13. Investment in associates
Movements in investments in associates
| in thousand EUR | 2020 | 2019 | ||
|---|---|---|---|---|
| At 1 January | 1 066 | 799 | ||
| Net additions/(disposals) | 3 099 | – | ||
| Share of profit/(loss) of associates | –354 | 438 | ||
| Dividend earned | –138 | –259 | ||
| Currency effects | –333 | 88 | ||
| At 31 December | 3 340 | 1 066 |
There are no unrecognized share of losses relating to the above associates.
Proportion of ownership in investment in associates
| Associate | Country | 31 December 2020 | 31 December 2019 | |||
|---|---|---|---|---|---|---|
| BK Energia Itacoatiara Ltda. | Brazil | 40% | 40% | |||
| Compagnie des Placages de la Lowé S.A. 1 | Gabon | 49% | 0% | |||
|
1 since 1st October 2020
|
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BK Energia Itacoatiara Ltda.
| in thousand EUR | 2020 | 2019 | ||
|---|---|---|---|---|
| At 1 January | 1 066 | 799 | ||
| Share of profit/(loss) of associates | 385 | 438 | ||
| Dividend earned | –138 | –259 | ||
| Currency effects | –333 | 88 | ||
| At 31 December | 980 | 1 066 |
The renewable-power-generation plant BK Energia Itacoatiara generates CERs (Certified Emission Reductions) in the Amazon region of Brazil. It complies with all the necessary conditions established in the Kyoto Protocol and by the UNFCCC (United Nations Framework Convention on Climate Change). Carbon emissions are avoided by substituting diesel fuel with wood waste from the sawmill and from forest operations for generation of electricity. CERs are granted by the UNFCCC for greenhouse gas reduction per metric ton of CO2 equivalent.
Set out below is the summarized financial information for the material associate BK Energia Itacoatiara Ltda.:
| in thousand EUR | 31 December 2020 | 31 December 2019 | ||
|---|---|---|---|---|
| Current assets | 2 692 | 3 080 | ||
| Non-current assets | 72 | 117 | ||
| Current liabilities | 313 | 532 | ||
| Equity | 2 451 | 2 665 | ||
| Group's share in equity | 980 | 1 066 | ||
| Group's carrying amount in the investment | 980 | 1 066 |
| in thousand EUR | 2020 | 2019 | ||
|---|---|---|---|---|
| Revenues | 2 738 | 3 571 | ||
| Cost of sales | –1 374 | –1 870 | ||
| Administration expenses | –178 | –206 | ||
| Financial result | 72 | –54 | ||
| Earnings before tax (EBT) | 1 258 | 1 441 | ||
| Income tax (expenses)/income | –296 | –346 | ||
| Net profit/(loss) for the period | 962 | 1 095 | ||
| Group's share of profit/(loss) for the year | 385 | 438 |
The associate had no contingent liabilities or capital commitments as at 31 December 2020 or 2019.
Compagnie des Placages de la Lowé S.A.
| in thousand EUR | 2020 | 2019 | ||
|---|---|---|---|---|
| At 1 January | – | – | ||
| Net additions/(disposals) | 3 099 | – | ||
| Share of profit/(loss) of associates | –739 | – | ||
| At 31 December | 2 360 | – |
Precious Woods Tropical Gabon Industrie S.A., owned 100 % by Precious Woods Group, entered into an arrangement with Placage Déroule du Gabon S.A., also a veneer producing company in Gabon, owned 100% by Arbor Group, France. Precious Woods Tropical Gabon Industrie S.A. acquired 49 % shares and voting rights in Placage Déroule du Gabon S.A. by contribution of net assets. The deal took place on 1st October 2020. At the same time, Placage Déroule du Gabon S.A. was renamed to Compagnie des Placages de la Lowé S.A. The new company is located in Libreville.
Precious Woods Group has no control or joint control over the investment but exercises significant influence.
At the date of acquisition, the fair value of the investment in Compagnie des Placages de la Lowé S.A. amounted to EUR 4.4 million.
Contributed assets and liabilities
| in thousand EUR | 1 October 2020 | |
|---|---|---|
| Current assets | 8 252 | |
| Non-current assets | 1 320 | |
| Total assets | 9 572 | |
| Current liabilities | 7 299 | |
| Non-current liabilities | 542 | |
| Total liabilities | 7 841 | |
| Total net assets transferred | 1 731 |
The Group recognized a gain of EUR 1.4 million, attributable to the other investor within line other operating income in the profit or loss. Prior the elimination of own attributable gain of EUR 1.3 million, the gain recognized was EUR 2.7 million.
Set out below is the summarized financial information for Compagnie des Placages de la Lowé S.A. The information for 2020 includes the results of Compagnie des Placages de la Lowé S.A. for the period from 1st October to 31 December 2020.
| in thousand EUR | 31 December 2020 | 31 December 2019 | ||
|---|---|---|---|---|
| Current assets | 12 902 | – | ||
| Non-current assets | 3 438 | – | ||
| Current liabilities | 9 724 | – | ||
| Non-current liabilities | 3 182 | – | ||
| Equity | 3 434 | – | ||
| Group's share in equity | 1 683 | – | ||
| Goodwill | 677 | |||
| Group's carrying amount in the investment | 2 360 | – |
| in thousand EUR | 2020 | 2019 | ||
|---|---|---|---|---|
| Revenues | 3 812 | – | ||
| Cost of sales | –4 437 | – | ||
| Administration expenses | –761 | – | ||
| Financial result | –81 | – | ||
| Earnings before tax (EBT) | –1 467 | – | ||
| Income tax (expenses)/income | –41 | – | ||
| Net profit/(loss) for October - December | –1 508 | – | ||
| Group's share of profit/(loss) for October - December | –739 | – |
The associate had no contingent liabilities or capital commitments as at 31 December 2020 or 2019.
Accounting policies
Associates are entities, over which the Group holds 20 to 50 percent of the voting rights and exercises significant influence. The Group does not exercise control over their financial and operational policy decisions. These associates are accounted for using the equity method. The Group’s share of profit of associate is classified within operating profit as these businesses form an integral part of the Group’s financial performance, reflecting its core business activities. Goodwill arising from an acquisition is included in the carrying amount of the investments in associated companies. Equity accounting is discontinued when the carrying amount of the investment together with any long-term interest in an associate reaches zero, unless the Group has either incurred or guaranteed additional obligations in respect of the associate.
The Group tests associates for impairment only when there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the investment. Objective evidence of impairment includes events such as significant financial difficulties of the associate or information about significant changes with an adverse effect that have taken place in the economic environment in which the associate operates, and indicates that the carrying amount of the associate may not be recovered.
An impairment loss is only recognized when the carrying amount of the associate exceeds its recoverable amount, being the higher of value in use and fair value less costs of disposal. The recoverable amount of an investment in an associate is assessed for each associate, unless the associate does not generate cash inflows from continuing use that are largely independent of those from other assets of the Group.
The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.