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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
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.