ISAGRO
Consolidated Half Yearly Report at 30th June 2004
BOARD OF DIRECTORS REPORT ON OPERATIONS
Dear Shareholders.
The consolidated half yearly report as at 30th June 2004 of your group shows a Net Profit after
taxes of Euros 12.772 millions,
after having carried out amortisation and depreciation
amounting to Euros 3.700 millions, of which Euros 0.476 millions for the amortisation of
Goodwill, and provisions for taxes of Euros 4.574 millions.
The aforesaid level of Net Profit after taxes also includes incomes of an extraordinary nature
that come from the acceptance and usage of what is contained in the Legislative Decree n°. 6 of
10th January 2003, the so-called “Vietti Reform”, which foresees the elimination of the
interferences of a fiscal nature within the statutory postings and which has brought about, in the
opening balances of the Financial Statements of Isagro, the elimination of the effects of those
interferences of a fiscal nature that have taken place during previous financial years, which
consist of the relative part of the investments for the development of new products that has been
sustained in prior years and already amortised and for the relative contributions treated as a
complete write off that have already passed through the Profit and Loss Account, on an accruals
timing basis, both of which are net of the relative fiscal impacts, posting to the accounting books
the reversal of the effects by means of the direct attribution of them to the Profit and Loss
Account, with, at the same time, an increase, net of the fiscal effect, of the Net Equity. The
posting of these write offs to the balances contained in the Profit and Loss Account has taken
place in order to fulfil the measures of the Italian Accounting Organism contained in the
document called “The main effects of the Company Law Reform on the drawing up of the
Financial statements” .
The Net Profit with the exclusion of the aforesaid extraordinary items caused by the application
of the “Vietti Reform” (Net result before “Vietti” gains ), amounting to Euros 6.725 millions
2
net of the relative fiscal write backs. Specifically, it amounts to Euros 6.047 millions. growing
by 30.6% compared to the 2003 pro-forma, of Euros 4.629 millions, and by 67.4% compared to
the 2003 actual of Euros 3.613 millions.
The build up of the pro-forma data for 2003, which is necessary in order to be able to make a
proper comparison between the first half year 2004 and the first half year 2003, was created by
making the period 1st January 2003 to 30th June 2003 uniform with the effects of the above
mentioned Legislative Decree n°. 6 of 10th January 2003.
It is highlighted that within the pro-forma Financial statements referred to for the first half year
2003 the items that have undergone the necessary adjustments are the following:
a) at the level of operating costs and revenues the research contributions from the Ministry for
Innovation, the University and Research (MIUR) and the amortisation of the development
costs that have been capitalised have both been reversed;
b) at the level of Net Fixed Capital, on the one hand. the costs for the developing of new
products, that have been increased by the costs of new products already amortised. net of the
relative fiscal impact, and. on the other hand the medium to long term liabilities increased
by the MIUR contributions posted to the Profit and Loss Account in prior financial years.
also net of the relative fiscal impact;
c) at the level of Own Means there has been an increase equal to the balance of point b).
amounting to Euros 6.725 millions;
With reference to Revenues, these have gone from Euros 87.775 millions of the first half year
2003 to Euros 93.198 millions of the first half year 2004 (+ 6.2%), while the EBITDA has
reached, at 30/06/2004, Euros 15.331 millions compared the Euros 14.425 millions pro-forma
at 30/06/2003 (+ 6.3%).
3
Euros millions
30/06/04
30/06/03
pro-forma
Difference
%
30/06/04
at same exchange
rate*
Revenues
93.198
87.775
+6.2%
95.190
EBITDA (G.O.M.)**
15.331
14.425
+6.3%
16.426
6.047
4.629
+30.6%
n.d.
6.725
-
n.s.
n.d.
Net Profit
12.772
4.629
n.s.
n.d.
Net Financial payables
76.611
96.336
-20.5%
n.d.
Net Profit before “Vietti” gains
Gains from the “Vietti Reform”
* At the same exchange rates for the US Dollar USA and the Rupee as 2003; see Attachment 1
** Includes the non speculative coverage on raw material purchases.
At the same exchange rates as those of the first half year 2003 it can be seen that the Revenues
would have reached Euros 95.190 millions (+ 8.4% compared to 2003), while the EBITDA
would have been Euros 16.426 millions (+ 13.9% compared to 2003 pro-forma).
Regarding the Net financial payables
it can be seen that they went from
Euros 96.336
millions at 30/06/2003 to Euros 76.611 millions at 30/06/2004, with an improvement in the 12
months from July 2003 to June 2004 of Euros19.725 millions (up 20.5%). of which:
-
Euros 13.480 millions of net incomes coming from the quotation of Isagro S.p.A on the
Computerised Stock Exchange managed by Borsa Italiana S.p.A.. finalised on 5th
November 2003 (Euros 15.926 millions of incomes gross of Euros 2.446 millions of costs).
-
Euros 6.245 millions of cash produced, after having paid dividends on the 2003 profit of
Euros 1.600 millions. Therefore, gross of the payment of the aforesaid dividends the free
cash flow generated by your Group in the period July 2003 to June 2004 amounts to Euros
7.845 millions (see also Attachment 1).
Compared to the values at 31/12/2003, the net financial payments at 30/06/2004 grew by Euros
7.778 millions (+11.3%), due to the well known seasonal effect of Isagro’s business,
characterised by a first peak of the sales revenues in the 2nd quarter of the year, with a
4
consequent increase in the working capital and of the relative short term indebtedness that is
necessary to cover it.
The improvements in the operating results of the first half year 2003 pro-forma, that have been
posted even after higher levels of amortisation, depreciation and provisions have taken place in
a situation that has seen (i) a significant strengthening of the Euro compared to the US Dollar
U.S.A., which weakened by about 11% compared to the preceding half year and the Indian
Rupee, which is the accounting currency of Isagro Asia Agrochemicals Pvt. Ltd., which
weakened by about 4% compared to the preceding half year and this strengthening of the Euro
has penalised your group compared to the first half year 2003. (ii) a slowing down of the sales
in the Middle East as a result of the war and political related events that took place between
2003 and 2004 e (iii) a stock situation at the beginning of the year, in Europe in general and in
Italy in particular, that had been built up during the last financial year following the
unfavourable weather conditions, which is basically being absorbed during the first half year
2004. These conditions had a negative influence on the sales of the first half-year, in the sector
of copper based fungicides, within which Isagro holds a leadership position.
However, these negative elements of the situation have been more than compensated for by
important improvement factors in sales performance and efficiency such as:
-
the continuing, already in the first half year, of the growth trend of the owned fungicide
Tetraconazole, a leading edge product of Isagro, on the soya crop in Brazil, which is second
biggest market in the world for this crop, in the fight against a serious fungus disease called
“Asian Rust”. Together with this there is highlighted that in
2004. and for the sixth year
running the have continued the sales of Tetraconazole in the very important United States
market, where it has been used to fight the disease called “Cercospora” that attacks the sugar
beet crop, on the basis of the so called “Section 18”, which while awaiting the measures for
the definitive registration of the product that is still being examined by the EPA, has allowed
your group to sell the product without the definitive registration.
-
The gaining of value, both in terms of business and of human resources from the parts of
companies that were acquired in 2001, which has made appositive contribution to the
5
performance del Your group. Specifically, from the point of view of business, during the
first half year del 2004 the factory of Panoli (India) has reached full production capacity of
the intermediate product called
M-Alcohol, which has enabled the achievement of
important efficiency levels regarding the costs of the production of the fungicide
Tetraconazole. From the point of view of human resources there have come out the
beneficial recoveries of efficiency following the rationalisation activities that were already
put in place starting from 2002, continued in 2003 and in the first half year 2004.
Consequently the labour cost went from Euros 13.308 millions in the first half year 2003 to
Euros 12.661 millions in the first half year 2004 (- 4.9%).
The decrease in the net financial charges in the first half year 2004 when they were Euros
1.826 millions, which is a decrease of 31.4% compared to the Euros 2.661 millions of the first
half year 2003, due both to the quotation on the Milan Stock Exchange referred to above and to
underlined decrease in the seasonal working capital.
The cash flow , profit before the “Vietti” gains plus amortisation and depreciation generated in
the first half year 2004, amounting to Euros 9.747 millions, up by 23.2% compared to the Euros
7.911 millions of the first half year 2003 pro-forma, has enabled the total coverage of the net
investments for the period of Euros 5.3 millions, while the coverage of the increase in the
seasonal working capital has been partially carried out with own means and for the balance by
the recourse to credit lines. Specifically, at 30/06/2004 your group has had recourse to short
term credit lines, net of available liquidity for Euros 48 millions, in the context of a total credit
line availability of Euros 110 millions.
With reference to the development of the new owned molecules of chemical synthesis, i.e. the
fungicide IR6141, the herbicide IR5878 and the fungicide IR5885), it is highlighted that the
costs sustained for the development of the new products
IR5878 and IR5885 were also
capitalised in the first half year of the current financial year, Euros 3.1 millions), while there has
begun the charging to the Profit and Loss Account of the amounts relative to IR6141, Euros 0.1
6
millions, for which a first, temporary, registration has been obtained in Portugal and for which it
is presumed sales will begin between the end of 2005 and the beginning of 2006. The herbicide
IR5878 and the fungicide IR5885 are foreseen to be put on sale starting from 2006 and 2007,
respectively.
The Agrochemicals Market
The market research company Phillips McDougall has highlighted a significant increase of the
US Dollar sales of the main companies within the sector. However, this increase is, at least
partially, falsified by the weakening that took place in the American against the other main
currencies. Therefore, putting the values into Euros the same source estimates the increase in
sales for the first half year 2004 of 4% compared to the same period for 2003.
The driving force has been the Latin American area., favoured by the economic turnaround in
most of its main countries. Specifically, Brazil has increased its cultivated surface area in the
2003/2004 campaign by more than 7% compared to the previous one (source: CONAB.
Numbers gathered in June 2004), increasing particularly the crops of soya (+15%), rice (+12%)
and cotton (+45%), while there was a drop in the cultivation of maize. With particular reference
to the soya crop, even if their was a significant increase in the cultivated area, worldwide
production of this product fell by more than 4%, also because of the fungus infection called
Asiatic Rust.
In Europe. The return of less dry climatic conditions has favoured the growth of pathogens and,
consequently, a greater usage of fungicides, whose consumption was depressed in the first half
year of the last year that was particularly hot and dry. There has also been positive the first signs
of the drop off of the set-aside, which is the subsidised withdrawal from production of seeds,
and the re-usage of agricultural areas that had been previously left fallow in order to let them
rest. However, even with good consumption numbers the sales of the main companies have been
7
significantly slowed down by the high stock levels, already referred to, that were held by
resellers at the beginning of the year and caused by the adverse weather conditions of 2003.
In North America, an area that, in the first half year 2004, was characterised by good weather
conditions, there have grown the areas given over to maize and soya while there was a drop in
that dedicated to cereals. The price of the herbicide Glifosate has continued to be eroded, but of
a lesser size. The very widespread availability of generic products with similar functions has
brought down the price of this herbicide, which is the highest selling product in North America
thanks, above all, to the possibility o0f its being able to be used on GMO crops.
In Japan the agrochemicals market has shown some slight signs of improvement, driven by the
market garden sector and by fungicides and insecticides for rice. However, there does remain
the reducing trend in government subsidies, which, for a few years now has been downsizing
the Japanese market. Furthermore, the remains a high demand level, in that country, for
products with a reduced environmental impact and that therefore allow the use of less
manpower in the crop operations.
In the rest of Asia, China has played a leading role. In that country, in fact, the energy crisis that
has taken place has lead to the deviation of internal energy consumption towards the more
profitable sectors, particularly downsizing local production and the exporting of generic
agrochemicals, among which the same Glifosate, which have therefore benefited in terms of
price. Furthermore, it has to be noted that there is a strong trend of interest towards cereals
shown by the high levels of imports in the second quarter and in order to maintain itself in a
system of self sufficiency with a fast growing population the Chinese government seems to be
directing itself towards an incentives policy to increase the cultivated areas and production
levels, with a consequently expected forecasted increase in the usage of agrochemicals.
Considering the main foodstuffs, cereals, maize and soya, which absorb about one third of the
worldwide consumption of agrochemicals, it is necessary to underline how towards the end of
the second quarter consumer prices suffered a decisive drop after having reached the highest
8
price levels that have been attained in the last few years. These pricing dynamics and the
consequently induced effect of them on the means of production, among which there are also
agrochemicals, could partially reduce, in the second half of the year, those very positive effects
that have been posted in the first half year.
Profit and Loss Account – Summary data
The Revenues of the first half year 2004 grew by 6.2% compared to those of the first half year
2003 pro-forma, due to a combination of the following elements:
-
On the one hand, in a favourable sense, the above mentioned higher sales of Tetraconazole
in Brazil, which it is estimated will reach their peak during the second six months of the
year.
Profit & Loss Account - millions € 1st half 2004 1st half 2003
Actual
Pro-forma Diff. %
Revenues
93.198
87.775
(65.206)
(60.042)
Added value
27.992
27.733
% On revenues
30.0%
31.6%
Labour costs
(12.661)
(13.308)
15.331
14.425
16.4%
16.4%
16.9%
Amortisation and depreciation
Provisions
(3.700)
(1.169)
(3.282)
(0.635)
(5.558)
(0.635)
EBIT (Operating profit)
10.462
10.508
11.2%
12.0%
9.8%
Financial components
Write-downs of shareholdings
Extraordinary components
(1.826)
(0.045)
1.798
(2.661)
(0.042)
0.482
(2.661)
(0.042)
0.782
Profit before taxes
10.389
Monetary operating costs
EBITDA (G. O.M.)*
% On revenues
% On revenues
+6.2%
Memo:
1 half 2003 Diff. %
Actual
87.775
+6.2%
st
(59.644)
+0.9%
28.131
-0.5%
(13.308)
+6.3%
-0.4%
8.287 +25.3%
14.823
8.630
6.709
+3.4%
+22.4%
+45.6%
Before gains for the “Vietti Reform”
% On revenues
Current, deferred taxes and
minorities profit
Group net profit
11.1%
9.4%
7.6%
(4.342)
(3.658)
(3.096)
6.047
4.629 +30.6%
3.613
+49.5%
9
Before gains for the “Vietti Reform”
% on revenues
Gains for “Vietti Reform”
Group Net Profit
Cash Flow**
6.5%
5.3%
6.725
-
12.772
9.747
4.1%
n.s.
-
4.629
n.s.
7.911 +23.2%
3.613
9.171
n.s.
+6.2%
before gains for the “Vietti Reform”
* Includes the non speculative coverage of the raw material copper purchases
** Net profit of the Group before the gains for the “Vietti Reform” plus amortisation and depreciation
-
on the other hand, in an unfavourable sense, the above mentioned effects of the weakening
of the US Dollar and the Indian Rupee, the lower sales in the Italian market, in particular in
the copper based products area partially set off by the higher sales on foreign markets, due
to a tender competition won in Africa, the situation caused by the high stock levels at the
beginning of the year, which, as has already been said are at the stage of being absorbed at a
30th June 2004 and by the growing levels of competition as well as a decrease in the amount
of work done on behalf of third parties following the withdrawal from the Italian market of
some products of third parts that were given to us to work on to order.
With reference to the Added Value at 30th June 2004, of Euros 27.992 millions, it is pointed
out that the growth of the revenues referred to above is basically stable compared to 30th June
2003 ( Euros 27.733 millions) pro-forma, following the lower capitalisations of the costs of a
R&D as a result of the decision to expense, from 1st January 2004, on the one hand, the costs
relative to the development of the new fungicide IR6141, which is coherently in line with the
accounting principles of Isagro, which lay down that the costs of developing new products are
capitalised until a first registration of the them is obtained that, in the case of this product, has
been obtained in Portugal and, on the other hand, for prudential reasons the costs relative to the
extraordinary defence of the insecticide Dimetoato and the development of some minor
biological products with, at the same time, a write down of the net value at 30/06/2004, which
is included among the extraordinary charges.
The EBITDA, then, thanks to the lower incidence of the labour cost, which, as has been said, in
the first half year 2004 by Euros 0.647 millions compared to the first half year of 2003
10
following the rationalisation initiatives that has more than compensated for the factors shown
above, going from the Euros 14.425 millions of 30th June 2003 pro-forma to the Euros 15.331
millions of 30th June 2004, with a positive progress 6.3% that is equal to 16.4% of the revenues
in the first half year 2004.
It is also pointed out that, as already partially anticipated above, at parity of foreign exchange
rates with the first half year 2004 the revenues would have amounted to Euros 95.190 millions
(+8.4% compared to the first half year 2003 pro-forma), while the
EBITDA would have
reached 16.426 millions (+ 7.1%).
With reference to the EBIT, it settled at 30th June 2004 at the level of Euros 10.462 millions.
Basically the same as the amount of Euros 10.508 millions at 30th June 2003 (-0.9%), in the
presence of higher amortisation, depreciation and provisions while the EBIT, as a percentage of
the revenues, went down, due to those elements that have been described previously, from the
12.0% of the first half year 2003 to 11.2% for the first half year 2004.
The net financial charges have gone down from the Euros 2.661 millions of the 30th June 2003
to Euros 1.826 millions at 30th June 2004, with an improvement of more than 31.4 %., as has
already been stated before, mainly due to the reduction in the financial payables coming from
the quotation operation on the Milan Stock Exchange associated with the reduction of the
seasonal working capital.
With reference to the net extraordinary items, with the exclusion of the gains that came in 2004
from the application of the so called “Vietti Reform”, these were equal, in the first half year to
Euros 1.8 millions, of which:
-
Euros 5.2 millions of extraordinary incomes deriving from the indemnities paid over by the
company Bayer CropScience relative to is exit from the joint venture in the formulating
company AgriFormula S.r.l. , of which Isagro purchased 100% in the month of June 2004.
11
-
Euros 3.4 millions of extraordinary charges coming from (i) Euros 1.2 millions of write
downs of tangible fixed assets belonging to the company AgriFormula S.r.l.. (ii) Euros 1.8
of write downs of intangible fixed assets, of which Euros 1.0 millions relative to the
extraordinary defence of the insecticide Dimetoato and
Euros 0.8 millions for the
development of some minor biological products, coherently with the prudential criteria of
expensing of the relative costs from 1st January 2004) and (iii) Euros 0.4 millions for
provisions of an extraordinary nature that are specifically linked to a series of rationalisation
interventions.
Due to the effect of the items given in the foregoing analysis the Profit before taxes, with the
exclusion of the gains relative to the application of the “Vietti Reform” at 30th June 2004 grew
by 25.3% compared to the 30th June 2003 pro-forma, Euros 10.389 millions against Euros
8.287 millions), while the Net Profit after taxes, with the exclusion of the gains relative to the
application of the “Vietti Reform”, reached the amount of Euros 6.047 millions in the first half
year 2004 versus the Euros 4.629 millions at 30/06/2003 pro-forma., which, furthermore,
includes a full IRPEG (Corporate Tax) rate. In fact, with reference to taxes it has to be
remembered that that in the estimate of the IRES (Corporate Tax replacing IRPEG from
01.01.2004) of the Group Parent at 30th June 2004, there has been used the facilitated rate of
20%, which is currently foreseen in the taxation legislation of our country for companies that
were quoted in 2003. The legislation foresees the application of this rate for the financial years
2003, 2004 and 2005. Furthermore it is highlighted that on 18th February 2004 the European
Commission has started up a procedure, according to what is contained in article 88, paragraph
2, of the EC Treaty regarding the legitimacy of the legitimacy of the taxation legislation that has
been referred to above.
12
Balance Sheet – Summary data
Balance Sheet - millions of €
Net Fixed Assets
Net working Capital
Net Capital Invested
30/06/04
30/06/03
Actual
pro-forma
64.441
60.248
78.916
83.150
30/06/03
actual
55.136
83.150
31/12/03
pro-forma
65.868
66.030
31/12/03
actual
59.143
66.030
143.357
143.398
138.286
131.898
125.173
Own means
Employee Leaving Indemnity
Net financial payables
59.447
7.269
76.611
38.821
8.241
96.336
33.709
8.241
96.336
55.270
7.795
68.833
48.545
7.795
68.833
Of which M/L term
28.093
29.707
29.707
27.598
27.598
1.29
2.48
2.85
1.25
1.42
Covered by
Fin. Payables net of Own means
During the first half year 2004 the net fixed assets, i.e. fixed assets and shareholdings net of the
relative medium/long term funds set up to cover these asset, went from the Euros 60.248
millions of the 30th June 2003 pro-forma to the Euros 64.441 millions, with a growth of 6.9%
for the carrying out of the investments in the development of new products the investments in
tangible fixed assets net of the amortisation, depreciation and write downs already referred to.
It can be seen that the increase in the net fixed assets at 30th June 2004 compared to 30th June
2003 actual, on the contrary, is for the most part due to the application of the “Vietti Reform”,
which as meant, as was foreseen, the retaking of the costs for the development of new products
that have already been amortised in previous financial years, net of the relative fiscal benefits,
which have constituted a fund for deferred taxes. Furthermore, there have also been carried out
adjustments in order to reverse from the value of the said assets the contributions received from
the
MIUR, net of the relative fiscal impact, for those products being developed that have
already passed through the Profit and Loss Account in the previous financial years by means of
the charging to it of the amortisation referred ton above.
13
With reference to the Net Working Capital, this settled at 30th June 2004 at the level of Euros
78.916 millions, which was down by 5.1% compared to the Euros 83.150 millions of the 30th
June 2003, mainly due to the increase in the payables for supplies that went from Euros 35.642
millions at 30th June 2003 to Euros 41.362 millions at 30th June 2004, following the purchases
of raw materials for the production of the fungicide Tetraconazole, carried out during the second
quarter to cover the forecasted sales for the second half of the current year.
On the basis of the foregoing happenings the Net Capital Invested at 30th June 2004 amounted
to Euros 143.357 millions, which is in line with the Euros 143.398 millions of the 30th June
2003 pro-forma.
With reference to the Employee Leaving Indemnity, went down Euros from 8.241 millions at
30/06/2003 to Euros 7.269 millions at 30/06/2004 (-11.8%), mainly due after having given the
guaranteed opportunity to the employees of your group to be able to use their Leaving
Indemnity to subscribe for shares of Isagro at the time of the IPO and also due to the effect of
the leaving of the company by employees as a result of the organisational rationalisation
initiatives that have been referred to before.
The level of Own Means at 30/06/2004 is higher compared to 30/06/2003 pro-forma due to the
net incomes coming from the quotation operation and the profit for the period belonging to the
Group, in spite of the dividends that have been paid out to the shareholders for Euros 1.600
millions and the conversion differences coming from the weakening of the Indian Rupee,
already referred to, which is the accounting currency of the company
Isagro Asia
Agrochemicals Pvt. Ltd., going from Euros 38.821 millions at 30/06/2003 pro-forma to the
Euros 59.477 millions at 30/06/2004.
Compared to the 30/06/2003 actual,
the significant increase in Own Means, furthermore,
reflects the effect of the application of the Vietti Reform, which has brought about an increase
in the assets and a parallel increase in the Net Equity of Euros 6.725 millions.
14
With reference to the net financial payables these have gone down from Euros 96.336 millions
at 30/06/2003 to Euros 76.661 millions at 30/06/2004, thanks both to the net incomes from the
share quotation of Euros 13.480 millions and to the free cash flow generated during the period
July 2003 to June 2004 of Euros 7.845 millions before the payment of the dividend on the
profit for 2003 of Euros 1.600 millions, compared to a free cash flow achieved in the period
July 2002 to June 2003 of Euros 5.300 millions, with a growth of 48.0%.
Consequently, the Debt to Equity Ratio at 30th June went from 2.48 (30/06/2003 pro-forma) to
1.29 (30/06/2004), with the Net Fixed Assets equal, as has been said to Euros 64.441 millions,
fully covered by the Own Means of Euros 59.477 millions together with the Employee Leaving
Indemnity of Euros 7.269 millions. Against this, the medium and long-term payables of Euros
28.093 millions and the short-term payables net of the liquidity of Euros 48.518 millions are
used to finance the working capital. Specifically, the net short term financial payables, as have
been shown previously were 61.5% of the working capital and 62.4% of the trade receivables,
which show an excellent historical record of receipts.
Specifically, in attachment 5 there are shown the details of the net financial position of Isagro.
Main indicators
The following table shows the main economic and financial indicators relative to your group.
30/06/2004
actual
30/06/2003
pro-forma
Earnings per share (€ - W/O gains for “Vietti Reform”)
0.38
0.29
Own means per share (€)
3.71
3.23*
Free cash flow per share (€ - 12 months)
0.49
0.33
EBITDA / Net financial charges
8.40
5.42
Net financial payables / Own means
1.29
2.49
Short-term fin. payables / Working Capital
0.61
0.80
Short-term fin. payables / Trade Receivables
0.62
0.92
15
(Own means +ELI+M/L fin. payables) / Fixed Assets
(Own means + ELI) / Fixed Assets
* On 12 million shares (16 million in 2004 – following the I.P.O. of 5
th
1.47
1.27
1.04
0.78
November 2003)
Main events the first half year 2004
(A): SALE OF THE PART OF THE COMPANY “VERDEVIVO” TO THE KOLLANT GROUP
With a view to concentrating greater focus on the Group’s core business, both in terms of the
management of the sales of Tetraconazole and in terms of he finalisation of the process of
developing new agrochemicals, which will be launched on the market starting from 2005, the
Group Parent Isagro S.p.A. has signed an agreement to sell the “Home & Garden” product line
which is known as “Linea VerdeVivo”, purchased in 2001 in the context of the purchase of the
agrochemicals part of the company Caffaro S.p.A., to the Kollant Group with effect from 1st
September 2004.
The sale of this area of the company, which invoiced 1.6 million Euros in 2003 shall enable the
generation of resources between capital disinvested and gains around 2 million Euros.
(B): P URCHASE OF 100% OF AGRIFORMULA
The Group Parent Isagro S.p.A. purchased, from Bayer CropScience the shareholding of 37%
that this latter company held in the formulating company AgriFormula S.r.l., thus taking its
own shareholding in AgriFormula to 100%.
This operation, which
effectively brings to an end the period of cooperation within
AgriFormula that was begun in 2001 between Isagro and Aventis CropScience, which was then
purchased by Bayer CropScience, was defined within the overall picture of the wide ranging
cooperation between Isagro and Bayer CropScience, whose Group Parent holds 15.46% of
Holdisa S.r.L.., the parent company of Isagro SpA. The purchase of the holding was made for a
price of 0.3 million Euros, as well as being accompanied by a payment from Bayer CropScience
of 5.2 million Euros and also its commitment to have work carried out by AgriFormula up to the
end of 2005, relative to the winding up of the various agreements existing between the parties
regarding AgriFormula.
16
The effect of the aforesaid agreement will be to give Isagro the total control of its own
formulating activities in Italy, with the full opportunity of optimising them.
(C): G ROWTH OF TETRACONAZOLE SALES
In the first half year 2004 there continued the growth in the sales of the owned fungicide
Tetraconazole, regarding which, on the one hand there was released, for the sixth year running,
the so called “Section 18”, which is the temporary exemption from the obligation of definitive
registration on the US market, by the E.P.A. (Environmental Protection Agency) and, on the
other hand, there has taken place strong sales growth in South America, i.e. Brazil, regarding the
soya crop in order to combat the fungous infection, already referred to, called “Asian Rust”.
Regarding the commercial seasonality of this market it is underline that this will be mainly
concentrated in the second half of the year. On the basis of current available information, which
shows that the Asian Rust disease is spreading even further in the sub-continent of Latin
America, both attacking areas in Brazil that were not yet hit by it in 2003 and extending its
negative effects also to other countries such as Argentina, Bolivia and Paraguay. Isagro expects
to see a continuation of the growth trend of the sales of Tetraconazole also in the second half
year 2004.
Furthermore, the Brazilian authorities have issued a second registration for the sale of the
fungicide Tetraconazole to the distribution company Hokko do Brasil, a company belonging to
the partner Arysta LifeScience. This second registration shall Isagro to have side by side with
the current distribution channel in Brazil, which is Sipcam Agro, a company belonging to the
partner Sipcam, a new Distributor, thus opening the road, through the coverage of new segments
of customers, to a significant increase in the sales of Tetraconazole in Brazil, which is the
second producer of soya in the world, in line with the estimates communicated to the market last
March.
(D): D EVELOPMENT OF NEW AGROCHEMICALS
17
? Development of IR6141, or Benalaxyl-M, an optical isomer of Benalaxyl The registration
dossier relative to the active principle involved is currently being evaluated by the European
Authorities, for inclusion in Annex I, according to Directive 91/414. During the first half
year 2004 there were prepared the Dossiers relative to the ready for use formulations, which
were then sent to the competent Authorities in the main European countries. There are also
going forward as planned the filed experimentation activities aimed at completing the
biological data required in order to obtain local registrations, the usage extension, i.e. on
other crops, and the exploring of new markets. It is to be remembered that in June 2003
there was obtained a first provisional registration in Portugal.
? Development of IR5878, a herbicide for precocious post-emergency treatment of
rice
paddies. The development of this broad spectrum herbicide is going ahead according to plan
and it is forecasted that the studies relative to the active principle and a representative
formulation shall be completed by the end of the current year. In the month of June 2004
there end, as planned, some fundamental studies on long term toxicity, which have
confirmed the favourable toxic profile of the molecule in question. A first important step
has been taken in the registration process in the United States, which was the sending of the
EUP (Experimental Use Permit) that is the prelude to large scale experimentation in the
main rice growing states in the US. In the geographical areas where the sale of the product is
forecasted, which are mainly Italy, Spain, Brazil, China, India and the United States, there
have also gone ahead the experimentation for local registrations, i.e. tests of agronomic
effectiveness and sample testing of treated crops to be able to calculate residue levels.
? Development of IR5885, an anti-mildew fungicide. The development of IR5885 is also
proceeding according to plan and within the forecasted times. In the first half year 2004,
contacts were made with a country in the European Union in order to have a preliminary
evaluation of the registration Dossier, taking into account that the official presentation will
take place, for Europe, during 2005. Furthermore, there was started up a very intensive field
experimental program for the valuation of mixtures with innovative partners, with the goal
of identifying high performance ready to use formulations and an improved environmental
impact. Furthermore, there are currently ongoing experimental tests in the United States,
18
which, outside of Europe, is one of the most interesting and profitable markets, and there
have also been started up the procedures for the authorisations to carry out experimental
tests in the main South American countries and in India.
?
Copper based products: Isagro is committed to three forms of product containing copper,
which are Oxychloride, Hydroxide and Bordeaux mixture.. In the first half year there were
favoured some development activities in new markets. Specifically, there were activated the
effectiveness tests in the United States, one of the key countries in the “Hydroxide project”.
Furthermore, there were carried out the procedures for the authorisation to carry out
experimental tests in Brazil with different copper based products, and others were also
activated in other South American countries. There has also continued the development of
innovative formulations, the so called “WG” – Wettable Granules. In Italia there was
carried out the campaign to launch Oxychloride WG, which combines with the new
formulation a substantial reduction in the dosage and therefore a lower environmental
impact. Furthermore, there was presented the request for the registration in Greece and
Hungary, while there went ahead as planned the development activities within Europe in
France, the Czech Republic, the Slovakian Republic, Portugal, Asia (Turkey) and Africa
(Kenya, with the goal of replacing, in the medium term, the existing formulations in powder
format, the so called “WP” – Wettable Powder), with a benefit in terms of profitability.
?
Biological products :
(i)
Microbiological products: in the first half year 2004 there was activated the program
of creating the studies necessary for the compilation of the dossier of the product
Remedier, foreseen for the European revision and to enable the presentation of the
requests for registration in the main European countries.
(ii)
Pheromones: also in this case, for the system called Ecodian CP there was made
ready the documentation necessary to be able to present within the year 2004 the
requests for registration in the main target markets of France, Austria and Portugal.
(iii)
Bio-stimulant products: during the first half year 2004 there took place in Italy the
campaign to launch the new formulations of Siapton X and Ergovit XL which has
enabled the revitalisation of the range of products already on sale, with very good
19
technical results. In Spain, which is the main European market for bio-stimulant
products, the aforesaid new products are currently the subjects of market tests in
order to evaluate the possibility of launching them within the next two years.
(E): T HE CONSTITUTION OF COMPANIES ABROAD
During
the first half year 2004 the group parent company communicated that it had
incorporated the company ISAGRO BRASIL, with its registered office in Sao Paolo and to have
inaugurated a branch of its own CUBA, with its headquarters in Havana.
These two new organisations that are now together with Isagro USA, which was constituted in
November of last year, with its operational headquarters in North Carolina., will enable, in the
very short term, the optimisation of Isagro’s growth, development and commercial strategy at
local level and, in the medium term, the protection of its intellectual property and know-how, by
being able to directly hold, in both these countries, the registrations for the products that are
owned by Isagro.
The incorporation of subsidiary companies in South American countries is a follow up to the
success achieved in them with the owned fungicide Tetraconazole, used to combat the disease
called “Asian Rust” in the soya crop, which it is estimated will bring about high growth in
operating profitability during the full year 2004.
(E): R ESTRUCTURING
OF AGRIFORMULA S.R.L.
During the first half year 2004 there was started up a procedure of employee mobility within the
subsidiary company AgriFormula S.r.l., followed by an agreement with the Labour Unions
regarding it. The said procedure, which involved a total of 24 people led up to the leaving, at
30 June 2004, of 18 people between blue collar workers, white collar workers and managers.
Human Resources
The effective workforce at 30/06/2004 consisted of 818 persons split as follows:
20
Number of
At 30/06/04
At 30/06/03
At 31/12/03
Executives
38
35
36
Managers
139
147
144
White collar workers*
367
371
364
Blue collar workers
188
224
194
Seasonal workers
86
79
7
Total
818
856
745
employees
* Includes “Specially qualified personnel”
Judicial Proceedings
Proquimicos (arbitrational judgement)
With an arbitration request, which was officially notified to the defending party on 25th August
2003 C.I. Proquimicos SA, began an action of arbitrational judgement involving Isagro S.p.A.
and Isagro Italia S.r.l., within which there was requested the reimbursement of damages that
were quantified by it as amounting to € 11,000,000 and which were asserted by Proquimicos as
having been suffered due to the claimed lack of fulfilment of the obligations contained in a
contract of distribution in which Isagro S.p.A., up to 1999, and Isagro Italia S.r.l., from January
1999, were nominated as distributors for the whole of Italy of a product that was called Copper
Pro 50 WDG.
The arbitrational judgement is being carried out according to the methodologies governed by the
Rules and Regulations of the Spanish Arbitration Court.
Isagro S.p.A. and Isagro Italia S.r.l. have deposited all the details and documentation for their
defence on 6th October 2003. With these defence documents Isagro Italia S.r.l. and Isagro
S.p.A. have asked that the arbitration court totally rejects the demands of the plaintiff, putting
forward as rebuttal and counter claim a requests for damages amounting to € 115,000, that were
21
afterwards added to, with the documentation dated 22nd January 2004, with a request for further
damages of € 42,354.80.
With the subpoena, which was officially notified to the defendant on 19th June 2003, C.I.
Proquimicos SA has also called to appear in judgement before the Court of Milan Isagro
Copper S.r.l. and Siapa S.r.l. regarding the reimbursement of asserted damages that it has
suffered as a consequence of claimed acts of unfair competition that have been perpetrated, but
the value of which it has not, however, quantified.
Regarding this and also in the light of the investigations and analyses of the facts that have been
carried out by the companies accused, even if it has to be dutifully pointed out that the legal
proceedings are very much still in their initial stages, Isagro maintains, also after having taken
counsel and been informed by its own lawyers regarding the question, that the risk that there
may be accepted the claims put forward by Proquimicos, particularly as far as the financial
consequences are concerned, must be considered to be extremely remote.
DE.DI.CA S.r.l. di Giordano Paolo Emilio e Paolo Emilio Giordano
With the subpoena, which was officially notified to the defendant on 7th May 2003, DE.DI.CA.
S.a.s. di Paolo Emilio Giordano and Mr. Paolo Emilio Giordano have called to appear before the
Court of Milan the companies FitoFormula S.r.l., Siapa S.r.l. and Isagro Italia S.r.l., as well as
Caffaro S.r.l., with reference to a contract for the renting of a company, which was stipulated
on 30th March 2000 between DE.DI.CA. and Caffaro S.r.l., which latter was afterwards sold to
the company FitoFormula S.r.l., and also with reference to other commercial agreements, which
were linked to the contract for the renting of the company, which was then sold to the
companies FitoFormula S.r.l., Siapa S.r.l. and Isagro Italia S.r.l..
The plaintiffs ask for the following; (i) the reimbursement of asserted damages following the
withdrawal of FitoFormula S.r.L. from the contract for the renting of the company and also for
the asserted illegitimate interruption of the commercial agreements linked to the aforesaid
contract for the rental of the company, as well as for the asserted non conformity of the
industrial building to the legislation regarding safety (ii) the reimbursement of certain damages
that have not been further defined but merely asserted to have been suffered by Mr. Paolo
22
Emilio Giordano relative to some problems linked to the employment relationship and the
services supplied by him when he was in the employment of in Caffaro.
The damages have been quantified by the opposing party as amounting to € 2,000,000 for
DE.DI.CA. and € 150,000 for Mr. Giordano.
FitoFormula S.r.l., Isagro Italia S.r.l. and Siapa S.r.l. presented themselves before the court,
where they appeared on 8th October 2003, asking as preliminary measures:
(i)
To ascertain that the introductory judicial act is null and void due to the extreme
vagueness of the request and/or establish the conversion of the legal process, because the
legal action is included in the subjects that are covered by the detail contained in article
447/second part of the Italian Code of Civil Procedure;
(ii)
To reject the demands of the opposing parties;
(iii)
As a counter legal claim to sentence DE.DI.CA. to pay the amount of € 100,600 for the
default on the payment of the Employee Leaving Indemnity due to employees and for
the default on the payment of the instalment for the rental of the company.
With a measure issued on 5th November 2003 the presiding Judge of the Court of Milan has
established the conversion of the legal proceedings from ordinary to special, has laid down the
separation of the legal action put forward by Mr. Giordano from that advanced by DE.DI.CA.,
ordering, for the first of the actions in question, that it be transmitted to the Labour Section of
the Court of Milan and fixing, for the rest of the plaintiff’s demands a hearing on the 31st March
2004.
At this hearing the legal proceedings were declared to have been interrupted because of the
merger by incorporation ,of FitoFormula S.r.l. into Isagro S.p.A., which had taken place in the
meantime.
As of now DE.DI.CA has not restarted the judicial proceedings.
Furthermore, Isagro S.p.A maintains, after having been informed by its own lawyers regarding the
question, that the risk that there may be accepted the claims put forward by the plaintiff parties
has to be considered to be extremely remote.
23
Correlated parties
With reference to the relationships with correlated parties we give below a summarised table of
Group Sumitomo
Eurosp
Sipcam Phytof
Bayer
Gruppi SipcamOxon
Description
Group
Arysta LifeScience
such relationships in thousand Euros.
Trade receivables
137
937
3.588
698
5.423
Other receivables
16
2
98
-
383
Financial receivables
-
-
-
-
-
Trade payables
-
(471)
(2.329)
(8)
(1.943)
Other payables
-
-
-
-
(1)
Financial payables
-
-
-
-
-
468
1.357
690
(1.193)
(418)
-
-
(3.054)
-
-
-
(268)
-
(66)
-
-
(60)
-
(8)
Other operating expenses
-
-
-
-
-
Financial Charges
-
-
-
-
-
1.422
7.031
1.526
TOTAL
BALANCE
SHEET
Costs
for
material
153
and
merchandise.
Fees paid for work done
-
Costs for services
Costs use of 3rd party
3.862
(3.710)
property
Revenues from sales and
services
876
9.059
Fees received for work done
-
1.198
-
-
139
Other revenues and incomes
-
70
16
-
549
Financial Incomes
-
7
2
1
-
Extraordinary Charges
-
(7)
-
(7)
-
Extraordinary incomes
-
5.200
8
5
-
876
6.697
3.257
1.525
5963
TOTAL PROFIT & LOSS
24
For the purposes of this paragraph the correlated parties are those companies that have holdings,
either direct or indirect, in the Share Capital of the company Isagro S.p.A. or in companies
belonging to the Isagro Group.
The transactions with the correlated parties, that are shown above have all taken place at
normal, arm’s length market conditions. The relationships with the subsidiary, affiliated and
associated companies are given in the explanatory notes within the comments regarding the
individual items contained in the Financial Statements.
Shareholdings owned by Directors, Statutory Auditors and General Managers
In observance of the regulations that were actuated by the Legislative Decree 52/98, issued by
Consob (Italian SEC) with the Resolution 1971/99, there are shown in the following table the
shareholdings held at 30th 2004 by the Directors, Statutory Auditors and General Managers of
the Company and those held in its subsidiary companies, as well as by their spouses that are not
legally separated and by their under age children as well as the relative movements for the
period:
Surname and First Name
Indirect
Holdings
Shares
%
Basile Giorgio
1,662,629 10.391
Filippini Battistelli Maria Camilla
923,601 5.773
Zucarello Lucio
299,891 1.874
Pucillo Francesca
0
0
Basile Maurizio
193,164 1.207
Ugo Renato
88,580
.554
Pizzotti Maddelena
0
0
Rapisarda Giuseppe
115,800
.724
Mariani Alessandro
0
0
Shares start
of period
12,000
12,000
600
600
0
0
0
33,000
1,800
Direct
holdings
Purchases Shares end
(Sales)
of period
25,000
37,000
0
12,000
1,850
2,450
5,100
5,700
0
0
0
0
5,000
5,000
0
33,000
11,900
13,700
Total
%
Shares
%
0.231 1,699,629 10.623
0.045
935,601 5.848
0.015
302,341 1.890
0.036
5,700 0.036
0
193,164 1.207
0
88,580 0.554
0.031
5,000 0.031
0.206
148,800 0.930
0.086
13,700 0.086
25
It is also pointed out that the company Piemme S.r.l. held directly, at 30 June 2004. 7,470
Shares di Isagro S.p.A., amounting to 0.047% of the total Shares of the company that are
included in this area within the context of the indirect shareholdings.
Significant events, which occurred after the closing of the half year
The recognised effectiveness of Tetraconazole in the combating of the disease called “Asian
Rust”, on the soya crop in Brazil, and the further growth and spread of this infection in other
South American countries has made it necessary to upgrade the productive set up in the
medium/long term.
Therefore, Isagro has put in place a series of initiatives, which were finalised after 30th June
2004, aimed at diversifying the sources of supply of both the intermediate products, such as M–
Alcohol and TFE (tetrafluorethylene), as well as those of the finished product for the purpose of
guaranteeing flexibility and security in the supply chain of Tetraconazole .
Specifically, the initiatives that have been put in place are the following:
(1) The strengthening, with a merely marginal investment, of the plant in Panoli (India). For the
production of the intermediate product “M-Alcohol”. This building up of the plant will
produce its effects starting from the second half of the current year.
(2) A four year agreement with Caffaro for the production of M-Alcohol.
(3) The extension for the next five years of the production agreement, which has been in
existence for many years, with Oxon Italia SpA., a company that is affiliated to the partner
Sipcam, with, at the same time, a significant increase in the maximum production capacity
levels of Tetraconazole. This agreement will produce its effects starting from next
September.
(4) A long term, 15 year, agreement with Solvay Solexis, who has already been a supplier for
more than ten years of TFE, for the furnishing of this intermediate product, which is a
fundamental component in the productive process of the fungicide called Tetraconazole. In
the context of this cooperative agreement, ISAGRO will build, within the year 2005, at
26
Bussi sul Tirino (PE), on an area currently owned by Solvay Solexis, its own production
plant for the final synthesis of Tetraconazole the creation of which is technically linked to
the usage of TFE. It should be noted that the funds necessary for the construction of this
plant will be made available by Solvay Solexys itself, in the form of a contribution.
(5) An agreement with DuPont, with its headquarters in the United States, for the long term
supply, for a ten year period, of the intermediate product TFE that will be used for the
production of Tetraconazole, in the USA, by DuPont itself.
Goals for the second half of 2004
During the second half of 2004 your group shall direct its activities towards the achievement of
the following goals:
1. The continuation of the development program regarding the three new chemical synthesis
molecules.
2. The evaluation of the possibility to begin development of a further herbicide.
3. The continuation with the program of rationalising the commercial and productive structures
coming from the acquisitions that have been carried out in Italy over the last few years.
4.
The selling off of non strategic real estate in Italy that was acquired with the agrochemicals
sector of the company Caffaro S.p.A..
5. The incorporation of Isagro Argentina during the second half of 2004.
6. The request to Borsa Italiana S.p.A. for admission to the Stock Exchange segment called
STAR (Segmento Titoli ad Alti Requisiti) (High Requisites Securities Segment) of the
Computerised Stock Market at a distance of one year from the listing on the stock market of
Isagro S.p.A..
27
Future prospects to the end of 2004
The prospects for the end of the year 2004 indicate an improvement in the operating result due,
in particular, to the following factors:
1. The continuing growth in the sales of Tetraconazole on the South American market
following the further spread of the Asian Rust disease.
2. The further development of the production synergies coming from the investments that have
been made in the Panoli (India) factory.
Protection of personal data
Your group, in the actuation of the Legislative Decree of 30th June 2003 n°. 196 "Code
regarding the protection of personal data", is setting up all the actions relative to the updating of
situations in order to be in conformity with the new legislation.
Adoption of the I.A.S. (International Accounting Standards)
On 30th December 2003 the CESR (Committee of European Securities Regulators) published a
recommendation document regarding the transition methodologies to be adopted in order to pass
to the new international accounting standards, which must be adopted by quoted companies
within the year 2005.
The recommendation asks quoted companies, at the time of the publication of their Financial
Statements for 2003, to describe the initiatives that they have put in place, and the state of their
progress to date, in relation to the adoption of the IRFS (International
Financial Reporting
Standards), which shall be obligatory starting from the financial year 2005.
Regarding this there is still going on the mapping of the accounting principles that are in use
throughout the various companies in the group, for the purpose of making them homogenous, in
order to fully understand any differences between the accounting principles that have been
identified and those contained in the IRFS, and the calculation of the possible Profit and Loss
Account and Balance Sheet impacts caused by the adoption of the IRFS.
28
Corporate Governance
The system of Corporate Governance adopted by your group has taken in the principles
contained the Self-disciplining Code for Quoted Companies and has also adopted those relative
to the regulatory requirements for the companies within the Stock Exchange Segment STAR
(High Requisites Securities Segment) as a guarantee of the quality of administering and
managing the company, contained in the recommendations issued by Consob (Italian SEC)
regarding this subject and in line with both national and international best practice.
The putting in place of these principles has been carried out through the creation of an
organisational model in line with that recommended in the Code, with the exception of those
cases regarding which the application of the measures contained in the Code has been held not
to be necessary, because of the specific and particular characteristic features of your group and
because of the well proven operational practices, which are being carried out by the companies
contained within it.
In this context there is being currently defined the complex revision of the Self-disciplining
Code of the Company and there is being actuated an overall Group project aimed at checking on
the suitability of the already existing organisational models, regarding the rules and regulations
laid down by the Legislative Decree n°. 231 of 2001, on the subject of the administrative
responsibility of entities for violations committed by their own collaborators, with the
consequent upgrading of the adequacy of the internal control system.
The Board of Directors
Milan, 10th September 2004
29
Attachment 1:
Calculation of the 30/06/2004 indicators at the 2003 exchange rates
1. US Dollar
1st half 2004
1st half 2004
($/€ exchange rate 1S04)
($/€ exchange rate 1S03)
Change in € for
exchange impact
Millions of €
Millions of €
Millions of €
Revenues
15.233
16.924
(1.691)
EBITDA
9.494
10.548
(1.055)
2. Indian Rupee
1st half 2004
1st half 2004
(Rupee/€ exchange rate
1S04)
(Rupee/€ exchange rate
1S03)
Millions of €
Millions of €
Change in € for
exchange impact
Millions of €
Revenues
7.694
7.996
(0.302)
EBIT
1.054
1.095
(0.041)
3. Total effect
Change in € for
exchange impact
Millions of €
Revenues
(1.993)
EBITDA
(1.095)
30
Attachment 2:
Details regarding the non-speculative operations for the coverage of the
purchase of the raw material “copper” in the period
from January 2004 – June 2004
Your group, through Isagro Copper S.r.l., has made purchases, during the first half year 2004, of
scrap copper, the price of which is set on the London Metal Exchange, which were used as raw
material for its own agrochemicals, which are copper based fungicides. At the same time it
carried out non-speculative coverage operations on these quantities of scrap copper. The relative
advantages/(disadvantages) between the operating cost and the underlying cost of the coverage
contract are posted as an addition to the purchase cost of the raw materials and, therefore, at the
level of EBITDA.
There follow the details relative to the first half year 2004 and to the first half year 2003
Thousand Euros
Incomes
from
the
non
30/06/2004
30/06/2003
1.608
338
(0)
(23)
1.608
315
speculative coverage operations
on copper purchases
Charges
from
the
non
speculative coverage operations
on copper purchases
Impact at EBITDA level
31
Attachment 3:
Free Cash Flow Calculation July 2003 – June 2004
+ Net Financial Payables at 30.06.2003
96.336
- Net Financial Payables at 30.06.2004
(76.611)
= Net Cash Flow July 03 to June 04
19.725
- Net Incomes from the IPO
(13.480)
+ Dividends in payment in 2004
1.600
= Free cash flow July 03 to June 04
7.845
Number of shares: 16,000,000
Free cash flow per share:
0.490 €
* Extraordinary charges relative to write-downs of tangible fixed assets not deductible.
** In the hypothesis of an average tax rate of 25% between the rate of 20% applied to the Group Parent Isagro S.p.A.
and 33% on the other companies that are subsidiaries or in which there are3 holdings.
32
Attachment 4
Table of analyses of the profitability results
Memo
(Amounts in 000’s Euros)
Revenues from sales and services
Changes in the inventories of products
Changes in the inventories of Work in Progress
Increases in the Fixed Assets for internal work done
Other revenues and incomes
Value of production
Consumption of materials and outside services
Added value
Labour Cost
Gross Operating Margin (EBITDA)
Amortisation and Depreciation:
- of Goodwill
- of the research and development costs
- others
Provisions to the Bad Debts Reserve
Provisions to the products write down fund
Provisions to the funds for risks and charges
Operating Profit (EBIT)
Dividends from shareholdings
Financial Charges
Write downs/Write ups of shareholdings
Profit before extraordinary items and taxes
Extraordinary incomes (charges)
Write downs of Intangible Fixed Assets
Profit before taxes
(Before the gains for the “Vietti Reform”)
Current Taxes
Deferred Taxes
(Profit)/Loss belonging to minorities
Profit (Loss) belonging to the Group
(Before the gains for the “Vietti Reform”)
Extraordinary incomes (charges) from the changes in
the gains for the “Vietti Reform”
Profit/(Loss) belonging to the Group
st
st
1 Half 2004 1 Half 2003 1st Half 2003
Actual
Pro-forma
Actual
93,198
87,775
87,775
3,375
(6315)
(6315)
1,194
698
698
1,859
1,786
1,786
2,289
3,336
3,734
101,195
87,280
87,678
(73,923)
(59,505)
(59,505)
27,992
27,775
28,173
(12,661)
(13,308)
(13,308)
15,331
14,467
14,865
(476)
(689)
(2,535)
(296)
(393)
(480)
10,462
0
(1,826)
(45)
8,591
4,826
(3,028)
10,389
(474)
(715)
(2,093)
(158)
(42)
(477)
10,508
0
(2,661)
(42)
7,805
482
0
8,287
(474)
(2,991)
(2,093)
(158)
(42)
(477)
8,630
0
(2,661)
(42)
5,927
782
0
6,709
(4,842)
268
232
6,047
9,747
6,725
(3,739)
117
(36)
4,629
7,911
0
(3,838)
804
(62)
3,613
12,772
4,629
3,613
0
33
Attachment 5
Table of the analyses of the Balance Sheet Structure
(Amounts in 000’s Euros)
30.06.2004
Actual
30.06.2003
Pro-forma
Memo:
30.06.2003
Actual
Memo:
31.12.2003
Actual
Memo:
31.12.2003
Pro-forma
Net Fixed Capital
Goodwill
Other Intangible Fixed Assets
Tangible Fixed Assets
Financial Fixed assets
Medium/Long term liabilities
Net Working Capital
Inventories
Work in Progress
Trade receivables
Other operating assets
Trade payables
Funds for risks and charges
Other operating liabilities
Capital Invested
Leaving Indemnity Fund
Net Capital Invested
Covered by:
Own Capital
Share Capital paid up
Reserves and results b/forward
Conversion reserve (difference)
Minorities capital and reserves
Group Profit (Loss) for the period
Total Own Capital
2,927
36,844
30,346
474
(6,150)
64,441
3,880
30,016
30,296
601
(4,545)
60,248
3,880
20,359
30,296
601
0
55,136
3,395
23,657
31,547
544
0
59,143
3,395
36,533
31,547
544
(6,151)
65,868
47,483
2,584
77,750
13,137
(41,362)
(7,527)
(13,149)
78,916
143,357
(7,269)
136,088
47,771
3,764
72,456
13,880
(35,642)
(2,575)
(16,504)
83,150
143,398
(8,241)
135,157
47,771
3,764
72,456
13,880
(35,642)
(2,575)
(16,504)
83,150
143,398
(8,241)
130,045
42,446
2,208
58,548
13,837
(36,651)
(2,410)
(11,948)
66,030
125,173
(7,795)
117,378
42,446
2,208
58,548
13,837
(36,651)
(2,410)
(11,948)
66,030
131,898
(7,795)
124,103
16,000
32,903
(2,306)
108
12,772
59,477
12,000
23,613
(1,928)
507
4,629
38,821
12,000
13,395
(1,928)
629
3,613
33,709
16,000
31,321
(2,569)
611
3,182
48,545
16,000
35,539
(2,569)
455
5,845
48,545
12,911
8,674
6,508
0
28,093
23,382
3,194
3,131
0
29,707
23,382
3,194
3,131
0
29,707
15,871
8,534
3,193
0
27,598
15,871
8,534
3,193
0
27,598
60,587
803
400
0
284
62,074
(13,556)
76,611
1.29
73,743
3,010
361
0
2,533
79,647
(13,018)
96,336
2.48
73,743
3,010
361
0
2,533
79,647
(13,018)
96,336
2.86
52,628
843
388
0
1,173
55,032
(13,797)
68,833
1.42
52,628
843
388
0
1,173
55,032
(13,797)
68,833
1.25
Net financial debt
Medium/ long term debts
- to banks
- to banks for facilitated financing
- to MUIR for facilitated financing
- to others
Short term debts
- to banks
- to banks for facilitated financing
- to MUIR for facilitated financing
- to subsidiaries and associates
- to factoring companies and others
Available cash/ bank deposits
Total Net Financial Position
Debt to
Ratio
Equity
34
Attachment 6
Table of the analyses of funds flow management (page 1 of 2)
(amounts in 000’s Euros)
Opening balance of available liquidity
Funds from operations
Profit (Loss) for the accounting period
Amortisation, Depreciation and write downs as follows:
- depreciation of tangible fixed assets
- amortisation of intangible fixed assets
- write downs of tangible fixed assets
-write downs of intangible fixed assets
1st Half year 1st Half year
2004 actual 2004 actual
13,797
17,452
12,540
3,675
1,716
1,984
1,818
1,210
6,728
1,427
4,131
0
0
5,558
647
5,614
848
7,109
64
703
771
552
2,026
(807)
Extraordinary (Income) from the elimination of fiscal interferences
(6,725)
0
Extraordinary (Income) for the indemnity from minority shareholders
(5,081)
0
41
35
Employee Leaving Indemnity paid and transferred
(1,173)
(926)
(Increase)/Decrease in the inventories and work in progress
(5,321)
4,428
(18,989)
(15,000)
784
(1,873)
(Increase)/Decrease in the trade payables
5,072
3,405
(Increase)/Decrease in other payables
1,178
3,269
Usage of funds for risks and charges
(1,328)
(1,622)
Funds flow from operations
(5,101)
2,168
Provisions to the following:
- Employee Leaving Indemnity Fund
- Taxes Fund
- Funds for risks and charges
(Gains)/Losses on the disposals of tangible fixed assets
(Write ups)/Write downs of shareholdings and other financial fixed assets
(Increase)/Decrease in the trade receivables
(Increase)/Decrease in other assets
35
Attachment 6
Table of the analyses of funds flow management (page 2 of 2)
(amounts in 000’s Euros)
1st Half
2004
actual
1st Half
2004
actual
Investment activities
(Investments)/disposals of intangible fixed assets
(3,626)
(5,600)
(Investments)/disposals of tangible fixed assets
(1,949)
(5,797)
(275)
0
27
1,276
5,200
0
30
52
0
0
(593)
(10,069)
(2,820)
378
Increase/(Decrease) in the medium/long term financing from MIUR
3,315
182
Increase/(Decrease) in the short term financing from banks
7,712
(10,255)
Increase/(Decrease) in the short term financing from factors and others
(976)
1,418
Increase/(Decrease) in the short term financial receivables from subsidiary and
associated companies
0
13,975
(Increase)/Decrease in the financial receivables from others and from financial
assets
99
10
(1,715)
0
5,615
(2,229)
0
3,479
(162)
(12)
(241)
13,556
(4,434)
13,018
Receipt (payment) for the change in the percentage ownership of subsidiary
companies
Price received from the sale of intangible fixed assets
Cashing in of the indemnity for the exit of minority shareholders
(Investments)/disposals of financial fixed assets
Price received from the sale of shareholdings
Cash flow from investment activities financing activities
Increase/(Decrease) in the medium/long term financing from banks
Distribution of dividends
Payments made by shareholders for Share Capital increase
Cash flow from financing activities
Change in the conversion difference
Available liquidity flows
Ending available liquidity
36
EXPLANATORY NOTES TO THE CONSOLIDATED HALF YEARLY
REPORT AT 30 TH JUNE 2004
The Consolidated Half Yearly Financial of the Isagro Group and the accounting
tables of the Group parent Company have been drawn up fully conforming to what
is laid down in the Legislative Decree numbered 127/91, following the
consolidation principles and the valuation criteria that are shown below.
Furthermore the there have been introduced the measures contained in the
Legislative Decree 6/2003, the so called Vietti Reform, which have caused, as well
as the effects of the fiscal clean up, also changes to the layouts of the Profit and
Loss Account of Balance Sheet as these are contained in articles 2424 and 2425 of
the Italian Civil Code. Therefore, where it has been necessary, some items in the
first half yearly report for the previous financial year have been reclassified in order
to be able to properly compare the items in the Financial Statements.
As a result of the suppression, introduced by the Legislative Decree 6/2003, cited
above, of paragraph 2, of the article 2426 of the Italian Civil Code, which allowed
the making of adjustments to values and the setting aside of provisions purely
applying taxation legislation, there has been carried out an elimination of the effects
that were a consequence of the interferences in the accounts caused by the
application of taxation legislation°. In fact, up till 31st December 2003, in order to
take advantage of the tax deductibility, the costs of research and development, as a
derogation of the relative accounting principles, were amortised starting from the
financial year during which they were sustained, independently of the date when
the project began to be exploited economically and the relative contributions
received on account of the capital invested were therefore posted to the Profit and
Loss Account in correlation to the amortisation°.
Furthermore, for the purposes of enabling abetter comparison with the numbers
relative to the previous year’s equivalent period, in the Board of Directors Report
on Operations, a special Profit and Loss Account and Balance Sheet situation proforma at 30 June 2003 has been drawn up with the aim of showing the economic
37
and financial situations at that date as if the aforesaid derogation of a fiscal nature
had never been applied.
The accounting treatment of the aforesaid fiscal clean up, in observance of the
recommendations of the Italian Accounting Organism, of the Bank of Italy and of
the Accounting Principle n°. 29 issued by the National Councils of Certified Public
Accountants and Bookkeepers, has taken place applying the new accounting
treatment retroactively, that is also regarding those facts and operations that took
place in previous financial years as if the new accounting treatment had always
been applied. The effects flowing from the change that are relative to previous
financial years, calculated from the beginning of the accounting period, have been
reflected in the Profit and Loss Account and classified as extraordinary components
of the financial result for the period.
Furthermore, these Explanatory Notes show the effects of the change in the
criterion, regarding the lay out of the Balance Sheet and Profit and Loss Account
situations also in order to be able to provide a better comparison of the of the items
contained in the Financial Statements.
There have been left out those items which have a zero balance in both this
and the previous comparable accounting period.
The valuation criteria used do not differ from those, which were used in
drawing up the consolidated half yearly report for the previous comparable year.
The accounting principles used conform to those laid down in article 2426 of the
Italian Civil Code, interpreted and integrated with the accounting principles issued
by the National Councils of Certified Public Accountants and Bookkeepers and also
taking into account the recommendations issued by Consob (Italian Securities and
Exchange Commission).
There have not occurred any special factors which would have made necessary the
recourse to the suspensions included in article 2423, 4th paragraph, and in article
2423, second part, 2nd paragraph, of the Italian Civil Code.
The changes, which have taken place in the balances of the assets and liability
items have been shown pursuant to article 2427, point 4, of the Italian Civil Code.
There have been taken into account all those risks and losses that are relative to the
Accounting period, on a proper timing basis, even if they only became known after
the closure of the accounting period itself.
38
Consolidation Principles
Consolidation Area
The Consolidated Financial Statements include the financial statements of Isagro
S.p.A. and those of the companies in which it owns, either directly or indirectly,
more than 50 percent of the Share Capital, with the exceptions of Isagro New
Zealand Ltd, of Isagro Australia Ltd and of Siamer S.r.l. because they are not
relevant from the point of view of representing the economic, financial and equity
situations of the Group:. Specifically:
-Companies consolidated with the full integration method :
ISAGRO S.p.A. (Group Parent)
Registered Office in Milan, via Felice Casati, 20 - Share Capital Euros 16,000,000.
Specifically, the company operates in the fields of research, of the management of
the Group’s intellectual property and of the development, the production and the
commercialisation of agrochemicals.
AGRIFORMULA S.r.l.
Registered Office in Milan, via Felice Casati, 20 – Share Capital Euros 515,000
owned 100% by the group parent company Isagro S.p.A..
The company operates in the field of the formulation of agrochemicals.
ISAGRO ASIA AGROCHEMICALS LTD
Registered Office in Mumbai (India) – 101/102, Ground Floor – Solitaire Corporate
Park – Share Capital Indian Rupees 101,700,000, owned for 95,99% by the group
parent company Isagro S.p.A..
The company operates in the field of the production, selling and distribution of
agrochemicals.
ISAGRO FRANCE Sarl
Registered Office in Asnières (France), 119 bis, rue de Colombes - Share Capital
Euros 650.000, owned 100% by the group parent company Isagro S.p.A..
39
The company operates for the development, production and sale of Isagro products
in the French market
ISAGRO ESPANA SL
Registered Office in Madrid (Spain), 17 Calle Castello – Share Capital Euros
120,200, owned 100% by the group parent company Isagro S.p.A..
The company operates for the development and distribution of agricultural
chemical products in the Spanish Market.
ISAGRO HELLAS LTD
Registered Office in Moschato (Athens - Greece), Pindou Street 51 - Share Capital
Euros 18,000, wholly owned by the group parent company Isagro S.p.A..
The company occupies itself with the promotion of the commercial presence of
Isagro products in Greece and the Eastern Mediterranean area.
ISAGRO USA INC
Registered Office in Wilmington (Delaware – USA), 1209 Orange Street – Share
Capital 500,000 US DOLLARS, wholly owned by the group parent company
Isagro S.p.A..
The company, operative since January 2004, occupies itself with the development ,
production and sales of Isagro products in the USA.
ISAGRO BRASIL LTDA
Registered Office in Sao Paulo (State of Sao Paulo – Brazil), Ruam Dom Josè de
Barros, 177, Share Capital Reals 209,293, owned 99% by
the group parent
company Isagro S.p.A. and 1% by Isagro Espana SL.
The company, operative since May 2004, occupies itself with promoting the
commercial presence of Isagro on Brazilian territory and with developing the new
products in it.
ISAGRO RICERCA S.r.l.
Registered Office in Milan, Via Felice Casati, 20 - Share Capital Euros 30,000,
owned for 51% by Isagro S.p.A.
40
The company operates in the field of innovative research aimed at the identification
of new agrochemicals and in the field of the development of the products that have
been identified.
ISAM S.r.l.
Registered Office in Milan, Via Felice Casati, 20 - Share Capital Euros 95,000,
owned for 51% by the group parent company Isagro S.p.A..
The company operates in the sector of the care of public and private green areas
and in civil and industrial weed removal and control.
ISAGRO BIOFARMING S.r.l. (was Isagro Biochem S.r.l.)
Registered Office in Milan, Via Felice Casati, 20 - Share Capital Euros 90,000,
owned 100% by the group parent company Isagro S.p.A..
The company operates in the field of the research, production and selling of natural
and chemical products for agricultural and civil use.
ISAGRO COPPER S.r.l.
Registered Office in Milan, Via Felice Casati, 20 – Share Capital Euros 2,000,000,
wholly owned by the group parent company Isagro S.p.A..
The company operates in the field of the production and selling of copper based
agrochemicals.
- Companies consolidated with the proportional method:
ISAGRO ITALIA S.r.l.
Registered Office in Milan, Via Felice Casati, 20 - Share Capital Euros 1.000.000,
owned for 50% by the group parent company Isagro S.p.A..
The company operates in the field of the production, selling and distribution of
agrochemicals in Italy.
SIAPA S.r.l.
Registered Office in Milan, Via Felice Casati, 20 – Share Capital 1.000.000 Euros,
wholly owned by Isagro Italia S.r.l..
41
The company operates in the field of the production and distribution of
agrochemicals in Italy.
Furthermore, there are given below the list of the shareholdings that have been
valued using the net equity method:
- subsidiary companies, excluded from the consolidation area because they are not
relevant from the point of view of representing the economic, financial and equity
situations of the Group:
? ISAGRO AUSTRALIA PTY LTD
Registered Office in Parramatta (Australia), Phillip Street, 111 – Share Capital
195,000 Australian Dollars, owned for 100% by the group parent company Isagro
S.p.A.. The company operates in the management of the necessary registrations of
Isagro products in Australia;
? ISAGRO NEW ZEALAND PTY LTD
Registered Office in Auckland (New Zealand), Princes Street, 9 – Share Capital
20,100 New Zealand Dollars, owned for 100% by the group parent company Isagro
S.p.A.. The company operates in the management of the necessary registrations of
Isagro products in New Zealand.
affiliated companies:
? REIVER INT’L SARL
Registered Office in Casablanca (Morocco), Rue Sijelmassa Angle BD Bahmad 91
– Share Capital 2,400,000 Moroccan Dirhams, owned for 27,92% by the group
parent company Isagro S.p.A.. The company operates in the field of the distribution
of agrochemicals;
? SIAMER SRL
Registered Office in Milan, Via Felice Casati 20 – Share Capital 104,000 Euros,
owned for 50% by the group parent company Isagro S.p.A.. The company operates
in the field of the selling of agricultural fertilisers.
Changes in the consolidation area and other operations
During the month of June la Isagro S.p.A. purchased from Bayer CropScience S.r.l.
37% of the company AgriFormula S.r.l., 63% of which was already owned by the
group parent company.
42
It is highlighted, furthermore, that on 02/03/2004 there was incorporated the
company called Isagro Brasil Comercio de Produtos Agroquimicos Ltda, with its
registered office in Sao Paulo (State of Sao Paulo), Share Capital Reals 209,293,
owned 99% by the group parent Isagro S.p.A. and 1% by Isagro Espana SL. The
company operates in the field of the commercial promotion of Isagro on Brazilian
territory and it began its operational activities in the month of May 2004.
Lastly, it is made known that the companies Isagro Europe S.r.l., FitoFormula S.r.l.,
Isagro BioFarming S.r.l. and VerdeVivo S.r.l., wholly owned by the group parent
company, were merged by incorporation into Isagro S.p.A., with effect from 1st
January 2004.
Financial Statements that are the subject of consolidation
The half yearly consolidated report has been prepared on the basis of the financial
statements that have been drawn up by the individual companies within the group at
30 June 2004.
The Financial Statements of the consolidated companies, whenever this has been
necessary, have been reclassified and adjusted in order to make them uniform with
valuation criteria used by the Group that are detailed below.
Consolidation Technique
The Financial Statements of the subsidiary companies that have been included in
the consolidation area have been consolidated with the full integration method,
which consists of the taking in each one of
all the individual balance items
contained in the Financial Statements, regardless of the percentage of the Share
Capital owned by the Group.
Specifically for those companies, which are included within the consolidation area
with the full integration method:
1) The accounting book value of the shareholdings included in the consolidation
area has been washed out with the net equity of the companies participated in
following the full integrated method and where the direct or indirect shareholding is
less than 100% of the total the is attributed the share of the profit and the net equity
belonging to minority interested third parties.
2) Any eventual difference between the purchase cost and the net book value of the
equity of the participated company at the time of the acquisition of the shareholding
43
has been allocated to the specific assets of the companies purchased and for the
remaining part, wherever the appropriate conditions exist to the “Consolidation
difference”, which is amortised in equal amounts according to what is considered to
be the period of the remaining useful life of the investment..
3) Whenever, due to this wash out procedure, there emerges a negative difference
this is posted to an item included in the net equity section of the Balance sheet
called “Consolidation reserve” or, when the negative difference arises from a
forecast of unfavourable financial results, it is posted to a fund for risks and
charges.
The Financial Statements of affiliated companies that are 50% owned, i.e. jointly
owned branches or joint-ventures, whenever the values involved are significant for
the purposes of giving a correct and exhaustive view of the Profit and Loss and
Balance Sheet situations of the Group, are consolidated with the proportional
integration method. This method consists in ensuring that each individual item
contained in the Financial Statements is posted into the consolidated accounts for
an amount that corresponds to the percentage of the total Share capital that is
owned by the Group and, therefore, there is no need to show the share of the profit
and the net equity belonging to minority interested third parties.
The Financial Statements of the affiliated companies, where the percentage
ownership of the Share Capital is not greater than 50%, and the shareholdings in the
subsidiary and the affiliated companies that are 50% owned, excluding from the
consolidation area because they are irrelevant, are valued with the net equity
method. For those companies that are valued with the net equity method the value
in the accounting books is updated to the value of the share of the net equity owned
by the Group on the basis of the figures in the Financial Statements at the closing of
the accounting period. The difference between the net equity at the date of
acquisition and the price that was paid for it is posted to the value of shareholding
and is amortised over a period of five financial years.
Conversion of the Financial Statements expressed in foreign currencies
The Financial Statements of the foreign companies are converted into Euros with
the following methodologies:
? The items contained in the Profit and Loss Account are converted at the average
exchange rates for the relative accounting period, while for the items included in
44
the Balance Sheet, excluding the profit for the accounting period and the net
equity, there are utilised the exchange rates at the end of the accounting period.
? The items included in the net equity are converted at the historical exchange
rates, maintaining any eventual stratification of the reserves.
? The balance of the conversion, originated from the difference between the net
equity converted at the historical exchange rates and the assets and the liabilities
in the Balance Sheet that have been converted at the exchange rates at the end of
the accounting period, is posted into the classification called “Other reserves”
contained within the consolidated net equity, in the specific item called
“Conversion Reserve (Difference)”.
The rates that have been applied for the conversion of the Financial Statements of
the subsidiary companies are shown in the table given below:
Company
Rate at
Average rate
Rate at
Rate at
Average rate
30.06.2004
First half year
31.12.2003
30.06.2003
First half year
2004
2003
Isagro Asia (Rupee)
55.8687
55.3045
57.582
53.097
53.2176
Isagro USA (Dollar)
1.2155
1.2275
1.263
N/A
N/A
Isagro Brasil (Real)
3.7832
3.6421
N/A
N/A
N/A
Consolidation adjustments
The relationships between the companies within the Group that are represented by
receivables, payables, charges and incomes are totally washed out in the cases of
subsidiary companies and proportionately to the percentage of ownership in the
cases of those companies that have been consolidated with the proportional method
(Isagro Italia S.r.l. and Siapa S.r.l.).
The profits and the losses resulting from inter-company transactions are wholly
eliminated in the case of “full integration”, allocating the effects of them, in those
cases where profits/losses are realised by the subsidiary companies proportionately
to the amounts which belong to the Group and to the third party minority interests.
On the other hand, in the case of “proportional integration” the elimination of the
45
inter-company profits and losses is carried out in proportion to the percentage
ownership held.
Valuation criteria
Intangible Fixed Assets
These are relative to costs and expenses that have multiyear usefulness and they are
shown in the financial statements at their purchase or production costs, including
any ancillary charges relative to them and they are systematically amortised on a
regular basis relative to their remaining useful life.
Start up and enlargement costs
The start up and enlargement costs are posted to the Assets in the Balance Sheet at
the value of the cost that has been sustained for them and they are amortised on a
straight line basis over a period that is no greater than five years.
Costs of Research and Development and Advertising
The costs of research for the ordinary defence relative to the
products and
productive processes and the costs of innovative research are posted directly to the
Profit and Loss Account during the accounting period in which they are sustained.
The costs of research for extraordinary defence relative to specific products and
sustained in order to be able to fulfil the obligations of the EEC Directive 91/414
“European Revision for plant health products” are posted to the Assets in the
Balance Sheet at the value of the cost that has been sustained for them and they are
amortised over a period of five years.
The research costs for development refer to projects relative to the development of
new proprietary products and new formulations, as well as the commercial
development, i.e. field tests and experimentation, of third party products for which
the companies appertaining to the Group have obtained the distribution rights.
These projects, when they offer reasonable prospects of future profitability are
posted to the Assets in the Balance Sheet at the cost that has been sustained for
them and they are amortised on a straight line basis over a period of five years,
pursuant to the rules that are contained in article 2427 of the Italian Civil Code, but
in any case for a period that is no greater than the true useful life of the project.
46
The amortisation begins to run from the time at which the asset, the process, or the
relative know how,
resulting from the research activity that has been carried out
on them becomes available for economic exploitation.
The costs relative to projects regarding proprietary products are only capitalised at
the exact time when there is obtained the official authorisation for the sale of the
products that is derived from these projects in at least one of the sales areas that are
commercially strategic for the Group such as Western Europe, the Far East and
North America, whereas the costs relative to the commercial development of the
products are only capitalised at the time from which the there is actually obtained
the authorisation for the selling of these products within those countries for which
the group has acquired the necessary distribution rights.
The advertising costs, relative to the launching of new products, are posted to the
assets contained within the Balance Sheet and are amortised on the basis of the
straight line method over a period that is no greater than five years.
Industrial patents and the rights for the usage of intellectual property
They are posted to the Assets in the Balance Sheet at the value of the cost that has
been sustained for them and they are amortised over a period of five years.
Concessions, licences, trademarks and similar rights
These are posted to the Assets in the Balance Sheet at the value of the cost that has
been sustained for them and they are amortised on a straight line basis over a period
amounting to their useful life for the company but, in any case, over a period that is
that is no greater than ten years.
The consolidation difference
This represents the higher price paid on acquisition compared to the relative share
of the net equity of the subsidiary company, which is recognised as coming under
the heading of goodwill, also taking into account the forecasted profitability
prospects for the future of the companies that have been acquired. This difference,
between the net book value and the actual price paid, is amortised over a period of
five financial years, excluding the specific consolidation difference arising from the
acquisition of the company called Tetraco, which was afterwards merged into
Isagro S.p.A., and to that relative to the company called Siapa S.r.l., which are
amortised over the period of ten financial years. The decision to amortise the
47
difference coming from the difference on the purchase of the shareholding in
Tetraco over the time period of 10 years is justified by the fact that the substance
called Tetraconazole, which is produced and sold by Tetraco, is still, as of now, a
leading edge product in the range of Isagro S.p.A., with forecasted profitability
levels over a time scale that effectively support the choice of this timeframe for the
amortisation°. The consolidation difference, which has arisen regarding the
company
Siapa S.r.l. is amortised over a period of ten years, taking into
consideration the activities that are carried out by this particular company and the
sector to which the company appertains, also taking into account the independent
outside valuation which considers this timeframe to be representative of the
duration of the useful life of the goodwill that was recognised at the time the
acquisition took place.
Goodwill
Goodwill is posted to the Assets in the Balance Sheet within the limit of the cost
that has been sustained for it and is amortised over a period of five years with the
exception of the goodwill for Isam S.r.l., which is amortised over a period of ten
years because of the particular activities that this company carries out and the
forecasted future profitability levels that are expected from it.
Others
They are posted to the Assets in the Balance Sheet and they are amortised over a
period of no longer than five years with the exception of the following items:
?
The costs for the improvements to assets belonging to third parties that are, in
fact, amortised in relation to the contractual period covering the third party
property to which they are related.
?
The commissions on loans and financing that are amortised over a period
amounting to the duration of the contract.
?
The expenses relative to the non-competition pacts that are amortised in
relation to the duration of the underlying obligation°.
Tangible Fixed Assets
The tangible fixed assets are posted at cost, including any ancillary charges, and are
shown in the financial statements net of their relative depreciation reserves.
The cost sustained after the purchase of the individual assets are posted as an increase
48
to their historical cost balance only if they lead to a significant and tangible increase
of the productive capacity, the safety or the useful life of the specific assets.
The expenses of ordinary maintenance and repairs, as opposed to those that actually
add to the value of the assets, are never capitalised and are posted directly to the Profit
and Loss Account in the period in which they are incurred.
Depreciation is calculated, in each accounting period, on the basis of a series of
financial/technical rates based on the remaining useful life of the individual assets.
Regarding the increases that have taken place, during the accounting period in
question, 50% of the standard rate has been applied because this gives the approximate
actual usage of the asset.
The timeframes utilised for the depreciation of Tangible Fixed Assets are the
following:
? Buildings
19 - 30 years
? Plant and Machinery
10 - 11 years
? Industrial and commercial equipment
3 - 6 years
? Other Tangible Fixed Assets
5 - 6 years
Financial Fixed Assets
Financial receivables are posted at their nominal value increased by any interest
that is matured on them but which has not yet been actually received.
The shareholdings in subsidiary and affiliated companies, which have been
excluded from the consolidation area are valued with the criterion that is given in
article 2426, n°. 4, of the Italian Civil Code, i.e. with the net equity method. The
positive difference that emerges from the value calculated with this criterion and
the purchase cost or the value posted to the preceding Consolidated Half Yearly
Report, for the part relative to profits, is posted to the item included in the Profit
and Loss Account “Write ups of shareholdings”.
The shareholdings in “Other companies” are posted in the Consolidated Half
Yearly Report at their purchase cost and written down to take account of any long
term loss in value.
49
Inventories
The inventories are posted at the lower of their purchase or production costs and
their presumed realisable value, which is calculated from the market trend
regarding them.
The values of the inventories are reinstated if the reasons for any write downs,
which have been carried out regarding them, disappear.
The method used for calculating the cost of the inventories is that of the average
weighted cost including the values of the opening inventories.
Within the purchase cost there are also included any ancillary costs. The cost of
production includes the costs of the materials involved, the manpower costs and the
direct and indirect production costs.
Furthermore, for those types of merchandise that are classed as slow moving,
obsolete or to be re-worked there is started up a specific fund for write downs,
which is directly set off against the inventories. The work in progress, which is
being carried out to the order of third parties relative to interventions of an
environmental nature and that are being supplied both on behalf of public and
private organisations and that are characterised by a timeframe for carrying them
out that extends over a period of a number of years, are valued, in relation to what
is contained in article 2426, n°.11, of the Italian Civil Code, on the basis of
contractual fees that have actually been matured, with a reasonable amount of
certainty, at the closing date of the accounting period.
Financial Assets that are not Fixed Assets
Those financial assets that that are not Financial Fixed assets are posted at the lower
of their purchase costs and their presumed realisable value, which is calculated
from the market trend regarding them.
Receivables
The receivables are posted at their presumed realisable value, which comes from
the difference between their nominal value and the Bad Debts Reserve that has
been provided and which is considered to be wholly adequate in order to cover any
estimated losses.
Sales of receivables
Those receivables that are sold on a basis of “pro-soluto”, meaning without any
right of recourse, are eliminated from the Balance Sheet. The cost of the operation
is represented by the difference between the value received from the company to
50
which the receivables are sold and the value at which the receivables are posted to
the Financial Statements.
Whenever the operation agreement includes a stipulation that a part of the value of
the receivables is held back by the factoring company as a guarantee for the
operation itself, the so called, part exemption, the part of the price that has been
deferred is held in the Financial Statements among the receivables.
The receivables that are sold with the right of recourse, which is called “prosolvendo”, remain posted to the Balance Sheet because they are considered as
being given as guarantees to cover the advance payments that have been received
on them. Consequently, within the assets contained in the Balance Sheet there are
posted the advance payments that have been received on them, net of any relative
commissions paid out, and among the liabilities there is posted the payable due to
the factoring company.
Any interest due to factoring companies on the advance payments that have been
received are posted to the Profit and Loss Account on an accruals basis respecting
the appropriate timing involved.
Available Liquidity
The available liquidity at the closing date of the financial year is posted at its
nominal value.
Accruals, Prepayments and Deferrals
The accruals, prepayments and deferrals are calculated according to the principle of
the timing periods to which they actually refer.
Funds for Risks and Charges
The funds for risks and charges are provided in order to cover losses or liabilities,
of a specifically known type, which either certainly or probably exist, but for
which, at the financial year closing it is not possible to calculate either the exact
amount or exact date on which they will fall due.
The provisions that are set aside represent the best possible estimate of these risks
and charges based on the available elements.
Employee Leaving Indemnity
The employee leaving indemnity corresponds to the true debt, which the companies
that are the subject of the consolidation owe towards the total of their individual
employees at the date of the closing of the Consolidated Half Yearly Report, less
any advances that have been given to them.
51
This has been posted in conformity with what is included in the relative Labour
Legislation regarding it and line with what is in force in the National Collective
Labour Contracts, for the Labour Categories involved.
Payables
The payables posted to the Liabilities in the Balance Sheet are shown at their
nominal value.
Receivables and Payables in Foreign Currencies
Those receivables and payables that have been originally expressed in foreign
currencies are converted into Euros at the historical spot exchange rates of the date
when the original operations took place. The realised exchange differences that
have taken place during the accounting period at the time of the cashing in of the
receivables and the settlement of the payables in foreign currencies are posted to
the Profit and Loss Account.
In the cases in which there have been carried out hedging operations for foreign
currency coverage on a futures basis the amounts relative to the exchange
differences are posted either to the relative Receivables or Payables. The premiums
relative to foreign exchange hedging operations are posted on an accruals timing
basis according to the duration period of the operation.
At closing of the accounting those receivables and payables balances that are
expressed in foreign currencies are shown in the Half Yearly Report at the
exchange rate in force at the date of the Report itself. The profits and losses coming
from these conversions are credited and debited, respectively, to the Profit and Loss
Account as income and expense components of a financial nature.
Commitments, Guarantees and Risks
Contra Accounts
The commitments and the guarantees are shown in the contra accounts at their
contractual values. The risks for which it is highly probable that there will arise a
liability are described within the Explanatory Notes and are provided for according to
the congruous necessities within the risks funds. Those risks regarding which it is
merely possible that there will arise an eventual liability are merely described in the
comments without there having been made any provisions to the risks funds according
to the relative accounting principles involved. Risks of a very remote nature are not
taken into account at all.
52
Copper futures contracts
In order to limit the exposure to the possible fluctuations, which may occur
regarding the market price of copper, the contractual reference market for which is
the London Metal Exchange (L.M.E.), there are stipulated, by the subsidiary
company Isagro Copper S.r.l., futures purchase contracts on lots of copper.
The closure of these contracts creates components posted to the Profit and Loss
Account that are either positive or negative, which correspond to the differences on
the quotation, which are allocated among the financial charges/incomes, as well as
to those charges represented by the costs of the intermediary services supplied by
the futures broker.
The commitments in existence at the end of the accounting period are posted
among the Contra Accounts and are valued at the lower of cost and market value.
Financial Derivatives Contracts (Interest rate swaps)
The company has stipulated financial derivatives contracts for the use of structured
financial products called “interest rate swaps ” aimed at generic risk coverage.
On the basis of these contracts the contracting parties commit themselves to paying
out, or receiving, at fixed future dates, amounts that are calculated on the basis of the
differential between the various interest rates involved.
The interest rates differential is posted on an accruals timing basis among the financial
charges or incomes.
The financial derivatives contracts in existence at the close of the accounting period
are valued coherently with the liabilities they cover.
The commitments in existence at the close of the accounting period are shown in the
Contra Accounts at their notional reference value.
Costs and Revenues
These are shown following the principle of prudential accounting and on the basis
of their proper financial timing.
Contributions on account of work done during the accounting period
These are posted among the “other revenues and incomes” of the accounting period in
which there arises the right of receipt of them and their amount is calculated on a
proper timing basis and on the basis of the costs relative to the amounts of the work
that has been done during the period for the individual projects to which they refer.
53
Contributions on account of capital relative to research and development projects
These are wholly posted among the “other revenues and incomes” of the accounting
period in which there arises the right of receipt of them and their amount is calculated
on a proper timing basis, through the posting of a deferred incomes account, which is
proportional to the amortisation of the costs of the research and development projects
to which they refer.
Contributions on account of plants
These are wholly posted among the “other revenues and incomes” of the accounting
period in which there arises the right of receipt of them and their amount is calculated
on a proper timing basis, through the posting of a deferred incomes account, which is
proportional to the depreciation of the plants to which they refer.
Income Taxes for the accounting period and IRAP (Regional Tax)
The “current taxes” are calculated on the basis of a realistic forecast of the tax
charges to be settled, applying the taxation legislation currently in force in the
individual countries involved. Applying Accounting Principle n°. 30, issued by the
National Council of Certified public Accountants, and by the National Council of
Bookkeepers, these calculated taxes are posted to the item “Funds for Taxes”
instead of to the item “Taxation Payables”, because the tax liability calculated for
the half yearly period may only be a supposition and, therefore, it cannot be posted
as a payable. The value shown in the Financial Statements is given gross of the
advance payments that have been made and of the withholding taxes that have been
suffered, which are posted among the receivables in the item “Taxation
Receivables”.
Deferred Taxes
In fulfilment of accounting principle n°. 25 issued by the National Council of
Certified Public Accountants and by the National Council of Bookkeepers, there are
shown, within the item “Taxation Fund”, the liabilities for deferred taxes and, in the
item “Receivables for prepaid taxes”, the assets for prepaid taxes. The deferred or
prepaid taxes are calculated, using the taxation rates currently in force, on the
basis of the timing differences between the statutory values of assets and liabilities
posted within the financial statements and the corresponding fiscal values
54
for the same items, as well as on the differences in value of the assets and liabilities
generated by the consolidation differences. Specifically, any prepaid taxes are only
accounted for in the books if there does exist a reasonable certainty of there future
full recovery.
The Receivables for prepaid taxes and the Payables for deferred taxes are set off
against one another whenever such a set off is allowed by law.
55
ANALYSES OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
ITEMS
All the values shown in these Explanatory Notes are given in thousand Euros.
Fixed Assets
Intangible Fixed Assets
At 30.06.2004
At 31.12.2003
At 30.06.2003
39,770
27,052
24,239
The breakdown and the summarised movements during the financial year of the
Intangible Fixed Assets are given in the following tables:
Breakdown
31.12.2003
Amort. Reserve
Historical cost
Costs of set up
& enlargement
Costs of research, of
Development &
advertising:
- research and
development
Industrial patent rights
and the
Rights of usage
Of intellectual property
Changes
Net Book Value
30.06.2004
Amort. Reserve
Historical cost
Net Book Value
2,639
(209)
2,430
(267)
2,639
(476)
2,163
33,795
(15,650)
18,145
13,864
37,290
(5,281)
32,009
33,795
(15,650)
18,145
13,864
37,290
(5,281)
32,009
0
0
0
0
0
0
0
Concessions, licences,
Trademarks and similar
rights
2,971
(1,166)
1,805
(183)
3,080
(1,458)
1,622
Goodwill:
- goodwill
- difference of
consolidation
72
5,702
(57)
(2,322)
15
3,380
(4)
(467)
72
5,709
(61)
(2,796)
11
2,913
5,774
(2,379)
3,395
(471)
5,781
(2,857)
2,924
1,085
(435)
650
(124)
1,106
(580)
526
452
635
(201)
(316)
251
319
(38)
(49)
452
652
(239)
(382)
213
270
31
52
100
2,355
(23)
(42)
(61)
(1,078)
8
10
39
1,277
(4)
(5)
(5)
(225)
31
52
105
2,398
(27)
(47)
(71)
(1,346)
4
5
34
1,052
47,534
(20,482)
27,052
12,718
51,188
(11,418)
39,770
Other:
- fee for the pact of
Non competition
- commissions on loans
at medium/long term
- improvements to 3rd
party property
- quality project
- know-how
- others
56
Movements
Half year
Elimination
interf. Fiscal
(historical cost)
Conversion
difference
(historical cost))
Acquisitions/
capitalisations
Elimination
interf. Fiscal
(accum. Amort.)
Conversion
difference
(accum. Amort.)
Amort.
Write downs
Total
changes
Costs of set up
& enlargement
Costs of research, of
Development &
advertising:
- research and
development
0
0
0
0
0
(267)
(267)
0
0
3,495
12,876
0
(2,507)
13,864
0
0
3,495
12,876
0
(2,507)
13,864
0
0
0
0
0
0
0
0
0
109
0
0
(292)
(183)
0
0
7
0
0
0
(4)
(4)
0
0
0
(3)
(471)
(467)
0
7
0
0
(3)
(475)
(471)
0
21
0
0
(8)
(137)
(124)
0
0
0
0
0
0
(38)
(38)
17
0
0
(66)
(49)
0
0
0
0
0
0
(4)
(5)
(4)
(5)
Industrial patent rights
and the
Rights of usage
Of intellectual property
Concessions, licences,
Trademarks and similar
rights
Goodwill:
- goodwill
- difference of
consolidation
Other:
- fee for the pact of
Non competition
- commissions on loans
at medium/long term
- improvements to 3rd
party property
- quality project
- know-how
0
- others
0
5
0
0
(10)
(5)
0
0
0
0
21
22
0
(8)
(260)
(225)
0
28
3,626
12,876
(11)
(3,801)
12,718
0
0
With the introduction of the Legislative Decree n°. 6 of 10th January 2003, the so
called Vietti Reform, there was suppressed paragraph 2 of article 2426 of the Italian
Civil Code, which allowed the making of adjustments to values and the setting
aside of provisions purely applying taxation legislation.
Specifically, in order to be able to take advantage of tax deductibility the costs of
research and development, capitalised by the companies within the Group, used to
be amortised starting from the accounting period in which they were sustained,
notwithstanding the fact that they referred to projects whose financial exploitation
would only become possible during future accounting periods.
The elimination of the effects generated by these higher levels of amortisation has
caused an increase in the research and development expenses, sustained during
prior accounting periods, of 12,876 thousand Euros, split as follows:
- IR 6141
3,654
- IR 5878
5,018
- IR 5885
3,179
- Pheromones
158
57
- Products of biological origin
587
- New insecticides
245
- Comm. Dev. 3rd party products
35
If there had continued to be applied the above mentioned fiscal interference the
amortisation for the accounting period would have been 2,866 thousand Euros
higher and consequently the total residual value of the research and development
expenses would have been 15,742 thousand Euros lower (12.876+2.866).
The increase in the research and development costs, in the column “capitalisations”
is attributable for 3,385 thousand Euros to the costs sustained for the projects for
the development of new products and for 110 thousand Euros to the costs relative to
the activity of extraordinary defence carried out in fulfilment of the EEC Directive
91/414 for the products “Benalaxyl”, “Tetraconazole” and “Copper based
products”.
The additions for the accounting period are basically referable to two projects that
were started up during previous financial years (herbicide IR 5878: 1,578 thousand
Euros, fungicide IR 5885: 1,792 thousand Euros), while the capitalisation process
was stopped for the fungicide IR 6141, because the first authorisation for its sale
was obtained in Europe during the accounting period. The results achieved up till
now and the future profitability prospects relative to these products are such as to
support the action of capitalising these costs. Specifically, the start up of sales for
the project IR 5878 is forecasted for 2006 and for project IR 5885 in 2007. The
margins foreseen in the future sales plans for these products shall enable the full
recovery of all the research cost that have been sustained.
The amount of the item “amortisation/write-downs, amounting to 3,801 thousand
Euros, includes 1,818 thousand Euros relative to the write down of the remaining
value of two classes of products, which are Dimethoato, included in the
extraordinary defence, for 981 thousand Euros and some biological products for
837 thousand Euros. The write-down has become necessary because the forecasted
future profitability levels have been reduced, following a series of market,
technological and competitive changes.
At 30th June 2004 the remaining value of the costs of research and development,
amounting to 32.009 thousand Euros, break down as follows:
- herbicide IR 5878
12,687
58
- fungicide IR 5885
9,875
- fungicide IR 6141
6,002
- products of biological origin
238
- new insecticides
690
- pheromones
353
- Comm. Dev. 3rd party products
131
- extraordinary defence
2,033
The increase of the item “concessions, licences, trademarks and similar rights”, in
the column “acquisitions” of 109 thousand Euros, refers to the incremental
expenses sustained in relation to the extension of the user licence of the new
information technology system and to the purchase of a series of software user
licences.
The net value of the item “consolidation difference”, amounting to 2,913 thousand
Euros, shows the remaining value of the positive difference between the higher
value of the posting to the accounting books of the shareholding purchased and the
relative fraction of the net equity belonging to the Group of the subsidiary
companies at the time of purchase.
Specifically this value refers to:
-
for 1,004 to the company Isagro Copfor S.r.l.;
-
for 1,110 to the company Siapa S.r.l.;
-
for 364 to the company Isagro BioFarming S.r.l.;
-
for 182 to the company Tetraco S.r.l., now incorporated into Isagro S.p.A.;
-
for 236 to the company Isagro Asia Agrochemicals Ltd;
-
for 17 to the company Fitoformula S.r.l., now incorporated into Isagro S.p.A..
The item “fee for the pact of non-competition” amounting to 1,106 thousand Euros
(Historical cost) inserted among the other intangible fixed assets refers to:
?
for 716 thousand Euros for the amount paid in financial year 2001 by the
subsidiary company Isagro Asia Agrochemicals Ltd for the purchase of the part
of the company relative to the production and sale of agrochemicals from the
Indian company RPG Life Science. Specifically, this latter company,
considering the amount that was paid, committed itself not to undertake, for a
59
period of five years, any economic activities that are in conflict with or in
competition with the activities of the part of the company that has been sold by
it. This value, compared to that at 31st December 2003, underwent a reduction
of 21 thousand Euros following the weakening of Indian Rupee compared to the
Euro. At 31/12/2004 the remaining value amounted to 335 thousand Euros.
?
for 390 thousand Euros for the amount paid in the financial year 2002 to the exminority shareholders of Isagro BioFarming S.r.l.., as a fee for the commitment
not to enter into competition with the company. The amortisation of these
expenses is carried out based on the duration of the obligation, which is from
20/12/2002 to 20/12/2005. At 31/12/2004 the remaining value amounted to 191
thousand Euros.
The remaining value of the item “commissions on loans at medium/long term”
amounting to 213 thousand Euros, inserted among the other intangible fixed assets,
refers to the charges sustained for obtaining a loan of 25,823 thousand Euros (start
up value) of the duration of six years, starting from 1/5/01, from a pool of banks
headed by the Banca Popolare Commercio e Industria.
Breakdown of the “historical costs of set up and enlargement” and of the “historical
costs of research and development”
Breakdown
Historical cost
30.6.2004
Costs of set up and enlargement
- expenses for admission to listing
- expenses of incorporation and
enlargement
- registration tax capitalised
Total
31.12.2003
2,446
101
2,446
101
92
2,639
92
2,639
391
1,116
690
136
391
1,105
690
132
- expenses for extraordinary defence
9,875
6,002
12,686
30,896
6,394
8,083
6,002
11,108
27,511
6,284
Total
37,290
33,795
Costs of research and development:
- development expenses relative to:
Tetraconazole
Products of biological origin
New Insecticides
Commercial development of third party
products
Fungicide IR 5885
Fungicide IR 6141
Herbicide IR 5878
60
Tangible Fixed Assets
At 30.06.2004
At 31.12.2003
At 30.06.2003
30,346
31,547
30,296
The breakdown and the summarised movements of the Tangible Fixed Assets are
given in the following tables:
Breakdown
31.12.2003
Depreciation
Reserve
Historical cost
Land and buildings
Plant and machinery
Industrial and
commercial
equipment
Other assets:
- furniture and fittings
- motor vehicles
- computers
Assets in progress and
advances
Total
1,487
11,578
(1,051)
10,527
18,128
(4,400)
13,728
2,315
20,796
(4,753)
16,043
3,474
(2,156)
1,318
(189)
3,392
(2,263)
1,129
637
161
1,493
2,291
(277)
(53)
(868)
(1,198)
360
108
625
1,093
(18)
(2)
44
24
652
168
1,582
2,402
(310)
(62)
(913)
(1,285)
342
106
669
1,117
6,368
0
6,368
(4,838)
1,530
0
1,530
40,118
(8,571)
31,547
(1,201)
39,698
(9,352)
30,346
Write downs
Other assets:
- furniture and
fittings
- motor vehicles
- computers
Assets in progress
and advances
Total
Net Book Value
9,040
((hist. Cost)) Difference
(hist. Cost)
Industrial and
commercial
equipment
30.06.2004
Depreciation
Reserve
Historical cost
(817)
Half year
Plant and
machinery
Change
9,857
Movements
Land and buildings
Net Book Value
Conversion
Purchases
Reclassificati
on
Disposals
Write downs
Conversion
Depreciation
(Depr. Res.) Difference
(Depr. Res.)
((hist. Cost))
Usage
Change
(Depr. Res.)
total
0
109
9
1,604
(1)
0
(6)
(228)
0
1,487
(1,963)
234
263
4,220
(86)
766
(31)
(1,110)
22
2,315
(105)
10
37
9
(33)
92
(1)
(221)
23
(189)
0
0
6
9
0
0
0
(33)
0
(18)
0
0
0
0
5
5
20
142
168
0
17
26
(13)
(75)
(88)
0
0
0
(1)
(1)
(2)
(17)
(107)
(157)
9
63
72
(2)
44
24
0
0
1,021
(5,859)
0
0
0
0
0
(4,838)
(2,068)
358
1,498
0
(208)
858
(40)
(1,716)
117
(1,201)
61
The changes that have taken place during the half year are basically relative to the
following:
?
The completion of the creation, within the Adria factory of the subsidiary
company Isagro Copper S.r.l., of a new WG plant for the formulation in
wettable granules of copper based products, with a higher added value, whose
production and sale began in the opening
months of 2004. This particular
intervention has brought about an increase in the historical cost of the item Land
and Buildings of 1,344 thousand Euros and in that of the item Plant and
Machinery for 4,096 thousand Euros;
?
The write-down, amounting to 1,210 thousand Euros, of the items “Plant and
Machinery” and “Industrial Equipment” belonging to the Aquila factory of the
subsidiary company AgriFormula S.r.l.. This write-down is a consequence of the
dissolving, which took place on 23rd June 2004, of the contract called the Toll
Manufacturing Agreement, which existed between Bayer CropScience S.r.l. and
Agriformula S.r.l..
The ending of the contract in question accompanied by the payment from Bayer
of the amount of 3,000 thousand Euros under the heading of an indemnity, has
brought about, in fact, a reduction in the requested production volumes of such a
size as not to allow a full usage of the plants and consequently a recovery of
their cost through utilisation. Therefore, it has been considered to be opportune
to go ahead with the write down of the assets of the subsidiary company because
the forecasted income flows, relative to the expected revenues of the enterprise,
will certainly not enable a full recovery of the investment that has been made.
The item “Fixed Assets in Progress”, amounting to 1.530 thousand Euros, mainly
refers to projects in progress in the production sites of the companies Isagro S.p.A e
Isagro Copper S.r.l.. furthermore, it is highlighted that there continued the
investment (232 thousand Euros) relative to the creation of a in the real estate
complex owned by research centre Isagro S.p.A., situated in the Municipality of
Novara, within the so called “Chemical Zone”.
The decrease of the item,
amounting to 4,838 thousand Euros, is basically relative to the conclusion of the
investment regarding the WG production plant, the value of which at 31.12.2003
amounted to 5,417 thousand Euros.
62
The Group does not possess any assets for which there have been carried out in the
past any monetary write ups, either on a voluntary discretionary basis or pursuant to
any legislation regarding this subject.
Financial Fixed Assets
At 30.06.2004
At 31.12.2003
At 30.06.2003
474
544
601
The Breakdown and the summarised movements of the financial fixed assets are
described in the table given below:
Breakdown
Historical
cost
Shareholdings in
subsidiary companies:
- Isagro Australia ltd
- Isagro New Zealand
Shareholdings in
affiliated companies:
- Reiver Int'l sarl
- Siamer S.r.L.
Value at
31.12.2003
Change in the accounting period
Conversion
Write downs
Write ups
difference
Acquisitions
(Disposals)
Increases
(Decreases)
Change
total
Value at
30.06.2004
21
13
34
(19)
(12)
(31)
2
1
3
0
0
0
0
0
0
(2)
(1)
(3)
0
0
0
(2)
(1)
(3)
0
0
0
78
165
243
(53)
(26)
(79)
25
139
164
0
0
0
0
0
0
0
(43)
(43)
0
0
0
0
(43)
(43)
25
96
121
32
0
32
0
1
0
0
1
33
345
345
654
0
0
(110)
345
345
544
(30)
(30)
(30)
0
0
1
0
0
(46)
5
5
5
(25)
(25)
(70)
320
320
474
Other shareholdings
Receivables from
others:
- prepaid tax on ELI
Cumulative
Write downs/
Write ups
List of shareholdings
Net
Equity before
Result for
period
Financial
result
(adjusted)
(adjusted)
Amount of
shareholding
(%)
Amount of
Net Equity
belonging
To the Group
Book
Value posted
Subsidiary companies:
Isagro Australia Pty Ltd - Parramatta
Share Capital AUD 185.000
1
(1)
100.00
0
0
Isagro New Zealand Pty Ltd - Auckland
Share Capital NZD 20.100
2
(2)
100.00
0
0
Affiliated companies:
Reiver Int'l sarl - Casablanca
Share Capital dh 2.400.000
99
(10)
27.92
25
25
Siamer srl - Milano
Share Capital euro 104.000
101
(86)
50.00
8
96
For the foreign subsidiaries and affiliates the values shown in Euros have been calculated using the following exchange rates at 30th June 2004
(AUD = 1,7554; $NZ = 1,921; Dh = 11,019)
63
The shareholdings in those subsidiary companies, which have been excluded from the
consolidation area because they are not significant, have been adjusted according to the net
equity found in the relative Balance Sheets at 30th June 2004.
Also the shareholdings in the affiliated companies are valued with the “net equity method”.
The higher value posted to the books for the shareholding in Siamer S.r.l. compared to the
share of the net equity belonging to the Group is due to the fact that at the time of the
acquisition, which took place during the financial year 2001, there was recognised an
amount for goodwill, included in the value of the shareholding, amounting to 161 thousand
Euros, relative to the forecasted future profits that are confirmed by the company business
plans. This goodwill is amortised over the period of five financial years, with a consequent
reduction in the net book value of the shareholding.
The Change of the item “tax prepayment for employee leaving indemnity”, pursuant to
article 3 of the law n°. 662 of 23.12.96 and its successive modifications, is caused by the
difference between the increase due to the write up for the period of 5 thousand Euros and
the decrease caused by the usage of the reduction of the IRPEF (Employee Income Tax) and
of the other taxes paid by the companies belonging to the Group for 30 thousand Euros.
Current Assets
Inventories
At 30.06.2004
At 31.12.2003
At 30.06.2003
53,219
46,988
54,636
Breakdown
Raw, ancillary
And consumable
Material
Work
In progress
And semi-finished
products
W-I-P
To order
Finished Products
& merchandise
Advances
Total
Net Book
value
31.12.2003
Increases/
Decreases
Write downs/
Provisions to the
Inventory write
Down reserve
Changes during the accounting period
Conversion
Other
Use of the
difference
changes
Inventory write
Down reserve
Other
Use of the
Change
total
Net Book
value
30.06.2004
12,489
1,790
0
24
0
0
1,814
14,303
676
(111)
0
21
0
0
(90)
586
4,542
1,194
0
0
0
0
1,194
5,736
29,255
3,111
(392)
47
(50)
374
3,090
32,345
26
222
0
0
0
0
223
249
46,988
6,206
(392)
92
(50)
374
6,231
53,219
64
The value of the inventories posted to the Consolidated Half Yearly Report is net of
the inventory write down reserve for the amount of 768 thousand Euros, relative to
merchandise that is obsolete or has to be reworked. The reserve, whose value at
31.12.2003 amounted to 700 thousand Euros, was used up for an amount of 374
thousand Euros to cover the write-downs and destruction of obsolete products.
The Work In Progress to order refers to the jobs of the subsidiary company Isam
S.r.l., relative to the interventions of an environmental nature that are supplied to
both public and private organisations.
The increase in the inventories of raw materials and finished products is basically
attributable to the creation of stocks of Tetraconazole in order to be able to face up
to the sales demand that is forecasted for this product during the second half year.
Receivables
At 30.06.2004
At 31.12.2003
At 30.06.2003
92,351
74,213
87,894
Breakdown
From customers
- Bad Debt Reserve receivables
- Bad Debt Reserve receivables late
payment interest
Net Book
Value
31.12.2003
Changes during the accounting period
Other
Write downs/
Use of the
changes
Provisions
Bad Debts
To Bad Debts
Reserve
Reserve
Start ups/
repayments
Change
total
Net Book
Value
30.06.2004
60,957
(1,565)
(296)
19,583
0
0
0
(5)
0
(13)
(288)
(117)
0
26
0
19,570
(267)
(117)
80,527
(1,832)
(413)
59,096
19,583
(5)
(418)
26
19,186
78,282
0
3
0
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
3
299
269
0
568
(56)
148
0
92
0
0
0
0
0
0
0
0
0
0
0
0
(56)
148
0
92
243
417
0
660
12
(2)
0
0
0
(2)
10
Taxation receivables
5,206
(1,734)
0
0
0
(1,734)
3,472
For prepaid taxes
2,568
1,682
0
0
0
1,682
4,250
From others:
- guarantee deposits
- MIUR
- Ministry for productive activities
- advances to suppliers and debtors
- employees
- research expenses recoveries
- financial receivables
- royalties
- indemnities/reimbursements
- others
884
3,553
0
144
171
82
443
435
174
960
(235)
(1,105)
178
(36)
173
219
(115)
(173)
(163)
171
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(235)
(1,105)
178
(36)
173
219
(115)
(173)
(163)
171
649
2,448
178
108
344
301
328
262
11
1,131
From subsidiary companies:
- trade receivables
- miscellaneous receivables
- financial receivables
From affiliated companies:
- trade receivables
- miscellaneous receivables
- financial receivables
From parent companies:
- miscellaneous receivables
65
- Bad Debts Reserve
Total
6,846
(86)
6,760
(1,086)
0
(1,086)
0
0
0
0
0
0
0
0
0
(1,086)
0
(1,086)
5,760
(86)
5,674
74,213
18,535
(5)
(418)
26
18,138
92,351
The receivables contained in the current assets increase, compared to the figure at
31st December 2003 by 18,138 thousand Euros, which was caused, on the one
hand, by the increase in the receivables from customers, i.e. a gross increase of
19,570 thousand Euros, and in the receivables for prepaid taxes with an increase of
1,682 thousand Euros) and, on the other hand by the reduction of the taxation
receivables, with a decrease of 1,734 thousand Euros and of the receivables
relative to contributions given as complete write offs regarding research projects,
with a decrease of 1,105 thousand Euros.
The receivables from customers, the increase of which is attributable both to the
seasonality of the Group’s business and to the very much higher than forecasted
sales of Tetraconazole in the United States and Brazilian markets, also include
3,410 thousand Euros of receivables, which have been sold with right of recourse to
both banks and factoring companies.
It is also pointed out that during the half yearly accounting period in question there
were also sold receivables, without the right of recourse, for a total amount of
29,694 thousand Euros, of which 12.047 thousand Euros refer to receivables that
had not yet fallen due for payment at 30th June 2004.
The Bad Debts Reserve for trade receivables, which at 31.12.2003 amounted to
1,565 thousand Euros, was utilised during the period for 26 thousand Euros.
Furthermore, the reserve increased by 288 thousand Euros for the provision that
was posted to it. The column called “other changes” refers to the difference on
conversion relative to the write down fund of the subsidiary company Isagro Asia
Agrochemicals Ltd.
In fulfilment of the Legislative Decree 231/2002 there have been accrued late
payment interest for customers for 134 thousand Euros, to cover, which, for
prudential reasons there has been provided a write down fund amounting to 117
thousand Euros.
The item “receivables from customers” also includes receivables from Isagro Italia
S.r.l. and Siapa S.r.l. for 3,159 thousand Euros and 2,239 thousand Euros,
respectively.
66
The receivables from the affiliated companies include trade receivables from the
affiliated company Reiver Int’l SARL for 243 thousand Euros and miscellaneous
receivables from the affiliated company Siamer S.r.l. for 417 thousand Euros,
relative to incomes for intermediation°.
In the following table there is shown the geographical split of the receivables from
customers and affiliated companies:
? Europe
62,265
? Central Asia and Oceania
? The Americas (*)
2,245
10,531
? Far East
1,143
? Middle East
2,683
? Africa
1,903
Total
80.770
(*) of which United States 8.038 thousand Euros.
The receivable of 2,448 thousand Euros from MIUR (Ministry of Education, the
University and Research), refers to receivables for contributions on the basis of
total write off on research projects and it breaks down as follows:
-
IR 6141
78
-
IR 5878
383
-
IR 5885
1,074
-
PNR Tema 4
230
-
PNR Tema 6
671
-
Other projects
12
During the accounting period in question the Group cashed in contributions for a
total of 1,466 thousand Euros, of which, specifically, 280 thousand Euros in
relation to the project IR 5878, 905 thousand Euros for the project IR 5885 and 268
thousand Euros for the project PNR Tema 3.
The receivable of 178 thousand Euros From the Ministry of Productive Activities is
relative to the remaining value (original value 357 thousand Euros) of a
contributions on account of plants that have been set up, which was obtained by the
subsidiary company Isagro Copper S.r.l. relative to the creation, within the
production site of Adria, of a new WG plant for the formulation of wettable
67
granules for copper based products. During the half-year period the subsidiary
company cashed in the first instalment of the contributions amounting to 179
thousand Euros.
The receivables from the Tax Authorities, amounting to 3.472 thousand Euros,
include 1,060 thousand Euros of tax credits for export incentives relative to the
subsidiary company Isagro Asia, 1,190 thousand Euros of VAT credits and 1,222
thousand Euros of tax credits relative to the direct taxes. Specifically, the decrease
posted in the half year of 1,734 thousand Euros is basically due to the decrease in
the amount of the Group’s VAT credit, after its set off against other taxes for 516
thousand Euros and the improvement in the management of purchases that are
exempt from the tax. Among the taxation receivables there are amounts that will
fall due beyond the next financial year for 318 thousand Euros.
The increase in the receivables for prepaid taxes of 1,682 thousand Euros breaks
down as follows:
- provisions 2004
1,450
- usage for the period
(471)
- conversion difference
14
- elimination of interferences on
taxes (so called Vietti Reform) 669
- other changes
20
The provisions for the accounting period, amounting to 1,450 thousand Euros,
refers for 365 thousand Euros to the tax effects of the elimination of inter-company
profits and for 1,085 thousand Euros to provisions that have been made by the
various companies belonging to the Group, in accordance with the timing
differences between the statutory results and the taxable incomes of 1,057 thousand
Euros and the fiscal benefits that are expected to be obtained by the usage of the
fiscally deductible losses that have been brought forward for 28 thousand Euros,
where these are considered to be recoverable with reasonable certainty.
The change relative to the elimination of the fiscal interferences, the so called Vietti
Reform is relative to the Legislative Decree n°. 6/2003, the introduction of which
has suppressed the rule that allowed carrying out value adjustments and provisions
purely on the basis of taxation legislation. The amount posted to the Financial
Statements refers to the effect following the elimination of the fiscal interferences
relative to the accounting treatment of the contributions received on account of
68
capital invest that have been received regarding the costs of research and
development. In order to have a detail of this you are refereed what is shown in the
item accruals and deferred income. If the fiscal interferences referred to were to be
continued to be applied the receivables for prepaid taxes would have been higher by
177 thousand Euros relative to their effects for the accounting period.
Among the receivables for prepaid taxes there are included receivables that will fall
due, or become useable, beyond the next financial year amounting to 2,630
thousand Euros.
The item “others” of the receivables from others includes receivables from Isagro
Italia S.r.l. and Siapa S.r.l. for 149 and 232 thousand Euros, respectively, relative to
the services supplied to them by Isagro SpA, to the recovery of certain personnel
costs and to miscellaneous other items. This item includes receivables from third
parties for the services of technical personnel and the recovery of labour costs
amounting to 201 thousand Euros.
Among the receivables “from others” there are included receivables that will
become due beyond the end of the next financial year amounting to 452 thousand
Euros that are basically relative to guarantee deposits.
Financial assets that are not fixed assets
At 30.06.2004
At 31.12.2003
At 30.06.2003
14
0
0
The item refers to the subscription, by the subsidiary company Isagro Brasil Ltda,
of a share in an investment fund that bears monthly interest at a rate of 1.05%, for
the purpose of temporarily investing excess liquidity.
Available liquidity
At 30.06.2004
At 31.12.2003
At 30.06.2003
13,556
13,797
13,018
Breakdown
Bank and postal deposits:
- banks ordinary a/cs & postal deposits
- banks foreign currency a/cs
- banks blocked a/cs
- banks unavailable a/cs
31.12.2003
6,951
791
4,068
1,968
13,778
Change
Total
990
941
(805)
(1,384)
(258)
30.06.2004
7,941
1,732
3,263
584
13,520
69
Money and securities in petty cash
Total
19
17
36
13,797
(241)
13,556
The item “banks unavailable accounts ” are relative to amounts that have been
accredited in the accounting books at 30th June 2004 but that will only become
available, in terms of their value dates, in the first few days of the second half year.
The item banks blocked accounts refers to “short term time deposits”, which have
been set up as a guarantee for the sureties issued by banks in the interest of the
subsidiary company Isagro Asia. There follow below the technical features of the
main time deposits:
-
2,400 thousand Euros towards Banca Intesa, expiry date 28.05.2004, gross
interest rate 1.567%;
-
857 thousand Euros towards the Banca Agricola Mantovana, expiry date
31.10.2004, gross interest rate 0.05%).
Prepayments, accrued incomes and deferred charges
At 30.06.2004
At 31.12.2003
At 30.06.2003
1,009
363
886
Breakdown
Accrued incomes:
- interest receivable
- royalties
Prepayments:
- marketing services
- rents paid
- contributions to associations
- leasing and maintenance and
instalments
- rentals of data transmission lines
- subscriptions
- insurances
- interest payable
- others
Total
31.12.2003
Change
total
30.06.2004
46
0
46
62
0
62
108
0
108
145
16
0
49
(37)
(16)
76
51
108
0
76
100
8
29
50
2
18
317
26
(8)
409
(2)
85
584
34
21
459
0
103
901
363
646
1,009
The item “accrued incomes” refers for 99 thousand Euros to the contributions on
account of interest, calculated at the rate of 2.95%, given by the company Simest
70
S.p.A. in relation to the medium/long term loan of 5,000 thousand Euros issued to
the parent company Isagro S.p.A. by Banca Mediocredito on 26.07.2002.
The item “marketing services” basically refers to the prepayment of the costs for
services of a multi-year nature relative to field tests and market analyses
commissioned to the shareholder company Sipcam PhytEurosp S.A., on the basis of
a contract with a five year duration.
Consolidated Net Equity of the Group
At 30.06.2004
At 31.12.2003
At 30.06.2003
59,368
47,934
33,080
The table below shows the reconciliation between the profit for the half-year of the
parent company Isagro S.p.A. and the consolidated profit, as well as the
reconciliation between the Net Equity of the parent company Isagro S.p.A. and the
Consolidated Net Equity:
Profit for
Net
The accounting period
Equity
Financial Statements of the parent Isagro
Spa
10,392
59,212
0
0
(2,058)
(4,583)
Elimination of inter-company dividends
(120)
0
Differences compared to the book values
of the
Subsidiary and affiliated companies
4,050
5,662
0
(2,307)
508
1,384
12,772
59,368
(232)
108
12,540
59,476
Harmonisation of the accounting
principles
Inter-company Profits
Conversion differences
Deferred taxes and for consolidation
Adjustments
GROUP
THIRD PARTIES
CONSOLIDATED FINANCIAL
STATEMENTS
The table below shows the movements of the accounting period of the Net Equity
belonging to the Group:
Breakdown
Net Book
Value
31.12.2003
Changes during the accounting period
Changes
Movements
Split of the
In the
Between
Profit
Consolidation
Reserves
Area
Increases/
(Decreases)
Change
Total
Net Book
Value
30.06.2004
Share Capital
16,000
0
0
0
0
0
16,000
Share Premium Reserve
15,706
0
0
0
0
0
15,706
71
Legal Reserve
Other reserves:
- Merger excess
- Reserve (difference) from
conversion
909
0
0
0
139
139
1,048
7,025
(2,569)
0
262
0
0
0
0
0
0
0
262
7,025
(2,307)
4,456
262
0
0
0
262
4,718
7,681
0
0
0
1,443
1,443
9,124
3,182
12,772
0
0
(3,182)
9,590
12,772
47,934
13,034
0
0
(1,600)
1,600
11,434
59,368
Profits (losses) brought forward
Profit (Loss) of the financial year
Belonging to the Group
Total
Dividends
Profits (losses) brought forward
At the closing of the accounting period the Share Capital of the parent company
was fully subscribed and paid up.
The table below shows the effects on the profit for the accounting period and also
on the Net Equity of the fiscal clean up pursuant to the Legislative Decree.
n°.6/2003 (so called Vietti Reform):
Cumulative effects
Lower cumulative amortisation of the R&D expenses capitalised
12,876
- fiscal effect (deferred tax fund)
(4,796)
8,080
Higher deferred incomes for the contributions on account of work done
(2,024)
+ fiscal effect (receivables for prepaid taxes)
669
(1,355)
Total cumulative effects (extraordinary components)
6,725
Effects for the accounting period
Lower amortisation of the R&D expenses capitalised
2,866
- fiscal effect (deferred tax fund)
(1,068)
1,798
Lower contributions on account of work done
(475)
+ fiscal effect (receivables for deferred taxes)
177
(298)
Total effects for the period (extraordinary components)
1,500
Total effects on the Profit and the Net Equity
8,225
Consolidated Net Equity belonging to third parties
At 30.06.2004
At 31.12.2003
At 30.06.2003
108
611
629
The table below shows the movements for the accounting period of the Net Equity
belonging to third parties:
72
Breakdown
Net Book
Value
31.12.2003
Capital and reserves
Profit (Loss) of third parties
Total
Changes during the accounting period
Increases/
Moves
(decreases)
between
Dividends
reserves
Changes
In the
Consolidation
area
Change
total
Net Book
Value
30.06.2004
567
(156)
0
44
(115)
(227)
340
44
0
(232)
(44)
0
(276)
(232)
611
(156)
(232)
0
(115)
(503)
108
The column “dividends” refers to the share belonging to third parties of the
dividends distributed by the subsidiary company Isam S.r.l..
The profit belonging to third parties does not contain the effect, for the accounting
period, of the financial result of Isagro Asia Agrochemicals Ltd, which is relative to
the minority shareholder Simest SpA of 4%, because it is foreseen in the contract
that this company is excluded from the coverage of any losses of that company and
also from participating in any profits.
The column called “Changes in the area of consolidation” refers to the Balance
Sheet effects on the Capital and Reserves of third parties of the acquisition of 37%
of AgriFormula S.r.l..
Funds for risks and charges
At 30.06.2004
At 31.12.2003
At 30.06.2003
12,325
2,410
6,293
The Breakdown and the movements of the funds for risks and charges are shown in
the table given below.
Breakdown
For taxes:
- Deferred taxes fund
- tax risks funds
Net Book
Value
31.12.2003
Changes during the accounting period
Reclass.
Provisions
And
Usages
Other
moves
Elimination
Of the
Fiscal
interferences
Change
total
Net Book
Value
30.06.2004
0
694
694
0
4,796
4,796
0
37
37
4,431
1,182
5,613
0
(62)
(62)
4,431
5,953
10,384
4,431
6,647
11,078
678
195
2
100
68
0
0
0
0
0
0
(50)
0
0
0
268
0
0
100
22
(639)
(32)
0
0
(65)
(371)
(82)
0
100
(43)
307
113
2
200
25
530
143
1,716
0
0
0
0
0
(50)
444
14
848
(530)
(1)
(1,267)
(86)
13
(469)
444
156
1,247
2,410
4,796
(13)
6,461
(1,329)
9,915
12,325
Others:
- fund for charges incentives for
redundancies
- fund for heath and safety
- fund for products guarantees
- fund for IRS risks
- fund for bonus to customers
- fund for other risks
- fund for participation bonus
And executive bonus
Total
73
Specifically:
-
The fund for charges relative to the incentives for leaving and redundancy was
basically used by the subsidiary companies AgriFormula S.r.l. (578 thousand
Euros) and Isagro Ricerca S.r.l. (36 thousand Euros) in order to cover the
charges sustained for the redundancy procedures and the leaving incentives
which have involved the restructuring of the organisational set ups of these two
companies. This fund was increased by 268 thousand Euros in order to be able
to cover the further costs that are necessary to complete this restructuring
operation within the subsidiary company AgriFormula S.r.l.
-
affiliated company Isagro Italia S.r.l., for 190 thousand Euros, following the
realisation of the organisational interventions, which foresee the encouraged
leaving of excess personnel. Furthermore, this fund was added to by an amount
of 652 thousand Euros following the charges posted to it for the redundancy
procedures and the leaving incentives which, following a large scale operation
of company restructuring, there are forecasted to be sustained during the
financial year 2004 by the subsidiary companies AgriFormula S.r.l. and Isagro
Research S.r.l.. The opposite side of the journal entry posting, to the Profit and
Loss Account, of this provision has been put into the extraordinary charges.
-
The Health and Safety fund was used for the amount of 32 thousand Euros in
order to cover the costs sustained for the updating and modernisation of the
production plants of the subsidiary company Isagro Copper S.r.l. and for the
covering of the costs relative to the disposal residues regarding working
materials.
-
The fund for risks to cover IRS (Interest Rate Swaps) gathers in, as a
prudential measure, the charges linked to any possible future losses that may
arise from the fluctuations in the reference rates of the IRS operation.
The fund for current taxes, created by applying Accounting Principle n°. 30includes
the provisions for the forecasted taxation liabilities that have been calculated for the
half yearly period in question. For Group Parent Company Isagro S.p.A., the same
having been admitted to listing on the Italian Stock Exchange during the last
financial year, and for the subsidiary company Isagro Copper S.r.l., for which there
is foreseen the merger by incorporation into the Group Parent Company, with an
effectiveness that is retroactive to 1st January 2004, there was used a tax rate for
74
IRES ( the new Corporate Tax replacing IRPEG from 1st January 2004) of 20%
instead of the ordinary Corporate Tax rate of 33%, a facilitation that was conceded
through the Legislative Decree n°. 269/03.
The fund for deferred taxes is made up from the deferred taxes liabilities relative
both to the residual value of the deferred taxes linked to the consolidation
adjustments as well as to the deferred taxes that are contained within the statutory
accounts of the consolidated companies.
Specifically, the provision set aside for the accounting period consists of the
following amounts:
?
the item “elimination of the fiscal interferences” refers to the fiscal effect
relative to the accumulative amortisation of the costs of research and
development that have been generated by the application of the Legislative
Decree N°. 6/2003, the so called “Vietti Law”.
?
The provisions for the period refers for 109 thousand Euros to the setting aside
of an amount carried out by the subsidiary company Isagro (Asia)
Agrochemicals Pvt Ltd. and for 1,068 thousand Euros it refers to the provision
that has been carried out and set aside relative to the fiscal deduction of the
amortisation of the costs of research and development for projects that are still
proceeding in their development stage and for which the statutory accounts
amortisation is suspended up till the time at which they can be put on the
market for sale.
Employee Leaving Indemnity Fund
At 30.06.2004
At 31.12.2003
At 30.06.2003
7,269
7,795
8,241
The item shows, compared to the figure at 31st December 2003, a decrease of 526
thousand Euros, whose Breakdown is shown in the table given below:
31.12.2003
Net Book
Value
Employee
Leaving
Indemnity
Fund
7,795
Charge
To
P&L
Prepaid
Taxes
On revaluation
ELI
647
(13)
Transfers
To other
Pension funds
(146)
Transfers
Of
personnel
Used for
reimbursements
Change
total
30.06.2004
Net Book
Value
0
(1,014)
(526)
7,269
75
The item “used for reimbursements” basically
refers to the operations and pf
restructuring and reorganisation that have been carried out in the various companies
belonging to the Group.
Payables
At 30.06.2004
At 31.12.2003
At 30.06.2003
146,160
132,814
160,049
The item shows an increase, compared to the figure at 31st December 2003, of
13.346 thousand Euros, la the breakdown of which is shown in the tables below:
Breakdown
Payables to banks
Payables due to other financiers:
- facilitated financing research (IMI)
- factoring companies
- others
Advances received
Payables due to suppliers
Taxation Payables:
- withholding taxes
- income taxes and VAT
- others
Payables due to Social Security
Institutions
Other payables:
- personnel
- agents and finders
- others
Total
31.12.2003
Change
total
77,785
5,132
82,917
3,538
1,533
0
5,071
3,322
(988)
0
2,334
6,860
545
0
7,405
4,168
520
4,688
36,795
4,675
41,470
567
1,725
0
2,292
(12)
85
0
73
555
1,810
0
2,365
1,488
63
1,551
1,694
1,766
1,755
5,215
580
14
(45)
549
2,274
1,780
1710
5,764
132,814
13,346
146,160
Breakdown
Within the
Next financial
year
Payables to banks
30.06.2004
Ageing of the payables by due dates
From 2nd to the
Beyond the 5 th
5th
Year
Year
after
after
Total
61,332
17,734
3,851
82,917
897
3,504
3,004
7,405
4,688
0
0
4,688
41,470
0
0
41,470
Taxation Payables
2,365
0
0
2,365
Payables due to Social Security
Institutions
1,551
0
0
1,551
Other payables
5,197
0
567
5,764
117,500
21,238
7,422
146,160
Payables due to other financiers
Advances received
Payables due to suppliers
Total
76
Among the payables to banks and those due to other financiers there are include
some amounts that will become due and payable beyond the end of the next
financial year for 28,093 thousand Euros, of which 6,855 that fall due beyond the
fifth successive financial year.
Specifically, the item called
“payables due to banks” basically contains the
following medium and long term loans and financing that have been obtained by
the parent company Isagro SpA:
- 18,076 thousand Euros (amount payable shortly 5.164 thousand Euros), issued by
a pool of banks headed up by Banca Popolare Commercio e Industria (now
called “Banche Popolari Unite”) on 1/5/01, with the duration of six years to be
repaid in six monthly equal instalments, which is interest bearing at the 6
months Euribor rate plus a spread of 2%;
- 4,643 thousand Euros (amount payable shortly 714 thousand Euros), issued during
the financial year 2002, by Banca Mediocredito, with the duration of eight
years to be repaid in six monthly instalments, which is interest bearing at the 6
months Euribor rate plus a spread of 1.30%. On this loan the parent company
receives from the company Simest Spa a contributions on account of interest at
the rate of 2.95%;
- 4,410 thousand Euros, issued by the Banca Centrobanca during the course of the
financial year 2003 and in the first half year of 2004 for 3,873 thousand Euros
and 537 thousand Euros, respectively, pursuant to the Law n°. 346/1988 for
applied research, to be repaid in 12 six monthly equal instalments, the first
falling due on 1st January 2007 and the last on 1st July 2012, in relation to the
research project and the development of new herbicide compositions for
agricultural usage called IR5878. This loan is interest bearing at a facilitated
rate amounting to 4.16% per annum.
The first two loans have been conceded with the commitment to observe certain
Balance Sheet and financial requisites (covenants), which, at 30th June 2004, result
as having been respected.
At 30th June 2004, the Group has in existence credit lines that have been agreed for
a total of 157,988 thousand Euros that split down as follows:
77
CREDIT LINES
FROM BANKS
131,468 thousand Euros
CREDIT LINES
FROM
26,520 thousand Euros
FACTORS
The financial payables to San Paolo IMI (6,860 thousand Euros) refer to:
?
for 3,493 thousand Euros to facilitated loan financing, at a half yearly rate of
1% issued by the organisation San Paolo IMI S.p.A. during the half year period
pursuant to the Law 46/82 per for applied research, which is relative to the
project n°. 1679, approved by the MIUR, and which is called “research and
development of new fungicide compositions for agricultural usage on the basis
of an innovative active principle coded IR5885”. This loan financing is
reimbursable in 10 equal half yearly instalments, starting at 1st January 2008
and ending at 1st July 2012;
?
for 740 thousand Euros (amount payable shortly 287 thousand Euros) to a
facilitated financing, at the six monthly rate of 1.85%, issued by San Paolo IMI
S.p.A., pursuant to the Law 46 of 17.02.1982 for applied research. This loan has
duration of 10 years starting from 1.7.1996 and is guaranteed by a surety that
has been given by the company Manisa S.r.l., the indirect parent company of the
Group Parent Company, as a guarantee for the total and punctual fulfilment of
all the obligations that have been taken on up until the loan is wholly
extinguished.
?
for 2,358 thousand Euros to a facilitated financing, at the six monthly rate of
1%, issued by San Paolo IMI S.p.A. during the years 2002 and 2003 for 1,932
and 426 thousand Euros, respectively, pursuant to the above mention Law 46,
in relation to the research project called IR 6141. This loan is to be repaid in 10
six monthly instalments the first of which falls due on 1 st July 2005 and the last
on 1st January 2010.
?
for 115 thousand Euros (amount payable shortly 45 thousand Euros) to a loan,
issued by San Paolo IMI S.p.A during the years 1997/1998, obtained in relation
to the research project, approved by the MIUR, called “the technological
improvement of biological products dedicated to agriculture, to the environment
78
and other miscellaneous items and the relative production processes”. This loan
will be fully repaid by 01.07.2006;
?
for 154 thousand Euros (amount payable shortly 19 thousand Euros) to a
facilitated financing, at the half yearly rate of 1%, issued by IMI S.p.A during
the financial year 2003 and obtained from the MIUR in relation to the research
project called “Realisation of microbiological ecologically compatible
products”, repayable by 01.07.2011.
The change in the payables due to banks and to other financiers (increase of 7,466
thousand Euros) is basically due to the seasonal trend of the sales agrochemicals,
which are typically concentrated in the first six months of each calendar year and
which have, obviously, caused an increase in the invested working capital and this,
specifically, relative to the Balance sheet situation at 31.12.2003.
The item “advances received” amounting to 4,688 thousand Euros basically
consists of :
-
3,152 thousand Euros for advances received from customers for the carrying
out of work relative to the jobs that have been commissioned by the
participated company ISAM S.r.l.;
-
775 thousand Euros for advances received from customers;
-
286 thousand Euros for the advances received from the MIUR relative to the
research project that is called “PNR Tema 6”;
-
228 thousand Euros for the payment on account received from the MIUR
relative to the project n°. 1679 called “Research and development of new
fungicide compositions for agricultural use based on an innovative active
principle coded IR5885”.
The change in the “payables to suppliers”, which ahs increased by 4,675 thousand
Euros can be basically imputed to the purchases of raw materials that are used in
the production of Tetraconazole, the stocks of which have been steadily increased
to be able to cover the forecasted sales in the second half of the financial year.
In the “payables to suppliers” there are included payables to the affiliated company
Siapa S.r.l. for 108 thousand Euros due to the affiliated company Isagro Italia S.r.l.
for 85 thousand Euros.
There follows the split by the relative geographical areas of the payables to
suppliers:
79
? Europe
? Central Asia and Oceania
33,037
4,971
? The Americas (*)
? Far East
916
1,845
? Middle East
689
? Africa
Total
12
41,470
(*) of which United States 223 thousand Euros.
The lack in the decrease of the item “taxation payables”, which underwent an
increase of 73 thousand Euros is fundamentally imputable, on the one hand, to the
decision to put off, for the Italian companies included within the consolidation area,
from the month of June to the month of July, the payment of the balance of the
direct taxes for 2003, benefiting from a fiscal extension of the payment date and,
on the other hand from the application of the accounting principle n°. 30, which
foresees that the tax charge calculated for the half year, because it is merely a
presumed expense, is posted to the tax funds and not among the taxation payables,
which is a different treatment from what takes place with the annual tax charge at
the time of the closing of the Annual Financial Statements.
Within the payables “due to others” there are included 567 thousand Euros, with a
due date that is beyond the fifth year, relative to guarantee deposits received from
the customers of the subsidiary company Isagro Asia Agrochemicals Ltd.
80
Accruals and deferred income
At 30.06.2004
At 31.12.2003
At 30.06.2003
5,510
2,940
3,278
Breakdown
Accruals:
- interest payable
- rentals and insurances
- others
Deferred income
- contributions to total write off
- contributions to total write off - Vietti Reform
- interest receivable
- safety works
- other deferrals
Total
31.12.2003
Variation
total
30.06.2004
177
0
0
177
31
35
0
66
208
35
0
243
2,537
0
27
165
34
2,763
558
2,024
3
(91)
10
2,504
3,095
2,024
30
74
44
5,267
2,940
2,570
5,510
The items “contributions to total write off” and “contributions to total write –Vietti Reform”
refers for 4,771 thousand Euros to the value of the contributions matured up to 30th June
2004 from the MIUR in relation to the research projects called in IR 6141 (846 thousand
Euros), IR 5885 (1,910 thousand Euros) e IR 5878 (2,015 thousand Euros).
In particular the regarding the so called “Vietti Reform” refers to contributions passed
through the Profit and Loss Account in preceding financial years relative to the amortisation
of the costs of research and development for which the contributions have been received.
These amounts have been recharged to the deferred incomes for the purpose of eliminating
the effects coming from the fiscal interferences.
If there had been continued to be applied the criterion that was used in the past, the deferred
incomes would have been lower by 2,499 thousand Euros, of which 2,024 relative to the
cumulative effects and 475 thousand Euros relative to the effects for the half yearly period
itself.
This item also includes the remaining value of public contribution on account of plants set
up that was obtained by the subsidiary company Isagro Copper S.r.l. amounting to 348
thousand Euros (original value 357 thousand Euros) relative to the construction within the
Adria factory, of a plant for copper based formulations in the form of wettable granules
(WG). This contribution has been deferred using a timeframe based on the useful life of the
related asset.
81
The item “safety works” refers to the incomes relative to the recharging to the company
Bayer Cropscience Italia S.r.l. of the costs sustained for the work regarding the updating of
the plants in order to align them with the safety legislation currently in force, carried out
during the financial year 2001 and capitalised among the tangible fixed assets, within the
production site of AgriFormula S.r.l.. This income has been deferred on the basis of the
period of the depreciation of the plants, which are the subject of the intervention.
Contra accounts
At 30.06.2004
At 31.12.2003
At 30.06.2003
153,137
177,944
172,218
Comfort letters, sureties and guarantees given:
- by the parent company in the interest
Of the subsidiary companies:
Isam srl
Isagro BioFarming srl
Isagro BioFarming srl (già Biochem Srl)
Isagro Copper srl
Fitoformula srl
Isagro Europe srl
Isagro Ricerca srl
Isagro Asia Agroc. Ltd
- by the parent company in the interest of affiliated and
associated companies:
Isagro Italia srl
Siapa srl
Siamer srl
- from associated companies in the
Interest of associated companies
Siapa srl
Total
Other contra accounts:
Guarantees received:
- bank sureties and of third parties in favour of third parties
- bank sureties and of third parties in favour of the Group
Other contra accounts:
- third party goods on loan for use/rented/leasing
- third party goods being worked on and on deposit:
Isagro Italia srl
Siapa srl
Bayer Cropscience Italia srl
Others
- commitment to purchase products
- commodities swap operations
- commitment for the sale or purchase of currency
- Interest Rate Swap operations
- bills discounted/receivables sold
- Loss coverage AgriFormula S.r.L.
- Share Purchase Commitment
Total other contra accounts
Total contra accounts
Net Book Values
Net Book Values
31.12.2003
30.06.2004
200
1,200
215
9,316
1,053
50
300
9,899
22,233
200
0
215
9,323
0
0
300
10,202
20,240
39,323
26,542
0
65,865
19,007
11,043
500
30,550
12,301
13,801
100,399
64,591
14,373
1,475
15,848
21,671
431
22,102
2,551
2,142
1,421
3,439
3,238
4,924
4,232
6,871
9,245
23,000
140
2,236
400
61,697
1,753
3,140
3,949
460
4,232
3,436
21,936
23,000
0
1,996
400
66,444
77,545
177,944
88,546
153,137
The item in the Financial Statements, amounting to 153,137 thousand Euros shows
a decrease compared to 31st December 2003 of 24,807 thousand Euros.
82
Specifically, the item “Comfort letters, sureties, guarantees given” amounting to
64,591 thousand Euros is relative to the following:
? Guarantees given by the parent company in the interest of
subsidiary
companies:
a) For the concession of bank credit lines and not, whose utilisation is wholly
reflected in the consolidated debt.
?
200 thousand Euros regarding guarantees given to Monte dei Paschi di
Siena in the interest of the subsidiary company Isam S.r.l., owned for 51%,
for the concession of bank credit lines;
?
215 thousand Euros regarding guarantees issued by the parent company
Isagro S.p.A. to Banca Intesa (85 thousand Euros) and to Unicredit Banca
d’Impresa (130 thousand Euros) in the interest of the subsidiary company
Isagro Biochem S.r.l., owned for 100%, for the concession of bank credit
lines;
?
9,059 thousand Euros regarding guarantees issued by the parent company
Isagro S.p.A. to Credito Italiano (1,800 thousand Euros), to Banca Popolare
di Novara (3,099 thousand Euros), to Banca Intesa (610 thousand Euros),
to Monte dei Paschi di Siena (3,000 thousand Euros) and to Banca di Roma
(550 thousand Euros) in the interest of the subsidiary company Isagro
Copper S.r.l., owned for 100%, for the concession of bank credit lines;
?
300 thousand Euros regarding guarantees given to SanPaolo IMI in the
interest of the subsidiary company Isagro Research S.r.l., owned for 51%,
for the concession of bank credit lines;
?
10,202 thousand Euros regarding guarantees issued, through Italian banks,
by the parent company Isagro S.p.A. in favour of Indian banks in the
interest of the subsidiary company Isagro Asia, owned for 95.90%, for the
concession of bank credit lines;
b) For other purposes:
?
59 thousand Euros regarding guarantees issued by the parent company
Isagro S.p.A. in favour of the suppliers of the subsidiary company Isagro
Copper S.r.l.;
?
205 thousand Euros regarding guarantees issued by the parent company
Isagro S.p.A. in favour of Sempra Metals Limited for
commodities
83
operations relative to copper in the interest of the subsidiary company Isagro
Copper S.r.l.;
? Guarantees given by the parent company in the interest of affiliated and associated
companies:
? For the concession of bank credit lines and not, whose utilisation is reflected,
limited to the companies Isagro Italia S.r.l. and Siapa S.r.l., for 50%, in the
consolidated debt:
?
11,043 thousand Euros regarding guarantees issued by the parent company
Isagro S.p.A. to the Banca Popolare di Bergamo (3,066 thousand Euros), to
Banca Intesa (3,977 thousand Euros) and to Monte dei Paschi di Siena
(4,000 thousand Euros) in the interest of the affiliated company Siapa Srl,
for the concession of bank credit lines;
?
19,007 thousand Euros regarding guarantees issued by the parent company Isagro
S.p.A. to Intesa B.C.I. (1,291 thousand Euros), Banca Nazionale del Lavoro (600
thousand Euros), to Monte dei Paschi di Siena (5,000 thousand Euros), to the Banca
Regionale Europea (1,616 thousand Euros), to Meliorfactor (6,000 thousand Euros)
and to Unicredit Factoring (4,500 thousand Euros) in the interest of the affiliated
company Isagro Italia S.r.l. for the concession of bank credit lines;
?
500 thousand Euros regarding guarantees issued by the parent company Isagro S.p.A.
to Unicredit Banca d’Impresa in the interest of the affiliated company Siamer S.r.l. for
the concession of bank credit lines;
? Guarantees given by associated and affiliated companies in the interest of
associated and affiliated companies:
?
13,801 thousand Euros regarding guarantees issued by the affiliated company Isagro
Italia S.r.l. to the Cassa di Risparmio di Parma e Piacenza (500 thousand Euros), to the
Banca di Roma (775 thousand Euros), to SanPaolo IMI (5,026 thousand Euros), to
Banco di Sicilia (1.500 thousand Euros) and to Meliorfactor (6,000 thousand Euros) in
the interest of the affiliated company Siapa S.r.l. . for the concession of bank credit
lines.
The item “Other Contra Accounts” amounting to 22,102 thousand Euros includes
21,671 thousand Euros of “bank sureties and from third parties in favour of third
parties”, broken down as follows:
84
? 2,620 thousand Euros regarding the surety given by Manisa S.r.l. in favour of the
Istituto Mobiliare Italiano as a guarantee for the issue of the facilitated financing
pursuant to the Law 46 of 17/2/1982 to Isagro S.p.A.;
? 1.923 thousand Euros regarding the surety given by the Banca Popolare
Commercio e Industria as a guarantee on the excess of the VAT credit of the
Group relative to the years 1998-1999-2000-2001;
? 1,208 thousand Euros for sureties issued by banks in the interest of Isagro S.p.A.
in favour of the Customs Offices of Milan and Aquila as a guarantee for the
payment of any eventual customs duties and VAT regarding the temporary
importation of raw materials and agricultural chemical products;
- 84 thousand Euros regarding the sureties issued by the Banca Popolare
Commercio e Industria, in the interests of Isagro S.p.A., in favour of the
Assicurazioni Generali S.p.A. and Genimmobil S.p.A. for the rental contract
regarding the offices;
-
465 thousand Euros regarding the surety given by the Banca Popolare
Commercio e Industria in favour of Wormald Italiana S.p.A. on 6.8.99, in the
interests of Isagro S.p.A, as a guarantee for any future charges or liabilities that
may arise relative to the sale of the shareholding in Faro S.r.l.;
?
3,725 thousand Euros regarding the surety issued by the Banca Popolare
Commercio e Industria (2,376 thousand Euros) and by Assicuratrice Edile
(1,349 thousand Euros) as a guarantee to cover the VAT credit of Isagro S.p.A.
relative to the years 1999 – 2000-2002;
?
599 thousand Euros regarding the surety issued by Assicuratrice Edile as a
guarantee to cover the VAT credit of the company Isagro BioFarming S.r.l. that
was incorporated into Isagro S.p.A. with effect from 1st January 2004;
? 456 thousand Euros regarding the surety given by the Banca Popolare
Commercio e Industria, on behalf of Isagro S.p.A., as a guarantee for the
advance payment received relative to the research project called “Research and
development of new fungicide compositions for agricultural use based on an
innovative active principle called IR5885, characterised by low toxicity and a
reduced environmental impact”;
? 1,604 thousand Euros regarding the sureties issued by the Banca Popolare
Commercio e Industria, on behalf of Isagro S.p.A., in favour of the MIUR
85
relative to the research project called “PNR – Tema 6” as a guarantee for the
exact fulfilment of the obligations inherent to the research project itself.
? 400 thousand Euros regarding the surety given by Intesa BCI Rete Comit in
favour of Simest S.p.A. as a guarantee for the contractual obligations related to
the sale of the shareholding of Isagro Asia Agrochemicals Ltd;
?
121 thousand Euros regarding the surety issued, on behalf of the company
FitoFormula S.r.l. that was incorporated into Isagro S.p.A. with effect from 1st
January 2004, by Unicredit Banca d’Impresa in favour of Enipower Trading
S.p.A as a guarantee for the payments relative to the supply of electrical energy
to the factory;
? 103 thousand Euros regarding the surety given, on behalf of the company
AgriFormula S.r.l., by Intesa BCI rete Comit in favour of Edison Energia S.p.A.
as a guarantee for the payments relative to the supply of electrical energy to the
factory;
? 677 thousand Euros regarding the surety issued, on behalf of the company Isagro
Research S.r.l., by the Banca Popolare del Commercio e dell’Industria in favour
of the MIUR, as a guarantee for the exact fulfilment of the obligations inherent
to the research and training project called “Syntheses and applied development
of new principles for plant pharmaceuticals” (PNR - Tema 3).
? 1.439 thousand Euros regarding the insurance and bank sureties issued, in the
interest of the company Isam S.r.l., to public and private organisations for the
participation in invitations to tender for contracts.
? 84 thousand Euros regarding the surety issued, on behalf of the subsidiary
company Isagro Copper S.r.l., by the Unicredit Banca on behalf of the company
Enel Trade S.p.A. a guarantee for a supply contract for electrical energy;
? 7 thousand Euros regarding the surety issued, on behalf of the company
subsidiary company Isagro Copper S.r.l., by the Banca Intesa BCI in favour of
the Ministry of Industry, Commerce and Crafts relative to the request for
facilitated financing foreseen in the Law 488/199 and relative to the investments
programme regarding the production unit of Adria;
? 7 thousand Euros regarding a surety issued, in the interest of the subsidiary
company Isagro Copper S.r.l., by Banca Intesa – Rete Comit in favour of Geza
General Foreign Trade Organization, for the participation in invitations to tender
for contracts.
86
?
142 thousand Euros regarding a surety issued, in the interest of the subsidiary
company Isagro Copper S.r.l., by the
Fortis Bank in favour of Alm
International S.A. for the supply of oxy-chlorides;
? 31 thousand Euros regarding sureties issued by Unicredit Banca, on behalf of
Isagro BioFarming S.r.l., formerly Isagro Biochem S.r.l., in favour of the
proprietors of the local unit of Corbetta (MI);
?
362 thousand Euros regarding a surety issued by Cofidi, on behalf of Isagro
BioFarming S.r.l., formerly Isagro Biochem S.r.l., in favour of Banca Regionale
Europea for the concession of the Mezzanino loan financing;
?
542 thousand Euros regarding guarantees issued by the Indian subsidiary
company Isagro Asia Agrochemicals Ltd. in favour of the Customs Authorities
(399 thousand Euros) and the Fiscal Authorities (143 thousand Euros) for the
importation of capital goods and materials relative to the production of
Tetraconazole;
?
72 thousand Euros regarding guarantees issued
Ministry by banks
in favour of the Finance
in the interest of the company Isagro Italia S.r.l., as a
guarantee for the bonus operation for customers;
?
2,500 thousand Euros, amounting to 50% of the face value of 5,000 thousand
Euros, regarding a surety issued by Sumitomo Chem., in the interest of the
affiliated company Isagro Italia S.r.l., in favour of the Bank of Tokyo –
Mitsubishi for the concession of bank credit lines;
?
2.500 thousand Euros amounting to 50% of the face value of 5,000 thousand
Euros, regarding a surety issued by Sumitomo Chem., in the interest of the
affiliated company Isagro Italia S.r.l., in favour of Citibank N°.A. for the
concession of bank credit lines.
The item “bank and third party sureties in favour of the Group ” amounting to 431 thousand
Euros refers to sureties issued, in favour of the company Isagro Copper S.r.l. (269 thousand
Euros), by third party suppliers, to cover the obligations arising from the supply of goods
relative to the construction of the plant for the production of copper based formulations
(WG) in favour of the parent company Isagro S.p.A. (162 thousand Euros), from Deutsche
Bank, on behalf of the customer Chemimpex Trading, as a guarantee for our sales.
87
The item “Others” of 66.444 thousand Euros consists of:
-
The item “commitments for the purchase and sale of foreign currencies” amounting to
21,936 thousand Euros refers to the equivalent values of USD 33,981,000 and Yen
786,088,000, for which there exists a commitment to sell currency by means of swaps
contracts stipulated for the purpose of covering commercial and financial transactions.
-
The item “commodities swap operations” amounting to 3.436 thousand Euros refer to
commitments to purchase copper futures in order to limit the exposure to the
fluctuations of the market price. On the transactions, relative to these commitments, that
were concluded in the month of July 2004 there were realised a series of net gains
amounting to 282 thousand Euros. The valuation of these contracts on the basis of the
average market prices for the month of June 2004 show presumed profits, not yet
-
realised, net of any commissions involved, for 1,523 thousand Euros.
The item “commitment for purchase of products” refers to the obligation to buy, from
Dow Agrosciences BV, forecasted quantities, for the financial year 2004, of
agrochemicals destined for sale.
?
The item “Interest Rate Swap operations” set up for the purpose of ensuring an
adequate management of the risk on the interest rates of the long term
indebtedness of the Group, the parent company Isagro S.p.A. has stipulated
financial derivatives contracts for the utilisation of structured financial products,
i.e. Interest Rate Swaps for a total amount of 23,000 thousand Euros, with the
following banks: Banca Agricola Mantovana, SanPaolo-IMI, Banca Intesa,
Banca Regionale Europea and the Cassa di Risparmio di Parma e Piacenza ;
-
The item “bills discounted/receivables sold” refers to:
?
for 1,736 thousand Euros to bills of exchange receivable, which fall due
for payment 30.6.2004 that the affiliated companies Siapa S.r.l. e Isagro Italia
S.r.l. have discounted at banks.
? for 260 thousand Euros regarding the risk of insolvency weighing upon the
companies Isagro Italia S.r.l. (amounting to 10% of the remaining amount of
the receivables sold) and Siapa S.r.l. (amounting to 5% of the remaining
amount of the receivables sold) relative to the sales of receivables without the
right of recourse and without notification, for which the factoring companies
88
Unicredit Factoring for Isagro Italia S.r.l., and Mediofactoring for Siapa S.r.l.,
have paid in advance the total value of the receivables sold to them.
-
The item “commitment to purchase shareholdings” is relative to the commitment on the part
of the parent company, towards the company Simest S.p.A., to buy back the amount of the
shareholding in the subsidiary company Isagro Asia Agrochemicals Ltd, sold during the
course of the financial year, on 30.06.2006.
It was held to be opportune and appropriate not to show the value of the merchandise in
warehouses on deposit and being worked on by third parties, because this is already
contained within the assets in the Balance Sheet.
PROFIT AND LOSS ACCOUNT
Revenues from sales and services
1st Half year 2004
Full Year 2003
1st Half year 2003
93,198
153,047
87,775
The item shows, compared to the 1st Half year 2003, an increase of 5,423 thousand
Euros and it breaks down as follows:
Breakdown
1st Half year 2004
ITALY
Revenues from sales:
- agricultural pharmaceuticals
- raw materials
- biological and environmental products
Revenues from services:
- fees for work done
- innovative research and the sale of
Scientific information
- defence and development of products
- environmental services
- others
Total
ABROAD
1st Half year 2003
TOTAL
ITALY
ABROAD
TOTAL
38,978
470
222
39,670
43,616
438
547
44,601
82,594
908
769
84,271
43,728
208
376
44,312
33,870
24
36
33,930
77,598
232
412
78,242
4,453
63
4,516
4,833
372
5,205
148
309
2,700
462
8,072
656
117
0
19
855
804
426
2,700
481
8,927
128
392
2,671
403
8,427
581
131
0
22
1,106
709
523
2,671
425
9,533
47,742
45,456
93,198
52,739
35,036
87,775
The item “revenues from the sales of
agrochemicals”, amounting to 82.594
thousand Euros, breaks down as follows:
89
? Europe
57,771
? Central Asia and Oceania
5,377
? The Americas (*)
12,986
? Far East
2,528
? Middle East
2,308
? Africa
1,624
Total
82,594
(*) of which United States 7,973 thousand Euros.
The increase in revenues compared to those of the previously comparable half-year
is mainly due to the following:
? To the higher sales of Tetraconazole that took place in the Brazilian market;
? To the higher sales of raw materials and biological products on foreign markets.
The item “revenues from sales” includes the amount of 50% of the revenues from
sales of products and raw materials to the affiliated companies Isagro Italia S.r.l.
and Siapa S.r.l. for 4,391 and 3,042 thousand Euros, respectively.
Furthermore, the item “revenues for services” includes the amount of 50% of the
revenues for fees for work done and for the management of warehouses and
transportation relative to the affiliated companies Isagro Italia S.r.l. and Siapa S.r.l.
for 378 and 1,341 thousand Euros, respectively .
Changes in the inventories of work in progress semi-finished and finished
products
1st Half year 2004
Full Year 2003
1st Half year 2003
2,982
(8,611)
(6,357)
The positive change in the inventories for products of 2,982 thousand Euros,
calculated net of the inventories obsolescence fund breaks down as follows:
-
Inventories net at 1.1.2004
-
Conversion difference
(29,931)
(68)
90
-
Reclassification of the inventory write down
50
fund
-
Inventories net at 30.06.2004
-
Change total
32,931
2,982
The change in the inventories of finished products was strongly influenced by the
decision to greatly increase the stocks of Tetraconazole, for the purpose of being
able to face up to the increase in the sales of this product that are forecasted to take
place in the second half of the year.
Changes in the work in progress to order
1st Half year 2004
Full Year 2003
1st Half year 2003
1,194
(1,625)
698
The positive change of the half-year of 1.194 thousand Euros is linked to the
increase in the value of the projects and jobs in existence at 30 June 2004 of the
subsidiary company Isam S.r.l..
Increases in fixed assets for internal work done
1st Half year 2004
Full Year 2003
1st Half year 2003
1,859
4,005
1,786
The item, which shows an increase, compared to the previous half year, of 73
thousand Euros, refers to the capitalisation of “internal” costs, i.e. labour and
general costs, for 1,758 thousand Euros and the consumption of technical materials
for 101 thousand Euros, relative to research and development projects.
The services supplied by third parties relative to these capitalised projects are
posted as a direct deduction of the “costs of production” to the item “services”.
The capitalisation of the expenses of research and development relative to internal
work done during the period breaks down as follows:
91
- IR 5878
670
- IR 5885
1,177
- Extraordinary defence
12
_________
- Total
1,859
========
Other revenues e incomes
1st Half year 2004
Full Year 2003
1st Half year 2003
2,289
7,398
3,734
Breakdown
Recovery of costs and services supplied to Isagro Italia:
- administrative and managerial services
- Electronic Data Processing services
- Rentals of offices
- transport expenses
- others
Recovery of costs and services supplied to Siapa:
- administrative services
- - Electronic Data Processing services
- transport expenses
- others
Administrative Services to parent companies
Recharging of research and development expenses
Recovery of transportation expenses from customers
Contributions on account of work done for research activities
Indemnities for losses on products
Royalties and similar rights
Technical services supplied to consortiums
Recovery of labour costs
Intermediation fees received
Export incentives
Others
Total
1st Half year 2004
1st Half year 2003
147
55
36
21
41
300
154
78
36
132
102
502
129
77
8
33
247
122
77
230
45
474
18
63
464
0
11
274
189
84
144
250
245
18
82
630
559
118
346
156
85
123
405
236
2,289
3,734
The lack of the posting of the "contributions on account of work done" is
attributable to the Legislative Decree n°. 6/2003, the so called “Vietti Reform”, of
which full details have been given in the section on the deferred incomes.
If these fiscal interferences had continued to be applied the contributions for the
period would have amounted to 475 thousand Euros.
The item “royalties and similar rights” is relative, for 266 thousand Euros, to the
sale to Makhteshim Agan Industries Ltd., formerly Makhteshim Chemical Works
Ltd., of the right to the development and sale of the product Novaluron, the patents
92
for which are owned by Isagro S.p.A.. According to the sales contract, which will
expire in 2009, Makhteshim Agan Industries Ltd. recognises to Isagro a royalty on
the sales that are carried out for all the authorised usages of the product.
The item “export incentives”, amounting to 250 thousand Euros, refers to the
subsidiary company Isagro Asia and consists incentives that are conceded with the
objective of favouring the export of products. These incentives can be utilised for
the payment of import duties.
Costs of production
1st Half year 2004
Full Year 2003
1st Half year 2003
95,695
144,438
79,344
The table below shows the breakdowns of the production costs of the Group for the
first half years of 2004 and 2003.
Breakdown
For raw, ancillary, consumable materials and
merchandise
raw materials, packing materials e agricultural
pharmaceuticals
- technical materials
- environmental sector merchandise and materials
- raw materials, packing materials biological sector
merchandise
- materials for research activities
- others
For services:
- utilities
- technical maintenance
- subcontracted work services
- transport and ancillary costs for purchases and sales
- work on third party premises
- consultancy and professional services
- supplies and services linked to research
- information technology system
- costs for services relative to personnel
- costs of marketing, advertising and promotion
- other services and supplies
For usage of third party property:
- rentals, hiring and rents paid
For personnel:
- wages and salaries
- social security charges
- employee leaving indemnity
- other costs
Amortisation of the intangible fixed assets:
- set up and enlargement costs
- costs of research, development and advertising
- industrial patent rights
- concessions, licences, trademarks and similar rights
- goodwill/consolidation difference
- other items
Depreciation of the tangible fixed assets:
- buildings
- plant and machinery
- industrial and commercial equipment
- other assets
1st Half year 2004
1st Half year 2003
51,578
40,375
383
459
239
393
636
219
150
311
53,120
128
312
42,063
1,888
723
1,559
4,889
4,236
1,747
1,211
439
726
1,195
2,173
20,786
1,867
868
666
4,996
1,272
1,260
907
336
595
1,125
1,947
15,839
1,350
1,550
9,030
2,975
646
10
12,661
9,547
3,047
703
11
13,308
267
689
0
292
475
260
1,983
25
2,991
0
340
474
301
4,131
228
1,110
221
157
1,716
186
818
276
147
1,427
Other write downs of the fixed assets:
93
- consolidation difference
- other intangible fixed assets
Write downs of receivables:
- postings to Bad Debts Reserve
- losses on receivables
- use of the Bad Debts Reserve
Change in the inventories of raw ancillary, consumable
materials
And merchandise
Other provisions:
- fund for participation bonus and bonuses to
executives
- fund bonuses to customers
- fund for additional indemnity to customers
Other operating expenses:
- tax charges
- transactions
- others
Total
1,818
1,210
3,028
0
0
0
288
21
(13)
296
158
29
(29)
158
(1,790)
(738)
444
441
22
14
480
24
12
477
1,738
0
327
2,065
95,695
888
10
231
1,129
79,344
The item “costs of production” shows, compared to the previous half year, an
increase of 16,351 thousand Euros. This change is basically due to the following
items :
? to the increase in the costs of the purchases of raw, ancillary, consumable
materials and merchandise (11,057 thousand Euros);
? to the increase in the costs of services (4,947 thousand Euros);
? to the reduction in the amortisation of intangible fixed assets (2,148 thousand
Euros);
? to the presence of write downs of fixed assets (3,028 thousand Euros);
? to the increase in the change in the inventories of raw, ancillary, consumable
materials (1,052 thousand Euros);
? to the increase in the other operating expenses (936 thousand Euros).
The increase in the costs of the purchases of raw, ancillary, consumable materials
and merchandise is linked both to the increase in the sales achieved by the Group
during the first half year of 2004, and to the presence in storage of M-Alcohol, an
intermediate of Tetraconazole.
The increase of the item “costs for services” is basically due to the following:
? to the increase in the work farmed out to third parties, which is also linked to
the increased sales of Tetraconazole, within the factories of Oxon S.p.A. (Italy)
and Helena Chemical (U.S.A.);
94
? to the
increase in the costs of subcontracted services sustained by the
subsidiary company Isam S.r.l. and related to the increase in the number of jobs
and projects obtained by the same.
The item “Costs for the use of third party property”, amounting to 1.350 thousand
Euros, includes the following items:
?
554 thousand Euros relative to real estate rents paid;
?
68 thousand Euros relative mainly to the hiring of motor vehicles;
?
728 thousand Euros relative to the leasing of motor vehicles and plant.
The significant reduction in the amounts of the amortisation of intangible fixed
assets, and particularly of those relative to the amortisation of research and
development expenses, can be ascribed to the entry into force, from 1st
th
2004, of the Legislative Decree n°. 6 of 10
January
January 2003, the so called Vietti
Reform, which has suppressed paragraph 2 of article 2426 of the Italian Civil Code,
which allowed the making of adjustments to values and the setting aside of
provisions purely applying taxation legislation.
Therefore, in order to be able to take advantage of tax deductibility, the costs of
research and development, capitalised by the companies within the Group, used to
be amortised starting from the accounting period in which they were sustained,
notwithstanding the fact that they referred to projects whose financial exploitation
would only become possible during future accounting periods.
The value of the amortisation of the research and development costs, if the
measures laid down in the Legislative Decree n°. 6/2003 had not been applied,
would have been higher by the amount of 2,866 thousand Euros.
During the first half year 2004 there were carried out write downs both on the costs
of research and development and on the intangible fixed assets for a total of 3,028
thousand Euros.
The write down of the intangible fixed assets is a consequence of the dissolution of
the contract for work to be done that existed between the company Bayer
CropScience S.r.l. and the subsidiary company AgriFormula S.r.l.. This fact has
brought about a reduction in the requested production volumes of such a size as not
to allow a full usage of the plants and, consequently, a total recovery of their
95
original cost through their full utilisation and the related revenue flows that would
have been generated.
Furthermore, due to the fact that there has intervened a reduction in the conditions
of future utilisation of some classes of products whose research and development
costs were previously capitalised, i.e. Dimethoato and biological products, the costs
involved have been written down for a total amount of 1,818 thousand Euros.
The item “Tax Charges”, amounting to 1,738 thousand Euros, refers for 825
thousand Euros to the consumption and fabrication duties sustained by the Indian
subsidiary company Isagro (Asia) Agrochemicals Ltd. and for 510 thousand Euros
to import duties that were sustained by the American subsidiary company Isagro
U.S.A. Inc..
Financial Incomes and Charges
Financial charges net of the incomes
1st Half year 2004
Full Year 2003
1st Half year 2003
218
4,629
2,323
Breakdown
Financial incomes:
- interest receivable on receivables from customers
- revaluation of the credit for the ELI advance paid
- incomes from Copper purchases coverage operations
- interest receivable on bank deposits
- gains on exchange rates
- premiums on future exchange rates
- incomes from financing to associated companies
- financial discounts from suppliers and other creditors
- late payment interest received
- provision to the late payment interest fund
- others
Financial charges:
- interest paid to banks
- interest paid to other financiers
- interest paid to suppliers
- interest on bills of exchange discounting operations
- financial discounts paid
- commissions paid to banks
- premiums paid on future exchange rates
- provision to risks fund for interest rate swap operations
- interest and commissions for factoring operations
- others
Gains on foreign exchange:
- Gains on foreign exchange
Losses on foreign exchange:
- Losses on foreign exchange
- Losses on foreign exchange for copper purchases
operations
Total
1st Half year 2004
1st Half year 2003
108
4
1,608
48
8
74
0
82
103
(118)
0
1,917
33
7
338
83
0
41
138
92
265
(265)
12
744
1,375
106
46
25
67
351
53
100
227
1
2,351
2,130
152
0
0
99
249
1
0
291
12
2,934
1,320
1,320
1,340
1,340
1,104
0
1,450
23
1,104
1,473
(218)
(2,323)
96
The item shows, compared to the previous half year period, a decrease amounting
to 2,105 thousand Euros. This decrease is mainly due to reduction in the financial
charges and the increase in the financial incomes.
Specifically, these latter items show an increase of 1,173 thousand Euros mainly
due to the increase in the incomes from the operations carried out regarding the
purchases of copper futures (commodity swaps).
The reduction in the financial charges, compared to the previous half-year period, is
basically due to the reduction of the charges payable to banks and to other
financiers, as a consequence of the reduction of the Group’s level of indebtedness.
However, on the other hand there has been an increase in the commissions that have
are payable to banks because of the increase in the prices of these bank services
themselves.
Furthermore, during the accounting period in question, the Group has carried out
the following operations and transactions:
?
Transactions regarding the sales, both with and without the right of recourse, of
receivables regarding which there have been posted costs for commissions and
interest amounting to 227 thousand Euros;
? Interest Rate Swap transactions relative to which, for prudential reasons, there
has been provided a specific risks fund of 100 thousand Euros, to cover the
possible future losses coming from the fluctuation of the reference rates relative
to the operation.
?
Operations for the cashing in of receivables by means of the presentation for
discounting of bills of exchange amounting to 25 thousand Euros.
Adjustments to the values of the financial assets
1st Half year 2004
Full Year 2003
1st Half year 2003
(46)
(61)
(42)
The item refers to the value of the write downs of the shareholdings in the affiliated
company Siamer S.r.l. (43 thousand Euros), as well as to the write downs of the
shareholdings in the subsidiary companies Isagro Australia Ltd. (2 thousand Euros) and
Isagro New Zealand Ltd. (1 thousand Euros), for the purpose of aligning the value of the
97
shareholdings with the corresponding shares of the Net Equities of the companies at 30
June 2004.
Extraordinary Incomes and Charges
Extraordinary incomes net of the charges
1st Half year 2004
Full Year 2003
1st Half year 2003
11,551
1,204
782
Breakdown
1st Half year 2004
Extraordinary incomes:
- usage of excess share premium reserve
- usage of excess bad debts reserve
- usage of excess of the fund for leaving incentive charges
- usage of excess in fund for taxes
- elimination of the fiscal interferences- Vietti Reform:
- cumulative amortisation of R&D costs
- fiscal effect of research contributions for previous years
- contractual indemnities
- MIUR contribution
- other income from previous financial years
- taxation income from previous financial years
- gains on sales of tangible assets
Extraordinary Charges:
- taxes for previous financial years
- losses on sales of tangible assets
- charges relative to stock exchange listing process
- charges leaving incentives/redundancies
- usage of fund for leaving incentives/redundancies
- elimination of the fiscal interferences- Vietti Reform:
- fiscal effect of the cumulative amortisation of R&D costs
- research contributions for previous years
- tax amnesties/self corrections/sanctions
- update prepaid tax credit/deferred taxes fund
- usage of other risks fund
- variable participation bonus
- charges from previous years and others
Total
1st Half year 2003
28
13
25
0
69
12
0
11
12,876
669
5,082
152
207
31
13
19,096
0
0
0
300
258
0
807
1,457
10
77
0
937
(613)
37
0
30
352
0
4,796
2,024
7
0
0
59
248
7,545
0
0
12
0
0
0
244
675
11,551
782
Specifically:
?
the item "elimination of
fiscal interferences – Vietti Reform" refers to the
application of the Legislative Decree n°. 6/2003, whose introduction suppressed
the rule whereby there was allowed, in order to take advantage of tax
deductibility, the amortisation of the costs of research and development starting
from the financial year in which they were actually sustained, independently of
the financial exploitation of the products to which they refer. The elimination of
the effects generated by this amortisation, also taking into account the posting on
an accruals timing basis of the contributions on account of capital that have
98
been obtained in relation to the above mentioned research projects, has brought
about the posting to the accounting books of a net extraordinary income of 6,725
thousand Euros, which breaks down as follows :
?
extraordinary incomes relative to the cumulative amortisation of the costs of
research and development (12,876 thousand Euros);
?
extraordinary
charges
relative
to
deferred
incomes
regarding
the
contributions for research and development posted to the accounting books in
previous financial years (2,024 thousand Euros);
?
extraordinary charges relative to the fiscal effect of the cumulative
amortisation of the costs of research and development (4,796 thousand
Euros);
?
extraordinary incomes relative to the fiscal effect of the contributions for
research and development posted to the Profit and Loss Account books in
previous financial years ( 669 thousand Euros) and recharged among the
deferred incomes;
?
the item "“contractual indemnities ” includes the following:
?
the indemnity of 2,082 thousand Euros paid out by the company Bayer
CropScience S.r.l. to Isagro S.p.A., with reference to the agreements between
them, as compensation for the withdrawal from the contracts between the
parties relative to the subsidiary company AgriFormula S.r.l.;
?
the indemnity of
3,000 thousand Euros paid out by the company Bayer
CropScience S.r.l. to the subsidiary company AgriFormula S.r.l., to cover the
dissolution of the contract called Toll Manufacturing Agreement, which was
stipulated on 22nd December 2000;
?
the item "MIUR contributions", amounting to 152 thousand Euros, is the
difference between the cashing in of the contractual balance of 268 thousand
Euros and the credit of116 thousand Euros, relative to the contribution as a total
write off that was obtained by the subsidiary company Isagro Ricerca S.r.l., in
relation to the project of research and training called “The synthesis and
99
application development of new active principles for plant chemicals (PNR
Tema 3)”, the relative costs of which have been sustained in previous financial
years. The final value of the contribution obtained amounted to 2,289 thousand
Euros for the research activities and 372 thousand Euros for the training
activities. Of these there have already been cashed in, in previous financial
years, 2,060 thousand Euros for the research activities and 333 thousand Euros
for the training activities.
-
the item “charges for leaving incentives/redundancies”, amounting to 937 thousand
Euros, refers to refers to the extraordinary operations of company reorganisation and
restructuring, already started during the financial year 2003 and that proceeded during
the half year in question , carried out by the subsidiary companies Isagro Research S.r.l.
and AgriFormula S.r.l.,. and by the affiliated company Isagro Italia S.r.l. by means of
offering leaving incentives and redundancy procedures. Furthermore, it is highlighted
that a part of these charges, amounting to 268 thousand Euros, was provided for in an
appropriate fund set up within the liabilities, because it is relative to expenses that will
be sustained during the next half year.
Income taxes and IRAP (Regional Tax)
1st Half year 2004
Full Year 2003
1st Half year 2003
4,574
3,064
3,034
Breakdown
Current taxes:
- income taxes
- IRAP (Regional Tax)
- usage of deferred taxes fund/prepaid taxes credit
1st Half year 2004
1st Half year 2003
3,407
1,026
409
4842
2,114
970
754
3,838
Deferred (prepaid) taxes)
(268)
(804)
Total
4,574
3,034
The provision for prepaid taxes of 268 thousand Euros is the difference between the
deferred tax asset for 1,450 thousand Euros and the deferred tax liability for 1,182
thousand Euros, of which 1,085 and 1,182 thousand Euros, respectively for
100
provisions contained in the Statutory Financial Statements of the companies that
come within the consolidation area.
The provision for the prepaid taxes coming from the Statutory Financial Statements
of the companies included within the consolidation specifically contains 77
thousand Euros of tax benefits expected from the future usage of funds that have
been taxed and 498 thousand Euros relative to the write down of the research and
development projects and 442 thousand Euros relative to the timing difference
between the fiscally calculated taxable income and the statutory profit of the parent
company regarding the contributions received for the total write off of the expenses
of the research and development projects, which, according to the relative fiscal
legislation, are taxed on a cash as opposed to an accruals basis.
Furthermore, the provision posted to the fund for deferred taxes is relative, for 1.06
thousand Euros, to the specific provision regarding the tax deduction of the
amortisation of the research costs of the projects that are still in the development
stage, for which the statutory amortisation is suspended up till the moment at which
the relative sales revenues begin to flow in.
The Group Parent Company Isagro S.p.A., having been admitted to listing on the
Italian Stock Exchange during the last financial year, benefits, for the financial
years 2003-2005, from a facilitated IRES (New Corporate Tax) rate of 20%.
Consequently, as has already taken place during the last financial year, the current,
deferred and prepaid taxes that have been posted to this Consolidated Half Yearly
Report have been calculated taking into account the facilitated rate referred to.
Specifically, it is highlighted that the positive effect on the financial result of the
period of the Group generated by this facilitation amounts to about 510 thousand
Euros.
Furthermore, it is also highlighted that the European Commission has started
proceedings regarding the legitimacy of the legislation referred to. In the case in
which the outcome of these proceedings would be unfavourable to the Italian State
the Group Parent Company could be called upon to recalculate the fiscal effects
with a consequently overall higher charge, also taking into account the facilitation
of the previous financial year, of about 710 thousand Euros.
101
The table below shows the reconciliation between the theoretical taxes of IRES
and IRAP at 33% and 4.25%, and the effective taxes, taking into account the
effect of the deferred taxes.
IRES (*)
Taxes
Theoretical Taxes
- increases
- decreases
- costs not relevant for
IRAP purposes
- effect of
changes/differences
In the tax rates
- increases for
consolidation postings
Without any fiscal
Effects and other
changes
Effective Taxes
IRAP (*)
%
5,648
Taxes
33,00
TOTAL (*)
%
727
Taxes
4,25
%
6,375
37,25
976
5,70
189
1,10
1,165
6,81
(2,601)
(15,20)
(34)
(0,20)
(2,635)
(15,40)
0
0,00
104
0,61
104
0,61
(527)
(3,08)
37
0,22
(490)
(2,86)
124
0,72
(69)
(0,40)
55
0,32
3,620
21,15
954
5,57
4,574
26,73
(*) The theoretical taxable base corresponds to a profit before taxes amounting to 17,114
thousand Euros.
The decrease in the IRES taxable base basically refers to the non-taxation of the net
extraordinary income of 6,725 thousand Euros created by the introduction of the so
called Vietti Reform, with its elimination of the fiscal interferences. The decreases,
on the other hand, are basically relative to write downs, provisions and charges
from other financial years that are not deductible. The item “costs not relevant for
IRAP purposes” refers basically to the labour costs of employees, to the provisions,
to the financial and extraordinary charges of the Group because these items are not
deductible for the purposes of calculating the Regional Tax on Productive
Activities
OTHER INFORMATION
Regarding the nature of the Group’s activities, the significant events that occurred
after the closing of the financial year and the relationships with correlated parties
reference should be made to the Board of Directors Report on Operations.
102
Average number of employees split by labour category
Average of the half
At 30.06.2004
At 31.12.2003
year
- executives
37
38
36
- managers
140
139
144
- white collar workers
357
361
356
7
6
8
189
188
194
65
86
7
795
818
745
- specially qualified workers
- blue collar workers
- seasonal workers
Total
The employees of
Isagro Italia S.r.l., considered for 50% because the company is
consolidated with the proportional method amounted at 30th June 2004 to 16 people, at
31st December 2003 to 16 people and the average for the first half year 2004 was 16
people.
The employees of Siapa S.r.l., considered for 50% because the company is consolidated
with the proportional method amounted at 30th June 2004 to 34 people, at 31st December
2003 to 33 people and the average for the first half year 2004 was 34 people.
103
Amount of the compensation paid to the Directors and the Statutory Auditors
of the parent company for the carrying out of their functions also in other
companies included in the consolidation (amounts in Euros)
Description of office
Person
Office
Duration
held
of the
Compensation
Emoluments
Bonuses,
Income
for the office other incentives
office held
And fringe
received as
employee
benefits
Directors:
Giorgio Basile
Chairman
3 years
205,002
369
0
Lucio Zuccarello
Vice Chairman
3 years
103,004
0
Giuseppe Rapisarda
Managing
3 years
12,502
36,681
Director
3 years
2,750
0
0
Genola
Director
30/04/2004
1,060
0
0
Tommaso Quattrin
Director
3 years
2,500
0
0
Albino Cima
Director
3 years
1,000
0
0
Mathias Haug
Director
3 years
1,500
0
0
Maurizio Basile
Director
3 years
500
0
0
Mauro Bontempelli
Director
3 years
2,000
0
0
Carlo Porcari
Director
3 years
1,000
0
0
Renato Ugo
Director
3 years
2,500
0
0
Vittorio Serafino
Director
3 years
2,750
0
0
Carlo Ticozzi Valerio
Chairman
3 years
19,150
0
0
Franco Caramanti
Auditor
3 years
4,000
0
0
Guido Sampietro
Auditor
3 years
4,000
0
0
Director
Ambrogio Caccia
Dominioni
Marco Galateri di
Statutory Auditors:
Furthermore, it is highlighted that the mandates of the Board of Directors of the
parent company will expire with the approval of the Financial Statements at 31st
December 2004, while those of the Board of Statutory Auditors will expire on 29th
May 2005.
The Board of Directors
Milan, 10th September 2004
104