ALBÉA GROUP S.A · Albéa Group S.A.S. Consolidated Management Report for period ended December 31, 2018 2 Albéa at a glance (*)Sales in 2018 proforma for 12 month of Albéa group

ALBÉA GROUP

S.A.S

CONSOLIDATED MANAGEMENT REPORT

YEAR ENDED DECEMBER 31, 2018

Albéa Group S.A.S. Consolidated Management Report for period ended December 31, 2018

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Albéa at a glance

(*)Sales in 2018 proforma for 12 month of Albéa group operating activities (non audited)


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GENERAL INFORMATION AND PRESENTATION OF FINANCIAL

STATEMENTS

General information :

Albéa Group S.A.S. previously Hercule Holding

S.A.S. (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 B221112

and is an affiliate of PAI Partners. Albéa Group and

the subsidiaries included in the scope of

consolidation constitute the Albéa Group (“Albéa”

or “the Group”).

The company was created January 12th, 2018 with

no activity. The Company held by PAI Partners

completed the acquisition of Albéa group on March

23th 2018.

The standards and interpretations applied to

prepare Consolidated financial statements as on

December 31, 2018 are those published by the

Official Journal of the European Union applicable as

on December 31, 2018.

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.


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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, 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.


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ALBEA GROUP BUSINESS OVERVIEW

Albéa activity presentation

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 40

plants, operating in 17 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 India and South

Africa. 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


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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.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 Group products and segments

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


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customers’ packaging spend and to attract

new customers.


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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 a 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. 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 to

most major toothpaste manufacturers, including Procter

& Gamble Unilever and Arm & Hamme

Albéa has engaged in a major development project with

our main customer to start producing 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.

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, which require distinctive and

branded packaging. 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 various diameters .Albéa sells most of its

tubes fitted with cap produced internally, including certain

caps with our proprietary designs such as our “slender


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caps” and our tamper resistant “access denied” lines. Albéa

also buys plastic caps from suppliers.

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 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


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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.

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


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optimal time to 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 Group Geographical footprint

Our business is diversified among numerous

regions around the world, with a broad

manufacturing footprint in 17 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.

Sales by geographic area From March 23 2018 to December 31,2018


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Manufacturing footprint

We have a global manufacturing platform of 40

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.

52%

34%

14%

Europe America Asia


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ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Profit and Loss statement December 31, 2018 (nine month operating activities for Albéa Group)

Albéa Group SAS is new head of consolidation since

the PAI acquisition, this entity has been created on

January 12th, 2018 with no activity. On March 23th

2018, one of its subsidiaries completes the Albéa SA

acquisition. In accordance to International

accounting rules (IAS 1), Albéa Group consolidated

financial statements includes only the consolidated

statement of financial position as at 31 December

2018, and the related consolidated statements of

income, comprehensive income, changes in equity

and cash flows for the period from 23 March 2018

to 31 December 2018 for Albéa Group S.A.S (only

nine month of operating activities). There is no

comparative for balance sheet and income

statement in accordance to this new group

constitution.

Revenue

Net sales for the period from March 23th to

December 2018 amount to $1 197 million.

Albea group Sales for 12-month period for year

ended 2018, at constant rates and perimeter,

growth by 3.0% from $1 512.4 million to $ 1 557.5

million in line with commercial ambitions.

Albéa’s sales growth is driven in 2018 by Global

Accounts with a performance of +8.4%.

Period Ended

December 31,

2018

Continuing operat ions:

Revenue 1 197 385

Cost of sales (969 863)

Gross profit 227 522

Selling and adm inist rat ive expenses (145 974)

Rest ruct uring and pro ject cost s (35 870)

Ot her incom e / (expense) (55 007)

Operat ing profit (9 329)

Financial incom e 21 487

Financial expense (89 614)

Financial result (68 127)

Share of prof it (loss) of associat es (428)

Profit (loss) from continuing operat ions before income taxes (77 884)

Incom e t ax expense (1 962)

Profit (loss) from continuing operat ions (79 846)

Profit (loss) for the period attributable to owners of the parent (79 846)


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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

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 :

Adjusted EBITDA

The adjusted EBITDA for the period from March

23th to December 2018 amount to $153.3 million,

Adjusted EBITDA margin ratio amounts to 12.8%.

Adjusted EBITDA proforma for Albéa group for 12

month period for year ended 2018 amounts to

$198.1 million including Covit, acquired at the end

of February 2018. It increased at constant rates and

same perimeter by 2.1% from $191.9 million for

2017 to $196.0 million for 2018 (excluding

perimeter effects).

Cost of Sales

Cost of sales amount to $969.9 million for period

ended December 2018 and the cost of sales to

revenue ratio represent 81,0% and 75.25%

excluding depreciation.

Employee benefit expenses related to cost of sales

(including temporary staff) for the nine months

ended December 31, 2018, represent 21.3% of our

revenue.

Selling and Administrative Expenses

Selling and administrative expenses amount to $146

million for nine-month period or 13.0% on sales.

R&D

Albéa spent $9.9 million in research and

development projects for the nine months ended

December 31, 2018. Albéa is the top 50 patent fillers

in France and has around 150 people dedicated to

Innovation, Development and Designing.

Restructuring and Project Costs

At December 31, 2018, the main components of

restructuring and projects costs are as follows:

- $20.3 million Transaction cost linked to

Albéa SA acquisition (Merger and

acquisition cost, legal and tax advisory cost

in accordance to the restructuring plan post

acquisition)

- $4.7 million, severance costs and

restructuring expenses

- $6.3 million, transformation project cost

(industrial and administrative

transformation projects …)

- $1.9 million corporate structure


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- $0.8 million integration cost linked merger

acquisitions project costs (Creative and

LTI)

- $1.7 million, other

Other Income / (Expense)

Other expenses amount to $55,0 million for period

ended December 2018. The other expenses include

mainly the depreciation of intangible assets (Albéa

customer relationship amortization and Albéa

Tradename recognized for the purchase price

allocation) for $31.5 million, the impact of the

reversal of the inventory step-up recorded in the

opening balance sheet for the purchase price

allocation for $19.5 million and $3.5 milion of

equity base compensation expense (free share plan

implemented in April 2018).

Financial Result

Financial result amounts to a loss of $68.1 million

at period ended December 2018, and includes:

- Interest costs on net debt : $14.8 million for

YBPEC instrument , $28.3 million for Term

loan B interest and S$10.4 million Senior

notes interest

- net realized foreign exchange gain of $4.7

million mainly due to Term loan B novation

operation (Term Loan B debt push down

from Luxembourg entity to our American

Organization)

- And Unrealized foreign exchange losses on

the net debt is mainly due conversion

impact of the Term Loan B for USD (8.6)

million. This is a non-cash item, a result of

the translation of Term loan USD held by

the company whose functional and

reporting currency is euro

Income Tax Expense

For income tax expense amount to $1.9 million, for

period ended December 2018. This tax expense can

be rationalized as follow : current tax expenses in

several regions (Germany, Mexico, Poland, US and

Indonesia) due to our profitability as per Local

regulation addition, others taxes like French CVAE

for $(3.4) million, withholding tax for $(1.5) million

mainly in Brazil, which are classified in income tax

in accordance with IFRS but are not calculated on

the net income before taxes compensate by deferred

tax income linked to customer relationship and

tradename amortization in accordance to Purchase

price allocation of Albéa acquisition.

Profit/(loss) from Continuing Operations

The result from continuing operations is a loss of

$(79.8) million at period ended December 2018

including several non recurring impacts linked to

Albéa SA acquisition of which reversal of inventory

step up of $(19.5) million and $(20.3) million of

acquisition cost .

Cash flow


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Cash flow from operating activities is positive for

period ended December 2018 at $103.6 million.

Capital expenditure net of disposal amounts to

$(76.3) million including assets deal with SAVCOR

and CEP for $(5.5) million.

Balance sheet for the year ended December 31, 2018

Net debt (non gaap mesure)

At December 31, 2018, net debt amount to $ 1 200.5 million including mainly Term loan B for $842.5 million,

Senior note for $163.8 million and YBPEC for $188.8 million

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 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

In $ million At December 31,

2018

Total assets 2 061,7

Cash and cash equivalent s 107,1

Invent ories 179,1

Trade and ot her receivables 186,7

Propert y, p lant and equipm ent 523,6

Int angib le asset s 434,2

Goodw ill 594,0

Ot her asset s 37,1

Total liabilit ies 1 852,8

Trade and ot her payables 328,2

Pensions and ot her post - em ploym ent benef it ob ligat ions 75,4

Ot her liab ilit ies 8,5

Def fered t ax liab ilit ies 124,4

Borrow ings 1 316,3

Total Equity 208,9

Share capit al 1,8

Addit ional paid- in capit al 263,9

Ret ained earn ings and ot her com ponent s of equit y (56,8)

Total Equity and liabilit ies 2 061,7


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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 have sufficient liquidity for our

present requirement.


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ALBEA GROUP EMPLOYEES

For the year ended December 31, 2018 our year-end

number of employees were 15 348 (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.

3 266

945

2 664

3 572

4 901

Global Headcount 20 18(Total 15 348)

North America South America

China South Asia

Europe


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ALBEA GROUP RISK FACTORS

Below is an overview of what we believe to be the principal risks to Albéa


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Group internal control profile

Our management is responsible for establishing and

maintain adequate 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.


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CORPORATE SOCIAL RESPONSIBILITY

Albéa has been committed to Corporate Social

Responsibility (CSR) since 2004. Regardless of how

our business has evolved over the past 15 years, our

convictions have always remained the same: CSR is

a lever for growth, reputation, commitment, and

attractiveness in the short and long term.

Our approach is meant to be inclusive. All our

employees and offices are involved, and we seek to

develop partnerships with our customers,

suppliers, and communities.

Our approach is structured around four pillars:

people, products, operations, and partners. For

each pillar, we set quantitative or qualitative

targets, supported by local or global programs, and

we track our progress each year!

In a global context marked by our clients’ firm CSR

commitments, the motivation of governments and

international associations, increasing expectations

of our employees and future talents, and regulatory

evolution, we affirm our ambition: We want to

improve the environmental, social and economic

footprint of our business, while actively

contributing to the development of an efficient

circular economy in the beauty and personal care

industry.

That’s why we target Ecovadis Gold and Carbon

Disclosure Project A/A- status.

In 2018, Albéa signs Ellen McArthur’s New Plastic Economy Global Commitment.


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ALBEA GROUP VISION

We share a vision: we want to be the best company for all our stakeholders

Our strategy is to accompany our clients in all their

ambitions, thanks to six pillars:

- Guarantee the complete satisfaction of our

customers. We closely monitor all indicators of

quality, service, reliability of new product

development, and more. Each year we measure

our customers' satisfaction and our internal

progress via a large-scale global survey.

- Ensure operational excellence. This includes

safety first and foremost, but also quality,

service, reliability of our new product

developments, efficiency of our lines,

competitiveness of our products, and more. In a

competitive, innovative and fast-paced market,

optimal operational performance is a

prerequisite, every day and everywhere.

- Create and produce innovative packaging and

solutions. We focus our innovations on three key

areas:

o Product: We manufacture or buy innovative

items that offer better ergonomics, visual

differentiation, new uses, affordable prices,

and stylish design.

o Process: We develop innovative technologies

and new processes so that our packaging is

increasingly distinctive, efficient,

competitive, and eco-friendly.

o Development: We create the packaging that

our customers imagine, overcoming technical

challenges and ensuring the end product is

cost effective.

- Build highly skilled teams. We want to build the

team that will help Albéa succeed, made up of

committed, passionate, motivated, and

competent women and men. We want to offer

them opportunities for professional growth, to

strengthen their skills, and to develop new ones.

- Invest to back our projects and strategy. Each

year, we invest to support our customers'

projects (new molds, lines, technologies,

installations, etc.), modernize our equipment

and factories, increase our operational

efficiency and competitiveness, train our

employees, and deploy new systems across

operations.


26

- Act responsibly towards all. For 15 years, we

have been committed to improving our

operations’ environmental, social, and economic

footprints worldwide, for all our employees and

stakeholders, in all communities in which we

operate.

SUBSEQUENTS EVENTS

In March 2019, Albéa has completed the acquisition

of 100% of the share capital of Orchard Custom

Beauty, a recognized specialist of full-service

turnkey solutions headquartered in Toronto,

Canada.

Orchard employs 100 people and operates through

offices in Canada, California and China. It generates

a turnover in excess of USD 50 million and serves

primarily private label retailers as well as beauty

brands and distributors – managing everything

from concept to delivery.

Albéa Group S.A.S. Consolidated Financial Statements For Year End December 31, 2018

Albéa Group S.A.S. Consolidated financial statements for period ended December 31, 2018 In thousands of USD

1

Contents CONSOLIDATED INCOME STATEMENT ........................................................................................................................... 3

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME ................................................................... 4

CONSOLIDATED BALANCE SHEET .................................................................................................................................... 5

CONSOLIDATED CASH FLOW STATEMENT .................................................................................................................... 6

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................................................. 7

NOTE 1 GENERAL INFORMATION ................................................................................................................................. 9

NOTE 2 ACCOUNTING POLICIES.................................................................................................................................. 10

2.1. STATEMENT OF COMPLIANCE .......................................................................................................................... 10

2.2. BASIS OF PREPARATION ................................................................................................................................ 10

2.3. SIGNIFICANT ACCOUNTING POLICIES ....................................................................................................... 13

NOTE 3 SIGNIFICANT EVENTS ...................................................................................................................................... 16

3.1. CHANGE IN CONSOLIDATION SCOPE: ALBEA ACQUISITION ................................................................... 16

3.2. SENIOR NOTES .................................................................................................................................................. 17

3.3. REFINANCING PROCESS ................................................................................................................................ 17

3.4. LTI ACQUISITION ............................................................................................................................................... 18

NOTE 4 SEGMENT REPORTING .................................................................................................................................... 19

4.1. SEGMENT REPORTING ....................................................................................................................................... 20

4.2. GEOGRAPHICAL INFORMATION ................................................................................................................. 20

NOTE 5 NOTES TO THE INCOME STATEMENT .........................................................................................................22

5.1. REVENUE .................................................................................................................................................................22

5.2. COST OF SALES .................................................................................................................................................22

5.3. SELLING AND ADMINISTRATIVE EXPENSES .............................................................................................23

5.4. RESTRUCTURING AND PROJECT COSTS ...................................................................................................23

5.5. OTHER INCOME (EXPENSE) ........................................................................................................................... 24

5.6. NET FINANCIAL RESULT .................................................................................................................................25

5.7. SHARE OF PROFIT ASSOCIATES .................................................................................................................. 26

5.8. INCOME TAX ..................................................................................................................................................... 26

5.9. EMPLOYEE BENEFIT EXPENSES AND PERSONNEL EXPENSES .......................................................... 29

NOTE 6 NOTES TO THE BALANCE SHEET ............................................................................................................ 30

6.1. GOODWILL ............................................................................................................................................................. 30

6.2. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT....................................................... 31

6.3. OTHER FINANCIAL ASSETS ............................................................................................................................ 33

6.4. INVENTORIES..................................................................................................................................................... 34

6.5. TRADE AND OTHER RECEIVABLES .............................................................................................................. 35

6.6. CASH AND CASH EQUIVALENTS ................................................................................................................. 36

6.7. ASSETS AND LIABILITIES HELD FOR SALE ................................................................................................ 36

6.8. SHAREHOLDERS’ EQUITY .............................................................................................................................. 36

6.9. BORROWINGS AND OTHER FINANCIAL LIABILITIES .............................................................................. 37

6.10. PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS OBLIGATIONS .................................. 39

6.11. PROVISIONS ....................................................................................................................................................... 42

6.12. TRADE AND OTHER PAYABLES .................................................................................................................... 43


2

6.13. FINANCIAL INSTRUMENTS ............................................................................................................................ 43

NOTE 7- ADDITIONAL INFORMATION ........................................................................................................................... 45

7.1. FINANCIAL RISK MANAGEMENT ...................................................................................................................... 45

7.2. COMMERCIAL RISKS ....................................................................................................................................... 49

7.3. CONTINGENCIES AND COMMITMENTS .................................................................................................... 49

7.4. LEASE COMMITMENTS ................................................................................................................................... 51

7.5. RELATED PARTIES ............................................................................................................................................52

7.6. EXECUTIVE COMMITTEE TOTAL REMUNERATION .................................................................................52

7.7. AUDITORS’ FEES................................................................................................................................................52

7.8. SUBSEQUENT EVENTS .................................................................................................................................... 53

NOTE 8 COMPANIES INCLUDED IN THE CONSOLIDATION SCOPE AS OF DECEMBER 31, 2018 ........... 54


3

CONSOLIDATED INCOME STATEMENT

Period from January 12, 2018 to December 31, 2018

The notes are an integral part of the consolidated financial statements.

Period Ended December 31,

Note 2018

Continuing operations:

Revenue 5.1 1 197 385

Cost of sales 5.2 (969 863)

Gross profit 227 522

Selling and administrative expenses 5.3 (145 974)

Restructuring and project costs 5.4 (35 870)

Other income / (expense) 5.5 (55 007)

Operating profit (9 329)

Financial income 21 487

Financial expense (89 614)

Financial result 5.6 (68 127)

Share of profit (loss) of associates 5.7 (428)

Profit (loss) from continuing operations before income taxes (77 884)

Income tax expense 5.8 (1 962)

Profit (loss) from continuing operations (79 846)

Profit (loss) for the period attributable to owners of the parent (79 846)


4

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME



NotePeriod Ended December 31,

2018

Profit/(Loss) for the period (79 846)

Other comprehensive income:

Items that will not be reclassified to profit or loss 6.10 4 472Actuarial gains/(losses) on post-employment benefit plans 4 818Tax effects (346)Items that may be reclassified to profit or loss 18 534

Net change in foreign currency translation adjustments 21 087Cash Flow Hedge (2 553)Total other comprehensive income for the period, net of tax 23 006

Total comprehensive income for the period (56 840)

Attributable to:

i) Owners of the parent (56 840)

ii) Non-controlling interests -


5

CONSOLIDATED BALANCE SHEET


At December 31,

2018Non-current assetsGoodwill 6.1 593 956 Intangible assets 6.2 434 184 Property, plant and equipment 6.2 523 574 Deferred tax assets 5.8 13 392 Investments in associates 1 809 Other financial assets 6.3 18 387 Total non-current assets 1 585 302

Current assetsInventories 6.4 179 069 Trade and other receivables 6.5 186 680 Other financial assets 6.3 3 251 Cash and cash equivalents 6.6 107 104 Assets held for sale 6.7 291 Total current assets 476 395

Total assets 2 061 697

Note

At December 31,

2018

EquityShare capital 6.8 1 833 Additional paid-in capital 263 934 Retained earnings and other components of equity (79 846)Other comprehensive income 23 006

Equity excluding non-controlling interests 208 927

Non-current liabilitiesBorrowings 6.9 1 240 350 Deferred tax liabilities 5.8 124 413 Pensions and other post-employment benefit obligations

6.10 75 375

Non-current provisions 6.11 3 204 Total non-current liabilities 1 443 342

Current liabilitiesBorrowings 6.9 75 905 Trade and other payables 6.12 328 237 Current provisions 6.11 5 286 Total current liabilities 409 428

Total liabilities 1 852 770

Total equity and liabilities 2 061 697

Note


6

CONSOLIDATED CASH FLOW STATEMENT


(1) Includes mainly Albéa SA acquistion (see note 3.1) and Laminate Tubes Industries SA Proprietary Ltd (LTI) acquisition (see note .4)

(2) Loan issued include mainly February 2018 Senior Notes issurance (see note 3.2), part of YBPEC classifed in net financial debt and Term Loan B issuance (for the same amount as the repayment) linked to the repricing (see note 3.3)

(3) Loan repayment includes Term Loan B repayment linked to the repricing (see note 3.3).

Period ended December 31,

2 018

Loss for the period (79 846)

Adjustments for :

Share of profit of associates 5.7 (428)

Income tax expense recognized in profit or loss 5.8 1 962

Net finance costs 5.6 68 127

Depreciation and amortization 6.2 104 315

Net (gain)/loss on disposal of assets 5.5 325

Unrealized foreing exchange gains (losses) on working capital 5.5 (517)

Movements in working capital 25 783

Change in provisions 4 601

Income taxes paid (20 752)

Cash flow from operating activities 103 569

Acquisitions of assets (80 147)

Loans (advances)/repayments -

Disposal of assets 6.2 3 786

Acquisition / Disposal of subsidiary, net of cash acquired (1) (497 520)

Other 1 953

Cash flow used in investing activities (571 928)

Cash flow from operating and investing activities (468 357)

Loans issued 6.9 (2) 1 249 988

Factoring 6.9 17 216

Repayment of loans 6.9 (3) (894 351)

Interest paid (53 240)

YBPEC inssurance Equity 79 650

Proceeds of share issue 183 281

Cash flow from (used in) financing activities 582 544

Net increase / (decrease) in cash and cash equivalents 114 185

Cash and cash equivalents at beginning of the period -

Exchange gains/(losses) (8 223)

Cash and cash equivalents at end of the period 6.6 105 965

Note


7

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Share capital On January 12, 2018, the Company was incorporated with a share capital of EUR 12 000 represented by 1 200 000 shares with a nominal value of EUR 0.01 each. On February 23, 2018, it was decided to increase the share capital of the Company by an amount of EUR 18 000 by the issuance of 1 800 000 shares contributed in cash. In March 20, 2018, it was decided to: - reclassify all the 3 000 000 shares issued by the Company into 3 000 000 ordinary shares. - increase the share capital of the Company by an amount of EUR 1 515 080 by the issuance of 24 733 520 ordinary shares and 126 774 519 preference shares, each with a nominal value of EUR 0.01. The contribution was made in cash for an amount of EUR 151 508 039 and allocated to the share capital account of the Company for an amount of EUR 1 515 080 and to the share premium account of the Company for an amount of EUR 149 992 958. - decrease the share capital of the Company by an amount of EUR 29 700 by the cancellation of 2,970,000 ordinary shares for a total redemption price of EUR 29 700 allocated to the share premium account of the Company.

On March 23, 2018, it was decided to increase the share capital of the Company by the issuance of 1 094 748 ordinary shares and 943 338 preference shares. The shares have been subscribed at a total issue price of EUR 2 038 086 by way of a contribution in kind of 808 B0 shares, 165 B1 shares and 264 B2 shares of Albéa S.à r.l. out of which EUR 20 380 was allocated to the share capital account of the Company and EUR 2 017 705 to the share premium account of the Company. On the same date, it was decided to create an authorized share capital of EUR 33 599 consisting of 2 551 166 ordinary shares and 808 751 preferences shares. As at December 31, 2018, the subscribed capital amounting to EUR 1 535 761 is represented by 25,858,268 ordinary shares and 127 717 857 preference shares each with a nominal value of EUR 0.01, fully paid and the authorized share capital of EUR 33 599 represented by 2 551 166 ordinary shares and 808 751 preferences shares. As at December 31, 2018, the share premium account amounts to EUR 152 040 363.

Share capital

Additional paid-in capital

Retained earnings

Actuarial gains

(losses)

Cash Flow Hedge

Translation reserve

Total Non controlling

interest

Total equity

At January 2018 - - - - - - - - -

Profit (Loss) for the period - - (79 846) - - - (79 846) - (79 846)

Other comprehensive income - - - 4 472 (2 553) 21 087 23 006 - 23 006

Total comprehensive income - - (79 846) 4 472 (2 553) 21 087 (56 840) - (56 840)

Proceeds of share issue 1 833 - - - - - 1 833 - 1 833

Equity based compensation - 2 837 - - - 2 837 - 2 837

Share premium issuance - 181 448 - - - - 181 447 - 181 447

YBPEC - 79 650 - - - - 79 650 - 79 650

At December 31, 2018 1 833 263 935 (79 846) 4 472 (2 553) 21 087 208 927 - 208 927

Attributable to owners of the parent


8

Yield Bearing Preferred Equity Certificates On March 20, 2018, Yield Bearing Preferred Equity Certificates (YBPECs) were issued by Albéa Group SAS and subscribed by Hercule PAI holding Sàrl for 231 615 124 with a part value of EUR 1 and an aggregate value of EUR 231 615 124. The YBPECs are interest bearing, with a coupon rate of 11.0% per year and carry no voting rights. Unless redeemed earlier, the YBPECs must be redeemed at value plus any accrued and unpaid interest on the later date of 10th anniversary of the date of issuance or the date falling 180 days following the final stated maturity of the Senior Notes. At redemption date, the Company may, instead of redeeming the YBPECs convert all or only some YBPECs into Preference Share. Considering the features of the instrument, YBPEC is a compound instrument which includes a financial liability component and an equity component. The financial liability components is equal to the discounted value of future cash payment, which are mainly interest due in 10 years. The difference between the nominal amount of the YBPECs and the financial liability component correspond to the equity component. As of December 31, 2018, the discounted carrying amount of the YBPECs is EUR 177.5 million (USD 143.9 million) and accrued interest EUR 12.9 million, (equivalent to USD 14.5 million) and is classified in borrowings (see note 6.9). The other portion was classified in equity for USD 79.6 million.

Equity Based compensation In 2018 the group implemented a free shares plan detailed as follows:

Free shares are granted to employees deemed to be key for the Group, subject to the grantees’ continued presence within the Group after a vesting period of one year, for the ordinary shares (OS); there is no vesting period for the preferred shares (PS). The free shares’ fair value corresponds to the nominal value of the Group shares at the date of the acquisition of the group by Hercule PAI Holdings S.à.r.l. (see note 5.5 and 5.9). Albea free shares plans is equity-settled. The fair value of instruments is recognized in “other income and expense”, for USD 3.4 million, on a straight-line basis over the period during which those rights vest, using the straight-line method, with the offsetting credit recognized directly in equity for USD 2.8 million at 2018 December closing these shares have not yet been issued cf. Note 6.8. Employees deemed to be key for the Group have invested in Albéa Group SAS at fair value and for the same price as the majority shareholder. Therefore, this investment has been recorded in equity and no charge has been recorded in the consolidated financial statements of the period. These individuals will be entitled to a potential capital gain following a liquidity event, subject to vesting conditions.

Grant Date Albéa - OS Albéa - PSApril 10, 2018 April 10, 2018

Number of shares granted 2 046 736 808 751 Share price at grant date (€) 1 1 Vesting date April 10, 2019 No vesting period Fair value of the instrument 1 1 2018 expense recognized (in $ thousands) 2 483 1 000


9

NOTE 1 GENERAL INFORMATION

General information

Albéa Group S.A.S. previously Hercule Holding S.A.S. (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 B221112 and is an affiliate of one fund of PAI Partners group. Albéa Group and the subsidiaries included in the scope of consolidation constitute the Albéa Group (“Albéa” or “the Group”). The company was created January 12th, 2018 with no activity. The Company held by a fund of PAI Partners group completed the acquisition of Albéa SA on March 23th 2018. 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 40 manufacturing facilities in 17 different countries across Europe, the Americas, Asia and South Africa.

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. According to IAS 1, Albéa's consolidated financial statements includes the consolidated statement of financial position as at 31 December 2018, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the period from January 12, 2018 to December31, 2018 for Albéa Group S.A.S, with operational activity of the group (Albéa SA) from March 23, 2018 to December 31, 2018. There is no comparative for balance sheet and income statement in accordance to this new group constitution. Albéa's consolidated financial statements for the period ended December 31, 2018 were authorized for issue by the Board of directors on March 28, 2019 and will submitted to the shareholder for approval before June 30, 2019


10

NOTE 2 ACCOUNTING POLICIES

2.1. STATEMENT OF COMPLIANCE

Albéa’s consolidated financial statements for the year ended December 31, 2018 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, 2018 consolidated financial statements are those published by the Official Journal of the European Union at December 31, 2018, 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 2.3.2. 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.

2.2.2. Accounting standards and interpretations issued by the IASB and endorsed by the European Union and applicable for financial years beginning on or after January 2018 IFRS 9 “Financial Instruments”

In July 2014, the IASB published the complete version of IFRS 9 – Financial Instruments, which replaces most of the guidance in IAS 39 – Financial Instruments: Recognition and Measurement. The complete standard covers three main topics: classification and measurement, impairment and hedge accounting. IFRS 9 introduces a single model for determining whether financial assets should be measured at amortized cost or at fair value. This model supersedes the various models set out in IAS 39. IFRS 9 introduces a single impairment model that also includes a simplified approach for financial assets that fall within the scope of IFRS 15 – Revenue from Contracts with Customers. This model is based in particular on the notion of

expected credit losses, which applies regardless of the financial assets’ credit quality. In October 2017, the IASB issued an amendment to IFRS 9 clarifying the accounting for the modification of financial liabilities. The amendment provides that modifications of financial liabilities that do not result in derecognition give rise to an adjustment to the amortized cost of the financial liability on the date of modification. The adjustment must be recognized in full in the income statement.


11

IFRS 15 “Revenue from Contracts with Customers”

This 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 Standard comes into effect as of January 2018 with early application permitted.

Amendment to IFRS 2 – Share-based Payment

In June 2016, the IASB issued an amendment to IFRS 2 – Share-based Payment. This amendment specifies in particular that, for cash-settled share-based payment plans, non-market performance conditions and service conditions must impact the number of granted shares expected to vest but not their fair value. In addition, the amendment outlines that, for equity-settled share-based payment plans, the IFRS 2 charge recognized in equity does not have to be reduced by any withholding tax to be paid by the entity to tax authorities on behalf of beneficiaries.

2.2.3. New standards, amendments and interpretations adopted by the European Union not applicable to the Group until future periods IFRS 16 “Leases”

IFRS 16 “Leases” deals with principles for the recognition, measurement, presentation and disclosures of leases. When entering into a lease involving fixed payments, this standard requires that a liability be recognized in the balance sheet, measured at the discounted present value of future lease payments and offset against a right- of- use asset amortized over the lease term. 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 subsidiaries of the group initiated the identification of their leases across segments and regions. The analyzes of these contracts with regards to the criteria of the new IFRS 16, as well as the estimation of the impacts on the consolidated financial statements, were finalized at the beginning of 2019. The amount of the liability depends on the assumptions used for the lease term and discount rate. The lease term used to calculate the liability

is the term of the initially negotiated lease, taking into account early termination or extension options if highly probable. The Group plans to apply exemptions allowed by IFRS 16.5 to not recognize short term leases (less than 12 months) and leases for which the underlying asset is of a low value. The discount rate is determined in the same way as the total of the risk- free rate for the lease currency, with respect to the lease term, and the Group’s credit risk for this same reference currency and maturity. IFRS 16, applicable to Albéa Group starting January 2019 is expected to have a material impact on the Group’s financial statements. The group will adopt the modified retrospective method. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January2019. The estimated impact on the balance sheet of the initial application of IFRS 16 will not exceed 15% of the total borrowings. Most leases are related to the Group’s production plants, machinery equipment, and warehouses.


12

IFRIC 23 - Uncertainty over Income Tax Treatments

In June 2017, the IASB issued IFRIC 23 – Uncertainty over Income Tax Treatments. According to this interpretation, when it is not probable that the relevant tax authority will accept a given tax treatment, this uncertainty should be reflected in income tax calculations, while the risk of detection by the tax authority should be considered as certain. This

interpretation is effective for annual periods beginning on or after January 1, 2019. The Group reviewed this interpretation, to determine its possible impact on the consolidated financial statements and related disclosures. This interpretation should have no material impact on the Group.

2.2.4. New standards, amendments and interpretations not yet adopted by the European Union not applicable to the Group until future periods

Amendments to IAS 19 – Employee Benefits

In February 2018, the IASB issued limited amendments to IAS 19 – Employee Benefits. These amendments specify that, in case of amendment, curtailment or settlement of a defined benefit pension plan, the entity must use the updated actuarial assumptions to determine the service cost and the net interest cost for the period following the plan amendment. They also specify that the impact of such cases on any plan surpluses must be accounted for in the income statement even if these surpluses were not previously recognized. These amendments, which have been adopted by the European Union, should be effective for annual periods beginning on or after January 1, 2019.

Amendments to IAS 1 and IAS 8 – Definition of Materiality

In October 2018, the IASB issued amendments to IAS 1 – Presentation of Financial Statements and IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors. These amendments clarify that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of the financial statements make. These amendments, which have not yet been adopted by the European Union, should be effective for annual periods beginning on or after January 1, 2020. The Group reviewed these amendments, to determine their possible impact on the consolidated financial statements and related disclosures. These amendments should have no material impact on the Group.


13

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 Group S.A.S. 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, 2018, there are no non-controlling interests. A complete list of these subsidiairies is presented in the note 8” Consolidation methods

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. 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.

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 acquire and the acquisition-date fair value of any previous equity interest in the acquire 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. 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 are mainly EUR; GBP, BRL and CNY). The consolidated financial statements are presented in US dollars, which is Albéa’s presentation currency.


14

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. 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. Judgments in applying critical accounting estimates 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


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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 (Deferred taxes (Note 5.8), goodwill (Note 6.1),

Intangible asset and Property plant and equipment (Note 6.2) and Provisions (Note 6.11)). 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.


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NOTE 3 SIGNIFICANT EVENTS

3.1. CHANGE IN CONSOLIDATION SCOPE: ALBEA ACQUISITION

Albéa Group S.A.S., top holding company of the Albéa Group, was created on January 2018 by a fund of PAI Partners group to structure the acquisition of Albea SA which was completed on March 23th, 2018. A fully own indirect subsidiary of Albéa Group SAS acquired Albéa SA for a net price of USD 603 million. This acquisition has been financed through capital injection of the owner and the issuance of a EUR 150 millions Senior Notes (Pay-if You-Can) issued by Hercule Debtco (fully own subsidiary of Albéa Group SAS). The assets and liabilities acquired were recognized based on book values at the acquisition date. All assets, liabilities and contingent liabilities will be measured at fair value in accordance with IFRS 3R – Business Combinations within 12 months following the

acquisition date. This business combination was recognized on a preliminary basis. In accordance with IFRS 3R, the purchase price allocation to identified assets and liabilities has been conducted with the help of an external independent valuation expert. As a result, the following assets and liabilities were identified on a preliminary basis ; the fair value adjustments relate mainly to intangible assets and the related deferred taxes.: - Albéa Corporate tradename for USD 55

million: The valuation method used was the relief-from-royalty method on a define useful life.

- Customer relationship for USD 282.1 million - Developed Technology for USD 112.5 million - Inventory step up for USD 19.5 million - Property plant and equipment step up for USD

53.6 million

In thousands of USDAt March 23, 2018

Fair value Assets Albéa Corporate Tradename 55 000 Customer relationships & technology 394 600 Net Intangible assets 15 452 Net tangible assets 556 514 Other non current assets 26 767 Deferred tax assets 13 733 Total non-current assets 1 062 066 Inventories 203 385 Trade receivables and other 227 142 Cash and cash equivalents 109 115 Total current assets 539 642 Total assets 1 601 708

LiabilitiesGross financial debt 995 039 Deferred tax liabilities 137 448 Provisions 93 818 Trade payables and other 366 043 Total Liabilities 1 592 348

Net attributable assets acquired A 9 360

Acquisition price B 603 180

Preliminary Goodwill B-A 593 820


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This preliminary residual goodwill of $593.8 million mainly refers to the following goodwill components: - The workforce mainly corresponding to

Production and back office employees team - The increase in revenues over the Business

Plan period, driven by the acquisition of new small and Medium clients and new products launches

- The revenues generated by the CRP product line especially Beauty Solutions activities

Acquisition expenses recognized in Albéa Group consolidated financial statements totalized USD (20.3) million (see note 5.4). Albéa SA contribution to the financial statement at December period: - Net Sales USD 1 197.3 million - Adjusted EBITDA USD 153.3 million Albéa SA figures for 12-month period ended December 2018 amount to: - Net sales USD 1 569 million - Adjusted EBITDA USD 198.1 million.

3.2. SENIOR NOTES

In February 2018, Hercule Debtco S.à.r.l, a Luxembourg private limited liability company is offered EUR 150.0 million in aggregate principal amount of its 6.750%/7.500% Senior HoldCo Pay-If-You-Can Notes (PIYC) due 2024 as part of the

financing for the proposed acquisition of Albéa S.A. The Notes were issued on February 2018. The Senior HoldCo Pay-If-You-Can Notes are measured at amortized costs. The financial interests are presented in Financial expenses starting from February 2018.

3.3. REFINANCING PROCESS

On March 28, 2018, Albéa Beauty Holding a subsidiary of Albéa Group SAS, has completed a debt repricing of its existing senior secured credit facilities issue in April 20, 2017 which include USD 818 million 7-year covenant-lite term loan B facility divided in two tranches: - the 406 million USD tranche at Libor US + 300

bps, with a 1% floor; repayment of 0.25% of the principal on a quarterly basis

- the 385 million EUR tranche at Euribor +

Documents

ALBÉA GROUP S.A · Albéa Group S.A.S. Consolidated Management Report for period ended December 31, 2018 2 Albéa at a glance (*)Sales in 2018 proforma for 12 month of Albéa group