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Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
1
ALBÉA BEAUTY
HOLDINGS S.A. ANNUAL REPORT 2017
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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I. GENERAL INFORMATION AND PRESENTATION OF FINANCIAL STATEMENTS
General information
Albéa Beauty Holdings S.A. (“Albéa”) is domiciled in Luxembourg and registered in the Luxembourg Trade and
Companies Registry (Registre du Commerce et des Sociétés de Luxembourg) under number B 162 078 and is
an affiliate of Sun Capital Partners V LP. Albéa and the subsidiaries included in the scope of consolidation
constitute Albéa Group (“Albéa” or “the Group”).
The Group was created by Sun Capital after the acquisition of the Beauty Packaging business from Rio Tinto
Alcan on July 2, 2010. Albéa is one of the world’s leading producers of plastic packaging products for the
beauty and cosmetics industry, providing a wide range of solutions for the make-up, fragrance, skincare,
personal and oral care markets. The operational headquarters of Albéa are located in Gennevilliers, France.
Albéa employs about 15 000 people and operates 39 manufacturing facilities in 16 different countries across
Europe, America and Asia.
Albéa Beauty Holdings S.A., which holds a significant part of the financing of the group, is held by Albéa S.A.
via another holding company. These three entities except financing and holding activities did not carry out any
operating activities in the year ended December 31, 2017.
Historical Financial Information
Albéa Beauty Holdings S.A. consolidated financial statements for the year ended December 31, 2017 were
prepared in accordance with the international accounting standards as adopted for use in the European Union.
These international accounting standards include International Financial Reporting Standards (IFRS) and
International Accounting Standards (IAS) and the related interpretations as prepared by the International
Financial Reporting Interpretations Committee (IFRIC).
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the periods and balances presented, unless
otherwise stated.
The standards and interpretations applied to prepare Consolidated financial statements as on December 31,
2017 are those published by the Official Journal of the European Union applicable as on December 31, 2017.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Non-IFRS Financial and Operating Information
While considering the financial performance of our business and use it as a management tool in decision
making, our management analyzes the financial performance measures of EBITDA and Adjusted EBITDA at a
company and operating segment level. We believe EBITDA and Adjusted EBITDA are useful metrics for
investors to understand our results of operations and profitability because they permit investors to evaluate
our recurring profitability from underlying operating activities. We also use these measures internally to
establish forecasts, budgets and operational goals to manage and monitor our business, as well as
evaluating our underlying historical performance. We believe EBITDA facilitates operating performance
comparisons between periods and among other companies in industries similar to ours because it removes
the effect of variation in capital structures, taxation, and non-cash depreciation, amortization and
impairment charges, which may differ between companies for reasons unrelated to operating performance.
We believe Adjusted EBITDA better reflects our underlying operating performance because it excludes the
impact of items which are not related to our core results of operations. EBITDA and Adjusted EBITDA
measures are frequently used by securities analysts, investors and other interested parties in their evaluation
of companies comparable to us, many of which present EBITDA related performance measures when
reporting their results.
EBITDA (Non-IFRS Financial Measure)
We define EBITDA as profit / (loss) from continuing operations before financial result, income taxes, share of
income from associates and depreciation and amortization.
Adjusted EBITDA (Non-IFRS Financial Measure)
We define Adjusted EBITDA as EBITDA adjusted to exclude restructuring costs and severance costs, non-
recurring fees, shareholders’ management fees, separation costs, acquisitions costs, integration and
transformation costs, other compensation and termination benefits, unrealized foreign exchange gains (losses),
gains (losses) on disposals, impairment, bargain purchase gain.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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II. BUSINESS OVERVIEW
Key Historical Steps
Albéa business was formed in 2004 when the Alcan group acquired Pechiney S.A. (“Pechiney”) and
consolidated two of its packaging businesses, Cébal Tube Europe and Techpack, to form Alcan Beauty
Packaging. In 2004, Alcan Beauty Packaging’s management identified non-core businesses for disposal and
optimized its manufacturing footprint and operations in order to create a more integrated and efficient
business. Rio Tinto acquired Alcan Beauty Packaging in 2007 as part of the wider acquisition of the Alcan
group to form Rio Tinto Alcan (RTA) Beauty Packaging. In July 2010, our subsidiary Twist Beauty Packaging S.à
r.l. and certain of its subsidiaries acquired Rio Tinto’s beauty packaging business and renamed it “Albéa.” On
December 31, 2012, we and certain of our subsidiaries acquired the Rexam Cosmetics Business from Rexam
PLC and several other Rexam entities to reinforce Rigid offering and Dispensing solutions. On August 9, 2016,
Albéa acquired 100% of Scandolara Tub-Est, s.r.o. This acquisition help us to extend our industrial footprint in
Slovakia to better serve our customers.
COVIT acquisition
In February 2018, Albéa acquired 100% of Covit S.L., a leading manufacturer of metal parts, from PHI private
equity fund. Covit S.L is a leader in the drawing, anodizing, assembly and decoration of metal parts for
packaging products, based in Torello, Spain. Covit owns an extensive know-how in stamping, anodizing and
color matching as well as years of experience primarily in dispensing systems. The company was founded in
1979. It employs 200 people and achieved sales of appr. €20 million in 2017. This acquisition will provide Albéa
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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with global Metal capabilities and expertise while building a strong, global supplier of metal parts. Metal is a
critical asset in the fragrance & cosmetics market where packaging often combines metal and plastic parts.
Albéa At glance
We have long-standing relationships with a number of blue-chip beauty packaging companies such as Avon,
Chanel, Coty, Estee Lauder, GlaxoSmithKline, L’Oréal, LVMH, Natura, Procter & Gamble and Unilever, and we
estimate that these relationships average more than 20 years. Our customers also include more than 2,000
regional and local beauty and personal care companies. We have been able to grow and maintain long-term
relationships with our customers due to the strength and global footprint of our manufacturing operations, our
strong customer focus, new product development capabilities and the critical position that our packaging
occupies within our customers’ supply chain. New product development is at the core of our and our
customers’ success. Our new product development teams collaborate with our customers to develop
packaging, enabling them to successfully market their products to consumers. This collaboration also enables
us to retain customers by efficiently addressing requests from existing customers for new packaging,
particularly for products with high renewal rates (such as rigid packaging).
Furthermore, we have advanced integrated printing, decorating, surface treatment (such as anodizing and
electro-plating) and metallization capabilities. The design and presentation of our packaging communicates
our customers’ distinct values and style, which are of particular importance in the end-markets that we serve.
Many are specialty items designed to provide a convenient and often unique means of storing, dispensing and
applying our customers’ products. Although our packaging often constitutes only a small portion of our
customers’ cost of production, it is an integral part of our customers’ successful marketing strategy and,
ultimately, an element of consumers’ satisfaction. We have a global manufacturing platform of 39 plants,
operating in 16 countries across Europe, the Americas and Asia. Our global manufacturing network is closely
aligned with our customers’ plants. We serve both large, developed markets such as Europe and North
America and faster-growing, developing markets such as Brazil, Mexico, China, Indonesia, Russia and India. We
believe that we are well positioned relative to our largely regional peers to take advantage of anticipated
growth in those emerging markets, in particular for affordable beauty and personal care products, since our
global footprint and broad product offering enables us to serve our developed market customers as they
expand globally as well as penetrate new regional and local customers in developing markets.
Our global exposure is enhanced by the use of our packaging for high-end beauty and personal care products
which are sold around the world. For example, several luxury brands we serve have their primary filling
locations in France, but sell their products globally. The global distribution of our customers’ products allows
us to more efficiently utilize our developed market manufacturing footprint while participating in global
growth trends.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Wider range of services and decoration expertise
Albéa serves the complete value chain, from new products development to conversion of raw materials,
decoration, assembly, and logistics, as reflected by the chart below. In some instances, through our beauty
solutions business, Albéa organizes a full service solutions with filling through subcontracting.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Our products
Albéa has two product segments: (i) our “tubes” segment, which encompasses laminate and plastic tubes for
the oral care and cosmetics industry; and (ii) our “cosmetic rigid packaging” segment, through which we
manufacture products for color make-up, skincare and fragrance caps, dispensing systems and beauty
solutions. We believe we have one of the broadest product portfolios in our industry, which allows us to
provide comprehensive product solutions, serve as a “one-stop-shop” for our customers and cross-sell a total
packaging solution to our customers, giving us the potential to increase our share of our existing customers’
packaging spend and to attract new customers.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Albéa ranks best in Plastic and Laminated Tubes as well, being top of class in global footprint and breadth of
product offer, with an continuous improving potential on reliability. Albéa Tubes business combines a global
reach with local presence through 20 sites and operates on regional basis with presence mainly in Europe,
North and South America and to a lesser extent in Asia. Our sites are located less than 1,000 km from filling
sites of customers.
Our principal tubes product categories are:
Laminate tubes.
Laminate tubes are made from several film layers assembled by heat, pressure or adhesives, in order for the
composite material to achieve improved oxygen, water or light resistance, or a better appearance. Albéa
manufactures laminate tubes with plastic and aluminum layers. Albéa carefully selects the combination of
layers to minimize costs and maximize the qualities of the film. Albéa manufactures laminate tubes in two
steps: the first part of the process consists of manufacturing and printing the laminate film (or “web”) using a
laminator and a printer and the second part consists of cutting, shaping and welding together the tube from a
printed laminate film and adding a tube head and a cap. Albéa owns and operates one laminator in Canada
and buys laminate films from third party suppliers. A large portion of our laminate tubes are produced for the
high volume toothpaste market, which requires long run, economical packaging. Albéa sells its laminate tubes
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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to most major toothpaste manufacturers, including Procter &
Gamble (“Crest,”Oral B”), Unilever (“Signal,” “Close up,”
“Pepsodent”) and Arm & Hammer
In 2014, We launched a premium laminate tube: Reflexion™. It is a
plastic Barrier Laminate Tube with brilliant metallic effects and
bounce back properties similar to conventional plastic Tubes.
Thanks to a specific process developed by Albéa, the Reflexion
Tube offers a vast range of metallic effects. The tubes can be
printed in 8 colors. In addition, thanks to a new seaming process
and 360° printing, the side seam is virtually invisible and almost
imperceptible to the touch.
With such new technology, Albéa aims to capture laminate
premiumization and should benefit from opportunity to offer
cosmetic laminate instead of plastic tubes mainly in emerging
market. Indeed, Albéa could provide more complex decorations and metallic effects and therefore, it will allow
Albéa to complement the existing portofolio of plastic tubes and target additional growth in mass and
masstige skin care markets.
Over the past few years, Albéa has engaged in a major development project with our main customer to start
producing since November 2015 the first laminate tubes for hair coloration: the Hair Dye project. Albéa
innovative patented technology offers an effective alternative to aluminium tubes preserving formulation from
reaction with oxygen as well as the environment.
More recently Tubes has launched a digital printing process in
order to answer very specific and value added customer request
with very short delivery time and small order size.
Plastic tubes.
Plastic tubes are made from plastic resin colored and shaped
into the desired form. The tube is then printed, decorated and
fitted with an injected tube head. Printing change overs are
relatively short, which allows us to customize printing and
appearance for comparatively small production batches.
The extrusion process produces a seamless tube allowing 360°
printing and high quality decoration. Plastic tubes are as a result
more versatile and more refined than laminate tubes.
Compared to laminate tubes, plastic tubes are less oxygen , water and light resistant and not suitable for
certain products. A large portion of our plastic tubes are produced for the skincare and personal care markets,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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which require distinctive and branded packaging. In recent years we have increased the production speed of
our manufacturing lines, added manufacturing capabilities (such as for tubes with an oval shaped section) and
eliminated sources of waste (such as production line change over times and scrap). Our plastic tubes come in a
variety of shapes and sizes, and can be fitted with various applicators, providing our customers with a range of
products to fit their brand’s needs.
Tube caps.
Albéa produces a variety of screw caps and flip top caps for plastic tubes with diameters ranging from 13.5 mm
to 60 mm. Albéa sells most of its tubes fitted with cap produced internally, including certain caps with our
proprietary designs such as our “slender caps” and our tamper resistant “access denied” lines. Albéa also buys
plastic caps from suppliers.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Our cosmetic rigid packaging segment encompasses the following sub-groups:
• Rigid packaging. These are products we manufacture through injection-molding, assembly and decoration
such as lipstick containers, mascara packs, fragrance and skincare caps and other similar packaging for
color make-up, skincare and fragrance products.
• Dispensing system. These products include spray pump engines and decorating parts we manufacture
through injection molding, high speed assembly and decoration, and which are typically used to spray
fragrance (“fine mist”), skin cream (“lotion”) , soap or conditioning products (“foam”) , spray product
samples (“samplers”) and Mini fragrance and facial care pumps.
• Beauty solutions. These are full service solutions where we design, develop & deliver tailor-made turnkey
projects, leveraging a global ecosystem with reliable partners and Albéa’s resources. We go far beyond
pack & formulas. We draw our inspiration from a deep understanding of market trends, leveraging social
network and data analytics, then we build a customized offering, with our full service approach and our
expertise in combining packs, formulas and accessories for an optimal time to market with innovations
and a wide library of stock items to be customized.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Albéa principal cosmetic rigid packaging products are:
Mascara and lip gloss.
Albéa sells a complete range of mascara bottles and brushes. Our
products include an innovative set of high volume brushes and
combing brushes that we developed, including our two in one
applicator for loading formula and combing lashes. Albéa’s
customers work with us to design products which meet their
appearance and functional requirements. Albéa uses packaging
materials that adequately store our customers’ product and provides
spill free and accurate dosage through brushes and wipers designed
to obtain the desired lash effect and emphasizes the visual impact of
the product.
Fragrance and skincare caps.
Fragrance and skincare caps are closures that fit on the ends of fragrance bottles and skincare jars.
They are designed to emphasize the status of the consumer and the exclusivity of the product.
They are comparatively thick pieces demanding a deep knowledge of mold design and injection
molding techniques. The challenges they present, range from delivering a strong visual impact at
minimal cost to achieve a unique appearance for exclusive brands through a combination of highly
skilled injection and decoration techniques. Albéa primarily sells our caps and jars in Brazil and in
Europe, where a large portion of worldwide production of exclusive fragrances is concentrated.
Lipstick containers.
Albéa offers lipstick packaging in various styles and
fashions to address all packaging needs. The core of a
lipstick container is the injected, assembled
components which together help to raise and retract
the lipstick paste. Albéa offers customers a choice of
mechanism with different value-propositions,
including a lubricant-free mechanism often
considered by exclusive brands as one of the best
options for sensitive formulas and for ease of use. We
also offer a wide array of decoration options.
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Compact powder-cases.
Compact powder-cases are designed to convey the status of the
consumer and the exclusivity of the brand and product. They also
offer long-lasting use, shock resistance and, most of the time, an
applicator for the product and a mirror for convenience. Compact
powder-cases are made from injected pieces and then are
decorated and assembled. Albéa’s compact powder-cases
production center in Indonesia has specialized in developing
distinctive, high-end compact powder-cases. Albéa’s product
development teams in Europe and the United States work
together with both our Indonesian and customers’ product
development teams to design the best product possible.
Dispensing systems.
Albéa’s dispensing systems include fragrance, lotion, foam and sampler pumps. Pumps are a highly
technical business given the miniaturization of the engines. Manufacturing the small components
and the valves requires sophisticated design, precise injection-molding and high-speed assembly.
Albéa offers a broad variety of pump engines and decoration for our fragrance pumps. In lotion
pumps, Albéa proposes both neutral and airless pumps which can dispense a variety of viscosities
and may include a lockable design or a protective cap. Albéa lotion pump business line includes our
Nea platform which offers high suction power suited for high viscosity products. Albéa also
produces foam pumps to dispense foam from a liquid solution without using propellants or
chemicals. Albéa adapts its pumps to specific formulations and offers a wide choice of bottle
customization, dosage and foam quality options. Albéa produce also a foam dispenser, its EZ’R line,
which is used by inverting the bottle and squeezing it with one hand, thereby providing high quality
foam and convenience.
Beauty solutions.
These are full service solutions were we design, develop & deliver tailor-made turnkey projects,
leveraging a global ecosystem with reliable partners and Albéa’s resources. We go far beyond pack
& formulas. We draw our inspiration from a deep understanding of market trends, leveraging social
network and data analytics, then we build a customized offering to (i) “reveal your formulas” with a
wide range of applicators and dispensing solutions (ii) “boost your sales” and transform the
customer experience with promotional items and pouches (iii) “ease your life” with our full service
approach and our expertise in combining packs, formulas and accessories for an optimal time to
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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market with innovations and a wide library of stock items to be customized. In addition we also
develop business verticals as with Travel Designer brand supplying business and first class travel
kits to major airlines.
Albéa ranks the best in Rigid Packaging for mascaras and Lipsticks, being top of the class in
innovation, quality and breadth of product offer. We offer a comprehensive global footprint with 15
sites worldwide, being able to address local demands in almost every region of the world as well as
offer lower capital intensive solutions from East-Asia. Our production is organized among regional
production sites specialized by products or technology. Albéa’s mascara and lipstick centers of
excellence are located in Europe, America and Asia, while fragrance cap business is located in
Europe and Brazil.
Dispensing Systems follow a very complex manufacturing process where Albéa has developed a
unique expertise. Our production is organized around several centers of excellence worldwide with
a strong presence in Europe, North and South America and China.
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Albéa’s market
We believe we are one of the world’s leading
producers of plastic packaging for the beauty
and personal care market, which we believe is
one of the fastest growing end-markets for
consumer packaged goods. Our packaging is
primarily used in the skincare, color cosmetics,
fragrance, bodycare and oral care segments of
the beauty and personal care industry and
consists of laminate tubes and plastic tubes,
mascaras, lip gloss and lipstick containers,
compact powder-cases, jars, fragrance caps
and dispensing systems such as fragrance
pumps and samplers, lotion pumps and foam
pumps, as well as promotional items. We
believe that our product offering addresses a
$9 billion sub-segment of the global market for
beauty and personal care packaging, which
according to a 2016 Smithers Pira report, is
estimated to be approximately $22 billion.
We are a global market leader across the majority of our product portfolio with over 70% of our
sales in product categories in which we believe we hold the number one or two market positions.
We believe that we have one of the broadest portfolios of packaging in our industry, enabling us to
provide comprehensive solutions which simplify and optimize our customers’ supply chain.
According to the Smithers Pira Report, the global beauty and personal care packaging market is
expected to grow at 4.1% per year between 2015 and projected 2021, while the annual market
growth in Western Europe and North America is expected to be 2.8% and 3.3%, respectively,
between 2015 and 2021. We expect growth in developed markets to continue to be influenced by
an aging population, consumer interest in beauty and personal care trends and growing demand
for more convenient and effective packaging solutions. We expect consumer demand for beauty
and personal care products in emerging markets to continue to be driven by a growing middle
class, a rapid increase in demand for branded and upscale products and improved retail
infrastructure. Our revenue will be impacted from period to period by our ability to penetrate, and
the continued growth in, these emerging markets.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Our packaging is primarily used in the skincare, color cosmetics, fragrance, body care and oral care
segments of the beauty and personal care industry and consists of laminate tubes and plastic
tubes, mascaras, lip gloss and lipstick containers, compact powder cases, jars, fragrance caps and
dispensing systems such as fragrance pumps and samplers, lotion pumps and foam pumps, as well
as promotional items.
*Management data unaudited
Skin Care: creams, masks, This market is led by a strong demand for facial care products (e.g. anti-
ageing cream, high-end facial creams) and increasing life expectancy.
Color Cosmetics: mascara, lipstick,…This market is also led by a strong demand widening consumer
base towards young people and highly linked to fashion trends.
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Hair Care: Albéa is not holding a strong position in market for Hair Care because Albéa does not
produce bottles used for shampoo neither aerosols used for lacquers nor aluminium tubes. Albéa
has entered the market through the Hair Dye project launched in November 2015, which is the first
laminate Tubes for hair coloration. This project represents significant adjacent market development
opportunity for the coming years and demonstrates Albéas leadership in laminated tube
technology.
Oral Care: mainly tooth paste. Its a stable market with limited potential for further differentiation
justifying people to trade up for more expensive products.
Fragrance: perfume... It’s also a stable market in mature market in developed counties (Europe,
North America) while increasing incomes and the rising attention to personal image in emerging
markets will drive growth in these regions.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Geography
Our business is diversified among numerous regions around the world, with a broad manufacturing footprint in
16 different countries across Europe, North America, South America and Asia, allowing us to provide customer
satisfaction in a variety of major markets. Our customers are increasingly expanding their global presence and
rely on us to provide regional or local supply solutions, allowing us to reinforce our position as a key global
supplier to them. Our ability to manufacture products in various regions allows us to serve markets where
delivery times and transportation and other costs such as import duties may be prohibitive.
We have leading positions and a strong manufacturing base in both mature and stable markets such as Europe
and North America, as well as developing and faster growing markets such as Brazil, Mexico, China, Indonesia,
Russia and India. We mostly produce high volume and affordable beauty and personal care products for the
emerging markets, whereas we have a higher proportion of both higher value added and high end beauty and
personal care products for the mature markets.
Our geographic diversification allows us to take advantage of regions with historically stable growth rates of
the beauty and personal care end market, such as Western Europe and North America, while building our
positions in faster growing emerging markets, such as Latin America, Asia Pacific and Eastern Europe. Its
important to underline that we sell to filling locations that might differ from the end market consumption.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Production
We have a global manufacturing platform of 39 plants, operating with a global footprint which allows us to be
closely aligned with our customers’ plants and to serve them as they expand globally.
We are permanently improving our global footprint. Since 2010, we have closed several plants (France, Mexico,
Brazil, China and Italy). We have completed the Rexam footprint integration.
We are now working on leveraging huge investments, restructuring and project cost done to develop further
operational excellence.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Albéa have done major footprint projects since 2010 in Mexico and Brazil. More recently we achieved the
following projects:
Footprint optimization
France: In 2013, we merged two separate tubes manufacturing sites in France into one new location to better
satisfy our customers. The move started during the summer and was completed earlier during winter 2013
with minimal impact on delivery.
China North: On October 2013, we relocated our Suzhou site in China to a new location, where we also moved
part of the Shanghai operations of Rexam Cosmetics following the requirement of the government to move.
The transfer was completed in June 2014. However, the ramp up phase of this facility has taken several months
to reach break-even in November 2015 and impacted revenues unfavourably.
The plant was opened in June 2014, in Suzhou, China. This brand new 30,000 m2 Center of Excellence with our
core industrial expertise in tubes, cosmetic packaging, and dispensing systems. Built to world-class operating
standards, with integrated decoration and assembly capabilities, Albea Suzhou draws on our 25-year legacy in
China to serve our prestigious local and global customers.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Italy: In September 2014, we opened Albéa Bottanuco, a European Center of Excellence for mascara, lip-gloss
and eyeliner packaging thanks to its integrated injection, assembly surface treatment and decoration
capabilities. We merged two plants into a new one as Albéa has been operating in Italy since 1979 and opened
the 18,000m2 Bottanuco facility in September 2014. In particular, this Center of Excellence provides customers
with a dedicated applicator development and production area as well as a comprehensive plastic and fiber
brush library.
Plouhinec/Simandre: The target is to reduce complexity by having each site dedicated to similar process,
technology. The project consists in transferring production of assets between Plouhinec and Simandre to
create respectively, two excellence center in lipstick for Plouhinec and Skincare/perfume for Simandre. Assets
transfers already took place in 2016, but this significant project is planned to be completed by end of 2018 and
Albéa will have fully restructured its industrial footprint in Europe.
Shenzhen (China South): In December 2015, we signed an agreement for the sale of our Shenzhen facility. We
transferred the existing production assets to two other existing plants (Nanglang and Tex) in China. This self-
funded operation allows Albéa to optimize our production sites in China South: leverage available space,
increase operational efficiency, refocus sites as expert centers. The administrative disposal of Shenzhen site is
planned to be completed in March 2017, although assets were transfered in the last quarter of 2016.
Portfolio Optimization
On October 1, 2013, we sold our Albéa Annecy business and on October 4, 2013, we sold a former cap making
facilities plant based in Albertville, France which had been closed since 2011.
In February 2014, we sold Cotuplas S.A.S., an equipment manufacturer for the productions of tubes, to
Automation Industrielle S.A., a larger equipment producer also specialized in equipment for tube
manufacturing and from whom we have been buying equipment in recent years. We intend to continue
cooperating with Cotuplas S.A.S. in developing innovative tube manufacturing equipment.
Continuous improvement of our profitability
Since the acquisition by affiliates of Sun Capital in 2010, Albéa has been transformed into one of the world’s
leading producers of plastic packaging for the beauty and personal care industry through a series of strategic
acquisitions and divestitures and capital investment and operational improvement programs. Albéa
established its global leadership position in the laminate tubes market through our merger with Betts, and
expanded into dispensing systems through the Rexam Cosmetics Acquisition. We have also completed several
bolt-on acquisitions to broaden our geographic exposure and to solidify our supply chain, such as the
purchases of Eyelematic in the U.S., Tex China and Albea Slovakia in Europe.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Albéa’s continuous focus on operational efficiency and acquisition integration has reduced costs and improved
our Adjusted EBITDA Margin. Albéa has invested significantly in new plants and equipment, and rationalized its
production capacity in France, Italy, Mexico, China and Brazil. Our strategic initiatives, in particular our
acquisitions and cost reduction measures, have resulted in significant Adjusted EBITDA growth and Adjusted
EBITDA Margin expansion.
Our Adjusted EBITDA has grown from $86.2 million in 2011 to $190.5 million for the twelve months ended
December 31, 2017. At same rates, the Adjusted EBITDA has increased by 6.4% versus 2016. The EBITDA
margin is at 12.8% at the end of 2017.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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IV. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Profit and Loss statement Twelve Months Ended December 31, 2017 as Compared to Twelve Months Ended December 31, 2016
Revenue
Reported revenue increase by $86.8 million, or +6.2%, from $1,402.4 million for the twelve months ended
December 31, 2016 to $1,489.2 million for the twelve months ended December 31, 2017. Organic sales, at same
rates and perimeter, grow by 3.7% versus 2016.
This increase was primarily due to an increase in volumes of tubes in Europe and emerging countries and to an
increase in sales in our cosmetic rigid packaging segment. Albéa’s sales growth in 2017 vs 2016 is lead by Global
accounts +6.9% along with Small and medium accounts +5.4% while few key accounts suffered especially in
Brazil.
In $ million
Consolidated Income Statement Data : 2017 2016
Revenue 1 489,2 1 402,4
Cost of sales (1 190,0) (1 126,4)
Gross profit 299,2 276,0
Selling and administrative expenses (183,4) (176,0)
Restructuring and project costs (15,9) (33,2)
Other income / (expense) (9,2) (12,5)
Operating profit 90,7 54,4
Financial result (9,1) (122,1)
Share of profit of associates (0,1) 0,1
Profit / (loss) from continuing operations before income taxes 81,5 (67,6)
Income tax expense (12,7) (11,1)
Profit / (loss) from continuing operations 68,8 (78,7)
Other comprehensive (loss) / income (74,4) 6,2
Total comprehensive income / (loss) (5,6) (72,5)
Attributable to:
— Owners of the Group (5,6) (72,5)
— Non‑controlling interests
Year ended December 31,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
25
Seasonality
Our business, on a consolidated basis, is generally not subject to seasonal fluctuations. However, each product
segment and geographical region, experiences seasonality independently, as a result of consumer buying
patterns, as well as local holidays and their impact on our customers’ manufacturing activity. In Europe, some
of our customers reduce manufacturing activity during August and December. This, in some cases, can be the
reason of lower sales in August and December.
In $ million Q4 2017 YTD Q4 2016 YTD Delta
Organic sales (*) 1 475,1 1 422,1 3,7%
Europe 748,1 705,0 6,1%
America 559,9 553,0 1,2%
North america 473,8 462,2 2,5%
South America 86,1 90,8 -5,2%
Asia 218,8 214,8 1,8%
China & Hong Kong 132,2 130,7 1,2%
Southeast Asia 86,5 84,2 2,8%
Africa 0,0 0,0
Corporate 0,0 0,0
Intercompany sales -51,7 -50,7
Perimeter effect (Albea Slovakia) 14,0 12,4
FX translation effects 19,7
Organic Sales by segment (*) 1 475,1 1 422,1 3,7%
Tubes 618,0 599,3 3,1%
CRP 857,2 822,8 4,2%
Reported sales 1 489,2 1 402,4 6,2%
Organic Adjusted Ebitda (*) 187,3 176,5 6,1%
Europe 91,5 84,2 8,7%
America 81,7 80,6 1,3%
North america 66,4 65,8 1,0%
South America 15,3 14,9 2,7%
Asia 29,3 27,5 6,4%
China & Hong Kong 14,8 12,5 18,4%
Southeast Asia 14,5 15,1 -3,6%
Africa 0,0 0,0
Corporate -15,1 -15,8 -4,4%
Perimeter effect (Albea Slovakia) 3,2 2,5
FX translation effects 2,4
Organic Adjusted Ebitda by segment 187,3 176,5 6,1%
Tubes 88,3 86,8 1,7%
CRP 114,1 105,5 8,2%
Reported Adjusted Ebitda 190,5 174,1 9,4%
(*) 2016 Sales/Adjusted EBITDA at 2017 rates
2017 Sales/Adjusted EBITDA restated with perimeter effect
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
26
Revenue by Geographic Region (at same rates)
The table shows a breakdown of our revenue and Adjusted EBITDA by regions for the twelve months ended
December 31, 2017 and December 31, 2016 and as a percentage of revenue (for revenue by region) and as
percentage of Adjusted EBITDA (for Adjusted EBITDA by region).
Europe: Sales in Europe increased by $43.1 million, or +6.1% from $705.0 million for the twelve months ended
December 31, 2016 at constant rates and perimeter to $748.1 million for the twelve months ended December 31,
2017. Sales increased in all product lines.
America: Sales in America increased by $6.9 million, or 1.2%, from $553.0 million for the twelve months ended
December 31, 2016 at constant rates to $559.9 million for the twelve months ended December 31, 2017. The
growth is driven mainly by our Rigid business in North America.
Asia: Sales in Asia increased by $4 million, or +1.8%, from $214.8 million for the twelve months ended December
31, 2016 at constant exchange rates to $218.8 million for the twelve months ended December 31, 2017. The
growth is coming from China and India while Indonesia is slightly down last year.
EBITDA / Adjusted EBITDA
The following table reconciles our profit / (loss) from continuing operations, our most directly comparable
measure under IFRS, to EBITDA and Adjusted EBITDA :
In $ million
2017 2016
Profit/(loss) from continuing operations 68,8 (78,7)
Income Tax 12,7 11,1
Financial result 9,1 122,1
Share of profit of associates 0,1 (0,1)
Depreciation and amortization 89,1 87,9
EBITDA 179,8 142,3
Impairment 0,2 0,3
Restructuring costs and separation costs * 16,6 33,2
Sun Capital management fees ** 4,5 4,1
Other items *** (10,6) (5,7)
Adjusted EBITDA 190,5 174,1
(*) Represents restructuring expenses relating to severance, relocation cost, transformation and ramp up cost link to new footprint optimization,
advisory costs related to strategic and operational consulting in relation to Albéa operational improvement plan, legal advice and audit costs in
relation to capital structure evolution program or debt issuance. These costs are deemed to be not in the ordinary course of business. For more
information, see note Restructuring and projects costs for more details.
(**) Represents management and transaction advisory fees paid to affiliates of Sun Capital. See “Related Party Transactions-Consulting Agreements."
(***) Represents in 2017 mainly gains on disposal of assets for $ 16,6 million due to the sale of Albéa Plastic Packaging Shenzhen and unrealized
foreign exchange losses on working capital for $(5) million. In 2016, it include mainly unrealized foreign exchange gains on working capital for
$6.3 million In Mexico, China and Brazil.
Year ended December 31,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
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Adjusted EBITDA
Adjusted EBITDA increase by $16.4 million, or 9.4%, from $174.1 million for the twelve months ended
December 31, 2016 to $190.5 million for the twelve months ended December 31, 2017.
At constant rates and perimeter, Adjusted EBITDA increased by $11.5 million (+6.4%) compared to last year. At
same perimeter, the increase is still significant at +6.1%
The increase was primarily due to cost savings and volume increases in Europe and China and was partially
offset by lower performance in North America, India and Indonesia due to lower volumes for the twelve
months ended December 31, 2017. This good performance is also the result of a better revenue management
and the positive return of our high capex done in previous years to bring our competitiveness to market level.
8 out of 11 clusters representing 80.7% of sales delivered EBITDA growth of 8.7% in 2017 vs 2016 at constant
rate. 7 out of 11 clusters representing 70% of sales in 2016, posted a EBITDA margin of 15% or above.
Adjusted EBITDA by Geographic Region (at same rates and perimeter)
Europe: Adjusted EBITDA in Europe increased by $7.3 million, or 8.7%, from $84.2 million for the twelve months
ended December 31, 2016 at constant rates to $91.5 million for the twelve months ended December 31, 2017.
This great performance is due to higher volume and all continuous improvement initiatives launched over the
past years especially in Rigid Europe which increased its Adjusted EBITDA significantly.
Americas: Adjusted EBITDA in Americas slightly increased by $1.1 million, or 1.3%, from $80.6 million for the
twelve months ended December 31, 2016 at constant rates to $81.7 million for the twelve months ended
December 31, 2017. The increase in Adjusted EBITDA in Americas was primarily due to volume growth and
costs improvements in the North American cosmetic rigid packaging business. This increase was partially
offset by lower sales in tubes and dispensing systems in North America.
Asia: Adjusted EBITDA in Asia increased by $1.8 million, or 6.4%, from $27.5 million for the twelve months
ended December 31, 2016 at constant rates to $29.3 million for the twelve months ended December 31, 2017.
This increase was mainly due to China North with the return on the transformation and automation program
launched few years ago.
Cost of Sales
Cost of sales increased by $63.6 million, or 5.6%, from $1 126.4 million for the twelve months ended December
31, 2016 to $1190.0 million for the twelve months ended December 31, 2017 .
The cost of sales to revenue ratio between the twelve months ended December 31, 2016 and the twelve
months ended December 31, 2017 slightly decreased from 80.3% to 79.9%.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
28
Excluding depreciation, at constant rate our cost base continue to decrease in 2017, costs of sales excluding
depreciation to revenue is 75.5% in 2016 compared to 75.2% in 2017. This performance comes from especially
purchasing savings and revenue management results.
Employee benefit expenses related to cost of sales (including temporary staff) for the twelve months ended
December 31, 2016, and 2017 are slightly decreased i.e. 21.3% to 20.6% of our revenue respectively.
Selling and Administrative Expenses
Selling and administrative expenses increased by $7.4 million, or 4.2%, from $176 million for the twelve months
ended December 31, 2016 to $183.4 million for the twelve months ended December 31, 2017. The increase is
mainly due to new recruitment to re-inforce the management team in 2017.
R&D
Albéa spent $12.1 million in research and development projects for the twelve months ended December 31,
2017 versus $13.3 million at same rates for the twelve months ended December 31, 2016. Albéa is the top 50
patent fillers in France and has around 200 people dedicated to Innovation, Development and Designing.
Restructuring and Project Costs
Restructuring and project costs decreased by $17.3 million from $33.2 million for the twelve months ended
December 31, 2016 to $15.9 million for the twelve months ended December 31, 2017.
At December 31, 2017, the main components of restructuring and projects costs are as follows:
- USD (5.8) million, severance costs and restructuring expenses
- USD (4.5) million, transformation project cost (footprint optimization in Europe, other industrial
optimization costs,..)
- USD (2.9) million, non-core business fees (corporate and shareholders projects)
- USD (0.6) million integration cost linked to Albéa Slovakia and merger acquisitions project costs
- USD (2.0) million, other
At December 31, 2016, the main components of restructuring and projects costs are as follows:
- USD (2.9) million, severance costs and restructuring expenses
- USD (10.3) million, transformation project cost (footprint optimization in Europe, lay out costs, other
industrial optimization costs,..)
- USD (11,5) million, projects costs linked to footprint optimization (completion of China South)
- USD (4.7) million, non-core business fees (fees incurred for shareholders projects)
- USD (1.3) million integration cost linked to Albéa Slovakia and merger acquisitions project costs
- USD (2.4) million, other
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
29
Other Income / (Expense)
Other expenses decreased by $3,3 million from an expense of $12.5 million for the twelve months ended
December 31, 2016 to an expense of $9,2 million for the twelve months ended December 31, 2017. The other
expenses include mainly the depreciation of intangible assets (recognized for the purchase price allocation of
Rexam PC and Albéa Slovakia) for $13.3 million, $4.5 million of Sun Capital management fees (See “Related
Party Transactions – Consulting Agreements” ), gain on disposals for $16,3 million due to the sale of Albéa
plastic packaging Shenzhen and unrealized foreign exchange losses on working capital for $(5) million.
Financial Result
The following table shows a breakdown of our financial result for the twelve months ended December 31, 2017
and December 31, 2016:
Financial result increased by $112.1 million from a loss of $122,1 million for the twelve months ended December
31, 2016 to a loss of $9.1 million for the twelve months ended December 31, 2017. This variance is mainly due to
foreign exchange unrealized impact on the Bond and Term loan B, form a loss of $(13,2) at December 2016 for
the Bond, to a gain of $47 million for the Term loan B at December 2017. Last year figures includes costs linked
to the refinancing process, for $36.6 million which include the Bonds premium redemption costs for $26.3
million and the impact of 2012’ issuance costs acceleration depreciation for $10.3 million.
In $ million
Financial Result 2017 2016
Interest on the Bond (16,5) (56,1)
Interest on Term Loan B (27,5) -
Interest on other financial debt (2,4) (6,6)
Amortized costs (Bond/Term loan B capitalized fees) (3,9) (13,8)
Unrealized foreign exchange (losses)/gains 47,0 (13,2)
Bonds Premium redemption costs (1,3) (26,3)
Other (4,5) (6,1)
Net finance costs (9,1) (122,1)
Year ended December 31,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
30
Income Tax Expense
Income tax expense increase by $1.6 million, from an expense of $11 million for the twelve months ended
December 31, 2016 to an expense of $12,6million for the twelve months ended December 31, 2017. We are
paying income tax in several regions (Germany, Mexico, Poland, China, US and Indonesia) due to our
profitability as per Local regulation. In addition, the group incurs others taxes like French CVAE for $(3.9)
million and withholding tax for $(2.7) million mainly in Brazil, which are classified in income tax in accordance
with IFRS but are not calculated on the net income before taxes.
Profit/(loss) from Continuing Operations
The result from continuing operations improved significantly from a loss of $(78.7) million in 2016 to a gain of
$68.8 million in 2017. The improvement is the result of :
- the increase of the Adjusted EBITDA
- the decrease of the restructuring and projects costs
- the significant variance of the financial results
Cash flow
The following table shows a summary of our free cash flows for the years ended December 31, 2017 and 2016 at
various rate.
In $ million
Cash flow 2017 2016
Cash flow from operating activities 166,1 135,4
o/w Adjusted Ebitda 190,5 174,1
o/w Change in working capital 11,2 18,7
o/w Income tax paid (14,6) (16,0)
o/w other (21,0) (41,4)
Cash flow for investing activities excluding acquisitions
(67,7) (60,0)
o/w capital expenditures net of disposals (69,9) (57,5)
Finance lease additions (capital expenditures) (0,2) (1,4)
Interest paid (including Forex cash on net debt) (57,8) (67,1)
Other (0,6) (3,0)
Free Cash Flow 39,1 3,1
Silgan asset deal - (33,4)
Albea Slovakia (199,5) -
Free Cash Flow (160,5) (30,3)
Year ended December 31,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
31
Cash from Operating Activities
Cash from operating activities for the twelve months ended December 31, 2017 was $166.1 million compared to
$135.4 million of cash used in operating activities for the twelve months ended December 31, 2016. The
improvement is due to:
- the increase of the profitability with a good control of the working capital.
- and the decrease of the cash out of “other” items which include mainly restructuring/severance costs
cash out $6.8 million, and transformation projects cost cash out for $13,7 million (Europe, China and Brazil)
and Sun management fees for $4.4 million.
Cash used in Investing Activities
Cash used in investing activities for the twelve months ended December 31, 2017 was $(60.0) million – which
includes for $30.4 million the proceed on Shenzhen disposal - compared to $(67.7) million for the twelve
months ended December 31, 2016.
Cash used in investing activities includes mainly capital expenditures. We continuously undertake capital
expenditure projects in order to increase our efficiency and production capacity and capability. Many of our
capital expenditures have been made to rationalize our manufacturing footprint in order to optimize our
resources in each geographic region in which we operate.
In 2017, we spent 4.7% of our revenue, or $69.6 million, on capital expenditures including finance lease. In 2016,
we spent 5.8% of our revenue, or $82.4 million, on capital expenditures including finance lease (excluding
impact of China South and Silgan asset deal).
Interest paid
Interest paid (including Forex cash on net debt) for the twelve months ended December 31, 2017 was
$57.8 million compared to $67.1 million for the twelve months ended December 31, 2016. The interest are
decreasing due to the benefit of the refinancing done in April 2017.
Free cash flow
Before acquisition and refinancing effects, the Free cash flow is positive at $39.1 million versus $3.1 million for
the twelve months ended December 31, 2016. We did a refinancing in April 2017 in order to reduce our
financing costs. The operation generated extra refinancing cash out of $(121.8) million due mainly to realized
forex losses after the repayment of the Bonds and breakup and issuance fees. The proceed from the financing
was used also to pay a dividend recap of $(77.7) million.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
32
Balance sheet for the year ended December 31, 2017 and December 31, 2016
Refinancing process
On April 20, 2017, Albéa has completed the refinancing which has been mandated by BNP Paribas S.A. and
Goldman Sachs International as Joint Global Coordinators and, together with Credit Agricole Corporate ,
Investment Bank, HSBC Bank PLC and ING Bank N.V. mandated Lead Arrangers and Joint Book runners to
arrange USD 924 million senior secured credit facilities comprising :
- a USD 818 million 7-year covenant-lite term loan B facility divided in two tranches
o the 408 million USD tranche at Libor US + 375 bps, with a 1% floor; repayment of 0.25% of the
principal on a quarterly basis starting at the end of September 2017
o the 385 million EUR tranche at Euribor + 400bps, with a 0% floor, repayment at maturity date
- a USD 105 million 6-year revolving credit facility, not yet used at the end of June 2017
According to this refinancing, the group extended the debt maturities from 2019 to 2024, and change the
financing term and condition with a biannual interest payment (last day of May and last day of November) .
In $ million
Consolidated Financial Position Data: 2017 2016
Total assets 1179,5 1101,9
Cash and cash equivalents 119,1 87,0
Inventories 162,1 144,9
Trade and other receivables 179,9 170,5
Property, plant and equipment 467,5 444,8
Goodwill 117,3 116,0
Assets held for sale 0,3 16,2
Other financial assets 36,9 14,4
Other assets 96,3 108,2
Total liabilities 1384,3 1222,5
Trade and other payables 331,1 286,3
Pensions and other LT employee benefit obligations 78,9 66,9
Other liabilities 52,2 89,4
Total borrowings 922,0 779,3
Liabilities held for sale 0,0 0,6
Total equity (204,9) (120,6)
Capital stock 0,4 0,4
Additional paid‑in capital 12,2 12,2
Equity excluding non‑controlling interests (217,4) (133,2)
Total equity and liabilities 1179,4 1101,9
Year ended December 31,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
33
The term loan B tranche are measured at amortized costs, the Term Loan B net in the financial statement
include USD 23.1 million of capitalized fees linked to the refinancing process.
On June 13, 2017, the USD tranche of Luxembourg Term loan B have been covered by a CAP of 2% with a
maturity debt of May 2020. The CAP premium Fair value is recognized in Other financial assets for USD 2.7
million (see note 6.3).
The proceeds from the Financing was used mainly to repay the Bonds including redemption costs , to pay a
dividend recap to shareholder and to fund the transaction expenses which are capitalized in accordance with
IFRS. This gives us additional liquidity to operate our business, while increase our flexibility to address strategic
actions that will allow Albéa to grow in future.
Net debt (non-Gaap measure)
Net debt for the year ended December 31, 2017 was $780.6 million compared to $689.9 million for the year
ended December 31, 2016.
Our leverage is stable around 4x.
Liquidity and Capital Resources
Our principal uses of cash have been to finance working capital, capital expenditures, restructuring expenses,
debt service and repayments. Our principal sources of liquidity since the Rexam Cosmetics Acquisition have
been provided by operating activities and borrowings under our European Receivables Facility and our North
American ABL Facility. We have also entered into local working capital facilities in some of the jurisdictions in
which we operate. After taking into account our current cash and cash equivalents and our anticipated cash
flow from operating and financing activities, we believe that we have sufficient liquidity for our present
requirements.
In $ million
Other Financial Data 2017 2016
Gross profit 299,2 276,0
EBITDA (1) 179,8 142,3
EBITDA Margin 12,1% 10,1%
Adjusted EBITDA (2) 190,5 174,1
Adjusted EBITDA Margin 12,8% 12,4%
Net debt 780,2 689,4
Ratio of net debt to Adjusted EBITDA 4,10x 3.96x
(*) Operating profit excluding depreciation and amortization.
(**) We define Adjusted EBITDA as EBITDA adjusted to exclude impairment, restructuring costs separation and transformation costs, Sun Capital
management fees, bargain purchase gain, non operating advisory and acquisition fees, inventory step up release due to purchase price allocation
and other items which are not related to our core results of operations.
Year ended December 31,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
34
Financing Arrangements
As of December 31, 2017, we had $118.6 million of net cash and cash equivalents, $5.4 million of positive
balance under the North American ABL Facility and under the European Receivables Facility. As of December
31, 2017, we also had €385.0 million aggregate principal amount of Euro Term Loan B and $406 million
aggregate principal amount of Dollar Notes outstanding, $24.7 million of lease financings and $39,6 millions of
other local facilities (included accrued interest and overdraft less finance lease receivable of $3,4 million and
Term loan B cap Fair value for $2.7). We also have $105 million equivalent multicurrency revolving credit facility
maturity April 2023, from which we have no outstanding drawing as on 31, December 2017.
European Receivables Facility
Certain of our subsidiaries in France, Italy, Germany, Poland, the Netherlands and the United Kingdom are
parties to a framework agreement, which includes a committed receivables facility and a non recourse
committed receivables facility, dated June 23, 2014 with Credit Agricole Leasing & Factoring (“CALF”) as the
actor. The European Receivables Facility took effect on July 6, 2014.
This factoring facility was signed in June 2014 by Albea’s European entities, including a syndication program
with BNPP and Natixis covering half of the line.
The European Receivables Facility Agreement provides for a three year period factoring facility and allows us
to draw funding of up to the lesser of: (i) €115 million (or the foreign currency equivalent); and (ii) the value of
the eligible trade receivables sold to CALF by us net of a“reserve” portion amounting to a minimum of 5% of
the outstanding receivables which may give rise to financing.
On 20 July, 2017 Cost of funding related to Pan-European Factoring was decreased from 0.8% to 0.6% margin.
On 28 December 2017, pan-European factoring line with Eurofactor was renewed to €115 million, until October
2019.
North American ABL Facility
On December 17, 2010, our U.S. and Canadian operating companies, Albéa Americas, Inc., Albéa Mexicana, L.P.,
Albéa Cosmetics America, Inc., Albéa Beauty Solutions USA, LLC and Albéa Canada Inc., entered into the North
American Facility Agreement with PNC Bank and General Electric Capital Corporation (collectively, the“ABL
Lenders”). The North American ABL Facility allows us to draw funding of up to $60.0 million in the aggregate,
subject to the borrowing base described below. Up to $3.0 million of the North American ABL Facility can be
utilized for borrowings in Canada and up to $10.0 million of the revolver facility can be utilized for letters of
credit. In May 2016, we increased the level of the borrowing base (mainly increase of financing quotity).
The term of the North American ABL Facility will expire on October 2019. Outstanding borrowings under the
North American ABL Facility are due and payable in full on the last day of the term. Amounts borrowed under
the North American Facility bear interest at a rate per year equal to a base rate plus an applicable margin,
which varies (from 1.25% to 1.75% in the case of loans bearing interest at the alternate base rate or the Canadian
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
35
prime rate and from 2.25% to 2.75% in case of loans bearing interest at the Eurodollar rate or the CDOR rate)
based on monthly average undrawn availability. Interest is payable monthly in arrears.
An unused line fee is payable monthly in an amount equal to 0.50% per year on the average daily unused
portion of the revolver facility subject to a step down to 0.375% based upon average daily unpaid balance of
revolver utilization.
The North American ABL Facility allows us to draw funding against a borrowing base, which includes eligible
trade receivables and eligible inventory, adjusted for the agreed advance rate and net of applicable funding
blocks and reserves. Only trade receivables and inventory owned by U.S. borrowers are included in the
borrowing base for the U.S. borrowings and only trade receivables and inventory owned by the Canadian
borrower are included in the borrowing base for Canadian borrowings.
Multi-currency Revolving Credit Facility (RCF)
A $105 million multicurrency revolving facility which may be utilized by each of the borrowers and any other
subsidiary of the Parent that accedes to the Senior Facilities Agreement. The revolving facility is available to be
drawn in USD, GBP, EUR or CAD and other currencies as may be agreed from time to time by the original
revolving facility lenders, maturing on 20 April 2023 (6 years). Cost of funding is Libor 6 months + 3.25%
(subject to leverage ratchet and zero rate Euribor / Libor floors). The multicurrency revolving facility is
available for general corporate purposes of the Group (including and without limitation, the financing or
refinancing of capital expenditure, any permitted acquisitions, investments and joint ventures, operational
restructurings and reorganization requirements of the Group, any fees and any related fees, costs and
expenses).
Local Facilities and Financial Leases
We have a variety of other local facilities, including revolving facilities, lease financing arrangements, term
loans, cash management and invoice discounting facilities in the countries in which we operate to fund
working capital and other requirements in those countries, as well as finance leases. These facilities are
generally in amounts between $1.0 million and $10.0 million (with $12.8 million finance lease for the plant of
Sainte Menehould in France) and are guaranteed or secured by a pledge of sum of all of our assets in the
applicable country.
As of December 31, 2017, our financial leases represented $24.7 million and our other local lending facilities
represented $39,6 million of indebtedness (included accrued interests and overdraft less finance lease
receivable of $3.4 million). In 2017, we signed term loan in Le Treport for $0.8 million for four years ending on
31, October 2021 to finance our operations.
Term Loan B
On 20 April 2017, €385 million term loan Facility B was utilized by Albéa Beauty Holdings S.A., Société
Française de Galvanoplastie S.A.S., Betts Limited and Albéa Alkmaar B.V.. (Facility B (EUR)) maturing on 20
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
36
April 2024 (7 years). Cost of funding is Euribor 6 months + 4.00% (subject to leverage ratchet and zero rate
Euribor floor).
Along with the above a $408 million term loan Facility B was also utilized by Albéa Beauty Holdings S.A. and
Twist Beauty Packaging Holding Corp (Facility B (USD)) on 20 April 2017, maturing 20 April 2024 (7 years). This
term loan facility is with 1% annual amortization. Cost of funding is Libor 6 months + 3.75% (subject to leverage
ratchet and 1% Libor floor) Both term loan Facility B, discharging existing group debt, payment of the
Recapitalisation Payments and other costs and expenses in connection with the Transaction.
Shareholder Funding Instruments
We also have shareholder funding instruments in the form of yield-free convertible preferred equity
certificates (“CPECs”) in an aggregate of USD 29,0 million of CPECs classified in equity in compliance with IFRS.
Pension Plans
We currently operate a number of pension plans. Some of the plans in which our employees participate are
defined contribution plans and some are defined benefit plans. Valuations of these plans are produced and
updated annually as on December 31 by qualified actuaries. The majority of our pension obligations relate to
unfunded defined benefit pension plans mostly in France and Germany, and lump sum indemnities payable
upon retirement to employees in France. Pension benefits are generally based on the employee’s service and
highest average eligible compensation before retirement, on expected future inflation rates for the respective
country and are periodically adjusted for cost of living increases, either by our practice, collective agreement
or statutory requirement.
As of December 31, 2017, we had pension liabilities, termination benefits and other long term employee benefit
obligations of $79 million, most of which are unfunded. The increase of the liabilities compared to 2016 is
mainly due to the variation in Foreign Exchange rate.
The present value of our defined benefit obligations depend on a number of factors that are determined on an
actuarial basis using a number of assumptions. The main assumption used in determining the defined benefit
obligations and net pension costs is the discount rate. Any change in this assumption may impact the amounts
recorded in our consolidated financial statements. The sensitivity analysis regarding the discount rate for
pensions and other long term employee’s benefits obligations is set forth in note 6.11 of our consolidated
financial statements for the years ended December 31, 2017 and 2016.
Quantitative and Qualitative Information Regarding Market and Operating Risks
Foreign Exchange Risk
We currently have operations in 16 different countries across Europe, North America, South America and Asia.
As a result, our businesses are subject to currency fluctuation risks. Our results of operations may be affected
by both the transaction effects and the translation effects of foreign currency exchange rate fluctuations.
Since we present our consolidated financial statements in U.S. dollars, we must translate the assets, liabilities,
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
37
revenue and expenses of all of our operations with a functional currency other than the U.S. dollar into
U.S. dollars at the applicable exchange rates. We are consequently subject to translation risk. As a result of our
operations in various countries, we generate a significant portion of our sales and incur a significant portion of
our expenses in currencies other than the U.S. dollar.
We are consequently subject to transaction risk. The primary currencies in which we generated revenue in
2017 were the euro, the U.S. dollar, the Brazilian real, the British pound sterling, the Mexican peso, the
Indonesian rupiah, the Indian rupee, the Chinese renminbi, the Polish złoty and the Russian ruble. In 2017, we
earned 42% of our revenue in euro, 31% in U.S. dollars, 6% in Brazilian real, 5% in Chinese Yuan and 16% in Others.
Interest Rate Risk
Interest rate risk relates to a negative impact on our profit and loan covenants arising from changes in interest
rates. Our income and operating cash flow are also dependent on changes in market interest rates. Some
balance sheet items, such as cash and bank balances, interest bearing investments and borrowings, are
exposed to interest rate risk. Borrowings under our North American ABL Facility and European Receivables
Facility, Term lona B and our main finance lease bear interest at variable rates. Mid-June 2017, the USD tranche
of Albéa Beauty Holdings SA term loan B was hedged via a 2% CAP (vs. Libor 6 months) for USD 388 million
(effective date November 30th 2017 and maturing May 31st 2020). Cap cost was USD 1.9 million. No
instrument taken to hedge floating interest rate on the EUR 385 million term loan B, mainly with Albéa Beauty
Holdings SA for EUR 380 million (remaining EUR 5 million between 3 European entities)
Taken into account the USD tranche of Albéa Beauty Holdings SA term loan B already hedged, an increase in
the variable rate of 100 basis points would have a negative impact of about USD 5 million on financial income.
Counterparty Risk
Counterparty risk is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract, leading to a financial loss. We are exposed to counterparty risk from our operating
activities (primarily from customer receivables) and from our financing activities, including deposits with banks
and financial institutions, foreign exchange transactions and other financial instruments. We do not generally
hold any collateral as security. With respect to trade receivables, the customer credit rating of our largest trade
debtors is carefully monitored by our credit management organization.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
38
V. MANAGEMENT AND EMPLOYEES
Board of Directors
Albéa Beauty Holdings S.A. is a holding company that is a wholly owned subsidiary of Albéa S.A, which is
indirectly held and controlled by funds affiliated and/or advised by Sun Capital. Albéa Beauty Holdings S.A
registered office is 5, rue Guillaume Kroll, L-1882 Luxembourg, Grand Duchy of Luxembourg.
The members of the board of directors of Albéa Beauty Holdings S.A, and their respective ages, are as follows:
Set forth below is a short biography of each of the directors of Albéa.
François Luscan has served as a director of Albéa since October 2012 and as Albéa’s President, Chief Executive
Officer, acting Executive VP Europe, since July 2010 and has been principally employed by Albéa (and its
predecessors) since 1985. He was Chief Executive Officer of Alcan Beauty Packaging Beauty from December
2005 to July 2010. In 2010, he led Albéa’s acquisition of the Betts group. Mr. Luscan holds a degree in
engineering in Centrale, France.
Xavier Leclerc de Hauteclocque has served as a director of Albéa since October 2012 and as Albéa’s Group
Executive VP, Chief Financial Officer of Albéa since June 2012. Prior to that, he was Chief Financial Officer of
Brakes France (the Brakes Group) from October 2007 to May 2012. Mr. Leclerc de Hauteclocque holds an MBA
from INSEAD, France and Singapore.
Timothy Stubbs has served as a director of Albéa since October 2012. Since October 2011, he has served as a
Managing Director of Sun European Partners, LLP, the European advisor to Sun Capital. Prior to that, he was
President and Chief Executive Officer of Sapa AB Group from September 2010 to September 2011. Prior to that,
he was President of Sapa Inc. from August 2009 to September 2011. Prior to that, he was Chief Executive
Officer of Indalex Inc, a former Sun Capital affiliated portfolio company, from April 2004 to August 2009. On
March 20, 2009, Indalex Inc filed chapter 11 petitions for bankruptcy in the United States. He holds an MBA
from the London Business School and a B.A. from St. Anne’s College, Oxford University.
Alexis Hennebault has served as a director of Albéa Beauty Holdings S.A. since November 2016. He is currently
a manager at Alter Domus, a leading provider of outsourced administration services for alternative investment
funds and underlying companies. Mr Alexis Hennebaut joined Alter Domus in 2012, and has over the years
worked with some of the world’s largest private equity and hedge funds, and developed extensive expertise in
Name Age Position
François Luscan 57 Director
Xavier Leclerc de Hauteclocque 44 Director
Timothy Stubbs 50 Director
Alexis Hennebault 29 Director
Laura Spitoni 48 Director
Anita Lyse 41 Director
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
39
the management, financial reporting, tax and legal aspects of funds and SPVs set up by such investors. He
holds an MSc in International Management from ESADE Business School, Barcelona.
Laura Spitoni has served as a director of Albéa since March 2014. She has served as legal counsel and IP
manager of Neuheim Lux Group Holding V S.à r.l., an affiliate of Sun Capital, since January 2014. Prior to that,
she served as a chief counsel EMEA at SCA (formerly Georgia Pacific) from 1999 to December 2013. She holds a
degree in law from La Sapienza University, Rome.
Anita Lyse has served as a director of Albéa Beauty Holdings S.A. since June 2011. She has been employed
principally by Alter Domus, a service provider to alternative investment funds, since 2001, and currently serves
as a Director in the Luxembourg office. She has significant experience working with Luxembourg companies in
a wide range of sectors. She holds an MSc in Business and Economics from the Université des Sciences
Sociales de Toulouse, France.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
40
Executive Officers and Key Employee
The following table sets forth information regarding the persons who are the Group’s executive officers. The
business address of our executive officers is 1, Avenue du Général de Gaulle, 92230 Gennevilliers, France.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
41
Set forth below is a short biography of each of the executive officers of Albéa who have not been described
above.
Axel Moreau has served as Albéa’s Executive VP Human Resources since July 2010. Prior to that, he served as
Global Human Resources Director of Alcan Beauty Packaging from March 2004 to July 2010. He holds a master
degree in social law from Angers University, France.
François Tassart has served as Albéa’s Executive VP Sales & Beauty Solutions since January 2013. Prior to that,
he was Vice President of Sales, Marketing & Innovation from September 2009 to December 2012. Prior to that,
he was Vice President of Sales & Marketing of Albéa’s worldwide tubes business from April 2009 to August
2009. Prior to that, he was Director of Sales & Marketing of Albéa’s European tubes business from October
2005 to March 2009. He holds a master’s degree in engineering from the École Centrale in Paris.
Charles-Antoine Roucayrol has served as Albéa’s General Counsel since October 2010 and was appointed
Executive VP in January 2013. From 2007 to October 2010, he served as global general counsel at the Alten
Group, a French listed company. Prior to that, from 2001 to 2007, he worked with the Safran Group as general
counsel of Labinal, specialized in the manufacture and supply of electrical systems and engineering services.
Prior to that, he worked at Siemens and the Valéo group. He holds an Executive MBA from École des Hautes
Études Commerciales (HEC) and a degree in business law from University Panthéon-Assas and from University
René Descartes.
Guillaume de Demandolx has served as Albéa’s Executive VP Cosmetic Rigid Packaging Product line since
September 2013. Prior to that, from July 2010 to June 2013, he served as VP Global Sales of MWV Beauty and
Personal Care business. Prior to that, from 2006 to July 2010, while based in Shanghai he served as VP and GM
of the Asia Pacific region for MeadWestaco for their personal and home care division. He holds a MBA from
Harvard Business School and graduated from École Nationale des Ponts et Chaussées.
Jose Filipe has served as Albéa’s Executive VP Americas since January 2013. Prior to that, from 2006 to
October 2013, he served as Albéa’s head of operations, Brazil, and from 2006 to January 2013, he served as
Albéa’s general manager of the global beauty solutions division. He holds a mechanical engineering degree
and a master in production systems from Porto University, Portugal.
Luc Rousselet has served as Albéa’s Executive VP Transformation since August 2016. Prior to that, he was
successively R&D Engineer (Alcatel-Lucent), Production Manager, Plant Manager, Lean Six Sigma
Transformation Leader (3M) as well as Chief Operating Officer (3M and Ahlstrom). He has worked in the
Pharmaceutical, Medical, Food Packaging, Automotive and Aerospace industries and brings a broad
international experience in both global and local roles. Luc holds a degree in Chemical Engineering and an
MBA and is a certified Lean Six Sigma Master Black Belt.
Arnaud Schuh joined Albéa in July 2017 as Executive VP, Tubes bringing a strong expertise in strategy,
manufacturing and global account management. Prior to that, he worked at Amcor from March 2009 to June
2017 where he headed Amcor’s snacks and confectionery business. Prior to that, he was Associate Principal at
McKinsey from 2000 to 2011. He holds a MBA from HEC Paris.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
42
Board Structure
Through control of a majority of the shares of Albéa S.A. (which controls 100% of Albéa’s shares), Sun Capital
and its affiliates have the power to control Albéa and our affairs and policies, including the election of our
directors and the appointment of our management team. Pursuant to the Security holders’ Deed, Sun Capital
indirectly has, effectively, the power to appoint and remove all of the members of the board of directors of
Albéa. For more information, see “Risk Factors—Risks Related to the Notes—The interests of our principal
shareholders may conflict with your interests.”
Board Committees
Currently, Albéa does not have any board committees.
Executive Compensation
For the year ended December 31, 2017, Albéa paid an aggregate of approximately $5.6 million to our executive
officers named in the table of executive officers of the Group set forth above, including cash compensation for
salary and bonuses, employer social contributions and car allowances.
In June 2011, our Management Participation Program, (the “MPP”), was created to align interests among our
key managers, our principal shareholders and the Albéa group by allowing managers to participate in our
economic success.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
43
Employees
For the year ended December 31, 2017, our year-end number of employees were 14,846 (including temporary
staff). Of our total employees, approximately 70% and 30% of our employees work in production and
non-production functions, respectively. The following table sets forth the number of employees (excluding
internships) we have on a geographical basis.
We have good relationships with our employees
and union representatives. In Europe, our
employees in France, Germany, Italy and the
Netherlands are represented by trade unions or
works councils. Our employees in the United
States are not unionized. In Mexico, Brazil and
Canada, our employees are represented by trade
unions. Our Asian employees are represented by
mandatory trade unions in China, Indonesia and
India. We take a constructive approach to union
relationships where there are unionized plants, and
have been able to secure the cooperation of our
unions and our workforce with regard to significant
changes and those plants. We experienced several
brief work stoppages but other than that there
have been no major work stoppages or strikes at
any of our plants during the past five years.
Our remuneration and benefits policy is designed
to reward employees in line with good market
practice. Accordingly, our salary system for certain
employees includes a variable bonus component in
the form of incentives directly related to efficiency,
which are determined on a local basis.
Total employee benefit expenses represented 28.74% of our revenue in 2017, slightly decreased compared to
last year. In certain countries where we operate, particularly in China and Indonesia, labor costs have recently
risen and are driven, to a certain extent, by government-mandated minimum wage increases. Additionally, in
certain other countries where we operate, particularly India, we are experiencing some margin pressure due to
increased labor costs which have not been passed through to the customer. We seek to revise prices based on
costs as new customer agreements are negotiated or purchase orders are placed.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
44
VI. SHAREHOLDERS
Sun Capital indirectly holds 93.5% of Albéa S.A. and members of our management hold 6.5% of Albéa S.A. We
have entered into management services agreements with Sun Capital. See “Related Party Transactions—
Consulting Agreements.”
On March 23, 2018, PAI Partners, a leading pan-European private equity firm, completed the acquisition of
Albéa. With PAI Partners, Albéa will continue to grow - in size and in strength, leveraging our assets and
market position, winning the talent war, bringing in new customers, joining forces with other players, rolling
out our strategic and operational priorities for the short- and the long-term. This is the start of a new era for
Albéa.
VII. RELATED PARTY TRANSACTIONS
Shareholder Funding Instruments
Convertible Preferred Equity Certificates
On June 30, 2010, we issued 19,090,147 yield-free convertible preferred equity certificates (“CPECs”) with an
initial par value of €1 and an aggregate par value of €19.1 million. These CPECs were held by an affiliate of Sun
Capital. We must redeem the CPECs for cash equal to the par value of the CPECs on the 49th anniversary of
the issue date of these CPECs.
On June 23, 2011, Twist Beauty Packaging S.à r.l. issued CPECs with an initial par value of €1 and an aggregate
par value of €9.3 million. These CPECs were held by an affiliate of Sun Capital. The repayment of these CPECs
was payable on the 49th anniversary of the issue date of these CPECs.
On October 29, 2012, the CPECs issued by us and by Twist Beauty Packaging S.à r.l. were cancelled and
replaced by the issuance, on November 26, 2012, of 28,497,971 new CPECs at a par value of €1 each. These
CPECs are held by an affiliate of Sun Capital, are not interest bearing and carry no voting rights.
At any time, upon the approval of a majority of shareholders representing at least two thirds of our share
capital, the holder of the CPECs is entitled to convert any or all of its CPECs into ordinary shares at a value
equal to the conversion price (one share for one CPEC). At any time, we are entitled to repurchase any or all of
the CPECs at the redemption price. The redemption price shall be (i) upon maturity date or liquidation, the par
value or, (ii) upon optional redemption, the greater of the par value for such outstanding CPECs and the fair
value of one share.
On December 31, 2012, 1,356,566 CPECs were redeemed for an amount of $27,299,000. On July 17, 2015,
1,482,787 CPECs were redeemed for €1,482,787 and reduce the equity accordingly. On January 6, 2016,
786 000 CPECs were redeemed for €786 000 and on November 22, 2016, 502 000 CPECs were redeemed for
€502 000 and reduce the equity accordingly.
On November 27, 2017 80,000 CPECs were redeemed for €80 000 and reduce the equity accordingly.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
45
At the end of December 2017 the remaining 24 208 674 CPECs are classified in equity for USD 29 033 million.
Consulting Agreements
We entered into (in aggregate) three consulting agreements (each, a “Consulting Agreement” and together,
the “Consulting Agreements”) in 2011 (as amended from time to time) with Sun Capital Partners Management
V, LLC (the “Sun Manager”), an affiliate of Sun Capital. The three Consulting Agreements were entered into by
Betts (effective as of January 1, 2011), North American Albéa entities and certain other Albéa entities (each
effective as of July 2, 2010). Each Consulting Agreement will expire on the tenth anniversary of its effective
date, with automatic one-year extensions thereafter. The Sun Manager has the right to terminate the
Consulting Agreements at any time. Pursuant to the Consulting Agreements, the Sun Manager provides us
with consulting and advisory services, including services relating to financial reporting, accounting and
management information systems.
In consideration for its services under the Consulting Agreement with Betts, the North American Albéa entities
and certain other Albéa entities, the Sun Manager receives an aggregate annualized consulting fee, payable
quarterly in advance and calculated as a percentage of our EBITDA. The aggregate minimum fee payable is
$4.3 million and the aggregate annual fee cap is $5.0 million. Additionally, we reimburse the Sun Manager for
reasonable out of pocket expenses incurred in connection with its performance of the services under the
Consulting Agreements. Upon the occurrence of certain corporate events such as refinancings, restructurings,
equity or debt offerings, acquisitions, mergers, consolidations, business combinations and sales and
divestitures, we are required to pay the Sun Manager a transaction advisory fee in an amount equal to 1.0% of
the aggregate value of any such transaction. In the years ended December 31, 2017 and 2016, we paid
$4.3 million and $4.5 million.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
46
VIII. RISK FACTORS
Below is an overview of what we believe to be the principal risks to Albéa
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
47
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
48
Our management is responsible for establishing and maintainadequate internal control over financial reporting
and business processes to mitigate our risks.
Our internal control program covers not only the financial reporting but also the key business processes. Albea
Internal control is organized around :
The Enterprise Risk Management framework (ERM). The framework of controls, defined by Albea
management, covers our core processes (selling/marketing, production, procurement, logistic,
development), support processes (IT, RH, Finance) and management processes (performance evaluation,
capex, budget).
We defined around 450 controls of which about 150 are keys controls. Each year, each site has to do a self-
evaluation of its internal control in “BWISE” which is a specific tool used to monitor all the ERM program.
The self-assessment is validated by the head of each site.
Based on a dashboard, each site can set-up appropriate action plans to improve the level of controls on
the key processes and mitigate major risks.
- A program of internal audits performed by a dedicated team : the team audits about 15 sites per year to
review the sincerity of the internal-control self-assessment and to review specific risks.
A Code of Conduct including ethics rules, anti-bribery policies, gift policy,…which is communicated and
applicable to all employees.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
49
VIII CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) is a long-term strategy driver and a strong business differentiator. CSR is
an everyday business priority.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
50
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
51
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
52
We intend to capitalize on our strengths in the beauty and personal care packaging market in order to grow
revenue and improve our Adjusted EBITDA Margin to the level of peers and become cash flow positive. We
seek to achieve these objectives by executing the following strategies.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
53
Leverage our capabilities to increase our market share
We believe that our new product development capabilities, our ability to cross sell our broad product offering
to customers and our global manufacturing platform will enable us to increase our share of the global beauty
and personal care packaging market. Our new product development capabilities have enabled us to penetrate
new geographic markets and new customers as well as support our cross selling initiatives. Additionally, our
ability to cross sell a total packaging solution to customers gives us the potential to increase our share of our
existing customersell a total packaging solution to customers gives us the potential to increase our share o the
benefits that we offer as a one stop shop. We also believe that we can increase the size of our addressable
market through our ability to replace aluminum and other packaging material with plastic. For example, our
laminate tube offering taking market share from aluminum tubes.
Continue to pursue acquisition opportunities
Given our global presence, scale and broad product offering, we believe that we have a large opportunity for
acquisitions globally within our industry. We believe that we can create significant value through strategic
acquisitions given our track record of integration and cost reduction, and our ability to leverage new products,
technologies and geographies across our global customer base to drive significant incremental revenue. We
will continue to have a disciplined acquisition strategy focused on increasing penetration in high growth
emerging markets and consolidating in our existing core markets while driving revenue growth and synergies.
Continue to penetrate regional and local customer base
We will continue to develop long term customer relationships and pursue business arrangements with small
and medium sized customers. Further development of our sales to regional and local customers globally
willenable us to increase our market share, leveraging our broad product portfolio and global footprint to serve
them whatever and wherever their needs and opportunities may be.
Improve profitability and cash flow generation through operational excellence and value adding business
solutions
We will continue to focus on operational excellence. We intend to improve productivity and asset utilization,
drive margins and lower costs by investing capital efficiently in cash generative projects and new production
equipment, by implementing purchasing process improvement initiatives. Additionally, we continue to pursue
production efficiencies through automation initiatives.
Build on existing positions to increase sales in attractive emerging markets
We believe that we have significant growth opportunities in emerging markets, which in recent years have
grown faster than the demand for beauty and personal care products in developed markets. We will continue
to leverage and build out our global footprint to both support existing global customers as they expand their
operations into emerging markets and service rapidly growing, regional and local customers, thus further
expanding and diversifying our customer base.
Albéa Beauty Holdings S.A. Annual Report for year ended December 31, 2017
54
XI. SUBSEQUENTS EVENTS
Change in Shareholder
On March 23, 2018, PAI Partners, a leading pan-European private equity firm, completed the acquisition of
Albéa. With PAI Partners, Albéa will continue to grow - in size and in strength, leveraging our assets and
market position, winning the talent war, bringing in new customers, joining forces with other players, rolling
out our strategic and operational priorities for the short- and the long-term. This is the start of a new era for
Albéa.
COVIT acquisition
In February 2018, Albéa acquired 100% of Covit S.L., a leading manufacturer of metal parts, from PHI private
equity fund. Covit S.L is a leader in the drawing, anodizing, assembly and decoration of metal parts for
packaging products, based in Torello, Spain.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
ALBÉA BEAUTY
HOLDINGS S.A. CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEAR ENDED
DECEMBER 31, 2017
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
Consolidated financial statements Consolidated balance sheet
Consolidated income statement Note 6 Notes to the balance sheet
Consolidated statement of comprehensive income Note 6.1 Goodwill
Consolidated balance sheet – assets Note 6.2 Intangible assets and
Consolidated balance sheet – equity and liabilities Property, plant and equipment
Consolidated cash flows statement Note 6.3 Other financial assets
Consolidated statement of changes in equity Note 6.4 Inventories
Note 6.5 Trade and other receivables
Note 6.6 Cash and cash equivalents
Consolidated general information Note 6.7 Assets / Liabilities held for sale
Note 6.8 Capital stock
Note 1 General information Note 6.9
Borrowings and other financial
liabilities
Note 2 Accounting Policies
Note 6.10 Pension and other long-term
employee benefits obligations
Note 3 Other information Note 6.11 Provisions
Note 4 Segment reporting Note 6.12 Other Financial Liabilities
Note 6.13 Trade and other payables
Note 6.14 Financial instruments
Consolidated income statement Additional Disclosures
Note 5 Notes to the income statement Note 7 Additional information
Note 5.1 Revenue Note 7.1 Financial risks management
Note 5.2 Cost of sales Note 7.2 Commercial risks
Note 5.3 Selling and Administrative
expenses Note 7.3 Contingencies and commitments
Note 5.4 Restructuring and project costs Note 7.4 Lease commitments
Note 5.5 Other income / (expense) Note 7.5 Related parties
Note 5.6 Net finance costs
Note 7.6 Executive Committee Total
Remuneration
Note 5.7 Share of profit of associates Note 7.7 Auditors’ fees
Note 5.8 Income tax Note 7.8 Subsequent Events
Note 5.9 Employee Benefit Expenses and
personnel expenses
Note 5.10 Earnings per share
Note 8 Companies included in the
consolidation scope
Note 9 Audit Report on the consolidated
financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
57
CONSOLIDATED INCOME STATEMENT
The notes are an integral part of the consolidated financial statements.
Year ended December 31,
Year ended December 31,
Note 2017 2016
Continuing operations:
Revenue 5.1 1 489 151 1 402 424
Cost of sales 5.2 (1 189 961) (1 126 383)
Gross profit 299 190 276 041
Selling and administrative expenses 5.3 (183 409) (176 010)
Restructuring and project costs 5.4 (15 859) (33 198)
Other income / (expense) 5.5 (9 175) (12 469)
Operating profit 90 747 54 364
Financial income 52 573 1 877
Financial expense (61 720) (123 954)
Financial result 5.6 (9 147) (122 077)
Share of profit of associates 5.7 (75) 83
Profit (loss) from continuing operations before income taxes 81 525 (67 630)
Income tax expense 5.8 (12 683) (11 063)
Profit (loss) from continuing operations 68 842 (78 693)
Profit (loss) for the period attributable to owners of the parent 68 842 (78 693)
Earnings per share -in USD (Basic) 5.10 242,26 (276,93)
Earnings per share -in USD (Diluted) 5.10 2,81 --
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
58
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
The notes are an integral part of the consolidated financial statements.
Year ended December 31,
Year ended December 31,
2017 2016Profit/(Loss) for the period 68 842 (78 693)
Other comprehensive income:
Items that will not be reclassified to profit or loss (262) (3 587) Actuarial gains/(losses) on post-employment benefit plans 381 (4 475)
Tax effects (643) 888
Items that may be reclassified to profit or loss (75 757) 9 775 Net change in foreign currency translation adjustmentsMark to market variance for hedge instrument 1 626 -
Items that may be reclassified to profit or loss (74 131) 9 775
Total other comprehensive income for the period, net of tax (74 393) 6 188
Total comprehensive income for the period (5 551) (72 505)
Attributable to: i) Owners of the parent (5 551) (72 505)
ii) Non-controlling interests - -
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
59
CONSOLIDATED BALANCE SHEET – ASSETS
The notes are an integral part of the consolidated financial statements.
At December 31, At December 31,
Note 2017 2016
Non-current assetsGoodwill 6.1 117 329 116 026
Intangible assets 6.2 80 963 90 843
Property, plant and equipment 6.2 467 501 444 772
Deferred tax assets 5.8 14 343 16 242
Investments in associates 1 037 1 119
Other financial assets 6.3 20 220 14 352
Total non-current assets 701 393 683 354
Current assetsInventories 6.4 162 080 144 900
Trade and other receivables 6.5 179 935 170 461
Other financial assets 6.3 16 694 -
Cash and cash equivalents 6.6 119 085 86 978
Assets held for sale 6.7 318 16 218
Total current assets 478 112 418 557 Total assets 1 179 501 1 101 911
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
60
CONSOLIDATED BALANCE SHEET - EQUITY AND LIABILITIES
The notes are an integral part of the consolidated financial statements.
At December 31, At December 31,2017 2016
EquityShare capital 6.8 373 373
Additional paid-in capital 12 218 12 218
Retained earnings and other components of equity (183 133) (173 276)
Other comprehensive income (34 302) 40 090
Equity excluding non-controlling interests (204 844) (120 595)Total equity (204 844) (120 595)
Non-current liabilitiesBorrowings 6.9 887 151 717 245
Deferred tax liabilities 5.8 33 320 42 315
Pensions and other post-employment benefit obligations 6.10 70 935 59 815
Other long-term employee benefit obligations 6.10 6 229 5 526
Termination benefits 6.10 1 818 1 545
Non-current provisions 6.11 1 632 3 252
Total non-current liabilities 1 001 085 829 698
Current liabilitiesBorrowings 6.9 34 859 62 100
Other current financial liabilities 6.12 3 28 774
Trade and other payables 6.13 331 110 286 318
Income taxes payable 8 162 6 283
Current provisions 6.11 9 126 8 709
Liabilities held for sale 6.7 - 624
Total current liabilities 383 260 392 808 Total liabilities 1 384 345 1 222 506 Total equity and liabilities 1 179 501 1 101 911
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
61
CONSOLIDATED CASH FLOW STATEMENT
(1) Use of government grant is related to the Chinese government grant and reflects the portion recorded through the income statement as an income to offset
expenses incurred during the period. This income is non-cash flow item and therefore excluded from the cash flows from operating activities.
(2) At the end of December 2016 : Albéa received in March 2016 USD 30.4 million after the transfer of 90% of Shenzhen shares. It includes also the cash balance
difference of Shenzhen, for USD 0.8 million, which is classified in assets held for sale in accordance with IFRS5. This amount also includes the price paid for the
shares for Albéa Slovakia for USD 19.6 million and USD 4.2 million for the net debt (Excluding finance lease on the building). At the end of December 2017 : Albéa
received in march 2017 the last cash settlement for USD 3.2 million which is the last step of Shenzhen sales. It includes also the cash balance variance since
December 2016 which was classified in assets held for sale in accordance with IFRS5 (see note 3-2)
(3) Loans issued : Albéa refinancing has been completed on April 20, 2017 with the issuance of a Term Loan B of USD 818 million (split into USD 408 million US
tranche and EUR 385 million euro tranche and paid bank fees capitalized and CAP premium for USD 23.7 million (see note 3.1)
(4) Repayment of loans : At the end of December 2017, this flow mainly includes the Bonds repayment for USD 646 million ( for USD 345 million and EUR 245 million)
,on April 20, 2017 following the completion of the refinancing.
(5) Interests paid at the end of December 2017 includes Bond redemption costs for USD 27.6 million.
(6) Dividend recapitalization paid to shareholders for USD 77.8 million and USD 1 million additional payment in Q3.
Period ended December 31,
Period ended December 31,
2 017 2 016
Loss for the period 68 842 (78 693)
Adjustments for :
Share of profit of associates 75 (83)
Income tax expense recognized in profit or loss 12 683 11 063
Net finance costs 9 147 122 077
Depreciation and amortization 88 879 87 006
Use of government grant (1) (89) (1 205)
Net (gain)/loss on disposal of assets (2) (16 252) 700
Unrealized foreing exchange gains (losses) on working capital 5 005 (6 290)
Movements in working capital 11 153 18 674
Movements in working capital - inventories (174) (6 390)
Movements in working capital - receivables (4 037) 11 988
Movements in working capital - payables 15 364 13 076
Change in provisions 1 265 (1 859)
Income taxes paid (14 583) (15 961)
Cash flow from operating activities 166 125 135 429
Acquisitions of assets (71 467) (100 965)
Loans (advances)/repayments (183) 163
Disposal of assets 1 781 2 015
Acquisition / Disposal of subsidiary, net of cash acquired (2) 4 246 8 446
Shenzhen 4 246 32 405
Albéa Slovakia - (23 959)
Other (2 028) (3 114)
Cash flow used in investing activities (67 650) (93 455)
Cash flow from operating and investing activities 98 475 41 974
Loans issued (3) 797 403 36 638
Factoring (35 464) 7 984
Repayment of loans (4) (668 029) (31 475)
Interest paid (5) (85 426) (63 664)
PECS/ CPECS redemption - (1 423)
Dividends paid (6) (78 699) -
Cash flow from (used in) financing activities (70 214) (51 941)
Net increase / (decrease) in cash and cash equivalents 28 260 (9 967)
Cash and cash equivalents at beginning of the period 84 551 96 796
Exchange gains/(losses) 5 777 (2 278)
Cash and cash equivalents at end of the period 118 588 84 551
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
62
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
The Dividend recapitalization has been paid to shareholder for USD 77.8 million and USD 1 million additional payment in Q3 (see note 3.1). The notes are an integral part of the consolidated financial statements.
Share
capital
Additional
paid-in
capital
Retained
earnings
Unrealized
gains
(losses)
Cumulative
translation
adjustment
s
Total Non
controlling
interest
Total equity
At December 31, 2015 373 13 641 (94 583) (9 008) 42 910 (46 667) - (46 667)
Loss for the period - - (78 693) - - (78 693) - (78 693)
Other comprehensive income - - - (3 587) 9 775 6 188 - 6 188
Total comprehensive income - - (78 693) (3 587) 9 775 (72 505) - (72 505)
Proceeds from shares issued - - - - - - - -
PECS and CPEC redemption - (1 423) - - - (1 423) - (1 423)
At December 31, 2016 373 12 218 (173 276) (12 595) 52 685 (120 595) - (120 595)
Profit (Loss) for the period - - 68 842 - - 68 842 - 68 842
Other comprehensive income - - - (262) (74 130) (74 392) - (74 392)
Total comprehensive income - - 68 842 (262) (74 130) (5 550) - (5 550)
Proceeds of share issue - - - - - - - -
Dividend to shareholder - - (78 699) - - (78 699) (78 699)
At December 31, 2017 373 12 218 (183 133) (12 857) (21 445) (204 844) - (204 844)
Attributable to owners of the parent
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
63
NOTE 1-GENERAL INFORMATION
General information
Albéa Beauty Holdings S.A. (the “Company”) is
domiciled in Luxembourg and registered in the
Luxembourg Trade and Companies Registry
(Registre du Commerce et des Sociétés de
Luxembourg) under number B 162 078 and is an
affiliate of Sun Capital Partners V LP. Albéa and
the subsidiaries included in the scope of
consolidation constitute Albéa Group (“Albéa” or
“the Group”).
The Group was created by Sun Capital after the
acquisition of the Beauty Packaging business from
Rio Tinto Alcan on July 2, 2010. On December 31,
2012, Albéa completed the acquisition 100% of
Rexam Personal Care, a leading producer of
dispensing systems and make-up packaging for
the Cosmetics and Personal Care markets.
Albéa Beauty Holdings S.A. funding holder , is held
by Albéa S.A. via another holding company. These
three entities except financing and holding
activities did not carry out any operating activities
in the year ended December 31, 2017.
Albéa is one of the world’s leading producers of
plastic packaging products for the beauty and
cosmetics industry, providing a wide range of
solutions for the make-up, fragrance, skincare,
personal and oral care markets. The operational
headquarters of Albéa are located in Gennevilliers,
France. Albéa employs about 15 000 people and
operates 39 manufacturing facilities in 16 different
countries across Europe, the Americas and Asia.
The consolidated financial statements are
presented in thousands of US dollars and all values
are rounded to the nearest thousand (‘000) except
where otherwise indicated.
Albéa's consolidated financial statements for the
period ended December 31, 2017 were authorized
for issue by the Board of directors on March 13,
2017
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
64
NOTE 2 ACCOUNTING POLICIES
2.1. STATEMENT OF COMPLIANCE
Albéa’s consolidated financial statements for the
year ended December 31, 2017 were prepared in
accordance with the international accounting
standards as adopted for use in the European
Union. These international accounting standards
include International Financial Reporting
Standards (IFRS) and International Accounting
Standards (IAS) and the related interpretations as
prepared by the International Financial Reporting
Interpretations Committee (IFRIC).
The principal accounting policies applied in the
preparation of these consolidated financial
statements are set out below. These policies have
been consistently applied to all the periods and
balances presented, unless otherwise stated.
The standards and interpretations applied to
prepare the December 31, 2017 consolidated
financial statements are those published by the
Official Journal of the European Union at
December 31, 2017, and applicable as of that date.
2.2. BASIS OF PREPARATION
2.2.1. General principle
The preparation of financial statements in
compliance with IFRS requires the use of certain
critical accounting estimates. It also requires
management to exercise its judgment in the
process of applying Albéa’s accounting policies.
The areas involving a higher degree of judgment
or complexity or areas where assumptions and
estimates are significant to the consolidated
financial statements are disclosed in Note 2.3.4.
The consolidated financial statements have been
prepared under the historical cost convention as
modified by revaluation at fair value of the
underlying assets and liabilities of acquired
subsidiaries at the date when the control was
achieved.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
65
2.2. BASIS OF PREPARATION (CONTINUED)
2.2.2. Accounting standards and interpretations issued by the IASB and not yet endorsed by the European
Union
IFRS 16 'Leases' deals with principles for the
recognition, measurement, presentation and
disclosures of leases.
The standard provides an accounting model,
requiring lessee to recognize assets and liabilities
for all leases unless the lease term is 12 months or
less or the underlying asset has a low value. The
lessor accounting approach remains unchanged.
The standard will replace IAS 17, 'Lease' and will be
effective for accounting periods beginning on or
after January 1, 2019.
In 2017, the Group initiated the identification of its
leases across segments and regions. The analyzes
of these contracts was with regard to the criteria
of the new IFRS-16, as well as the estimation of
the impacts on the consolidated financial
statements, are in progress.
Moreover, a software for dealing with the impacts
of the standard for these contracts will be
acquired and being put into place.
2.2.3. Accounting standards and interpretations issued by the IASB and endorsed by the European Union and
applicable for financial years beginning on or after January 1, 2017
IFRS 9 “Financial Instruments”
On July 24, 2014, the International Accounting
Standards Board (IASB) completed the final
element of its comprehensive response to the
financial crisis by issuing IFRS 9 Financial
Instruments. The package of improvements
introduced by IFRS 9 includes a logical model for
classification and measurement, a single, forward-
looking expected loss impairment model and a
substantially-reformed approach to hedge
accounting. The new Standard will come into
effect as of January 1, 2018 with early application
permitted.
IFRS 15 “Revenue from Contracts with Customers”
This new standard supersedes IAS 11 “Construction
contracts” and IAS 18 “Revenues” on revenue
recognition. Revenue will be recognized to depict
the transfer of goods or services to customers in
amounts that reflect the payment to which the
company expects to be entitled in exchange for
those goods or services. The new Standard will
come into effect as of January 1, 2018 with early
application permitted.
These improvements or new standards are not
expected to have any material impact on the
Group’s financial statements.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
66
2.3. SIGNIFICANT ACCOUNTING POLICIES
2.3.1. Consolidation
Basis of consolidation
The consolidated financial statements include all
of the assets, liabilities, revenue, expenses and
cash flows of Albéa Beauty Holdings S.A. and its
subsidiaries (collectively “Albéa”). For majority-
owned and controlled subsidiaries included in
Albéa, equity and net earnings attributable to
outside shareholders are presented under Non-
controlling interests in the consolidated balance
sheet and income statement, respectively. As of
December 31, 2017, there are no more non-
controlling interests.
Subsidiaries
Subsidiaries constitute all entities (including
special purposes entities) over which Albéa has
control, where control is defined as the power to
govern the entities’ financial and operating
policies in order to obtain benefits from their
activities. Control is presumed to exist when Albéa
owns more than fifty percent of the voting rights
(which does not always equate to percentage
ownership) unless it can be demonstrated that
ownership does not constitute control. Generally,
the Company has a shareholding of more than one
half of the voting rights in its subsidiaries. The
impact of potential voting rights that are currently
exercisable is considered when assessing whether
control exists. Subsidiaries are fully consolidated
from the date control is transferred to the
Company, and are de-consolidated from the date
control ceases.
Business combinations Albéa uses the acquisition method to account for
business combinations. The consideration
transferred for the acquisition of a subsidiary
corresponds to the fair value of the assets
transferred and the equity interests issued by
Albéa. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business
combination are measured initially at fair value at
the acquisition date.
On an acquisition-by-acquisition basis, Albéa
recognizes any non-controlling interests in the
acquiree either at fair value or based on the non-
controlling interest’s proportionate share of the
acquiree’s net assets.
Investments in subsidiaries are accounted for
based on cost less impairment. Cost is adjusted to
reflect changes in consideration arising from
contingent consideration amendments. Cost also
includes directly attributable costs of investment.
The excess of the consideration transferred
corresponds to the amount of any non-controlling
interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the
acquiree over the fair value of Albéa’s share of the
identifiable net assets acquired, is recorded as
goodwill. In the case of a bargain purchase, if this
is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognized
directly in the income statement.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
67
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.1. Consolidation (continued)
Inter-company transactions between subsidiaries
Inter-company transactions, balances and
unrealized gains on transactions between Group
companies are eliminated. Unrealized losses are
also eliminated.
Joint ventures
Joint ventures are entities over which the
Company has joint control with one or more
unaffiliated entities. Albéa accounts for its joint
ventures using the equity method .
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each
of Albéa’s entities are measured using the
currency of the primary economic environment in
which the entity operates (the functional
currency). The consolidated financial statements
are presented in US dollars, which is Albéa’s
presentation currency.
Transactions and balances
The recognition and measurement of foreign
currency transactions are defined by IAS 21 – The
Effects of Changes in Foreign Exchange Rates.
Foreign currency transactions are translated into
the functional currency using the exchange rates
prevailing at the date of the transaction or
valuation in the case of items that are remeasured.
Foreign exchange gains and losses resulting from
the settlement of such transactions and from the
translation at year-end exchange rates of
monetary assets and liabilities denominated in
foreign currencies are recognized in the income
statement, except when deferred in other
comprehensive income as qualifying cash flow
hedges and qualifying net investment hedges.
Foreign exchange gains and losses that relate to
borrowings and cash and cash equivalents are
presented in the income statement within
Financial income or Financial expense. All other
foreign exchange gains and losses are presented
in the income statement within Other
income/(expense). Changes in the fair value of
monetary securities denominated in foreign
currencies classified as available for sale are
allocate either to translation differences resulting
from changes in the amortized cost of the security
and other changes in the carrying amount of the
security. Translation differences related to
changes in amortized cost are recognized in profit
or loss, and other changes in carrying amount are
recognized in other comprehensive income.
As an exception to the rule described above,
translation differences arising on long-term intra-
group financing transactions that can be
considered to form part of the net investment in a
foreign subsidiary are recognized under
transaction differences as a separate component
of equity until the net investment is
deconsolidated
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
68
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.1. Consolidation (continued)
Group companies
The results and financial position of all Albéa
entities (none of which has the currency of a
hyper-inflationary economy) whose functional
currency differs from the presentation currency
are translated into the presentation currency as
follows:
� assets and liabilities for each balance sheet
presented are translated at the closing rate at
the date of that balance sheet;
� income and expenses for each income
statement are translated at average exchange
rates (unless this average is not a reasonable
approximation of the cumulative effect of the
rates prevailing on the transaction dates, in
which case income and expenses are
translated at the rate on the dates of the
transactions); and
� all resulting exchange differences are
recognized in other comprehensive income.
On consolidation, exchange differences
arising from the translation of net investments
in foreign operations, and of borrowings and
other currency instruments designated as
hedges of such investments, are taken to
other comprehensive income. Goodwill and
fair value adjustments arising on the
acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and
translated at the closing rate.
2.3.2. Income statement items
Revenue recognition
Revenue from product sales comprises sales to
third parties at invoiced amounts. Amounts billed
to customers in respect of shipping and handling
are classified as sales revenue where Albéa is
responsible for carriage, insurance and freight. All
shipping and handling costs incurred by Albéa are
recognized as operating costs within cost of sales.
If Albéa is acting solely as an agent, amounts
billed to customers are offset against the relevant
costs. Delivery is considered to have occurred
when title and risk of loss have transferred to the
customer.
Revenue from product sales, net of trade
discounts, allowances and volume-based
incentives, is recognized once delivery has
occurred provided that persuasive evidence exists
that all of the following criteria are met:
� the significant risks and rewards of ownership
of the product have been transferred to the
buyer;
� neither continuing managerial involvement to
the degree usually associated with
ownership, nor effective control over the
goods sold, has been retained by Albéa;
� the amount of revenue can be measured
reliably;
� it is probable that the economic benefits
associated with the sale will flow to Albéa;
and costs incurred or to be incurred in
respect of the sale can be measured reliably.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
69
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.2. Income statement items (Continued)
Cost of sales
Cost of sales correspond to the amount paid for
the direct costs of running the business including
direct costs of materials, appropriate salaries and
the amount due to external third parties for
services directly related to revenue.
Government grant
A government grant is recognized when there is
reasonable assurance that the group will comply
with the conditions attaching to it, and that the
grant will be received.
When government grants relate to capital
expenditures in Property, Plant and Equipment,
they are recognized as a reduction in the
depreciation charge over the useful life of the
depreciable asset.
When they relate to operating expenditures, they
are recognized in profit up to the related costs
incurred for which the grant is intended to
compensate.
Restructuring and project costs
Restructuring and project costs include non-
recurring incomes and expenses as restructuring
costs and severance costs, non-recurring fees,
acquisitions, integration and separation costs,
moving costs.
Interest income and expenses
Financial expenses comprise mainly interest
payable on borrowings and interest expense
component of finance lease payments. These
financial expenses are recognized in profit or loss
using the effective interest rate method.
Financial income comprises mainly interest on
loans receivable from related parties and on the
interest bearing components of its cash and cash
equivalents.
Interest income is recognized using the effective
interest method. When loans and receivables are
impaired, Albéa reduces the carrying amount to
its recoverable amount, corresponding to the
estimated future cash flow discounted at the
original effective interest rate of the instrument,
and continues unwinding the discount as interest
income. Interest income on impaired loans and
receivables are recognized using the original
effective interest rate.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
70
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.2. Income statement items (Continued) Income tax
Income tax on the profit or loss for the periods
presented comprises current and deferred tax.
Income tax is recognized in profit or loss except to
the extent that it relates to items recognized
directly in equity.
The current income tax charge is the expected tax
payable on the taxable income for the year and
calculated on the basis of the tax laws enacted or
substantively enacted at the reporting date in the
countries where Albéa subsidiaries and associates
operate and generate taxable income
Deferred tax is provided using the balance sheet
liability method, providing for temporary
differences between the carrying amounts of
assets and liabilities for financial reporting
purposes and the amounts used for taxation
purposes
The impact on deferred tax assets and liabilities of
a change in tax rates and laws is recognized in
income in the period that the rate change is
substantively enacted except to the extent that
the tax arises from a transaction or event which is
recognized, in the same or a different period,
outside profit or loss (other comprehensive
income or directly in equity) or a business
combination.
Deferred tax assets and liabilities are measured
using tax rates that are expected to apply in the
period when the asset is realized or the liability is
settled, based on the tax rates and laws that have
been enacted or substantively enacted at the
reporting date.
A deferred tax asset is recognized only to the
extent that it is probable that future taxable
profits will be available to recover this asset.
Deferred tax assets are reduced to the extent that
it is no longer probable that the related tax benefit
will be realized and reflected through a valuation
allowance recognized against deferred tax assets.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset
current tax assets and liabilities and when they
relate to income tax levied by the same tax
jurisdiction and the Group intends to settle its
current tax assets and liabilities on a net basis.
Significant judgment is required in determining
the worldwide provision for income taxes and
recording the related assets and liabilities. Group
management establishes tax reserves and accrues
interest thereon in expectation that some of
Albéa’s positions may be challenged.
Management believes that Albéa’s accruals for tax
liabilities are sufficient to settle the probable
outcome of all material tax litigations.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
71
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.3. Balance sheet items
Goodwill
Goodwill, which corresponds to the excess of
consideration transferred over Albéa’s share in the
fair value of the acquired company’s assets,
liabilities and contingent liabilities on the
acquisition date, is recognized as an asset.
Goodwill comprises non-identifiable items such as
the know-how and business expertise of staff.
Goodwill is recorded in the functional currency of
the acquired entity. For the purpose of
impairment testing, goodwill acquired in a
business combination is allocated to each of the
cash-generating units (CGUs) or groups of CGUs
that is expected to benefit from the synergies of
the combination. Each CGU or group of CGUs to
which the goodwill is allocated represents the
lowest level within the entity at which the
goodwill is monitored for internal management
purposes. Goodwill impairment tests are
undertaken annually or more frequently if events
or changes in circumstances indicate a potential
impairment. The carrying amount of goodwill is
compared to the recoverable amount, which is the
higher of value in use and the fair value less costs
to sell. Any impairment is recognized immediately
as an expense and is not subsequently reversed.
When goodwill is allocated to a cash-generating
unit (or group of cash-generating units) and part
of the operation within that unit is disposed of,
the goodwill associated with the operation
disposed of is included in the carrying amount of
the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of,
in this circumstance, is measured based on the
relative values of the operation disposed of and
the portion of the cash-generating unit retained.
Intangible assets
Intangible assets other than goodwill are carried
at cost less accumulated amortization and
impairment losses recognized. They are
depreciated over the estimated useful life of the
related assets using the straight-line method. The
main intangible assets are Customer relationships
and existing technologies which are depreciated
over 10 years.
Albéa incurs certain development costs in
connection with producing and delivering
products for specific customer needs.
Development costs that are directly attributable
to these specific products are recognized as
intangible assets when the following criteria are
met:
� it is technically feasible to complete the
product so that it will be available for use;
� management intends to complete the product
and use or sell it;
� there is an ability to use or sell the product;
� it can be demonstrated how the product will
generate probable future economic benefits;
� adequate technical, financial and other
resources to complete the development and to
use or sell the product are available; and
� the expenditure attributable to the product
during its development can be reliably
measured.
Research costs, and development costs that do
not meet the above criteria, are expensed as
incurred.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
72
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
Property, plant and equipment are carried at cost
less any depreciation and impairment losses
recognized.
The cost of property, plant and equipment is
composed of its purchase price, any costs directly
attributable to bringing the asset to the location
and condition necessary for it to be capable of
operating in the manner intended by
management.
Major improvements that extend the useful life of
an asset are capitalized and depreciated. On-
going regular maintenance costs related to
property, plant and equipment are expensed as
incurred.
Property, plant and equipment are depreciated
over the estimated useful lives of the related
assets using the straight-line method. The
principal annual depreciation rates used by Albéa
range from 2% to 10% for buildings, from 6% to 10%
for plant machinery and equipment and from
12.5% to 20% for vehicles, office and computer
equipment and software (included within
machinery and equipment).
Impairment of non-current assets
When a test for impairment is conducted, the
recoverable amount is assessed by reference to
the higher of “value in use” (corresponding to the
net present value of the expected future cash
flows of the relevant cash-generating unit) and
“fair value less costs to sell”. Where there is no
binding sale agreement or active market, fair
value less costs to sell is based on the best
information available to reflect the amount Albéa
could receive for the cash-generating unit in an
arm's length transaction. The estimates of future
cash flows used for impairment tests are based on
management’s estimate of the present value of
expected future revenue, costs and costs to sell.
As a result of impairment tests, an impairment
loss would be recognized in the amount of any
excess of the carrying amount over the fair value
less costs to sell of a non-current asset or disposal
group held for sale.
The expected future cash flows of cash-
generating units reflect long-term plans which are
based on detailed research, analysis and iterative
modeling to optimize the level of return from
investment. Cost levels incorporated in the cash
flow forecasts are based on the current long-term
plan for the cash-generating unit. For impairment
tests, recent cost levels are considered, together
with expected changes in costs that are
compatible with the current condition of the
business and which meet the requirements of IAS
36 – Impairment of Assets. IAS 36 includes a
number of restrictions on the future cash flows
that can be recognized in value in use
assessments in respect of future restructurings
and improvement-related capital expenditures.
Cash flows are based on Albéa’s budget process
and strategic plan for the first three years, and an
extrapolation calculated for the last two years.
The discount rate applied in determining the net
present value is based upon the expected market
rate of return for a similar investment, regardless
of the sources of financing.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
73
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases
Albéa leases various buildings, machinery and
equipment from third parties under operating
lease agreements. Under such operating lease
agreements, total rent expense for each lease is
recognized on a straight-line basis over the
primary term of the lease agreement, and is
included in Albéa consolidated financial statement
(Cost of sales or Selling and administrative
expenses), depending on the nature of the leased
assets, in Albéa’s consolidated income statement.
Albéa also leases various buildings, machinery,
and equipment from third parties under finance
lease agreements. Under such capital lease
agreements, upon inception of the lease, assets
are stated at an amount equal to the fair value of
the leased property or, if this is lower, the present
value of the minimum lease payments at
inception of the lease, less accumulated
depreciation (see below) and impairment losses.
Minimum lease payments are apportioned
between the finance expense and the reduction of
the outstanding liability. Assets under capital
leases are amortized on a straight line basis over
the shorter of the useful lives of the assets or the
primary lease term. Each lease payment is
allocated between liabilities and financial expense.
The corresponding rental obligations, net of
financial expense, are included in other long-term
payables. The interest element of the finance cost
is recognized in the income statement over the
lease period in order to produce a constant
periodic rate of interest on the remaining balance
of the liability for each period.
Inventories
Inventories are valued at the lower of cost or net
realizable value, primarily on a weighted average
cost basis. The weighted average cost of raw
materials, work in progress and finished goods is
calculated using the costs incurred in the current
period (including purchase price of materials;
freight, duties and customs; the cost of
production, which includes labor costs, materials
and other expenses which are directly attributable
to the production process; and production
overheads) and similar costs in opening inventory.
If the carrying amount of inventories is higher than
their realizable value at year-end, an impairment
loss is booked.
Trade receivables
Trade receivables are initially recognized at fair
value and are subsequently reduced by provisions
for impairment. A provision for impairment of
trade receivables is established when there is
objective evidence that Albéa will not be able to
collect all amounts due. Indications of impairment
would include financial difficulties of the debtor,
likelihood of the debtor's insolvency, default in
payment or a significant deterioration in credit
worthiness. Any impairment is recognized in the
consolidated income statement within selling and
administrative expenses. When a trade receivable
is deemed uncollectible, it is written off against
the provision for impairment account. Subsequent
recoveries of amounts previously written off are
credited against selling and administrative
expenses in the consolidated income statement.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
74
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and cash equivalents
Cash and cash equivalents (with original
maturities at inception of less than three months)
comprise cash in hand and demand deposits as
well as other short-term highly liquid investments
that are readily convertible to a known amount of
cash and are subject to an insignificant risk of
changes in value.
For the purpose of the cash flow statement, cash
and cash equivalents comprise cash at bank, cash
in hand, short-term deposits with an original
maturity of three months or less held for the
purpose of meeting short-term cash
commitments and bank overdrafts.
Post-employment benefits
Amounts recognized as defined benefit liabilities
correspond to the difference between the present
value of defined benefit obligations and the fair
value at the end of the reporting period of plan
assets (if any) on the consolidated balance sheet.
Any recognized assets are restricted, where
applicable, to the present value of any amounts
Albéa expects to recover by way of refunds from
the plan or reductions in future contributions.
Actuarial gains and losses arising in the year are
charged or credited to other comprehensive
income. For this purpose, actuarial gains and
losses comprise both the impact of changes in
actuarial assumptions and experience
adjustments arising due to differences between
previous actuarial assumptions and what has
actually occurred.
Other movements in the net surplus or deficit are
recognized in the consolidated income statement,
including current service costs, past service costs
and the impact of any curtailments or
settlements. The net interest expenses (income)
relating to the discounting of the net funded
position (defined benefit obligation less plan
assets) is presented in net financial expenses in
the income statement.
The most significant assumptions used in
accounting for pension plans are the long-term
rate of return on plan assets, the discount rate and
mortality assumptions. The actual return on plan
assets is used to calculate interest income on
pension assets. The discount rate is used to
determine the net present value of future
liabilities. Each year, the unwinding of the
discount on these liabilities is charged to interest
expense, included in Net finance costs. The
mortality assumption is used to project the future
stream of benefit payments, which is then
discounted to arrive at a net present value of
liabilities.
The values attributed to plan liabilities are
assessed in accordance with the advice of
qualified actuaries.
Albéa’s contributions related to defined
contribution pension plans are charged to the
consolidated income statement in the period to
which the contributions are made.
Long-term employee benefits
Provisions for jubilee and other long-service
benefits paid during the employees’ service period
are valued based on similar actuarial calculations
to those used for post-employment benefits.
Actuarial gains and losses are recognized in the
other comprehensive income.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
75
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trade payables
Trade payables are obligations to pay for goods or
services that have been acquired in the ordinary
course of business from suppliers. Accounts
payable are classified as current liabilities if
payment is due within one year or less (or in the
normal operating cycle of the business if longer). If
not, they are presented as non-current liabilities.
Provisions
Albéa records provisions for the estimated present
value of liabilities, as defined in IAS 37 – Provisions,
Contingent Liabilities and Contingent Assets. The
ultimate cost to settle these liabilities is uncertain
and cost estimates can vary in response to many
factors. In addition, the expected timing of
expenditure can also change. As a result, there
could be significant adjustments to Albéa’s
provisions, which could result in additional
expenses or recoveries affecting future financial
results. The types of liabilities for which Albéa
establishes provisions and the related accounting
policies for each type are as follows:
Site closure and restoration costs
Site closure and restoration costs include the
dismantling and demolition of infrastructure and
the removal of residual material from disturbed
areas. Estimated site closure and restoration costs
are provided for in the accounting period when
the legal or constructive obligation arising from
the related disturbance occurs and it is probable
that an outflow of resource will be required to
settle the obligation. These costs are based on the
net present value of estimated future costs.
Provisions for site closure and restoration costs do
not include any additional obligations which are
expected to arise from future disturbance.
The costs are estimated on the basis of a closure
plan, are updated annually during the life of the
operation to reflect known developments
(e.g. revisions to cost estimates and to the
estimated lives of operations) and are subject to
formal review at regular intervals throughout each
year.
The initial closure provision together with other
movements in provisions for site closure and
restoration costs, including those resulting from
new disturbance, updated cost estimates,
changes to the estimated lives of operations and
revisions to discount rates, are capitalized within
Property, Plant and Equipment. These costs are
then depreciated over the remaining useful lives
of the related assets.
Restructuring
Provisions for restructuring are recorded when
Albéa’s management is demonstrably committed
to the restructuring plan and where such liabilities
can be reasonably estimated. These costs are
charged to restructuring costs in the consolidated
income statement.
Other litigation and potential claims
Provisions for other litigation and potential claims
are made when it is probable that liabilities will be
incurred and where such liabilities can be
reasonably estimated. Depending on their nature,
these costs may be charged to Cost of sales or
Other income/(expense) in the consolidated
income statement.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
76
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial assets and liabilities
Financial assets
Albéa classifies its financial assets in the following
categories: (a) at fair value through profit or loss,
(b) as loans and receivables, and (c) as available-
for-sale securities. The classification depends on
the purpose for which the financial assets were
acquired. Management determines the
classification of financial assets at initial
recognition.
(a) Financial assets at fair value through profit or
loss: Derivatives are included in this category.
Generally, Albéa does not acquire financial
assets for the purpose of selling in the short-
term. Financial assets carried at fair value
through profit or loss are initially recognized
at fair value and transaction costs are
expensed in the consolidated income
statement.
(b) Loans and receivables: Loans and receivables
are non-derivative financial assets with fixed
or determinable payments that are not
quoted in an active market. They are
classified as current or non-current assets
based on their maturity date. Loans and
receivables are included in Trade receivables
and other, or Other financial assets or Cash
and cash equivalents in the consolidated
balance sheet. Loans and receivables are
carried at amortized cost using the effective
interest method, less any impairment.
(c) Available-for-sale securities: Investments not
held for trading are measured and recognized
in the consolidated balance sheet at fair
value, with any gains or losses arising from
the change in fair value being recognized in
other comprehensive income, except for
impairment losses and foreign exchange
gains and losses. Upon disposal and de-
recognition of available-for-sale securities,
any cumulative gains or losses from the
change in fair value are removed from other
comprehensive income and recognized as
gains or losses in the consolidated income
statement.
Financial liabilities
Borrowings and other financial liabilities are
recognized initially at fair value, net of
transaction costs incurred, and are subsequently
carried at amortized cost using the effective
interest method. Any difference between the
amounts originally received (net of transaction
costs) and the redemption value is recorded to
the consolidated balance sheet and subsequently
amortized or accreted into income over the
period to maturity using the effective interest
method.
The effective interest rate is the rate that exactly
discounts the expected stream of future cash
flows through to maturity to the current net
carrying amount of the liability on initial
recognition. When calculating the effective
interest rate of a financial liability, future cash
flows are determined on the basis of contractual
commitments.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
77
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial assets and liabilities (Continued)
Transaction costs are incremental costs that are
directly attributable to the issue of the credit line.
They include fees and commissions paid to
agents and advisers, levies by regulatory
agencies and securities exchanges, and transfer
taxes and duties. Transaction costs do not
include debt premiums, or allocations of internal
administrative or overhead expenses. For
financial liabilities that are carried at amortized
cost, transaction costs are included in the
calculation of amortized cost using the effective
interest rate method and, in effect, amortized
through the income statement over the life of
the instrument.
Derivative financial instruments
Albéa enters into derivative contracts designed to
reduce exposure related to assets and liabilities or
firm commitments. Albéa's policy with regard to
financial risk management is set out in Note 7.1 –
Financial Risk Management.
All derivatives are initially recognized at their fair
value on the date at which the derivative contract
is entered into and are subsequently re-measured
to fair value at each reporting date. Changes in the
fair value of derivatives, which are not designated
as a hedging instrument, are included in financial
result. Albéa had no significant derivatives
designated for hedge accounting treatment
during the periods presented.
Compound instruments
The component parts of compound instruments
issued by Albéa are classified separately as
financial liabilities and equity, in accordance with
the substance of the contractual arrangement.
In the case of a bond that may be converted into a
fixed number of equity shares, the fair value of the
liability component is estimated at the date of
issue using the prevailing market interest rate for
a similar non-convertible instrument.
This amount is recorded on an amortized cost
basis using the effective interest method until
extinguished upon conversion or at the
instrument's maturity date. The equity component
is determined by deducting the amount of the
liability component upon issue from the fair value
of the compound instrument as a whole. This is
recognized and included in equity and is not
subsequently re-measured. Issue costs are
apportioned between the liability and equity
components of the convertible loan notes based
on their relative carrying amounts at the date of
issue. The portion relating to the equity
component is charged directly against equity.
Albéa sells some of its trade accounts receivable
under various programs. Where trade accounts
receivable are sold without recourse, the amounts
are de-recognized under the provisions of IAS 39 –
Financial Instruments: Recognition and
Measurement from the consolidated balance
sheet, as substantially all the risks and rewards
associated with these receivables have been
transferred. Where trade accounts receivable are
sold with limited recourse, the amounts do not
qualify for de-recognition, as Albéa has not
transferred substantially all the risks and rewards
associated with these receivables. Albéa accounts
for limited recourse sales of trade accounts
receivable as secured financing transactions, and
such trade receivables continue to be recognized
in Trade receivables and other.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
78
2.3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative financial instruments (Continued)
Fair value
Fair value is the amount for which an asset could
be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length
transaction.
These instruments are presented in Level 2 of the
fair value measurement hierarchy, unless their
valuation depends significantly on non-observable
parameters. In this case, they are presented at
Level 3 of the fair value measurement hierarchy.
2.3.4. Judgments in applying accounting policies and key sources of estimation uncertainty
Many of the amounts included in the consolidated
financial statements involve the use of judgment
and/or estimation. These judgments and
estimates are based on management's best
knowledge of the relevant facts and
circumstances, taking into account previous
experience, but actual results may differ from the
amounts included in the consolidated financial
statements.
The preparation of financial statements in
compliance with IFRS requires management to
make judgments, estimates and assumptions that
affect the application of policies and the carrying
amounts of assets and liabilities that are not
readily apparent from other sources. The
estimates and associated assumptions are based
on historical experience and other factors
including expectations of future events that are
considered to be reasonable and relevant under
the circumstances. Actual results may differ from
these estimates.
The key assumptions concerning the future and
other key sources of estimation uncertainty at the
reporting date, that have a significant risk of
causing a material adjustment to the carrying
amounts of assets and liabilities within the next
financial year, are described below and directly
disclosed in the notes of the financial statements.
Impairment of non-current assets
Assets are subject to impairment tests whenever
changes in events or circumstances indicate that
impairment may have occurred. Assets are written
down to the higher of (a) fair value less costs to
sell or (b) value in use. Value in use is calculated by
discounting the expected cash flows from the
asset at an appropriate discount rate which uses
management’s assumptions and estimates of the
future performance of the asset. Differences
between expectations and actual cash flows could
result in differences in the amount of impairment
charges required.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
79
NOTE 3 OTHER INFORMATION
3.1. REFINANCING PROCESS
On April 20, 2017, Albéa has completed a debt
refinancing with BNP Paribas S.A. and Goldman
Sachs International as Joint Global Coordinators
and, together with Credit Agricole Corporate,
Investment Bank, HSBC Bank PLC and ING Bank
N.V. mandated Lead Arrangers and Joint Book
runners to arrange a USD 923 million senior
secured credit facilities comprising :
� USD 818 million 7-year covenant-lite term loan
B facility divided in two tranches
� the 408 million USD tranche at Libor US +
375 bps, with a 1% floor; repayment of
0.25% of the principal on a quarterly basis
starting at the end of September 2017
� the 385 million EUR tranche at Euribor +
400bps, with a 0% floor, repayment at
maturity date
� USD 105 million 6-year revolving credit
facility, not yet used at the end of December
2017
As a result of this refinancing, the group
extended the debt maturity from 2019 to 2024,
and changed the financing terms and conditions
with a biannual interest payment (last day of May
and last day of November). The Term loan B
tranches are measured at amortized costs, the
Term Loan B net in the financial statement
include USD 21.7 million of capitalized issuance
cost linked to the refinancing process.
The proceeds from the Financing were used
mainly to repay the Bonds including redemption
costs, to pay a dividend recapitalization to
shareholder and to fund the transaction
expenses which are capitalized in accordance
with IFRS.
Mid-June 2017 , the USD tranche of Luxembourg
Term loan B has been hedged by an interest rate
CAP of 2% with a maturity date of May 2020. The
CAP premium Fair value is recognized in Other
financial assets for USD 2.7 million at the end of
December 2017 (see note 6.3).
Albéa Beauty Holdings SA undertakes to comply
with the specific covenant. According to the
Term loan B agreement signed with the lenders
on April 20, 2017, the Net Debt ratio to EBITDA
should remain below 7.97. starting of December
2018.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
80
3.2. SHENZHEN TRANSFER AGREEMENT
Albéa Plastic Packaging Hong Kong signed on
December 8, 2015 an “Agreement for the transfer
of equity interest” related to its subsidiary Albéa
Plastic Packaging Shenzhen (Albéa Shenzhen). As
of December 31, 2015, the assets and liabilities of
Albéa Shenzhen had been classified as held for
sales according to IFRS 5.
Based on the agreement, the disposal of the
shares has been realized in two steps:
� Step 1: Albéa will dispose 90% of the shares.
The Board of Albéa Shenzhen will still be in
the hand of Albéa.
� Step 2: the disposal of 10% remaining shares
has been signed on January 24 2017 and the
financial transaction has been concluded in
the end of March 17.
In March 2016, Albéa Plastic Packaging Hong
Kong Ltd received in advance 90% of the proceed
(USD 30.4 million) related to the sale of Albéa
Plastic Packaging Shenzhen.
On March 24 , 2017 Albéa Plastic Packaging
Hong Kong completed the transfer of its
subsidiary Albéa Plastic Packaging Shenzhen and
received the last cash settlement for USD 3.2
million generating a USD 17.7 million non-cash
profit recognized in financial statements for the
year ended December 31, 2017, in accordance
with IFRS 5.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
81
NOTE 4 SEGMENT REPORTING
As described below, Albéa has two operating
segments, and reports the corporate costs not
allocated to either of these two segments in the
“Corporate” segment:
- Tubes: laminate and plastic tubes for the oral
care and cosmetics industry and dispensing
system for Tubes
- Cosmetic Rigid Plastic (CRP): skincare caps,
lipstick, compacts, mascara, trading activities
and dispensing system for Fragrance and
cosmetic
- Corporate: “Holding & Corporate” costs not
allocated to the two operating segments
Albéa also presents data based on three
geographical market, consisting of its three main
geographic markets: Europe, Americas (of which
North America - includes US and Mexican
activities - and South America) and Asian
countries (of which China and South Asia).
The Adjusted EBITDA- non GAAP Measure- is
defined as operating profit before depreciation &
amortization, restructuring costs and severance
costs, non-recurring fees, shareholders’
management fees, separation costs, acquisitions,
integration and transformation costs, other
compensation and termination benefits,
unrealized foreign exchange gains [losses], gains
[losses] on disposals, impairment, bargain
purchase gain.
Operating segments figures in this section are the
same as the figures included in the internal
reporting provided to Chief Operating Decision
Maker. The Chief Operating Decision Maker, who
is responsible for allocating resources and
assessing the performance of the operating
segments, has been identified as the executive
committee that assess performance and allocates
resources.
Adjusted EBITDA BRIDGE
The detail of the others is the following :
(*) Unrealized forex gain (non-cash) on working capital recorded mainly in China, Brazil and Mexico.
Period ended December 31,
Period ended December 31,
Note 2017 2016
Operating Profit 90 747 54 364
Depreciation/amortization 89 085 87 883
Restructuring & project costs 5.4 15 859 33 198
Others (5 208) (1 367)
Adjusted EBITDA 190 483 174 078
Year ended December 31,
Year ended December 31,
Note 2017 2016
SUN management fees 7.5 4 451 4 066
Impairment 6.2 200 261
(Gains)/losses on disposals 3.2 (16 252) 700
Unrealized foreign exchange (Gains)/losses on working capital (*) 5 005 (6 290)
Other 1 388 (104)
Others (5 208) (1 367)
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 82
4.1. SEGMENT REPORTING
As at December 31, 2017
(1) See Adjusted EBITDA Bridge.: The “Others” for the corporate includes mainly management fees
recharged to the other segments.
(2) Segment assets are reconciled with the balance sheet as follows:
(*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to CRP
segment
At December 31,2017 Notes TUBES CRP Corporate Consolidated
Segment revenue 631 993 857 159 - 1 489 151
Adjusted EBITDA 91 477 114 138 (15 132) 190 483
Depreciation/amortization (30 857) (55 964) (2 264) (89 085)
Restructuring and projects costs (3 471) (4 391) (7 997) (15 859)
Others (1) (17 077) 63 22 222 5 208
Operating Profit 40 072 53 846 (3 171) 90 747
Segment assets (2) 229 722 410 578 36 397 676 697
Capital expenditure of the period Cash flow (29 898) (39 662) (1 907) (71 467)
At December 31, 2017 (Segment assets) Notes TUBES CRP Corporate Consolidated
Non current assets (*) 227 119 420 049 18 625 665 793
Inventories, net 6.4 57 936 104 143 - 162 079
WC - Receivables 6.5 64 111 72 448 43 376 179 935
WC - Payables 6.13 (119 444) (186 062) (25 604) (331 110)
Segment assets 229 722 410 578 36 397 676 697
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 83
4.1. SEGMENT REPORTING (CONTINUED)
As at December 31, 2016
At the end of December 2016, Capital expenditure of Tube segment included the Silgan asset deal of USD
(11,1) million.
(1) See Adjusted EBITDA Bridge . The “Others” for the corporate includes mainly management fees
recharged to the other segments.
(2) Segment assets are reconciled with the balance sheet as follows:
(*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to CRP segment
At December 31, 2016 Notes TUBES CRP Corporate Consolidated
Segment revenue 591 461 810 963 - 1 402 424
Adjusted EBITDA 85 269 104 207 (15 395) 174 081
Depreciation/amortization (27 633) (56 901) (3 349) (87 883)
Restructuring and projects costs (3 154) (18 365) (11 679) (33 198)
Others (1) (11 896) (6 912) 20 173 1 365
Operating Profit 42 586 22 029 (10 250) 54 365
Segment assets (2) 219 398 425 200 36 086 680 684
Capital expenditure of the period Cash flow (42 630) (55 383) (2 952) (100 965)
At December 31, 2016 (Segment assets) Notes TUBES CRP Corporate Consolidated
Non current assets (*) 210 406 423 812 17 423 651 641
Inventories, net 6.4 50 361 94 539 - 144 900
WC - Receivables 6.5 58 879 73 953 37 629 170 461
WC - Payables 6.13 (100 247) (167 105) (18 966) (286 318)
Segment assets 219 398 425 200 36 086 680 684
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 84
4.2. GEOGRAPHICAL INFORMATION
As at December 31, 2017
Of which :
(1) See Adjusted EBITDA Bridge
(2) Geographical assets are reconciled with the balance sheet as follows
(*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to Corporate Geographical
area.
Notes Europe America Asia Corporate Consolidated
Revenue 737 236 546 078 205 837 1 489 151
Adjusted EBITDA 94 653 81 693 29 269 (15 132) 190 483
Depreciation/amortization (37 759) (23 512) (13 468) (14 346) (89 085)
Restructuring and projects costs (4 421) (2 879) (563) (7 996) (15 859)
Others (1) (12 755) (13 202) 8 942 22 223 5 208
Operating Profit 39 718 42 100 24 180 (15 251) 90 747 Geographical assets (2) 213 232 186 627 76 159 200 680 676 697
Capital expenditure of the period Cash flow (37 595) (23 149) (8 815) (1 908) (71 467)
AmericaNorth
AmericaSouth
AmericaTotal
AmericaAsia China
South Asia
Total Asia
SALES 459 984 86 094 546 078 SALES 119 502 86 335 205 837
Adjusted EBITDA 66 441 15 251 81 692 Adjusted EBITDA 14 757 14 513 29 270
At December 31, 2017 Notes Europe America Asia Corporate Consolidated
Non current assets (*) 250 085 156 538 76 261 182 909 665 793
Inventories, net 6.4 91 433 45 438 25 209 - 162 079
WC - Receivables 6.5 48 943 63 176 24 441 43 375 179 935
WC - Payables 6.13 (177 229) (78 525) (49 752) (25 604) (331 110)
Geographical assets 213 232 186 627 76 159 200 680 676 697
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 85
4.2. GEOGRAPHICAL INFORMATION (CONTINUED)
As at December 31, 2016
Of which :
(1) See Adjusted EBITDA Bridge
(2) Geographical assets are reconciled with the balance sheet as follows
(*) Intangibles & tangibles assets, net and goodwill, Rexam PC Goodwill has been allocated to Corporate Geographical
area.
Notes Europe America Asia Corporate Consolidated
Revenue 663 824 532 703 205 897 - 1 402 424
Adjusted EBITDA 82 629 79 320 27 526 (15 393) 174 082
Depreciation/amortization (38 785) (22 242) (11 426) (15 430) (87 883)
Restructuring and projects costs (6 725) (2 673) (12 121) (11 679) (33 199)
Others (1) (9 246) (4 528) (5 033) 20 171 1 364
Operating Profit 27 873 49 877 (1 054) (22 331) 54 365
Geographical assets (2) 203 399 182 374 82 460 212 451 680 684
Capital expenditure of the period Cash flow (40 792) (39 032) (18 189) (2 952) (100 965)
AmericaNorth
AmericaSouth
AmericaTotal
AmericaAsia China
South Asia
Total Asia
SALES 449 557 83 146 532 703 SALES 122 434 83 463 205 897
Adjusted EBITDA 65 645 13 675 79 320 Adjusted EBITDA 12 585 14 941 27 526
At December 31, 2016 Europe America Asia Corporate Consolidated
Non current assets (*) 222 777 157 550 77 525 193 789 651 641
Inventories, net 70 465 47 741 26 694 - 144 900
WC - Receivables 49 584 54 980 28 268 37 629 170 461
WC - Payables (139 427) (77 897) (50 027) (18 967) (286 318)
Geographical assets 203 399 182 374 82 460 212 451 680 684
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 86
NOTE 5- NOTES TO THE INCOME STATEMENT
5.1. REVENUE
Revenue represents sales of goods deriving from Albéa’s main activities, net of value added tax (VAT).
The breakdown of revenue by segment and by geographic segment is presented in the Note 4.
5.2. COST OF SALES
Changes in the cost of sales are directly linked to changes in revenue.
Other expenses can be broken down as follows:
NoteYear ended
December 31,Year ended
December 31,2017 2016
Employee benefit expenses - COGS 5.9 (307 473) (298 570)
Depreciation production assets - COGS 6.2 (69 756) (68 215)
Other expenses (812 732) (759 598)
Total cost of sales (1 189 961) (1 126 383)
Year ended December 31,
Year ended December 31,
2017 2016
Raw materials and components (resins, film, inks, purchase for resale, etc.) (565 408) (524 038)
Other production consumables, energy and utilities (55 213) (49 404)
Freight out costs (30 333) (28 168)
Other costs (repairs, maintenance, services, etc.) (161 778) (157 988)
Total other expenses (from Costs of sales) (812 732) (759 598)
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 87
5.3. SELLING AND ADMINISTRATIVE EXPENSES
Other expenses for the year ended December 31,
2017 include mainly:
� External costs (mainly operational consulting
and advisory fees): IT (USD 11,4 million),
Finance (USD 6.4 million) and Human
resources (USD 4.8 million)
� Selling costs: USD 6.3 million
� Rental costs: USD 4.5 million
Other expenses for the year ended December 31,
2016 include mainly:
� External costs (mainly operational consulting
and advisory fees): IT (USD 9 million), Finance
(USD 6.4 million) and Human resources (USD
4.9 million)
� Selling costs: USD 7.0 million
� Rental costs: USD 4.6 million
5.4. RESTRUCTURING AND PROJECT COSTS
Restructuring and project costs include non-recurring incomes and expenses as restructuring costs and
severance costs, non-recurring fees, acquisitions, integration and separation costs, moving costs (footprint
optimization) .
At December 31, 2017, the main components of
restructuring and projects costs are as follows:
� USD (5.8) million, severance costs and
restructuring expenses
� USD (4.5) million, transformation project cost
(footprint optimization in Europe, other
industrial optimization costs,..)
� USD (2.9) million, non-core business fees
(corporate and shareholders projects)
� USD (0.6) million integration cost linked to
Albéa Slovakia and merger acquisitions
project costs
� USD (2.0) million, other
At December 31, 2016, the main components of
restructuring and projects costs are as follows:
� USD (2.9) million, severance costs and
restructuring expenses
� USD (10.3) million, transformation project cost
(footprint optimization in Europe, lay out
costs, other industrial optimization costs,..)
� USD (11,5) million, projects costs linked to
footprint optimization (completion of China
South)
� USD (4.7) million, non-core business fees (fees
incurred for shareholders projects)
� USD (1.3) million integration cost linked to
Albéa Slovakia and merger acquisitions
project costs
� USD (2.4) million, other
Note Year ended
December 31,Year ended
December 31,2017 2016
Employee benefit expenses - SAE 5.9 (120 538) (111 229)
Depreciation and amortization - SAE (5 574) (5 792)
Other expenses - SAE (57 297) (58 989)
Total selling and administrative expenses (183 409) (176 010)
Year ended December 31,
Year ended December 31,
2017 2016Allowances / reversal of Restructuring provisions (non cash) (2 589) (1 227)
Other costs for the year - Restructuring (13 270) (31 971)
Total restructuring and project costs (15 859) (33 198)
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
88
5.5. OTHER INCOME (EXPENSE)
At the end of December 2017,
� Intangible assets amortization includes customer relationships recognized as part of the Purchase
Price Allocation for the Rexam PC and Albéa Slovakia acquisition.
� Gain on disposal for USD 16.3 million is mainly related to Shenzhen Disposal (see Note 3.2)
� Retirement plan amendment for USD (1.1) million is linked to French legal assumption change in
accordance to IAS19 (See note 6.10)
Year ended December 31,
Year ended December 31,
2017 2016
Sun management fees 7.5 (4 451) (4 066)
Intangible assets depreciation (*) (13 348) (12 737)
Gains (losses) on disposals 3.2 16 252 (700)
Unrealized forex gains (losses) on working capital (5 005) 6 290
Impairment charges (200) (261)
Retirement Plan Amendment 6.10 (1 107) -
Other - OIE (1 316) (995)
Total other income/(expense) (9 175) (12 469)
Note
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 89
5.6. NET FINANCE COSTS
Some subsidiaries of Albéa group hedge the
exposure to volatility in foreign currency when
they subscribe loans or perform business
transactions expressed in a currency that is not
their functional currency. Changes in the fair
value of these derivatives are recognized within
finance income in the consolidated income
statement. Unrealized income related to the
underlying financial assets / liabilities is offset
within finance income.
Interest cost on net debt are mainly due to the
high yield Bonds USD (16.6) million and Term loan
B interest for the period for USD (27.6) million.
Unrealized foreign exchange losses on the net
debt as of December 31, 2017 is also linked to the
Term Loan B for USD 45.6 million. This is a non-
cash item linked to the translation of Bonds USD
held by the company whose functional and
reporting currency is euro.
5.7. SHARE OF PROFIT ASSOCIATES
Share of profit of associates are linked to Cosmetech Mably International (HK) Ltd.
Year ended December 31,
Year ended December 31,
2017 2016
Cost of net debt (57 747) (119 036)Interest costs on net debt (51 920) (62 694)
Amortized costs (3 943) (13 893)
Realized foreign exchange losses on net debt (499) (3 054)
Unrealized foreign exchange losses on net debt - (13 102)
Bonds break up fees (1 385) (26 293)
Other financial expense (3 973) (4 916)
Interest costs on pensions (1 744) (2 549)
Actuarial losses on other benefit obligations - (152)
Other financial expense (2 229) (2 215)
Financial expense (61 720) (123 952)
Other financial income 52 573 1 874 Actuarial gains on other benefit obligations 342 -
Realized foreign exchange gains on net debt 4 589 -
Unrealized foreign exchange gains on net debt 47 614 - Other financial income 29 1 874
Financial income 52 573 1 874
Net finance costs (9 147) (122 078)
Cost of net debt
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 90
5.8. INCOME TAX
Analysis of the income tax expense
Albéa is subject to income tax in a number of
jurisdictions. Significant judgment is required in
determining the provision for income tax as there
are many transactions and calculations for which
the ultimate tax determination is uncertain during
the ordinary course of business.
Albéa recognizes liabilities based on estimates of
whether additional taxes will be due. Where the
final tax outcome of these matters is different
from the amounts that were recorded, such
differences will impact the current and deferred
income tax provisions and results of operations in
the period in which such ultimate tax
determination is made.
Reconciliation between the statutory tax rate in Luxembourg and Albéa’s effective tax rate
The unused tax losses for USD (2.6) million as at
December 2017 are mainly linked to losses
making in entities where no taxable profit is
expected in the foreseeable future (mainly
Luxembourg) and interest expenses which are
not deductible in some countries.
The Utilization of unused tax losses related to
prior period for USD 19.6 million are mainly linked
to profit made in entities where no taxable profit
are expected in the foreseeable future.
Year ended December 31,
Year ended December 31,
2017 2016
Current income tax charge (20 410) (16 986)
Deferred income tax benefit / (charge), net 7 727 5 923
Income tax benefit / (expense) (12 683) (11 063)
Year ended December 31,
Year ended December 31,
2017 2016
Income before taxes 81 525 (67 631)
Standard tax rate applicable in Luxembourg (in %) 27,08% 27,08%
Theoretical income tax benefit / (expense) (22 077) 18 315
Effect of:
- Differences in current tax rates of foreign countries (1 303) 1 185
- Income not subject to tax or taxed at a reduced rate (192) -
- Income/(expenses) arising from tax losses and other deductible
temporary differences due to changes in caps on tax rates during the period 3 178 (258)
- Unused tax losses and other deductible temporary differences for the period
not recognized as deferred tax assets (2 583) (47 184)
- Utilization during the period of unused tax losses and other deductible
temporary differences not previously recognized as deferred tax assets 19 631 18 134
- Deferred tax assets impairment (127) -
- Prior year adjustments 203 1 343
- Expenses not deductible for tax purposes (1 813) (493)
- Other permanent differences (1 001) 1 929
- Withholding tax (2 688) (1 033)
- Impacts of others Tax (French CVAE, Italian IRAP,… ) (3 909) (3 002)
Actual income tax benefit / (expense) (12 683) (11 063)
Effective tax rate (in %) 15,72% N/A
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
91
5.8. INCOME TAX (CONTINUED)
Deferred taxes recorded in the balance sheet
The carrying amount of deferred tax assets is
reviewed at each reporting date and increased or
reduced as appropriate to reflect changes in the
likelihood that a taxable profit will become
available against which the deferred tax asset can
be utilized. To assess the likelihood that a taxable
profit will become available, the following factors
are taken into account: results in previous years,
forecasts of future results, non-recurring items
that are unlikely to arise again in the future and
the tax planning strategy. As a result, a substantial
amount of judgment is involved in assessing
Albéa’s ability to utilize its tax loss carry forwards.
If future results were substantially different from
those expected, Albéa would have to increase or
decrease the carrying amount of its deferred tax
assets, which could have a material impact on its
balance sheet and income statements.
Deferred taxes break down as follows by type of temporary difference. Most of these deferred taxes are
long term.
Changes in net balance of deferred tax :
At 31 December 2017
At 31 December 2016
Deferred tax assets 14 343 16 242
Deferred tax liabilities 33 320 42 315
Net balance of deferred tax (18 977) (26 073)
Deferred tax on :
Pension provisions 6 934 5 553
Fixed assets (29 634) (39 173)
CPEC/PEC (7 552) (6 931)
Provisions (27) 176
Tax losses carried forward 6 026 7 565
Other timing differences (accruals) 5 275 6 737
Net balance of deferred tax (18 977) (26 073)
Net balance of deferred tax at december 31, 2016 (26 073)
Deferred tax income/(expense) recognized in income statement 7 726
Deferred tax income/(expense) recognized in equity (1 260)
Scope change -
Exchange differences 648
Other (19)
Net balance of deferred tax at December 31, 2017 (18 977)
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 92
5.8. INCOME TAX (CONTINUED)
As of December 31, 2017, Albéa recognized a USD
6 million deferred tax asset on tax losses carry
forwards amounting to USD 29 million. The main
tax entities to which these tax losses related
were as follows:
- Polish subsidiaries in an amount of USD 4
million
- UK subsidiaries in an amount of USD 11.2 million
- US subsidiaries in an amount of USD 5.3 million
- Italian subsidiaries in an amount of USD 6.7
million
- Subsidiaries from other countries in an amount
of USD 1.8 million
Additionally, Albéa holds unused tax losses carry
forwards on operating entities amounting to USD
192.7 million for which no deferred tax assets
have been recognized due to uncertainty
regarding their utilization. The main tax entities
to which these tax losses related were as follows:
- UK subsidiaries in an amount of USD 17.2 million
- French subsidiaries in an amount of USD 119.3
million
- Brazil subsidiaries in an amount of USD
25.2million
- Chinese subsidiaries in an amount of USD 10.7
million
- Italian subsidiaries in an amount of USD 3.8
million
- Russian subsidiary in an amount of USD 2.3
million
5.9. EMPLOYEE BENEFIT EXPENSES AND PERSONNEL EXPENSES
5.10. EARNINGS PER SHARE
Year ended December 31,
Year ended December 31,
2017 2016
Wages, salaries, social security costs and pension costs - defined contribution plans (423 727) (406 710)
Pension costs - defined benefit plans and other post-retirement benefits (4 285) (3 089)
Total employee benefit expenses (428 012) (409 799)
Number of employees (Full Time Equivalent ) 14 846 15 011
Year ended December 31,
Year ended December 31,
Note 2017 2016
Number of shares:
Weighted average number of ordinary shares in issue (Basic) 6.8 284 161 284 161
Effect of share option issue (CPEC) 6.9 24 208 674 24 288 674
Weighted average number of ordinary shares in issue (Diluted) 24 492 835 24 572 835
Net profit:
Net profit attribuable to owners of the group (in thousands of USD) 68 842 (78 694)
Earnings per share -in USD (Basic) 242,26 (276,93)
Earnings per share -in USD (Diluted) 2,81 --
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 93
NOTE 6 NOTES TO THE BALANCE SHEET
6.1. GOODWILL
(1) For the purpose of impairment testing, the goodwill related to the
acquisition of Betts Gro up has been allocated to groups of cash-
generating units, which belong to Tubes segment reporting. The
variance between 2017 and 2016 is due to foreign exchange rate as
Betts goodwill is in GBP.
(2) Rexam PC goodwill has been allocated to a group of CGUs which
uses the dispensing technology.
(3) Albéa Slovakia goodwill has been allocated to the group CGUs “Tube
Europe” The variance between August 2016 (detail in note 3.4) and
December 2017 is due to foreign exchange rate as Albéa Slovakia
goodwill is recorded in EUR.
Goodwill impairment tests
The recoverable amount of this group of cash-
generating units was determined based on value
in use. The calculation of the value in use is based
on discounted cash flow method arising from
financial budgets approved by management
covering a five-year period. The valuation done
with discounted cash flow method includes a
terminal value based of the last flows of the plan.
Assumptions used to establish financial budgets
reflect past experience. Cash flows are
extrapolated using a perpetuity growth rate that
is consistent with long-term average growth rate
for the business in which the CGU operates.
The assumptions used for value-in-use
calculations in 2017 are as follows:
- Perpetuity growth rate: 2.5%
- Discount rates after tax group : 8.9 %
(adjusted by region between 8.9 % and 10.7%)
The assumptions used for value-in-use
calculations in 2016 are as follows:
- Perpetuity growth rate: 2.5%
- Discount rates after tax group : 9.5 %
(adjusted by region between 9.5% and 12.8%)
With regards to the assessment of value-in-use
of goodwill and other intangible and fixed assets,
the Group believes that possibly changes in the
key assumptions (including discount rate or
perpetuity growth rate) would not cause the
carrying value of the above cash-generating units
to exceed its recoverable amount.
No impairment has been recorded in 2017.
Further, no impairment charge would have been
recognized in 2017 if :
- discounted projected cash flows were 5% lower
- the discount rate was increased by 50 basis
points
- the perpetuity growth rate was decreased by
50 basis points
At December 31, At December 31,
Note 2 017 2 016
Betts (1) 10 401 9 467
Rexam PC (2) 103 892 103 892
Albéa Slovakia (3) 3 035 2 667
Goodwill 117 328 116 026
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
94
6.2. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
At December 31, 2017
The following table shows the opening and closing balances and the activity of property, plant and
equipment and intangible assets for the year ended December 31, 2017.
Construction in progress represents the value of capitalized equipment under construction and/or not yet
commissioned as of December 31, 2017.
At December 31, 2016
(1) Business combinations: Albéa Slovakia acquisition in August 2016.
Depreciation, impairment and amortization expense
Total depreciation, impairment and amortization expense related to intangible assets and property, plant
and equipment was charged to the consolidated income statement as follows:
Intangible assets
Land Buildings Machinery and
Equipment
Other tangible
assets
Construction in progress
Property, Plant and
Equipment
At December 31, 2016 90 843 16 401 92 462 278 471 3 391 54 045 444 770
Additions under finance lease - - - 183 - (6) 177 Other additions 2 100 - 574 23 985 930 42 527 68 016 Disposals and write-offs - - (81) (2 925) (7) (72) (3 085)Depreciation and amortization (17 324) (528) (4 902) (63 449) (2 387) (127) (71 393)Impairment charges - (736) - 245 - 291 (200)Transfers in(out) from contructions in progress 3 875 736 916 29 385 655 (35 665) (3 973)Foreign exchange difference and other 1 468 1 245 8 708 19 700 284 3 253 33 190 Other reclassifications - - - - - - -
At December 31, 2017 80 963 17 118 97 677 285 595 2 866 64 247 467 503
Intangible assets
Land Buildings Machinery and
Equipment
Other tangible
assets
Construction in
progress
Property, Plant and
Equipment
At December 31, 2015 96 071 16 323 89 976 264 469 4 354 42 915 418 037
Additions under finance lease - - - 1 264 176 - 1 440
Other additions 5 106 - 1 289 38 237 614 55 339 95 479
Disposals and write-offs (49) (90) (244) (1 860) (251) (155) (2 600)
Depreciation and amortization (16 018) (552) (1 285) (66 726) (2 221) 87 (70 697)
Impairment charges - - - (812) 527 23 (262)
Transfers in(out) from contructions in progress - 26 346 43 552 162 (44 086) -
Business combinations (1) 6 166 1 099 4 469 5 528 46 291 11 433
Foreign exchange difference and other (433) (565) (3 232) (4 961) (31) (1 027) (9 816)
Reclassified as assets held for sale - 160 1 145 (220) 15 658 1 758
At December 31, 2016 90 843 16 401 92 464 278 471 3 391 54 045 444 772
Year ended December 31,
2017
Cost of sales - Depreciation (69 756)
Selling and administrative expenses - Depreciation (5 574)
Other income and expenses - Amortization (13 348)
Impairment of intangible and tangible fixed assets (200)
Total depreciation, impairment and amortization expense (88 878)
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 95
6.2. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Impairment tests for property, plant and equipment
Albéa has organized its management operation
and reporting structure into ten clusters which
represents the CGUs : Tubes Europe, Tube
Americas, CRP North America, China, Indonesia,
India, Brazil, Beauty Solutions, Dispensing
systems and CRP Europe. These clusters have a
dedicated management (cluster manager,
finance, HR, sales). Operating measurement and
resource allocation are carried out by
management on this structure.
At the end of each period, Albéa assesses
whether there is an indication that an asset
(other than a financial asset) or a cash generating
unit (CGU) may be impaired.
The recoverable amount of property, plant and
equipment is based primarily on calculations
using value in use. These calculations use post-
tax cash flow projections based on financial
budgets approved by management covering a
five-year period. Cash flows beyond the five-year
period are extrapolated using the estimated
growth rates presented below. The key
assumptions used for value-in-use calculations
for each CGU are as follows:
The assumptions used for value-in-use
calculations in 2017 are as follows:
- Perpetuity growth rate: 2.5%
- Discount rate after tax: 8.9 % (adjusted by
region between 8.9% and 10.7%)
The assumptions used for value-in-use
calculations in 2016 were as follows:
- Perpetuity growth rate: 2.5%
- Discount rate after tax: 9.5% (adjusted by
region between 9.5% and 12.8%)
Management determined average gross margins
based on past performance and its expectations
of market development. The weighted average
growth rates used are consistent with the
forecasts included in industry reports. The
discount rate is the rate used by comparable
companies.
No impairment has been recorded neither in
2017, or in 2016. Further, no impairment charge
would have been recognized in 2017 if :
- discounted projected cash flows were 5%
lower
- the discount rate was increased by 50 basis
points
- the perpetuity growth rate was decreased by
50 basis points
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
96
6.3. OTHER FINANCIAL ASSETS
As at December 31, 2017, Other non-current financial assets mainly contains long term receivable of USD
3.2 million linked to the acquisition of Albéa Slovakia to be received at the end of the lease on land and
buildings, when Albéa will execute the buy-back option. It also includes USD 2.6 million for 2% Cap
Premium concluded on USD 388 million Term Loan B Tranche in Luxembourg (see note 3.1 and note 6.9).
Other Financial assets includes mainly deposits and employee loans.
6.4. INVENTORIES
Inventories are carried at the lower of cost or net realizable value, which requires the estimation of the future
sales price of goods. Any differences between the expected and actual sales price achieved will be
recognized in the income statement in the period in which the sale is made.
The amounts shown above include provisions and the elimination of the intercompany margin in finished
goods inventory for Albéa entities.
At December 31, At December 31,
2017 2016
Factoring - Financial Assets 16 694 -
Deposits 10 143 7 562
Employee loans (from French "1% logement") 3 165 2 672
Term Loan B Cap Premium Fair value 2 667 -
Other non-current financial assets 4 244 4 118
Total other financial assets 36 914 14 352
Of which current 16 694 -
Of which non current 20 220 14 352
At December 31, At December 31,
2017 2016Work in Progress 34 566 32 487
Finished goods 64 277 63 850
Raw Materials 78 033 64 587
Provision / Impairment on Inventories (14 796) (16 024)
Total inventories 162 080 144 900
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 97
6.5. TRADE AND OTHER RECEIVABLES
Due to their short-term maturities, the fair value of Trade receivables and other is close to its carrying
amount. None of Albéa’s trade receivables is interest bearing.
The ageing of Albéa’s past due trade receivables is as follows:
Additions to and reversals of provisions for bad debt have been included in selling and administrative
expenses in the consolidated income statement. When a trade receivable is deemed uncollectible, it is
written off against the provision for bad debt account. Subsequent recoveries of amounts previously
written off are credited against selling and administrative expenses in the consolidated income statement.
At December 31, At December 31,2017 2016
Trade receivables, gross 126 087 116 946
Less : impairment (1 978) (2 167)
Trade receivables, net 124 109 114 779
Operating Working Capital - assets 43 990 28 820
Non-operating Working Capital - assets 11 837 26 862
Other debtors 55 826 55 682
Total Trade receivables and other debtors 179 935 170 461
Ageing of Albéa's past due trade receivables At December 31, At December 31,2017 2016
Not Due - Receivables 115 499 106 333
0 day - Receivables 2 185 1 631
Less than 1 month - Receivables 5 557 5 788
Between 31 days and 60 days - Receivables 812 1 027
Between 61 days and 90 days - Receivables 56 -
Total past due trade receivables 124 109 114 779
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
98
6.6. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in bank accounts and on hand, short-term deposits held on call
with banks and highly liquid investments that are readily convertible into known amounts of cash and
which are subject to insignificant risk of changes in value, less bank overdrafts that are repayable on
demand.
Bank overdrafts are included in current borrowings (See note 6.9). Net cash and cash equivalents include USD 48.3 million of cash from some Asian subsidiaries which is not
immediately available at group level.
6.7. ASSETS/LIABILITIES HELD FOR SALE
Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are
classified as assets held for sale when their
carrying amount is to be recovered principally
through a sale transaction which is considered
highly probable by Albéa's management. They are
stated at the lower of carrying amount and fair
value less costs to sell.
As at December 31, 2017, they include :
- Albéa Tube France : Assets for USD 0.3
million for Building in Sainte Ménéhould.
As at December 31, 2016, they include :
- Shenzhen: Assets for USD 15.2 million and
Liabilities for USD (0.6) million of liability
related to Albéa Plastic Packaging
(Shenzhen) CO, limited in accordance with
IFRS 5 (See note 3.2)
- Albéa Tube France : Assets for USD 0.9
million for Building in Sainte Ménéhould.
6.8. CAPITAL STOCK
The capital of Albéa Beauty Holdings S.A. amounts to EUR 284 161.
At December 31, At December 31,2017 2016
Cash in bank accounts and on hand 104 566 79 455
Short-term bank deposits and investments 14 519 7 523
Cash and cash equivalents 119 085 86 978
Less: Bank overdrafts repayable on demand (497) (2 427)
Net Cash and cash equivalents 118 588 84 551
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 99
6.9. BORROWINGS AND OTHER FINANCIAL LIABILITIES
Changes in borrowings during the year:
(1) Bonds, net at the end of December 2016 includes :gross debt USD 643.1 million, Bonds Premium Redemption cost (break-up
fees) for USD 26.3 million and Bonds amortized fees for USD (1.4) million.
(2) Term Loan B, net at December 31, 2017: include gross debt for US 867.6 million, Term loan B amortized fees for USD (21.7) (see
note 3.1) and non-cash unrealized forex for USD 48.9 million.
Asset Based Lending / Factoring : Transferred
assets under these factoring arrangements are
Trade receivables for the Credit Agricole Leasing
Factoring / Eurofactor European arrangement
and Hong-Kong arrangement, and Trade
receivables and Inventories for the ABL US
arrangement.
In accordance with IAS 39.30, these transferred
assets are not derecognized in the financial
statements as Albéa is still considered as
"continuing involved" in the recoverability of
these assets. When risk and rewards attached to
receivables are transferred, the assets are not
anymore recognized (USD 90.3 million as at
December 31, 2017 net of deposit).
The main components of the other borrowings
are as follows:
- Brazil :USD 9.1 million
- France : USD 12.3 million
- Slovakia USD 13.8 million
- Accrued interest on Term Loan B: USD 3.7
million
- Bank overdrafts: USD 0.5 million
Asset Based Lending / Factoring
Bonds, net
(1)
Term Loan B, Net(2)
Finance lease
liabilities
Other borrowings Total
At December 31, 2016 29 077 668 041 - 29 188 53 039 779 345
New finance lease obligations - - - 179 - 179
Proceeds from loans other than lease obligations - - 818 450 - 3 050 821 500
Repayment of loans - (646 195) (2 264) (8 127) (11 403) (667 989)
Factoring (17 828) - - - (963) (18 791)
Bonds Premium Redemption cost (26 293) - - - (26 293)
Accrued interests - - - - (5 889) (5 889)
Amortization of arrangement fees - 1 365 (19 204) - 19 (17 820)
Proceeds from / (repayment of) bank overdrafts - - - - (2 042) (2 042)
Exchange differences 6 3 082 48 972 3 414 4 336 59 810
At December 31, 2017 11 255 - 845 954 24 654 40 147 922 010
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 100
6.9. BORROWINGS AND OTHER FINANCIAL LIABILITIES (CONTINUED)
Net debt
Net debt is a non IFRS GAAP measure which include interest bearing debt less cash and cash equivalents and finance lease receivable.
Bonds, net at the end of December 2016 includes :gross debt USD 643.1 million, Bonds Premium Redemption cost
(break-up fees) for USD 26.3 million and Bonds amortized fees for USD (1.4) million.
Term Loan B net as at December 31, 2017: include gross debt for US 867.6 million, Term loan B amortized fees for USD
(21.7) million (see note 3.1)
The maturity schedule of the borrowings is as follows:
At December 31, At December 31,Note 2017 2016
Asset Based Lending / Factoring 11 255 29 077
Bonds, net - 668 041
Term Loan B, net 845 954 -
Finance lease liabilities 24 654 29 188 Other (excluding bank facilities and bank overdraft) 39 649 50 612
Borrowings excluding bank facilities and bank overdraft ( A ) 921 512 776 918
Other current financial assets 16 694 -
Other non-current financial assets 6 072 2 951
Other financial assets ( B ) 6.3 22 766 2 951
Short-term bank deposits and investments 14 519 7 523
Cash in bank accounts and on hand 104 566 79 455Bank facilities and bank overdraft (497) (2 427)
Net Cash and cash equivalents ( C ) 6.6 118 588 84 551
Net Debt ( A ) - ( B ) - ( C ) 780 158 689 416
At December 31, 2017Less than one year
Between 1 and 4 years
5 years and more
Total
Asset Base Landing / Factoring 11 255 - - 11 255
Term Loan B 1 148 3 448 863 052 867 648
Finance lease liabilities 7 533 10 184 6 938 24 655
Others 17 996 13 845 8 305 40 146
Gross borrowings 37 932 27 477 878 295 943 704
Less: Amortized financing fees (3 073) (10 004) (8 618) (21 695)
Borrowings 34 859 17 473 869 677 922 009
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 101
6.9. BORROWINGS AND OTHER FINANCIAL LIABILITIES (CONTINUED)
Convertible Preferred Equity Certificates
The component parts of compound instruments
issued by Albéa are classified separately as
financial liabilities and equity, in accordance with
the substance of the contractual arrangement. In
the case of a bond that may be converted into a
fixed number of equity shares, the fair value of the
liability component is estimated at the date of
issue using the prevailing market interest rate for
a similar non-convertible instrument.
In accordance with IFRS, the nominal value of this
liability has been discounted to determine its
carrying amount as at the reporting date, using an
estimated fair value cost of debt discount rate of
11.0% over a 49-year maturity period. The explicit
interest rate within the CPECS is 0%. A 11.0% rate
has been obtained by looking at the market rate
of debt available on similar borrowings at the date
of issue. Had a different cost of debt been
calculated, and interest charged annually, the
amount recognized in the consolidated financial
statements on initial recognition, and in
subsequent years, may have differed from the
values presented here.
At any time, upon the approval of a majority of
shareholders representing at least two thirds of
the share capital, the holder is entitled to convert
any or all of its CPECS into ordinary shares with a
value equal to the conversion price (one share for
one CPEC). At any time, the issuer shall be
entitled to repurchase any of all of the CPECS at
the redemption price.
The redemption price shall be:
� upon maturity date or liquidation, the par
value or,
- upon optional redemption, the greater of (a)
the par value for such outstanding CPECS
and (b) the fair value of one share
The CPECS are non-interest bearing and carry no
voting rights.
Issued in 2010
On June 30, 2010, the Company issued 19,090,147
Convertible Preferred Equity Certificates (CPECS)
with an initial par value of EUR 1 and an
aggregate par value of EUR 19.1 million. They are
held by an affiliate of Sun Capital Partners. The
repayment of the nominal value is payable on the
49th anniversary of the issue date of the CEPCS
which are yield free.
Issued in 2011
On June 23, 2011, the Company issued CPECS for
EUR 9.3 million which are held by an affiliate of
Sun Capital Partners. The repayment of the
nominal value is payable on the 49th anniversary
of the issue date of the CEPCS which are yield
free.
CPECS restructuring in 2012
On October 29, 2012, the above-mentioned
CPECS which were issued by the Company and
by Twist Beauty Packaging S.à r.l. were cancelled
and replaced by the issuance on November 26 of
28,497,971 new CPECS held by an affiliate of Sun
Capital Partners. On December 31, 2012, 1,356,566
CPECs were redeemed for an amount of USD
27,299,000. To remove from Albéa the share of
rose HPC holding L.L.C, which is currently an
affiliate of Sun Capital.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 102
6.9. BORROWINGS AND OTHER FINANCIAL LIABILITIES (CONTINUED)
Convertible Preferred Equity Certificates (continued)
On July 17, 2015, 1,482,787 CPECs were redeemed
for EUR 1,482,787 and reduce the equity
accordingly. On January 6, 2016, 786 000 CPECs
were redeemed for EUR 786 000 and on
November 22, 2016, 502 000 CPECs were
redeemed for EUR 502 000 and reduce the
equity accordingly.
On November 27, 2017 80,000 CPECs were
redeemed for EUR 80 000 and reduce the equity
accordingly.
At the end of December 2017 the remaining
24 208 674 CPECs are classified in equity for USD
29 033 million.
6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS
The present value of Albéa’s defined benefit
obligations depends on a number of factors that
are determined on an actuarial basis using a
number of assumptions. The assumptions used in
determining the defined benefit obligations and
net pension costs include the expected long-term
rate of return on the relevant plan assets and the
discount rate. Any changes in these assumptions
may impact the amounts recorded in Albéa’s
consolidated financial statements.
Description of plans
Albéa operates a number of pension plans. Some
of these plans are defined contribution plans and
some are defined benefit plans (France,
Germany, Indonesia, and Italy). Valuations of
these plans are produced and updated annually
at December 31, 2017 by qualified actuaries.
Termination
Termination plan concerns only German early
retirement program.
Pension plans
The majority of Albéa's pension obligations relate
to unfunded defined benefit pension plans
mostly in France and Germany, and lump-sum
indemnities payable upon retirement to
employees in France. Pension benefits are
generally based on the employee’s service and
highest average eligible compensation before
retirement, and are periodically adjusted for
increases in the cost of living, either by Albéa
practices, collective agreements or statutory
requirements.
Pensions Other long-term employee
benefit obligations
Termination benefits Total
At December 31, 2016 59 815 5 526 1 545 66 886
Current service costs 3 579 318 388 4 285
Interest costs 1 488 256 - 1 744
Benefits paid (1 629) (310) (321) (2 260)
Change in exchange variation 6 970 781 205 7 956
Actuarial gains and losses on benefit obligations (381) (342) 1 (722)
Plan amendement (Past service cost) 1 107 - - 1 107
At December 31, 2017 70 935 6 229 1 818 78 982
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
103
6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED)
Main Assumptions (rates per annum)
The main assumptions used in the valuations of the plans are set out below:
The Iboxx AA rate has been used as reference to determine the discount rate of the euro zone.
Total expense and Income recognized in the consolidated income statement
France Germany
At December 31, 2017
Rate of increase in salaries 2.0% + nominal rate between 0.25% to 3,50% 0,00%
Rate of increase in pensions N/A 2,00%
Discount rate 1,30% 1,50%
Inflation 2,00% 0,00%
Duration 14 years 18.9 years
At December 31, 2016
Rate of increase in salaries 2.0% + nominal rate between 0.25% to 3,50% 0,00%
Rate of increase in pensions N/A 2,00%
Discount rate 1,31% 1,50%
Inflation 2,00% 0,00%
Duration 15.7 years 18.2 years
Year ended December 31,
Year ended December 31,
2017 2016
(4 285) (3 089)
Pension interest costs (Other than normal service costs) (1 744) (2 549)
Retirement Plan Amendment (1 107) -
Actuarial Gain / (Losses) on other benefit obligations 342 (152)
Total expenses (6 794) (5 790)
Current employer service cost for defined benefit plans
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 104
6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED)
Reconciliation between the provisions and present values of the defined benefit obligation/fair value of
plans assets
At December 31, 2017
At December 31, 2016
Pensions
At December 31, 2017 France Germany Other Total
Present value of obligation 38 593 20 382 15 362 74 337
Fair Value of plan assets - (3 402) - (3 402)
Net provision recognized 38 593 16 980 15 362 70 935
Other long-term employee benefit obligations
At December 31, 2017 France Germany Other Total
Present value of obligation 6 229 - - 6 229
Fair Value of plan assets - - - -
Net provision recognized 6 229 - - 6 229
Termination benefits
At December 31, 2017 France Germany Other Total
Present value of obligation - 1 818 (0) 1 818
Fair Value of plan assets - - - -
Net provision recognized - 1 818 (0) 1 818
Pensions
At December 31, 2016 France Germany Other Total
Present value of obligation 32 346 18 212 12 246 62 804
Fair Value of plan assets - (2 989) - (2 989)
Net provision recognized 32 346 15 223 12 246 59 815
Other long-term employee benefit obligations
At December 31, 2016 France Germany Other Total
Present value of obligation 5 525 - - 5 525
Fair Value of plan assets - - - -
Net provision recognized 5 525 - 1 5 525
Termination benefits
At December 31, 2016 France Germany Other Total
Present value of obligation - 1 545 (0) 1 545
Fair Value of plan assets - - -
Net provision recognized - 1 545 (0) 1 545
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 105
6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED)
Sensitivity analyses
The present value of Albéa’s obligation for
pensions and other post-employment benefits is
sensitive to changes in discount rates
An decrease of 25 basis points in the discount
rate would have the following impacts on the
present value of Albéa‘s defined benefit
obligation (DBO):
6.11. PROVISIONS
The amounts of provisions recognized represent management’s best estimates of the liabilities at the
reporting date. Expectations will be revised each period until the actual liability is settled, with any difference
accounted for in the period in which the revision is made.
The other provisions for risks and contingencies are related to commercial, employees, tax litigations and
building dilapidation cost or commercial claims.
Pensions
At December 31, 2017In thousands of
USDIn % of DBO
France 1 468 3,94%
Germany 824 4,06%
Other countries N/A
Total 2 292
Other long-term employee benefit obligations
At December 31, 2017In thousands of
USDIn % of DBO
France 157 2,52%
Germany N/A
Other countries N/A
Total 157
(Excluding pension and OPEB)
At December 31, 2016
Allowances Reversals of provisions
used
Reversals of provisions
not used
Foreign exchange
impactOther
At December 31, 2017
Restructuring 5 506 3 264 (3 514) (676) 506 36 5 120
Other provisions for risks and contingencies 6 454 1 444 (262) (2 359) 491 (129) 5 638
Total Provisions 11 960 4 708 (3 776) (3 035) 997 (93) 10 758
of which current - Provision 8 709 9 126
of which non current - Provision 3 252 1 632
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 106
6.12. OTHER FINANCIAL LIABILITIES
At the end of December 31, 2016, the main components of the other financial liabilities are mainly USD 28.8
million (translated value as at end of 2016 of the USD 30.4 million received in march 2016) of cash received
in advance according to the step 1 of Shenzhen project assets transaction (see note 3.2).
At the end of December 31, 2017, Albéa Plastic Packaging Hong Kong completed the transfer of its
subsidiary Albéa Plastic Packaging Shenzhen and recognized final impact in 2017 net result (see note 3.2).
6.13. TRADE AND OTHER PAYABLES
The ageing of Albéa’s past due trade payables is as follows:
At December 31, At December 31,2017 2016
Trade payables 171 806 146 394
Other payables 76 142 69 420
Employee payables 83 162 70 504
Total Trade and other payables 331 110 286 318
At December 31, At December 31,
2017 2016
Not Due - Payables 128 494 97 836
0 day - Payables 16 731 11 377
Less than 1 month - Payables 15 501 14 211
Between 31 days and 60 days - Payables 8 086 13 498
Between 61 days and 90 days - Payables 1 810 5 952
Between 91 days and 180 days - Payables 1 184 3 520
Total past due trade payables 171 806 146 394
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
107
6.14. FINANCIAL INSTRUMENTS
The information below relates to Albéa’s financial instruments, and excludes those of joint ventures
accounted for under the equity method of accounting. Carring amount of loan and receivable are close to
fair value.
Fair value Hierarchy
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date.
The fair value of financial instruments traded in
active markets is based on quoted market prices
at the balance sheet date. The quoted market
price used for financial assets held by the Group
is the current bid price; the appropriate quoted
market price for financial liabilities is the current
ask price. This valuation method is referred to as
Level 1 in the hierarchy established by IFRS 13.
The fair value of financial instruments that are
not traded in an active market is determined by
using valuation models incorporating various
inputs including the credit quality of
counterparties, foreign exchange spot and
forward rates and forward interest rate curves.
The assumptions used are observable either
directly (i.e. as prices) or indirectly (i.e. derived
from prices). This valuation method is referred to
as Level 2 in the hierarchy established by IFRS 13.
Carrying amount
Fair value hierarchy
levelFair value
Assets/Liabilities available for sale
Loans and receivables
Assets held to
maturity
Debt at amortised
cost
Derivatives instruments
Other financial assets 36 914 2 6 072 - 30 842 - - -
Trade receivables 179 935 N/A - - 179 935 - - 450
Cash and cash equivalents 119 085 N/A - - 119 085 - - -
Assets held for sale 318 N/A - 318 - - -
Assets 336 252 6 072 318 329 862 - - 450
Term Loan B 845 954 2 845 954 - - - - -
Other borrowings 76 055 N/A - - 75 769 - 286
Trade payables and other 331 110 N/A - - 331 110 - - -
Other financial liabilities 3 N/A - - 3 - - -
Liabilities held for sale - N/A - - - - - -
Liabilities 1 253 122 845 954 - 406 882 - - 286
At 31 December 2016Carrying amount
Fair value hierarchy
level
Fair value Assets/Liabilities available for sale
Loans and receivables
Assets held to
maturity
Debt at amortised
cost
Derivatives instruments
Other financial assets 14 352 2 2 951 - 11 821 - - -
Trade receivables 170 461 N/A - - 170 461 - - -
Cash and cash equivalents 86 978 N/A - - 86 978 - - -
Assets held for sale 16 218 N/A - 16 218 - - -
Assets 288 009 2 951 16 218 269 260 - - -
Bonds 668 041 1 668 041 - - - - -
Other borrowings 111 304 N/A - - 110 478 - - 826
Trade payables and other 286 318 N/A - - 286 318 - - -
Other financial liabilities 28 774 N/A - - 28 586 - - 188
Liabilities held for sale 624 N/A - 624 - - - -
Liabilities 1 095 061 668 041 624 425 382 - - 1 014
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
108
N
NOTE 7- ADDITIONAL INFORMATION
Albéa’s capital management objectives are to safeguard Albéa’s ability to continue as a going concern in
order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
7.1. FINANCIAL RISK MANAGEMENT
7.1.1. Risk management objectives and policies
Albéa is exposed to various types of risk:
- Foreign exchange risk
- Interest rate risk
- Liquidity risk
- Covenants
- Counterparty risk
- Raw material price risks
Albéa’s risk management is coordinated at its
headquarters, in close cooperation with the
executive committee, and focuses on securing
Albéa’s short- to medium-term cash flows by
minimizing exposure to financial markets.
Albéa faces a number of risks, among which the
main ones are market, environmental, social as
well as financial risks. Risk management is an
issue addressed by every employee and Albéa is
committed to running its operations in a
responsible and sustainable manner. Albéa has
put in place a risk management framework.
Albéa’s approach to risk management is to
identify relevant risks affecting its strategy and
operations, report them throughout the
organization and mitigate these risks.
7.1.2. Foreign exchange risk
Operating flows
Albéa operates in 16 countries through
consolidated subsidiaries. Albéa’s net
investments, earnings and cash flows are
influenced by a wide variety of currencies due to
the geographic diversity of Albéa’s sales and the
countries in which it operates.
Albéa records its financial position and income in
the relevant local currency, and then converts
these figures into US dollar at the applicable
exchanges rates for the purpose of consolidation
in Albéa’s financial statements (see Note 2.3.1).
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 109
7.1. FINANCIAL RISK MANAGEMENT (CONTINUED)
7.1.2. Foreign exchange risk (continued)
Part of the main currencies in revenue breaks down as follows :
Operating profit is mainly influenced by the currencies of those countries in which Albéa’s operating plants
are located. The Euro and US dollar are the currencies that influence operating profit the most.
Main CurrenciesNet Sales
At December 31, 2017
in % At December 31,
2016
in %
Brasilian Real BRL 86 094 5,78% 83 146 5,93%
Canadian Dollar CAD 1 015 0,07% 1 808 0,13%
Chinese Yuan CNY 69 351 4,66% 79 576 5,67%
Euro EUR 629 334 42,26% 570 398 40,67%
British Pound Sterling GBP 54 062 3,63% 53 781 3,83%
Hong Kong Dollar HKD 10 307 0,69% 6 421 0,46%
Indonesia Rupiah IDR 32 650 2,19% 33 515 2,39%
Indian Rupee INR 25 116 1,69% 21 257 1,52%
Mexican Peso MXN 25 440 1,71% 27 602 1,97%
Polish Zloty PLN 72 241 4,85% 60 770 4,33%
Russian Ruble RUR 16 074 1,08% 15 686 1,12%
US Dollar USD 467 468 31,39% 448 464 31,98%
Net Group Sales 1 489 151 100% 1 402 424 100%
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 110
7.1. FINANCIAL RISK MANAGEMENT (CONTINUED)
Due to the low proportion of financial assets and
liabilities that are not denominated in the
subsidiaries’ functional currency, Albéa is not
significantly exposed to transactional foreign
exchange risk. However Albéa remains exposed
to foreign exchange risk through the translation
of the financial statements of its entities from
functional currencies to US dollars. Moreover
Albéa is slightly exposed to the following foreign
exchange risks:
- Albéa has chosen to manufacture products
that are sold in the euro and USD zones in low-
cost countries (Poland, Mexico, Indonesia, and
China). As a result, Albéa is exposed to the
impact of changes in the EUR/PLN, USD/MXN,
USD/IDR, USD/INR, USD/CAD and EUR/CNY
rates. The "transactional risk" part of this
exposure is not hedged since Albéa considers
that over time the cost of hedging would be
greater than the benefits derived from
smoothing out the impact of fluctuations in the
exchange rate.
- Albéa is exposed to the impact of changes in
the USD/CAD rate as a result of the production in
Canada of the webbing used to manufacture
tubes sold in the USA. Albéa also considers that
over time the cost of hedging would be greater
than the benefits derived from smoothing out
the impact of the fluctuations in the exchange
rate. Albéa is still following USD/CAD fluctuation
and ready to setup any appropriate hedging
strategy if needed.
- The trading business unit (Beauty Solutions)
imports products from Asia, purchased in USD, to
Europe and as a result is exposed to the impact
of fluctuations in the USD/EUR rate. Flows are
under monitoring and punctual foreign exchange
hedging is done.
- Brazil is hedging its hard currencies net
outflows (USD & EUR vs. BRL) form quarter to
quarter
- Poland is hedging its EUR net inflows against
PLN for the full year.
- Within Albéa, support services are mostly
provided from the European head office,
exposing Group companies outside of the
Eurozone to the impact of fluctuations in the
EUR exchange rate. Albéa’s policy is mainly to
leave exposures resulting from intercompany
cash flows unhedged.
The following table shows the trade receivables and payables for the main currencies to which Albéa is
exposed as at December 31, 2017 and 2016 (figures in thousands of USD).
At December 31, 2017 EUR USD GBP Other
WC - Receivables 74 087 39 098 11 730 55 020
WC - Payables (176 599) (58 923) (16 423) (79 165)
Net Balance Sheet position (102 512) (19 825) (4 693) (24 145)
At December 31, 2016 EUR USD GBP Other
WC - Receivables 68 103 44 947 8 536 48 874
WC - Payables (141 329) (60 127) (11 935) (72 927)
Net Balance Sheet position (73 226) (15 179) (3 399) (24 053)
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
111
7.1. FINANCIAL RISK MANAGEMENT (CONTINUED)
Financing flows
Borrowings per currency are the followings :
On April 20, 2017, Albéa has completed a debt
refinancing , USD 818 million 7-year covenant-lite
term loan B facility divided in two tranche : 408
million USD tranche and the 385 million EUR. A
part of USD Tranche of the Term loan B is held by
a subsidiary whose functional and reporting
currency is euro.
As a result, Albéa is exposed to the impact of
changes in the EUR/USD rate. The transactional
foreign exchange risk part of this exposure is not
hedged since Albéa considers that over time the
cost of hedging would be greater than the
benefits derived from smoothing out the impact
of fluctuations in the exchange rate.
Sensitivity to changes in exchange rates for the main exposure
For Albéa the main exposure is the variation of the exchange rate USD/EUR.
As of December 31, 2017, the sensibility of consolidated revenue and operating profit to this exchange rate
is as follows:
As many of Albéa’s operating plants are located in the euro zone, the higher EUR is, the more revenues and
operating profit are positively impacted.
At December 31, 2017
At December 31, 2016
US Dollar 393 441 435 026
Euro 524 218 335 265
British Pound Sterling - 2 992
Other currencies 4 350 6 062
Total Borrowings 922 009 779 345
Borrowings by currencies
Year ended December 31, 2017 5% Increase 10% Increase
Impact of revenues 31 467 62 933
Impact on operating profit 1 451 2 902
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 112
7.1. FINANCIAL RISK MANAGEMENT (CONTINUED)
7.1.3. Interest rate risk
Interest rate risk refers to the risk that the value of financial instruments that are held by Albéa and are
subject to variable rates or the cash flows associated with such instruments will fluctuate due to changes
in market interest rates.
(*) Bonds, net for December 2016 includes: gross debt USD 643.1 million Bonds Premium Redemption cost (non-interest
bearing) for USD 26.3 million and Bonds amortized fees for USD (1.3) million
Borrowings under our Asset Based Lending facility and
European Invoice Discounting facility had a weighted
average interest rate of 5.40 % and 2.60%, respectively,
as at December 31, 2017 (3.81% and 2.98% as at
December 31, 2016).
The main Finance Lease is related to the plant in Tubes
France (Sainte Ménéhould) for USD 12.8 million. The
remaining duration is 8 years. The interest rate is
Euribor 3M+2.9%.
As of December 31 2017, Albéa is exposed to interest
rate risk, mainly due to refinancing of Bonds (fixed
rates) via Term loans B (floating rates ).Mid-June 2017,
the USD tranche of Albéa Beauty Holdings SA term loan
B was hedged via a 2% CAP (vs. Libor 6 months) for USD
388 million (effective date November 30th 2017 and
maturing May 31st 2020). Cap cost was USD 1.9 million.
No instrument taken to hedge floating interest rate on
the EUR 385 million term loan B, mainly with Albéa
Beauty Holdings SA for EUR 378.5 million (remaining
EUR 6.5 million between 3 European entities)
Taken into account the USD tranche of Albéa Beauty
Holdings SA term loan B already hedged, an increase in
the variable rate of 100 basis points would have a
negative impact of about USD 5 million on financial
income.
At December 31, 2017 Carrying amountOf which fixed
rateOf which variable
rateOf non-interest
bearing
ABL Factoring 11 255 - 11 255 -
Term Loan B , net of amortized costs 845 954 - 845 954 -
Finance lease liabilities 24 654 - 24 654 -
Others 40 143 23 923 8 768 7 452
Borrowings 922 007 23 923 890 631 7 452
At December 31, 2016 Carrying amountOf which fixed
rateOf which variable
rateOf non-interest
bearing
ABL Factoring 29 077 - 29 077
Bonds, net of amortized costs (*) 668 041 641 748 - 26 293
Finance lease liabilities 29 188 - 29 188 -
Others 53 039 30 977 8 812 13 251
Borrowings 779 345 672 725 67 076 39 544
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
113
7.1. FINANCIAL RISK MANAGEMENT (CONTINUED)
7.1.4. Liquidity risk
Risks concern Albéa’s ability to access financing and future development. Albéa’s shareholder supports the
strategy to be implemented, and Albéa has put in place a funding facility to support its current operations.
The following table shows the contractual maturity of the Group’s financial liabilities:
Albéa’s principal uses of cash have been to
finance working capital, capital expenditure,
debt service and repayments, and acquisitions.
Albéa’s principal sources of liquidity have
historically been net cash provided by operating
activities and borrowings under our European
Invoice Discounting revolving facility (European
Factoring) and Asset Based Lending facility (ABL
facility) in the USA and Canada.
As at December 31, 2017, Albéa had USD 118.6
million of net cash and USD 72.8 million of the
undrawn Asset Based Lending facility, European
Factoring facility and USD 105 million multi-
currency revolving facility.
---------- 7.1.5. Covenants Albéa Beauty Holdings SA undertakes to comply
with the specific covenant. According to the
Term loan B agreement signed with the lenders
on April 20, 2017, the Net Debt ratio to EBITDA
should remain below 7.97. starting of December
2018.
For the other borrowings, while Albéa respects
its covenants, the related amounts are not
significant enough to generate a liquidity issue
should Albéa have to immediately reimburse
them.
At December 31, 2017Less than one year
Between 1 and 4 years
5 years and more
Total
Asset Base Landing / Factoring 11 255 - - 11 255
Term Loan B 1 148 3 448 863 052 867 648
Finance lease liabilities 7 533 10 184 6 938 24 655
Others 17 996 13 845 8 305 40 146
Gross borrowings 37 932 27 477 878 295 943 704
Less: Amortized financing fees (3 073) (10 004) (8 618) (21 695)
Borrowings 34 859 17 473 869 677 922 009
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 114
7.1. FINANCIAL RISK MANAGEMENT (CONTINUED)
7.1.6. Counterparty risk
Counterparty risk is the risk that a counterparty
will not meet its obligations under a financial
instrument or customer contract, leading to a
financial loss. Albéa is exposed to counterparty
risk from its operating activities (primarily from
customer receivables) and from its financing
activities, including deposits with banks and
financial institutions, foreign exchange
transactions and other financial instruments. The
maximum exposure to counterparty risk at the
reporting date is the carrying amount of each
class of financial assets as described in Note 6.14
“Financial instruments”. Albéa does not generally
hold any collateral as security.
Counterparty risks related to receivables
Customer credit ratings are carefully monitored
by Albéa’s credit management organization.
Other risks are monitored and addressed
carefully by the Finance Department.
Counterparty risk related to financial instruments
and cash deposits
Counterparty risk from balances with banks and
financial institutions is managed by Albéa’s
Treasury Department
7.1.7. Raw material price risk
Rises in raw material prices may affect Albéa’s
profitability. In order to minimize this risk, a large
part of Albéa sales are indexed on raw material
prices with escalation/de-escalation
mechanisms.
7.2. COMMERCIAL RISKS
Albéa’s top ten customers represent 51% of the
Group’s sales. Therefore losing one of these
customers would deeply impact Albéa’s
profitability. Only one customer represents about
16% of total sales and the other customers
represent less than 6%.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
115
7.3. CONTINGENCIES AND COMMITMENTS
Term Loan B contingencies and commitments
As part of its ordinary course of business, Albéa
Beauty Holdings S.A. has entered into
arrangements and incurred obligations that will
impact the Company’s future operations and
liquidity, some of which are reflected as liabilities
in the consolidated financial statements at year-
end.
Albéa Beauty Holdings S.A. main commitments
are in the form of debt and interest repayments
in relation to Albéa's financing, mainly Albéa
Beauty Holdings S.A. term loan facilities B, fully
drawn, EUR 385 million at Euribor + 4% (zero rate
Euribor floor) and USD 408 million at Libor +
3.75% (1% Libor floor), maturing on April 20, 2024.
Albéa Beauty Holdings S.A. also a USD 105 million
multi-currency revolving facility (undrawn at
December 31, 2017. This facility at Euribor/Libor +
3.25% (zero rate Euribor floor / 1% Libor floor),
maturing April 20, 2023 is available for general
corporate purposes of the Group. The Company
also has operating lease commitments relating to
corporate offices, factories and machinery.
USD 818 million equivalent aggregate principal
amount of the EUR and USD term loan facilities B
and interest payments are guaranteed on a
senior secured basis by subsidiary guarantors.
The term loan facilities B are guaranteed by some
of our Company's subsidiaries operating in Brazil,
Canada, France, Germany, Italy, Luxembourg,
Poland, the United Kingdom, the Netherlands
and the United States.
The term loan facilities B are secured on a first-
priority basis by Albéa’s collateral, subject to
certain exceptions including the collateral
securing the North American senior secured
credit facility.
The Group’s collateral is made up of assets
owned by the guarantors including real estate
assets, fixed assets, equipment and other goods,
intellectual property, investment property
(including capital stock), share capital of
subsidiaries, intercompany loans, accounts
receivable, inventories and related assets, certain
deposit and securities accounts, letters of credit
rights and general intangibles. The collateral is
subject to exclusions for assets already secured,
or subject to a negative pledge, under our
European Accounts Receivable Discounting
facility or under other existing credit facilities.
The term loan facilities B are secured on a
second-priority basis by the collateral securing
indebtedness under our North American senior
secured credit facility.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
116
7.3. CONTINGENCIES AND COMMITMENTS (CONTINUED)
Other contingencies and commitments
Cotuplas sale commitments
As part of the sale of Cotuplas, Albéa has
undertaken to maintain its volume of trading
with Cotuplas over the next years and to accept a
gradual increase in machine prices to improve
Cotuplas profitability.
Albéa committed to buy from Cotuplas a
minimum of EUR 4.7million of equipment and
services annually in 2014 and 2015, in line with the
average of recent years. The minimum purchase
commitment then goes to EUR 3.6 million for
year 2017 and EUR 0.7 million annually in 2017
and EUR 0.8 million 2018. Should Albéa fail to
meet its commitment, it will provide an
indemnity to Cotuplas amounting to 45% of
Cotuplas turn-over shortfall.
The equipment price increase agreed with
Cotuplas amounts to 2.5% annually in 2014 and
2015. Albéa met the commitment in 2017 also.
---------- Seller warranties
Rio Tinto Alcan
In connection with the acquisition of the beauty
packaging business of Rio Tinto Alcan in July
2010, Rio Tinto France SAS and the other Selling
Parties have agreed to indemnify Albea, subject
to certain limitations, for certain liabilities. The
Sellers warranties are subject to certain
deductibles, caps, exclusions and procedural
requirements. Most of these warranties are now
expired. The main surviving warranties are
environmental liabilities related to the
Washington, New Jersey site (including any
liability incurred in connection with the
Pohatcong Valley Superfund Site), and to the
Semarang, Indonesia, site.
Rexam plc
In connection with the Rexam Acquisition,
Rexam plc has agreed to indemnify us, subject to
certain limitations, for certain liabilities. Most of
these warranties had expired. The tax
indemnification clauses will expire gradually as
the underlying tax obligations related to year
2012 and earlier reach the statute of limitations.
Sellers warranties on the historical environmental
liabilities and related to the Annecy site (divested
since by Albea) are not bound by time limits.
At December 31, 2017
Banks and corporate guarantees 41 566
Pledges 119 516
Unconditional purchase/sell obligation 11 978
Commitments given 173 060
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 117
7.3. CONTINGENCIES AND COMMITMENTS (CONTINUED)
Albéa Slovakia
In connection with the acquisition of the Levice
business of Scandolara in August 2016,
Scandolara Holding S.r.l. and Scandolara S.p.A
(the “Sellers”) agreed to indemnify Albéa, subject
to certain limitations, for certain liabilities. The
Sellers’ warranties are subject to certain
thresholds, caps, exclusions, time limitations and
procedural requirements
US environmental litigations
Our current manufacturing facility located in
Washington, New Jersey (“Washington
Facility”) has soil and groundwater
contamination which is migrating offsite from
the property and into the indoor air within the
facility. The environmental risk was estimated
at USD 27.3 million as of December 31, 2013.
Pursuant to the July 2, 2010 agreement by
which RTA Beauty Packaging Business (Old
Albea name) was acquired from Rio Tinto, they
agreed to perform all remedial action required
at the Washington Facility and to indemnify
Albéa for losses or claims Albéa may incur
associated with historical environmental
conditions at the Washington Facility and the
Pohatcong Valley Superfund Site.
In November 2014, the parties have reached an
agreement in principle to settle the United
States Department of Justice lawsuits and
have negotiated a consent decree to
document the terms of the settlement
(“Pohatcong Consent Decree”). The Pohatcong
Consent Decree has been signed and
submitted to the court by EPA. Subject to the
completion of a public review and comment
period, the Pohatcong Consent Decree is
expected to enter into force in early 2015.
Due to the indemnity, Albéa’s primary
obligation under the Pohatcong Consent
Decree should be limited to providing access
to the Washington Facility as necessary for the
remedial work and to implementing and
maintaining institutional controls placed on the
property that are required by EPA.
In November 2014, an agreement has been
signed with United States to settle definitively
the litigation with no cash issue for Albéa.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 119
7.4. LEASE COMMITMENTS
Minimum future lease payments on non-cancellable operating leases:
7.5. RELATED PARTIES
Related-party transactions include:
• The PECS and CPECS debt component issued in 2010 and 2012 and the associated interest cost
with entities controlled by Sun Capital (see Note 6.9 “Borrowings and other financial liabilities”).
• Management fees invoiced by Sun Capital Partners Management V, LLC for an amount of USD 4.4
million in relation with consulting agreements (see “Related parties transactions”) .
• Operating purchases ( mainly resins) to Sun affiliates for USD 1 million
7.6. EXECUTIVE COMMITTEE TOTAL REMUNERATION
The amount paid in 2017 for the total remuneration of the Executive Committee is USD 5,628,176 (including
social security costs).
7.7. AUDITORS’ FEES
The aggregate fees billed by the external auditor, PricewaterhouseCoopers, for professional services
rendered for the years 2017 and 2016 were as follows:
Payments due by maturityAt December 31,
2017
Within 1 year 27 793
Between 1 and 5 years 88 696
Beyond 5 years 14 956
Operating lease 131 445
Year ended December, Year ended December,
2017 2016
Audit fees 3 418 2 950
Audit -Related fees 47 97
Tax fees 36 332
Total Auditor's fees 3 501 3 379
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
120
7.8. SUBSEQUENT EVENTS
Change in Shareholder
On March 23, 2018, PAI Partners, a leading pan-
European private equity firm, has completed the
acquisition of Albéa.
With PAI Partner , Albéa will continue to grow -
in size and in strength, leveraging our assets and
market position, winning the talent war, bringing
in new customers, joining forces with other
players, rolling out our strategic and operational
priorities for the short- and the long-term. This is
the start of a new era for Albéa.
COVIT acquisition ;
In February 2018, Albéa acquired 100% of Covit
S.L., a leading manufacturer of metal parts, from
PHI private equity fund.
Covit S.L is a leader in the drawing, anodizing,
assembly and decoration of metal parts for
packaging products, based in Torello, Spain.
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
121
NOTE 8 COMPANIES INCLUDED IN THE CONSOLIDATION SCOPE
8.1. SCOPE OF CONSOLIDATION AS AT DECEMBER 31, 2017
The following subsidiaries and joint ventures were legal entities held by Albéa at December 31, 2017.
SUBSIDIARIES DESCRIPTION OPERATING SEGMENTCOUNTRY OF
INCORPORATIONPERCENTAGE OF
CONTROLPERCENTAGE OF
INTEREST
R do Brasil Embalagens Ltda - embalagens CRP/DISPENSING/TUBES Brazil 100% 100%
Betts Brazil Participaciones LTDA CORPORATE Brazil 100% 100%
Beauty Packaging Canada Holdings Inc. CORPORATE Canada 100% 100%
Albea Canada Brampton Tubes TUBES Canada 100% 100%
Albea Dispensing Systems Shanghai Co Ltd DISPENSING China 100% 100%
Albea Plastic Metallizing Technologies Shanghai Co Ltd CRP China 100% 100%
Twist Beauty Packaging Plastic Processing Shanghai Co Ltd CRP China 100% 100%
Plastic Molds Shanghai Co Ltd CRP China 100% 100%
Twist Beauty Packaging Plastic Products Shanghai Ltd CRP China 100% 100%
Plastic Packaging Shanghai Co Ltd CRP China 100% 100%
Albea Zhongshan Co Ltd CRP/TUBES China 100% 100%
ZongShan Meiquan Plastic Products Co Ltd TEX CRP China 100% 100%
Albea Packaging (Suzhou) Co Ltd CRP/DISPENSING/TUBES China 100% 100%
Albea Deutschland GMBH - Schesslitz TUBES Germany 100% 100%
Twist Beauty Packaging Holding Germany CORPORATE Germany 100% 100%
Albea Le Treport DISPENSING France 100% 100%
Albea Dispensing Lacrost DISPENSING France 100% 100%
Albea Simandre CRP France 100% 100%
Twist beauty packaging holding France CORPORATE France 100% 100%
Albea Beauty Solutions Europe SAS CRP France 100% 100%
Albea Tubes France SAS TUBES France 100% 100%
Albea Cosmetics France CRP France 100% 100%
SFG - (Bernaville) CRP France 100% 100%
Albea Services SAS CORPORATE France 100% 100%
Twist Beauty Packaging Asia Ltd CRP Hong Kong 100% 100%
Twist Beauty Packaging Make-up (Hong kong) Ltd CORPORATE Hong Kong 100% 100%
Albea Plastic Packaging (Hong kong) Ltd CRP/DISPENSING Hong Kong 100% 100%
Albea CMI HK Beauty Solutions Hong Kong 51% 51%
Twist Beauty Packaging Holding Hong kong Ltd CORPORATE Hong Kong 100% 100%
PT Albea Rigid Packaging Surabaya CRP Indonesia 100% 100%
PT Betts Indonesia - Tubes Surabaya TUBES Indonesia 100% 100%
PT Teckpack Asia - Semarang CRP/DISPENSING Indonesia 100% 100%
Betts India Pvt Ltd - Goa TUBES India 100% 100%
Albea Tubes Italy S.R.L TUBES Italy 100% 100%
Albea Cosmetics Italy S.R.L CRP Italy 100% 100%
Twist Beauty Packaging sarl (Luxembourg Bidco) CORPORATE Luxembourg 100% 100%
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 122
8.1. SCOPE OF CONSOLIDATION AS AT DECEMBER 31, 2017 (CONTINUED)
The following subsidiaries and joint ventures were legal entities held by Albéa at December 31, 2017
SUBSIDIARIES DESCRIPTION OPERATING SEGMENTCOUNTRY OF
INCORPORATIONPERCENTAGE OF
CONTROLPERCENTAGE OF
INTEREST
Albea Beauty Holdings SA CORPORATE Luxembourg Holding Holding
Albea Matamoros - Local Albea Packaging de Mexico CRP/TUBES Mexico 100% 100%
Albéa Mexicana LP TUBES Mexico 100% 100%
Twist Beauty Packaging Holding Mexico S de R.L DE CV CORPORATE Mexico 100% 100%
Cebal Americas Recursos Humanos S de R.L de CV TUBES Mexico 100% 100%
Cebal Americas de Reynosa S de R.L de CV TUBES Mexico 100% 100%
Cepillos de Matamoros SA de CV CRP Mexico 100% 100%
TPI Mexicana SA de CV CRP Mexico 100% 100%
Twist Beauty Packaging Holding Netherlands B.V CORPORATE Nederland 100% 100%
Albea Alkmaar DISPENSING Nederland 100% 100%
Albea Poland SP TUBES/CRP Poland 100% 100%
Albea Noginsk TUBES Russia 100% 100%
Albea Slovakia s.r.o. TUBES Slovakia 100% 100%
Albéa Slovakia Properties, s.r.o TUBES Slovakia 100% 100%
Rexam Taiwan Co CRP Taiwan 100% 100%
UK Bidco CORPORATE United Kingdom 100% 100%
Betts Ltd CORPORATE United Kingdom 100% 100%
Twist Beauty Packaging Asia Holdings Ltd CORPORATE United Kingdom 100% 100%
Albea UK Ltd (Colchester) TUBES United Kingdom 100% 100%
Boddington IP Limited CORPORATE United Kingdom 100% 100%
Betts International Ltd CORPORATE United Kingdom 100% 100%
Twist Beauty Packaging Asia Holdings Ltd CORPORATE United Kingdom 100% 100%
Betts Central Europe Holdings Ltd CORPORATE United Kingdom 100% 100%
Twist Beauty Packaging Holding Corp. CORPORATE USA 100% 100%
Albea Thomaston DISPENSING USA 100% 100%
Albéa Metal (Consolidated) CRP USA 100% 100%
Albéa Metal Holding, Corp CRP USA 100% 100%
Albéa Metal Real Estate, Inc. CRP USA 100% 100%
Albea Americas Inc. - Tubes HQ TUBES USA 100% 100%
Albea Americas Inc. - Shelbyville Tubes TUBES USA 100% 100%
Albea Plastic Packaging Texas Inc. CORPORATE USA 100% 100%
Albea Cosmetics Americas Inc CRP USA 100% 100%
Albéa Mexicana LP TUBES USA 100% 100%
Betts USA - Florence CORPORATE USA 100% 100%
Betts USA Holdings CORPORATE USA 100% 100%
Albea Beauty Solutions USA LLC CRP USA 100% 100%
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 123
8.2. SCOPE OF CONSOLIDATION AS AT DECEMBER 31, 2016
The following subsidiaries and joint ventures were legal entities held by Albéa at December 31, 2016.
SUBSIDIARIES DESCRIPTION OPERATING SEGMENTCOUNTRY OF
INCORPORATIONPERCENTAGE OF
CONTROLPERCENTAGE OF
INTEREST
Albéa do Brasil Embalagens Ltda CRP Brazil 100% 100%
Betts Brasil Tubos Laminados Ltda CORPORATE Brazil 100% 100%
Beauty Packaging Canada Holdings, Inc CORPORATE Canada 100% 100%
Albéa Canada, Inc TUBES Canada 100% 100%
Albéa Dispensing Systems Shanghai Co., Limited DISPENSING China 100% 100%
Albéa Plastic Metallizing Technology Shanghai Co. Limited CRP China 100% 100%
Twist Beauty Packaging Processing Shanghai Co., Limited CRP China 100% 100%
Albéa Plastic Molds Shanghai Co., Limited CRP China 100% 100%
Twist Beauty Packaging Plastic Products Shanghai Co., Limited CRP China 100% 100%
Twist Beauty Packaging Plastic Decoration Shanghai Co., Limited CRP China 100% 100%
Albéa Plastic Packaging Shenzen Co., Limited CRP China 100% 100%
Albéa Plastic Packaging Shanghai Co., Limited CRP China 100% 100%
Albéa (Packaging) Suzhou Co. Limited CRP China 100% 100%
Albéa Tubes (Zhongshan) Co., Limited TUBES China 100% 100%
Zhongshan Meiquan Plastic & Rubber Products Co., Limited CRP China 100% 100%
Albéa Deutschland GmbH TUBES Germany 100% 100%
Twist Beauty Packaging Holding Germany GmbH CORPORATE Germany 100% 100%
Albéa Le Treport S.A.S DISPENSING France 100% 100%
Albéa Dispensing Lacrost S.A.S DISPENSING France 100% 100%
Albéa Simandre S.A.S.U CRP France 100% 100%
Twist Beauty Packaging Holding France S.A.S CORPORATE France 100% 100%
Albéa Tubes France SAS TUBES France 100% 100%
Albéa Beauty Solutions Europe SAS CRP France 100% 100%
Albéa Cosmetics France S.A.S. CRP France 100% 100%
SFG – Société Française de Galvanoplastie S.A.S. CRP France 100% 100%
Albéa Services SAS CORPORATE France 100% 100%
Twist Beauty Packaging Asia Ltd CRP Hong Kong 100% 100%
Twist Beauty Packaging Make Up Hong kong Ltd CORPORATE Hong Kong 100% 100%
Albea Plastic Packaging Hong kong Ltd CORPORATE Hong Kong 100% 100%
Albéa Hong Kong Limited CRP Hong Kong 100% 100%
Twist Beauty Packaging Holding Hong Kong Limited CORPORATE Hong Kong 100% 100%
Cosmetech Mably International (HK) Limited CRP Hong Kong 51% 51%
PT Albéa Rigid Packaging Surabaya CRP Indonesia 100% 100%
PT Betts Indonesia TUBES Indonesia 100% 100%
PT Techpack Asia CRP Indonesia 100% 100%
Betts India Private Limited TUBES India 100% 100%
Albéa Tubes Italy S.p.A. TUBES Italy 100% 100%
Albéa Cosmetics Italy S.p.A CRP Italy 100% 100%
Twist Beauty Packaging sarl (Luxembourg Bidco) CORPORATE Luxembourg 100% 100%
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83 124
8.2. SCOPE OF CONSOLIDATION AS AT DECEMBER 31, 2016 (CONTINUED)
The following subsidiaries and joint ventures were legal entities held by Albéa at December 31, 2016.
DESCRIPTION OPERATING SEGMENTCOUNTRY OF
INCORPORATIONPERCENTAGE OF
CONTROLPERCENTAGE OF
INTEREST
Albéa Beauty Holdings SA CORPORATE Luxembourg Holding Holding
Albéa Servicios De México SA de CV TUBES Mexico 100% 100%
Twist Beauty Packaging Holding Mexico S. De R.L. de CV CORPORATE Mexico 100% 100%
Cebal Americas Recursos Humanos S de R.L de CV TUBES Mexico 100% 100%
Cebal Americas deReynosa S. de RL De CV TUBES Mexico 100% 100%
Albéa Cepillos de Matamoros CRP Mexico 100% 100%
Albéa Packaging De México SA de CV TUBES Mexico 100% 100%
TPI Mexicana SA de CV TUBES USA 100% 100%
Twist Beauty Packaging Holdings Netherlands B.V. CORPORATE Nederland 100% 100%
Albéa Alkmaar B.V. DISPENSING Nederland 100% 100%
Albea Poland TUBES Poland 100% 100%
St Petersburg CORPORATE Russia 100% 100%
Albéa RUS LLC TUBES Russia 100% 100%
Albea Slovakia Sro TUBES Slovakia 100% 100%
Albea Slovakia Holdings Sro TUBES Slovakia 100% 100%
Albea Slovakia Properties Sro TUBES Slovakia 100% 100%
Rexam Taiwan Co. Ltd CRP Taiwan 100% 100%
Albéa UK Limited TUBES United Kingdom 100% 100%
Twist Beauty Packaging UK Limited CORPORATE United Kingdom 100% 100%
Twist Beauty Packaging Asia Holdings Limited CORPORATE United Kingdom 100% 100%
Betts Ltd CORPORATE United Kingdom 100% 100%
Betts Central Europe Holdings Ltd CORPORATE United Kingdom 100% 100%
Betts International Ltd CORPORATE United Kingdom 100% 100%
Boddington IP Limited CORPORATE United Kingdom 100% 100%
Albéa Thomaston, inc. DISPENSING USA 100% 100%
Betts USA, inc. CORPORATE USA 100% 100%
Betts USA Holdings, inc. CORPORATE USA 100% 100%
Twist Beauty Packaging Holding Corp CORPORATE USA 100% 100%
Albéa Metal Holding, Corp CRP USA 100% 100%
Albéa Metal Real Estate, Inc. CRP USA 100% 100%
Albéa Metal Americas Inc CRP USA 100% 100%
Albéa Beauty Solutions USA LLC CRP USA 100% 100%
Albéa Plastic Packaging Texas Holding, inc CORPORATE USA 100% 100%
Albéa Americas, inc TUBES USA 100% 100%
Albéa Cosmetics Americas Inc CRP USA 100% 100%
Cébal Mexicana LLC CRP USA 100% 100%
Cébal Mexicana LP CRP USA 100% 100%
SUBSIDIARIES
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg T : +352 494848 1, F : +352 494848 2900, www.pwc.lu Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256) R.C.S. Luxembourg B65 477 - TVA LU25482518
Audit report
To the Board of Directors of Albéa Beauty Holdings S.A.
Our opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of Albéa Beauty Holdings S.A. (the “Company”) and its subsidiaries (the “Group”) as at 31 December 2017, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
What we have audited
The Group’s consolidated financial statements comprise:
• the consolidated statement balance sheet as at 31 December 2017;
• the consolidated income statement and consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of changes in equity for the year then ended;
• the consolidated cash flow statement for the year then ended; and
• the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our responsibilities under those Law and standards are further described in the “Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the consolidated financial statements” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial statements. We have fulfilled our other ethical responsibilities under those ethical requirements.
2
Other information
The Board of Directors is responsible for the other information. The other information comprises the information stated in the Annual report including the Management report but does not include the consolidated financial statements and our audit report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors for the consolidated financial statements
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the consolidated financial statements
The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
3
• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors;
• conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause the Group to cease to continue as a going concern;
• evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
• obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. PricewaterhouseCoopers, Société coopérative Represented by
Luxembourg, 9 April 2018
Malik Lekehal
Albéa Beauty Holdings S.A. Consolidated financial statements for the year ended December 31, 2017
In thousands of USD
83
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