issue paper and aper prices main arise from oth changes in the or d supp and demand and the financia situation of each of the internationa mar et p a ers producers, traders, distri utors, c ients, etc , creating successi e changes in e ui i rium prices and raising the g o a market’s o ati it
he pu p and paper mar ets are high competiti e ignificant ariations in e isting production capacities cou d ha e a strong inf uence on or d mar et prices hese factors ha e encouraged the Group to fo o a defined mar eting and randing strateg and to in est in re e ant capita e penditure to impro e producti it and generate high ua it and differentiated products
n ecem er , a decrease in the price per ton of pu p and of in the price per ton of paper and issue paper so d the a igator Group in the period, ou d ha e represented a negati e impact on its operating resu ts of appro imate uro , , and uro , , , respecti e ecem er uro , , and uro , , , respecti e
GROUP’S
Notwithstanding the references below to the concentration of the portfolio of the Group’s customers, any decrease in demand for , and tissue paper in the uropean and the nited tates mar ets cou d ha e a significant impact on the Group’s turno er he demand for produced the Group a so depends on the e o ution of the capacit for paper production in the or d, since se era of the Group’s ma or customers are themse es paper producers
he demand for uncoated printing and riting paper has een historica re ated ith macroeconomic factors e g , G gro th, emp o ment, particu ar in hite co ar o s, confidence indices , techno ogica e g , penetration of information techno og and hard are soft are, and demographic e g , popu ation, a erage e e of education, age structure of societ he e o ution of these factors dri es the demand for paper positi e or negati e , and in the recent past, the trend of paper consumption is negati e in the more de e oped countries and positi e or sta e in the emerging de e oping countries atura , the performance of the a igator Group a so depends on the e o ution of demand in the arious mar ets in hich it operates
ncertaint o er the effects of the andemic a es on estern economies particu ar impacted in the first a e , hich ha e increased the e e and duration of oc do ns, ma affect demand for the Group s products, oth pu p, paper and issue
egarding the demand for euca ptus mar et pu p, this is arge dependent on the production progress in the non integrated producers of printing and riting paper, tissue and specia t papers hinese demand for this t pe of pu p represents more than of the or d s demand, ma ing hina one of the most rea through dri ers of demand
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egarding Tissue segment, the key variables affecting the demand are • E pected future economic growth • Population growth and other demographic and social changes • evel of development of the service sector, namely tourism • Product penetration levels • evelopments in the quality of Tissue paper and product specifications and • ubstitution effects.
Tissue paper consumption is not very sensitive to cyclical economic changes, although it tends to grow faster with higher economic growth.
The importance of economic growth for the consumption of Tissue is more obvious in developing countries. hen the level of the income per capita is very low, the consumption of Tissue tends to be low. There is a threshold after which consumption accelerates. Economic growth allows greater penetration of the product, which is one of the main drivers of demand for such paper in the population with lower incomes. n economies heavily dependent on the tourism sector, some contraction of consumption in the professional sector is e pected. The Tissue paper is a product that does not face ma or threats of substitution by other materials, and there are no e pected changes at this level. n contrast, changes in hygiene and cleaning standards that may be associated with the current health crisis will tend to boost Tissue consumption.
onsumer preferences may have an impact on global paper demand or in certain particular types of paper, such as the demand for recycled products or products with certified virgin fibre.
egarding this matter, and in the particular case of U and Tissue paper, the Navigator Group believes that the marketing strategy and branding that has been followed, combined with the significant investments made to improve productivity and produce high quality products, allow it to deliver its products in market segments that are less sensitive to variations in demand, resulting in a lower e posure to this risk.
RG
The pulp and paper production process is dependent on the constant supply of electric and steam energy. The Group has several cogeneration units, which provide this supply, and redundancies have been planned between the various units in order to mitigate the risk of any unplanned shut downs.
Part of the electricity production is sold to the supplier of last resort at regulated tariffs, based on a legal framework that lays down the special regime production from renewable resources and cogeneration. The remuneration legal framework provides for a progressive tariff reduction over the applicable time period, implying that the central banks will tend to operate in a self consumption regime. This fact can be proven by both the reduction shown in revenues associated with the electric power generation activity in recent years and by the reduction of electric energy and natural gas consumption.
s of ecember , a worsening in the price of electricity would have represented a negative impact on the Group s operating results of around Euro , , ecember Euro , , .
OU R R S POR UG
The Navigator Group has a strong presence in Portugal. ts activity is based on assets whose main location is Portugal. ikewise, about of its raw material comes from Portuguese forests.
The Group is the third largest e porter in Portugal and the largest generator of National dded alue, accounting for appro imately of national G P, around of national e ports of goods, close to of total containerised cargo e ported by national ports.
lthough open to the world, the strong dependence of its country of origin in terms of production factors e poses the Group to Portugal s risk inde .
247
OU R R S O U
ue to the investment in the o ambican pro ect, the Navigator Group is e posed to the specific risk in this country. owever, consideration has been given to investments in terms of timing, choice of suppliers partners and geographical location, taking this risk into account, and the Group ensures that these steps are taken with reasonable certainty that there will be no effects arising from the risk.
t this moment, the o ambique pro ect is essentially a forestry pro ect, with an option to develop an industrial pro ect. The planned investment will be implemented in two phases, the first being a ship production woodchip pro ect and a second phase the construction of a large scale pulp mill. The Group is, however, prepared to move forward with the forestry plan foreseen, once the necessary conditions most of which are under discussion with the o ambican authorities are met.
Until ecember , the e penditure with this pro ect amounted to Euro . million ecember Euro . million , mainly related to plantation, land preparation and forest maintenance, the social development programme, land management, environmental and social licensing and the construction of what is now one of frica s largest forest nurseries.
Given the uncertainties still e isting, the Group kept its e posure to o ambique fully provisioned.
OU R R S US
The U market has a significant weight in the total turnover of U paper, increasing the e posure to the country’s specific risk.
This e posure requires a careful evaluation of the impacts resulting, for e ample, from changes in regulations and ta es, or even from their application and interpretation by governmental entities and ta authorities.
s with producers of other nationalities ustralia, Bra il, hina and ndonesia , with regard to imports of U paper into the U , the Group has been sub ect to nti dumping measures imposed by the U epartment of ommerce since , and its products are sub ect to anti dumping duties as defined by the United tates epartment of ommerce – see Note . . Until these duties affected the Group s earnings by Euro , , review periods to Euro , , .
O P O
Increased competition in the paper and pulp markets may have a significant impact in price and consequently, in the Group’s profitability.
The pulp and paper markets are highly competitive and thus the entry into the market of new production units with increased available production capacity could have a relevant impact on prices worldwide.
BEKP producers from the southern hemisphere namely from Bra il, hile, Uruguay and ndonesia , with significantly lower production costs, have been gaining weight in the market, undermining the competitive position of European pulp producers. n the coming years capacity increases are planned in outh merica, strengthening the position of these producers in the global market.
These factors have forced the Group to make significant investments in order to keep production costs competitive and produce high quality products as it is likely that this competitive pressure will remain strong in the future.
There has been some disinvestment in the paper sector in the U , with closures conversions of installed capacity by some U producers, in a clear attempt to ad ust supply according to the negative evolution of demand. n the contrary, investments in new U capacity in hina in the short and medium term have occurred and are e pected.
The Group has been ad usting its commercial strategy to the evolution of regional consumption patterns. The Group has a significant presence in the U , accounting for about half of European producer sales to this market. The turnover intended to the European markets represented , achieving particularly strong market shares in estern European countries and relevant market shares in the other main European markets.
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O R O O CUSTOMERS’ POR O O
As of 31 December 2020, the Group’s 10 main BEKP customer groups accounted for 12% of the period’s production of BEKP pulp and of e ternal sales of pulp his asymmetry is a result of the strategy pursued y the avigator Group, consisting of a gro ing integration of the pulp produced into the paper produced and sold evertheless, the Group elieves there is little e posure to risks of customer concentration in the marketing of pulp
In 2020, the Navigator Group’s 10 main customer groups for UWF paper represented 40% of this product’s sales during the period hen considering individual customers, the concentration has reduced to of sales volume in he avigator Group recorded ne customers ith sales in lso, regarding paper, the Group follo s a strategy of mitigating the risk of concentration in its customer portfolio he avigator Group sells paper to more than countries and to more than , individual customers, there y allo ing a dispersion of the risk of sales concentration in a reduced num er of markets and or customers
issue sales amounted to uro million in than in ommercial activity focuses essentially on sales of finished goods in the I erian eninsula, hich represent of its sales
he Group continues ith the goal of e panding its commercial activity in issue for the foreign market, namely y increasing avigator s presence in pain, and y strengthening sales of finished goods
RO G S O
In recent years, environmental legislation has ecome more restrictive ith regard to the control of environmental emissions he companies of the avigator Group comply ith the prevailing legislation, in its various parameters s
n eptem er , the ommission s implementing decision approved the est vaila le echnologies eference ocuments – onclusions on est vaila le echniques of the eference aper – for the paper and pulp sectors containing the ne limits and requirements for these sectors he companies have four years to promote the required ad ustments to its practices and equipment urthermore, the technical discussion on the arge om ustion acilities eference ocument as finalised and pu lished his document has an impact on the Navigator Group’s equipment, particularly in boilers and combustion facilities, hich ill e covered y the ne legislation, therefore requiring ne investments, such as particle filters for iomass oilers
s such, the Group has een follo ing the technical development of this matter, trying to anticipate and plan the necessary improvements to their equipment so to comply ith the limits to e pu lished here is a possi ility that the Group may need to perform additional investments in this area in order to comply ith any changes in limits and environmental regulations hich may e approved
o date, the legislative changes that are kno n relate to the evolution of the missions rading ystem , esta lished y irective , and amended y irective , hich outlines the legal frame ork for the period of and hich as transposed into the national la y ecree a of arch
ecently, irective of arch amending irective as also approved aiming to increase the cost effectiveness of emission reductions and investment in lo car on technologies irective sets out, among other things, the ne period to e in force et een , hich ill sho a reduction in the amount of emission allo ances allocated free of charge
his development ill ring increased costs for the transformation industry in general and in particular for the paper and pulp industry, ithout any compensation for the that, annually, is a sor ed y the forests of this industry
In order to mitigate the impact of this change, the Group has long undertaken a series of environmental investments that, among other advantages, have allo ed the continuous reduction of emissions, despite the fact that, in recent years, there has een a steady increase in production volumes In addition, the group has a ar on eutral ompany rogram that aims to implement, y , changes in its production processes in order to minimise the use of fossil fuels and consequently reduce their emissions
249
In 201 , an environmental strategic plan as analysed and established, aiming to adapt Navigator Group to a set of ne and future requirements in the environmental area, namely to the reference document for the sector onclusions on Best Available echniques of the eference Document for the sector B EF ommission Implementing Decision 2014 EU and for arge ombustion Facilities he reference documents correspond to the implementation of Directive 2010 EU on industrial emissions Pro ects are under ay to implement the appropriate technological changes, as ell as a ne version of the Environmental aster Plan, hich incorporates ne environmental challenges that have arisen in the meantime
he Environmental trategic Plan aimed for areas other than the environmental covered by this document It as possible to confirm that Navigator Group is broadly in compliance ith this future referential and to identify some areas for improvement as ell as technological solutions such as atmosphere emissions from biomass boilers
n the other hand, under the terms set in Decree a 14 200 , dated 2 une that transposed directive 2004 3 E to the national la , the Navigator Group secured the environmental insurances demanded by that la , thus guaranteeing compliance and reducing e posure to environmental ris s
R S S SSOC TE T T E RO UCT O O E ER
Energy is an activity of gro ing importance in the Group allo ing the use of endogenous rene able resource hich is the biomass generated in the BEKP production he energy generation assets also allo the Group’s ood suppliers to generate additional income from the sale of biomass and contributing to the reduction of the ris of fires in the country
As a ay of boosting the use of forest residual biomass made available by the forestry sector, t o biomass thermoelectric plants to produce rene able electric energy ere built by the Group in 200 and are fully operational
he Group has played a pioneering role and has been developing a mar et for the sale of biomass for supplying its rene able cogeneration po er stations and biomass po er plants he fostering of this mar et in a phase prior to the start up of the ne po er generating units has enabled it to secure a sustained ra material supply net or
he incentives in place in Portugal only consider the use of residual forest biomass, rather than the use of ood to produce electrical po er
In terms of legal frame or , e highlight the follo ing diplomas
• Decree a no A 201 of 30 April, hich establishes provisions on energy efficiency and cogeneration and amends Decree a no 23 2010 and rder 140 2012, revised by rder 32 A 2012, applicable to the regime of P E pecial egime Production in cogeneration
• For units po ered through residual forestry biomass B , dedicated to the production of electricity, the legal frame or is provided by Decree a 33 A 200 , revised by Decree a 22 200 ,that e tends from 1 to 2 years the guaranteed tariffs under the P E pecial egime Production For these assets, the legal frame or thus supports a tariff frame or that is e pected to remain stable over the coming years
• ore recently, the Decree a no 120 201 of 22 August created a special and e traordinary regime for the installation and operation of ne biomass recovery plants, located near forest areas considered critical in terms of ildfire ris
As a result of the measures ta en under the Financial Ad ustment Program to hich Portugal as sub ect, the entire remuneration system of the national electricity sector as revised, being the ma or impact in the electricity produced from cogeneration, recognised as an energy efficiency measure already hich represents one of the most efficient forms of energy production
he Group represents a significant part of the energy produced in Portugal he units o ned and operated by the Group under the ogeneration regime, supported by a revie of the electric energy sales prices, over a period that began temporarily in 2012 and hich ill end progressively bet een 202 2030
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ANNUAL REPORT 2020
pro r ss r r u o sso s o r sp r s o o sus o s o r r r or r pp p r o s o r o s o op r o s o su p o s s r supp u s s r o urr ur s o r o u u r o s ru r
o s u s or op s o o pro u o os s o r u s s s o pro s or pro u o o r ro r sour s r s Group s s o s r s or Group o u o s ru o o o ss o r us r s o u r o s u op o o ss r o r p u r r o s so p s r pro s or so r p o o o r o s o su p o s s
R S S RE T TO T E CEME T ER T ES SE ME T
SU O R M TER S
r s o r s r r s u ur pro ss o r s o or r r o o s rr ou s o u rr s o or r s r s sur Group sus op r o o rs
S E R CE
r s s ops s rs o r p r s r or pr s p ss o o o s u o o ou r
EM O GROUP’S RO UCTS
The segment of Cement and derivatives’ turnover is dependent on the level of u s or o o o r p r s op r s o s ru o s or s o p r u r ur o o s p s o o r s o r u s s o o s s r s ru ur s
o s ru o s or s s s o ors su s r s r s r or o ur o o sp o o o r ss o s us r
sp Group o s r s o r p rs o s s s o s s r s s us ss s u o op r pro o s o s ru o s or o s r s op r s
COM ET T O
o p s o s o r s op s s ro o p ro or u u s r urr o s o s ro s or ss p o o op r ors o r por s p r or o s s
s pp s r ou r u r r ss o urr ss s p s p pr s u s o rsupp s so pus o pr s
E ER COSTS
s p r o Group’s os s s p o r os s r s os or su s o us ss rr o s su s r s Group p r or s s o r r s r pr r s rou us o r u s s or s o r r po r supp o r s or r o s r r u r s o r s luctuations in electricity and fuel costs can have a negative impact on the Group’s business, financial situation op r pro
COU TR R S – R TU S O
s pos o ou r r s o r u s o r Group o s s s pro u o u s
251
OU R R S – O
n the case of ebanon, high rates of unemployment, inflation and currency depreciation place restrictions on access to essential services by the ebanese population and the thousands of refugees ho have sought shelter in the country
The arrival of the C pandemic and the restrictions imposed to contain its spread aggravated the scenario of vulnerability faced by the country Thus the ris s at the top of the priorities ere the failure of national governance, the crisis of the state, unemployment and underemployment, hyperinflation and deep social instability
as further characterised by the massive printing of currency, the devaluation of the local currency, the shortage of foreign currency reserves and the deterioration of the economic conte t The scarcity of foreign currency to meet the import of essential goods e g medicines and food led to the Government being forced to free e ban accounts in dollars, hich promoted the gro th of the unregulated mar et for buying and selling currency These transactions of e changing ebanese pounds for other currencies carried out at a different e change rate from the official one, hich allo ed local operators to ensure the maintenance of their operations, this constituting a prerogative of force ma eure , ere e ceptionally recognised by the ebanese inistry of inance through a guideline published at the end of the financial year
ith regard to inflation, it has started its escalation since the beginning of , representing in uly a cumulative inflation of more than over a period of years, so that the country has been declared a hyperinflationary economy n this sense, companies ere re uired to apply inancial eporting in yperinflationary conomies ote
n it is also important to highlight the e plosion that occurred in the port of eirut hich, in addition to all the human damage, caused a trail of destruction and idespread protests against the corruption found in the country and, conse uently, the Government These protests resulted in the resignation of the rime inister, increasing the ris of political instability
RO G S O
ill definitely be characterised by t o main themes the pandemic follo ing the emergence of the covid virus at the beginning of the year and the a areness of climate change ith the s goal of achieving carbon neutrality by
ollo ing the publication of the uropean Green eal at the end of the has launched a number of relevant initiatives
• uropean Climate a hich includes the s goal of achieving climate neutrality by
• iodiversity trategy aiming to create protected areas and restore degraded habitats by
• arm to or trategy hich aims to promote the fair transition of the agri food system in the
• uropean ndustrial trategy in order to promote and lead the transition to ards climate neutrality and digital leadership
n addition to these, circular economy and fair transition are also relevant
t thus becomes clear that the sustainability of economic activities ill re uire a transition to ards more sustainable economic models that ill pose important challenges to the various sectors in general and to the cement sector in particular
The greenhouse gas emission reduction target initially set at over emissions has been updated ith an increased ambition to at least
egarding the uropean missions Trading cheme T , the third period ended, ith the ne period starting on anuary This ne period as divided into t o sub periods and ith a mid term revie
The T revie process for the first sub period is practically over ith the publication of the Commission mplementing
egulation on arch the ne benchmar values for clin er ere set at gC t clin er grey and
gC t clin er hite for the sub period , corresponding to a reduction of grey and hite The linear reduction factor increased from to The final decision on the reduction factor is e pected in pril and the disclosure of the number of free allo ances to be allocated in une
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ANNUAL REPORT 2020
n the second half of a ne revie of the T ill start for the sub period, hich ill reflect the necessary changes arising from the ne reduction target for and also the possible creation of a Carbon order d ustment easure C that ensures a level playing field ith third countries outside the that are not sub ect to the same rules, hich puts them at a competitive advantage in imports to the
ecil, a are of this ne frame or and the impact on the reduction of free grants receivable, began the process of technological upgrading of its production unit in ut o, ro ect CC Clean Cement ine, using more efficient and mature technologies and innovative technologies that lead to a reduction in carbon emissions, a clean generation of of the unit s electricity consumption, a ero use of fossil fuels and a reduction in thermal consumption This investment totals around uro million and is e pected to be concluded by , ma ing this unit a uropean reference in energy and environmental efficiency
ollo ing the publication by Cembureau of the Carbon eutrality oadmap for the cement and concrete value chain by , the national cement sector is developing its o n roadmap adapted to the national reality
or its part ecil is developing a set of and investment pro ects that ill constitute its o n roadmap for carbon neutrality
The supply of ra materials for the segment of nvironment, developed by the subgroup T , is conditioned by the availability of animal carcasses and aste from the food industry, particularly in slaughterhouses This mar et is relatively vulnerable to the deterioration of the economic situation, as ell as changes in consumption habits and ease of substitution bet een food products, hich could limit the activity of this subgroup
Given its nature, ETSA’s business is exposed to volatility in prices of soft commodities on international markets (cereals and cereal products , since these are substitute products to those transacted by T
The correlation bet een ETSA’s selling prices and movements in prices of soft commodities on international mar ets is an additional ris factor for the activity
GROUP’S
decrease in demand or diminished level of activity in animal feed industry, agriculture e ploitations, pet food and biodiesel may have a significant impact on group ETSA’s turnover
ub group T develops its activity in a mar et here it competes ith other companies operating in the collection and recovery of animal by products and other companies that produce substitutes for these products such as industries related to the production of cereals and edible oils n this frame or , any increase or decrease in competition ill be reflected in the levels of profitability of the Group
The T subsidiary has a service contract ith the ortuguese tate regarding C , ith relevance in the consolidated turnover of the T Group This contract has a limited term and its continuity depends not only on competitive factors, since it is promoted by public tender, but also on regulatory factors, since its e istence and regime depend on strategic options of the ortuguese tate
253
R S S R G O R GROUP
O OG R P
T e Group s industrial units are sub ect to risks of tec nolo ical replacement as ell as t ose in erent to any industrial economic activity, suc as accidents, breakdo ns or natural catastrop es t at may lead to losses in t e Group s assets or temporary s utdo n in t e production process
ike ise, t ese risks may affect t e Group s main customers and suppliers, ic ould ave a si nificant impact on profitability levels if it ere not possible to find ot er customers in order to uarantee sales levels or suppliers t at ould make it possible to maintain t e same cost structure
G R S S
t s ould be noted t at le al risks result mainly from tax and re ulatory risks ic are covered by t e analysis of risks of an operational nature, and specific risks of overall responsibility or risks associated it t e ne otiation and conclusion of contractual arran ements
T ese risks are controlled by le al advisory measures ic are in place eit er at Semapa s level as a s are oldin or at its subsidiaries’ level, and by outsourcing external lawyers whenever the specificity of the matter, its value or other specific factors so recommend
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O OR R S O
he accompanying financial statements are a translation of financial statements originally issued in ortuguese n the event of any discrepancies the ortuguese version prevails
O R O R ORS
R
RS
255 STATUTORY AUDIT REPORT STATUTORY AUDIT REPORT
STATUTORY AUDITORS’ REPORT AND AUDITORS’ REPORT
(Free translation from a report originally issued in Portuguese language. In case of doubt the Portuguese version will always prevail.)
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Opinion We have audited the accompanying consolidated financial statements of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. (the Group), which comprise the consolidated statement of financial position as at 31 December 2020 (showing a total of Euro 3,890,995,016 and total equity of Euro 1,207,976,603, including a profit for the period attributable to the Navigator Company’s shareholders of Euro 106,588,079), and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and the accompanying notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements give a true and fair view, in all material respects, of the consolidated financial position of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. as at 31 December 2020 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and further technical and ethical standards and guidelines as issued by Ordem dos Revisores Oficiais de Contas (the Portuguese Institute of Statutory Auditors). Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section below. We are independent of the entities that comprise the Group in accordance with the law and we have fulfilled other ethical requirements in accordance with the Ordem dos Revisores Oficiais de Contas’ code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Recoverability of goodwill (Euro 331,146,928), other intangible assets (Euro 313,145,496) and property, plant and equipment (Euro 1,802,961,376) ANNUAL REPORT 2020
See Note 1.6 Main estimates and judgements and Notes 3.1, 3.2 and 3.3 of the Financial Statements
The Risk Our response to the identified risk
Recoverability of goodwill and property, Our audit procedures included the other intangible assets and property, plant following, among others: and equipment is a relevant matter due to the materiality of the amounts involved as § We assessed the designing and well as due to the complexity and implementation of the main controls subjectivity inherent to impairment tests, implemented by the Group related to namely regarding the uncertainty inherent this matter and analysed budgeting to the financial projections, which are procedures in which the financial based on the Board of Directors projections are based on, comparing expectations materialised in business the actual performance with estimates plans, which key assumptions such as performed in prior periods, as well as discount rates, expected margins, short the integrity of the discounted cash and long term growth rates, investment flow model; plans and demand depend on § We assessed the internal and external unobservable inputs. assumptions used, such as current The developments in the economic business trends , market performance, environment, as well as the control and inflation, projected economic growth monitoring of the spread of COVID–19 and and discount rates and assessed their its effects created greater uncertainty over reasonableness; the financial projections that support the § We performed sensitivity analysis to assessment of impairment. the robustness of assumptions and forecasts § We involved experts in the calculation of the weighted average cost of capital; and § We reviewed the adequacy of the disclosures in the financial statements, in accordance with the applicable accounting standard.
2
Fair value of biological assets (Euro 148,584,452)
See Note 1.6 Main estimates and judgements and Note 3.7 of the Financial Statements
The Risk Our response to the identified risk
The fair value of biological assets is Our audit procedures included the determined through an internally following, among others: developed model, based on economic and market projections, whose § We assessed the design and assumptions, namely the forest implementation of the main controls productivity, the sales price of wood implemented by the Group related to less the harvesting cost, the value of this matter; own and leased land rents, logging and § We tested the model's mathematical transportation costs, plantation and accuracy and integrity; maintenance costs and the discount rate, require a high degree of § We analysed the budgeting estimation and judgement of the Board procedures in which projections are of Directors. based on; § We compared the actual performance of variables inherent to the model with the estimates performed in prior periods, namely: forest productivity, the value of own and leased land rents, fixed costs, logging and transportation costs, plantation and maintenance costs; § We compared the internal and external assumptions used, such as spot price vs expected price and the discount rate with the market data and assessed their sensitivity; § We reviewed the adequacy of the disclosures in the financial statements, in accordance with the applicable accounting standard.
3 ANNUAL REPORT 2020
Uncertainty over income tax treatments
See Note 1.6 Main estimates and judgements and Notes 6.1 and 6.2 of the Financial Statements
The Risk Our response to the identified risk
The application of tax law to various Our audit procedures included the transactions and circumstances of following, among others: uncertain tax treatment has an inherent § We assessed the processes for complexity and requires judgement in monitoring uncertain tax positions determining and measuring the risks and regarding the treatment of income uncertainties in defining the best tax, including design and estimate, by weighing all possible results implementation testing and under its control and their associated inquiries to the Board of Directors probabilities. and to the tax managers on the The estimate of amounts that may result basis of their estimates and in future outflows requires a high degree judgements; of judgement of the Board of Directors. The Board of Directors evaluate the § We analysed ongoing tax probability of outcome, based on the proceedings and potential opinion of their legal and tax advisors. uncertain tax positions, considering the effect of uncertainty for each
uncertain tax treatment, supported by tax experts, and reviewed the existing documentation; § We analysed the responses to the confirmation requests received from external lawyers; § We assessed the consistency of the criteria followed in the previous years; and; § We reviewed the adequacy of the disclosures in the financial statements, in accordance with the applicable standard.
4
Lebanon - Hyperinflationary Economy
See Note 1.2. Lebanon - IAS 29 - Hyperinflation and note 1.4 Basis for Preparation - Presentation currency and transactions in a currency other than the presentation currency and hyperinflationary economies
The Risk Our response to the identified risk
The economic and political crisis that Our audit procedures included the affected Lebanon in 2020 led to this following, among others: geography being classified as a § We assessed the adjustments hyperinflationary economy under IAS 29. arising from the application of IAS 29 As a result, entities whose functional made by the Board of Directors, currency is the Lebanese pound were namely we: required to apply IAS 29 — Financial Reporting in Hyperinflationary Economies § Analysed the general price index to their financial statements. Thus, the applied; financial statements of subsidiaries § Validated the classification of whose functional currency is the monetary and non-monetary Lebanese pound were restated by items; applying a Lebanese general price index and then transposed to the exchange § Validated the adequacy of the rate applicable to dividends and methodology applied in the repatriation of capital, as this is the rate restatement of the financial that, at the date of the financial position, position date; the investment in the foreign operation will be recovered. § Analysed the assessment of the book value of non-current assets Considering the complexity and in accordance with IAS 36 — magnitude of the impacts of applying IAS Impairment of Assets, whereby 29 to the consolidated financial the restated amount is reduced to statements, as well as of the translation the recoverable amount of the of the financial statements at the assets. exchange rate applicable to dividends and repatriation of capital, we have § Assessed the adjustments arising considered these impacts as a key audit from the application of IAS 21 matters. made by the Board of Directors, namely the translation of the financial statements at the exchange rate applicable to dividends and repatriation of capital. § We reviewed the adequacy of the disclosures in the financial statements, in accordance with the applicable accounting standard.
Management and the Supervisory Body for the Consolidated Financial Statements Management is responsible for:
5 ANNUAL REPORT 2020
§ the preparation of consolidated financial statements that give a true and fair view of the Group’s consolidated financial position, consolidated financial performance and its consolidated cash flows, in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union; § the preparation of the consolidated management report, the corporate governance report, the non-financial statement and the remuneration report in accordance with applicable laws and regulations; § designing and maintaining an appropriate internal control system to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; § the adoption of accounting policies and principles appropriate in the circumstances; and, § assessing the Group’s ability to continue as a going concern, and disclosing, as applicable, the matters that may cast significant doubt about the Group’s ability to continue as a going concern. The supervisory body is responsible for overseeing the Group’s financial reporting process. Auditor´s Responsibilities for the Audit of the Consolidated Financial Statements Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatements whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: § identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control; § obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; § evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; § conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
6
evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern; § evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation; § obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion; § communicate with those charged with governance, including the supervisory body, regarding, among other matters, the planned scope and timing of the audit, and significant audit findings including any significant deficiencies in internal control that we identify during our audit; § determine, from the matters communicated with those charged with governance, including the supervisory body, those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes their public disclosure; and, § provide the supervisory body with a statement that we have complied with the relevant ethical requirements regarding independence and communicate all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Our responsibility also includes the verification that the information contained in the consolidated management report is consistent with the financial statements, and the verification of the requirements as provided in numbers 4 and 5 of Article 451 of the Portuguese Companies’ Code (Código das Sociedades Comerciais), as well as the verification that the consolidated non-financial information was presented.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS On the Consolidated Management Report Pursuant to Article 451(3)(e) of the Portuguese Companies' Code, it is our opinion that the consolidated management report was prepared in accordance with the applicable legal and regulatory requirements and the information contained therein is consistent with the audited consolidated financial statements and, having regard to our knowledge and assessment of the Group, we have not identified any material misstatements.
7 ANNUAL REPORT 2020
On the Corporate Governance Report Pursuant to Article 451(4), of the Portuguese Companies' Code, it is our opinion that the corporate governance report includes the information required to the Entity to provide under Article 245-A of the Securities Code, and we have not identified any material misstatements on the information provided therein in compliance with paragraphs c), d), f), h), i) and m) of that Article.
On the consolidated non-financial information Pursuant to Article 451(6), of the Portuguese Companies' Code, we inform that the Group has prepared a separate report where includes the non-financial information defined in Article 508-G of the Portuguese Companies’ Code, having that report being published with the management report. On the additional matters provided in Article 10 of the Regulation (EU) no. 537/2014 Pursuant to Article 10 of the Regulation (EU) no. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and in addition to the key audit matters mentioned above, we also report the following: § We were first appointed as auditors of the Group in the shareholders general assembly held on 27 September 2017 for a mandate from 2018 to 2021. § Management as confirmed to us that they are not aware of any fraud or suspicion of fraud having occurred that has a material effect on the consolidated financial statements. In planning and executing our audit in accordance with ISAs we maintained professional scepticism, and we designed audit procedures to respond to the possibility of material misstatement in the consolidated financial statements due to fraud. As a result of our work, we have not identified any material misstatement of the consolidated financial statements due to fraud. § We confirm that the audit opinion we issue is consistent with the additional report that we prepared and delivered to the supervisory body of the Group on 06 April 2021. § We declare that we have not provided any prohibited services as described in Article 77(8) of the Ordem dos Revisores Oficiais de Contas Statutes, and we have remained independent of the Group in conducting the audit.
6 April 2021
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (no. 189) represented by Paulo Alexandre Martins Quintas Paixão (ROC no. 1427)
8 REPORT AND OPINION OF THE AUDIT BOARD REPORT AND OPINION OF THE AUDIT BOARD SEMAPA – Sociedade de Investimento e Gestão, SGPS, S.A. 5. Within the scope of our competences, we found that:
Report and Opinion of the Audit Board a) The Consolidated Income Statement, the Consolidated Financial Consolidated Financial Statements Statement, the Statement of Comprehensive Income, the Statement of Consolidated Changes in Equity and the Consolidated Cash Flow Statement and its Notes to the Consolidated Financial Statements Year 2020 give a true and fair view of the financial position of the company, in respect of its results, comprehensive income, changes in equity and cash flow; Dear Shareholders, b) The accounting policies and valuation criteria applied are in 1. As laid down by law, established in the articles of association and in conformity with the International Financial Reporting Standards carrying out the mandate entrusted to us, we hereby deliver our report (IFRS), as adopted in the European Union, and ensure that a true on the audit activities carried out in 2020 and issue our opinion on the and fair assessment of the company's assets and results is given, Management Report and the Consolidated Financial Statements and the findings and recommendations of the external auditor have submitted by the Board of Directors of Semapa – Sociedade de been followed through; Investimento e Gestão, SGPS, S.A., for the year ended 31 December 2020. c) The Management Report clearly shows the development of the business and the situation of the company and the subsidiaries 2. During the year, we monitored the company's activity and that of its included in the consolidation, highlighting key aspects of the main subsidiaries and affiliated companies on a regular basis, with the activity; frequency and to the extent that we deemed appropriate, namely through regular meetings with the Company's Management and d) The Corporate Governance Report covers all of the points referred to Directors. We oversaw the reviewing of the accounting records and the in Article 245 A of the Securities Code, and considered the supporting documents, and the efficacy of the risk management, recommendations on the Code of the Portuguese Corporate internal control and audit systems. We ensured compliance with the Governance Institute (IPCG). law and the Articles of Association. We did not run up against any obstacles in the exercise of our duties. 6. Consequently, taking into account the information delivered by the Company's Board of Directors and Departments, and the conclusions of 3. We met several times with the statutory auditor and the external the Legal Accounts Certificate and Audit Report, we are of the opinion auditor, KPMG & Associados, SROC, Lda., to monitor the audits that: conducted and supervise their independence. We have analysed the legal Accounts Certificate and Audit Report, and merit our agreement. a) The Management Report should be approved;
4. The Audit Board analysed the proposals that were presented to it for b) The Consolidated Financial Statements should be approved. non-audit services by the Statutory and External Auditor, having approved those that related with permitted services, did not affect the independence of the Statutory and External Auditor and fulfilled the other legal requirements. ANNUAL REPORT 2020
5. Within the scope of our competences, we found that:
a) The Consolidated Income Statement, the Consolidated Financial Statement, the Statement of Comprehensive Income, the Statement of Consolidated Changes in Equity and the Consolidated Cash Flow Statement and its Notes to the Consolidated Financial Statements give a true and fair view of the financial position of the company, in respect of its results, comprehensive income, changes in equity and cash flow;
b) The accounting policies and valuation criteria applied are in conformity with the International Financial Reporting Standards (IFRS), as adopted in the European Union, and ensure that a true and fair assessment of the company's assets and results is given, and the findings and recommendations of the external auditor have been followed through;
c) The Management Report clearly shows the development of the business and the situation of the company and the subsidiaries included in the consolidation, highlighting key aspects of the activity;
d) The Corporate Governance Report covers all of the points referred to in Article 245 A of the Securities Code, and considered the recommendations on the Code of the Portuguese Corporate Governance Institute (IPCG).
6. Consequently, taking into account the information delivered by the Company's Board of Directors and Departments, and the conclusions of the Legal Accounts Certificate and Audit Report, we are of the opinion that:
a) The Management Report should be approved;
b) The Consolidated Financial Statements should be approved.
7. Finally, the members of the Audit Board are grateful to the Board of Directors, the key supervisors and other company staff, as well as to the statutory auditor KPMG & Associados, SROC, Lda. for their collaboration.
Lisbon, 6 April 2021
The Chairman of the Audit Board
José Manuel Oliveira Vitorino
Member of the Audit Board,
Gonçalo Nuno Palha Gaio Picão Caldeira
Member of the Audit Board,
Maria da Graça Torres Ferreira da Cunha Gonçalves ANNUAL REPORT 2020
(Page intentionally left blank) SEPARATE FINANCIAL STATEMENTS SEPARATE FINANCIAL STATEMENTS SEPARATE INCOME STATEMENT
Amounts in Euro Note 2020 2019
Revenue 2.1 13,242,763 17,746,329 Other operating income 2.2 45,250 94 Supplies and services 2.3 (5,997,017) (9,112,734) Payroll costs 7.1 (6,623,726) (7,759,809) Other operating expenses 2.3 (506,339) (975,658) Depreciation, amortisation and impairment losses on non-financial assets 3.3 (386,728) (349,838) Operating results (225,797) (451,616)
Share of profit/(losses) of subsidiaries 10.1 120,137,537 130,930,236 Financial income and gains 5.10 311,766 55,167 Financial expenses and losses 5.10 (10,401,612) (10,925,752) Profit before tax 109,821,894 119,608,035
Income tax 6.1.1 (3,233,815) 4,445,685 Net profit for the period 106,588,079 124,053,720
Earnings per share Basic earnings per share 5.3 1.334 1.540 Diluted earnings per share 5.3 1.334 1.540
The following Notes form an integral part of these separate financial statements.
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SEPARATE STATEMENT OF COMPREHENSIVE INCOME
Amounts in Euro Note 2020 2019
Net profit for the period 106,588,079 124,053,720
Items that may be reclassified to the income statement Other comprehensive income from subsidiaries 5.5 (96,352,444) 6,040,512
Items that may not be reclassified to the income statement Other comprehensive income from subsidiaries 5.5 (5,276,335) (8,170,850)
Total other comprehensive income (net of taxes) (101,628,779) (2,130,338) Total other comprehensive income 4,959,300 121,923,382
The following Notes form an integral part of these separate financial statements.
275 SEPARATE STATEMENT OF FINANCIAL POSITION
Amounts in Euro Note 2020 2019
ASSETS Non-current assets Property, plant and equipment 3.1 673,989 864,772 Right-of-use assets 3.2 174,472 249,216 Investments In Subsidiaries 10.1 1,219,396,344 1,284,660,569 Other financial investments 8.2 187,869 42,143 Receivables and other non-current receivables 4.1 17,782 13,553 1,220,450,456 1,285,830,253 Current asset Receivables and other current receivables 4.1 13,438,144 84,277,160 Income tax 6.1 2,316,969 - Cash and cash equivalents 5.8 10,051,528 85,020 25,806,641 84,362,180 Total assets 1,246,257,097 1,370,192,433
EQUITY AND LIABILITIES Equity Share capital 5.2 81,270,000 81,270,000 Treasury shares 5.2 (15,946,363) (8,922,980) Reserves by applying the equity method 5.5 (425,335,543) (323,706,762) Legal reserves 5.5 16,695,625 16,695,625 Other reserves 5.5 1,098,936,466 984,866,417 Retained earnings 86,613,994 86,613,994 Net profit for the period 106,588,079 124,053,720 Total Equity 948,822,258 960,870,014
Non-current liabilities Interest-bearing liabilities 5.6 212,991,868 281,795,047 Lease liabilities 5.7 92,610 146,504 Pension and other post-employment benefits 7.2.1 901,825 1,008,908 Deferred tax liabilities 6.2 119,166 418,082 214,105,469 283,368,541 Current liabilities Interest-bearing liabilities 5.6 60,617,895 110,156,081 Lease liabilities 5.7 84,763 105,559 Payables and other current liabilities 4.2 14,779,166 11,294,353 Income tax 6.1.2 7,847,546 4,397,885 83,329,370 125,953,878 Total liabilities 297,434,839 409,322,419
Total Equity and Liabilities 1,246,257,097 1,370,192,433
The following Notes form an integral part of these separate financial statements.
276 SEPARATE STATEMENT OF CHANGES IN EQUITY
Reserves by Net profit for the Amounts in Euro Note Share Capital Treasury Shares applying the Equity Legal Reserves Other Reserves Retained Earnings Total period Method Equity as of 1 January 2020 81,270,000 (8,922,980) (323,706,762) 16,695,625 984,866,417 86,613,994 124,053,720 960,870,014 Net profit for the period ------106,588,079 106,588,079 Other comprehensive income (net of taxes) - - (101,628,779) - - - - (101,628,779) Total comprehensive income for the period - - (101,628,779) - - - 106,588,079 4,959,300 Application of 2019 profit: - Transfer to other reserves - - - - 114,070,049 - (114,070,049) - - Dividends paid 5.4 ------(9,983,671) (9,983,671) Acquisition of treasury shares 5.2 - (7,023,383) - - - - - (7,023,383) Total transactions with shareholders - (7,023,383) - - 114,070,049 - (124,053,720) (17,007,054) Other movements in equity of subsidiaries 5.5 - - (2) - - - - (2) Total other operations - - (2) - - - - (2) Equity as of 31 December 2020 81,270,000 (15,946,363) (425,335,543) 16,695,625 1,098,936,466 86,613,994 106,588,079 948,822,258
Reserves by Net profit for the Amounts in Euro Note Share Capital Treasury Shares applying the Equity Legal Reserves Other Reserves Retained Earnings Total period Method Equity as of 1 January 2019 81,270,000 (6,740,954) (313,619,142) 16,695,625 896,323,538 83,870,483 132,554,337 890,353,887 Net profit for the period ------124,053,720 124,053,720 Other comprehensive income (net of taxes) - - (2,130,338) - - - - (2,130,338) Total comprehensive income for the period - - (2,130,338) - - - 124,053,720 121,923,382
277 Application of 2018 profit: - Transfer to reserves - - - - 88,542,879 - (88,542,879) - - Dividends 5.4 ------(41,267,948) (41,267,948) - Bonus to employees - - - - - 2,743,510 (2,743,510) - Acquisition of treasury shares 5.2 - (2,182,026) - - - - - (2,182,026) Other movements - - - - - 1 - 1 Total transactions with shareholders - (2,182,026) - - 88,542,879 2,743,511 (132,554,337) (43,449,973) Intra-group acquisition differences of equity shares 5.5 - - (7,957,280) - - - - (7,957,280) Other movements in equity of subsidiaries 5.5 - - (2) - - - - (2) Total other operations - - (7,957,282) - - - - (7,957,282) Equity as of 31 December 2019 81,270,000 (8,922,980) (323,706,762) 16,695,625 984,866,417 86,613,994 124,053,720 960,870,014
The following Notes form an integral part of these separate financial statements. ANNUALREPORT 2020
SEPARATE STATEMENT OF CASH FLOWS
Amounts in Euro Note 2020 2019
CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers 19,990,767 16,623,306 Payments to suppliers (8,706,898) (9,430,306) Payments to employees (7,042,689) (8,556,883) Cash flows from operations 4,241,180 (1,363,883)
Income tax received / (paid) (4,126,004) (9,520,029) Other receipts / (payments) relating to operating activities 2,312,722 4,203,969 Cash flows from operating activities (1) 2,427,898 (6,679,943) CASH FLOWS FROM INVESTING ACTIVITIES Inflows: Financial investments 10.1 19,700,000 3,500,000 Property, plant and equipment - 50 Interest and similar income 6,331 27,621 Dividends from subsidiaries 139,334,385 139,617,793 159,040,716 143,145,464 Outflows: Financial investments 10.1 (5,940,000) (880,000) Property, plant and equipment (36,274) (374,522) (5,976,274) (1,254,522) Cash flows from investing activities (2) 153,064,442 141,890,942
CASH FLOWS FROM FINANCING ACTIVITIES Inflows: Interest-bearing liabilities 1,284,800,000 2,779,861,000 Other financing operations - 1,300,000 1,284,800,000 2,781,161,000 Outflows: Interest-bearing liabilities (1,404,091,828) (2,860,672,618) Amortisation of lease agreements 5.9 (116,052) (148,084) Interest and similar expenses (9,110,898) (12,121,976) Dividends 5.4 (9,983,671) (41,267,948) Acquisition of treasury shares 5.2 (7,023,383) (2,182,026) (1,430,325,832) (2,916,392,652) Cash flows from financing activities (3) (145,525,832) (135,231,652) CHANGE IN CASH AND CASH EQUIVALENTS (1)+(2)+(3) 9,966,508 (20,653) Effect of exchange rate differences - (2) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 5.8 85,020 105,675 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5.8 10,051,528 85,020
The following Notes form an integral part of these separate financial statements.
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ANNUAL REPORT 2020
1 INTRODUCTION...... 281 1.1 PRESENTATION...... 281 1.2 RELEVANT EVENTS OF THE PERIOD...... 281 1.3 SUBSEQUENT EVENTS...... 283 1.4 BASIS FOR PREPARATION...... 284 1.5 NEW IFRS ADOPTED AND TO BE ADOPTED...... 286 1.6 MAIN ESTIMATES AND JUDGEMENTS...... 290 2 OPERATIONAL PERFORMANCE...... 291 2.1 REVENUE...... 291 2.2 OTHER OPERATING INCOME...... 291 2.3 OTHER OPERATING EXPENSES...... 292 3 INVESTMENTS...... 293 3.1 PROPERTY, PLANT AND EQUIPMENT...... 293 3.2 RIGHT-OF-USE ASSETS...... 294 3.3 DEPRECIATION, AMORTISATION AND IMPAIRMENTS LOSSES...... 295 4 WORKING CAPITAL...... 296 4.1 RECEIVBLES AND OTHER CURRENT ASSETS...... 296 4.2 PAYABLES AND OTHER CURRENT LIABILITIES...... 296 5 CAPITAL STRUCTURE...... 298 5.1 CAPITAL MANAGEMENT...... 298 5.2 SHARE CAPITAL AND TREASURY SHARES...... 298 5.3 EARNINGS PER SHARE...... 299 5.4 DIVIDENDS...... 300 5.5 RESERVES AND RETAINED EARNINGS...... 300 5.6 INTEREST-BEARING LIABILITIES...... 301 5.7 LEASE LIABILITIES...... 303 5.8 CASH AND CASH EQUIVALENTS...... 304 5.9 CASH FLOWS FROM FINANCING ACTIVITIES...... 304 5.10 NET FINANCIAL RESULTS...... 305 6 INCOME TAX ...... 306 6.1 INCOME TAX FOR THE PERIOD...... 306 6.2 DEFERRED TAXES...... 308 7 PAYROLL ...... 310 7.1 PAYROLL COSTS...... 310 7.2 EMPLOYEE BENEFITS...... 310 7.3 REMUNERATION OF CORPORATE BODIES...... 311 8 FINANCIAL INSTRUMENTS...... 312 8.1 FINANCIAL RISK MANAGEMENT...... 312 8.2 OTHER FINANCIAL INVESTMENTS...... 316 8.3 FINANCIAL ASSETS AND LIABILITIES...... 316
279 9 PROVISIONS, COMMITMENTS AND CONTINGENCIES...... 318 9.1 PROVISIONS...... 318 9.2 COMMITMENTS...... 318 9.3 CONTINGENT ASSETS AND LIABILITIES...... 318 10 GROUP STRUCTURE...... 319 10.1 INVESTMENTS IN SUBSIDIARIES...... 319 10.2 TRANSACTIONS WITH RELATED PARTIES...... 324 11 NOTE ADDED FOR TRANSLATION………………………………………………………………………………………328
280 ANNUAL REPORT 2020
1 INTRODUCTION
The following symbols are used in the presentation of the Notes to the financial statements:
ACCOUNTING POLICIES This symbol indicates the disclosure of accounting policies specifically applicable to the items in the respective Note.
MAIN ESTIMATES AND JUDGEMENTS This symbol indicates the disclosure of the estimates and/or judgements made regarding the items in the respective Note. The most significant estimates and judgements are presented in Note 1.6.
REFERENCE This symbol indicates a reference to another Note or another section of the Financial Statements where more information about the items disclosed is presented.
1.1 PRESENTATION
Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. (Semapa or Company) located at Av. Fontes Pereira de Melo, 14, 10º Piso, Lisboa was incorporated on 21 June 1991 and its corporate purpose is to manage holdings in other companies as an indirect form of performing economic activities. The Company has been listed on Euronext Lisbon since 1995 with ISIN PTSEM0AM0004.
Semapa is the parent company of the Semapa Group (Group), comprising Semapa and Subsidiaries, as presented in the consolidated financial statements. The Group is engaged in three different business segments: pulp and paper, cement and derivatives and environment, developed under the aegis of the subsidiaries The Navigator Company (ex. Portucel, S.A. named in the present document as "Navigator" or "Navigator Group"), Secil - Companhia Geral de Cal e Cimento, S.A. (“Secil” or “Grupo Secil”) and ETSA – Investimentos, SGPS, S.A. ("ETSA" or "ETSA Group").
In 2018, the Group launched a new venture capital business unit through its subsidiary Semapa Next, S.A., whose objective is to promote investments in startups and venture capital funds with high growth potential.
A more detailed description of Semapa's activities in relation to the management of its holdings is disclosed in Note 2.1 - Revenue.
Semapa is included in the consolidation perimeter of Sodim — SGPS, S.A., which is its parent company and the final controlling entity.
1.2 RELEVANT EVENTS OF THE PERIOD
CORONAVIRUS
The activity in 2020 reflected the effects of the COVID-19 pandemic, namely the different periods of confinement implemented in the various geographies where Semapa subsidiaries operate. Its impact on operational activity was diverse in the different business segments and different geographies of Semapa subsidiaries, and was greater in the Pulp and Paper segment, with less impact on the Cement and Derivatives business in Portugal and Brazil and improvement in the Environment.
A Crisis Management Office was set up to monitor, anticipate and mitigate the impacts of the COVID-19 pandemic, both in terms of health and economic-financial aspects, in the various companies. Four Monitoring Groups were set up: 1) Preservation of Employees' Health and Containing the Epidemic, 2) Communication, 3) Business Evolution and Continuity Plans and 4) Financial (Contingency) Plan.
281
In an adverse environment, the contingency plans in place at the subsidiaries' various industrial units were activated to keep operations running. In view of the impact of the closure on UWF demand, the subsidiary Navigator temporarily suspended production at some of its paper machines between late April and early July, as a preventive measure against the accumulation of stocks in the value chain, and so managed to preserve its working capital.
Semapa and its subsidiaries currently show a remarkable free cash-flow generation and a strengthened financial position, and it is the Board of Directors’ belief that, given its financial and liquidity position, they will overcome the negative impacts of this crisis, without compromising the going concern principle applied in the preparation of these separate financial statements.
LIQUIDITY
Semapa and its subsidiaries currently have a comfortable liquidity position as a result of a significant increase in their short-term assets and careful management of working capital.
Semapa and its subsidiaries have been working and will continue to work thoroughly within their reach, namely in their operational and commercial planning, cost efficiency, cash flow allocation and effective liquidity management to ensure they remain a going concern and the health of their employees. It should be noted that, as of 31 December 2020, the Semapa is in compliance with the negotiated covenants and the safety margin of these covenants is comfortable.
RECOVERABILITY OF INVESTMENTS IN SUBSIDIARIES
Semapa analysed whether there were signs of impairment arising from the impacts of COVID-19. Considering the lower impact of the pandemic in the Cement and Derivatives segment, as of 31 December 2020, no signs of impairment were identified in the subsidiary Secil.
In the Pulp and Paper segment, despite the significant declines that occurred, both in the global consumption of UWF paper and in pulp and paper prices, based on future performance estimates, based on projections of GDP growth and inflation in Portugal, according to the IMF and Banco de Portugal, no impairment was identified on the investment in the Navigator subsidiary and there is a substantial gap compared to the book value of assets associated with that segment.
LEBANON | IAS 29 - HYPERINFLATION
In the last quarter of 2020, Lebanon was considered a hyperinflationary economy, under the terms of IAS 29 — Financial Reporting in Hyperinflationary Economies, based on the inflation recorded over the last three years. In fact, as of 31 December 2020, the accumulated inflation rate over the last three years exceeds 100%, which is an objective quantitative condition that leads to consider, in addition to the existence of other conditions laid down in IAS 29, that Lebanon is, as of 31 December 2020, a hyperinflationary economy.
The following price levels and inflation have been verified in Lebanon:
CPI Inflation rate Price index as at 31 December 2019 1.0696 7.0% Price index as at 30 November 2020 2.3347 133.0% Average price index in 2020 1.7868 79.0%
This standard applies to the separate financial statements and consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy and is applicable from the beginning of the reporting period in which the entity identifies its currency as hyperinflationary.
In accordance with IAS 29, the non-monetary assets and liabilities of the Lebanese subsidiaries Ciments de Sibline and Soime, held directly by Secil, were restated by applying a general price index reflecting changes in the general purchasing power in Lebanon since the date of acquisition of the assets. The restated amount of a non-monetary item has been reduced when it exceeds its recoverable amount. Monetary items of Lebanon subsidiaries are not restated because they are already expressed in terms of the currency unit current at the balance sheet date.
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ANNUAL REPORT 2020
Income statement items relating to the Lebanese subsidiaries have been restated by applying the change in the general price index from the dates the items of income and expenses were initially recorded in the financial statements. The loss on the net monetary position arising from price changes in 2020 is recognised in the income statement under the caption Gains or losses on the Net Monetary Position in the financial statements of those subsidiaries.
The restated amount of property, plant and equipment has been written down, in accordance with IAS 36 - Impairment of Assets, to its recoverable amount by calculating its value in use.
After having measured the impacts of IAS 29, the Group carried out the exchange translation of the accounts of the Lebanese subsidiaries in accordance with IAS 21, by applying the exchange rate applicable to dividends and capital repatriation, because it is the rate at which, at the date of the financial position, the investment in the foreign operation will be recovered (Note 1.4).
Considering Semapa's exposure to Lebanon through its investment in Secil, the application of IAS 29 had an impact of Euro 17,171,066 in the caption investments in subsidiaries and an impact in net profit of Euro 6,836,011 by applying the equity method.
As of 31 December 2020, the amount of investments in subsidiaries concerning the Lebanese subsidiaries amounts to Euro 18.2 million (2019: Euro 52.3 million).
MERGER OF SEINPAR INVESTMENTS, B.V.
On 1 January 2020, Semapa integrated by merger the Dutch law subsidiary, Seinpar Investments, B.V. and whose main effects on the statement of financial position at that date are detailed in Note 10.1.
1.3 SUBSEQUENT EVENTS
Between 1 January 2021 and 6 April 2021 (Note 1.4) the following events occurred, which did not give rise to adjustments to the separate financial statements of 2020:
SODIM PUBLIC ACQUISITION OFFER (OPA) TO ACQUIRE ALL SEMAPA SHARES
On 18 February 2021, Sodim, SGPS, S.A. informed the market and the CMVM of its intention to launch a general and voluntary public offer for the ordinary shares representing the share capital of Semapa, SGPS, S.A., which it does not yet hold. The launch of the Offer is subject to several conditions described in the preliminary announcement published on that date by Sodim, including the granting by the CMVM of the Offer's prior registration.
According to the aforementioned preliminary announcement, it is Sodim's intention, regardless of the results of the Public Acquisition Offer, to maintain the business activities of Semapa and the controlled entities, within the scope of their respective corporate purpose and in a similar manner to those that have been developed. Accordingly, this transaction will have no direct impact on Semapa and its subsidiaries, in particular with regard to their loan agreements.
ANTI-DUMPING RATE
On 19 January 2021, the Department of Commerce (DoC) confirmed the final rate to be applied to the sale of certain paper products in the US for the third period of review ("POR3"). The final rate is unchanged from the preliminary rate at 6.75%.
The rate now confirmed is in line with Navigator's estimates and means that, from now on, the rate payable on US sales of uncoated paper will be 6.75% until results are determined for the final rate for the POR4, which is expected to occur in April 2021.
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1.4 BASIS FOR PREPARATION
AUTHORISATION TO ISSUE FINANCIAL STATEMENTS
These financial statements were approved by the Board of Directors on 06 April 2021. However, they are still subject to approval by the General Shareholders’ Meeting, in accordance with the Portuguese Commercial Company Law.
The Company’s senior management, which are the members of the Board of Directors who sign this report, declare that, to the best of their knowledge, the information contained herein was prepared in conformity with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and results of the Company.
ACCOUNTING FRAMEWORK
The separate financial statements for the period ended 31 December 2020 were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), effective 1 January 2020 and as adopted by the European Union.
BASIS FOR MEASUREMENT
The notes to the separate financial statements have been prepared on a going concern basis from the books and accounting records of the Company and based on historical cost, except for financial instruments measured at fair value through profit or loss or at fair value through other comprehensive income (Note 8.2). The liability for Pensions and other post-employment benefits is recognised at its present value less the respective asset.
COMPARABILITY
These financial statements are comparable in all material respects with those of the previous year.
PRESENTATION CURRENCY AND TRANSACTIONS IN A CURRENCY OTHER THAN THE PRESENTATION CURRENCY AND HYPERINFLATIONARY ECONOMIES
The functional currency of the Company is the Euro. These separate financial statements are presented in Euro.
All the Company's monetary assets and liabilities (amounts of cash and assets and liabilities receivable or payable in fixed or determinable amounts of units of a currency) expressed in a currency other than the functional currency have been translated into Euro using the exchange rates ruling at the Financial Position date (Note 8.1.1).
The currency differences arising from differences between the exchange rates ruling at the transaction date and those ruling on collection, payment or at the statement of financial position dates, are recorded as income and expenses (Note 5.10).
The items Profit or loss for the period and Other comprehensive income from foreign subsidiaries (Note 10.1) were translated at the average exchange rate for the period, and the balances of assets, liabilities and goodwill of foreign subsidiaries were translated exchange rate prevailing at the Statement of financial position date. The exchange differences calculated were reflected in Reserves by applying the equity method (MEP - método de equivalência patrimonial), in Equity (Note 5.5).
For subsidiaries in hyperinflationary economies, the financial statements in local currency are restated in terms of the measuring unit current at the statement of financial position date to reflect the impact of inflation before translation into the Company's presentation currency. IAS 29 — Financial Reporting in Hyperinflationary Economies requires that amounts not yet expressed in terms of the measuring unit current at the financial position date are restated by applying a general price index, leading to a potential gain or loss on the monetary position. Furthermore, the Company assesses the book value of non-current assets in accordance with IAS 36 — Impairment of Assets, so that the restated amount is reduced to the recoverable amount, ensuring that the book value reflects the economic value of the assets.
The profit and loss and financial position of foreign operations in hyperinflationary economies are translated at the closing rate at the date of the financial position. In the case of Lebanon, Semapa uses the exchange rate applicable to dividends and capital repatriation, because it is the rate at which, at the date of the financial position, the investment in the subsidiary will be recovered.
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As of 31 December 2020 and 2019, the exchange rates used for the translation of assets and liabilities expressed in currencies other than Euro are detailed as follows:
31-12- 31-12- Valuation/ 31-12- 31-12- Valuation/ 2020 2019 (devaluation) 2020 2019 (devaluation)
TND (Tunisian Dinar) DKK (Danish krone) Average exchange rate Average exchange rate for for the period 3.1998 3.2820 2.50% the period 7.4542 7.4661 0.16% Exchange rate for the Exchange rate for the end end of the period 3.2879 3.1758 (3.53%) of the period 7.4409 7.4715 0.41%
LBN (Lebanese pound) HUF (Hungarian forint) Average exchange rate Average exchange rate for for the period 10,307.60 1,687.60 (510.78%) the period 351.2494 325.3000 (7.98%) Exchange rate for the Exchange rate for the end end of the period 10,307.60 1,693.50 (508.66%) of the period 363.8900 330.5300 (10.09%)
USD (American dollar) AUD (Australian dollar) Average exchange rate Average exchange rate for for the period 1.1422 1.1195 (2.03%) the period 1.6549 1.6108 (2.74%) Exchange rate for the Exchange rate for the end end of the period 1.2271 1.1234 (9.23%) of the period 1.5896 1.5995 0.62%
GBP (Sertling pound) MZM (Mozambican metical) Average exchange rate Average exchange rate for for the period 0.8897 0.8775 (1.39%) the period 80.2346 70.2110 (14.28%) Exchange rate for the Exchange rate for the end end of the period 0.8990 0.8508 (5.67%) of the period 92.9200 69.6100 (33.49%)
PLN (Polish zloti) BRL (Brazilian real) Average exchange rate Average exchange rate for for the period 4.4430 4.2968 (3.40%) the period 5.8978 4.4149 (33.59%) Exchange rate for the Exchange rate for the end end of the period 4.5597 4.2568 (7.12%) of the period 6.3768 4.5298 (40.77%)
SEK (Swedish krona) MAD (Moroccan dirham) Average exchange rate Average exchange rate for for the period 10.4848 10.5893 0.99% the period 10.8163 10.7693 (0.44%) Exchange rate for the Exchange rate for the end end of the period 10.0343 10.4468 3.95% of the period 10.9351 10.7645 (1.58%)
CZK (Czech koruna) NOK (Norway Kroner) Average exchange rate Average exchange rate for for the period 26.4551 25.6686 (3.06%) the period 10.7228 9.8434 (8.93%) Exchange rate for the Exchange rate for the end end of the period 26.2420 25.4080 (3.28%) of the period 10.4703 9.8638 (6.15%)
CHF (Swiss franc) AOA (Angolan Kwanza) Average exchange rate Average exchange rate for for the period 1.0705 1.1125 3.78% the period 689.8670 419.9963 (64.26%) Exchange rate for the Exchange rate for the end end of the period 1.0802 1.0854 0.48% of the period 822.3820 564.2410 (45.75%)
TRY (Turkish lira) MXN (Mexican peso) Average exchange rate Average exchange rate for for the period 8.0547 6.3609 (26.63%) the period 24.5194 21.5527 (13.76%) Exchange rate for the Exchange rate for the end end of the period 9.1131 6.6843 (36.34%) of the period 24.4160 21.2202 (15.06%)
ZAR (South African rand) AED (Dirham) Average exchange rate Average exchange rate for for the period 18.7655 16.1714 (16.04%) the period 4.1931 4.1099 (2.02%) Exchange rate for the Exchange rate for the end end of the period 18.0219 15.7773 (14.23%) of the period 4.5065 4.1257 (9.23%)
RUB (Russian roubles) CAD (Canadian dollar) Average exchange rate Average exchange rate for for the period 82.7248 72.4250 (14.22%) the period 1.5300 1.4853 (3.01%) Exchange rate for the Exchange rate for the end end of the period 91.4671 69.9563 (30.75%) of the period 1.5633 1.4598 (7.09%)
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1.5 NEW IFRS ADOPTED AND TO BE ADOPTED
STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED IN 2020
Amendment Standards and amendments Amendments to In March 2018, the International Accounting Standards Board (IASB) issued a comprehensive set of concepts for References to the financial reporting, the revised Conceptual Framework for Financial Reporting (Conceptual Framework), whose aim is Conceptual to update, in existing Standards, references to, and quotes from, the existing version of the Conceptual Framework or Framework in IFRS the version that was replaced in 2010 so that they refer to the revised Conceptual Framework. Standards The revised Conceptual Framework has an effective date of 1 January 2020 for companies that use the Conceptual Framework to develop accounting policies when no IFRS Standard applies to a particular transaction.
Definition of Material On 31 October 2018, the International Accounting Standards Board has issued amendments to its definition of material (amendments to IAS 1 to make it easier for companies to make materiality judgements. and IAS 8) The Amendments consist of (a) replacing the term ‘could influence’ with ‘could reasonably be expected to influence’; (b) including the concept of ‘obscuring information’ alongside the concepts of ‘omitting’ and ‘misstating’ information in the definition of material; (c) clarifying that the ‘users’ referred to are the primary users of general purpose financial statements referred to in the Conceptual Framework; and (d) aligning the definition of material across IFRS publications.
The amended definition of material therefore states that ‘Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity’.
Reform of Interest Rate On 26 September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7. The amendments modify some Benchmarks specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR (amendments to IFRS 9, reform. Additionally, the amendments require companies to provide additional information to investors about their IAS 39 and IFRS 7) hedging relationships which are directly affected by these uncertainties.
The Amendments provide exceptions so that entities would apply hedge accounting requirements assuming that the interest rate benchmark on which the hedged risk or hedged cash flows of the hedged item or cash flows of the hedging instrument are based is not altered as a result of the IBOR reform. The proposed exceptions apply only to the hedge accounting requirements and the Amendments do not provide relief from any other consequences arising from interest rate benchmark reform.
The Amendments are limited in scope. If a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified by the Amendments, then discontinuation of hedge accounting is still required. The Amendments are mandatory to all hedging relationships to which the exceptions are applicable.
The amendments have an effective date of annual periods beginning on or after 1 January 2020. The amendments would be applied retrospectively to those hedging relationships that existed at the beginning of the reporting period in which the entity first applies the Amendments and to the gain or loss recognised in other comprehensive income that existed at the beginning of the reporting period in which an entity first applies the Amendments (i.e. even if the reporting period is not an annual period).
Definition of a Business On 22 October 2018, the IASB issued the amendments to its definition of a business. (amendments to IFRS 3 Business Combinations) The Amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. They also clarify that a set of activities and assets can qualify as a business without including all of the inputs and processes needed to create outputs, or including the outputs themselves, by replacing the term ‘ability to create outputs’ with ‘ability to contribute to the creation of outputs’.
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It is no longer necessary to assess whether market participants are capable of replacing any missing inputs or processes (for example by integrating the acquired activities and assets) and continuing to produce outputs. The Amendments focus on whether acquired inputs and acquired substantive processes, together, significantly contribute to the ability to create outputs.
The Amendments shall be applied to transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020, with earlier application permitted. If entities apply the Amendments earlier, they shall disclose that fact.
COVID-19-Related Rent In May 2020, the International Accounting Standards Board (Board) issued COVID-19- Related Rent Concessions, which Concessions amended IFRS 16 Leases. Amendment to IFRS 16 If certain conditions are met, the Amendment would permit lessees, as a practical expedient, not to assess whether particular COVID-19-related rent concessions are lease modifications. Instead, lessees that apply the practical expedient would account for those rent concessions as if they were not lease modifications, so that, for example, the amount of rent forgiven on or before 30 June 2021 is taken to income the same year that the concession is granted, instead of being allocated over the duration of the contract as would be the case were the practical expedient not allowed.
The Amendment shall be applied for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorised for publication on 28 May 2020.
The above standards, amendments and interpretations had no impact on the financial statements.
STANDARDS, AMENDMENTS AND INTERPRETATIONS OF MANDATORY APPLICATION ON OR AFTER 1 JANUARY 2021
287
Amendment Effective date Standards and amendments endorsed by the European Union which Semapa has opted not to apply early
COVID-19-Related Rent In May 2020, the International Accounting Standards Board (Board) issued COVID-19- Related 1 January 2022 Concessions Rent Concessions, which amended IFRS 16 Leases. Amendment to IFRS 16 If certain conditions are met, the Amendment would permit lessees, as a practical expedient, not to assess whether particular COVID-19-related rent concessions are lease modifications. Instead, lessees that apply the practical expedient would account for those rent concessions as if they were not lease modifications, so that, for example, the amount of rent forgiven on or before 30 June 2021 is taken to income the same year that the concession is granted, instead of being allocated over the duration of the contract as would be the case were the practical expedient not allowed.
The Amendment shall be applied for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorised for publication on 28 May 2020.
Interest Rate In August 2020, the IASB issued Interest Rate Benchmark Reform—Phase 2, which amends IFRS 9 1 January 2021 Benchmark Reform – Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Phase 2 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases. (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 The objective of the Amendments is to assist entities with providing useful information to users and IFRS 16) of financial statements and to support preparers in applying IFRS Standards when changes are made to contractual cash flows or hedging relationships, as a result of the transition from an IBOR benchmark rate to alternative benchmark rates, in the context of the ongoing risk-free rate reform (‘IBOR reform’).
The Amendments are the results of the second phase of the IASB project that deals with the accounting implications of the IBOR reform, which originated the Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) issued by the IASB on 26 September 2019. They complement the first phase of the project which dealt with pre-replacement accounting implications of the IBOR reform and which have been issued by the IASB in 2019. The Amendments shall be applied retrospectively for annual periods beginning on or after 1 January 2021, with earlier application permitted.
Extension of the IASB has issued Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to 1 January 2021 Temporary Exemption IFRS 4) ('the Amendments') on 25 June 2020. from Applying IFRS 9 The objective of the Amendments is to extend the expiry date of the temporary exemption from (amendments to IFRS 4) applying IFRS 9 by two years (i.e. from 2021 to 2023) in order to align the effective dates of IFRS 9 Financial Instruments with IFRS 17 Insurance Contracts.
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Amendment Effective date Standards and amendments not yet endorsed by the European Union Clarification IASB issued on 23 January 2020 an amendment to IAS 1 – Presentation of Financial 1 January 2022 requirements for Statements to clarify how to classify debt and other liabilities as current and non- current. classifying liabilities as current or non- current The amendments are intended to promote consistency in the application of requirements (amendments to IAS 1 to help companies determine whether, in the statement of financial position, debt or other – Presentation of liabilities with an uncertain settlement date should be classified as current (to be settled or Financial Statements) potentially settled within one year) or non- current. Changes include explanations on the debt classification requirements that a company can settle by converting into equity.
This amendment is effective for periods starting on 1 January 2022.
Reference to the In May 2020 the IASB issued Reference to the Conceptual Framework, which made 1 January 2022 Conceptual Framework amendments to IFRS 3 Business Combinations. (Amendments to IFRS 3) The amendments updated IFRS 3 by replacing a reference to an old version of the Board’s Conceptual Framework for Financial Reporting with a reference to the latest version, which was issued in March 2018.
The Amendments shall be applied to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018.
Property, Plant and In May 2020, the IASB issued Property, Plant and Equipment—Proceeds before Intended 1 January 2022 Equipment – Proceeds Use, which made amendments to IAS 16 Property, Plant and Equipment. before Intended Use, Amendments to IAS 16 The Amendments would prohibit deducting from the cost of an item of property, plant and Property, Plant and equipment any proceeds from selling items produced while bringing that asset to the Equipment location and condition necessary for it to be capable of operating in a manner intended by management. Instead, an entity would recognise those sales proceeds in profit or loss.
The Amendments shall be applied retrospectively for annual periods beginning on or after 1 January 2022, with earlier application permitted.
Onerous Contracts - In May 2020, the IASB issued Onerous Contracts—Cost of Fulfilling a Contract, which made 1 January 2022 Cost of Fulfilling a amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Contract The objective of the Amendments is to clarify the requirements of IAS 37 on onerous contracts regarding the assessment of whether, in a contract, the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
The Amendments shall be applied for annual periods beginning on or after 1 January 2022, with earlier application permitted.
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Annual On 14 May 2020, the IASB issued Annual Improvements to IFRS Standards 2018– 1 January 2022 Improvements to 2020 containing the following amendments to IFRSs: IFRS Standards 2018 – 2020 (a) permit an entity that is a subsidiary, associate or joint venture, who becomes a first-time adopter later than its parent and elects to apply paragraph D16(a) of IFRS 1 First-time Adoption of International Financial Reporting Standards, to measure the cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRSs; (b) clarify that the reference to fees in the 10 per cent test includes only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf;
(c) remove the potential confusion regarding the treatment of lease incentives applying IFRS 16 Leases as was illustrated in Illustrative Example 13 accompanying IFRS 16; and
(d) remove the requirement in paragraph 22 of IAS 41 Agriculture for entities to exclude cash flows for taxation when measuring fair value applying IAS 41.
The Amendments shall be applied for annual periods beginning on or after 1 January 2022, with earlier application permitted.
IFRS 17 – Insurance The IASB issued on 18 May 2017 a standard that superseded IFRS 4 and completely 1 January 2023 Contracts reformed the treatment of insurance contracts. The standard introduces significant changes to the way in which the performance of insurance contracts is measured and presented with various impacts also at the level of the financial position. The standard expected to be effective for annual periods beginning on or after 1 January 2023.
1.6 MAIN ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the Board of Directors to use of estimates and judgements that affect the amounts of income, expenses, assets, liabilities and disclosures at the date of the financial position. To that end, the Board’s estimates and judgements are based on:
(i) the best information and knowledge of current events and in certain cases on the reports of independent experts; and
(ii) the actions that the Company considers it may have to take in the future.
On the date on which the operations are realised, the outcome could differ from those estimates.
MAIN ESTIMATES AND JUDGEMENTS
The estimates and assumptions which present a significant risk of generating a material adjustment to the carrying amount of assets and liabilities in the following financial year are presented below:
Estimates and judgements Notes Recoverable amount from investments in subsidiaries 10.1 – Investments in subsidiaries Income tax 6.1 – Income tax for the period 6.2 – Deferred taxes Actuarial assumptions 7.2 – Employee benefits Recognition of provisions 9.1 – Provisions
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2 OPERATIONAL PERFORMANCE
2.1 REVENUE
Semapa's revenue derives from the Group's centralised management activities, corresponding to services rendered by the Company to its subsidiaries in the areas of strategic planning, legal, financial, accounting and tax advisory, information systems and talent management, among others. In providing services to Group companies, Semapa incurs essentially in payroll costs and contracting specialised services (Note 2.3). Revenue is recognised in accordance with IFRS 15 on a monthly basis for services rendered on a regular basis over the contractual period. Revenue is presented by business lines of subsidiaries and by geographic area, based on the country of destination of the services rendered by the Company.
REVENUE BY BUSINESS LINE OF SUBSIDIARIES, BY GEOGRAPHIC AREA AND BY RECOGNITION PATTERN
Cement and Total Total 2020 Pulp and paper Environment derivatives Amount % Portugal 8,718,731 4,225,120 298,912 13,242,763 100% 8,718,731 4,225,120 298,912 13,242,763 100% Measurement standard Over time 8,718,731 4,225,120 298,912 13,242,763 100%
Cement and Total Total 2019 Pulp and paper Environment derivatives Amount % Portugal 12,811,123 4,630,057 305,149 17,746,329 100% 12,811,123 4,630,057 305,149 17,746,329 100% Measurement standard Over time 12,811,123 4,630,057 305,149 17,746,329 100%
2.2 OTHER OPERATING INCOME
As of 31 December 2020 and 2019, Other operating income is detailed as follows:
Amounts in Euro 2020 2019 Gains on disposal of non-current assets - 94 Gains from changes in lease agreements 45,249 - Other operating income 1 - 45,250 94
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2.3 OTHER OPERATING EXPENSES
As of 31 December 2020 and 2019, Other operating expenses is detailed as follows:
Amounts in Euro 2020 2019
Supplies and services Specialised services - related parties 3,203,599 3,803,856 Specialised services - other 1,571,371 3,880,633 Travel and accommodation 131,324 399,264 Energy and fluids 59,458 100,215 Materials 41,247 53,669 Related Estate expenditure - related parties (Note 10.2) 774,864 625,499 Other 215,154 249,598 5,997,017 9,112,734
Payroll costs (Note 7.1) 6,623,726 7,759,809
Other operating expenses Taxes 226,821 247,260 Donations 154,525 57,588 Membership fees 21,018 45,768 Non-competition agreements - 600,000 Other expenses 103,975 25,042 506,339 975,658
Total operating expenses 13,127,082 17,848,201
In 2020, short-term lease payments amounted to Euro 680,424 (2019: Euro 653,668) and low-value asset lease payments amounted to Euro 10,106 (2019: Euro 14,604).
INVOICED FEES REGARDING STATUTORY AUDIT AND AUDIT SERVICES
In the year ended 31 December 2020 and 2019, the amount of fees invoiced, as well as the related expenses for the period in respect of statutory audit and audit services were as follows:
2020 2019 Amounts in Euro Expenses in Expenses in Invoiced fees Invoiced fees the period the period KPMG (SROC) and other entities belonging to the same network Statutory audit and audit services 46,772 49,323 39,605 32,209 Other reliability assurance services 15,000 16,500 1,500 1,500 61,772 65,823 41,105 33,709
The services indicated as Other reliability assurance services relate essentially to the issue of reports on financial information.
The Board of Directors believes there are adequate procedures safeguarding the independence of auditors, through the Audit Board process analysis of the work proposed and careful definition of the work to be performed by the auditors.
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3 INVESTMENTS
3.1 PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment includes Buildings and other constructions, essentially consisting of work on properties owned by third parties, Administrative equipment, essentially furniture and computer equipment, and Other property, plant and equipment.
Recognition Property, plant and equipment are recorded at acquisition cost less accumulated depreciation and impairment losses. and initial measurement
Depreciation and The straight-line method is used from the moment the asset is available for use, using the rates that best reflect its impairment estimated useful life.
Buildings and other constructions 8 – 10 Average estimated useful life (years): Administrative equipment 3 – 10 Other tangible assets 8
Semapa does not apply residual values to its assets. The respective useful lives are reviewed and adjusted, if necessary, at the Statement of financial position date. When the carrying amount of the asset exceeds its realisable value, the asset is written down to the estimated recoverable amount, and an impairment charge is booked (Note 3.3).
Custos Major maintenance expenses are considered a component of the acquisition cost of property, plant and equipment and subsequentes are fully depreciated throughout the estimated useful life.
Other expenses with repairs and maintenance are recognised as an expense in the period in which they are incurred.
Abates e alienações Gains or losses arising from write-offs or disposals are determined by the difference between the proceeds from the disposals when applicable less transaction costs and the carrying amount of the asset, and are recognised in the income statement as Other operating income (Note 2.2) or Other operating expenses (Note 2.3).
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MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT
Buildings and Equipment and Assets under other Total other assets construction Amounts in Euro constructions Gross amount Balance as of 1 January 2019 1,875,484 1,266,664 455,840 3,597,988 Acquisitions - 43,901 297,005 340,906 Disposals - (2,262) - (2,262) Settlements, transfers and write-offs 613,856 36,697 (650,553) - Balance as of 31 December 2019 2,489,340 1,345,000 102,292 3,936,632 Acquisitions - 34,590 - 34,590 Balance as of 31 December 2020 2,489,340 1,379,590 102,292 3,971,222 Accumulated depreciation and impairment losses Balance as of 1 January 2019 (1,625,222) (1,147,701) (102,292) (2,875,215) Depreciation for the period (Note 3.3) (142,814) (56,093) - (198,907) Disposals - 2,262 - 2,262 Balance as of 31 December 2019 (1,768,036) (1,201,532) (102,292) (3,071,860) Depreciation for the period (Note 3.3) (167,689) (57,684) - (225,373) Balance as of 31 December 2020 (1,935,725) (1,259,216) (102,292) (3,297,233)
Net book value as of 1 January 2019 250,262 118,963 353,548 722,773 Net book value as of 31 December 2019 721,304 143,468 - 864,772 Net book value as of 31 December 2020 553,615 120,374 - 673,989
3.2 RIGHT-OF-USE ASSETS
At the date the lease enters into force, the Company recognises an asset under right of use at its cost, which corresponds to the initial amount of the lease liability adjusted for: i) any prepayments; ii) lease incentives received; and iii) initial direct costs incurred. To the right-of-use asset, the estimate of removing and/or restoring the underlying asset and/or its location may be added, when required by the lease agreement. The right-of-use asset is subsequently depreciated using the straight-line method, from the start date until the lower between the end of the asset's useful life and the lease term. Additionally, the right-of-use asset is reduced of impairment losses, if any, and adjusted for any remeasurement of the lease liability. The useful life considered for each class of assets under right of use is equal to the useful life of Property, plant and equipment (Note 3.1) in the same class when there is a call option and the Company expects to exercise it. SHORT-TERM LEASES AND LOW-VALUE ASSET LEASES The Company recognises payments for leases of 12 months or less and for leases of assets whose individual acquisition value is less than Euro 5,000 directly as operating expenses of the year (Note 2.3), on a straight-line basis.
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MOVEMENTS IN RIGHT-OF-USE ASSETS
Equipment and Amounts in Euro Total other assets
Gross amount Balance as of 1 January 2019 357,765 357,765 Acquisitions 42,382 42,382 Settlements, transfers and write-offs (27,799) (27,799) Balance as of 31 December 2019 372,348 372,348 Acquisitions 86,611 86,611 Settlements, transfers and write-offs (113,442) (113,442) Balance as of 31 December 2020 345,517 345,517 Accumulated amortisation, depreciation and impairment losses Balance as of 1 January 2019 - - Depreciation (150,931) (150,931) Settlements, transfers and write-offs 27,799 27,799 Balance as of 31 December 2019 (123,132) (123,132) Depreciation (161,355) (161,355) Settlements, transfers and write-offs 113,442 113,442 Balance as of 31 December 2020 (171,045) (171,045)
Net book value as of 31 December 2019 249,216 249,216 Net book value as of 31 December 2020 174,472 174,472
The company's right-of-use assets correspond essentially to vehicles.
3.3 DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES
Amounts in Euro 2020 2019 Depreciation of property, plant and equipment (Note 3.1) 225,373 198,907 Depreciation of right-of-use assets for the period (Note 3.2) 161,355 150,931 386,728 349,838
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4 WORKING CAPITAL
4.1 RECEIVABLES AND OTHER CURRENT ASSETS
RECEIVABLES FROM RELATED PARTIES AND OTHER DEBTORS
Classification Receivables from related parties result essentially from services rendered to the Company's subsidiaries (Note 2.1), from receivables from subsidiaries within the scope of tax consolidation (Note 6.1) and from loans granted to subsidiaries. The business model followed is "hold to collect". Balances from other debtors are typically from the "hold to collect" model.
Initial measurement At fair value
Subsequent At amortised cost, net of impairment losses. measurement Impairment Impairment losses are recorded on the basis of the general estimated credit loss model of IFRS 9.
As of 31 December 2020 and 2019, Receivables and other current assets were detailed as follows:
31-12-2020 31-12-2019 Amounts in Euro Non-current Current Total Non-current Current Total Receivables - current operations with related - 5,685,800 5,685,800 - 7,033,685 7,033,685 parties (Note 10.2) Share of profit / (losses) - related - - 69,336,179 69,336,179 parties (Note 10.2) Tax consolidation - related parties (Note 10.2) - 7,416,347 7,416,347 - 7,694,383 7,694,383 Accrued income - - - - 53,739 53,739 Deferred expenses - 112,575 112,575 - 97,588 97,588 Other 17,782 223,422 241,204 13,553 61,586 75,139 17,782 13,438,144 13,455,926 13,553 84,277,160 84,290,713
As of 31 December 2019 the amount receivable of Euro 69,336,179 relates to results attributed by the subsidiaries The Navigator Company, S.A: and Seinpar Investments, B.V. and whose distribution took place in January 2020.
The amounts above are net of accumulated impairment losses. Analysis of impairment for receivables and other current assets is presented in Note 8.1.4 - Credit risk.
4.2 PAYABLES AND OTHER CURRENT LIABILITIES
FINANCIAL LIABILITIES AT AMORTISED COST
Initial measurement At fair value, net of transaction costs incurred. Subsequent At amortised cost, using the effective interest rate method. measurement The difference between the repayment amount and the initial measurement amount is recognised in the income statement over the debt period under "Interest on other financial liabilities at amortised cost" (Note 5.10).
296
ANNUAL REPORT 2020
As of 31 December 2020 and 2019, Payables and other current liabilities were detailed as follows:
Amounts in Euro 31-12-2020 31-12-2019 Payables - current operations with related parties (Note 10.2) 735,210 15,278 Tax consolidation - related parties (Note 10.2) 6,438,701 2,019,818 Trade payables - current account 63,548 64,426 Trade payables - investments 29,825 23,974 State 510,984 1,159,626 Accrued expenses 6,956,735 7,975,676 Deferred income - 2,748 Other creditors 44,163 32,807 14,779,166 11,294,353
The item State is detailed as follows:
Amounts in Euro 31-12-2020 31-12-2019 Personal income tax withhold (IRS) 147,590 110,322 Value Added Tax 280,097 952,883 Social Security contributions 82,901 96,070 Other taxes 396 351 510,984 1,159,626
As of 31 December 2020 and 2019, there were no arrears debts to the State.
Accrued costs are detailed as follows:
Amounts in Euro 31-12-2020 31-12-2019 Payroll costs 3,086,132 3,503,866 Interest payable 1,640,600 1,132,752 Bank services 215,392 262,573 Supplies and services 1,999,884 3,058,166 Other 14,727 18,319 6,956,735 7,975,676
297 5 CAPITAL STRUCTURE
5.1 CAPITAL MANAGEMENT
CAPITAL MANAGEMENT POLICY
For capital management purposes, the Company defines capital as including equity and net debt.
The Company manages the Group's corporate debt, with the main holdings of each business line having an autonomous Treasury management.
The Company's objectives regarding capital management are:
(i) To safeguard its ability to continue in business and thus provide returns for shareholders and benefits for its remaining stakeholders;
(ii) To keep a solid capital structure to support the growth of the Group's business; and
(iii) To maintain an optimal capital structure that enables it to reduce the cost of capital.
In order to maintain or adjust its capital structure, the Company can adjust the amount of dividends payable to its shareholders, return capital to its shareholders, issue new shares or sell assets to lower its borrowings.
5.2 SHARE CAPITAL AND THEASURY SHARES
Semapa's share capital is fully subscribed and paid up, represented by shares with no nominal value. Costs directly attributable to the issue of new shares or other equity instruments are reported as a deduction, net of taxes, from the proceeds of the issue. The cost directly attributable to the issue of new shares options for a business acquisition are included in the acquisition cost, as part of the purchase price. TREASURY SHARES Recognition At acquisition value, as a reduction of equity.
Disposal of treasury When shares are subsequently sold or repurchased, any proceeds, net of the directly attributable shares transaction costs and taxes, is reflected in the shareholders’ equity of the company’s shareholders, under Other reserves (Note 5.5).
Extinction of treasury The extinction of treasury shares is reflected in the financial statements, as a reduction of share shares capital and in the caption Treasury shares at its nominal and acquisition cost, respectively. The differential between those amounts is recorded in Other reserves.
298 ANNUAL REPORT 2020
SEMAPA'S SHAREHOLDERS
31-12-2020 31-12-2019 Description No. of shares % No. of shares % Shares without nominal value Cimo - Gestão de Participações, SGPS, S.A. 38,959,431 47.94 38,959,431 47.94 Sodim, SGPS, S.A. 19,478,903 23.97 15,252,726 18.77 Bestinver Gestión, SGIIC, S.A. 4,032,051 4.96 4,032,051 4.96 Cimigest, SGPS, S.A. - - 3,185,019 3.92 Norges Bank (the Central Bank of Norway) 1,699,613 2.09 1,699,613 2.09 Sociedade Agrícola da Quinta da Vialonga, S.A. 625,199 0.77 625,199 0.77 Treasury Shares 1,400,627 1.72 823,337 1.01 Other shareholders with less than 2% interest 15,074,176 18.55 16,692,624 20.54 81,270,000 100.00 81,270,000 100.00
TREASURY SHARES – MOVEMENTS
2020 2019 Book value No. of No. of shares Book value (Euro) (Euro) shares
Treasury shares held at the beginning of the period 8,922,980 640,666 6,740,954 823,337
Acquisition of shares by Semapa 7,023,383 182,671 2,182,026 577,290 Treasury shares held at the end of the period 1,400,627 15,946,363 823,337 8,922,980
5.3 EARNINGS PER SHARE
The basic earnings per share are determined based on the division of profits or losses attributable to the ordinary shareholders of the Company by the weighted average number of common shares outstanding during the period. For the purpose of calculating diluted earnings per share, the Company adjusts the profits or losses attributable to ordinary shareholders, as well as the weighted average number of outstanding shares for the purposes of all potential dilutive common shares.
Amounts in Euro 2020 2019 Profit attributable to the Company's shareholders 106,588,079 124,053,720
Total number of issues shared 81,270,000 81,270,000 Average treasury shares in the portfolio (1,400,627) (726,322) Weighted average number of shares 79,925,565 80,543,678
Basic earnings per share 1.334 1.540 Diluted earnings per share 1.334 1.540
299 5.4 DIVIDENDS
COMPANY DIVIDEND DISTRIBUTION POLICY
The Company favours a dividend policy that minimises the volatility of the annual amount returned to shareholders per share (Dividend Policy).
Dividends per share presented are calculated based on the number of shares outstanding on the grant date.
The distribution of dividends to shareholders is recognised as a liability in the Company’s financial statements in the year in which the dividends are approved by the shareholders and up until the time of their payment.
DIVIDENDS DISTRIBUTED IN THE PERIOD
Amount Dividends per Amounts in Euro Date allocated share Dividends distributed in 2020
Approval at the Semapa Annual Shareholders' Meeting of the payment of dividends relating 29 May 2020 9,983,672 0.125 to the 2019 net profit on an individual basis in accordance with IFRS
Dividends distributed in 2019
Approval at the Semapa Annual Shareholders' Meeting of the payment of dividends relating 16 April 2019 41,267,948 0.512 to the 2018 net profit on an individual basis in accordance with IFRS
5.5 RESERVES AND RETAINED EARNINGS
RESERVES BY APPLYING THE EQUITY METHOD Corresponds to the accumulated change in changes in equity in the Company's subsidiaries whose investment is measured by the equity method (Note 10.1). In accordance with the Portuguese Commercial Companies Code, these reserves are not distributable. FAIR VALUE RESERVES Corresponds to the accumulated change in fair value of financial investments measured at fair value through other comprehensive income (Note 8.2), net of deferred taxes. The change in fair value of financial investments recorded under this item is not recycled to profit and loss. LEGAL RESERVES The Portuguese Commercial Company Law prescribes that at least 5% of annual net profit must be transferred to the legal reserve, until this is equal to at least 20% of the share capital. This reserve cannot be distributed, unless in the event of the Company’s winding up. However, it may be used to absorb losses after the other reserves have been exhausted or it can be incorporated into the issued capital. The legal reserve is constituted by its maximum amount in the periods presented. OTHER RESERVES This caption corresponds to reserves available for distribution to shareholders that were constituted through the appropriation of prior year’s earnings and other movements. The part of the balance corresponding to the acquisition value of treasury shares held is not distributable (Note 5.2).
Amounts in Euro 31-12-2020 31-12-2019 Reserves by applying the Equity Method (425,335,543) (323,706,762) Legal reserves 16,695,625 16,695,625 Other reserves 1,098,936,466 984,866,417 Retained earnings 86,613,994 86,613,994 Reserves and retained earnings 776,910,542 764,469,274
300 ANNUAL REPORT 2020
RESERVES BY APPLYING THE EQUITY METHOD – MOVEMENTS
Amounts in Euro 2020 2019 Balance at the beginning of the period (323,706,762) (313,619,142) Other comprehensive income Items that may be reclassified to the income statement Fair value of financial instruments (284,699) (329,893) Currency translation reserve (96,067,745) 6,370,405 (96,352,444) 6,040,512 Items that may not be reclassified to the income statement Actuarial gains and losses (6,598,862) (8,183,944) Exchange differences in equity instruments (607,251) 13,094 Impact of hyperinflationary economies 1,929,778 - (5,276,335) (8,170,850) Transfer to retained earnings due to liquidation of subsidiaries Intra-group acquisition differences of equity shares - (7,957,280) Other movements (2) (2) (2) (7,957,282) Balance at the end of the period (425,335,543) (323,706,762)
RESERVES BY APPLYING THE EQUITY METHOD – BY SUBSIDIARY
Amounts in Euro 31-12-2020 31-12-2019 ETSA Investimentos, SGPS, S.A. (9,227,390) (9,227,390) Secil - Companhia Geral de Cal e Cimento, S.A. (282,404,439) (189,285,061) Seinpar Investments, B.V. - (42,971,424) Semapa Inversiones, S.L. (36,764,962) (36,764,962) Semapa Next, S.A. (601,280) 5,971 The Navigator Company, S.A. (96,337,472) (45,463,896) (425,335,543) (323,706,762)
5.6 INTEREST-BEARING LIABILITIES
Interest-bearing liabilities includes Bonds, Commercial Paper, bank loans and other financing. Initial measurement At fair value, net of transaction costs incurred.
Subsequent At amortised cost, using the effective interest rate method. The difference between the measurement repayment amount and the initial measurement amount is recognised in the Separate Income Statement over the debt period under "Interest expenses on other loans" in Note 5.10 - Net Financial Results, using the effective interest rate method.
Fair value The carrying amount of short-term interest-bearing liabilities or loans contracted at variable interest rates are close to their fair value. The fair value of interest-bearing liabilities that are remunerated at a fixed rate is disclosed in Note 8.3 - Financial assets and liabilities.
Presentation In current liabilities, unless the Company has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date.
COMMERCIAL PAPER The Company has several commercial paper programmes negotiated; agreements with which issues with contractual maturity below one year and with a revolving nature are often made. Where the Company expects to extend these loans (roll over), it classifies them as non-current liabilities.
301 As of 31 December 2020 and 2019, interest-bearing liabilities are detailed as follows:
31-12-2020 31-12-2019 Amounts in Euro Non-current Current Total Non-current Current Total Bond loans 100,000,000 - 100,000,000 100,000,000 80,000,000 180,000,000 Commercial paper 85,000,000 50,000,000 135,000,000 144,250,000 10,000,000 154,250,000 Bank loans 29,000,000 10,500,000 39,500,000 39,500,000 10,630,000 50,130,000 Loan-related charges (1,008,132) - (1,008,132) (1,954,953) - (1,954,953) Debt securities and bank debt 212,991,868 60,500,000 273,491,868 281,795,047 100,630,000 382,425,047
Short-term shareholder - - - - 9,400,521 9,400,521 loans (Note 10.2)
Short-term subsidiary loans (Note 10.2) - 117,895 117,895 - 125,560 125,560
Other interest-bearing liabilities - 117,895 117,895 - 9,526,081 9,526,081
Total interest-bearing liabilities 212,991,868 60,617,895 273,609,763 281,795,047 110,156,081 391,951,128
Analysis of interest-bearing liabilities by maturity is presented in Note 8.1.3 - Liquidity risk.
BOND LOANS
Amounts in Euro 31-12-2020 Quotation 31-12-2019 Quotation Maturity Interest rate Variable rate
Semapa 2014 / 2019 - April 2019 indexed to - Euribor Variable rate November Semapa 2014 / 2020 80,000,000 102.50 indexed to - - 2020 Euribor
Semapa 2016 / 2023 100,000,000 June 2023 Fixed rate 100,000,000 100,000,000 180,000,000
COMMERCIAL PAPER
31 DECEMBER 2020
Amount used Contracted amount Non-current Current Total Maturity date Interest rate
90,000,000 - - - November 2020 Variable rate indexed to Euribor
40,000,000 - 40,000,000 40,000,000 August 2021 Variable rate indexed to Euribor
100,000,000 - 10,000,000 10,000,000 September 2021 Variable rate indexed to Euribor
25,000,000 25,000,000 - 25,000,000 February 2022 Fixed rate
50,000,000 20,000,000 - 20,000,000 October 2023 Fixed rate
40,000,000 40,000,000 - 40,000,000 May 2024 Variable rate indexed to Euribor
80,000,000 - - - July 2026 Variable rate indexed to Euribor 425,000,000 85,000,000 50,000,000 135,000,000
302 ANNUAL REPORT 2020
31 DECEMBER 2019
Amount used Contracted amount Non-current Current Total Maturity date Interest rate
90,000,000 - - - November 2020 Variable rate indexed to Euribor
40,000,000 - - - August 2021 Variable rate indexed to Euribor
100,000,000 89,250,000 - 89,250,000 September 2021 Variable rate indexed to Euribor
25,000,000 25,000,000 - 25,000,000 February 2022 Fixed rate
50,000,000 30,000,000 10,000,000 40,000,000 October 2023 Fixed rate
40,000,000 - - - May 2024 Variable rate indexed to Euribor
80,000,000 - - - July 2026 Variable rate indexed to Euribor 425,000,000 144,250,000 10,000,000 154,250,000
BANK LOANS
31-12-2020 31-12-2019 Index Non-current Current Total Non-current Current Total Fixed rate 24,000,000 8,000,000 32,000,000 32,000,000 8,130,000 40,130,000 Variable rate 5,000,000 2,500,000 7,500,000 7,500,000 2,500,000 10,000,000 29,000,000 10,500,000 39,500,000 39,500,000 10,630,000 50,130,000
FINANCIAL COVENANTS IN FORCE
Given the contractual limits, in 2020 and 2019 the Company is in compliance with the covenants negotiated.
5.7 LEASE LIABILITIES
Interest-bearing liabilities includes Bonds, Commercial Paper, bank loans and other financing. Initial measurement At the start date of the lease, the Company recognises lease liabilities measured at the present
value of future lease payments, which include fixed payments less any lease incentives, variable lease payments, and amounts expected to be paid as residual value. Lease payments also include the exercise price of call or renewal options reasonably certain to be exercised by the Company or lease termination penalty payments if the lease term reflects the Company's option to terminate the agreement. In calculating the present value of future lease payments, the Company determines the incremental financing rate if the implied interest rate on the lease transaction is not easily determinable.
Subsequent Subsequently, the value of the lease liabilities is increased by the interest amount (Note 5.10 Net measurement Financial Results) and decreased by the lease payments. Presentation In current liabilities, unless the Company has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date.
303
31-12-2020 31-12-2019 Amounts in Euro Non-current Current Total Non-current Current Total Vehicles 92,610 84,763 177,373 146,504 105,559 252,063 92,610 84,763 177,373 146,504 105,559 252,063
Analysis of interest-bearing liabilities by maturity is presented in Note 8.1.3 - Liquidity risk.
5.8 CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash, bank accounts and other short-term investments with an initial maturity of up to 3 months, which can be mobilised immediately without any significant risk in value fluctuations. For cash flow statement purposes, this caption also includes bank overdrafts, which are presented in the Statement of financial position as a current liability, under the caption Interest-bearing liabilities (Note 5.7).
Amounts in Euro 31-12-2020 31-12-2019 Cash 385 4,377 Bank deposits available on demand 10,051,143 80,643 Cash and cash equivalents in the cash flow statement 10,051,528 85,020
5.9 CASH FLOWS FROM FINANCING ACTIVITIES MOVEMENTS IN LIABILITIES FOR FINANCING ACTIVITIES
Cash flows Transactions not affecting cash and cash equivalents from Amounts in Euro 01-01-2020 31-12-2020 financing Lease Amortisation Accrued Other activities recognition costs interest operations Interest-bearing liabilities (Note 5.6) Bond loans 180,000,000 (80,000,000) - - - - 100,000,000 Commercial paper 154,250,000 (19,250,000) - - - - 135,000,000 Bank loans 50,130,000 (10,630,000) - - - - 39,500,000 Charges with the issue of loans (1,954,953) - - (1,041,834) 1,988,655 - (1,008,132) Other interest-bearing liabilities 9,526,081 (9,411,828) - - 3,642 - 117,895 Lease liabilities 252,063 (116,052) 86,611 - - (45,249) 177,373 (Notes 1.5.1 and 5.7) Total 392,203,191 (119,407,880) 86,611 (1,041,834) 1,992,297 (45,249) 273,787,136
Cash flows Transactions not affecting cash and cash equivalents from Amounts in Amounts in Euro 01-01-2020 financing Lease Amortisation Accrued Other Euro activities recognition costs interest operations Interest-bearing liabilities (Note 5.6) Bond loans 330,000,000 (150,000,000) - - - - 180,000,000 Commercial paper 90,300,000 63,950,000 - - - - 154,250,000 Bank loans 50,000,000 130,000 - - - - 50,130,000 Charges with the issue of loans (2,016,459) - - (1,568,890) 1,630,396 - (1,954,953) Other interest-bearing liabilities 4,409,411 5,108,382 - - 8,288 - 9,526,081 Lease liabilities 357,765 (148,084) 42,382 - - - 252,063 (Notes 1.5.1 and 5.7) Total 473,050,717 (80,959,702) 42,382 (1,568,890) 1,638,684 - 392,203,191
304 ANNUAL REPORT 2020
5.10 NET FINANCIAL RESULTS
The Company classifies as "Financial income" the income and gains resulting from treasury management activities such as: i) interest obtained from the application of cash surplus; and ii) changes in the fair value of financial instruments measured at fair value through profit or loss.
During 2020 and 2019 net financial results are detailed as follows:
Amounts in Euro 2020 2019 Interest on debt securities and bank debt (7,942,395) (8,478,370) Interest on other borrowings (4,802) (10,847) Commisions on loans and expenses with credit facilities (2,448,699) (2,428,867) Interest expense by applying the effective interest method (10,395,896) (10,918,084) Other fees and commissions - - Interest paid on lease liabilities (5,528) (7,665) Financial expenses related to the capital structure (10,401,424) (10,925,749) Unfavourable exchange differences (188) (2) Other financial expenses and losses - (1) Financial expenses and losses (10,401,612) (10,925,752)
Interest earned on financial assets at amortised cost 6,067 22,324 Favourable exchange differences - 63 Fair value gains from other financial investments 145,726 31,770 Other financial income and gains 159,973 1,010 Financial income and gains 311,766 55,167
Net financial results (10,089,846) (10,870,585)
305 6 INCOME TAX
6.1 INCOME TAX FOR THE PERIOD
Current income tax is calculated based on net profit, adjusted in conformity with tax legislation in force at the Statement of financial position date. According to the legislation in force, the gains and losses relating to investments in subsidiaries, associated companies and joint ventures, resulting from the application of the equity method are not relevant for tax purposes, being deducted from or added to, respectively, to the net profit of the period for the purpose of calculating taxable income. Dividends are considered, when determining the taxable income, in the year in which they are received, if the financial investments are held for less than one year or if they represent less than 10% of the share capital. TAX BUSINESS GROUP Semapa Group is subject to the Special Tax Regime for Groups of Companies (RETGS - Regime Especial de Tributação de Grupos de Sociedades), comprising companies in which the shareholding is equal to or more than 75% and which meet the conditions laid down in Article 69 and following of the Corporate Income Tax Code (IRC Code). Companies included within the tax business group, calculate and recognise corporate income tax (IRC) as though they were taxed on an individual basis. Liabilities are recognised as due to the dominant entity of the tax business Group, currently the Company, which is responsible for the overall clearance and payment of the corporate income tax. Where there are gains on the use of this regime, these are recorded in the dominant entity financial statements. In the periods presented, the tax business group comprises the Groups Secil and ETSA, as well as all the subsidiaries that meet the legal requirements of the Corporate Income Tax Code. The amounts the Company has receivable from or payable to other companies in the tax business group in respect of their liabilities are presented under Receivables and other current assets (Note 4.1) and Payables and other current liabilities (Note 4.2).
The Company recognises liabilities for additional settlements that may result from Portuguese Tax Authorities inspections. When the final result of these inspections is different from the amounts initially recorded, the differences will have an impact on income tax in the period when the final result is known. In Portugal, annual income statements are subject to review and possible adjustment by the tax authorities for a period of 4 years. However, if tax losses are presented they may be subject to review by the tax authorities for a bigger period. The Board of Directors considers that any corrections to those declarations as a result of reviews/inspections by the Portuguese Tax Authorities will not have a significant impact in the Separate Financial Statements as of 31 December 2020, although the years up to and including 2018 have already been reviewed. ADDITIONAL TAX LIABILITIES FOR UNCERTAIN TAX POSITIONS The amount of estimated assets and liabilities recorded on account of tax proceedings arises from an assessment made by the Company, at the date of the Statement of Financial Position, regarding potential differences of interpretation against the Portuguese Tax Authorities, considering the developments in tax matters. With respect to the measurement of uncertain tax positions, the Company takes into consideration the provisions of IFRIC 23 – “Uncertainty over income tax treatments”, namely the measurement of risks and uncertainties in defining the best estimate of expenditure required to settle the obligation, by weighting all possible results controlled by the Company and their related probabilities.
6.1.1 TAX AMOUNT RECOGNISED IN THE INCOME STATEMENT
Amounts in Euro 2020 2019 Current tax (3,532,730) 3,983,436 Deferred tax (Note 6.2) 298,915 462,249 (3,233,815) 4,445,685
306 ANNUAL REPORT 2020
NOMINAL TAX RATE
2020 2019 Portugal Income tax treatment 21.0% 21.0% Municipal surcharge 1.5% 1.5% 22.5% 22.5% State surcharge - on taxable income between Euro 1,500,000 and Euro 7,500,000 3.0% 3.0% State surcharge - on taxable income between Euro 7,500,000 and Euro 35,000,000 5.0% 5.0% State surcharge - on taxable income above Euro 35,000,000 9.0% 9.0%
RECONCILIATION OF THE EFFECTIVE INCOME TAX RATE FOR THE PERIOD
Amounts in Euro 2020 2019 Profit before tax 109,821,894 119,608,035 Expected tax at nominal rate (22.5%) 24,709,926 26,911,808 Tax resulting from the applicable rate 24,709,926 26,911,808 Differences (a) (26,994,184) (29,462,105) Tax for prior periods (1,086,888) (5,226,228) Additional tax liabilities 3,746,670 - Non-recoverable tax losses 1,985,344 2,088,048 Autonomous taxation 872,947 1,242,792 3,233,815 (4,445,685)
Effective tax rate 2.94% -3.72%
(a) This amount essentially refers to: 2020 2019 Effect of applying the equity method (Note 10.1) (120,137,537) (130,930,236) Gains / (losses) for tax purposes - 94 (Gains) / losses for accounting purposes - (94) Employee benefits (Note 7.2.1) 23,431 23,431 Employee benefits - pensions paid (Note 7.2.1) (130,514) (130,514) Other 270,470 94,631 (119,974,150) (130,942,688) Tax effect (22.5%) (26,994,184) (29,462,105)
6.1.2 TAX RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION
Amounts in Euro 31-12-2020 31-12-2019 Assets Corporate Income Tax 2,316,969 - 2,316,969 - Liabilities Corporate Income Tax 7,847,546 4,397,885 7,847,546 4,397,885
307 DETAIL OF CORPORATE INCOME TAX - IRC (NET)
Amounts in Euro 31-12-2020 31-12-2019 Income tax for the period (872,947) (1,242,792) Income tax for the period of subsidiaries (585,072) (53,210) Payments on account, Special payments and Additional payments on account 3,568,563 1,240,548 Withholding tax recoverable 21,173 25,421 Income tax recoverable from prior periods 185,252 185,252 Additional tax liabilities (7,847,546) (4,553,104) (5,530,577) (4,397,885)
ADDITIONAL TAX LIABILITY – LIABILITIES
Amounts in Euro 2020 2019 Balance at the beginning of the period 4,553,104 - Increases 3,746,670 - Amount recognised in the income statement (Note 6.1.1 - (gain) / loss) 3,746,670 - Transfers - 12,800,000 Charge-offs (452,228) (8,246,896) Balance at the end of the period 7,847,546 4,553,104
During 2020, Semapa reinforced the additional tax liability, in the amount of Euro 3,746,670, to cover potential effects resulting from tax inspections of prior periods. In addition, the tax corrections of prior periods, which became effective in 2020, led to charge-offs in the amount of Euro 452,228.
During the year ended 31 December 2019 and following a tax inspection of the first tax period of 2015, Semapa paid the amount of Euro 8,246,896, resulting from an additional income tax assessment. However, the Company had previously recognised an additional tax liability for its uncertain tax position and therefore used it in the period.
6.2 DEFERRED TAXES
Deferred tax is calculated on the basis of the financial position, on temporary differences between the carrying amounts of assets and liabilities and their respective tax base. The income tax rate expected to be in force in the period in which the temporary differences will reverse is used in calculating deferred tax. Deferred tax assets are recognised whenever there is a reasonable likelihood that future taxable profits will be generated against which they can be offset. Deferred tax assets are revised periodically and decreased, whenever it is likely that tax losses will not be used. Deferred taxes are recorded as an income or expense for the year, except where they result from amounts recorded directly under shareholders’ equity, situation in which deferred tax is also recorded under the same caption. Deferred tax liabilities are not recognised for taxable temporary differences relating to investments in subsidiaries to the extent that: i) the Company is able to control the timing of the reversal of the temporary difference; and ii) it is probable that the temporary difference will not reverse in the foreseeable future.
DEFERRED TAXES RECOGNISED RELATING TO UNUSED TAX LOSSES The Company records deferred tax liabilities on tax losses and tax benefits arising to subsidiaries that integrate the RETGS, reportable intra-group, whenever their future use by those subsidiaries is expected, on an individual basis.
308 ANNUAL REPORT 2020
MOVEMENTS IN DEFERRED TAXES
Income Statement As of 1 January As of 31 Amounts in Euro 2020 December 2020 Increases Decreases
Temporary differences originating deferred tax liabilities Inter-group tax losses carried forward - (21,532) - (21,532) Inter-group tax benefits carried forward (418,082) (131,805) 435,243 (114,644)
(418,082) (153,337) 435,243 (136,176) Deferred tax liabilities (418,082) (136,327) 435,243 (119,166)
Income Statement As of 1 January As of 31 Amounts in Euro 2019 December 2019 Increases Decreases
Temporary differences originating deferred tax liabilities Inter-group tax losses carried forward (445,450) - 445,450 - Inter-group tax benefits carried forward (786,787) (223,115) 591,820 (418,082)
(1,232,237) (223,115) 1,037,270 (418,082) Deferred tax liabilities (880,331) (223,115) 685,364 (418,082)
UNUSED TAX LOSSES OF SUBSIDIARIES WITHOUT DEFERRED TAXES RECOGNISED
31 December 2020 2028 Total 2025 2026 2027 Amounts in Euro onwards
Tax losses of the Semapa Tax Business Group (RETGS) 367,224,745 19,702,470 - 230,446,890 117,075,386 367,224,745 19,702,470 - 230,446,890 117,075,386
31 December 2020 2028 Total 2023 2025 2027 Amounts in Euro onwards
Tax losses of the Semapa Tax Business Group (RETGS) 384,957,308 37,435,032 230,446,890 117,075,386 - 384,957,308 230,446,890 117,075,386 -
As per Article 11(3) of Law 27-A/2020, which approves the Supplementary State Budget for 2020, the reckoning of the deadline for carrying forward tax losses effective on 1 January 2020 is suspended for two years.
309 7 PAYROLL
7.1 PAYROLL COSTS
SHORT-TERM EMPLOYEE BENEFITS ENTITLEMENTS – HOLIDAY AND HOLIDAY ALLOWANCE In accordance with current legislation, employees are entitled to 22 working days leave, annually, as well as to a month’s holiday allowance, entitlement to which is acquired in the year preceding its payment. BONUS According to the current Performance Management System (Sistema de Gestão de Desempenho), employees have the right to a bonus, based on annually defined objectives. The entitlement of this bonus is usually acquired in the year preceding its payment. These liabilities are recorded in the year in which the Employees acquire the respective right, irrespective of the date of payment, whilst the balance payable at the date of the Statement of financial position is shown under the caption Payables and other current liabilities. TERMINATION BENEFITS The benefits arising from termination of employment are recognised when the Company can no longer withdraw the offer of such benefits or in which the Company recognises the cost of restructuring under the provisions recording. Benefits due over 12 months after the end of the reporting period are discounted to their present value.
Amounts in Euro 2020 2019 Statutory bodies remuneration (Note 7.3) 3,872,242 4,365,272 Other remunerations 1,788,565 2,315,101 Post-employment benefits (Note 7.2.1) 23,431 23,431 Compensations (567) - Charges on remunerations 826,234 927,250 Other payroll costs 113,821 128,755 Payroll costs 6,623,726 7,759,809
Number of employees at the end of the period 24 27
7.2 EMPLOYEE BENEFITS
POST-EMPLOYMENT BENEFITS - DEFINED-BENEFIT PLAN The Company has assumed the commitment to make payments to their Directors in the form of complementary retirement pensions, having constituted a defined-benefit plan for this purpose. In the periods presented, the amount of the liability reflected in the statement of financial position under the item "Post- employment benefit liabilities" corresponds to Semapa's liability related to a single beneficiary, a retired employee, who did not join the revocation of the pension plan for the Company's directors, which occurred in December 2012. The Company has not set up funds relating to this liability. Actuarial deviations resulting from changes in the estimated liabilities, as a result of changes in the financial and demographic assumptions used and experience gains, are recorded directly in the Statement of comprehensive income, in retained earnings. The net interest corresponds to the application of the discount rate to the value of net responsibilities and is recognised under the caption Personnel costs. The gains and losses generated by a settlement of a defined-benefit plan are recognised in the income statement when the settlement occurs.
310 ANNUAL REPORT 2020
ACTUARIAL ASSUMPTIONS Liabilities relating to defined-benefit plans are calculated, based on actuarial assumptions. Changes to those assumptions can have a material impact on the previously mentioned liabilities.
As of 31 December 2020 and 2019, actuarial assumptions were as follows:
31-12-2020 31-12-2019 Social Security Benefits Formula Decree-Law no. 187/2007 of May 10 Mortality rate TV 88/90 TV 88/90 Disability rate EKV 80 EKV 80 Pension growth rate 1.00% 1.00% Technical interest rate 2.00% 2.00% Rate of return 2.00% 2.00% Wage growth rate 1.00% 1.00% Pension reversability rate 50.00% 50.00% Number of complement annual payments 12 12
7.2.1 PENSION LIABILITIES
2020 2019 Amounts in Euro No. Benef. Amount No. Benef. Amount Group liabilities for past services Retired employees 1 901,825 1 1,008,908 Unfunded pension liabilities 1 901,825 1 1,008,908
EVOLUTION OF PENSION LIABILITIES
Net interest Amounts in Euro Opening balance Payments Closing balance (Note 7.1)
2020 1,008,908 23,431 (130,514) 901,825 2019 1,115,990 23,431 (130,513) 1,008,908
7.3 REMUNERATION OF CORPORATE BODIES
The remuneration of corporate bodies, including the estimate for the management premium for the years ended 31 December 2020 and 2019, was as follows:
Amounts in Euro 2020 2019 Board of Directors Remunerations 2,554,597 2,793,262 Management premium 1,234,145 1,493,510 Audit Board and other statutory bodies 83,500 78,500 Total (Note 7.1) 3,872,242 4,365,272
REMUNERATION OF THE MEMBERS OF THE BOARD OF DIRECTORS
All details of the remuneration policy of the members of Semapa's Board of Directors are disclosed in the Company's Corporate Governance Report, Part I - Section D.
As of 31 December 2020 and 2019, for the members of the Board of Directors of Semapa, there were no (i) additional liabilities related to other long-term benefits, (ii) termination benefits, (iii) share-based payments, (iv) any outstanding balances.
311 8 FINANCIAL INSTRUMENTS
8.1 FINANCIAL RISK MANAGEMENT
The Company, as a holding company develops direct and indirect managing activities over its subsidiaries. Thus, the fulfilment of the obligations undertaken by the Company depends on the cash flows generated by its subsidiaries, which include the distribution of dividends, payment of interest, repayment of loans granted and payment for services rendered by the Company. The ability of Semapa's subsidiaries to generate positive cash flows and to make funds available to the holding company will depend on their respective earnings, available reserves and financial structure.
The Semapa Group has a risk-management program, which focuses its analysis on the financial markets with a view to mitigate the potential adverse effects on the Group’s financial performance. Risk management is undertaken by the Financial Management of the Company and main subsidiaries, in accordance with the policies approved by the Board of Directors and monitored by the Company's Risks and Control Committee/Internal Control Committee.
The Group adopts a proactive approach to risk management, as a way to mitigate the potential adverse effects associated with those risks, namely the exchange rate risk and interest rate risk.
In the context of the separate financial statements, the Company's exposure to financial risk resulting from the Group's activity is mainly associated with external Interest-bearing liabilities (Note 5.6).
8.1.1 EXCHANGE RATE RISK
EXCHANGE RATE RISK MANAGEMENT POLICY
In the context of separate financial statements, the exchange rate risk to which the Company is directly exposed in terms of financial assets and liabilities is not significant.
However, an unfavourable change in the exchange rates associated to the relevant geographies for its subsidiaries can cause a significant decrease in the value of assets and profit or loss of subsidiaries and in the distribution of dividends to the Company. The Group seeks to mitigate this risk by constantly monitoring exposure to each currency and by using natural hedges, as well as by contracting hedging derivative financial instruments, as presented in the consolidated financial statements.
8.1.2 INTEREST RATE RISK
INTEREST RATE RISK MANAGEMENT POLICY
A significant share of the Company’s financial liabilities cost are indexed to short-term reference interest rates, which are reviewed more than once a year (generally every six months for medium and long-term debt). Hence, changes in interest rates can have an impact on the Company’s income statement.
SENSITIVITY ANALYSIS Semapa carries out sensitivity analysis in order to assess the impact on the income statement and equity caused by an increase or decrease in market interest rates, considering all other factors unchanged. This is a mere illustrative analysis, since changes in market rates rarely occur separately.
EXPOSURE TO INTEREST RATE RISK
Amounts in Euro 31-12-2020 31-12-2019 0.5% increse in market interest rates Impact on profit before tax - increase / (decrease) (438,089) (943,880)
312 ANNUAL REPORT 2020
The fixed rate (which does not expose the Company to interest rate risk) and variable rate (which expose the Company to interest rate risk) financial assets and liabilities are detailed as follows:
As of 31 December 2020 Fixed rate Variable interest rate - next rate reset date Toral interest- beared Amounts in Euro Amount % Below 3 months 3-12 months Total % Assets Non-current Receivables and other current - 0% 17,782 - 17,782 100% 17,782 assets (Note 4.1) Current Receivables and other current 13,438,144 100% - - - 0% 13,438,144 assets (Note 4.1) Cash and cash equivalents (Note 5.8) 10,051,528 100% - - - 0% 10,051,528
Total financial assets 23,489,672 100% 17,782 - 17,782 0% 23,507,454
Liabilities Non-current Interest-bearing liabilities (Note 5.6) 169,000,000 79% 45,000,000 - 45,000,000 21% 214,000,000 Lease liabilities (Note 5.7) 92,610 100% - 0% 92,610 Current Interest-bearing liabilities (Note 5.6) 18,000,000 30% 42,500,000 117,895 42,617,895 70% 60,617,895 Lease liabilities (Note 5.7) 84,763 100% - - - 0% 84,763 Payables and other current 14,779,166 100% - - - 0% 14,779,166 liabilities (Note 4.2) Total financial liabilities 201,956,539 70% 87,500,000 117,895 87,617,895 30% 289,574,434
Net financial position (178,466,867) (87,482,218) (117,895) (87,600,113) (266,066,980)
As of 31 December 2019 Fixed rate Variable interest rate - next rate reset date Toral interest- Below 3 Amounts in Euro Amount % 3-12 months 1-5 years Total % beared months Assets Non-current Receivables and other current - 0% 13,553 - - 13,553 100% 13,553 assets (Note 4.1) Current Receivables and other current 84,277,160 100% - - - - 0% 84,277,160 assets (Note 4.1) Cash and cash equivalents (Note 5.8) 85,020 100% - - - - 0% 85,020
Total financial assets 84,362,180 100% 13,553 - - 13,553 0% 84,375,733
Liabilities Non-current Interest-bearing liabilities (Note 5.6) 197,000,000 69% 79,250,000 - 7,500,000 86,750,000 31% 283,750,000
Lease liabilities (Note 5.7) 146,504 100% - - - - 0% 146,504 Current Interest-bearing liabilities (Note 5.6) 8,130,000 7% 20,776,081 81,250,000 - 102,026,081 93% 110,156,081 Lease liabilities (Note 5.7) 105,559 100% - - - - 0% 105,559 Payables and other current 11,294,353 100% - - - - 0% 11,294,353 liabilities (Note 4.2) Total financial liabilities 216,676,416 53% 100,026,081 81,250,000 7,500,000 188,776,081 47% 405,452,497
Net financial position (132,314,236) (100,012,528) (81,250,000) (7,500,000) (188,762,528) (321,076,764)
313 8.1.3 LIQUIDITY RISK
LIQUIDITY RISK MANAGEMENT POLICY
The Company manages liquidity risk in two ways:
(i) by ensuring that its financial debt has a high medium and long-term component with maturities appropriate to the Company's activity as a holding company, considering the characteristics of the industries in which its subsidiaries operate, and
(ii) through the contracting with financial institutions of credit facilities available at all times, for an amount that guarantees adequate liquidity.
AVAILABLE BUT NOT USED CREDITS
The Company's policy is to maintain credit lines at adequate levels to meet i) potential business acquisitions and ii) cash requirements for scheduled repayments of loans as per the cash budget and actual execution.
CONTRACTUAL MATURITY OF FINANCIAL LIABILITIES (UNDISCOUNTED CASH FLOWS, INCLUDING INTEREST)
Below 1 Amounts in Euro 1-3 months 3-12 months 1-5 years Total month As of 31 December 2020 Liabilities Interest-bearing liabilities (Note 5.6) Bond loans - - 2,680,000 104,020,000 106,700,000 Commercial paper - 1,429,132 50,753,319 87,502,757 139,685,208 Bank loans 1,313,787 - 9,804,008 29,606,944 40,724,739 Other loans - - 117,895 - 117,895 Lease liabilities (Note 5.7) 9,298 18,100 60,699 95,219 183,317 Payables and other current liabilities (Note 4.2) 2,857,532 2,396,801 9,524,833 - 14,779,166 Total liabilities 4,180,617 3,844,033 72,940,755 221,224,920 302,190,325 of which interest (at the rates prevailing) 63,787 1,429,132 3,987,327 7,129,701 12,609,947
As of 31 December 2019 Liabilities Interest-bearing liabilities (Note 5.6) Bond loans - - 84,866,427 106,700,000 191,566,427 Commercial paper 22,560 435,069 10,760,886 146,235,198 157,453,714 Bank loans 1,465,049 - 9,972,075 40,724,739 52,161,863 Other loans - - 9,532,273 - 9,532,273 Lease liabilities (Note 5.7) 10,129 20,259 80,149 150,386 260,923 Payables and other current liabilities (Note 4.2) 3,188,996 2,581,673 5,523,684 - 11,294,353 Total liabilities 4,686,734 3,037,001 120,735,494 293,810,323 422,269,552 of which interest (at the rates prevailing) 107,609 435,069 6,355,580 9,909,937 16,808,195
The undiscounted cash flows of interest-bearing liabilities included above are detailed as follows:
Amounts in Euro 31-12-2020 31-12-2019 Below 12 months 80,965,405 128,459,230 1 to 2 years 49,938,605 114,153,721 2 to 3 years 130,712,799 49,440,349 3 to 4 years 40,571,845 130,216,253 4 to 5 years 1,672 - 1 to 5 years 221,224,920 293,810,323 Total 302,190,325 422,269,553
314 ANNUAL REPORT 2020
The contractual maturity of interest-bearing liabilities requires the compliance with financial covenants, as detailed in Note 5.6 – Interest-bearing liabilities.
AVAILABLE AND UNDRAWN CREDIT FACILITIES
Amounts in Euro 31-12-2020 31-12-2019 Undrawn credit facilities Commercial paper 187,500,000 270,750,000 Other credit facilities 9,750,000 9,620,000 197,250,000 280,370,000 Commercial paper used (Note 5.6) 135,000,000 154,250,000 Other credit facilities used (Note 5.6) 39,500,000 50,130,000 Contracted credit facilities (nominal value) 371,750,000 484,750,000
8.1.4 CREDIT RISK
IMPAIRMENT OF FINANCIAL ASSETS The Company assesses, on a prospective basis, the expected credit losses associated with its financial assets measured at cost as detailed in Note 8.3.1 - Categories of financial instruments of the Company. RECEIVABLES FROM SUBSIDIARIES Receivables from subsidiaries are subject to the general impairment model of IFRS 9 (3-step model). As the subsidiaries' credit risk is considered low, due to the reduced risk of uncollectibility and their ability to repay on demand, the impairment estimate corresponds to the first step of the model with the assessment of the uncollectibility risk of the cash flows of the following 12 months. OTHER RECEIVABLES AND OTHER FINANCIAL ASSETS Financial assets are derecognised when there is no real expectation of receipt. The Company classifies a receivable to be derecognised when the debtor fails to make the contractual payments due. After being derecognised, the Company continues to take steps to recover the amounts due. In cases of success with the recovery of amounts, such amounts are recognised in the results of the period.
CREDIT RISK MANAGEMENT POLICY
The Company has no significant commercial activity other than the management of the Group's financial investments and the rendering of services to subsidiaries.
In the context of the separate financial statements, the credit risk in respect of financial assets to which the Company is directly exposed derives mainly from loans granted to and other receivables from subsidiaries (Note 4.1), and cash and cash equivalents (Note 5.8) balances.
RECEIVABLES FROM SUBSIDIARIES Regarding the receivables from subsidiaries related to the services rendered to them by the Company and the loans granted to them, the Company did not record impairment in the periods presented. OTHER RECEIVABLES Other receivables are initially recorded at fair value and are subsequently measured at their amortised cost, net of impairment losses, so as to state them at their expected net realisable value. Impairment losses are recorded in accordance with the expected credit losses throughout the respective duration, whenever, at each reporting date, there is a significant increase in the credit risk since the initial recognition of the receivables. It is considered as default the payments after a delay of 180 days or more, resulting from the experience of actual historical losses over the period considered statistically relevant.
315 MAXIMUM EXPOSURE TO CREDIT RISK
Amounts in Euro 31-12-2020 31-12-2019 Non-current Other financial investments (Note 8.2) 187,869 42,143 Receivables and other current assets (Note 4.1) 17,782 13,553 Current Cash and cash equivalents (Note 5.8) 10,051,528 85,020 10,257,179 140,716
8.2 OTHER FINANCIAL INVESTMENTS
This Note includes equity instruments held by the Company relating to companies over which it has no control or significant influence. Other financial investments are measured at fair value through profit or loss when the Company holds them for trading purposes. The Company records the remaining financial investments as financial assets at fair value through other comprehensive income.
Amounts in Euro 31-12-2020 31-12-2019
Financial assets at fair value through profit or loss Mor-Online, SA 18,618 12,235 Ynvisible, SA 169,251 29,908
187,869 42,143
8.3 FINANCIAL ASSETS AND LIABILITIES
8.3.1 CATEGORIES OF FINANCIAL INSTRUMENTS OF THE COMPANY
The financial instruments included in each caption of the statement of financial position are classified as follows:
Financial assets Financial assets Financial asset at fair value Non-financial Amounts in Euro Note at amortised outside the Total through profit or assets costs scope of IFRS 9 loss 31 December 2020 Other financial 8.3 - 187,869 - - 187,869 investments Receivables and other 4.1 13,325,569 17,782 - 112,575 13,455,926 current assets Cash and cash equivalents 5.8 10,051,528 - - - 10,051,528 Total assets 23,377,097 205,651 - 112,575 23,695,323 31 December 2019 Other financial 8.2 - 42,143 - - 42,143 investments Receivables and other 4.1 84,125,833 13,553 53,739 97,588 84,290,713 current assets Cash and cash equivalents 5.8 85,020 - - - 85,020 Total assets 84,210,853 55,696 53,739 97,588 84,417,876
316 ANNUAL REPORT 2020
Financial Non-financial Amounts in Euro Note liabilities at Total liabilities amortised cost
31 December 2020 Interest-bearing liabilities 5.6 273,609,763 - 273,609,763 Lease liabilities 5.7 177,373 - 177,373 Payables and other current liabilities 4.2 14,268,182 510,984 14,779,166 Total liabilities 288,055,318 510,984 288,566,302 31 December 2019 Interest-bearing liabilities 5.6 391,951,128 - 391,951,128 Lease liabilities 5.7 252,063 - 252,063 Payables and other current liabilities 4.2 10,131,979 1,162,374 11,294,353 Total liabilities 402,335,170 1,162,374 403,497,544
8.3.2 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The fair value of financial instruments is classified in accordance with the fair value hierarchy of IFRS 13 - Fair value measurement:
Level 1 Fair value is based on active markets quotations, at the reporting date.
Level 2 Fair value is determined using valuation models, whose main inputs of the models used are observable in the market.
Level 3 Fair value is determined using valuation models, whose main inputs are not observable in the market.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT AMORTISED COST The Company considers that the carrying amount of loans at variable rates, as well as financial assets and liabilities measured at amortised cost in the remaining captions (Note 8.3.1), is close to their fair value.
317 9 PROVISIONS, COMMITMENTS AND CONTINGENCIES
9.1 PROVISIONS
Recognition and Provisions are recognised whenever: initial measurement (i) the Company has a legal or constructive obligation, as a result of past events; (ii) it is likely that a cash outflow and/or resources will be required to settle the obligation; and (iii) and the amount has been reliably estimated. Subsequent Provisions are reviewed on the Statement of financial position date and are adjusted so as to measurement reflect the best estimate at that date.
INVESTMENTS IN SUBSIDIARIES Provisions are recognised for the Company's liabilities for losses on investments in subsidiaries (Note 10.1), after the related carrying amount has been reduced to zero, to the extent that the Company may have incurred legal or constructive obligations or made payments on behalf of such subsidiaries. TAX PROCEEDINGS The balances of additional tax liabilities for the Company’s uncertainty over income tax are disclosed in Note 6.1 - Income tax.
LEGAL PROCEEDINGS These provisions were made in accordance with the risk assessments carried out internally by the Company with the support of its legal advisors, based on the likelihood of the decision being favourable or unfavourable to the Company.
9.2 COMMITMENTS
In the periods ended 31 December 2020 and 2019, Semapa has no commitments other than those already disclosed above.
9.3 CONTINGENT ASSETS AND LIABILITIES
In the periods ended 31 December 2020 and 2019, Semapa has not identified any disclosable contingent assets and liabilities.
318 ANNUAL REPORT 2020
10 GROUP STRUCTURE
10.1 INVESTMENTS IN SUBSIDIARIES
Subsidiaries are all entities over which the Company has control, which occurs when the Company is exposed or entitled to the variable returns resulting from its involvement with the entities and has the capacity to affect that return through the exercise of power over the entities, regardless of the percentage they hold over equity. The existence and the effect of potential voting rights which are currently exercisable or convertible are considered when the Company assesses whether it has control over another entity. MEASUREMENT Investments in subsidiaries are accounted under the equity method. In accordance with the equity method, the financial investments are initially recorded at their cost and adjusted by the amount corresponding to the share of the net profit of subsidiaries against the "Gains/(losses) from subsidiaries - equity method", by the dividends received and by other changes in their equity against "Other comprehensive income". Additionally, investments in subsidiaries may also be adjusted through the recognition of impairment losses. The accounting policies of joint ventures are amended, when necessary, to ensure that they are applied consistently with those of the Company. When the Company’s share in the subsidiary’s losses is equal to or exceeds its investment in the subsidiary, the Company ceases to recognise additional losses, except where it has assumed liability or made payments in the subsidiary’s name, as detailed in Note 9.1 - Provisions. If they subsequently report profits, the Company resumes recognising its share of those profits only after its share of the profits equals the share of unrecognised losses.
RECOVERABLE AMOUNT FROM INVESTMENTS IN SUBSIDIARIES The Company performs impairment tests on investments in subsidiaries annually and on dates when it determines that there are indications that the investments may be impaired. In the separate financial statements, Goodwill included in the measurement of financial investments is not presented separately, and the impairment tests are based on the total carrying amount of the investment tested. These projections result from budgets for the following year and estimates of cash flows for a subsequent period of four years, reflected in the approved Medium/Long-Term Plans, approved by the Board of Directors. Cash flows are discounted at WACC (Weighted Average Cost of Capital) rates based on CAPM (Capital Asset Pricing Model) and based on weighted average debt and equity costs, estimated according to the segments where CGUs are inserted. The risk-free interest rate considered are the result of market information on medium-term sovereign debt. The beta and leverage of the sectors are based on information from a broad set of comparable companies subject to an annual review. All this information is gathered from international and independent sources, including Reuters and rating agencies (S&P, Moody's and Fitch). The growth rate in perpetuity reflects the Board's medium and long term vision for the different CGU's, taking into account the inflation objectives of the respective Central Banks, estimates of future inflation rates, the macroeconomic outlook, as well as the foreseeable evolution of the Markets where the Group operates. The sources of macroeconomic forecasts are the IMF and Banco de Portugal.
319 The assumptions that were the basis of the business plans are detailed as follows:
ASSUMPTIONS ON THE BASIS OF THE BUSINESS PLANS
Assumptions (CAGR 2021-2025) Pulp and Cement and Derivatives* paper Portugal Sales in quantity (kt) Reference UWF paper Cement and Clinker CAGR Quantity sales (kt) 1.9% -0.1% - 3.4% Average selling price LC/t Reference UWF paper Grey Cement in the Internal Market CAGR Average selling price LC/t 0.9% 1.0% - 13.9% Total Cash Costs LC CAGR Total Cash Costs LC 1.35% 2.0% - 12.8% * Range corresponding to Portugal, Brazil, Tunisia, Lebanon and Angola geographies
Assumptions (CAGR 2020-2024) Pulp and Cement and Derivatives* paper Portugal Sales in quantity (kt) Reference UWF paper Cement and Clinker CAGR Quantity sales (kt) 1.5% -0.8% - 13.3% Average selling price LC/t Reference UWF paper Grey Cement in the Internal Market CAGR Average selling price LC/t 0.0% 0.5% - 7.3% Total Cash Costs LC CAGR Total Cash Costs LC 0.50% 1.40% * Range corresponding to Portugal, Brazil, Tunisia, Lebanon and Angola geographies
MACROECONOMIC AND FINANCIAL ASSUMPTIONS
The main assumptions considered at macroeconomic level are projections of GDP growth rate and inflation in the markets where the Group operates (Portugal for all CGUs and also Tunisia, Lebanon, Brazil and Angola in the Cement and Derivatives segment). The sources of forecasts are the IMF and Banco de Portugal.
The perpetuity growth rate reflects the Boards of Directors' vision in the medium and long-term for the different CGUs, bearing in mind the macroeconomic assumptions.
31-12-2020 31-12-2019 Financial assumptions Risk-free WACC Perpetuity Tax Risk- WACC Perpetuity Tax interest rate* rate EUR growth rate rate free rate growth rate rate EUR interest EUR EUR rate* Pulp and paper Portugal Explicit Planning Period 0.53% 4.67% - 27.50% 0.77% 5.36% - 27.50% Perpetuity 2.71% 6.66% 0.00% 27.50% 2.85% 7.31% 0.00% 27.50% Cement and derivatives Portugal Explicit Planning Period 0.53% 4.61% - 27.50% 0.77% 5.22% - 27.50% Perpetuity 2.71% 6.50% 1.70% 27.50% 2.85% 7.12% 1.50% 27.50% Notes: In Cements and derivatives WACC rates in Euro between 6.47% and 17.19% were also considered for Brazil, Tunisia, Angola and Lebanon * Includes the Country Risk Premium
IMPAIRMENT TESTS
As a result of the impairment tests performed in 2020 and 2019, no impairment loss was identified in Goodwill.
320 ANNUAL REPORT 2020
SENSITIVITY ANALYSIS
A sensitivity analysis was performed to the assumptions regarded as key (independently for each assumption), wacc rate and free cash flow, which did not determine any impairment for the goodwill allocated to each CGU.
VARIATION OF SEMAPA EQUITY BY A CHANGE IN THE WACC RATE:
WACC Rate Sensitivity Analysis -50bps +50bps -1% +1% Pulp and paper Explicit Planning Period 3% -3% 6% -5% Perpetuity 8% -6% 16% -12% Explicit Planning and Perpetuity 10% -9% 23% -17% Cements and other construction materials Explicit Planning Period 3% -3% 6% -6% Perpetuity 11% -9% 24% -16% Explicit Planning and Perpetuity 14% -11% 31% -21%
VARIATION OF SEMAPA EQUITY BY A CHANGE IN FREE CASH FLOW:
FCF Sensitivity Analysis -5% +5% -10% +10% Pulp and paper -6% 6% -13% 13% Cements and other construction materials -7% 7% -14% 14%
As of 31 December 2020 and 2019, the caption Investments in joint ventures recorded by the equity method in the statement of financial position, including goodwill, were as follows:
31-12-2020 31-12-2019 Company name Head Office Equity % held Balance Equity % held Balance
Aphelion, S.A. Portugal 43,479 100.00% 43,479 44,488 100.00% 44,488 ETSA Investimentos, SGPS, S.A. Portugal 70,245,188 99.99% 70,237,337 65,456,369 99.99% 65,449,053 Secil - Companhia Geral de Cal e Portugal 319,473,992 100.00% 453,632,742 385,761,124 100.00% 519,918,513 Cimento, S.A. Seinpar Investments, B.V. The Netherlands - - - 360,448,114 100.00% 360,448,114 Semapa Inversiones, S.L. Spain 131,275 100.00% 131,275 140,028 100.00% 140,028 Semapa Next, S.A. Portugal 8,629,091 100.00% 8,629,091 3,741,059 100.00% 3,741,059 The Navigator Company, S.A. Portugal 806,624,456 69.97% 686,722,420 818,915,102 36.00% 334,919,314 1,219,396,344 1,284,660,569
Until 31 December 2019 Semapa held an indirect shareholding of 33.71% in The Navigator Company, S.A. through Seinpar Investments, B.V.. However, after the merger of this subsidiary (Note 1.2), the referred investment was transferred to Semapa.
As of 31 December 2020, the fair value of the Company's investment in Navigator, a company listed on Euronext Lisbon, was Euro 1,243,48,013 (31 December 2019, including the percentage indirectly held: Euro 1,785,450,870).
SUMMARY OF FINANCIAL INFORMATION OF SUBSIDIARIES
Current Non-current Current Non-current Revenue in Net Comprehensive 31 December 2020 assets assets liabilities liabilities the period profit income Aphelion, S.A. 44,603 - 1,124 - - (1,009) (1,009) ETSA Investimentos, SGPS, S.A. 21,350,400 62,494,558 11,235,618 2,363,207 31,391,237 5,388,819 5,388,819 Secil - Companhia Geral de Cal e 288,699,017 925,987,747 316,743,245 427,666,887 451,000,152 46,534,560 (53,133,956) Cimento, S.A. Semapa Inversiones, S.L. 134,346 - 1,661 1,410 - (8,753) (8,753) Semapa Next, S.A. 41,840 9,236,595 649,345 - 1,482,001 (444,718) (1,051,969) The Navigator Company, S.A. 716,956,664 1,676,209,242 635,846,603 950,419,665 1,385,360,624 98,141,846 86,848,275
321 Current Non-current Current Non-current Revenue in Net Comprehensive 31 December 2019 assets assets liabilities liabilities the period profit income Aphelion, S.A. 45,546 - 1,058 - - (825) (825) ETSA Investimentos, SGPS, S.A. 18,899,627 62,764,833 10,781,658 5,425,490 30,260,432 3,782,236 3,782,236 Secil - Companhia Geral de Cal e 299,935,130 894,067,795 432,877,479 399,312,947 510,994,979 17,674,888 22,419,637 Cimento, S.A. Seinpar Investments, B.V. 33,708,725 360,402,915 33,663,525 - - 53,186,996 45,815,824 Semapa Inversiones, S.L. 2,566,807 - 733 2,426,048 - (7,528) (7,528) Semapa Next, S.A. 99,429 4,030,876 389,245 - 1,973,593 (137,269) (124,175) The Navigator Company, S.A. 634,366,835 1,754,991,991 462,070,494 1,108,099,415 1,687,859,963 157,218,440 146,744,636
RECONCILIATION BETWEEN THE EQUITY OF RELEVANT SUBSIDIARIES WITH THE BALANCE OF THE FINANCIAL INVESTMENT
31 December 2020 Secil - ETSA Investimentos, Companhia Geral Semapa Semapa Next, The Navigator Aphelion, S.A. SGPS, S.A. de Cal e Cimento, Inversiones, S.L. S.A. Company, S.A. Amounts in Euro S.A.
Equity of subsidiary 43,479 70,245,188 319,473,992 131,275 8,629,091 806,624,456 % held 100% 100% 100% 100% 100% 69.97% 43,479 70,237,337 319,467,437 131,275 8,629,091 564,397,974 Goodwill - - 134,165,305 - - 122,324,446 Financial shareholding in the subsidiary 43,479 70,237,337 453,632,742 131,275 8,629,091 686,722,420
31 December 2019 Secil - ETSA Companhia Seinpar Semapa Semapa Next, The Navigator Aphelion, S.A. Investimentos, Geral de Cal e Investments, B.V. Inversiones, S.L. S.A. Company, S.A. SGPS, S.A. Amounts in Euro Cimento, S.A.
Equity of subsidiary 44,488 65,456,369 385,761,124 360,448,114 140,028 3,741,059 818,915,102 % held 100.00% 99.99% 100.00% 100.00% 100.00% 100.00% 36.00% 44,488 65,449,053 385,753,208 360,448,114 140,028 3,741,059 294,819,085 Goodwill - 134,165,305 - - 40,100,229 Financial shareholding in the 44,488 65,449,053 519,918,513 360,448,114 140,028 3,741,059 334,919,314 subsidiary
322 ANNUAL REPORT 2020
CHANGES IN INVESTMENTS IN SUBSIDIARIES
Amounts in Euro 2020 2019 Opening balance 1,284,660,569 1,375,391,926 Acquisitions Investment in The Navigator Company, by merger of Seinpar Investments, B.V. 278,178,698 - Goodwill of The Navigator Company, by merger of Seinpar Investments, B.V. 82,224,217 - Additional capital contributions Semapa Next, S.A. 5,940,000 880,000 Acquisitions and capital increases 366,342,915 880,000 Repayment of share premium Seinpar Investments, B.V. - - Repayment of additional capital contributions Secil – Companhia Geral de Cal e Cimento, S.A (19,700,000) (3,500,000) Settlements Settlement by merger of Seinpar (360,448,114) - Investments, B.V. Capital decreases, disposals and liquidations (380,148,114) (3,500,000) Share of profits - equity method Aphelion, S.A. (1,009) (825) ETSA Investimentos, SGPS, S.A. 5,388,217 3,781,813 Secil - Companhia Geral de Cal e Cimento, S.A. 46,533,605 17,674,525 Seinpar Investments, B.V. - 53,186,996 Semapa Inversiones, S.L. (8,753) (7,528) Semapa Next, S.A. (444,718) (137,269) The Navigator Company, S.A. 68,670,195 56,432,524 Net profit 120,137,537 130,930,236 Dividends The Navigator Company, S.A. (69,367,852) (107,234,839) ETSA Investimentos, SGPS, S.A. (599,933) (599,933) Seinpar Investments, B.V. - (101,119,200) Dividends attributed (69,967,785) (208,953,972) Other comprehensive income (101,628,779) (2,130,338) Intra-group acquisition differences from participating interests - (7,957,280) Other changes 1 (3) Other equity changes of subsidiaries (101,628,778) (10,087,621) Closing balance 1,219,396,344 1,284,660,569
323 10.2 TRANSACTIONS WITH RELATED PARTIES
BALANCES WITH RELATED PARTIES
31-12-2020 Receivables and Payables and Receivables - Interest-bearing Amounts in Euro other current other current Payables - RETGS RETGS liabilities assets liabilities (Note (Note 4.2) (Note 4.1) (Note 5.6) (Note 4.1) 4.2) Shareholders (Note 5.2) i) Sodim, SGPS, S.A. 2,687 - - - -
Subsidiaries - direct shareholdings (Note 10.1) i) Aphelion, S.A. 620 - - 330 43,971 ETSA Investimentos, SGPS, S.A. 57,529 - - 68,348 73,924 Secil - Companhia Geral de Cal e Cimento, S.A. 2,880,623 - - 5,093,725 - Semapa Next, S.A. 409,829 - - 2,865 - The Navigator Company, S.A. 1,477,915 6,447,546 - - -
Other subsidiaries of the Semapa Group Abapor - Comércio e Indústria de Carnes, S.A. 27,100 59,809 - - - Argibetão - Soc. de Novos Prod. de Argila e Betão, S.A. - 4,053 - - - Beto Madeira - Betões e Britas da Madeira, S.A. 336 - - 1,017 - Betotrans II - Unipessoal, Lda. - 35,695 - - - Biological - Gestão de Resíduos Industriais, Lda. 1,196 10,949 - - - Brimade - Sociedade de Britas da Madeira, S.A. 2,643 35,194 - - - Celcimo, S.L. 1,504 - - - - Cimentos Madeira, Lda. 8,146 - - 89,679 - Ciminpart - Investimentos e Participações, SGPS, S.A. - - 733,500 17,805 -
ETSA Log, S.A. 7,703 - - 7,138 -
ITS - Indústria Transformadora de Subprodutos, S.A. 95,979 1,672 - - - Sebol - Comércio e Indústria de Sebo, S.A. 102,045 505,304 - - - Secil - Britas, S.A. 190,329 - - 405,458 - Secil Brands - Marketing, Publicidade, Gestão e Desenvolv. de Marcas, - 42,424 - - - Lda. Secil Martingança - Aglomerantes e Novos Materiais para a 226,982 273,701 - - - Construção, S.A. Secil Prebetão - Prefabricados de Betão, S.A. - - - 41,791 - Serife - Soc. de Estudos e Realizações Industriais e de Fornec. de - - - 3,178 - Equip., Lda. SPB, SGPS, Lda. - - - 4,700 - Unibetão - Indústrias de Betão Preparado, S.A. 188,431 - - 702,667 -
Other related parties Hotel Ritz, S.A. - - 1,072 - - Sociedade Agrícola da Herdade dos Fidalgos, Unipessoal, Lda. - - 638 - - Members of the Corporate Bodies 4,203 - - - -
5,685,800 7,416,347 735,210 6,438,701 117,895
324 ANNUAL REPORT 2020
31-12-2019 Receivables and Payables and Receivables - Interest-bearing Amounts in Euro other current Attributed results other current Payables - RETGS RETGS liabilities assets (Note 4.1) liabilities (Note (Note 4.2) (Note 4.1) (Note 5.6) (Note 4.1) 4.2) Shareholders (Note 5.2) i) Cimigest, SGPS, S.A. 2,390 - - - - - Cimo - Gestão de Participações, SGPS, S.A. - - - - - 7,487,014 Sodim, SGPS, S.A. - - - - - 1,913,507
Subsidiaries - direct shareholdings (Note 10.1) i) Aphelion, S.A. 480 - - - 328 44,912 ETSA Investimentos, SGPS, S.A. - - - - 61,308 - Secil - Companhia Geral de Cal e Cimento, S.A. 408 388,409 - - - - Seinpar Investments, B.V. - - 33,645,000 - - Semapa Inversiones, S.L. - - - - - 80,648 Semapa Next (former Inspiredplace, S.A.) 145,708 - - 12,803 2,398 - The Navigator Company, S.A. 4,294,550 2,851,033 35,691,179 - - -
Other subsidiaries of the Semapa Group Abapor - Comércio e Indústria de Carnes, S.A. - - - - 52,416 - About The Future - Empresa Produtora de Papel, - 894,938 - - - - S.A. Aboutbalance, SGPS, S.A. - - - - 500 - Allmicroalgae - Natural Products, S.A. 4 2,749 - - - - Arboser - Serviços Agro-Industriais, S.A. - 61,694 - - - - Argibetão - Soc. de Novos Prod. de Argila e Betão, - 1,629 - - - - S.A. Atlantic Forests - Comércio de Madeiras, S.A. - 337 - - - - Biological - Gestão de Resíduos Industriais, Lda. - 4,328 - - - - Ciminpart - Investimentos e Participações, SGPS, - - - - 6,640 - S.A. CMP - Cimentos Maceira e Pataias, S.A. 2,035,502 337,635 - - - - EMA21 - Eng. e Manutenção Industrial Século XXI, - - - - 7,351 - S.A. Empremédia - Corretores de Seguros, S.A. - - - - 825 - ETSA Log, S.A. - 28,674 - - - - Headbox - Operação e Controlo Industrial, S.A. - - - - 12,149 - Hewbol - SGPS, Lda. - - - - 999 - ITS - Indústria Transformadora de Subprodutos, S.A. - - - - 101,298 - Navigator Added Value, S.A. - 27,698 - - - - Navigator Floresta, SGPS, S.A. - - - - 500 - Navigator Forest Portugal, S.A. - - - - 904 - Navigator Lusa, Unipessoal, Lda. - 4,712 - - - - Navigator Paper Setúbal, S.A. - 342,917 - - - - Navigator Pulp Cacia, S.A. - 359,456 - - - - Navigator Pulp Figueira, S.A. - 1,851,898 - - - - Navigator Pulp Holding, SGPS, S.A. - - - - 243,411 - Navigator Pulp Setúbal, S.A. - - - - 484 - Navigator Tissue Cacia, S.A. - 698 - - - - Navigator Tissue Ródão, S.A. - - - - 26,520 - Sebol - Comércio e Indústria de Sebo, S.A. - 187,629 - - - - Secil - Britas, S.A. 119,845 - - - 318,314 - Secil Brands - Marketing, Publicidade, Gestão e - 2,495 - - - - Desenvolv. de Marcas, Lda. Secil Martingança - Aglomerantes e Novos Materiais 185,856 - - - 261,873 - para a Construção, S.A. Secil Prebetão - Prefabricados de Betão, S.A. - - - 38,881 - Serife - Soc. de Estudos e Realizações Industriais e - - - - 3,178 - de Fornec. de Equip., Lda. Sociedade de Vinhos da Herdade de Espirra - - - - - 610 - Produção e Com. de Vinhos, S.A. SPB, SGPS, Lda. - - - 4,700 - SPCG - Sociedade Portuguesa de Co-Geração - - - - 35 - Eléctrica, S.A.
Unibetão - Indústrias de Betão Preparado, S.A. 247,978 874,196 - - - - Viveiros Aliança - Empresa Produtora de Plantas, - 345,454 - - - - S.A.
Other related parties Hotel Ritz, S.A. - - - 2,475 - - Members of the Corporate Bodies 964 - - - - -
7,033,685 7,694,383 69,336,179 15,278 2,019,818 9,526,081
325 (i) As of 31 December 2020 and 2019, interest-bearing liabilities from shareholding companies and subsidiaries relate to short-term treasury operations that bear interest at market rates, debited quarterly.
TRANSACTIONS WITH RELATED PARTIES
2020 Amounts in Euro Purchases of Sales and services External services Financial income / Amount of loans Amount of loans
goods and services rendered recharge (expense) granted obtained Shareholders (Note 5.2) Cimo - Gestão de Participações, SGPS, S.A. - - - (4,136) - 3,102 Sodim, SGPS, S.A. (71,827) - - (505) - 378 (71,827) - - (4,641) - 3,480 Subsidiaries - direct shareholdings (Note 10.1) Aphelion, S.A. - - - (58) - 58 ETSA Investimentos, SGPS, S.A. - 298,912 - - - - Secil - Companhia Geral de Cal e Cimento, S.A. - 4,225,120 - 6,067 189,500,000 - Semapa Inversiones, S.L. - - - (103) - 103 Semapa Next, S.A. (1,482,001) - 249 - - - The Navigator Company, S.A. - 8,718,731 - - - -
(1,482,001) 13,242,763 249 5,906 189,500,000 161 Other related parties Bestweb, Lda. (22,022) - - - - - CLA - Caldas, Lopes, Almeida & Associados (36,000) - - - - - Hotel Ritz, S.A. (27,978) - 108 - - - Letras Criativas, Unipessoal, Lda. (60,000) - - - - - Sociedade Agrícola da Herdade dos (4,128) - - - - - Fidalgos, Lda. Sonagi - Imobiliária, S.A. (774,864) - - - - - (924,992) - 108 - - - (2,478,820) 13,242,763 357 1,265 189,500,000 3,641
326 ANNUAL REPORT 2020
2019 Amount of Amounts in Euro Purchases of goods Sales and services External services Financial Amount of loans loans and services rendered recharge income/(expense) granted obtained Shareholders (Note 5.2) Cimigest, SGPS, S.A. (107,740) - - - - - Cimo - Gestão de Participações, SGPS, - - - (9,560) - 14,623,170 S.A. Sodim, SGPS, S.A. - - 564 (677) - 2,670,507 (107,740) - 564 (10,237) - 17,293,677 Subsidiaries - direct shareholdings (Note 10.1) Aphelion, S.A. - - - (59) - 44,913 ETSA Investimentos, SGPS, S.A. - 305,149 3,760 - - - Secil - Companhia Geral de Cal e - - 13,912 7,509 261,800,000 - Cimento, S.A. Semapa Inversiones, S.L. - - - (123) - 123 Semapa Next, S.A. (1,973,593) - - (428) - 1,100,432 The Navigator Company, S.A. - 12,811,123 14,288 - (1,973,593) 13,116,272 31,960 6,899 261,800,000 1,145,468 Other subsidiaries of the Semapa Group CMP - Cimentos Maceira e Pataias, S.A. - 4,630,057 - - - - Navigator Paper Figueira, S.A. - 4,630,057 - - - - Other related parties Bestweb, Lda. (33,072) - - - - - CLA - Caldas, Lopes, Almeida & (36,000) - - - - - Associados Hotel Ritz, S.A. (93,451) - - - - - Letras Criativas, Unipessoal, Lda. (30,000) - - - - - Salvador Pereira Palha Mendes de (30,000) - - - - - Almeida Sonagi - Imobiliária, S.A. (625,499) - - - - - Sonagi, SGPS, S.A. - - 1,316 - - - Vagamente - Consultoria e (1,500,000) - - - - - Empreendimentos, Limitada (2,348,022) - 1,316 - - - (4,429,355) 17,746,329 33,840 (3,338) 261,800,000 18,439,145
In previous years, lease agreements were signed between Semapa and Sonagi - Imobiliária. S.A. relating to the lease of several office floors in the building which it owns and operates the head office of Semapa at Av. Fontes Pereira de Melo. no. 14. in Lisboa.
RECEIVABLES AND PAYABLES - TAX CONSOLIDATION (RETGS)
The balances receivable from and payable to the subsidiaries included in the Company's tax business group. related to the RETGS operations (Note 6.1) are of the following nature:
31-12-2020 31-12-2019 Amounts in Euro Receivable Payable Receivable Payable Income tax on subsidiaries 1,404,186 1,279,199 4,349,580 (725,190) Corporate Income Tax receivables (1,397,549) (7,700,102) (3,375,096) 2,465,382 Withholding tax recoverable (3,308) (17,798) (20,938) 4,483 Corporate Income Tax from prior years 7,413,018 - 6,740,837 275,143 7,416,347 (6,438,701) 7,694,383 2,019,818
OTHER RELATED PARTY DISCLOSURES
In 2018, the Group, through its subsidiary Semapa Next. S.A., entered into an agreement to perform an investment of USD 12 million in the "Alter Venture Partners Fund 1", entity in which a member of the executive team is also a non-executive board member of Semapa.
The remuneration of the Company’s key management personnel is detailed in Note 7.3 – Remuneration of corporate bodies.
327 11 NOTE ADDED FOR TRANSLATION
The accompanying financial statements are a translation of financial statements originally issued in Portuguese. In the event of any discrepancies the Portuguese version prevails.
CERTIFIED ACCOUNTANT PAULO JORGE MORAIS COSTA
BOARD OF DIRECTORS
CHAIRMAN: JOSÉ ANTÔNIO DO PRADO FAY
MEMBERS: JOÃO NUNO DE SOTTOMAYOR PINTO DE CASTELLO BRANCO RICARDO MIGUEL DOS SANTOS PACHECO PIRES VÍTOR PAULO PARANHOS PEREIRA ANTÓNIO PEDRO DE CARVALHO VIANA BAPTISTA CARLOS EDUARDO COELHO ALVES FILIPA MENDES DE ALMEIDA DE QUEIROZ PEREIRA FRANCISCO JOSÉ MELO E CASTRO GUEDES LUA MÓNICA MENDES DE ALMEIDA DE QUEIROZ PEREIRA MAFALDA MENDES DE ALMEIDA DE QUEIROZ PEREIRA VÍTOR MANUEL GALVÃO ROCHA NOVAIS GONÇALVES
328 ANNUAL REPORT 2020
329 STATUTORY AUDIT REPORT STATUTORY AUDIT REPORT
STATUTORY AUDITORS’ REPORT AND AUDITORS’ REPORT
(Free translation from a report originally issued in Portuguese language. In case of doubt the Portuguese version will always prevail.)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the accompanying financial statements of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. (the Entity), which comprise the separate statement of financial position as at 31 December 2020 (showing a total of Euro 1,246,257,097 and total equity of Euro 948,822,258, including a profit for the year of Euro 106,588,079), and the separate income statement, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and the accompanying notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view, in all material respects, of the financial position of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. as at 31 December 2020 and of its financial performance and its cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and further technical and ethical standards and guidelines as issued by Ordem dos Revisores Oficiais de Contas (the Portuguese Institute of Statutory Auditors). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the applicable law and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics for Professional Accountants of the Portuguese Institute of Statutory Auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of financial investments (Euro 1,219,396,344)
See Note 1.6 Main estimates and judgements and Note 10.1 of the Financial Statements ANNUAL REPORT 2020
The Risk Our response to the identified risk
The assessment of risk on the valuation Our audit procedures included the of Entity's financial investments requires following, among others: a high degree of estimation and § We assessed the designing and judgement by the Board of Directors, implementation of the main controls namely with regard to the determination implemented by the Entity and of the recoverable value of the analysed budgeting procedures in investments made when impairment which the financial projections are signs are identified. based on, comparing the actual The developments in the economic performance with estimates environment, as well as the control and performed in prior periods, as well monitoring of the spread of COVID–19 as the integrity of the discounted and its effects created greater cash flow model; uncertainty over the financial projections § We assessed the internal and that support the assessment of external assumptions used, such as impairment. current business trends, market performance, inflation, projected economic growth and discount rates and assessed their reasonableness; § We performed sensitivity analysis to the robustness of assumptions and forecasts; § We involved experts in the calculation of the weighted average cost of capital; and § We reviewed the adequacy of the disclosures in the financial statements, in accordance with the applicable accounting standard.
2
Responsibilities of Management and the Supervisory Body for the Financial Statements Management is responsible for: § the preparation of financial statements that give a true and fair view of the Entity’s financial position, financial performance and the cash flows, in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union; § the preparation of the management report and the non-financial statement, in accordance with applicable laws and regulations; § the implementation and maintenance of an appropriate internal control system to enable the preparation of the financial statements that are free from material misstatement, whether due to errors or fraud; § the adoption of accounting policies and principles appropriate in the circumstances; and, § assessing the Entity’s ability to continue as a going concern, disclosing, as applicable, matters that may cast significant doubt on the going concern of the operations. The supervisory body is responsible for overseeing the Entity’s financial reporting process. Auditor´s responsibilities for the Audit of the financial statements Our responsibility is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor´s report based on our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: § identify and assess the risks of material misstatement of the financial statements due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control; § obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control; § evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
3 ANNUAL REPORT 2020
§ conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern; § evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation; § communicate with those charged with governance, including the supervisory body, regarding, among other matters, the planned scope and timing of the audit, and significant audit findings including any significant deficiencies in internal control that we identify during our audit; § determine, from the matters communicated with those charged with governance, including the supervisory body, those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes their public disclosure; and, § provide the supervisory body with a statement that we have complied with the relevant ethical requirements regarding independence and communicate all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Our responsibility also includes the verification that the information contained in the management report is consistent with the financial statements, and the verification of the requirements as provided in numbers 4 and 5 of Article 451 of the Portuguese Companies’ Code (Código das Sociedades Comerciais).
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS On the Management Report Pursuant to Article 451(3)(e) of the Portuguese Companies' Code, it is our opinion that the management report was prepared in accordance with the applicable legal and regulatory requirements and the information contained therein is consistent with the audited financial statements and, having regard to our knowledge and assessment of the Entity, we have not identified any material misstatements. On the Corporate Governance Report Pursuant to Article 451(4) of the Portuguese Companies' Code, it is our opinion that the corporate governance report includes the information required to the Entity to provide under article 245-A of the Securities Code, and we have not identified any material misstatements on the information provided therein in compliance with paragraphs c), d), f), h), i) and m) of that article. On the additional matters provided in Article 10 of the Regulation (EU) no. 537/2014 Pursuant to Article 10 of the Regulation (EU) no. 537/2014 of the European Parliament and of the Council, of 16 April 2014, and in addition to the key audit matters mentioned above, we also report the following:
4
§ We were first appointed as auditors of the Entity in the shareholders general assembly held on 27 September 2017 for a mandate from 2018 to 2021. § Management as confirmed to us that they are not aware of any fraud or suspicion of fraud having occurred that has a material effect on the financial statements. In planning and executing our audit in accordance with ISAs we maintained professional scepticism, and we designed audit procedures to respond to the possibility of material misstatement in the financial statements due to fraud. As a result of our work, we have not identified any material misstatement of the financial statements due to fraud. § We confirm that the audit opinion we issue is consistent with the additional report that we prepared and delivered to the supervisory body of the Entity on 06 April 2021. § We declare that we have not provided any prohibited services as described in Article 77(8) of the Ordem dos Revisores Oficiais de Contas Statutes, and we have remained independent of the Entity in conducting the audit.
6 April 2021
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (no. 189) represented by Paulo Alexandre Martins Quintas Paixão (ROC no. 1427)
5 ANNUAL REPORT 2020
(Page intentionally left blank) REPORT AND OPINION OF THE AUDIT BOARD REPORT AND OPINION OF THE AUDIT BOARD SEMAPA - Sociedade de Investimento e Gestão, SGPS, S.A. 5. Within the scope of our competences, we find that:
Report and Opinion of the Audit Board a) The separate Income Statement, the separate Financial Statement, Separate Financial Statements the separate Statement of Comprehensive Income, the separate Statement of Changes in Equity and the separate Cash Flow Year 2020 Statement and its Notes to the separate financial statements give a true and fair view of the financial position of the company, in respect of its results, comprehensive income, changes in equity and Dear Shareholders, cash flow;
1. As laid down by law, established in the articles of association and in b) The accounting policies and valuation criteria applied are in carrying out the mandate entrusted to us, we hereby deliver our report conformity with the International Financial Reporting Standards on the audit activities carried out in 2020 and issue our opinion on the (IFRS), as adopted in the European Union, and ensure that a true Management Report and the Separate Financial Statements submitted and fair assessment of the company's assets and results is given, by the Board of Directors of Semapa – Sociedade de Investimento e and the findings and recommendations of the external auditor have Gestão, SGPS, S.A., for the year ended 31 December 2020. been followed through;
2. During the year, we monitored the company's activity on a regularly c) The Management Report clearly shows the development of the basis, with the frequency and to the extent that we deemed business and the situation of the company, highlighting key aspects appropriate, namely through regular meetings with the Company's of the activity; Management and Directors. We oversaw the reviewing of the accounting records and the supporting documents, and the efficacy of d) The Corporate Governance Report covers all of the points required the risk management, internal control and audit systems. We ensured under the terms of Article 245 A of the Securities Code, and compliance with the law and the Articles of Association. We did not run considered the recommendations to the Code of the Portuguese up against any obstacles in the exercise of our duties. Corporate Governance Institute (IPCG).
3. We met several times with the Statutory Auditor and the External 6. We are of the opinion that the allocation of profits as proposed by the Auditor, KPMG & Associados, SROC, Lda., to monitor the audits Board of Directors does not run counter to the applicable legal or conducted and supervise their independence. We have analysed the statutory provisions. legal Accounts Certificate and Audit Report, and merit our agreement. 7. Consequently, taking into account the information delivered by the 4. The Audit Board analysed the proposals that were presented to it for company's Board of Directors and Departments, and the conclusions of non-audit services by the Statutory and External Auditor, having the legal Accounts Certificate and Audit Report, we are of the opinion approved those that related with permitted services, did not affect the that: independence of the Statutory and External Auditor and fulfil the other legal requirements. a) The Management Report should be approved;
b) The separate Financial Statements should be approved;
c) The allocation of results as proposed by the Board of Directors should be approved. ANNUAL REPORT 2020
5. Within the scope of our competences, we find that:
a) The separate Income Statement, the separate Financial Statement, the separate Statement of Comprehensive Income, the separate Statement of Changes in Equity and the separate Cash Flow Statement and its Notes to the separate financial statements give a true and fair view of the financial position of the company, in respect of its results, comprehensive income, changes in equity and cash flow;
b) The accounting policies and valuation criteria applied are in conformity with the International Financial Reporting Standards (IFRS), as adopted in the European Union, and ensure that a true and fair assessment of the company's assets and results is given, and the findings and recommendations of the external auditor have been followed through;
c) The Management Report clearly shows the development of the business and the situation of the company, highlighting key aspects of the activity;
d) The Corporate Governance Report covers all of the points required under the terms of Article 245 A of the Securities Code, and considered the recommendations to the Code of the Portuguese Corporate Governance Institute (IPCG).
6. We are of the opinion that the allocation of profits as proposed by the Board of Directors does not run counter to the applicable legal or statutory provisions.
7. Consequently, taking into account the information delivered by the company's Board of Directors and Departments, and the conclusions of the legal Accounts Certificate and Audit Report, we are of the opinion that:
a) The Management Report should be approved;
b) The separate Financial Statements should be approved;
c) The allocation of results as proposed by the Board of Directors should be approved.
8. Finally, the members of the Audit Board are grateful to the Board of Directors, the key supervisors and other company staff, as well as to the statutory auditor KPMG & Associados, SROC, Lda. for their collaboration.
Lisbon, 06 April 2021
The Chairman of the Audit Board
José Manuel Oliveira Vitorino
Member of the Audit Board,
Gonçalo Nuno Palha Gaio Picão Caldeira
Member of the Audit Board,
Maria da Graça Torres Ferreira da Cunha Gonçalves ANNUAL REPORT 2020
(Page intentionally left blank) SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A. PUBLIC LIMITED COMPANY
Av. Fontes Pereira de Melo, No. 14, 10º, 1050-121 Lisboa Tel (351) 213 184 700 | Fax (351) 213 521 748
WWW.SEMAPA.PT
Company Registration and Corporate Taxpayer Number: 502 593 130 | Share Capital: EUR 81 270 000 ISIN: PTSEM0AM0004 | LEI: 549300HNGOW85KIOH584 | Ticker: Bloomberg (SEM PL); Reuters (SEM.LS)
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