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2016 ANNUAL REPORTMAHOU SAN MIGUEL
WE ARE UNITED BY OUR EXCITEMENT SUMMARY
BEING THE BEST
COLLABORATING
LETTER FROM THE CHAIRMAN
PROMOTING TALENT
OVERCOMING OUR CHALLENGES
BALANCE SHEET AND CONSOLIDATED OLIDATED OLIDA ACCOUNTS
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PROTECTING THE ENVIRONMENT
SURPRISING PEOPLE
GENERATING VALUE
UNITED BY OUR PASSION
FOR
20
8
6
58
50
30
66
72
80
44
01
02
03
04
05
06
07
08
09
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
LETTER FROM THE CHAIRMAN
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2016 ANNU2016 ANNUAAL REPOL REPORRTT
Off-trade, according to market data. The determining factor was our multifunctional model and the way we support our customers, with the shared goal of creating more value for their businesses. Thus, for example, in 2016 we increased our support to the on-trade sector, allocating €59.5 million to it, 31% more than the previous year.
Our commitment to creating value for our customers is based on innovation to better address the needs of consumers, on the development of products and more premium propositions, and on the promotion of beer culture, which leads to a better understanding of our product and expands the number of occasions for enjoying it. One example of our interest in this area is the recent opening of our innovative Centro de Colaboración con Clientes [Customer Collaboration Centre] in Madrid, where we take advantage of the latest technology to share our consumer knowledge to work with our customers in the development of new buying and consumption experiences and to explore with them innovations that address new needs.
Accordingly, last year we dedicated more than €17 million to innovation and launched eight new products to the market, creating with some of them entirely new segments, with varieties like Mahou Barrica and San Miguel 0,0 Isotónica, and contributing to the growth of others, such as Speciality, with launches like Mahou Maestra and Alhambra Roja.
Our New Business Unit also enabled us to continue exploring and, in tandem with Nómada Brewing, in which we hold a 40% stake, to launch to the market new craft beer varieties made at our microbrewery in Alovera, some of them recognised in the most prestigious beer rankings in the world, such as RateBeer, and at very important festivals like the "Barcelona Beer Festival", where La Salve, a Bilbao-based brewery in which we hold a nearly 25% stake, was also recognised.
Our strategy for the future also includes continuing to develop outside our borders, with the conviction that the international footprint of Mahou San Miguel will continue growing year after year. In 2016 our sales outside Spain reached two million hectolitres and represented 15% of the total volume. We continue learning and advancing in markets like North America through our partner Founders Brewing, the North American craft brewery in which we hold a 30% stake, as well as in India, a country with enormous potential where we have a production centre. In addition, this year has been excellent both for the Water Business Unit, which has managed to grow continuously in double digits and expand its international footprint, and for our Logistics and Distribution Services Business Unit, which has increased its profitability and operating efficiency, with a greater focus on sustainability.
Like every year, we decisively promote our business, guided by the commitment of our shareholders to the long-term development of the Company. Thus, our investments increased to €77.7 million in 2016 to continue improving our facilities technologically: seven beer production centres in Spain and one in India and three mineral water springs with their associated bottling plants, to continue innovating in products and processes; and to develop initiatives that help us to be part of the best moments in the lives of our consumers.
We want to continue growing in a sustainable manner, in accordance with our principles, with the certainty that contributing value to society and to our environment is the best possible reward. That's why 94% of our purchases are made from local suppliers, who we also help to promote sustainability in their businesses. We collaborate with the communities where we have a presence, supporting social, cultural and sporting initiatives at the service of citizens. We create direct employment all over Spain, with more than 27 work centres in the country. We encourage corporate volunteer work and help the groups that most need it through the Fundación Mahou San Miguel which, under the slogan “Pensando en personas” [Thinking of People], pursues its work to address major social problems such as inequality and youth unemployment with programmes like “Creamos Oportunidades en Hostelería” [We Create Opportunities in the On-trade Sector], which last year trained over 100 young people, all of them members of groups at risk for social exclusion, and helped place them in jobs.
Looking back, reviewing the entire year and seeing what was achieved is an incentive to continuing to advance with the same passion in everything we do. Only that way will we continue learning and remaking ourselves at the pace of an increasingly demanding market. United, as we've always been, by our excitement.
José Antonio Mahou HerráizCHAIRMAN OF MAHOU SAN MIGUEL:
LETTER FROM THE CHAIRMAN
WE ARE UNITED BY
OUR PASSION
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If I had to sum up 2016 in just one sentence, I would say that it was a year in which we enjoyed ourselves doing what we do best. We helped our professionals grow, we were close to our consumers, we created top-quality products and unique experiences, adding value to our travelling companions, distributors and customers, and we contributed to the sustainable development of our society. All with an ingredient that unites us and guides us in improving: excitement.
In 2016 we grew as a company, and our thirst for knowledge led us to innovate and explore new paths, because we know that our leadership goes beyond figures and that we have a responsibility to continue developing and adding value to our industry. Our strength for this is built on the know-how of each of the 3,000 people who make up our Company and who, every day, give the best of themselves and look to the future based on a set of values that has been with us throughout our over 126 years of history.
We are convinced that our greatest asset is the team that makes up this big family that is Mahou San Miguel, a diverse, inclusive company replete with projects, where talent finds the best environment for development. Last year, 218 new professionals joined our workforce, showing our firm commitment to the creation of quality employment. We received multiple awards in this and other areas that, beyond the recognition they signify, encourage us to continue distinguishing ourselves for being a company that does things right.
In 2016 we maintained our leadership in the Spanish beer sector with a production share of 34% and increasing our sales volume by 3.9% to reach 16.1 million hectolitres, of which 13.5 correspond to beer and 2.6 to mineral water and beverages made with mineral water and fruit juices. We are especially proud of being a local, family business, 100% Spanish and independent, which leads the industry in its home country, a major accomplishment in the European market. We achieved the best turnover in our history, €1.22 billion, 3.7% more than last year, thanks to the strength of our national business. There, for the first time ever, we were number one in sales in both channels, On-trade and
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At Mahou San Miguel, we make an effort to improve day after day, which has led us to become the leading company in the beer sector in our country. Being a family-owned business, 100% Spanish, with a history replete with beer mastery, innovation and contribution to society gives us a very special nature. This specialness marks our 3,000 professionals working at beer production centres, seven in Spain and one in India, three water springs, two corporate offices and 15 sales delegations.
We have the satisfaction of generating direct employment in 11 Spanish autonomous communities, increasing the size of our team year after year and offering differential working conditions that guarantee their professional and personal development.
Our way of being, of enjoying what we do every day, leads us to promote the beer category in Spain, fomenting beer culture and supporting our over 850 distributors and 204,000 customers.
Our effort to incorporate the latest technologies and reinvent ourselves constantly enables us to grow the sector through innovation, launching new products and creating new occasions for consumption.
Our portfolio consists of more than 50 top-quality brands. The standouts, among others, are Mahou Cinco Estrellas, San Miguel Especial and Alhambra Reserva 1925; pioneering products like San Miguel 0,0, San Miguel 0,0 Isotónica, San Miguel ECO and Mahou Barrica; and brands suitable for people affected by celiac disease, like San Miguel Gluten Free and Mahou Cinco Estrellas Sin Gluten. We also have a wide range of international beers and, of course, brands of mineral water like the iconic Solán de Cabras and Natura.
This same passion for exploration that led us in 2014 to take a position in the North American craft beer Founders Brewing, and in 2015 in the Bilbao brand La Salve, have spurred us to embark on a new adventure with Nómada Brewing, one of the best-rated craft breweries in our country. Our 40% stake in this company enables us to advance in our propositions in the craft sector and will be a great source of learning.
And, we continue to increase our international footprint and strengthen our profitable expansion into key markets with Mahou, San Miguel, Alhambra and Solán de Cabras, which have become great ambassadors of Brand Spain outside out borders. Likewise, we are generating very good results in our Mahou India and Mahou Andina subsidiaries and experiencing extraordinary growth with Founders in the U.S. We are now present in 70 countries on five continents, with 170 of our professionals working outside Spain, and we produce 70% of the Spanish beer consumed in the world.
We are proud of being an open company that contributes value to the communities where we operate, especially those where we have production centres (Guadalajara, Burgos, Canary Islands, Córdoba, Granada, Lleida, Málaga and Rajasthan, in India), and our three water springs (Cuenca and Jaén).
We contribute to the development of our surroundings through the creation of quality employment, constant investment, support for social, cultural and sports initiatives, and protection of the environment.
At Mahou San Miguel, we make an effort to improve day after day, which has led us to become the in the beer sector in our countrycountry.
Being a family-owned business, 100% Spanish, with a history replete with beer mastery, innovation and contribution to society gives us a very special nature. This specialness marks our 3,000 professionalsat beer production centres, seven in Spain and one in India, three water springs, two corporate offices and 15 sales
IN CONTINUOUS
EVOLUTIONAT MAHOU SAN MIGUEL,
WE ADVANCE EVERY DAY WITH THE RESPONSIBILITY OF LEADING
OUR SECTOR
RECORD IN OUR TURNOVER
1.22BILLION EUROS
Innovation and Sustainability in all our Production Centres
3SPRINGSsupplying water8
CENTRES for productionof beer
and
MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
2016 FINANCIAL RESULTS
In 2016 our Company achieved the best turnover in its history, led by its strength in Spain. Our revenue increased from €1.2205 billion, 3.7% more than in 2015.
We consolidated our leadership by increasing total sales by 3.9% to reach 16.1 million hectolitres, of which 13.5 correspond to beer and 2.5 to mineral waters and beverages made with mineral water and fruit juices.
Our operating income was reduced by 6% due strictly to an accounting aspect, the effect of the regulatory change affecting amortisation of goodwill, although our investments increased to €77.7 million. These were aimed fundamentally at the introduction of technological improvements in our facilities that guarantee their sustainability, product and process innovation, development of beer culture, and support to our customers. In 2016 we added 218 professionals to our workforce, made up of 3,000 people.
KEY RESULTS 2016 2015 16 VS 15
TURNOVER (€BN) 1.2205 1.177 +3.7%
Operating income (€m) 175.3 187 -6.5%
Major investments (€m) 77.7 77 +0.6%
Sales volume (millions hectolitres) 16.1 15.5 +3.9%
New hires (no.) 218 213 +2.4%
Workforce (no.) 3,000 2,820 6.3%
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UNITED BY OUR PASSION FOR... ... BEING THE BEST
11 autonomous communities
218 NEW HIRES
We help 6,000 people with OUR VOLUNTEER WORK
PEOPLE
BEER CULTURE
CONTRIBUTION
INNOVATION
ENVIRONMENT
59.5 million euros to SUPPORTING THE ON-TRADE SECTOR
1.4 million euros dedicated to SOCIAL ACTION
LEADERS IN SPAIN
34% market share
WE TRAIN
40% of our
customers
17.1 million euros for R&D+i
1.2% savings in WATER
PRODUCTION
16.1 million
hectolitres
2.6 of WATER13.5 of BEER
Partnership with NÓMADA BREWING
3% savings in ENERGY
Present at
204,000 POINTS OF SALE
in Spain
RECORD IN OUR TURNOVER:
1.2205 billion euros
WE CREATE NEW CATEGORIES:
Mahou Barrica and San Miguel 0,0 Isotónica
110,000 HOURS of TRAINING
WE INVEST
78 million euros
LEADERSHIP
70% of the SPANISH BEER
consumed IN THE WORLD
We produce
94% of our SUPPLIERS are Spanish
MAINMILESTONES 2016
8 new PRODUCTS launched
2 million euros in
INVESTMENT
3,000 PROFESSIONALS
BAR
WE CONTRIBUTE
1.272 billion euros to the Spanish economy
FOUNDERS BREWING grows by 28% in the
U.S.
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WE CREATE EMPLOYMENT in
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UNITED BY OUR PASSION FOR... ... BEING THE BEST
For our management
For our social contribution
For our products
❚ Seal of Adhesión a la Estrategia de Emprendimiento y Empleo Joven [Adherence to the Strategy of Youth Entrepreneurship and Employment] granted by Spain's Ministry of Labour and Social Ssecurity.
❚ Mahou San Miguel, among the 20 best regarded companies in our country according to MERCO.
❚ Mahou and San Miguel among the 30 most highly valued brands according to the biennial ranking of Interbrand.
❚ Mahou, the most highly valued consumer brand on social media in Spain according to the “Icarus Gran Consumo 2016” study by Epsilon Technologies.
❚ European Business Award for the Environment awarded by the Fundación Biodiversidad of Spain's Ministry of Agriculture, Food and Environment.
❚ Healthy Leadership award for our “A tu Salud” [To Your Health] programme by the organisation “Mi empresa es saludable”.
❚ Cegos award for the youth talent and employment programme “Crecemos” [We Grow].
❚ Honourable Mention in Training and Development at the Human Capital Awards.
❚ The app "Compartir coche" [Car share], awarded by the Asociación Española de Gestores de Flotas de Automóviles.
❚ Silver Prize as an opinion leader by the UN Global Compact Spain Network.
❚ “Mójate por el Agua en India” [Take the Plunge for Water in India] named Best Internal Communication Campaign by the Observatorio de la Comunicación y la Acción de la Responsabilidad Empresarial.
For our innovation
❚ Our startup accelerator, Barlab, 50 Mejores Ideas Digitales [50 Best Digital Ideas] award from Expansión. *
❚ Mahou Maestra, awarded in the Carrefour innovation awards.
RECOGNITION MAHOU SAN MIGUEL
❚ Cervezas Alhambra awarded in the Superior Taste Awards and the World Beer Awards.
❚ The new flavours of San Miguel 0,0 and San Miguel Gluten Free named Product of the Year by consumers.
❚ Mahou Clásica named the Best Product of the Year in India.
*
MISSION, VISION and VALUES
MISSIONTo make our brands part of the best moments of the day for our consumers.
VISIONTo be an independent beer company recognised for:
OPENNESS: We are an independent-minded organisation that is open to new ideas and encourages discussion. We proactively consider how we can improve, and we recognise that we can learn outside and inside of our sphere of action.
TRUST: We believe in all of the Company's people, in their capacity and desire to develop our business, by fostering relationships of respect, transparency, and mutual understanding.
EXCELLENCE: We work to exceed our goals, ensuring the highest quality in everything we do, strictly following procedures, and paying close attention to detail.
INTEGRITY: We fulfil our external and internal commitments with honesty, seeking mutual benefit in all our relationships.
COLLABORATION: We work as a team with a global outlook and making use of the talent that exists within our Company. We share challenges and excitement.
COMMITMENT: We involve ourselves enthusiastically and responsibly in developing the business, adopting company objectives as our own. We promote the personal and professional development of our teams.
COMMITMENT TO SERVICE: We seek to exceed the expectations
of our clients and consumers through our work, whilst also respecting the Company's quality and profitability
standards.
❚ Leading the industry in the Spanish market.
❚ Having a solid international footprint.
❚ Offering our consumers and customers reference brands.
❚ Producing and marketing top-quality products.
❚ Being committed to creating sustainable value for our team, community, and shareholders.
VALUES
of our clients and
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UNITED BY OUR PASSION FOR... ... BEING THE BEST
BOARD OF DIRECTORS
CHAIRMAN Mr. José Antonio Mahou Herráiz
FIRST VICE PRESIDENT Mr. Gerardo Fernández Calvo 1
SECOND VICE PRESIDENT Mr. José Togores Mahou
CHIEF EXECUTIVE OFFICERS
Mr. Eduardo Petrossi Valdés 2
Mr. Javier López del Hierro 3
MEMBERS
Ms. Alejandra Mahou ParraMr. Alfredo Mahou HerráizMs. Ana Francisca Gervás Hierro 4
Ms. Fátima Mahou HerráizMs. Germina Christelle Eva Gervás 5
Ms. María Mercedes Calvo Caminero 6Ms. Carmen Mahou de la Torre
SECRETARY (non-board member) Ms. Beatriz Martínez-Falero
VICE SECRETARY (non-board member) Mr. Juan Ruiz de Velasco
MANAGEMENT TEAM
MANAGING DIRECTOR* Mr. Alberto Rodríguez-Toquero
MANAGING DIRECTOR OF FINANCE AND STRATEGY* Mr. Mariano Navarro
MANAGING DIRECTOR OF MARKETING* Mr. César Hernández
MANAGING DIRECTOR OF OPERATIONS* Mr. José Luis Rodríguez
MANAGING DIRECTOR OF PEOPLE AND ORGANISATION* Mr. Jesús Domingo
MANAGING DIRECTOR OF THE SPAIN BUSINESS UNIT* Mr. Peio Arbeloa
MANAGING DIRECTOR OF THE INTERNATIONAL BUSINESS UNIT* Mr. Erik D’Auchamp
MANAGING DIRECTOR OF THE WATER BUSINESS UNIT* Mr. Jesús Núñez
MANAGING DIRECTOR OF THE LOGISTICAL SERVICES BUSINESS UNIT* Mr. Miguel Ángel Miguel
DIRECTOR OF THE NEW BUSINESS,QUALITY, R&D+i AND ENVIRONMENT UNIT
Mr. Benet Fité
DIRECTOR OF THE LEGAL AREA Ms. Beatriz Martínez-Falero
DIRECTOR OF INTERNAL AUDITING AND CONTROL Mr. Antonio Jiménez
DIRECTOR OF CORPORATE COMMUNICATION, INSTITUTIONAL RELATIONS AND SUSTAINABILITY
Ms. Patricia Leiva
DIRECTOR OF PROPERTY ASSETS Ms. Paloma Boceta
EXECUTIVE BOARD
CHAIRMAN Mr. Eduardo Petrossi Valdés 2
VICE PRESIDENT Mr. José Antonio Mahou Herráiz
MEMBERS
Mr. Alfredo Mahou Herráiz
Mr. Gerardo Fernández Calvo 1
Mr. Javier López del Hierro 3
Mr. José Togores Mahou
Composition of the Board of Directors of Mahou San Miguel:
The Mahou San Miguel Executive Committee, whose role it is to take the management decisions of the business, with the support of the executive team, is made up of:
Our shareholders drive the GROWTH and SUSTAINABLE DEVELOPMENT of the Company
* Managers who are members of the Executive Board.
EXECUTIVE BOARDBOARD OF DIRECTORS MANAGEMENT TEAM
1 Representing Mosquililla, S.L.U. 2 Representing Tamarinver, S.L.U.3 Representing Inversiones Múltiples, S.L.U.4 Representing I.P.L Gala International, S.L.5 Representing Sociedad Gala de Inversiones, S.L.6 Representing Altinver, S.A.U
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TRANSPARENCY AND GOOD
GOVERNANCE
The Company's Board of Directors in 2016 approved the creation of the Ethics and Compliance Committee which integrates the functions of the former Ethics Committee and Prevention and Compliance Committee. It is responsible for dissemination and implementation of the General Policies and Ethical Principles of Mahou San Miguel, as well as:
❚ Promote, disseminate and interpret the content of the rules that make up the Prevention and Compliance Programme and, in particular, the Code of Conduct, fostering a culture of compliance among professionals.
❚ Control and monitor compliance with the General
Policies, implementing rules, and especially, with the law.
❚ Serve as a channel for whistleblowing and lead internal investigations.
❚ Propose disciplinary sanctions.
❚ Prepare periodic reports on compliance and develop new internal rules.
❚ Set up a system of integration and correlation between the Mahou San Miguel Criminal and Reputational Risks Map and the controls and measures to be adopted for their mitigation.
❚ Implement a computerised compliance control system.
We apply sustainable procurement criteria while ensuring that the companies that supply us with goods and services operate within the framework of a solid policy of corporate social responsibility and business ethics. For this reason, in 2014, we created the Suppliers' Code of Conduct, a document that is updated each year and which contains our Procurement Policy under the following principles:
❚ Transparency and non-discrimination, ensuring an honest and open business.
❚ Compliance with current legislation, especially as
regards occupational risk prevention, quality, food safety and the environment.
❚ Promotion of a policy of stable business
relationships based on principles such as quality, transparency, continuous improvement, mutual benefit, innovation and development.
SUPPLIERS' CODE OF CONDUCT
ETHICS AND COMPLIANCE COMMITTEE
For the purposes of avoiding conflicts of interest and channelling communication with the highest Governance Bodies, at Mahou San Miguel we have committees and codes of conduct that guarantee the integrity and honesty of our business:
We are part of the Executive
Committee of the UN Global
Compact Spain Network and we are committed to:
+
+
+
Sustainable management of
natural resources
Equal opportunity and non-
discrimination
Defence of human rights
Fighting business
corruption
AT MAHOU SAN MIGUEL WE UNDERTAKE OUR BUSINESS BASED
ON
CERTAIN PRINCIPLES THAT GUARANTEE
TRANSPARENCY AND RESPONSIBILITY IN MANAGEMENT
CODE OF CONDUCT The Code of Conduct, updated in 2016,
contains the guidelines, values and principles that should
guide the behaviour of all professionals
at Mahou San Miguel towards our
stakeholders and society in general.
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Spanish suppliers
733 billion euros
Public Administrations
318 billion euros
Our professionals
221billion euros
We are committed to the creation of stable, quality employment. Proof of this is the fact that in 2016 we welcomed 218 new hires to our team to reach 3,000 professionals. These employees are distributed in seven breweries, three water springs with their
associating bottling plants, two corporate offices and fifteen sales delegations in Spain, in addition to a beer production centre in India. In the past decade, we have hired 735 professionals, representing a 50% increase in our workforce.
BILLION EUROS1.272
Our contribution to the SPANISH ECONOMY
We create STABLE, QUALITY EMPLOYMENT
MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
WE BOOST ECONOMIC
GROWTH
As a family-owned company, 100% Spanish, we are firmly committed to the economic, social and cultural development of our country.
We create direct employment in 11 autonomous communities, support local businesses and promote initiatives that contribute value to citizens.
In 2016 our activities contributed a total of €1.272 billion to the Spanish economy. Of these, €733 million corresponded to purchases from suppliers, €221.5 million to our professionals, and €317.6 million to Public Administrations.
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We form part of different bodies and institutions that share our same goals and aspirations. We are affiliated with:We collaborate with
Asociación Turística de Madrid
Our contribution to the economy does not just impact the country's GNP. We also contribute to the development of culture, sport, music, art and gastronomy through different initiatives to which we dedicated over €22 million in 2016, which brings us closer to citizens.
WE SUPPORT CULTURE, GASTRONOMY AND SPORT
MUSICIn 2016 we dedicated €1.6 million to promoting festivals and Spanish artists as a way of connecting with the local public.
SPORTThe values transmitted by sport and promotion of a healthy lifestyle are aspects we take very much into account at Mahou San Miguel. So we dedicate €16.3 million to sponsorships through our brands to teams and sporting events in disciplines such as soccer, basketball, golf and swimming, among others.
GASTRONOMYIn the past year, we have continued to promote Spanish gastronomy, development of the business of our on-trade customers, and beer culture. Fairs, tastings and workshops organised around our product, associated with the best culinary propositions, are some of the initiatives to which we dedicate €1.6 million.
FASHION AND ARTWe promote numerous artistic and cultural disciplines. We are sponsors of the Fundación Atapuerca, we collaborate with the Prado Museum in Madrid and the Guggenheim in Bilbao, and we sponsor major events like ARCO and Madrid Fashion Week. All of these collaborations represented nearly €3 million.
16.3 million euros in
sport
2.9 million euros in
fashion and art
and music3.2 million euros in
gastronomy
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SHARED RESPONSIBILITY
The way we understand corporate responsibility extends beyond our own business. We seek to create value for society by involving our professionals and encouraging work in networks with other organisations. A commitment that forms part of what we are, of how we have grown, and what guides us when starting up numerous initiatives to achieve it. Examples of this are the work of the Fundación Mahou San Miguelon projects for young people at risk for social exclusion, the thousands of hours of volunteer work our professionals and their families dedicate to social projects and to improving our environment, and the ongoing support we provide in the fight against cancer through the pink Solán de Cabras bottle.
Thanks to the efforts of all of us, we have ensured that the Company continues to be the most responsible company in our sector, according to the “2016 Merco Corporate Responsibility and Governance” report.
MOST RESPONSIBLE
COMPANY IN THE OFF-TRADE
AND BEVERAGE SECTOR, ACCORDING TO MERCO
49 activities involving corporate VOLUNTEER WORK
1,000 VOLUNTEERS
Over
1.4million euros dedicated to SOCIAL ACTION
6,000 Over
PEOPLE BENEFITED
4,000 hours of
VOLUNTEER WORK
COMMITMENT OF OUR PROFESSIONALS AND THEIR FAMILIESIn 2016 over 1,000 Mahou San Miguel professionals and their families participated in fifty activities within our programme “Somos Voluntarios” [We are Volunteers], an initiative that also included their family members and friends and to which we dedicated 4,000 hours. Over 6,000 people benefited last year, 20% more than in 2015, which speaks of the commitment of our team to contributing actively to sustainable development in our society.
SUPPORT TO PEOPLE WITH DISABILITIESSome of the volunteer actions of which we are most proud are the ones we undertake with organisations working with people with disabilities. In 2016 over 260 volunteers from Mahou San Miguel participated in eight activities that helped half a million people in this group.
Our professionals participated in multiple workshops and sports activities in conjunction with organisations such as the Fundación Juan XXIII, the Fundación Down Madrid, the Asociación de Síndrome de Down de Málaga, the Fundación Aldaba and Acadi.
THE “GRAN RECOGIDA DE ALIMENTOS” Eighty volunteers from our Company participated in a new edition of the food drive organised by the Food Bank. Our logistics operator, Taisa, joined in by donating 6,000 kilometres in free services for the transport of non-perishable products all over the country. This initiative is on top of the ongoing donation of product and financial support to social causes to 20 social organisations.
HELP IN LABOUR REINTEGRATIONOur volunteers collaborated with inmates at the Alcalá Meco prison (Madrid) to help in their reintegration to the job market through training on job skills.
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Solán de Cabras again supported the fight against breast cancer by launching, for the third year in a row, a new edition of the pink bottle, thus changing the iconic blue colour of its container.
This pioneering initiative, whose slogan is “Gotas de Solidaridad” [Drops of Solidarity], once again lined the aisles of Off-trade establishments to collaborate with the Asociación Española Contra
el Cáncer (AECC). Thanks to this and other parallel programmes, such as the #gotasdesolidaridad campaign, a trending topic on Twitter, we donated 26,000 minutes of psychological counselling for patients and family members.
Likewise, the professionals of Mahou San Miguel donated more than €2,000 at the tables the AECC set up on World Cancer Day at all our work centres. Additionally,
we decorated and customised the tables of our on-trade customers to help give this cause greater visibility.
In 2016 the pink Solán de Cabras bottle voyaged to extend this wave of solidarity outside our borders, reaching Japan, the Netherlands, Chile and the Arab Emirates, where different awareness-raising activities were also held, such the sponsorship of races or special decorations in shopping centres to increase awareness of this disease.
Solán de Cabras sponsored the Women's Race in support of people affected by breast cancer, the largest community event in Europe for women in relation to breast cancer. This race, in which we donated more than 300,000 pink bottles, was held in eight Spanish cities and included more than 100,000 participants, among them, Mahou San Miguel professionals on the
Solán Woman Running Team who had prepared for the event with the help of expert trainers. An initiative that takes its place among our Company's other awareness-
raising activities
aimed at encouraging our professionals to integrate physical activity and healthy living habits as a cancer-prevention measure.
RACE FOR SOLIDARITY
The Company reinforces its commitment to society through the Fundación Mahou San Miguel by offering opportunities to groups that have difficulty joining the job market, supporting talent, and promoting an education in values based on healthy recreation and sport. To do so, we dedicate more than €1.2 million to programmes for young people at risk for social exclusion.
We are especially proud that, for another year, the initiative “Creamos Oportunidades en Hostelería” [We Create Opportunities in the On-trade sector] has been a success.
More than a hundred young people at risk of social exclusion or with cognitive disabilities participated in this innovative job training initiative that enables them to obtain an official qualification and a job opportunity.
In 2016 “Creamos Oportunidades en Hostelería” was extended to more cities and was carried out in Bilbao and Burgos, in addition to Madrid.
Eighty-two percent of the students who finished their apprenticeship signed an employment contract with one of the 73 collaborating restaurants, something that would have been impossible without the help of the participating social organisations and hotel and restaurant schools.
WE COLLABORATE TO FIGHT CANCER
28
community event in Europe for women in relation to breast cancer. This race, in which we donated more than 300,000 pink bottles, was held in eight Spanish cities and included more than 100,000 participants, among them, Mahou San Miguel professionals on the
takes its place among our Company's other awareness-
raising activities
prevention measure.
MORE THAN 80 YOUNG PEOPLE AT RISK FOR SOCIAL EXCLUSION
FOUND A JOB THANKS TO THE FUNDACIÓN MAHOU
SAN MIGUEL
“WE CREATE OPPORTUNITIES IN THE ON-TRADE SECTOR"
Through the “Crecemos en equipo” [We Grow as a Team] initiative, the Fundación Mahou San Miguel, together with social, educational and sport organisations, promoted a values-oriented education and healthy recreation through sport among a hundred teenagers at risk of social exclusion in Madrid and Guadalajara. After taking part in this project, 85% of the participants improved their emotional intelligence skills, values and athletic abilities.
“CRECEMOS EN EQUIPO” Promotion of Youth EmploymentLike us, many companies and institutions are working to address youth unemployment. Very important work that we wanted to recognise by launching the “I Premio al Impulso del Empleo Juvenil” [First Prize for Boosting Youth Employment], along with the Club de Excelencia en Sostenibilidad [Excellence in Sustainability Club].
Success of the “Kliquers” tourMore than 3,500 young people from Bilbao, A Coruña and Madrid participated in the “Kliquers” programme, an initiative that trains participants by teaching them values and emotional intelligence skills.
Other collaborationsIn 2016 we supported projects like “Campvs”, which offers people with disabilities access to higher education; the inclusive soccer and basketball schools of the Fundación Real Madrid; and the Musical Talent scholarships of the Fundación Albéniz. In addition, we continued working with the Asociación Española de Fundaciones, the Fundación Exxit and the Fundación Botín, among others.
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MAHOUMAHOU SAN SAN MIGUELMIGUEL
UNITED BY OUR UNITED BY OUR PASSION FOR... FOR...
32
INNOVATING WITH NEW
EXPERIENCES
17 BILLION EUROS
invested in R&D+i 8 NEW LAUNCHES
WITH NÓMADA AND
FOUNDERS BREWING, WE ARE SPEARHEADING THE
CRAFT SEGMENT IN SPAIN
CERVECISTAS We promote beer culture with numerous initiatives aimed at our customers and consumers. In this context, in 2016 we launched “Los Cervecistas” [“Beerists”] which, under the slogan “Cuanto más sabes, saben mejor” [The more you know, the better they taste], offers consumers extensive information to help them differentiate, discover and enjoy our most premium varieties. An initiative in which we also involve our On-trade and Off-trade customers through training activities, tastings, workshops and beer discovery routes.
WE PROMOTE BEER CULTURE
The aim of this initiative, pioneering in our country, is to promote beer culture and elevate the role of this beverage in gastronomy by training restaurant professionals so that they, in turn, can be the best ambassadors for our beverage in front of consumers. So, together with the Madrid Chamber of Commerce and for the second year running, the “Beer Sommelier” course contributed a great deal of knowledge in areas such as the brewing process, types of beers, tasting and gastronomic food-pairings hosted by top experts.
TRAINING BEER SOMMELIERS
This drive to explore led us to continue growing in the craft segment. In fact, we are the most advanced Spanish beer in this category, as we were the first to take a position in a craft brewery, the North American Founders Brewing, incorporating new ways of understanding the product and the consumer. A path we have continued to follow with Nómada Brewing, the highest-rated Spanish craft beer, in which we have held a 40% share since 2016. This agreement is synonymous with collaboration, inspiration and learning on both sides. The surprising Nómada varieties, award-winners in the most prestigious competitions, have been made entirely at the Mahou San Miguel microbrewery in Alovera (Guadalajara).
Our consumers are at the centre of everything we do, and it excites us to surprise them with unique products and experiences. They challenge us and inspire us to keep innovating, balancing the beer tradition with the most cutting-edge new ideas.
In 2016 we invested €17.1 million and launched eight new products to the market, creating new categories with varieties like Mahou Barrica and Miguel 0,0 Isotónica.
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SOUNDS GOOD,TASTES BETTER
PLAYER NO. 12
Gastronomy is one of the hallmarks of our country, an important motor of its economy, and one of its best calling cards outside our borders. Beer can be its perfect partner and, for this reason, we've made a commitment to leading the promotion of the culture around this product, to give it the place it deserves in gastronomy.
This objective encompasses the initiatives we develop with our Mahou, San Miguel and Alhambra brands throughout Spain in order to promote the business of local restaurateurs and to highlight the gastronomy of each region, such as the 60 tapas routes we organise all over the country. To this we add six large gastronomic events:
“IV CLUB ALHAMBRA RESERVA 1925”: Cervezas Alhambra presented the fourth edition of this series of concerts that spotlighted the celebration of the 20th anniversary of the emblematic CD “Omega” by Enrique Morente and Lagartija Nick. This musical event went to Málaga, Bilbao, Barcelona, Granada, Córdoba, Madrid, Vigo, Valencia and Murcia.
Our brands have always been closely related to sport. So in 2016 we dedicated more than €16 million to supporting different athletic disciplines, particularly soccer, basketball, swimming, handball and golf.
Mahou Cinco Estrellas boosted its commitment as a leading soccer sponsor by supporting La Liga and 13 First, Second and Second-B teams, including Real Madrid and Atlético de Madrid. And, our San Miguel brand continued to support clubs like Atletic de Bilbao and Atlético Osasuna.
Our brands also promote basketball through the sponsorship of Real Madrid, Estudiantes and Valencia Basket, among others.
BEER ANDGASTRONOMY
OTHER INITIATIVES: In 2016 we expanded the “Barrios para comérselos” [Delectable Neighbourhoods] route to new cities under the umbrella of “Ciudades para comérselas” [Delectable Cities], and we sponsored Toledo Capital Gastronómica 2016. Likewise, Alhambra Especial was the official beer of the prestigious “Córdoba Califato Gourmet”, where eleven of the most famous Spanish chefs came together.
MERCADO DE SABORES: The “Taste Market” event is considered one of the most important gastronomic events of the year. In Madrid, over 16,000 people were able to enjoy their Mahou Cinco Estrellas with tapas from the leading representatives of Madrid gastronomy. Chefs of the calibre of María Marte, Mario Sandoval, Alberto Chicote and David Marcano, among others, competed to take the prize for the best tapa. An event that was extended to Vigo with the participation of the leading local restaurateurs.
“MADRID BEER WEEK”: Seventy-five Madrid establishments participated in its third edition, which included more than 320 activities related to the world of beer. Among the new features, a sensory tasting event for deaf people, an initiative that enabled them to enjoy all the secrets of this product.
“SAN MIGUEL FOOD EXPLORERS” IN MÁLAGA, BARCELONA AND BILBAO: Under this umbrella, three important gastronomic events were held that represent an evolution in our traditional Tapas Fairs. “GastroMálaga”, “BCN-Tast” and “Bilbokatessen” were, once more, meeting points where consumers enjoyed original combinations of our beers and the finest culinary propositions of the leading local restaurateurs.
“EXPLORATORIUM” WITH SAN MIGUEL: The brand strengthened its commitment to Selecta with this initiative that increased beer culture among consumers through three main actions: “Las Mesas Nómadas” [Nomadic Tables], “Las Catas Viajeras” [Travelling Tastings] and “Los Cuadernos de Viaje” [Travel Journals]. This initiative covered Bilbao, Burgos, Gijón, Oviedo and León in 2016.
“CÓMPLICES DE MAHOU” TOUR: Among our trendsetting propositions, a new edition of the programme “Cómplices de Mahou” [Mahou Accomplices], which in 2016 went on tour to support live music in intimate venues in cities like Salamanca, Vigo, Santiago, León, Oviedo, Gijón and Madrid, stood out. Audiences had the opportunity to see artists like M-Clan, Marlango and Dani Martín, among others, at close range while savouring a Mahou Cinco Estrellas.
THE “CONCIERTOS ESPECIALES DE LAS 2”: Valencia, Granada, Córdoba, Murcia, Alicante and Barcelona hosted these concerts that brought together the latest in live music with the finest gastronomy thanks to Cervezas Alhambra.
Our brands also promote basketball through the
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PRODUCT CAMPAIGNS¿CON QUIÉNTIENES UNAMAHOU PENDIENTE?
SAN MIGUEL SELECTA DÉBUTS A CAMPAIGN
The commitment of San Miguel to beer culture was on display in the launch of the first television
campaign for Selecta, which reflected the swashbuckling personality of the brand and its dedication to discovering new flavours through
its master brewers. The plan was completed with the launch of the communication platform
“Exploratorium” for bringing the Selecta world to the consumer through food-pairings in cities in
provinces like Burgos, Asturias, León and Bilbao. In the latter, the brand also launched, with the
Athletic de Bilbao, the campaign “Estamos juntos en esta historia” [We're together in this story], which
recapped the centenary history of the two brands.
ALHAMBRA CREA SIN PRISA
In 2016 we updated the image and commitment to the craftsmanship of Cervezas Alhambra by starting
the “Crear/sin/prisa” [Create/unhurriedly] contemporary creation platform. Its purpose is to promote, through
collaboration with the best artisans and artists, a lifestyle that invites people to take the time they need to
appreciate and enjoy all the nuances.
SOLÁN DE CABRAS SE VISTE DE ROSA
WE LISTEN TO CONSUMERS Bars and restaurants are unquestionably places for interacting and enjoying our products. So this year we wanted to learn more about the habits and tastes of our consumers in these establishments. We conducted the study “The habits of Spanish consumers in the on-trade sector”. Seeing friends, celebrating special occasions and disconnecting are the main reasons for going to bars. And, six out of ten people surveyed believe that the restaurant offer in Spain has improved in recent years and considers it key for our country's economy (85%) and tourism (83.9%).
Our commitment to consumers led us to add information on nutrition, calories and ingredients on our product labelling to give them the most complete information possible. Thus, we went beyond what laws establish, which require this only in the case of foods and beverages with an alcohol content of less than 1.2%.
NUTRITIONAL INFORMATION ON OUR LABELSinteracting and enjoying our products. So this year we wanted
to learn more about the habits and tastes of our consumers
. Seeing
Marta Hazas, Álex García, Estopa, Fernando Torres, El Langui or Millán Salcedo and Josema Yuste, among others starred in our “¿Con quién tienes una Mahou pendiente?” [Who do you need to share a Mahou with] campaign. All with the Extremoduro song “Dulce introducción al caos” playing in the background.
Our water brand launched, for another year, its pink bottle to demonstrate its commitment to people with breast cancer. Solán de Cabras donated, thanks to its “Gotas de Solidaridad” [Drops of Solidarity] campaign, 20,000 minutes of personalised psychological counselling to patients and their families in conjunction with the Asociación Española Contra el Cáncer (AECC). Our On-trade customers joined this initiative by dressing their tables up in pink on World Breast Cancer Day.
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2016 was a year of launches. Innovation and constant evolution to maintain our position as the number one beer company in our country led us to expand our portfolio with eight new products
that surprised our consumers. Some of these even represented the creation of new categories, strengthening our leadership in the generation of value for the entire sector.
2016 NEWS
Alhambra Reserva Roja With this extra-intense beer, inspired by “traditional bock” recipes, we were able to continue growing in the speciality segment and reinforce the added value of our pillar brand, Alhambra Reserva 1925.
Mahou Barrica, a milestone in the marketWith this launch we started a whole new category in Spain, barrel-aged lagers. Mahou Barrica Original and Mahou Barrica 12 Meses are now part of the best moments in the lives of our consumers who value an unprecedented taste proposition in our country.
Maestraby Mahou
Cerveza 0,0 isotónica by San MiguelWe again innovated with a new beer category, isotonic alcohol-free beer, made from 100% natural ingredients. Pau Gasol and Mireia Belmonte, San Miguel 0,0 ambassadors, presented this new variety that inspires a healthy lifestyle and helps in recuperation after exercising, without giving up flavour.
50TH ANNIVERSARY OF OUR PRODUCTION CENTRE IN MÁLAGA: In 2016 we commemorated our half century in the city. Under the slogan “50 años siendo boquerones” [50 years as boquerones], we wanted to be closer to Malagueños through multiple initiatives. We
opened the doors of our centre to more than 1,000 people who enjoyed the music of Antonio Orozco, David de Maria, Rozalén and Pablo López. These events were joined by others in emblematic concert halls in Málaga with performances by rock, indie, jazz and contemporary pop groups.
In 2016 more than 10,200 consumers contacted us through our Customer Service department, and 1,879,798 followed us on social media. And, more than 25,000 people visited our
Production Centres in an experience that brought them closer to who we are and how our products are made. Our facilities also opened their doors to citizens to celebrate different moments:
OVER 25,000 PEOPLE
VISITED OUR PRODUCTION CENTRES
TO LEARN ABOUT HOW WE WORK
WE OPEN OUR DOORS TO CONSUMERS
LLEIDA AND BURGOS, TO THE BEAT OF “SAN MIGUEL MUSIC EXPLORERS”: The Production Centres of Lleida and Burgos also
opened their doors to the best music, and each managed to attract over 2,000 people to enjoy artists like Sidonie, Dorian and Neuman.
followers on SOCIAL MEDIA of all the
Company's brands in Spain
1,879,798
In 2016 we presented Mahou Maestra, the new toasted, double-hopped beer created to win over the most discerning palates. A beer inspired by the over 125 years of experience behind the know-how of Mahou's master brewers.
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MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
MAHOUWith 126 years of history, Mahou combines the taste of the most vaunted beer tradition with the taste of innovation, creating new products that manage to surprise our consumers.
Our most cosmopolitan brand continues making its products on the basis of exquisite care and excellence, without renouncing the search for new horizons.
SAN MIGUEL
With an intense golden colour and light foam. Its minty aroma with hints of rum gives way to a sweet and refreshing taste on the palate against a subtle bitter backdrop. Intense body and persistence.
With brilliant golden colour and firm foam, its aroma of cereal with notes of yeast and hops stands out. Balanced in the mouth, with a sweet and slightly acid taste, with a slight hint of minerality.Its texture is velvety, and it leaves behind a refreshing sensation.
SAN MIGUEL 0,0 ISOTÓNICA
MIXTA REVOLUXION
Golden-coloured, brilliant and with creamy foam. It comes on with an intense lemony citrus aroma that gives way to a grain and cereal background. In the mouth a light note of bitterness balanced with a soft texture and an acid taste comes through, boosting its refreshing sensation. A sweet and pleasant finish.
MAHOU LIMÓN
Brilliant amber in colour and with firm foam, in the nose it has a primary sensation of a dry fragrance followed by fresh floral notes and fruity, toasted aromas. In the mouth it offers moderate bitterness and slight sweetness. It has body, and is full and velvety.
MAHOU MAESTRA
With a brilliant golden colour and creamy foam. The aroma is mildly fruity and fresh, reminiscent of banana and apple, with a touch of yeast and floral, hoppy notes. In the mouth it is strong and consistent, balanced and slightly bitter and acid.
MAHOU SIN GLUTEN
Coppery in colour and brilliant in appearance, it presents a complex aroma with toasted cereal and fruity notes. In the mouth it offers a bitter taste balanced with light acidity. The full-bodied texture leaves behind a pleasant, bitter after-taste.
ALHAMBRA ROJA
Twelve months of ageing in French oak barrels mark this lager with notes of vanilla, dried fruits, caramel and honey. Infinite nuances that combine in perfect balance to create a sweet sensation on the palate.
12 MESESMAHOU BARRICAMAHOU BARRICA
Aged in oak, it takes us back the origins of beer. With its aroma of cereals, vanilla and almond, it is a dry lager in the mouth that takes the palate on a journey to the best moments around a table.
ORIGINAL
NEW LAUNCHES OUR PORTFOLIO
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MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
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INTERNATIONAL BEERSWe have a wide variety of international beers for all types of consumers and occasions.
LA SALVEWe promote the local beer thanks to our collaboration with the Bilbao brand.
REINAOur Canarian beer continues to win over consumers on the islands.
NÓMADA BREWINGThe innovative craft beers of Nómada Brewing are made at the Mahou San Miguel microbrewery in Alovera (Guadalajara).
ALHAMBRAExperience, seduction, creativity and art are concepts that define our Andalusian beer. A contrast of unique flavours and experiences.
MINERAL WATERSProducts especially aimed at the well-being of our consumers. Solán de Cabras, a symbol of quality, purity and design, stands out.
FOUNDERS BREWINGThe craft beers of our North American partner are characterised by their big personality, aromas and intense flavours.
We offer EXCELLENT PRODUCTS
for all occasions for consumption
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UNITED BY OUR PASSION FOR... ...COLLABORATING
Our Company would not be what it is without its main travelling companions, our suppliers, customers, dealers and distributors. That's why we're excited about developing joint collaboration strategies aimed at guaranteeing the sustainability of our businesses.
MAJOR PARTNERS
MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
94%OF OUR SUPPLIERS ARE SPANISH
MILLION EUROS SPENT ON THE PURCHASE OF GOODS AND SERVICES FROM LOCAL BUSINESSES
733
OUR SUPPLIERS
We have a network of more than 3,000 suppliers, of which 94% are Spanish. In 2016 we dedicated €733 million to the purchase of goods and services in our country.
We acquire in Spain 99% of the malt and 60% of the hops we use in brewing our beers, thereby supporting the local agriculture sector.
Committed to sustainability, we work to generate synergies throughout our value chain, guaranteeing that the entire process, from when we purchase raw materials to when our products reach the consumer, is environmentally friendly.
Initiatives like the “Supplier Portal”, a communication channel created to provide our suppliers with up-to-date information and allow them to declare their compliance level in the area of sustainability, or our “Suppliers' Code of Conduct”, with which we elevate the commitment of our partners with the UN Global Compact. In 2016, additionally, we expanded to more businesses and cities the “Avanzamos Juntos” [Moving Forward Together] programme, which extends corporate responsibility to our partners.
Nearly 200 professionals from Mahou San Miguel supplier companies have already participated in “Avanzamos Juntos” [Moving Forward Together], and innovative initiative implemented jointly with the Global Compact Spain Network and aimed at boosting corporate responsibility among our suppliers. Additionally, it aims to emphasise the importance of responsible management throughout the supply chain.
This programme, which we started in 2015 as a pilot experience in Madrid, was strengthened in 2016 by its expansion to more cities and more suppliers and by holding workshops in Madrid, Guadalajara, Málaga, Lleida and Burgos. Thanks to their participation, a significant percentage of the companies that provide services to our Company have incorporated new social responsibility mechanisms in their businesses and improved their competitive position in the market.
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...COLLABORATING
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This is an online platform we want to use to contribute to developing the business of independent On-trade establishments. This innovative project not only allows us to offer value solutions and personalised service but also is intended to establish direct communication to become closer to and listen to the needs of our customers.
www.rentabilibar.es
49
Ongoing support to our customers is key for fulfilling our mission: to make our brands part of the best moments of each day in the lives of our consumers. We have more than 204,000 customers, and the relationship of closeness and trust we maintain with them allowed us, in 2016, to consolidate our leadership in both the On-trade and Off-trade channels.
Last year we reaffirmed our commitment to our on-trade customers by dedicating €59.5 million to supporting the development of their businesses, 31% more than in 2015, with the implementation of initiatives aimed at generating more traffic to their places of business and promoting beer culture.
BARLABThis is a startup accelerator aimed at entrepreneurs and small businesses that want to promote innovation in On-trade establishments. With the slogan “Barra libre de ideas” [Open Bar for Ideas], we promote creativity applied to business models and the development of technology focussed on improving the consumer experience.
www.barlabmahousanmiguel.com
OUR CUSTOMERS
In addition, we promote the enhancement of the beer category through innovation and premiumisation. Thus, projects like Rentabilibar and Barlab are born with the goal of creating new solutions and formats that meet the needs of our customers and consumers.
MORE THAN 59 MILLION EUROS
to support the On-trade
channel
Our 850 distributors and dealers are a key piece in our business. They are not only the direct link with our 185,000 on-trade customers but also the best ambassadors of our brands at the point of sale.
Our commitment to them is solid and forward-looking. At their side, we work to jointly address our challenges, involving them in everything we do. In 2016 we met with all of them in Madrid to share our strategy, set joint objectives and listen to their opinions within the framework of a yearly meeting.
OUR DISTRIBUTORS AND DEALERSRENTABILIBAR
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MAHOUMAHOU SAN SAN MIGUELMIGUEL
UNITED BY OUR UNITED BY OUR PASSION FOR... FOR...
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A BIG FAMILY
In 2016 we welcomed 218 new hires, to reach a total of 3,000 professionals. We maintain a firm commitment to guaranteeing gender equality; proof of this is that, since 2000, we have quadrupled the number of women on our team, hiring new professionals in all areas, including traditionally male ones.
We want to continue adding new talent to our Company and, in 2016, we started the“Growing Experience” programme aimed at young people seeking international opportunities. Additionally, we help our professionals develop themselves through innovative tools for listening and continuous training, internal promotions, and the diverse opportunities of mobility inside and outside our country.
We know that the passion and talent of our professionals defines us as a company. We have a committed team, excited about their work, that every day gives the best of themselves and reinvents themselves constantly. We are in debt to this team, and therefore we guarantee that everyone who is part of this big family that is Mahou San Miguel is able to develop their talent in the best possible environment, with programmes that support their well-being, development and work-life balance.
MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
We know the importance of work-life balance for guaranteeing the well-being of our team. So we never stop moving forward with measures that allow them to balance the two. We were the first company in the sector to earn the Family-Friendly Company seal of approval, a recognition of the efforts made to allow our
professionals to enjoy more flexible schedules and more vacation time than required by law; of our support to people responsible for disabled family members; and of our initiatives like “Días Sin Cole” [School Holidays] or assistance for summer camp, among others.
We are also immersed in a
cultural change in our way of working to favour work-life balance, which has led us to advance from “Objetivo 19:30” [Target 19:30] to “Objetivo 18:30” at our Madrid office to increase productivity and rationalise schedules by encouraging employees to set a goal of ending their work day at 6:30 p.m.
❚ Medical service at all work centres.
❚ Complete medical check-ups.
❚ Health workshop, sports activities and mindfulness.
❚ Ergonomic workstations.
❚ Flexible working hours.
❚ More holiday than required by law.
❚ Day-care vouchers.
❚ Días sin Cole [School Holidays] and assistance for summer camp for our professionals' children.
❚ Expansion of the shorter
working day until the child reaches the age of 10.
❚ Financial assistance for professionals with disabilities or family members with disabilities.
❚ Pension plans.
❚ Insurance policies.
❚ Loans and advances..
❚ Meal tickets.
❚ Subsidised public and private transportation (car-pooling and parking).
❚ Financial aid for education
❚ Grants for school supplies for children.
SOCIAL BENEFITS
WORK-LIFE BALANCE
CONTRACT TYPE
218NEW HIRES IN 2016
3,000 PROFESSIONALS
WE ARE CONVINCED THAT
WORK-LIFE BALANCE
IS THE KEY TO HAVING PROFESSIONALS THAT ARE
MORE CONTENT, MOTIVATED AND PRODUCTIVE
11 AUTONOMOUSCOMMUNITIES
WE CREATE EMPLOYMENT IN
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96% PERMANENT
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“Conversamos”
Committed to youth employment
In 2016 we invested €1.3 million in training plans to attract, retain and develop talent among Mahou San Miguel professionals, creating innovative mentoring and coaching programmes. This figure enabled us to offer more than 113,000 hours of training to our team compared to 92,000 in 2015, an increase of 22%.
Last year, our Company, in collaboration with the education council of Castilla-La Mancha and the Instituto Castilla in Guadalajara started the first edition of the Industrial
Specialisation Course of the Escuela Mahou San Miguel, in which more than 30 skilled workers from our Production Centre in Alovera are participating.
This innovative official programme lasting nine months provides specific training on Electromechanics and Mechatronics and is designed to prepare the professionals for upcoming challenges in the business: digitalisation, Industry 4.0 and personalisation of production to adapt to the demands of the new consumers.
Mahou San Miguel has a clear commitment to its team to guarantee its growth and promote its talent. To do so, in 2016 we put into place our new “Master Plan” for People & Organisation and the “Conversamos” [Let's Talk] programme that helps generate quality spaces for managers to inspire and help their teams to develop themselves and improve their skills, and also for employees to express their concerns and expectations.
Our promotion of youth employment and training was recognised in 2016 with the Adhesión a la Estrategia de Emprendimiento y Empleo Joven [Adherence to the Strategy of Youth Entrepreneurship and Employment] seal, which the president of the Spanish government, Mariano Rajoy, presented to us at our Production Centre in Alovera. An official decal granted by Spain's Ministry of Labour and Social Security to companies that promote hiring and employee training.
Attracting talented young people is essential for the future of our business. So in 2016 our “Crecemos” [We Grow] programme went one step further with the “Growing Experience” initiative, a pioneering project that offers young people a job opportunity so that they can pursue their career in some of the Company's key markets, such as the United Kingdom, the United States, India and Germany.
Those selected for this training plan spend their first six months on the job in Spain,
where they absorb the Mahou San Miguel way of working, culture and values, to later implement an aligned strategy in their destination countries. Additionally, reverse mentoring plays a fundamental role in the initiative, as one of the pillars of the programme is cross-cutting enrichment, which allows senior professionals already at the Company to see new points of view.
ATTRACTING AND DEVELOPING TALENT
WE TAKE A NEW STEP IN OUR
“CRECEMOS” PROGRAMME
WITH “GROWING EXPERIENCE”
than in 2015 22% more
Over
113,000 HOURS OF TRAINING
More than 1.3 million euros
invested in TRAINING PLANS
We promote international talent
GRI TABLE OF CONTENTS: G4-LA10GRI TABLE OF CONTENTS: GG4-EC3, G4-DMA, 4-LA9, G4-LA10, G4-LA11
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR... ...PROMOTING TALENT
TOWARDS A MORE EQUAL COMPANY
COMMITTED TO HEALTH AND SAFETY
We belong to a traditionally male sector, and therefore in recent years we have made an effort to implement plans that will make Mahou San Miguel more equal.
Thus, we have quadrupled the number of women since 2000 and, in 2016, they accounted for 22% of our workforce. Additionally, of the 218 new hires last year, 55% were women. There is no gender-based salary gap, and we have gender parity in our Board of Directors.
The measures and steps we have taken toward equality have earned us recognition, making us, for example, the first company in our sector to receive the “Distintivo de Igualdad en la Empresa” [Equality in Companies] seal of approval from Spain's Ministry of Health, Social Services and Equality.
We are also very proud of having received the “Empresa más Igual” [More Equal Company] seal, awarded by the Community of Madrid, and the
FEDEPE award for our “Women-friendly Company Policy”.
In addition, we collaborate with Spain's Ministry of Health, Social Services and Equality in its campaigns to promote equality and against gender-based violence, as well as in committees to support their dissemination and raise social awareness.
We work every day to ensure the best working conditions for our professionals, both physically and emotionally. To do so, we have a strategy that seeks to anticipate their needs through innovative programmes.
Knowing that having a healthy and motivated workforce is the best way to address daily challenges, we were pioneers in implementing the Healthy Company Model, certified by AENOR
and developed in collaboration with the Instituto de Salud y Bienestar Social.
This commitment to health includes, among other initiatives, plans for promoting physical activity and healthy eating, as well as stress-management tools. Aware that the latter affects the happiness and productivity of our professionals, we go one step further by offering mindfulness workshops.
Along these lines, our programme “A tu salud”[To Your Health] in 2016 was recognised in the first edition of the “Mi Empresa es Saludable” awards, in the health category, for its track record in the implementation of initiatives for promoting physical activity and psychosocial well-being.
Our occupational safety policies are based on a Culture of Prevention that we apply at all levels of the Company. It encompasses everyone, from General Management to workers in the production centres, which have the OHSAS 18001 certification in Workplace Health and Safety. On this basis, we make significant investments in our facilities and in training our professionals on risk prevention. This has enabled us to reduce our accident frequency rate by 5.8% compared to 2015, placing us below the industry average.
Mindfulness to combat stress and workshops to promote PHYSICAL ACTIVITY AND HEALTHY EATING HABITS
PREVENTION, A SURE BET
55%of NEW HIRES in 2016 were WOMEN
WOMEN represent
22%OF OUR WORKFORCE
23% of our EXECUTIVES are WOMEN
OUR ACCIDENT FREQUENCY RATE IS BELOW
THE INDUSTRY AVERAGE
GRI TABLE OF CONTENTS: G4-LA12, G4-LA13 GRI TABLE OF CONTENTS: G4-DMA, G4-LA5, G4-LA6, G4-SO1
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR... ...PROTECTING THE ENVIRONMENT
-3%+3.9%
-5%
99.8%
PRODUCTION
CO2 emissions
RECOVERY
Energy CONSUMPTION
-1.2%Water consumption
Water saved since 2000: MORE THAN 3.5 MILLION M3
In 2016, we continued improving our environmental indicators
WATERIn 2016 our production centres and offices used 1.2% less water than the previous year thanks to optimisation of equipment and processes. Since 2000 we have reduced consumption of this basic resource by 40%, which represents a savings of more than 3.5 million m3 of water.
Total water withdrawal by source (m3/tn): 5,376,866 m3
Water reuse: 3,554,758 – 2.39
WATER CONSUMPTION BY SOURCE 2016
Total water withdrawal by source (m3/tn): 3.61
Municipal origin 68.6%
From wells 26.6%
From surface waters 4.7%
GRI TABLE OF CONTENTS: G4-2, G4-15, G4-EC8, G4-DMA, G4-EN8, G4-EN9, G4-EN10, G4-EN27, G4-EN31
Evolution of water consumption per hectolitre produced
2000
6.09 hl/hl
2015
3.70hl/hl
2016
3.65hl/hl
COMMITTED TO SUSTAINABILITY
Environmental Management System certified according to the ISO 14001 standard and the EMAS Regulationthat enables us to identify, assess and control diverse environmental aspects in all phases of our production process. This system was recognised in 2016 with the European Business Award for the Environment, in the Spanish section, under the category of “Management for Sustainable Development for Large and Medium Enterprises” by the Fundación Biodiversidad of Spain's Ministry of Agriculture, Food and the Environment.
We collaborate actively with various initiatives aimed at minimising environmental impact, such as the UN CEO Water Mandate to guarantee the sustainability of water resources and the UN Global Compact Spain Network to extend social responsibility to the entire supply chain.supply chain.
In 2016 we invested nearly €2 million in environmental projects.
At Mahou San Miguel we understand that growth must always be sustainable and create value for society whilst protecting the environment in every aspect of our activity. We mobilise all of our enthusiasm and resources to achieve our goal: to make ours the company with the smallest environmental footprint in the sector by 2020.
Inspired by the UN Sustainable Development Goals, we Development Goals, we incorporated social and environmental factors in all our processes. We have an Environmental Policy and an
MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
IN THE PAST FIVE YEARS WE HAVE INVESTED
36 MILLION EUROS IN ENVIRONMENTAL
PROTECTION
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR... ...PROTECTING THE ENVIRONMENT
RECOVERY AND REUSEWe currently recover 99.8% of our wastes, and we have set the goal of achieving 100% by 2020. With respect to container and packaging, the reuse rate is 39.02%, whilst for the remaining 60.98% recycled materials are used.
This philosophy has even been extended to the way we present our products, thanks to the firm commitment we are applying to ecological design. In 2016 we used 2,013 fewer tonnes of material for manufacturing our containers and packaging. Additionally, 100% of our paper labels are from forests certified by the Forest Stewardship Council (FSC).
MATERIALS USED (in tonnes) 2016
Raw materials (malt, hops, adjuncts) 216,062
Packaging 205,972
Additional materials (additives, chemical products) 5,080
CONTAINERS AND PACKAGING RECOVERED AT THE END OF THEIR USEFUL LIFE 2016
Metal 84.50%
Cardboard 81.50%
Glass 70.00%
Plastic 56.60%
TOTAL WEIGHT OF WASTES GENERATED BY END DESTINATION (in tonnes) 2016
By-products destined for animal feed 218,563 (15,34%)
Non-hazardous waste to recycling 31,038 (20.83%)
Waste to landfill 410 (0.27%)
Hazardous waste 55 (0.04%)
Transport 3,201 tn / 2.03 Kg / tn
EMISSIONS
CO2 (total emissions, direct and indirect, of greenhouse gases by weight) TN KG/TN
2016 49,389 33.21
2015 49,951 34.63
NOX TN KG/TN
2016 51 0.03
2015 65 0.04
ENERGYAnd, 100% of the electricity we consume in our production centres and Spanish offices comes from renewable sources. Lastly, each year we undertake new projects that enable us to optimise and reuse energy, like the recovery of cooking steam started in 2008 at our Alovera plant and since extended to other centres, like that of Burgos, in 2016. Periodically we assess our performance with energy audits and adopt measures to reduce consumption in cold production and packaging.
DIRECT ENERGY CONSUMPTION Breakdown by primary sources 2016
854,256 – 0.57 Gj/tn
Natural gas 89,35%
Biogas 7.42%
Diesel fuel 3.23%
Fuel --
INDIRECT ENERGY CONSUMPTION Breakdown by primary sources 2016
418,748 – 0.28 Gj/tn
Renewable 100%
Year after year, we manage to reduce our greenhouse gas emissions thanks to the initiatives developed in this area.
We were pioneers in our sector in joining the Carbon Footprint Register of Spain's Ministry of Agriculture, Food and the Environment, earning the “Calculo, Reduzco” [I Calculate, I Reduce] seal. Additionally, we have an agreement with CHEP, a multinational that provides systems for pooling pallets and containers, in order to introduce into our logistics chain the plastic half-pallet for the Off-trade channel. This system represents a reduction of more than 280 tonnes of CO2 emissions per year and is associated with an emissions offset project in the Amazon jungle in the Brazilian state of Acre.
In addition, we promoted sustainable mobility in our distribution system through the implementation of a plan
that has saved more than one million travel kilometres since 2010. A commitment which also encompasses the creation of a “ride sharing” application used to encourage our more than 3,000 professionals to carpool to work. This initiative was recognised by the Asociación Española de Gestores de Flotas de Automóviles (AEGFA), which gave us the 2016 Flotas Award.
GRI TABLE OF CONTENTS: G4-2, G4-15, G4-18, G4-EC2, G4-EN3, G4-EN4, G4-EN6, G4-EN16, G4-EN17, G4-EN18, G4-EN19, G4-EN20, G4-EN21, G4-EN31 GRI TABLE OF CONTENTS: G4-EC2, G4-EN1, G4-EN2, G4-EN23, G4-EN28
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR... ...PROTECTING THE ENVIRONMENT
COMMITTED PROFESSIONALS INNOVATION
APPLIED TO SUSTAINABILITYSustainable coolers with substantial benefits for the On-trade sector
Together with WWF
Sustainability Week
European Mobility Week
Mójate por el Agua in India
Thinking that our customers might also make their towns more environmentally friendly, we have created a new and exclusive range of sustainable coolers, development and implementation of which represented an investment of over €3.3 million between 2015 and 2016.
The system has multiple benefits for restaurateurs, as it consumes less energy, thereby reducing energy consumption costs, and uses propane for cooling, a gas that requires 59% less charging and increases cooling capacity by 8%, reducing greenhouse gas emissions to zero.
We understand environmental protection as an ethical obligation that guides all of our activity and which our team assumes as its own. This is demonstrated by the involvement of more than 400 professionals in the environmental volunteer activities the Company put into place in 2016 aimed at preserving natural spaces in the places where our production centres and offices are located.
As part of our strategic agreement with WWF, in 2016 Company professionals, their families, neighbours and institutional representatives in the towns of representatives in the towns of Cañizares, Puente de Vadillos and Beteta, in the province of Cuenca, participated in activities for the improvement of the Solán de Cabras spring. They reforested the area with
native species and performed brush-clearing tasks to prevent forest fires. Additionally, we participated in Earth Hour by turning off the lights at our work centres and on lights at our work centres and on advertising signs.
Under the slogan “Comprometidos con nuestro entorno” [Committed to Our Environment] and in conjunction with the Asociación Paisaje Limpio, more than 300 professionals and their families participated in clean-up brigades on riverbanks and beaches and analysed water quality. They also took part in recycling
workshops and training and awareness-raising sessions on resource use. Our colleagues at the production centre in Bhiwadi, India, also participated in these work days, together with neighbours and local government representatives, by planting 100 trees in Aravalli Hills, in the vicinity of our facilities.
Our professionals had the chance to try out electric, hybrid and petrol vehicles during European Mobility Week, at which a sustainable driving protocol designed to reduce CO2 emissions by up to 15% was also presented.
For yet another year, we celebrate World Water Day by requesting the participation of our team in the “Mójate por el Agua en India” [Take the Plunge for Water in India] campaign. Their commitment was translated into 400 “drops of solidarity”, which enabled us to set up, along with the local NGO SCRIA, a social project to improve access to drinking water for 400 students of schools in Rajasthan, near our production centre. Likewise, restrooms and water-related infrastructures are being built in these schools.
GRI TABLE OF CONTENTS: G4-15, G4-16, G4-EC2, G4-HR1, G4-DMA, G4-SO1 GRI TABLE OF CONTENTS: G4-15, G4-16, G4-EC2, G4-HR1, G4-SO1
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
WE ARE UNITED BY THE EXCITEMENT OF... ...OVERCOMING OUR CHALLENGES
EXCITING CHALLENGES
FOR CONTINUING TO IMPROVE
❚ SERVE AS A BENCHMARK IN SUSTAINABILITY, creating innovative initiatives that generate positive impact all around us.
❚ Continue to be a COMPANY THAT ATTRACTS AND NURTURES TALENT, that offers opportunities for growth, and where people are at the centre of all decisions.
MAHOU SAN MIGUEL
UNITED BY OUR PASSION FOR...
GRI TABLE OF CONTENTS: G4-2, G4-27
These are DEMANDING and AMBITIOUS CHALLENGES, but they are unquestionably achievable. We have all the ingredients to do so successfully: THE BEST TEAM and EXCITEMENT about continuing to do things right.
❚ LEAD THE RELATIONSHIP WITH THE CONSUMER with differential propositions and products and even more premium, healthy and sustainable experiences.
❚ CREATE ALLIANCES WITH CUSTOMERS, SUPPLIERS AND COMMUNITIES WHERE WE WANT TO BE by generating value for everyone and enhancing people's quality of life.
❚ CONTINUE INVESTING IN THE GROWTH OF OUR COMPANY and in making it more agile, dynamic, efficient and flexible every day.
❚ INCREASE OUR FOOTPRINT OUTSIDE SPAIN, with an increasingly diverse, multicultural and international team, and becoming a more diversified company in terms of brands, products and geographic areas.
Our nature as an independent, family-owned and 100% Spanish Company gives our business model important competitive advantages that lead us to look to the future with excitement and confidence.
The long-term view of our shareholders and their commitment to the sustainable development of our Company guides us in making our mission and vision a reality, and in continuing to promote the corporate culture and values that have made us the company we are today.
We continuously propose challenges that lead us to continue improving and generating value for all of society. These are our main challenges:
IN THE FUTURE WE WILL CONTINUE
PROMOTINGTHE CORPORATE CULTURE AND VALUES
THAT HAVE MADE US THE COMPANY
WE ARE TODAY
❚ REINFORCE OUR POSITION IN THE SPANISH MARKET as the brewery that develops the category and creates value for the entire sector.
❚ BE MORE INNOVATIVE AND ENTREPRENEURIAL, updating tradition and taking it into the future through technology and digitalisation.
COMPANYMAHOU SAN MIGUEL
PLACESPAIN
PERIOD COVERED2016
FREQUENCYYEARLY
REGISTERED COMPANY ADDRESSC/ TITÁN, 15, MADRID
MORE [email protected].: 91 526 91 00www.mahou-sanmiguel.com
PROFILE OFANNUAL REPORT
For the purpose of measuring the Company's social, environmental and economic performance, for the eighth straight year, we present our Annual Report. In this way, we demonstrate and renew our commitment to transparency, value creation and fluid communication with our principal stakeholders.
❚ Sectoral and business associations❚ Off-trade customers ❚ On-trade customers ❚ Consumers ❚ Distributors and dealers❚ Government and Public Administration❚ Media❚ Professionals❚ Suppliers❚ Third Sector❚ Universities, business schools and
training centres
On this road, and in the interest of informing on the activities of 2016, we follow the guidelines of the Global Reporting Initiative, version G4, in accordance with Core level.
This report has a structure similar to reports published in previous years to facilitate comparability. Additionally, we have detected the most important aspects for our business.
❚ ETHICAL MANAGEMENT OF THE BUSINESS, with special attention to the activity of the entire supply chain.
❚ EXCELLENCE OF OUR PORTFOLIO, opting for quality and versatility.
❚ RESPONSIBILITY TO THE PROFESSIONALS WHO WORK AT THE COMPANY, improving their quality of life and listening to their needs.
❚ COMMITMENT TO SOCIETY, promoting responsible brands and sustainable activities.
❚ PROTECTION OF THE ENVIRONMENT, caring for our surroundings and reducing our environmental footprint.
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2016 ANNUAL REPORTMAHOU SAN MIGUEL
UNITED BY OUR PASSION
OUR STAKEHOLDERS
ANALYSIS OF MATERIAL ASPECTS AND COMPARABILITY
GRI TABLE OF CONTENTS: G4-3, G4-5, G4-18, G4-19, G4-24, G4-25, G4-26, G4-27, G4-30, G4-31 GRI TABLE OF CONTENTS: G4-18, G4-19, G4-24, G4-25, G4-26, G4-27
GRI INDICATORS
72 73
GENERAL STANDARD DISCLOSURES PAGES OMISSIONS
STRATEGY AND ANALYSISG4-1 6, 7
G4-2 15, 23-29, 32, 34, 35, 47, 52, 61, 62, 69
PROFILE OF THE ORGANISATIONG4-3 70
G4-4 11, 15, 33, 34, 35, 39, 40-43
G4-5 11, 70
G4-6 11
G4-7 11
G4-8 11
G4-9 11, 12, 23, 40-43, 52
G4-10 52
G4-11 100% of employees are covered by a collective bargaining agreement
G4-12 47
G4-1311, 4740% share in the Nómada Brewing company
G4-14 47
G4-15 15, 24, 25, 26, 27, 28, 29, 53, 64, 65
G4-16 24-28, 53, 64, 65
MATERIAL ASPECTS AND COVERAGE G4-17 11
G4-1862, 70, 71Process coordinated by the Institutional Relations, Communications and Corporate Responsibility Unit. Carried out under the GRI - G4 parameters
G4-19 70, 71
G4-20Delimited by the coordination of the annual report and if it involves confidential information
G4-21 The annual report covers activity in Spain
G4-22There has been no restatement of the relevant information. Any restatements are specified in each indicator
G4-23 There have been no significant changes
GENERAL STANDARD DISCLOSURES PAGES OMISSIONS
PARTICIPATION OF STAKEHOLDERS G4-24 70, 71
G4-2570, 71CSR Strategic Plan drafted in 2012
G4-26 26-29, 47-49, 70, 71
G4-2726-29, 49, 53, 69, 70, 71The annual reports links the relevant issues for the Company with the relevant issues for the stakeholders. The list of future challenges encompasses these relevant issues
PROFILE OF THE ANNUAL REPORTG4-28 01/01/2016 – 31/12/2017
G4-29 Year 2016
G4-30 70
G4-31 70
G4-32 Core
G4-33 The annual report is not verified externally
GOVERNANCEG4-34 16, 17
G4-35 16, 17
G4-36 16, 17
G4-3718, 19We have codes and committees for channelling communication with the highest Governance Bodies
G4-38 16, 17
G4-39 16, 17
G4-40 16, 17
G4-41 16, 17, 18
G4-42 15-18
G4-4316, 17See note G4-37
G4-44 18
G4-45 18
G4-46 18
G4-47 18
G4-48 Management Team
G4-4919See note G4-37
G4-50 19
G4-51The governance mechanisms specify remuneration of the board members, among other rights and responsibilities
G4-52 See note G4-51
G4-53 See note G4-51
G4-54Confidential information. Its publication would violate corporate data protection policies
G4-55Confidential information. Its publication would violate corporate data protection policies
ETHICS AND INTEGRITYG4-56 15, 19, 47
G4-57 47
G4-58 18, 19
2016 ANNUAL REPORTMAHOU SAN MIGUEL
GRI CONTENT INDEX
1. GENERAL STANDARD DISCLOSURES
GRICONTENT INDEX
74 75
INFORMATION ON THE MANAGEMENT APPROACH AND INDICATORS
PAGE OMISSIONS
CATEGORY: ECONOMY
ECONOMIC PERFORMANCE
G4-DMA 11
G4-EC1 11, 23-28, 34, 35, 48
G4-EC2 62-65
G4-EC3 53, 54
G4-EC4 In 2016 no significant financial assistance was received from governments
PRESENCE IN THE MARKET
G4-DMA 23
G4-EC5 Included in the collective bargaining agreement
G4-EC6The Company centres its activity in Spain All of its management is hired from the local community
INDIRECT ECONOMIC IMPACTS
G4-DMA 23, 24, 26
G4-EC7 11, 12, 13, 23, 24, 26, 28, 29, 32, 35, 48, 53
G4-EC8 12, 13, 26-29, 37-39, 47, 48, 53, 61
PROCUREMENT PRACTISES
G4-DMA 23, 47
G4-EC9 23, 46, 47
CATEGORY: ENVIRONMENT
MATERIALS
G4-DMA 61
G4-EN1 63
G4-EN263The rate of container and packaging reuse is 39.02%, whilst in the remaining 60.98% recycled materials are used.
ENERGY
G4-DMA 61
G4-EN3 62
G4-EN4 62
G4-EN5 61
G4-EN613.62Energy audit of the Production Centres
G4-EN712Management of energy consumption and reduction of energy consumption in cold production and packaging.
WATER
G4-DMA 61
G4-EN8 61
G4-EN9 61. Does not affect our facilities
G4-EN10Recycling 0%
INFORMATION ON THE MANAGEMENT APPROACH AND INDICATORS
PAGE OMISSIONS
BIODIVERSITY
G4-DMA 61
G4-EN11Total sites: 518,820 m2 / Protected sites: 1.22%. Beteta (Cuenca) water bottling plant facility in ZEC and ZEPA zone (ES4230014)
G4-EN12 There have been no significant impacts
EG4-N13The Beteta bottling centre is in operation and there are no significant impacts that require intervention
G4-EN14Of the animal species on the list. ZEPA does not detect a nesting and breeding habitat in the vicinity of the facility. The plant species Atropa Baetica is not found in the vicinity of the facility
EMISSIONS
G4-DMA 61
G4-EN15 61
G4-EN16 62
G4-EN17 62
G4-EN18 62
G4-EN19 12, 13, 62
G4-EN20 62
G4-EN21 62
EFFLUENTS AND WASTE
G4-DMA 61
G4-EN223,554,758 m3 which represents 2.39 m3/t** m3 wastewater per tonne produced
G4-EN23 63
G4-EN24 Not produced
G4-EN26 No significant impact
PRODUCTS AND SERVICES
G4-DMA 61
G4-EN2712, 61, 63
G4-EN28 63
COMPLIANCE
G4-DMA 61
G4-EN29 There were no fines or non-monetary sanctions in 2016
TRANSPORT
G4-DMA 61
G4-EN30
62Own fleet emissions: 3,021 t CO2 | 2.03 kg/t*Distribution emissions: 125,671 t CO2 | 84.34 kg/t**Refers to kg of CO2 per tonne of product
GENERAL
G4-DMA 60, 61
G4-EN31 12, 60, 61, 62Environmental expenditures: €5.633bn; Environmental investments: €1.999bn
SUPPLIER ENVIRONMENTAL ASSESSMENT
G4-DMA 18, 47
G4-EN32 18, 47. The approval process includes environmental aspects for all suppliers
G4-EN33 47. We have not identified real, significant negative impacts
2016 ANNUAL REPORTMAHOU SAN MIGUEL
GRI CONTENT INDEX
2. SPECIFIC STANDARD DISCLOSURES
76 77
INFORMATION ON THE MANAGEMENT APPROACH AND INDICATORS
PAGE OMISSIONS
ENVIRONMENTAL GRIEVANCE MECHANISMS
G4-DMA 60
EN34 Not produced
CATEGORY: SOCIAL
SUB-CATEGORY: LABOUR PRACTISES AND DECENT WORK
EMPLOYMENT
G4-DMA 52, 53
G4-LA1 52Employee turnover rate: 0.12
G4-LA2 53Part-time employees have the same social benefits.
LABOUR/MANAGEMENT RELATIONS
G4-DMA19, 53Included in the collective bargaining agreement, therefore 100% of the workforce is covered
G4-LA4 Included in the collective bargaining agreement
OCCUPATIONAL HEALTH AND SAFETY
G4-DMA 57
G4-LA5 5790% of workers are represented through the Health and Safety Committees
G4-LA6
57. Internal communication through Parte Proforma and GICOOfficial disclosure of accidents with and without lost days through the Delt@ systemSince the start of 2017, we have started to track the number and type of accidents.
G4-LA7 57. Understanding the disease to be "occupational", there are workers who are exposed to the "noise" pollutant.
G4-LA857. Yes, by means of the Health and Safety Committees, as well as by means of occupational risk prevention regulations
TRAINING AND EDUCATION
G4-DMA 54
G4-LA912, 5441.21 hours per employee
G4-LA10 54, 55
G4-LA11 54Over 50%
DIVERSITY AND EQUAL OPPORTUNITY
G4-DMA 56
G4-LA12 56
EQUAL REMUNERATION FOR WOMEN AND MEN
DMA 56
G4-LA1356There are no salary differences between men and women in equivalent positions unrelated to seniority
SUPPLIER ASSESSMENT FOR LABOUR PRACTISES
G4-DMA
18, 47All Mahou San Miguel suppliers are included in a global approval process, sign a Supplier's Code of Ethics and sign a document indicating compliance with the 10 Principles of the UN Global Compact
G4-LA1447Labour practises are included in the approval process and in the commitment to respect these norms indicated in the UN Global Compact
G4-LA15 47We do not consider suppliers with negative labour practises
INFORMATION ON THE MANAGEMENT APPROACH AND INDICATORS
PAGE OMISSIONS
LABOUR PRACTISES GRIEVANCE MECHANISMS
G4-DMA 18
G4-LA16 Not produced
SUB-CATEGORY: HUMAN RIGHTS
INVESTMENT
G4-DMA19Mahou San Miguel is a signatory and member of the executive committee of the Global Compact
G4-HR1 18, 19Mahou San Miguel is a signatory and member of the executive committee of the Global Compact
G4-HR2 No specific training on human rights is carried out
NON-DISCRIMINATION
G4-DMA 19See note G4-HR1
G4-HR3 19
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
G4-DMA 19See note G4-HR1
G4-HR4 All of the workforce is covered by a collective bargaining agreement
CHILD LABOUR
G4-DMA 19See note G4-HR1
G4-HR5 19See note G4-HR1
FORCED OR COMPULSORY LABOUR
G4-DMA 19See note G4-HR1
G4-HR6 19 See note G4-HR1
SECURITY PRACTISES
G4-DMA 19 See note G4-HR1
G4-HR7 19, 57Corporate training sessions and talks are given annually to communicate the CSR aspects
INDIGENOUS RIGHTS
DMA Mahou San Miguel has no facilities in places with indigenous communities
G4-HR8 Mahou San Miguel has no facilities in places with indigenous communities
ASSESSMENT
G4-DMA In 2016 no human rights assessments were performed in the operations
G4-HR9 In 2016 no human rights assessments were performed in the operations
SUPPLIER HUMAN RIGHTS ASSESSMENT
G4-DMA18, 47 All Mahou San Miguel suppliers are included in a global approval process, sign a Supplier's Code of Ethics and sign a document indicating compliance with the 10 Principles of the UN Global Compact
G4-HR10 18, 47 All Mahou San Miguel suppliers are included in a global approval process, sign a Supplier's Code of Ethics and sign a document indicating compliance with the 10 Principles of the UN Global Compact
G4-HR11 Not produced
2016 ANNUAL REPORTMAHOU SAN MIGUEL
GRI CONTENT INDEX
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INFORMATION ON THE MANAGEMENT APPROACH AND INDICATORS
PAGE OMISSIONS
HUMAN RIGHTS GRIEVANCE MECHANISMS
G4-DMA 22, 23See note G4-HR1
G4-HR12 Not produced
SUB-CATEGORY: SOCIETY
LOCAL COMMUNITIES
G4-DMA15, 26The Fundación Mahou San Miguel channels the company's social action through activities in the area of integration and education on values
G4-SO1 15, 23-29, 48, 49, 53, 57, 64, 65
G4-SO2 There have been no operations with significant negative impacts
ANTI-CORRUPTION
G4-DMA 19
G4-SO3 In 2016 no corruption risk assessments were conducted of the company's operations
G4-SO4 19
G4-SO5 Not produced
PUBLIC POLICY
G4-DMA 18, 19
G4-SO6 The company does not make donations of this type
ANTI-COMPETITIVE BEHAVIOUR
G4-DMA 18, 19
SO7 Not produced
COMPLIANCE
G4-DMA 18, 19
G4-SO8 Not produced
SUPPLIER ASSESSMENT FOR IMPACTS ON SOCIETY
G4-DMA 19
G4-SO9 All Mahou San Miguel suppliers are included in a global approval process, sign a Supplier's Code of Ethics and sign a document indicating compliance with the 10 Principles of the UN Global Compact
GRIEVANCE MECHANISMS FOR IMPACTS ON SOCIETY
G4-DMA 18, 19
G4-SO11 Not produced
SUB-CATEGORY: PRODUCT RESPONSIBILITY
CUSTOMER HEALTH AND SAFETY
G4-DMA 18, 19
G4-PR1 All phases or our production process —from procurement of raw materials to product labelling— are subject to strict controls, both internal and external. 100% of our formats are analysed
G4-PR2 Not produced
PRODUCT AND SERVICE LABELLING
G4-DMA 37
G4-PR337. 100% of the organisation's products subject to information requirements comply with these requirements and with current labelling laws
G4-PR4 Not produced
G4-PR5 36, 38
INFORMATION ON THE MANAGEMENT APPROACH AND INDICATORS
PAGE OMISSIONS
MARKETING COMMUNICATIONS
G4-DMA 33
G4-PR7 Not produced
CUSTOMER PRIVACY
G4-DMA 18, 19
G4-PR8 Not produced
COMPLIANCE
G4-DMA 18, 19
G4-PR9 There have been no fines
SUPPLEMENTAL OFF-TRADE SECTOR FP1
FP212See note G4-PR1
FP3
SOCIETY
FP4
PRODUCT RESPONSIBILITY
FP5
FP6
FP7
FP8 See note G4-PR3
ANIMAL WELFARE
FP9 Not applicable to our business
FP10 Not applicable to our business
FP11 Not applicable to our business
FP12 Not applicable to our business
FP13 Not applicable to our business
2016 ANNUAL REPORTMAHOU SAN MIGUEL
GRI CONTENT INDEX
ANNUAL REPORT 2016MAHOU SAN MIGUEL
80 81
MAHOU, S.A. AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 AND DIRECTORS’ REPORT.
MAHOU, S.A. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET AS AT31 DECEMBER 2016 AND 2015
EUROS
ASSETS NOTES 2016 2015
NON-CURRENT ASSETS 1,048,647,132 1,035,440,557
INTANGIBLE ASSETS 7 172,581,145 185,496,942
Patents, licences, trademarks and similar items 19,858,403 20,472,732
Computer software 8,525,698 6,351,420
Goodwill 143,185,644 157,373,876
Other intangible assets 1,011,400 1,298,914
PROPERTY, PLANT AND EQUIPMENT 8 456,695,750 443,616,657
Land and buildings 239,144,310 235,585,724
Plant, machinery and other items of property plant and equipment 202,758,248 191,449,069
Property, plant and equipment in the course of construction 14,793,192 16,581,864
INVESTMENT PROPERTY 9 35,517,245 36,780,828
Land and buildings 35,517,245 36,780,828
INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 135,199,354 137,608,320
Investments in companies accounted for using the equity method 6 135,114,354 137,608,320
Loans to companies accounted for using the equity method 85,000 -
NON-CURRENT FINANCIAL ASSETS 11.1 170,729,140 150,287,182
Equity instruments 261,227 261,227
Loans to third parties 130,141,845 126,969,081
Derivatives 12 56,085 62,361
Other financial assets 40,269,983 22,994,513
DEFERRED TAX ASSETS 17.7 77,924,498 81,650,628
CURRENT ASSETS 548,908,970 480,949,302
INVENTORIES 72,687,262 66,711,548
Goods held for resale 4,641,033 2,590,123
Raw materials and other supplies 31,150,346 32,814,681
Work in progress 10,795,048 9,726,614
Finished goods 26,100,835 21,580,130
TRADE AND OTHER RECEIVABLES 187,720,328 187,616,721
Trade receivables for sales and services 179,358,597 174,982,719
Sundry accounts receivable 5,030,255 8,647,930
Employee receivables 2,223,230 2,016,706
Current tax assets 17.1 463,834 425,793
Other accounts receivable from public authorities 17.1 644,412 1,543,573
CURRENT INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 867 -
Loans to companies accounted for using the equity method 867 -
CURRENT FINANCIAL ASSETS 11.2 30,651,267 26,243,771
Loans to companies 29,240,065 25,730,261
Derivatives 12 1,391,146 182,723
Debt securities 20,056 330,787
CURRENT PREPAYMENTS AND ACCRUED INCOME 15,410,978 12,430,977
CASH AND CASH EQUIVALENTS 242,438,268 187,946,285
Cash 206,015,253 86,297,058
Cash equivalents 36,423,015 101,649,227
TOTAL ASSETS 1,597,556,102 1,516,389,859
The accompanying Notes 1 to 24 are an integral part of the consolidated balance sheet as at 31 December 2016,
ANNUAL REPORT 2016MAHOU SAN MIGUEL
82 83
EUROS
EQUITY AND LIABILITIES NOTES 2016 2015
TOTAL EQUITY 1,275,743,291 1,176,509,544
EQUITY ATTRIBUTABLE TO THE PARENT 1,273,519,768 1,174,489,924
SHAREHOLDERS’ EQUITY 13 1,251,885,494 1,156,616,182
Share capital 14,028,253 14,028,253
Reserves 1,091,365,573 988,475,118
Legal and bylaw reserves 13.1 2,805,651 2,805,651
Revaluation reserve Law 16/2012 13.3 21,532,668 21,532,668
Reserve for goodwill 13.4 - 3,273,955
Capitalisation reserve 13.6 13,725,015 -
Other reserves 13.2/13.5/13.7 1,053,302,239 960,862,844
Reserves of fully consolidated companies 13 21,338,147 23,505,113
Reserves of companies accounted for using them equity method 13 30,451,416 27,051,764
Interim dividend 4 (40,007,365) (40,007,365)
Profit for the year 134,709,470 143,563,299
VALUATION ADJUSTMENTS 18,622,116 14,014,628
Hedges 1,085,423 145,740
Translation differences 17,536,693 13,868,888
GRANTS DONATIONS AND LEGACIES RECEIVED 14 3,012,158 3,859,114
NON-CONTROLLING INTERESTS 13.8 2,223,523 2,019,620
NON-CURRENT LIABILITIES 92,894,008 98,855,814
LONG-TERM PROVISIONS 15 25,218,451 32,270,175
Other provisions 25,218,451 32,270,175
NON-CURRENT PAYABLES 16.1 56,434,078 54,689,579
Other financial liabilities 56,434,078 54,689,579
DEFERRED TAX LIABILITIES 17.8 11,209,187 11,826,268
NON-CURRENT ACCRUALS AND DEFERRED INCOME 32,292 69,792
CURRENT LIABILITIES 228,918,803 241,024,501
CURRENT PAYABLES 16.2 21,176,855 20,520,107
Derivatives 12 - 50,765
Other financial liabilities 21,176,855 20,469,342
TRADE AND OTHER PAYABLES 207,715,054 220,472,536
Payable to suppliers 127,957,616 131,266,873
Sundry accounts payable 10,582,012 22,217,275
Remuneration payable 18,706,404 18,885,942
Current tax liabilities 17.1 5,595,197 5,864,176
Other accounts payable to public authorities 17.1 44,873,825 42,238,270
CURRENT ACCRUALS AND DEFERRED INCOME 26,894 31,858
TOTAL EQUITY AND LIABILITIES 1,597,556,102 1,516,389,859
The accompanying Notes 1 to 24 are an integral part of the consolidated balance sheet as at 31 December 2016,
MAHOU, S.A. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2016 AND 2015
EUROS
NOTES 2016 2015
CONTINUING OPERATIONS
REVENUE 18.1 1,220,543,902 1,177,501,757
CHANGES IN INVENTORIES 5,589,139 15,004
PROCUREMENTS (351,161,709) (337,627,437)
Cost of goods held for resale sold 18.2 (34,498,214) (27,935,014)
Cost of raw materials and other consumables used 18.2 (315,920,249) (309,692,423)
Write-down of goods held for resale, raw materials and other supplies 5.8 (743,246) -
OTHER OPERATING INCOME 11,620,995 13,298,757
STAFF COSTS (221,496,060) (213,695,082)
Wages, salaries and similar expenses (165,981,298) (162,400,718)
Employee benefit costs 18.3 (55,514,762) (51,294,364)
OTHER OPERATING EXPENSES (401,602,363) (381,758,248)
Outside services (389,382,425) (362,621,254)
Taxes other than income tax (3,320,581) (10,128,267)
Losses on and write-down of trade receivables and changes in provisions for commercial transactions 11.3 (7,457,105) (7,667,340)
Other current operating income and expenses (1,442,252) (1,341,387)
DEPRECIATION AND AMORTISATION CHARGE 7/8/9 (87,663,683) (72,204,999)
ALLOCATION TO PROFIT OR LOSS OF GRANTS RELATED TO NON-FINANCIAL NON-CURRENT ASSETS AND OTHER GRANTS 14 1,318,125 1,963,187
IMPAIRMENT AND GAINS OR LOSSES ON DISPOSALS OF NON-CURRENT ASSETS (1,885,746) (65,807)
Impairment and other losses 7 (1,999,447) -
Gains or losses on disposals and other 8/9 113,701 (65,807)
PROFIT FROM OPERATIONS 175,262,600 187,427,132
FINANCE INCOME 18.4 3,094,176 1,868,859
Marketable securities and other financial instruments of companies accounted for using the equity method 23 -
Marketable securities and other financial instruments of third parties 3,094,153 1,868,859
FINANCE COSTS 18.4 (365,751) (1,494,252)
On debts to third parties (365,751) (1,494,252)
EXCHANGE DIFFERENCES 8,066,322 1,145,868
IMPAIRMENT AND GAINS OR LOSSES ON DISPOSALS OF FINANCIAL INSTRUMENTS (36,277) 194,010
Impairment and other losses (6,796) -
Gains or losses on disposals and other (29,481) 194,010
FINANCIAL PROFIT 10,758,470 1,714,485
SHARE OF PROFITS OF COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD 6 (1,613,563) 6,326,947
PROFIT BEFORE TAX 184,407,507 195,468,564
Income tax 17.5 /17.6 (49,502,157) (51,662,284)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 134,905,350 143,806,280
CONSOLIDATED PROFIT FOR THE YEAR 134,905,350 143,806,280
Profit attributable to the Parent 134,709,470 143,563,299
Profit attributable to non-controlling interests 13.8 195,880 242,981
The accompanying Notes 1 to 24 are an integral part of the consolidated statement of profit or loss for the year ended 31 December 2016,
ANNUAL REPORT 2016MAHOU SAN MIGUEL
84 85
MAHOU, S.A. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED 31 DECEMBER 2016 AND 2015
NOTES 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES (I) 204,998,561 239,709,589
PROFIT FOR THE YEAR BEFORE TAX 184,407,507 195,468,564
ADJUSTMENTS FOR: 94,533,167 74,764,643
Depreciation and amortisation charge 7/8/9 87,663,683 72,204,999
Impairment losses on property, plant and equipment 1,999,447 -
Write-downs of trade receivables 7,457,105 7,667,340
Write-down of inventories 743,246 -
Impairment losses on non-current financial assets 6,796 -
Changes in provisions 15.1 (1,068,177) 4,633,602
Recognition of grants in profit or loss 14 (1,069,851) (1,765,673)
(Gains) Losses on derecognition and disposal of non-current assets (113,701) 65,807
(Gains) Losses on derecognition and disposal of financial instruments 29,481 (194,010)
Finance income 18.4 (3,094,176) (1,868,859)
Finance costs 18.4 365,751 348,384
Results of companies accounted for using the equity method 6 1,613,563 (6,326,947)
CHANGES IN WORKING CAPITAL (30,276,694) 9,999,131
Inventories (3,513,922) (2,984,166)
Trade and other receivables (5,877,218) (9,068,058)
Other current assets (2,941,339) (2,870,884)
Trade and other payables (17,901,751) 24,890,381
Accrual accounts (42,464) 31,858
OTHER CASH FLOWS FROM OPERATING ACTIVITIES (43,665,419) (40,522,749)
Interest paid (365,751) (348,384)
Dividends received 3,494,285 5,845,858
Interest received 3,675,703 1,906,516
Income tax recovered (paid) (44,106,466) (39,891,016)
Other amounts received (paid) (6,363,190) (8,035,723)
CASH FLOWS FROM INVESTING ACTIVITIES (II) (101,210,540) (189,512,735)
PAYMENTS DUE TO INVESTMENT (108,397,340) (192,329,438)
Group companies and associates (887,545) (80,584,720)
Intangible assets 7 (5,804,529) (5,323,013)
Property, plant and equipment 8 (76,804,560) (71,409,299)
Investment property 9 (1,732,808) (475,581)
Non-current financial assets (23,167,898) (34,536,825)
PROCEEDS FROM DISPOSAL 7,186,800 2,816,703
Intangible assets 7 1,099 -
Property, plant and equipment 8 4,276,915 1,881,609
Non-current financial assets - 683,770
Investment property 9 2,714,000 225,485
Other financial assets 194,786 25,839
CASH FLOWS FROM FINANCING ACTIVITIES (III) (49,378,828) (38,829,291)
PROCEEDS AND PAYMENTS RELATING TO EQUITY INSTRUMENTS 508,000 -
Proceeds from issue of equity instruments 508,000 -
PROCEEDS AND PAYMENTS RELATING TO FINANCIAL LIABILITY INSTRUMENTS (9,879,463) 1,178,074
Proceeds from issue of other borrowings 1,177,658 1,178,074
Repayment of borrowings (11,057,121) -
DIVIDENDS AND RETURNS ON OTHER EQUITY INSTRUMENTS PAID (40,007,365) (40,007,365)
Dividends (40,007,365) (40,007,365)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES (IV) (157,469) 252,082
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III+IV) 54,251,724 11,619,645
Cash and cash equivalents at beginning of year 187,946,285 176,326,640
Cash and cash equivalents due to the merger 240,259 -
Cash and cash equivalents at end of year 242,438,268 187,946,285
The accompanying Notes 1 to 24 are an integral part of the statement of cash flows for the year ended 31 December 2016,
EUROS
NOTES 2016 2015
PROFIT PER STATEMENT OF PROFIT OR LOSS (I) 134,709,470 143,563,299
TOTAL INCOME AND EXPENSE RECOGNISED DIRECTLY IN CONSOLIDATED EQUITY (II) 1,289,129 377,592
Grants, donations and legacies received 203,706 231,852
Arising from cash flow hedges 1,447,231 194,320
Tax effect 17.4 (361,808) (48,580)
TRANSFERS TO CONSOLIDATED PROFIT OR LOSS (III) (1,196,402) (4,024,546)
Grants, donations and legacies received (1,318,125) (1,963,187)
Arising from cash flow hedges (194,320) (4,019,980)
Tax effect (arising from cash flow hedges) 17.4 48,580 1,205,994
Tax effect (grants) 17.4 267,463 416,367
Other - 336,260
TOTAL RECOGNISED INCOME AND EXPENSE (I+II+III) 134,802,197 139,916,345
A) CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE EUROS
2015 BEGINNING BALANCE 14,028,253 859,759,975 43,029,964 (30,017,195) 166,040,017 (424,500) 2,813,986 4,837,822 1,060,068,322 1,692,441 1,061,760,763
B) STATEMENT OF CHANGES IN TOTAL EQUITY
Transactions with shareholders
Other adjustments to equity
Distribution of profit
Interim dividend
Changes in the scope of consolidation
- - - - 143,563,299 - (2,668,246) (978,708) 139,916,345 242,981 140,159,326
- 128,715,143 7,307,679 30,017,195 (166,040,017) - - - - - -
- - - (40,007,365) - - - - (40,007,365) - (40,007,365)
- 219,234 - - 14,293,388 - - 14,512,622 (15,802) 14,496,820
100,000 100,000
2016 ENDING BALANCE 14,028,253 1,091,365,573 51,789,563 (40,007,365) 134,709,470 17,536,693 1,085,423 3,012,158 1,273,519,768 2,223,523 1,275,743,291
2015 ENDING BALANCE 14,028,253 988,475,118 50,556,877 (40,007,365) 143,563,299 13,868,888 145,740 3,859,114 1,174,489,924 2,019,620 1,176,509,544
Total recognised income and expense
Transactions with shareholders
Other adjustments to equity
Distribution of profitInterim dividend
Changes in the scope of consolidation
The accompanying Notes 1 to 24 are an integral part of the statement of changes in equity for the year ended 31 December 2016.
- - - - 134,709,470 - 939,683 (846,956) 134,802,197 195,880 134,998,077
- 102,890,455 665,479 40,007,365 (143,563,299) - - - - -
- - - (40,007,365) - - - - (40,007,365) - (40,007,365)
- - 567,207 - - 3,667,805 - - 4,235,012 508,000 4,743,012
- - - - - - - - - (499,977) (499,977)
SHARE CAPITAL TOTAL
RESERVESOF THE PARENT
CONSOLIDATED RESERVES
INTERIM DIVIDEND
PROFIT FOR THE YEAR
TRANSLATION DIFFERENCES
VALUATION ADJUSTMENTS
GRANTS, DONATIONS
AND LEGACIES RECEIVED
EQUITY OF THE PARENT
NON-CONTROLLING
INTERESTS
EUROS
MAHOU, S.A. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2016 AND 2015
Total recognised income and expense
ANNUAL REPORT 2016MAHOU SAN MIGUEL
86 87
Mahou, S.A. and Subsidiaries (“Mahou San Miguel”) make up a consolidated group of companies that engages mainly in the production and sale of beer. This activity is carried on mainly in Spain from its plants located in Alovera, Lleida, Málaga, Burgos, Tenerife, Córdoba and Granada, and internationally in India, among other countries.
In 2014, Mahou San Miguel implemented a corporate restructuring project which involved the spin-off of the production line of business through the non-monetary contribution of its assets and liabilities to the newly-formed companies Mahou Fábrica de Cervezas, S.L. (now Cervezas Mahou, S.L.U.) and San Miguel Fábricas de Cervezas, S.L.
(now Cervezas San Miguel, S.L.U.),and the merger by absorption of San Miguel Fábricas de Cervezas y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.L.U. and MSM Grupo Comercializador, S.A.U.
The information on this corporate restructuring is included in the 2014 financial statements of Mahou San Miguel.
The Parent is Mahou, S.A., which was incorporated in Madrid on 30 December 1957. The Parent’s object, per its bylaws, is the sale of beer. The Parent’s registered office is at C/ Titán no. 15, Madrid and it files its consolidated and separate financial statements at the Mercantile Registry of Madrid.
The changes in 2016 were as follows:
La Salve Comercializadora, S.L. On 24 February 2016, the Parent subscribed and paid the capital increase performed by its subsidiary La Salve Comercializadora, S.L., amounting to EUR 900,000, maintaining the same percentage of ownership that it held at the end of 2015.
Mahou India Private LimitedOn 28 April 2016, Mahou, S.A. and Cervecera Independiente, S.A.U. increased their investment in the equity of the aforementioned company for amounts of EUR 5,780,191 and EUR 64,880, respectively.
Also, on 1 August 2016 a new investment was made in the equity of Mahou India Private Limited by Mahou, S.A. and Cervecera Independiente, S.A.U. for amounts of EUR 5,297,730 and EUR 59,464, respectively.
In both transactions the percentages of ownership held by Mahou, S.A. and Cervecera Independiente, S.A.U. at 2015 year-end were maintained.
Mahou Andina, S.p.A. (formerly Exportaciones e Importaciones de Líquidos RCR, S.A.)At the end of 2015, the Parent held an ownership interest of 33.51% in the share capital of the aforementioned company.
On 18 February 2016, Mahou, S.A. entered into an agreement with the majority shareholders of Exportaciones e Importaciones de Líquidos RCR, S.A. to acquire all of its shares. Upon completion of this share-purchase transaction, the Parent became the sole shareholder of the aforementioned company and, as a result, it became fully consolidated. At 2015 year-end, Mahou San Miguel was accounting for this company using the equity method (see Note 2.2).
Also, on 19 February 2016 Mahou, S.A. increased its investment in the share capital of this company by EUR 1,500,000 through the conversion of debt into share capital.
On 1 December 2016, Exportaciones e Importaciones de Líquidos RCR, S.A. changed its company name to Mahou Andina, S.p.A.
2.1 SUBSIDIARIES
The subsidiaries, which are the companies over which the Parent exercises or can exercise, directly or indirectly, control, which is taken to be the power to govern the financial and operating policies of the subsidiary so as to obtain economic benefits
from its activities, were fully consolidated. Control is, in general but not exclusively, presumed to exist when the Parent owns directly or indirectly half or more of the voting power of the investee.
The subsidiaries included in the scope of consolidation at 2016 year-end are as follows:
MAHOU, S.A. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016
1. LINE OF BUSINESS
2. GROUP OF COMPANIES
EFFECTIVE % EUROS OF OWNERSHIP VALUE OF INVESTMENT
LOCATION DIRECT INDIRECT DIRECT INDIRECT LINE OF BUSINESS
CERVEZAS MAHOU, S.L.U. (*) Madrid 100.00 - 55,049,890 - Beer brewing
CERVEZAS SAN MIGUEL, S.L.U. (*) Barcelona 100.00 - 42,843,273 - Beer brewing
CERVECERA INDEPENDIENTE, S.A.(-) Madrid 100.00 - 6,013,493 - Beer distribution
CERVEZAS REINA 2000, S.L.U. (*) Tenerife 100.00 - 31,269,780 - Beer brewing
TAISA, LOGISTICS 1960, S.L.U. (*) Madrid 100.00 - 1,878,551 - Transport services
SPAIN’S BEST BEERS INC (-) US 100.00 - 88,093,990 - Beer distribution
ALHAMBRA DISTRIBUIDORA MERIDIONAL, S.L.U. (*) Granada 100.00 - 7,281,250 - Beer distribution
PENIBÉTICA DE CERVEZAS Y BEBIDAS, S,L,U,(*) Córdoba 100.00 - 4,537,361 - Beer brewing
CERVEZAS ALHAMBRA, S.L.U. (*) Granada 100.00 - 7,000,001 - Beer brewing
AGUAS SOLÁN DE CABRAS, S.A.U. (*) Cuenca 100.00 - 151,795,073 - Bottling of mineral water
DISTRIBUCIÓN BALEAR Palma de ALMACENAJE Y LOGÍSTICA S.A. (*) Mallorca 69.98 - 3,530,088 - Beer distribution
MAHOU INDIA PRIVATE LIMITED (̂ ) India 98.89 1.11 63,580,106 821,894 Beer brewing
LA SALVE COMERCIALIZADORA, S.L. (-) Bilbao 75.00 - 1,200,000 - Beer distribution
MAHOU ANDINA S,P,A (ANTES EXPORTACIONESE IMPORTACIONES DE LÍQUIDOS RCR, S.A). (̂ ) Chile 100.00 - 3,175,745 - Beer distribution
CERMADIS S.L. (̂ ) Valencia 74.00 - 828,800 - Beer distribution
(*) Audited by Deloitte (-) Not obliged to be audited (̂ ) Audited by Ernst & Young
ANNUAL REPORT 2016MAHOU SAN MIGUEL
88 89
As described in Note 2.1, Mahou Andina, S.p.A. (formerly Exportaciones e Importaciones de Líquidos RCR, S.A.) changed its method of consolidation from the equity method to full consolidation, following the agreement entered into in February 2016 for the acquisition of 66.49% of the remaining shares by Mahou, S.A., which thereby made it the sole shareholder of the aforementioned company.
Also, on 7 April 2016, the Parent acquired a
40% ownership interest in Nomada Brewing Company, S.L. through the subscription of a capital increase of 1,535 shares totalling EUR 15,350 which were issued with a share premium of EUR 59,650. Therefore, the total investment in the investee amounted to EUR 75,000.
2.3 CHANGES IN THE SCOPE OF CONSOLIDATION
The main changes in the scope of consolidation are discussed in Notes 2.1 and 2.2.
EFFECTIVE % OF EUROS OWNERSHIP VALUE OF INVESTMENT
LOCATION DIRECT INDIRECT DIRECT INDIRECT LINE OF BUSINESS
INTERMALTA, S.A. NAVARRA 33.34 13.56 5,638,696 6,612,800 PRODUCTION OF MALT
LA SALVE BILBAO, S.L. BILBAO 25.00 - 400,000 - HOLDING COMPANY
CANAL STREET BREWING CO L.L.C. US - 30.00 - 80,184,720 BEER BREWING
NOMADA BREWING COMPANY, S.L. BARCELONA 40.00 - 75,000 - BEER BREWING
The companies accounted for using the equity method are as follows:
3.1 REGULATORY FINANCIAL REPORTING FRAMEWORK APPLICABLE
These consolidated financial statements were formally prepared by the directors in accordance with the regulatory financial reporting framework applicable to the Group, which consists of:
The Spanish Commercial Code and all other Spanish corporate law. The Rules for the Preparation of Consolidated Financial Statements approved by Royal Decree 1159/2010 and the Spanish National Chart of Accounts approved by Royal Decree 1514/2007. The mandatory rules approved by the Spanish Accounting and Audit Institute in order to implement the Spanish National Chart of Accounts and the relevant secondary legislation. All other applicable Spanish accounting legislation.
3.2 FAIR PRESENTATION
The consolidated financial statements, which were obtained from the accounting records of the Parent and of its investees, are presented in accordance with the regulatory financial reporting framework applicable to the Group and, in particular, with the accounting principles and rules contained therein and, accordingly, present fairly the equity, financial position, cash flows and results of Mahou San Miguel.
These consolidated financial statements, which were formally prepared by the Board of Directors of the Parent, at its meeting held on 15 March 2017, and the financial statements of the investees, will be submitted for approval by the shareholders at the respective Annual General Meetings, and it is considered that they will be approved without any changes. The consolidated financial statements for 2015 were approved by the shareholders at the Annual General Meeting of the Parent, held on 25 May 2016 and were filed at the Mercantile Registry of Madrid.
The figures contained in the documents comprising these consolidated financial statements (consolidated balance sheet, consolidated statement of profit or loss, consolidated statement of changes in equity, consolidated statement of cash flows and notes to the consolidated financial statements) are expressed in euros.
3.3 ACCOUNTING PRINCIPLES APPLIED
The Parent’s directors formally prepared these consolidated financial statements by taking into account all the obligatory accounting principles and standards with a significant effect hereon. All obligatory accounting principles were applied.
3.4 KEY ISSUES IN RELATION TO THE MEASUREMENT AND ESTIMATION OF UNCERTAINTY
In preparing the consolidated financial statements estimates were made by the Parent’s directors in order to measure certain of the assets, liabilities, income, expenses and obligations reported herein. These estimates relate basically to the following:
The assessment of possible impairment losses on certain assets. The useful life of intangible assets, property, plant and equipment and investment property. The fair value of certain financial instruments. The calculation of provisions. The recoverability of deferred tax assets. The estimate of the term of leases.
Although these estimates were made on the basis of the best information available at 2016 year-end, events that take place in the future might make it necessary to change these estimates (upwards or downwards) in coming years. Changes in accounting estimates would be applied prospectively.
3.5 COMPARATIVE INFORMATION
The information relating to 2015 contained in these notes to the consolidated financial statements is presented solely for comparison purposes with the information for 2016.
Royal Decree 602/2016, of 2 December
Royal Decree 602/2016, of 2 December (amending the Spanish National Chart of Accounts, approved by Royal Decree 1514/2007, of 16 November, and the Rules for the Preparation of Consolidated Financial Statements approved by Royal Decree 1159/2010, of 17 September), was approved in December 2016. The aforementioned Royal Decree 602/2016 is applicable to reporting periods beginning on or after 1 January 2016.
3. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTSCermadis, S.L.On 27 Abril 2016, Mahou, S.A. entered into an agreement to acquire 27,935 shares with a par value of EUR 3 each, representing 74% of the total shares of Cermadis, S.L.
This ownership interest has been included in the scope of consolidation since the acquisition date.
Subsequently, on 27 September 2016 the Parent subscribed and paid -in proportion to its percentage of ownership- the capital increase performed by its subsidiary Cermadis, S.L. for an amount of EUR 592,000.
2.2 ASSOCIATES
Associates are accounted for using the equity method. Associates are companies over whose management significant influence is exercised, which is understood to be the power to influence the investee’s
financial and operating policy decisions, but not control or joint control.
The equity method consists of including under “Non-Current Investments in Group Companies and Associates – Investments Accounted for Using the Equity Method” in the consolidated balance sheet the value of the net assets and any goodwill relating to the percentage of ownership of the investee. The net profit or loss for each year corresponding to the percentage of ownership of these companies is reflected under “Share of Profit (Loss) of Companies Accounted for Using the Equity Method” in the consolidated statement of profit or loss. The greater value of the net assets and underlying goodwill is reduced in subsequent years with a charge to consolidated profit or loss as the corresponding asset items are depreciated, become impaired or are derecognised or disposed of to third parties.
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The proposed distribution of the profit of the Parent for the year that the directors will
submit for approval by the shareholders at the Annual General Meeting is as follows:
In 2016, the distribution of an interim dividend of EUR 40,007,365 was approved at the Parent.
The provisional accounting statement prepared at 29 February 2016 in accordance with legal requirements
evidencing the existence of sufficient liquidity for the distribution of the dividends is as follows:
Position of the financial accounts as stated on the asset side of the Company’s provisional balance sheet as at 31 August 2016:
The distribution of the profit for 2015 is shown in the consolidated statement of
changes in equity.
4. DISTRIBUTION OF THE PROFIT OF THE PARENT
EUROS
BASIS OF DISTRIBUTION
Profit for the year 144,624,404
DISTRIBUTION OF PROFIT
Dividends 40,007,365
To voluntary reserves 94,363,414
To capitalisation reserves 10,253,625
EUROS
CASH 49,127,448
CURRENT FINANCIAL ASSETS 101,153,275
NET CASH POSITION 150,280,723
The main amendments introduced by Royal Decree 602/2016 that affect Mahou San Miguel relate to:
I. New disclosures in the notes to the consolidated financial statements which include most notably, in addition to the disclosures arising from the changes referred to in point II below:
A) the amount of the premiums paid under directors’ third-party liability insurance policies; and
B) the employees with a level of equal to or greater than 33%.
II. Amendments to the recognition and measurement standard for intangible assets (in particular, goodwill) In line with the amendments to the Spanish Commercial Code introduced by Law 22/2015, of 20 July, intangible assets are assets with a finite useful life and, therefore, should be amortised systematically over the period in which it can reasonably be foreseen that the economic benefits incidental to the asset will generate income for the company. When the useful life of intangible assets cannot be estimated reliably, they will be amortised over a maximum period of ten years, without prejudice to the periods established in the specific rules on these assets. The Law specifies that goodwill will be amortised over its useful life which it is presumed will be over ten years and on a straight-line basis, unless there is evidence to the contrary. Formerly, these intangible assets and goodwill had an indefinite useful life and were not subject to systematic amortisation, only to impairment.
III. Greenhouse gas emission allowances, which used to be recognised under “Intan-gible Assets”, will now be recognised under “Inventories”.
In relation to the new disclosure requirements, as permitted by current legislation the Parent did not disclose comparative information (except for information on employees with a disability).
With regard to the depreciation and amortisation of goodwill and non-current assets previously classified as having an indefinite useful life, and as permitted by the single transitional provision of Royal Decree 602/2016, from the beginning of 2016 the Mahou San Miguel applied prospectively the new amortisation methods envisaged in the regulations to the carrying amount of the goodwill existing at the end of the previous reporting period. The related depreciation and amortisation charge recognised in the consolidated statement of profit or loss for 2016 amounted to EUR 16,070,202 thousand.
Certain figures in the accompanying consolidated balance sheet as at 31 December 2015 differ from those contained in the consolidated financial statements approved for that year because they include reclassifications of certain asset items made to aid to their understanding.
In 2015 the Company recognised certain assets under “Current Prepayments and Accrued Income” in the consolidated balance sheet as at 31 December 2015. However, due to the nature of these balances, in 2016 it was resolved to reclassify the aforementioned assets (EUR 1,403,162) to “Inventories” in the accompanying consolidated balance sheet as at 31 December 2015.
3.6 MATERIALITY
It should be noted that in preparing these consolidated financial statements the Group omitted any information or disclosures which, not requiring disclosure due to their qualitative importance, were considered not to be material in accordance with the concept of materiality defined in the applicable conceptual framework.
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The principal accounting policies used by Mahou San Miguel in preparing its consolidated financial statements for 2016, in accordance with the Spanish National Chart of Accounts and the other regulations in force, were as follows:
5.1 BASIS OF CONSOLIDATION
A. Transactions between consolidated companies
The balances and transactions and results of operations between fully consolidated companies were eliminated on consolidation. The results of operations between Mahou San Miguel companies and associates were eliminated in proportion to Mahou San Miguel’s percentage of ownership of the latter. B. Uniformity of items
The accounting policies and procedures used by the Mahou San Miguel companies were unified in order to present the consolidated financial statements on a uniform basis.
C. Translation of financial statements denominated in foreign currency
The financial statements of investees with a functional currency other than the presentation currency, the euro, were translated to euros as follows:
The assets and liabilities in their balance sheets were translated at the exchange rates ruling at the balance sheet date. The statement of profit or loss items were translated at the cumulative average exchange rates for the period in which they arose. Any resulting exchange differences are recognised as a separate component of equity under “Translation Differences”.
5.2 GOODWILL AND BUSINESS COMBINATIONS
The obtainment by the Parent of control over a subsidiary constitutes a business combination to which the acquisition
method is applied. When the ownership interest is consolidated subsequently, the equity investment in the subsidiary is generally eliminated on the basis of the values resulting from applying the acquisition method (described below) at the date on which control is obtained.
Business combinations are accounted for by applying the acquisition method. For this purpose, the acquisition date is determined and the cost of the combination is calculated, and the identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values.
Goodwill or a gain from a bargain purchase arising from a combination is calculated as the difference between the acquisition-date fair value of the assets acquired and liabilities assumed and the cost of the business combination at the acquisition date.
The cost of a business combination is the aggregate of:
The acquisition-date fair value of the assets transferred, the liabilities incurred or assumed and the equity instruments issued. The fair value of any contingent consideration that depends on future events or on the fulfilment of certain specified conditions.
The costs incurred to issue equity or debt securities given up in exchange for the items acquired are not included in the cost of a business combination.
Also, the cost of a business combination does not include the fees paid to legal advisers and other professionals involved in the combination or, clearly, any costs incurred internally in this connection. Such amounts are charged directly to profit or loss.
If the business combination is achieved in stages, as in the case of Mahou India Private Limited in 2014 and Mahou Andina, S.p.A. (formerly Exportaciones e Importaciones de Líquidos, RCR, S.A.) in 2016 (see Note 2.1), and, therefore, the
acquirer already held an equity interest in the acquiree immediately before the acquisition date (the date on which control is obtained), the goodwill or gain from a bargain purchase is the difference between:
The cost of the business combination, plus the acquisition-date fair value of any equity interest previously held by the acquirer in the acquiree; and The fair value of the identifiable assets acquired less the fair value of the liabilities assumed, determined as indicated above.
Any gain or loss resulting from the remeasurement of the previously held equity interest in the acquiree at its acquisition-date fair value is recognised in profit or loss. If the investment in this investee had previously been measured at fair value, any valuation adjustments not yet recognised in profit or loss will be transferred to the consolidated statement of profit or loss. Also, the cost of a business combination is presumed to be the best reference for estimating the acquisition-date fair value of any previously held equity interest.
Goodwill arising on the acquisition of companies with a functional currency other than the euro is measured in the functional currency of the acquiree and is translated to euros at the exchange rate prevailing at the balance sheet date.
Goodwill is amortised and subsequently measured at cost less accumulated amortisation and any accumulated impairment losses recognised. Since 1 January 2016, in accordance with applicable legislation, the useful life of goodwill has been established at ten years and is amortised on a straight-line basis.
Also, the Group analyses if there are any indications of impairment of the aforementioned cash-generating units at least once a year and, if there are, they are tested for impairment according to the methodology described below and, where appropriate, they are written down.
An impairment loss recognised for goodwill must not be reversed in a subsequent period.
If, exceptionally, a gain on a bargain purchase arises from the business
combination, it is recognised as income in the consolidated statement of profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete, and the provisional amounts may be adjusted in the period required to obtain the necessary information. However, the measurement period shall not exceed one year from the acquisition date. The effects of the adjustments made in that period are recognised retrospectively and comparative information for prior periods must be revised as needed.
Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss, unless the consideration has been classified as equity, in which case subsequent changes in its fair value are not recognised.
5.3 INTANGIBLE ASSETS
As a general rule, intangible assets are recognised initially at acquisition cost. They are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses. These assets are amortised over their years of useful life. When the useful life of these assets cannot be estimated reliably they are amortised over a period of ten years.
Intangible assets include the amounts paid for title to or the right to use computer applications and software. Mahou San Miguel only capitalises external costs relating to projects for the development of new applications, whereas in-house costs incurred in this connection are charged to income.
Software maintenance costs are charged directly to income for the year in which they are incurred.
Computer software is recognised at acquisition cost and is amortised on a straight-line basis over three years.
Trademarks are recognised at the costs incurred in acquiring them from third parties, either through direct purchase or as the result of a business combination. They are amortised on a straight-line basis over 10 or 20 years.
5. ACCOUNTING POLICIES AND MEASUREMENT BASES
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The items included under “Property, Plant and Equipment in the Course of Construction” continue to be recognised in this account until they come into operation, when they are transferred to the appropriate account, depending on the nature of the asset in question, and depreciation commences.
“Other Items of Property, Plant and Equipment” includes the returnable containers at Mahou San Miguel’s warehouses and those delivered to customers and distributors. In accordance with current legislation, companies engaging in the sale of beer must charge a deposit for the delivery of their containers and crates. This deposit is refunded as the containers are returned. The deposits received which
have not yet been refunded to customers and distributors are recognised under “Non-Current Payables - Other Financial Liabilities” on the liability side of the consolidated balance sheet.
Impairment of intangible assets, property, plant and equipment and investment property At the end of each reporting period (for intangible assets with indefinite useful lives) or whenever there are indications of impairment (for other assets), Mahou San Miguel tests the tangible and intangible assets for impairment to determine whether the recoverable amount of the assets has been reduced to below their carrying amount.
Recoverable amount is the higher of fair value less costs to sell and value in
use. Mahou San Miguel generally uses discounted cash flow methods to determine the aforementioned value. The discounted cash flow calculations are based on five-year projections made by the Parent and a perpetual return. The flows take into account past experience and represent the Parent’s best estimate of future market performance. There were no impairment losses in 2016 and 2015.
5.5 INVESTMENT PROPERTY
“Investment Property” in the consolidated balance sheet reflects the values of the land, buildings and other structures held either to earn rentals, or for capital appreciation.
Investment property is measured as described in Note 5.4 on property, plant and equipment.
Effective for accounting purposes from 1 January 2013, the value of virtually all the Company’s investment property existing at that date was revalued pursuant to Law 16/2012, of 27 December (see Note 9).
5.6 LEASES
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.
5.6.1 FINANCE LEASESAt 31 December 2016 and 2015, Mahou San Miguel did not have any finance leases.
5.6.2 OPERATING LEASESLease income and expenses from operating leases are recognised in income on an accrual basis.
5.7 FINANCIAL INSTRUMENTS
5.7.1 FINANCIAL ASSETSThe main financial assets held by Mahou San Miguel are cash and cash equivalents, held-to maturity investments, loans and receivables, i.e. financial assets arising from the sale of goods or the rendering of services in the ordinary course of the
Company’s business, or financial assets which, not having commercial substance, are not equity instruments or derivatives, have fixed or determinable payments and are not traded in an active market.
Initial recognitionIn general terms, financial assets are initially recognised at the fair value of the consideration given, plus any directly attributable transaction costs.
Subsequent measurementLoans and receivables and held-to maturity investments are measured at amortised cost.
At least at each reporting date Mahou San Miguel tests financial assets not measured at fair value through profit or loss for impairment. Objective evidence of impairment is considered to exist when the recoverable amount of the financial asset is lower than its carrying amount. When this occurs, the impairment loss is recognised in the consolidated statement of profit or loss.
In particular, Mahou San Miguel calculates valuation adjustments relating to trade and other receivables by means of a specific analysis based on the age and characteristics of the receivables.
Mahou San Miguel derecognises a financial asset when the rights to the cash flows from the financial asset expire or have been transferred and substantially all the risks have also been transferred.
Cash and cash equivalents include cash in current accounts and demand deposits at banks and other short-term, highly liquid investments that are readily convertible into cash, which are subject to an insignificant risk of changes in value at the inception of the investment. Investments which mature in less than three months from the acquisition date are also included.
Mahou San Miguel does not perform any bill discounting, factoring or asset securitisation transactions.
5.7.2 FINANCIAL LIABILITIESFinancial liabilities include accounts payable by Mahou San Miguel that have arisen from the purchase of goods or services in the normal course of the
5.4 PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment were recognised at acquisition or production cost, although, effective for accounting purposes from 1 January 2013, certain items of property, plant and equipment of Mahou San Miguel existing at that date were revalued pursuant to Law 16/2012, of 27 December (see Note 8). The effect of the asset revaluations made pursuant to Laws 74/1980 and 9/1983 and to Royal Decree-Law 7/1996 was also included in the value of the assets.
The initial measurement is subsequently adjusted for any accumulated depreciation and any accumulated impairment losses. The revaluation surpluses or net increases in value resulting from revaluations are depreciated over the tax periods in the
remaining useful lives of the revalued assets.
Property, plant and equipment upkeep and maintenance expenses are recognised in the statement of profit or loss for the year in which they are incurred. However, the costs of improvements leading to increased capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised.
The annual depreciation charge is calculated using the straight-line method based on the estimated useful lives of the assets. The diminishing-balance depreciation method is used for machinery because this is the method best suited to the characteristics and use of this machinery.
The depreciation rates applied in 2016 and 2015 were as follows:
STRAIGHT-LINE METHOD
Buildings 2 – 3
Plant and machinery 4 – 20
Other fixtures 10 – 33
Other items of property, plant and equipment 15 – 30
DIMINISHING-BALANCE DEPRECIATION METHOD
Machinery 30
DEPRECIATION RATE %
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Company’s business and those which, not having commercial substance, cannot be classed as derivative financial instruments.
Accounts payable are initially recognised at the fair value of the consideration received, adjusted by the directly attributable transaction costs. These liabilities are subsequently measured at amortised cost.
Mahou San Miguel derecognises financial liabilities when the obligations giving rise to them cease to exist.
5.7.3 EQUITY INSTRUMENTS An equity instrument is a contract that evidences a residual interest in the assets of Mahou San Miguel after deducting all of its liabilities.
Equity instruments issued by the Company are recognised in equity at the proceeds received, net of issue costs.
5.7.4 DERIVATIVESMahou San Miguel uses derivative financial instruments to hedge the risks to which its future cash flows are exposed. Basically, these risks relate to changes in exchange rates. As part of these transactions, Mahou San Miguel arranges certain hedging financial instruments, which are recognised at fair value.
The fair value of the hedging instruments was calculated using measurement techniques based on the spot exchange rate and yield curves.
In order for these financial instruments to qualify for hedge accounting, they are initially designated as such and the hedging relationship is documented. Also, Mahou San Miguel verifies, both at inception and periodically over the term of the hedge (at least at the end of each reporting period), that the hedging relationship is effective, i.e., that it is prospectively foreseeable that the changes in the cash flows of the hedged item (attributable to the hedged risk) will be almost fully offset by those of the hedging instrument and that, retrospectively, the gain or loss on the hedge was within a range of 80-125% of the gain or loss on the hedged item.
The portion of the gain or loss on the hedging instrument that has been
determined to be an effective hedge is recognised temporarily in equity and is recognised in the statement of profit or loss in the same period during which the hedged item affects profit or loss, unless the hedge relates to a forecast transaction that results in the recognition of a non-financial asset or a non-financial liability, in which case the amounts recognised in equity are included in the initial cost of the asset or liability when it is acquired or assumed.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the year.
5.8 INVENTORIES
Inventories are measured at the lower of acquisition or production cost and net realisable value. Trade discounts, rebates, other similar items and interest included in the face value of the related payables are deducted in determining the costs of purchase.
Production cost includes the costs of direct materials, direct labour and production overheads.
Net realisable value is the estimated selling price less the estimated costs of completion and costs to be incurred in marketing, selling and distribution.
The cost of inventories is assigned by Mahou San Miguel using the weighted average cost formula.
Mahou San Miguel recognises the appropriate write-downs as an expense in the consolidated statement of profit or loss when the net realisable value of the inventories is lower than acquisition or production cost.
At 2016 year-end it was considered necessary to write down inventories by EUR 743,246.
Greenhouse gas emission allowancesAs indicated in Note 3.5, since 1 January 2016 greenhouse gas emission allowances granted to the Company for no consideration by public bodies under international environmental accords embodied in the Kyoto Protocol are no longer classified as intangible assets but rather as inventories. The allowances held for sale were already recognised in this way.
Allowances allocated or acquired for consumption in the production process are recognised at cost.
In the case of allowances allocated free of charge or acquired for a price significantly lower than their market value, income is recognised directly in consolidated equity at the beginning of the calendar year to which they correspond, and the related amount is recognised in consolidated profit or loss at the same rate as the emission expenses associated with the allowances allocated free of charge.
Mahou San Miguel recognises the appropriate write-downs as an expense in the consolidated statement of profit or loss when the recoverable amount of the aforementioned allowances is lower than their carrying amount.
At 31 December 2016, the consolidated balance sheet included under “Grants, Donations and Legacies Received” the value of the allowances not yet used. In the consolidated statements of profit or loss for 2016 and 2015, the consumption of emission allowances is reflected as a period expense under “Other Operating Expenses”. The related deferred income is allocated to profit or loss under “Grants Related to Non-Financial Non-Current Assets and Other Grants”.
5.9 FOREIGN CURRENCY TRANSACTIONS
Transactions in currencies other than the euro are recognised at their equivalent euro value by applying the exchange rates prevailing at the date of the transaction. Exchange differences are recognised in the statement of profit or loss when they arise. At year-end the amounts receivable and payable in foreign currencies are translated to euros at the exchange rates prevailing at that date, and the exchange differences are
recognised in the statement of profit or loss for the year.
5.10 INCOME TAX
Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax expense (deferred tax income).
The current income tax expense is the amount payable by Mahou San Miguel as a result of income tax settlements for a given year. Tax credits and other tax benefits, excluding tax withholdings and pre-payments, and tax loss carryforwards from prior years effectively offset in the current year reduce the current income tax expense.
The deferred tax expense or income relates to the recognition and derecognition of deferred tax assets and liabilities. These include temporary differences measured at the amount expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled.
Deferred tax liabilities are recognised for all taxable temporary differences, except for those arising from the initial recognition of goodwill or of other assets and liabilities in a transaction that is not a business combination and affects neither accounting profit (loss) nor taxable profit (tax loss).
Deferred tax assets are recognised to the extent that it is considered probable that there will be taxable profits in the future against which the deferred tax assets can be utilised.
Also, at consolidated level, any differences between the consolidated carrying amount of an investment in an investee and the related tax base are also taken into account. In general, such differences arise from the undistributed profits generated since the date of acquisition of the investee, from tax credits associated with the investment and, in the case of investees with a functional currency other than the euro, from translation differences. The deferred tax assets and deferred tax liabilities arising
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from these differences are recognised, unless, in the case of taxable temporary differences, the investor is able to control the timing of the reversal of the temporary difference and, in the case of deductible temporary differences, it is probable that the temporary difference will reverse in the foreseeable future and it is probable that the Group will have sufficient future taxable profits.
Deferred tax assets and liabilities arising from transactions charged or credited directly to equity are also recognised in consolidated equity.
The deferred tax assets recognised are reassessed at the end of each reporting period and the appropriate adjustments are made to the extent that there are doubts as to their future recoverability. Also, unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that they will be recovered through future taxable profits.
Since 1 January 2010, Mahou San Miguel has filed consolidated tax returns. The head of Mahou San Miguel is Mahou, S.A. and the subsidiaries are Cervezas Reina 2000, S.A.U. (formerly Reina Fábrica de Cervezas, S.A.U.), Taisa Logistics 1960, S.A.U., Cervecera Independiente, S.A., Alhambra Distribuidora Meridional, S.L., Cervezas Alhambra, S.L.U. (formerly Alhambra Fábrica de Cervezas, S.L.U.), Penibética de Cervezas y Bebidas, S.L.U., and Aguas de Solán de Cabras, S.A.U. In 2014 Cervezas Mahou, S.L.U (formerly Mahou Fábrica de Cervezas, S.L.U.), and Cervezas San Miguel, S.L.U. (formerly San Miguel Fábricas de Cervezas, S.L.U.) were included in the tax group.
5.11 REVENUE AND EXPENSE RECOGNITION
Revenue and expenses are recognised on an accrual basis, i.e. when the actual flow of the related goods and services occurs, regardless of when the resulting monetary or financial flow arises. Revenue is measured at the fair value of the consideration received, net of discounts and taxes.
Revenue from sales is recognised when the significant risks and rewards of ownership
of the goods sold have been transferred to the buyer, and the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.
Revenue from the rendering of services is recognised by reference to the stage of completion of the transaction at the end of the reporting period, provided the outcome of the transaction can be estimated reliably.
Interest income from financial assets is recognised using the effective interest method and dividend income is recognised when the shareholder’s right to receive payment has been established. Interest and dividends from financial assets accrued after the date of acquisition are recognised as income.
5.12 PROVISIONS AND CONTINGENCIES
When preparing the consolidated financial statements the Parent’s directors made a distinction between:
A. Provisions: credit balances covering present obligations arising from past events with respect to which it is probable that an outflow of resources embodying economic benefits that is uncertain as to its amount and/or timing will be required to settle the obligations; and
B. Contingent liabilities: possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly within Mahou San Miguel’s control.
The consolidated financial statements include all the provisions with respect to which it is considered likely that the obligation will have to be settled. Contingent liabilities are not recognised in the financial statements, but rather are disclosed, unless the possibility of an outflow in settlement is considered to be remote.
Provisions are measured at the present value of the best possible estimate of the amount required to settle or transfer the obligation, taking into account the information available
on the event and its consequences. Where discounting is used, adjustments made to provisions are recognised as interest cost on an accrual basis.
5.13 ENVIRONMENTAL ASSETS AND LIABILITIES
Environmental assets are deemed to be assets used on a lasting basis in Mahou San Miguel’s operations whose main purpose is to minimise environmental impact and protect and improve the environment, including the reduction or elimination of future pollution.
In this regard, investments in environmental activities are measured at acquisition cost and capitalised as an addition to the cost of non-current assets in the year in which they are made, in accordance with the methods described in Note 5.4.
The expenses incurred in protecting and improving the environment are charged to income in the year they are incurred, regardless of when the resulting monetary or financial flow arises.
The provisions for probable or certain environmental third-party liability and outstanding environmental obligations of undetermined amount not covered by insurance policies are recognised when the liability arises.
5.14 PENSION OBLIGATIONS AND OTHER EMPLOYEE BENEFIT OBLIGATIONS
Mahou San Miguel has various pension and similar obligations to its employees, the most significant of which are as follows:
1. In August 2001 Mahou, S.A. reached an agreement with its workers’ representatives to create an occupational pension plan of which all serving employees at 1 January 2001 could avail themselves. This is a defined contribution plan and covers the following contingencies:
A. Normal or early retirement of participant.B. Situation similar to that of retirement.C. Permanent and comprehensive disability.
D. Death of participant.
Pursuant to current legislation, the pension plan was externalised through an agreement with Banco Bilbao Vizcaya Argentaria, S.A. This pension plan is financed through annual contributions made by the Parent, which are recognised under “Employee Benefit Costs - Pensions and Obligations to Employees” in the consolidated statement of profit or loss.
2. The Parent arranged two policies to cover the pre-retirement and supplementary pension payment obligations to employees of the Parent who had retired before the entry into force of the above-mentioned pension plan. In 2016, the Parent considered that no contingencies or liabilities were going to arise.
3. In addition, defined contribution obligations for managers and executives of Mahou, S.A. were externalised through Group insurance policies arranged with BBVA Seguros.
4. In 2014 Mahou, S.A. transferred the same pension and other employee benefit obligations to a new plan for the employees of Fábrica de Cervezas, S.L.U. (now Cervezas Mahou, S.L.U.).
5. In 2004 San Miguel S.A. entered into an agreement establishing a pension plan, the characteristics of which are similar to those of the plan of the Parent, for the workforce of San Miguel Fábricas de Cerveza y Malta S.A., a company liquidated by the merger in 2014. In 2005 this pension plan was externalised through an agreement with Banco Bilbao Vizcaya Argentaria, S.A. The annual contribution was recognised under “Employee Benefit Costs - Pensions and Obligations to Employees” in the consolidated statement of profit or loss for 2016. The following changes arose as a consequence of the corporate restructuring in the reporting period:
5.1.In 2014 the merged company transferred the same pension and other employee benefit obligations to the employees of the spun-off company San Miguel Fábricas de Cervezas S.L.U. (now Cervezas Mahou, S.L.U.).
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100 101
5.2.The obligations to the employees of San Miguel Fábricas de Cerveza y Malta S.A. were assumed by the Parent, Mahou S.A.
6. In 2004 an agreement was entered into with the employees of Taisa Logistics 1960, S.A.U. to create a defined contribution pension plan, the characteristics of which are similar to those of the other Mahou San Miguel companies. This plan does not cover past services and was externalised through a group employee welfare insurance policy. The cost of the premium in 2016 was recognised under “Employee Benefit Costs - Pensions and Obligations to Employees”.
7. At 31 December 2016, Alhambra Distribuidora Meridional, S.L.U., Alhambra Fábrica de Cervezas, S.L.U. (now Cervezas Alhambra, S.L.U.) and Penibética de Cervezas y Bebidas, S.L. had obligations to serving employees that may be provisioned, as stipulated in the Collective Labour Agreement. The obligations covered by these provisions are as follows:
A. Serving employees: bonus for length of service. The plan relating to these obligations was externalised through an insurance policy taken out with Mapfre Vida, S.A.
B. Other items: These relate mainly to supplements for death of spouse, death of both parents, etc. The calculations were also performed by the related companies by applying actuarial techniques.
8. The subsidiary Aguas de Solán de Cabras, S.A. had certain obligations to the employees assigned to the Los Villares (Jaén) work centre consisting of a retirement bonus. Pursuant to the collective labour agreements in force until 2014, the Company was obliged to pay the aforementioned bonus to the employees in the aforementioned group, provided that certain circumstances were met. This obligation was externalised through an insurance policy taken out with Allianz Vida Grupo.
As a result of the new collective labour agreement entered into in 2014, the obligation consisting of a retirement bonus
ceased to exist, and the contributions made to the aforementioned insurance policy were recouped by the Company in 2016. Also, a Business Social Welfare Plan was established with a defined annual contribution and an initial extraordinary contribution.
The cost of the annual premium is recognised under “Staff Costs - Employee Pensions and Obligations” in the consolidated statement of profit or loss.
9. The subsidiary Distribuidora Balear Almacenaje y Logística, S.A. is governed by the Balearic Island collective labour agreement for the commercial sector and, therefore, employees who retire over the age of 60 and with over 10 years’ service at the company have a right to a bonus for the termination of the employment relationship that ranges between 6 and 12 months depending on the employee’s age on retirement. At 2016 year-end, the Group had recognised a provision in this connection totalling EUR 351 thousand (2015: EUR 331 thousand) under “Long-Term Provisions - Employee Benefit Obligations” (see Note 15).
10. The obligations assumed by Mahou San Miguel to cover benefits for death or disability of employees while they are still working are covered by insurance policies.
11. Mahou San Miguel offers certain of its employees the possibility of retiring before reaching retirement age, for which it assumes certain obligations, in terms of both salaries and other employee benefits, from the date of their pre-retirement to the date of actual retirement (see Note 15).
5.15 TERMINATION BENEFITS
Under current legislation, the Group is required to pay termination benefits to employees terminated under certain conditions. Therefore, termination benefits that can be reasonably quantified are recognised as an expense in the year in which the decision to terminate the employment relationship is taken. The accompanying consolidated financial statements do not include any provision
in this connection, since no situations of this nature are expected to arise.
5.16 GRANTS, DONATIONS AND LEGACIES RECEIVED
Mahou San Miguel accounts for grants, donations and legacies received as follows:
A. Non-refundable grants, donations and legacies relating to assets: these are measured at the fair value of the amount or the asset received, based on whether or not they are monetary grants, and they are taken to income in proportion to the period depreciation taken on the assets for which the grants were received or, where appropriate, on disposal of the asset or on the recognition of an impairment loss, except for grants received from shareholders or owners, which are recognised directly in equity and do not give rise to the recognition of any income.
B. Grants related to income: grants related to income are credited to income when granted, unless their purpose is to finance losses from operations in future years, in which case they are allocated to income in those years. If grants are received to finance specific expenses, they are allocated to income as the related expenses are incurred.
5.17 RELATED PARTY TRANSACTIONS
Mahou San Miguel performs all its transactions with related parties on an arm´s length basis. Also, the transfer prices are adequately supported and, therefore, the Parent’s directors consider that there are no material risks in this connection that might give rise to significant liabilities in the future.
5.18 CURRENT/NON-CURRENT CLASSIFICATION
Current assets are assets associated with the normal operating cycle, which in general is considered to be one year; other assets which are expected to mature, be disposed of or be realised within twelve months from the end of the reporting period; financial assets held for trading, except for financial derivatives that will be settled in a period exceeding one year; and cash and cash equivalents. Assets that do not meet these requirements are classified as non-current assets.
Similarly, current liabilities are liabilities associated with the normal operating cycle, financial liabilities held for trading, except for financial derivatives that will be settled in a period exceeding one year; and, in general, all obligations that will mature or be extinguished at short term. All other liabilities are classified as non-current liabilities.
ANNUAL REPORT 2016MAHOU SAN MIGUEL
102 103
The changes in “Intangible Assets” in 2016 and 2015 were as follows:
7. INTANGIBLE ASSETS
Balance at Inclusion in the Increase Decrease Transfers Translation Balance at 31/12/15 Scope of Consolidation (Note 5.8) Adjustment 31/12/16
TRADEMARKS 36,945,605 1,962,430 341 (1,099) - 238 38,907,515
GAS EMISSION ALLOWANCES 64,314 - - - (64,314) - -
COMPUTER SOFTWARE 46,658,166 32,075 5,694,188 - - 62 52,384,491
GOODWILL 157,373,876 3,881,417 - (1,999,447) - - 159,255,846
OTHER INTANGIBLESASSETS 3,332,000 - 110,000 - - - 3,442,000
TOTAL COST 244,373,961 5,875,922 5,804,529 (2,000,546) (64,314) 300 253,989,852
TRADEMARKS (16,472,873) - (2,576,042) - - (197) (19,046,995)
COMPUTER SOFTWARE (40,306,746) (20,744) (3,531,243) - - (60) (43,858,793)
GOODWILL - - (16,070,202) - - - (16,070,202)
OTHER INTANGIBLES ASSETS (2,097,400) - (333,200) - - - (2,430,600)
TOTAL ACCUMULATED AMORTISATION (58,877,019) (20,744) (22,510,687) - - (257) (81,408,707)
TOTAL, NET 185,496,942 5,855,178 (16,706,158) (2,000,546) (64,314) 43 172,581,145
EUROS
2016
Balance at Increase Decrease Other Translation Balance at 31/12/14 Adjustments Adjustment 31/12/15
TRADEMARKS 36,918,147 26,589 - - 869 36,945,605
GAS EMISSION ALLOWANCES 29,976 231,852 (197,514) - - 64,314
COMPUTER SOFTWARE 42,328,526 4,324,424 - 5,216 - 46,658,166
GOODWILL 157,373,876 - - - - 157,373,876
OTHER INTANGIBLESASSETS 2,360,000 972,000 - - - 3,332,000
TOTAL COST 239,010,525 5,554,865 (197,514) 5,216 869 244,373,961
TRADEMARKS (14,116,083) (2,356,727) - - (63) (16,472,873)
COMPUTER SOFTWARE (37,521,817) (2,779,713) - (5,216) - (40,306,746)
OTHER INTANGIBLES ASSETS (1,829,000) (268,400) - - - (2,097,400)
TOTAL ACCUMULATEDAMORTISATION (53,466,900) (5,404,840) - (5,216) (63) (58,877,019)
TOTAL, NET 185,543,625 150,025 (197,514) - 806 185,496,942
EUROS
2015
COMPANY Balance at Changes in the 2015 Dividends Translation Other Balance at 31/12/14 Scope of Consolidation Profit/(Loss) Paid Adjustment Adjustments 31/12/15
INTERMALTA, S.A. 42,040,670 - 1,993,797 (2,813,400) - (600) 41,220,467
S.A.E. FOMENTO DEL LÚPULO 521,313 (521,313) - - - - -
EXPORTACIONES E IMPORTACIONES 1,100,000 - (404,901) - - - 695,099DE LÍQUIDOS RCR, S.A
LA SALVE BILBAO, S.L. - 400,000 - - - - 400,000
CANAL STREET BREWING COMPANY, LLC - 80,184,720 4,738,051 (3,032,458) 13,402,441 - 95,292,754
TOTAL 43,661,983 80,063,407 6,326,947 (5,845,858) 13,402,441 (600) 137,608,320
EUROS
2015
The changes in “Investments in Companies Accounted for Using the Equity Method” in 2016 and 2015 were as follows:
6. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
COMPANY Balance at Changes in the 2016 Dividends Consolidation Translation Other Balance at 31/12/15 Scope of Consolidation Profit/(Loss) Paid adjustments Adjustment Adjustment 31/12/16 (Notes 2.1, 2.2 y 2.3) (a)
INTERMALTA, S.A. 41,220,467 - 2,781,174 (2,344,500) - - 2 41,657,143
MAHOU ANDINA, S.P.A (FORMERLY EXPORTACIONES 695,099 (695,099) - - - - - -E IMPORTACIONES DE LÍQUIDOS RCR, S.A.)
LA SALVE BILBAO, S.L. 400,000 - - - (24,866) - (9,295) 365,839
CANAL STREET BREWING COMPANY, LLC 95,292,754 - 3,460,556 (1,149,785) (7,756,008) 3,071,892 171,382 93,090,791
NOMADA BREWERING COMPANY, S.L. - 75,000 (14,296) - (60,123) - - 581
TOTAL 137,608,320 (620,099) 6,227,434 (3,494,285) (7,840,997) 3,071,892 162,089 135,114,354
EUROS
2016
(a) These include primarily the amortisation of underlying goodwill.
ANNUAL REPORT 2016MAHOU SAN MIGUEL
104 105
The changes in 2016 and 2015 in “Property, Plant and Equipment” in the consolidated balance
sheet and the most significant information affecting this heading were as follows:
8. PROPERTY, PLANT AND EQUIPMENT
Balance at Increase Decrease Transfers Other Translation Balance at 31/12/14 (Note 9) Adjustments Adjustments 31/12/15
LAND AND BUILDINGS 312,201,158 20,920,833 (88,399) 1,183,547 249,006 410,437 334,876,582
PLANT AND MACHINERY 598,049,007 21,481,223 (494,488) 8,435,582 - 255,011 627,726,335
OTHER FIXTURES 123,574,854 19,879,979 (1,339,726) 54,366 - 9,498 142,178,971
OTHER ITEMS OF PROPERTY, PLANT AND EQUIPMENT 146,430,229 8,486,318 (5,484,210) 130,930 - 6,127 149,569,394
PROPERTY, PLANT AND EQUIPMENT IN THE COURSE OF CONSTRUCTION 14,446,441 12,140,946 - (10,012,163) - 6,640 16,581,864
TOTAL COST 1,194,701,689 82,909,299 (7,406,823) (207,738) 249,006 687,713 1,270,933,146
LAND AND BUILDINGS (92,807,181) (6,259,254) - - (202,522) (21,901) (99,290,858)
PLANT AND MACHINERY (465,789,141) (37,959,357) 479,665 - 190,915 (24,335) (503,102,253)
OTHER FIXTURES (90,284,401) (15,199,734) 16,493 - 39,033 (1,742) (105,430,351)
OTHER ITEMS OF PROPERTY, PLANT AND EQUIPMENT (117,226,094) (7,219,633) 4,963,249 - (8,873) (1,676) (119,493,027)
TOTAL ACCUMULATED DEPRECIATION (766,106,817) (66,637,978) 5,459,407 - 18,553 (49,654) (827,316,489)
TOTAL, NET 428,594,872 16,271,321 (1,947,416) (207,738) 267,559 638,059 443,616,657
EUROS
2015
The goodwill at 31 December 2016 and 2015 relates to the following cash generating units:
In 2014 Mahou San Miguel recognised goodwill totalling EUR 11,754,005 arising from the acquisition of Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited).
Also, as a result of the change in consolidation method of the subsidiary Mahou Andina, S.p.A., following the acquisition of an additional 66.49% of its shares (see Note 2.1), Mahou San Miguel recognised goodwill amounting to EUR 2,221,608.
Also, as a result of the acquisition of the subsidiary Cermadis, S.L. (see Note 2.1), Mahou San Miguel recognised goodwill amounting to EUR 1,659,809.
Each year, Mahou San Miguel tests the goodwill for impairment, Recoverable amount is the higher of fair value less costs to sell and value in use. The Parent generally uses discounted cash flow methods to determine the aforementioned value. The discounted cash flow calculations are based on five-year projections made by management and a perpetual return. The flows take into account past experience and represent management’s best
estimate of future market performance. In 2016 impairment of goodwill amounting to EUR 1,999,447 was recognised in connection with the subsidiary Mahou Andina under “Impairment and Gains or Losses on Disposals of Non-Current Assets - Impairment and Other Losses” in the accompanying consolidated statement of profit or loss for 2016. At 31 December 2015 it was not considered necessary to recognise any impairment.
Computer software includes the development of the information systems plan carried out by each company in recent years.
On 30 July 2016, in the framework of the objective of strengthening the position of the Group in the water and soft drinks industry, Aguas de Solán de Cabras, S.A.U, acquired the production unit of Agua de Beteta, S.A. through a successful bid. As a result of this agreement, the Group recognised intangible assets totalling EUR 972,000.
At the end of 2016 and 2015 Mahou San Miguel had fully amortised intangible assets still in use amounting to EUR 50,364,138 and EUR 43,480,768 respectively.
Balance at Inclusion in the Increase Decrease Transfers Translation Balance at 31/12/15 Scope of Consolidation Adjustments 31/12/16
LAND AND BUILDINGS 334,876,582 6,136,670 3,304,571 (220,837) 2,375,374 41,559 346,513,919
PLANTS AND MACHINERY 627,726,335 38,071 16,883,418 (295,621) 11,664,051 33,746 656,050,000
OTHER FIXTURES 142,178,971 145,119 29,931,967 (51,245,113) 1,665,356 1,769 122,678,069
OTHER ITEMS OF PROPERTY, PLANT AND EQUIPMENT 149,569,394 1,485,308 12,394,882 (5,458,812) 382,307 3,506 158,376,585
PROPERTY, PLANT AND EQUIPMENT IN THE COURSE OF CONSTRUCTION 16,581,864 - 14,289,722 - (16,087,088) 8,694 14,793,192
TOTAL COST 1,270,933,146 7,805,168 76,804,560 (57,220,383) - 89,274 1,298,411,765
LAND AND BUILDINGS (99,290,858) (1,567,409) (6,650,526) 148,743 - (9,559) (107,369,609)
PLANTS AND MACHINERY (503,102,253) (5,340) (32,479,069) 293,660 847 (21,349) (535,313,504)
OTHER FIXTURES (105,430,351) (142,092) (17,391,717) 47,900,925 1,214 (1,718) (75,063,739)
OTHER ITEMS OF PROPERTY, PLANT AND EQUIPMENT (119,493,027) (890,915) (8,490,020) 4,908,309 (2,061) (1,449) (123,969,163)
TOTAL ACCUMULATED DEPRECIATION (827,316,489) (2,605,756) (65,011,332) 53,251,637 - (34,075) (841,716,015)
TOTAL, NET 443,616,657 5,199,412 11,793,228 (3,968,746) - 55,199 456,695,750
EUROS
2016
EUROS
GOODWILL 2016 2015
Beer 69,509,787 77,233,096
Water 72,126,702 80,140,780
Distribution 1,549,155 -
143,185,644 157,373,876
NET VALUE
ANNUAL REPORT 2016MAHOU SAN MIGUEL
106 107
EUROS
DESCRIPTION INCREASE DEPRECIATION ACCUMULATED CARRYING IN VALUE CHARGE DEPRECIATION AMOUNT
LAND AND BUILDING 25,978,878 (1,184,481) (6,539,449) 19,439,429
PLANT AND MACHINERY 17,011,852 (1,299,673) (14,775,854) 2,235,998
OTHER FIXTURES 65,841 (5,435) (54,262) 11,579
OTHER ITEMS OF PROPERTY, PLANT AND EQUIPMENT 20,974 - (20,974) -
TOTAL 43,077,545 (2,489,589) (21,390,539) 21,687,006
The additions relate to the acquisition of certain flats and commercial premises and the reductions in 2016 correspond to the sale of industrial buildings.
“Investment Property” includes the land and buildings whose cost is expected to be recovered through the sale or lease thereof.
In 2016 Mahou San Miguel derecognised items of investment property with a carrying
amount of EUR 2,908,468, obtaining a loss of EUR 194,468 recognised under “Impairment and Gains or Losses on Disposals of Non-Current Assets - Gains or Losses on Disposals and Other” in the accompanying consolidated statement of profit or loss for 2016.
At year-end, Mahou San Miguel companies did not have any purchase commitments and did not receive any rental income from investment properties.
The changes in “Investment Property” in the consolidated balance sheet in 2016 and 2015 were as follows:
9. INVESTMENT PROPERTY
EUROS
2016
Balance at Inclusion in the Increases Decreases Balance at 31/12/15 Scope of Consolidation 31/12/16
LAND AND BUILDINGS 37,972,398 57,573 1,732,808 (3,207,040) 36,555,739
TOTAL COST 37,972,398 57,573 1,732,808 (3,207,040) 36,555,739
BUILDINGS (775,426) (3,832) (141,664) 298,572 (622,350)
TOTAL ACCUMULATED DEPRECIATION (775,426) (3,832) (141,664) 298,572 (622,350)
LAND AND BUILDINGS (416,144) - - - (416,144)
TOTAL IMPAIRMENT LOSSES (416,144) - - - (416,144)
TOTAL, NET 36,780,828 53,741 1,591,144 (2,908,468) 35,517,245
EUROS
2015
Balance at Increase Decrease Transfers Othe Balance at 31/12/14 (Note 8) Adjustments 31/12/15
LAND AND BUILDINGS 37,569,942 475,581 (257,015) 207,738 (23,848) 37,972,398
TOTAL COST 37,569,942 475,581 (257,015) 207,738 (23,848) 37,972,398
BUILDINGS (590,998) (162,181) 31,530 - (53,777) (775,426)
TOTAL ACCUMULATED DEPRECIATION (590,998) (162,181) 31,530 - (53,777) (775,426)
LAND AND BUILDINGS (416,144) - - - - (416,144)
TOTAL IMPAIRMENT LOSSES (416,144) - - - - (416,144)
TOTAL, NET 36,562,800 313,400 (225,485) 207,738 (77,625) 36,780,828
The increases in 2016 relate mainly to the investments made in fixtures and machinery at factories, investments in fixtures at customers, which are recognised under “Other Fixtures” and replacement investments in relation to the container depot included under “Other Items of Property, Plant and Equipment”.
In 2016 Mahou San Miguel derecognised items of property, plant and equipment with a carrying amount of EUR 3,968,746, obtaining a net gain of EUR 308,169 recognised under “Impairment and Gains or Losses on Disposals of Non-Current Assets - Gains or Losses on Disposals and Other” in the accompanying consolidated statement of profit or loss for 2016.
The gross value of the investments depreciated using the diminishing-balance method at 31 December 2016 was EUR 252,872,822 (31 December 2015: EUR 240,525,766).
The diminishing-balance depreciation for the year and accumulated depreciation at 31 December 2016 amounted to EUR 13,209,441 and EUR 218,520,919 respectively, (31 December 2015: EUR 14,967,335 and EUR 205,521,253 respectively).
The detail of the carrying amount of the buildings and land relating to the properties owned by Mahou San Miguel at the end of 2016 and 2015 is as follows:
The detail of Mahou San Miguel’s fully depreciated items of property, plant and equipment still in use at the end of 2016 and 2015 is as follows:
Mahou San Miguel takes out insurance policies to cover the possible risks to which its property, plant and equipment are subject, The Parent’s directors consider that these risks were sufficiently insured at 31 December 2016.
In 2016 the cost and carrying amount of the assets revalued pursuant to Royal Decree-Law 7/1996 amounted to EUR 21,687,806 and EUR 5,901,358 respectively (2015: EUR 21,741,948 and EUR 6,122,001, respectively). The effect of the revaluation on the depreciation charge in 2016 was EUR 219,163 (2015: EUR 256,729).
As indicated in Note 5,4, the Company revalued its property, plant and equipment pursuant to Law 16/2012. The detail of the accounts affected by the revaluation performed pursuant to the aforementioned Law and the related effect at 31 December 2016 is as follows:
EUROS
PROPERTY 2016 2015
Land 98,037,771 98,040,242
Buildings 141,106,539 137,545,482
239,144,310 235,585,724
EUROS
2016 2015
CARRYING AMOUNT CARRYING AMOUNT
Buildings 29,609,268 27,553,290
Other assets 504,894,857 502,949,280
534,504,125 530,502,570
ANNUAL REPORT 2016MAHOU SAN MIGUEL
108 109
10.1 THE GROUP AS LESSEE
At the end of 2016 and 2015 Mahou San Miguel had contracted with lessors for the following minimum lease payments, based
on the leases currently in force, without taking into account the charging of common expenses, future increases in the CPI or future contractual lease payment revisions:
The most significant operating leases held by Mahou San Miguel relate to the lease of the warehouses in Leganés and Alovera and to the just-in-time and bonded warehouses in Antequera, Lleida Park, Alovera and Burgos.
Mahou San Miguel also held several operating lease for certain items of machinery, transport equipment and other assets, In 2016 these leases amounted to EUR 10,952,493 (2015: EUR 10,226,506). This expense is considered to be recurring, since the various leases are
renewed on expiry as they are necessary for the operations of each company.
10.2 THE GROUP AS LESSOR At the end of 2016 and 2015 Mahou San Miguel had arranged to receive the following minimum lease payments, based on the leases currently in force, without taking into account the charging of common expenses, future increases in the CPI or future contractual lease payment revisions:
The most significant operating leases held by Mahou San Miguel as lessor relate to the lease of various floors and garages of the
building at Calle Titán 15, Madrid, where its head office is located.
10. LEASES
2016 2015
NOMINAL VALUE NOMINAL VALUE
WITHIN ONE YEAR 5,942,625 5,967,020
BETWEEN ONE AND FIVE YEARS 23,659,125 23,835,778
29,601,750 29,802,798
MINIMUM OPERATINGLEASE PAYMENTS
EUROS
NOMINAL VALUE
2016 2015
WITHIN ONE YEAR 1,323,356 1,386,849
BETWEEN ONE AND FIVE YEARS 5,293,425 5,547,395
6,616,781 6,934,244
EUROS
11.1 NON-CURRENT FINANCIAL ASSETS
The detail of “Non-Current Financial Assets” at the end of 2016 and 2015 is as follows:
“Held-to-Maturity Investments” includes deposits maturing in 2018 denominated in foreign currency which earn interest at market rates.
The detail, by maturity, of the items comprising “Loans and Receivables”, “Current
Prepayments and Accrued Income” and “Non-Current Financial Assets - Held-to-Maturity Investments” is as follows:
11. FINANCIAL ASSETS (NON-CURRENT AND CURRENT)
EUROS
2016 2015
EQUITY INSTRUMENTS 261,227 261,227
LOANS AND RECEIVABLES 110,101,543 107,199,488
CURRENT PREPAYMENTS AND ACCRUED INCOME 22,363,221 21,178,721
DERIVATIVES 56,085 62,361
HELD-TO-MATURITY INVESTMENTS 37,947,064 21,585,385
170,729,140 150,287,182
2018 2019 2020 2021and Total subsequent years
LOANS AND RECEIVABLES 26,835,500 26,835,500 26,835,500 29,595,043 110,101,543
CURRENT PREPAYMENTS AND ACCRUED INCOME 9,360,734 7,287,499 3,384,297 2,330,691 22,363,221
HELD-TO-MATURITY INVESTMENTS 37,947,064 - - - 37,947,064
74,143,298 34,122,999 30,219,797 31,925,734 170,411,828
EUROS
At 2016 year-end the Group did not have any fully depreciated investment properties.
In 2016 and 2015 the cost and carrying amount of the assets revalued pursuant to Royal Decree-Law 7/1996 amounted to EUR 2,651,131, respectively.
In 2016 the gross value of the items
of property, plant and equipment revalued pursuant to Law 16/2012, of 27 December, amounted to EUR 3,926,057. The depreciation charge for the year and accumulated depreciation at 31 December 2016 amounted to EUR 10,476 and EUR 40,397, respectively. In 2015 the depreciation charge totalled EUR 3,947.
The detail of the value of the buildings and land at 2016 year-end is as follows:
EUROS
PROPERTY 2016 2015
Land 30,059,488 30,059,488
Buildings 5,457,757 6,721,340
35,517,245 36,780,828
2016
ANNUAL REPORT 2016MAHOU SAN MIGUEL
110 111
11.2 CURRENT FINANCIAL ASSETS
The detail of “Current Financial Assets” at the end of 2016 and 2015 is as follows:
11.3 INFORMATION ON THE NATURE AND LEVEL OF RISK OF FINANCIAL INSTRUMENTS
Financial risk management is delegated to financial management of the Parent, Mahou, S.A., which has established the mechanisms required to control exposure to fluctuations in the significant risks, within the parameters approved by the Board of Directors, by appropriately identifying, measuring and managing the risks and ensuring achievement of the strategic plan’s targets, controlling volatility on the basis of the following premises:
A. Credit riskThere will be no significant concentration of credit risk exposure to third parties.
Demand sufficient guarantees to cover the credit risk exposure to third parties.
Recognise allowances for credit risk exposure vis-á-vis third parties in relation to the probability of default.
B. Liquidity riskHold cash and cash equivalents at banks with high credit ratings.
Hold and maintain levels of cash adapted to the level of operations.
Maintain a low level of indebtedness in proportion to the volume of operations and EBITDA.
Place cash surpluses in accordance with criteria of utmost security, solvency and assurance.
C. Market riskHedge exposure to interest rate risk on the basis of performance of the market at all times.
Hedge exposure to exchange rate risk on the basis of the performance of currencies at all times. The priority currency in any transaction is the euro.
Also, the Procurement Department together with Financial Management will control exposure to market risk in relation to the volatility of commodities prices on the basis of the performance of the market at all times.
At 31 December 2016, Mahou San Miguel had recognised allowances for customer
EUROS
2016 2015
LOANS AND RECEIVABLES 29,240,065 25,730,261
DERIVATIVES 1,391,146 182,723
DEBT SECURITIES 20,056 330,787
30,651,267 26,243,771
Mahou San Miguel uses derivative financial instruments to hedge the risks to which its future cash flows are exposed. As part of these transactions Mahou San Miguel companies arranged certain hedging
financial instruments.
The detail of the fair value of these hedging instruments is as follows:
credit risk and trade receivables amounting to EUR 66,467,007 (2015: EUR 61,971,538). The charge for the year in 2016 amounted
to EUR 7,457,105 (2015: EUR 7,667,340). Allowances amounting to EUR 2,961,636 were used in connection with uncollectible balances.
12. DERIVATIVE FINANCIAL INSTRUMENTS
CLASSIFICATION TYPE AMOUNT EXPIRY ASSETS LIABILITIES ARRANGED (*)
FOREIGN CURRENCY FORWARDS GBP SALE 1,800,000 2017 495,081 -
FOREIGN CURRENCY FORWARDS GBP SALE 2,000,000 2017 57,412 -
FOREIGN CURRENCY FORWARDS INR CALL 1,000,000,000 2017 838,653 -
FOREIGN CURRENCY FORWARDS GBP CALL 2,000,000 2018 56,085 -
1,447,231 -
FAIR VALUE
AMOUNTS IN EUROS
2016
CLASSIFICATION TYPE AMOUNT EXPIRY ASSETS LIABILITIES ARRANGED (*)
FOREIGN CURRENCY FORWARDS GBP SALE 850,000 2016 - 50,765
FOREIGN CURRENCY FORWARDS GBP SALE 2,400,000 2016 84,855 -
FOREIGN CURRENCY FORWARDS GBP SALE 1,800,000 2017 62,361 -
FOREIGN CURRENCY FORWARDS INR CALL 130,040,000 2016 33,289 -
FOREIGN CURRENCY FORWARDS INR CALL 731,600,000 2016 64,579 -
245,084 50,765
FAIR VALUE
AMOUNTS IN EUROS
2015
2017 2018 2019 2020 and Total subsequent years
LOANS, RECEIVABLES AND OTHER FINANCIAL ASSETS 27,274,514 27,031,269 26,835,557 26,802,234 107,199,488
CURRENT PREPAYMENTS AND ACCRUED INCOME 11,480,846 5,436,425 1,961,975 2,299,475 21,178,721
HELD-TO-MATURITY INVESTMENTS - 21,585,685 - - 21,585,685
38,755,360 54,053,079 28,797,532 29,101,709 128,378,209
EUROS
2015
(*) The hedging instrument expires in the year in which the cash flows affecting the statement of profit or loss will foreseeably occur.
ANNUAL REPORT 2016MAHOU SAN MIGUEL
112 113
The detail of “Reserves” is as follows:
13. EQUITY AND SHAREHOLDERS’ EQUITY
At 2016 year-end the share capital of the Parent amounted to EUR 14,028,253, represented by 2,334,152 fully subscribed
and paid shares of EUR 6,01 par value each, issued in two series called A and B, which carry the same rights and obligations.
No OF SHARES PERCENTAGE OF OWNERSHIP
LAS TEJONERAS, S.L. 1,167,076 50.00
SDAD, GALA DE INVERSIONES, S.L. 633,800 27.15
I,P,L, GALA INTERNACIONAL, S.L. 529,576 22.69
OTHER SHAREHOLDERS 3,700 0.16
2,334,152 100.00
THOUSANDS OF EUROS
2016 2015
LEGAL RESERVE 2,805,651 2,805,651
REVALUATION RESERVE LAW 16/2012 21,532,668 21,532,668
RESERVE FOR GOODWILL - 3,273,955
RESERVE FOR RETIRED CAPITAL 7,006,915 7,006,915
MERGER RESERVES (56,244,132) (56,244,132)
CAPITALISATION RESERVE 13,725,015 -
VOLUNTARY RESERVES 1,099,265,501 1,010,100,061
RESTRICTED VOLUNTARY RESERVES 3,273,955 -
TOTAL RESERVES OF THE PARENT 1,091,365,573 988,475,118
RESERVES OF SUBSIDIARIES 21,338,147 23,505,113
RESERVES OF COMPANIES ACCOUNTED FOR USING THEM EQUITY METHOD 30,451,416 27,051,764
TOTAL CONSOLIDATED RESERVES 51,789,563 50,556,877
TOTAL RESERVES 1,143,155,136 1,039,031,995
13.1 LEGAL RESERVE
Under the Consolidated Spanish Limited Liability Companies Law, the Company must transfer 10% of net profit for each year to the legal reserve until the balance of this reserve reaches at least 20% of the share capital. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. Otherwise, until the legal reserve exceeds 20% of share capital, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose.
At the end of 2016 the balance of this reserve had reached the legally required minimum at the Parent.
13.2 RESERVE FOR RETIRED CAPITAL
In accordance with Article 335 of the Spanish Limited Liability Companies Law, this reserve of EUR 7,006,915 may only be used if the same requirements as those for the reduction of share capital are met.
13.3 REVALUATION RESERVE
The surplus resulting from the revaluation of property, plant and equipment by the Parent on 1 January 2013, pursuant to Law 16/2012, of 27 December, adopting various tax measures aimed at consolidating public finances and promoting economic activity (see Notes 8 and 9), was credited to “Revaluation Reserve” for EUR 21,532,668, net of the related tax (5%) (EUR 1,133,295).
From the date on which the tax authorities have reviewed and approved the balance of this account, or once the three-year period for review has expired, this balance can be used, free of tax, to offset accounting losses and to increase share capital. From 1 January 2023 (after ten years have elapsed from the date of the balance sheet in which the revaluations were recognised) the balance of “Revaluation Reserve” may be allocated to “Unrestricted Reserves”, although it may only be distributed when the revalued assets have been fully depreciated, transferred or derecognised.
If this balance were used in a manner other than that provided for in Law 16/2012, it would be subject to tax.
13.4 RESERVE FOR GOODWILL
Until the year ended 31 December 2015 and in accordance with the Spanish Limited Liability Companies Law, when distributing the profit for each year an appropriation of at least 5% of the goodwill recognised on the asset side of the balance sheet had to be made to a restricted reserve for that goodwill. If a company did not report a profit, or the amount was insufficient, unrestricted reserves had to be used for this purpose.
Pursuant to the amendments introduced into the Spanish Limited Liability Companies Law by Spanish Audit Law 22/2015, of 20 July, this amount was reclassified to voluntary reserves.
13.5 MERGER RESERVE
These reserves relate to the merger by absorption of San Miguel Fábricas de Cerveza y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.A.U., and MSM Grupo Comercializador, S.A. by Mahou, S.A., in 2014 (see Note 23 to the consolidated financial statements for 2014).
13.6 CAPITALISATION RESERVE
In 2016 the Parent recognised a capitalisation reserve in order to reduce the tax base by 10% of the amount of the increase in its equity as permitted under Article 25 of Spanish Income Tax Law 27/2014.
This increase in equity is maintained over a five-year period from the end of the tax period to which the reduction relates, unless the entity incurs accounting losses.
The amount appropriated to the capitalisation reserve totalled EUR 13,725,015. This reserve will be restricted over the established five-year period.
13.7 OTHER RESERVES
At 2016 year-end this heading included, inter alia, the amount corresponding to the contribution made to the reserve for goodwill by the Company up to 2015 year-end which pursuant to Spanish Audit Law 22/2015, of 20 July, must be reclassified to “Voluntary Reserves” (see Note 13.4). At 31 December 2016, this reserve, amounting to EUR 3,273,955, was restricted.
At the end of 2016 the shareholders of the Parent were as follows:
ANNUAL REPORT 2016MAHOU SAN MIGUEL
114 115
14. GRANTS
“Grants” includes the non-refundable grants related to assets received and the CO2 emission allowances.
The most salient information on this item in the consolidated balance sheet is as follows:
The grant given in 2013 by the Institute for Energy Diversification and Saving (IDAE) is aimed at supporting the financing of projects investing in energy saving and efficiency.
At 31 December 2016 and 2015, all the obligations attaching to these grants were being met.
EUROS
2016
Amount Balance at Addition Increase/ Balance at Granted 31/12/15 Decrease 31/12/16
INSTITUTE FOR ENERGY DIVERSIFICATION AND SAVING (IDAE) 11,829,742 5,059,733 - (1,069,851) 3,989,882
GAS EMISSION ALLOWANCES - 64,314 203,706 (248,274) 19,746
TOTAL 11,829,742 5,124,047 203,706 (1,318,125) 4,009,628
TAX EFFECTS - (1,264,933) - 267,463 (997,470)
TOTAL GRANTS 11,829,742 3,859,114 203,706 (1,050,662) 3,012,158
EUROS
2015
Amount Balance at Addition Adjustments Increase/ Balance at Granted 31/12/14 Decrease 31/12/15
INSTITUTE FOR ENERGY DIVERSIFICATION AND SAVING (IDAE) 11,829,742 6,388,939 - 336,260 (1,665,466) 5,059,733
DEPARTMENT OF ECONOMY OF THE CANARY ISLANDSAUTONOMOUS COMMUNITY 1,014,648 55,571 - - (55,571) -GOVERNMENT
DEPARTMENT OF INNOVATION, SCIENCE AND BUSINESS (AUTONOMOUS COMMUNITY GOVERNMENT OF ANDALUSIA)
GAS EMISSION ALLOWANCES - 29,976 231,852 - (197,514) 64,314
TOTAL 12,956,633 6,519,122 231,852 336,260 (1,963,187) 5,124,047
TAX EFFECT - (1,681,300) - - 416,367 (1,264,933)
TOTAL GRANTS 12,956,633 4,837,822 231,852 336,260 (1,546,820) 3,859,114
112,243 44,636 - - (44,636) -
Balance at Inclusion in the Share of Profit Capital Balance at 31/12/15 Scope of Consolidation or Loss for Increases 31/12/16 the Year
DISTRIBUCIÓN BALEAR ALMACENAJE Y LOGÍSTICA, S.A. 1,972,525 - 277,864 - 2,250,389
LA SALVE COMERCIALIZADORA, S.L. 47,095 - (24,376) 300,000 322,719
CERMADIS, S.L. - (499,977) (57,608) 208,000 (349,585)
2,019,620 (499,977) 195,880 508,000 2,223,523
EUROS
Balance at Incorporation of Share of Profit Other Balance at 31/12/14 Group Companies or Loss for Changes 31/12/15 the year
DISTRIBUCIÓN BALEAR ALMACENAJE Y LOGÍSTICA, S.A. 1,692,441 - 295,886 (15,802) 1,972,525
LA SALVE COMERCIALIZADORA, S.L. - 100,000 (52,905) - 47,095
1,692,441 100,000 242,981 (15,802) 2,019,620
EUROS
13.8 NON-CONTROLLING INTERESTS
The changes, by item, in “Non-Controlling Interests” in 2016 were as follows:
2016
2015
ANNUAL REPORT 2016MAHOU SAN MIGUEL
116 117
15.1.1 OBLIGATIONS TO EMPLOYEESThe Mahou San Miguel companies have acquired various obligations to their employees.
The balance of “Employee Benefit Obligations” amounting to EUR 7,014,571 is to meet the overall obligations to employees, which include covering early retirement pension obligations.
15.1.2 CONTINGENCIES AND CHARGES“Provisions for Contingencies and Charges” includes mainly provisions to meet probable or certain contingencies in relation to tax assessments that have been appealed against by Mahou San Miguel. These provisions were recognised in accordance with the accounting principle of prudence in valuation.
In 2016 payments amounting to EUR 2,147,943 were made, and the balances of the provisions recognised in prior years were adjusted based on the most recent available information (see Note 5.14).
15.2 GUARANTEE COMMITMENTS TO THIRD PARTIES AND OTHER CONTINGENT LIABILITIES
In 2016 the guarantees received by Mahou San Miguel from licensees and other debtors as security for commercial transactions amounted to EUR 548,375,080 (2015: EUR 514,841,007).
In 2016 and 2015 the guarantees received by Mahou San Miguel’s suppliers from banks as security for the proper functioning of machinery purchased from these third parties amounted to EUR 4,253,927 and EUR 3,499,286, respectively.
The guarantees provided by Mahou San Miguel to third parties, mainly to the Economic-Administrative Tribunals for the tax assessments appealed against, amounted to EUR 8,826,918 in 2016 and no losses are expected to arise for Mahou San Miguel for which provisions have not been recognised. In 2015 these guarantees amounted to EUR 18,884,908.
16. NON-CURRENT AND CURRENT LIABILITIES
16.1 NON-CURRENT FINANCIAL LIABILITIES
The detail of “Non-Current Payables” at the end of 2016 and 2015 is as follows:
Accounts payable include loans granted by the Centre for Industrial and Technological Development to finance nutritional health projects. No interest rate was set for these loans and they are repaid as certain pre-established conditions are met.
“Long-Term Guarantees” includes the
amounts of the container deposits billed to customers. In view of the fact that the amounts deposited remain the same from the beginning to the end of the commercial relationship with the customers and of the related settlement of the balances, the amounts deposited are classified as non-current.
16.2 CURRENT FINANCIAL LIABILITIES
The detail of “Current Payables” at the end of 2016 and 2015 is as follows:
EUROS
2016 2015
ACCOUNTS PAYABLE 4,084,983 4,510,060
LONG-TERM GUARANTEES 52,349,095 50,179,519
56,434,078 54,689,579
DERIVATIVES Other Financial Total Liabilities
ACCOUNTS PAYABLE 50,765 20,469,342 20,520,107
50,765 20,469,342 20,520,107
2015
EUROS
Other Financial Total Liabilities
ACCOUNTS PAYABLE 21,176,855 21,176,855
21,176,855 21,176,855
2016
EUROS
Balance at Period Provisions/ Amounts Balance at 31/12/14 (Reversals) used 31/12/15
EMPLOYEE BENEFIT OBLIGATIONS 18,797,486 127,485 (7,955,486) 10,969,485
CONTINGENCIES AND CHARGES 11,874,810 9,515,238 (89,358) 21,300,690
TOTAL 30,672,296 9,642,723 (8,044,844) 32,270,175
EUROS
2015
15. PROVISIONS AND CONTINGENCIES
15.1 PROVISIONS
The detail of the provisions in the consolidated balance sheets at the end of 2016 and 2015 and of the main changes therein in 2016 and 2015 is as follows:
Balance at Inclusion in the Provisions Amounts Reversals Translation Balance at 31/12/15 Scope of Consolidation Used adjustment 31/12/16
EMPLOYEE BENEFIT OBLIGATIONS 10,969,485 138,637 2,632,819 (4,215,247) (2,514,065) 2,942 7,014,571
CONTINGENCIES AND CHARGES 21,300,690 230,631 9,397,162 (2,147,943) (10,584,093) 7,433 18,203,880
TOTAL 32,270,175 369,268 12,029,981 (6,363,190) (13,098,158) 10,375 25,218,451
EUROS
2016
ANNUAL REPORT 2016MAHOU SAN MIGUEL
118 119
EUROS
2016 2015
PARENT 45,575,618 45,557,957
SUBSIDIARIES
Cervezas Mahou, S.L. 1,655,907 1,339,161
Cervezas Reina 2000, S.A.U. 94,273 262,883
Cervecera Independiente, S.A. (395,772) (448,466)
Taisa Logistics 1960, S.A 856,190 916,680
Distribución Balear Almacenaje y Logística, S.A. 804,435 352,937
Alhambra Distribuidora Meridional, S.L. 242,053 149,789
Cervezas San Miguel, S.L. 1,380,032 1,768,279
Penibética de Cervezas y Bebidas, S.L. 183,637 196,463
Cervezas Alhambra, S.L. 28,692 140,797
Aguas de Solán de Cabras, S.A. (687,295) 1,582,596
La Salve Comercializadora, S.L. (34,177) (66,828)
Cermadis, S.L. (158,026) -
Consolidation adjustment (43,410) (89,964)
49,502,157 51,662,284
17.2 BREAKDOWN OF THE INCOME TAX EXPENSE BY GROUP COMPANY
17.3 RECONCILIATION OF THE ACCOUNTING PROFIT TO THE TAXABLE PROFIT
The reconciliation of the accounting profit to the taxable profit for income tax purposes for 2016 and 2015 is as follows:
EUROS
INCREASE DECREASE TOTAL
ACCOUNTING PROFIT BEFORE TAX - - 184,407,507
PERMANET DIFFERENCES - - 6,769,767
Fines and penalties 95,530 - -
Donation 3,423,080 - -
Capitalisation reserve - (10,253,625) -
Consolidation adjustment 13,504,782 - -
TEMPORARY DIFFERENCES
Arising in the year: - - 13,134,319
Pensions 4,051,951 - -
Provisions 9,082,368 - -
ARISING IN PRIOR YEARS (9,787,195)
Pensions - (1,173,448) -
Provisions - (9,768,282) -
Non-current assets 12,062,889 (11,728,399) -
Others 820,045 -
TAXABLE PROFIT - - 194,524,398
OFFSET OF RECOGNISED TAX LOSSES - - (1,254,815)
2016
EUROS
TAX TAX RECEIVABLES PAYABLES
CANARY ISLANDS GENERAL INDIRECT TAX 10,980 93,847
TAX REFUNDS 463,834 -
VAT 554,093 14,757,891
PERSONAL INCOME TAX WITHHOLDINGS - 4,031,471
INCOME TAX - 5,595,197
EXCISE TAXES 57,723 22,571,399
ACCRUED SOCIAL SECURITY TAXES - 3,419,217
OTHER CONCEPT 21,616 -
1,108,246 50,469,022
2016
EUROS
TAX TAX RECEIVABLES PAYABLES
CANARY ISLANDS GENERAL INDIRECT TAX 26,635 97,907
TAX REFUNDS 425,793 -
VAT 1,506,308 12,384,120
PERSONAL INCOME TAX WITHHOLDINGS - 4,324,652
INCOME TAX - 5,864,176
EXCISE TAXES - 22,169,638
ACCRUED SOCIAL SECURITY TAXES - 3,261,953
1,969,366 48,102,446
2015
17. TAX MATTERS
Mahou, S.A. has been the head of the consolidated tax group, which at 2016 year-end was composed of the following companies: Cervezas Reina 2000, S.A.U. (formerly Reina Fábrica de Cervezas, S.A.), Taisa Logistics 1960, S.A., Cervecera Independiente, S.A., Alhambra Distribuidora Meridional, S.L., Cervezas Alhambra, S.L.U. (formerly Alhambra Fábrica de Cervezas, S.L.), Penibética de Cervezas y Bebidas, S.L., Aguas de Solán de Cabras, S.A., Cervezas San Miguel, S.L.U. (formerly San Miguel Fábricas de Cervezas, S.L., and
Cervezas Mahou, S.L.U. (formerly Mahou Fábrica de Cervezas, S.L.).
Also, the Mahou San Miguel companies have filed consolidated VAT returns except for Reina Fábrica de Cervezas, S.A. (now Cervezas Reina 2000, S.A.U.), which is not part of the VAT Group.
17.1 CURRENT TAX RECEIVABLES AND PAYABLES
The detail of the current tax receivables and payables is as follows:
ANNUAL REPORT 2016MAHOU SAN MIGUEL
120 121
17.4 TAX RECOGNISED IN EQUITY
The detail of the tax recognised directly in equity is as follows:
EJERCICIO 2012
Increase Decrease Total
DEFERRED TAX LIABILITIES
Arising in the year
Grants, donations and legacies received - 267,463 267,463
Revaluation of other financial assets (361,808) - (361,808)
Arising in prior years
Revaluation of other financial assets - 48,580 48,580
(361,808) 316,043 (45,765)
EUROS
2016
TOTAL TAX RECOGNISED DIRECTLY IN EQUITY
EJERCICIO 2012
Increase Decrease Total
DEFERRED TAX LIABILITIES
Arising in the year
Grants, donations and legacies received - 416,367 416,367
Revaluation of other financial assets (48,580) - (48,580)
Arising in the year
Revaluation of other financial assets - 1,205,994 1,205,994
(48,580) 1,622,361 1,573,781
EUROS
2015
TOTAL TAX RECOGNISED DIRECTLY IN EQUITY
17.5 RECONCILIATION OF THE ACCOUNTING PROFIT TO THE INCOME TAX EXPENSE
The reconciliation of the accounting profit to the income tax expense for 2016 and 2015 is as follows:
2015
ACCOUNTING PROFIT BEFORE TAX 195,468,564
Tax charge at 28% 54,731,198
Effect of permanent differences (3,203,103)
Tax credits earned in the year (3,042,724)
Adjustment to 2014 income tax and adjustment for the change in income tax rate (*) (1,823,087)
Other Adjustments 5,000,000
TOTAL INCOME TAX EXPENSE 51,662,284
2015
2016
ACCOUNTING PROFIT BEFORE TAX 184,407,507
Tax charge at 25% 46,101,877
Effect or permanent differences 1,692,441
Tax credits earned in the year (2,956,584)
Adjunstment to 2015 income tax 1,958,799
Other adjustments 2,705,624
TOTAL INCOME TAX EXPENSE 49,502,157
2016
(*) The adjustment for the change in income tax rate includes the adaptation of the balance of deferred taxes to the new income tax rate of 25%, which came into force on 1 January 2016 and the recognition of deferred taxes relating to the increased value of non-current assets.
“Other Tax Credits” includes, inter alia, the tax credits relating to the sponsoring of events of special interest.
“Other Tax Credits” includes, inter alia, the tax credits relating to the sponsoring of events of special interest.
EUROS
INCREASE DECREASE TOTAL
ACCOUNTING PROFIT BEFORE TAX - - 195,468,564
PERMANENT DIFFERENCES - - (11,439,646)
Fines and penalties 140,436 - -
Donations 2,700,000 - -
Capitalisation reserve - (13,725,015) -
Consolidation adjustments - (555,067) -
TEMPORARY DIFFERENCES
Arising in the year: - - 17,121,513
Pensions 3,600,747 - -
Provisions 13,490,500 - -
Other 30,266 - -
ARISING IN PRIOR YEARS (18,227,220)
Pensions - (1,391,503) -
Provisions - (8,719,960) -
Non-current assets 6,006,396 (12,351,966) -
Other 7,463 (1,777,650) -
TAXABLE PROFIT - - 182,923,211
OFFSET OF RECOGNISED TAX LOSSES - - (8,273,006)
2015
ANNUAL REPORT 2016MAHOU SAN MIGUEL
122 123
17.7 DEFERRED TAX ASSETS RECOGNISED
The detail of “Deferred Tax Assets” at the end of 2016 and 2015 is as follows:
EUROS
2016 2015
TEMPORARY DIFFERENCES
Pensions 11,724,469 10,976,309
Non-current assets 43,865,883 45,696,753
Provisions for contingencies and liability 8,306,649 10,877,585
Impairment of assets - 614,936
Tax credit carryforwards and other 7,304,140 7,304,324
Tax loss carryforwards 5,938,308 5,645,392
Other 785,049 535,329
TOTAL DEFERRED TAX ASSETS 77,924,498 81,650,628
The deferred tax assets indicated above were recognised in the consolidated balance sheet because the Parent’s directors considered that,
based on their best estimate of the Group’s future earnings, it is probable that these assets will be recovered.
Also, as a result of the merger by absorption of its subsidiary San Miguel, Fábricas de Cerveza y Malta, S.A. in 2014, the Parent
has unused tax assets amounting to EUR 7,304,140, the detail being as follows:
At 31 December 2016, the Group companies had tax loss carryforwards totalling EUR 23,753,231, the detail being as follows:
(*) The adjustment for the change in income tax rate includes the adaptation of the balance of deferred taxes to the new income tax rate of 25%, which came into force on 1 January 2016 and the recognition of deferred taxes relating to the increased value of non-current assets.
17.6 BREAKDOWN OF INCOME TAX EXPENSE
The breakdown of the income tax expense is as follows:
EUROS
2016 2015
CURRENT TAX:
Continuing operations 45,483,856 45,926,163
DEFERRED TAX:
Continuing operations (646,122) 2,559,210
ADJUSTMENT TO PRIOR YEAR’S INCOME TAX AND CHANGE IN INCOME TAX RATE (*)
Deferred tax for continuing operations 3,925,453 (1,507,695)
Current tax for continuing operations 738,970 4,684,606
TOTAL INCOME TAX EXPENSE 49,502,157 51,662,284
YEAR AGUAS DE SOLAN CERVEZAS REINA DISTRIBUCIÓN LA SALVE CERMADIS, TOTALINCURRED DE CABRAS, S.A. 2000, S.A. BALEAR A.L, S.A. COMERCIALIZADORA S.L. S.L.
2001 1,753,374 - - - - 1,753,374
2002 2,556,333 - - - - 2,556,333
2003 367,661 - - - - 367,661
2004 57,759 1,875,141 - - - 1,932,900
2005 39,738 - - - - 39,738
2006 103,709 - - - - 103,709
2007 57,442 - - - - 57,442
2008 5,101,594 - - - - 5,101,594
2009 4,027,305 - - - - 4,027,305
2010 3,815,395 - - - - 3,815,395
2011 - - 888,819 - - 888,819
2012 - - 130,597 - - 130,597
2013 - - 274,543 - - 274,542
2015 - - - 268,754 1,933,504 2,202,258
2016 - - - 131,680 369,884 501,564
TOTAL 17,880,310 1,875,141 1,293,959 400,434 2,303,388 23,753,231
EUROS
YEAR EARNED AMOUNT IN EUROS LAST YEAR OR USE
2005 912,561 2020
2006 1,157,675 2021
2007 358,965 2022
2008 2,435,525 2023
2009 2,439,414 2024
7,304,140
ANNUAL REPORT 2016MAHOU SAN MIGUEL
124 125
17.8 DEFERRED TAX LIABILITIES
The detail of “Deferred Tax Liabilities” at the end of 2016 and 2015 is as follows:
17.9 YEARS OPEN FOR REVIEW AND TAX AUDITS
In March 2013 the Parent was served notice of the commencement of tax audits of income tax from 2008 to 2011, of VAT, of personal income tax withholdings and prepayments of employees and professionals, of withholdings on income from movable capital and real estate and for non-resident income tax withholdings from 2009 to 2012 and also of the annual statement of transactions from 2010 to 2012. The tax audit of income tax for 2010 and 2011 comprised the consolidated tax group headed in those years by Mahou, S.A., formed on 1 January 2010, and the tax audit of VAT comprised the VAT group formed on 1 January 2009, which is also headed by Mahou, S.A.
In 2014 the aforementioned tax audits were concluded and the assessments were signed on a contested basis for each of the items open for review.
The tax assessments signed on a contested basis relating to income tax (2008 to 2011) and personal income tax (2009 to 2012) were settled in full in 2014 and appeals were filed against them in the same year at the Central Economic-Administrative Tribunal. No ruling had been handed down by the Tribunal in relation to these appeals at the date of preparation of the consolidated financial statements.
The tax assessments signed on a contested basis relating to VAT (2009 to 2012) were also settled in full in 2014 and appeals were filed against them at the Central Economic-Administrative Tribunal. In July 2016 the Tribunal handed down its ruling dismissing the Company’s claim. In November 2016 the Parent filed an appeal for judicial review at the National Appellate Court, and at the date of preparation of the consolidated financial statements the aforementioned Court had not yet handed down a ruling thereon.
In 2013 San Miguel Fábricas de Cervezas y Malta, S.A. (company absorbed by Mahou, S.A.) was served notice of the commencement of tax audits of income tax for 2008 and 2009, of withholdings on income from movable capital and on real estate, of non-resident income tax withholdings, of the annual statement of transactions and declaration of intra-Community supplies and acquisitions of goods for 2009 and of personal income tax withholdings and prepayments of employees and professionals from 2009 to 2012. The tax audit of income tax for 2008 and 2009 comprised the consolidated tax group, headed in those years by San Miguel Fábricas de Cerveza y Malta, S.A., and which was dissolved on 1 January 2010.
The tax assessments signed on a contested basis relating to income tax (2009 and 2010) were settled in full by San Miguel
EUROS
2016 2015
ASSETS IN WHICH REINVESTMENT WAS MADE 614,038 651,531
NON-CURRENT ASSETS 3,175,607 4,164,527
GOODWILL 3,554,957 3,010,858
OTHER 3,864,585 3,999,352
TOTAL DEFERRED TAX LIABILITIES 11,209,187 11,826,268
Fábricas de Cerveza y Malta, S.A. in 2014 and appeals were filed against them in the same year at the Central Economic-Administrative Tribunal. No ruling had been handed down by the Tribunal in relation to these appeals at the date of preparation of the consolidated financial statements.
With regard to excise taxes, in March 2015 the National Appellate Court handed down a ruling in favour of the claims of San Miguel Fábricas de Cerveza y Malta, S.A. (company absorbed by Mahou, S.A., as indicated in Note 1) in relation to tax assessments amounting to EUR 8,1 million signed on a contested basis. However, in April 2015 the Spanish government lawyer filed a cassation appeal against the aforementioned ruling at the Supreme Court. In July 2015 the Company filed a reply brief for a ruling refusing leave to proceed in regard of the aforementioned cassation appeal. On 22 June 2016, the Judicial Review Chamber of the Supreme Court handed down a ruling in favour of the Company, refusing the cassation appeal filed by the government lawyer leave to proceed and ordering the Spanish Government to pay costs, rebutting the ruling of the National Appellate Court on the annulment of the assessments issued.
The tax audit initiated in 2014 of excise taxes on alcohol and beer for the periods from 2011 to 2012 of the absorbed company San Miguel Fabricas de Cervezas y Malta, S.A. was concluded in April 2016 and the resulting tax assessment giving rise to tax payable of EUR 2,8 million and late-payment interest of EUR 450 thousand was signed on a contested basis. The Group settled the amount arising from the tax assessment in full and in May 2016 filed an economic-administrative appeal at the Central Economic-Administrative Tribunal, which, at the date of preparation of these consolidated financial statements.
The Parent’s directors and its advisers consider that the final outcome of these proceedings will not give rise to any contingencies for which provisions have not been recognised in the accompanying consolidated balance sheet as at 31 December 2016.
In general and as a result of the aforementioned tax reviews that were ongoing at the date of formal presentation of the consolidated financial statements, the following years are open for review by the tax authorities for the various companies composing Mahou San Miguel:
YEAR
INCOME TAX 2012 TO 2015
PERSONAL INCOME TAX WITHHOLDINGS 2013 TO 2016
VAT 2013 TO 2016
CANARY ISLANDS GENERAL INDIRECT TAX 2013 TO 2016
EXCISE TAXES 2013 TO 2016
17.10 CODE OF GOOD TAX PRACTICES
The Company is adhered to the Code of Good Tax Practices promoted by the Large Companies Forum and the Spanish State Tax Agency, and complied with the provisions thereof.
17.11 OTHER DISCLOSURES
In 2014, as described in Note 1 to the consolidated financial statements for that year, the Parent of Mahou San Miguel
carried out a merger by absorption of San Miguel Fábricas de Cervezas y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.L.U, and MSM Grupo Comercializador, S.A.U. and spin-off by means of the non-monetary contribution of the assets and liabilities forming the production line of business to the newly created companies Mahou Fábrica de Cervezas, S.L. (now Cervezas Mahou, S.L.U.) and San Miguel Fábricas de Cervezas, S.L., (now Cervezas San Miguel, S.L.U). This
ANNUAL REPORT 2016MAHOU SAN MIGUEL
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18.INCOME AND EXPENSES
18.1 REVENUE
Substantially all of the sales were made in Spain, and our international business represents 6.6% of total sales (2015: 6.7%).
18.2 PROCUREMENTS
The detail of “Cost of Goods Held for Resale Sold” and “Cost of Raw Materials and Other Consumables Used” in 2016 and 2015 is as follows:
The detail, by origin, of the purchases made by the Mahou San Miguel in 2016 and 2015 is as follows:
EUROS
2016 2015
COST OF GOODS HELD FOR RESALE SOLD
Purchases 36,549,124 28,353,292
Changes in inventories (2,050,910) (418,278)
34,498,214 27,935,014
COST OF RAW MATERIALS AND OTHER CONSUMABLES USED
Purchases 314,272,920 312,243,307
Changes in inventories 1,647,329 (2,550,884)
315,920,249 309,692,423
EUROS 2016 2015
SPAIN 289,979,649 278,169,405
EU COUNTRIES 55,315,626 59,716,764
IMPORTS 5,526,769 2,710,430
350,822,044 340,596,599
18.3 EMPLOYEE BENEFIT COSTS
The detail of “Employee Benefit Costs” in the 2016 and 2015 reporting periods is as follows:
18.4 FINANCE COSTS AND FINANCE INCOME
Substantially all the Group’s finance income and finance costs, with the exception of dividends, are calculated using the effective interest method.
18.5 RELATED PARTY TRANSACTIONS
The detail of the transactions with related parties in 2016 and 2015 is as follows:
EUROS
2016 2015
ASSOCIATES
Services 84,000 -
Purchases (53,147,517) (51,765,680)
Services received (21,872) (41,796)
Royalties Incomes 10,692 -
Royalties Expenses (57,684) (13,719)
EUROS 2016 2015
EMPLOYEE BENEFIT COSTS
Employer social security costs 35,499,407 33,611,515
Pensions and obligations to employees 4,552,917 4,495,317
Other employee benefit costs 15,462,438 13,187,532
55,514,762 51,294,364
restructuring process qualified for the special tax regime provided for in Chapter VII of Title VII of Spanish Income Tax Law 27/2014, of 27 November.
The Parent included in its separate financial statements for 2014 the information required under Article 86 of Spanish Income Tax Law 27/2014, of 27 November.
18.6 REMUNERATION OF DIRECTORS AND SENIOR EXECUTIVES
In 2016 and 2015, the Parent’s Board of Directors and senior executives received total remuneration in all connections of EUR 4,161,988 and EUR 4,103,744 respectively. All the senior executives are also members of the Board of Directors.
In 2016 and 2015 the Parent had twelve directors: six legal-entity directors (represented by three men and three women) and six natural-person directors (three men and three women).
No advances or loans have been granted to the Board members. Also, no obligations had been assumed on their behalf at the end of the year.
Mahou, S.A., the Parent of the Mahou San Miguel Group, arranged a third-party liability insurance policy to cover the directors of the Mahou San Miguel companies for damage caused by acts or omissions. The total premium paid in connection with this policy in 2016 amounted to EUR 37,476.
18.7 INFORMATION REGARDING SITUATIONS OF CONFLICT OF INTEREST INVOLVING THE DIRECTORS
Pursuant to Article 229,3 of the Spanish Limited Liability Companies Law, at the end of 2016 neither the members of the Board of Directors of the Parent nor persons related to them as defined in the Spanish Limited Liability Companies Law had notified the other members of the Board of Directors of any direct or indirect conflict they might have with the interests of the Group.
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19. INFORMATION ON THE ENVIRONMENT
Mahou San Miguel has been carrying out various environmental management activities and projects in accordance with its environmental policy.
In 2016 and 2015 Mahou San Miguel incurred environmental costs amounting to EUR
2,482,728 and EUR 2,396,241, respectively.
Mahou San Miguel considers that any possible environmental contingencies that might arise are sufficiently covered by its third-party liability insurance policies and by the provisions recognised relating to liability.
20. OTHER DISCLOSURES
20.1 EMPLOYEES
The average number of employees at Mahou San Miguel, by professional category, was as follows:
2016 2015
EXECUTIVES AND MIDDLE MANAGERS 539 485
LINE, ADMINISTRATIVE AND RETAIL PERSONNEL 1,377 1,169
MANUAL WORKERS 1,027 1,084
2,943 2,738
2016 2015
EXECUTIVES AND MIDDLE MANAGERS 5 5
LINE, ADMINISTRATIVE AND RETAIL PERSONNEL 12 12
MANUAL WORKERS 36 43
53 60
The average number of employees at the Group with a disability equal to or greater
than 33% in 2016 was as follows:
In 2016 the fees for the financial audit services provided by other auditors firms were as follows:
At 31 December 2016 and 2015, the Group had 2,999 and 2,796 employees,
respectively, the breakdown by gender being as follows:
2016 2015
MEN 2,401 2,261
WOMEN 598 531
2,999 2,792
20.2 FEES PAID TO AUDITORS
In 2016 and 2015, the fees for financial audit and other services provided by
the auditor of the Mahou San Miguel’s consolidated and separate financial statements, Deloitte, S.L., or by firms in the Deloitte organisation, were as follows:
EUROS
2016 2015
AUDIT SERVICES 382,920 378,890
OTHER SERVICES 12,200 14,000
AUDIT-RELATED SERVICES 395,120 392,890
OTHER SERVICES 58,210 71,075
TOTAL PROFESSIONAL SERVICES 453,330 463,965
EUROS
2016 2015
AUDIT SERVICES 54,886 23,090
OTHER SERVICES 1,466 1,080
TOTAL AUDIT-RELATED SERVICES 56,353 24,170
20.3 DISCLOSURES ON THE AVERAGE PERIOD OF PAYMENT TO SUPPLIERS
Set forth below are the disclosures required by Additional Provision Three “Disclosure obligation” provided for in Law 15/2010, of 5 July:
31/12/2016 31/12/2015
AVERAGE PERIOD OF PAYMENT TO SUPPLIERS 57 59
RATIO OF TRANSACTIONS SETTLED 59 62
RATIO OF TRANSACTIONS NOT YET SETTLED 41 42
AMOUNT (EUROS) AMOUNT (EUROS)
TOTAL PAYMENTS MADE 714,583,646 625,883,361
TOTAL PAYMENTS OUTSTANDING 79,449,370 99,263,514
ANNUAL REPORT 2016MAHOU SAN MIGUEL
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The figures shown in the foregoing table in relation to payments to suppliers relate to suppliers that because of their nature are trade creditors for the supply of goods and services and, therefore, they include the figures relating to “Trade and Other Payables” under “Current Liabilities” in the accompanying consolidated balance sheet.
“Average period of payment to suppliers” means the period of payment or delay in payment of trade payables. This average period of payment to suppliers is calculated as the quotient whose numerator is the sum of the ratio of transactions settled multiplied by the total amount of the payments made and the ratio of transactions not yet settled multiplied by the total amount of outstanding payments, and whose denominator is the result of adding the total amount of the payments made to the total amount of the outstanding payments.
The ratio of transactions settled is calculated as the quotient whose numerator is the result of the sum of the products of multiplying the amounts paid by the number
of days of payment (the number of calendar days between the end of the maximum payment period and the date of effective payment of the transaction) and whose denominator is the total amount of the payments made,
Also, the ratio of transactions not yet settled is calculated as the quotient whose numerator is the result of the sum of the products of multiplying the amount of the transactions not yet settled by the number of days in which payment has not been made (the number of calendar days between the end of the maximum payment period and the date of the consolidated financial statements, as appropriate) and whose denominator is the total amount of the outstanding payments.
The maximum period of payment applicable to the Parent in 2016 was 30 days under Law 11/2013, of 26 June (unless the requirements established therein, which enable the aforementioned maximum period of payment to be extended to 60 days, are satisfied).
21. SEGMENT REPORTING
22. BUSINESS COMBINATION
23. EVENTS AFTER THE REPORTING PERIOD
24. EXPLANATION ADDED FOR TRANSLATION TO ENGLISH
Mahou San Miguel identifies its operating segments on the basis of internal reports on the components of Mahou San Miguel, which are reviewed, discussed and assessed regularly by the Board of Directors as the authority ultimately responsible for taking decisions and for allocating funds to the segments and evaluating their performance.
Accordingly, Mahou San Miguel considers
that it operates mainly within the refreshing beverage segment and also carries on activities complementary thereto. The other segments in which Mahou San Miguel operates are not significant.
Substantially all Mahou San Miguel’s sales are made in Spain. There is no single customer which accounts for more than 10% of its revenue.
Incorporaciones al perímetro de consolidación
The inclusions of Mahou Andina, S.p.A. (formerly Exportaciones e Importaciones de Líquidos RCR, S.A.) and Cermadis, S.L. in the
consolidated financial statements gave rise, upon first-time consolidation, to the following impacts, after having performed the PPA (purchase price allocation):
No events have occurred since the end of the reporting period that might have a material impact on the consolidated
financial statements of Mahou San Miguel for 2016.
These consolidated financial statements are presented on the basis of the regulatory financial reporting framework applicable to the Group in Spain (see Note 3). Certain
accounting practices applied by the Group that conform with that regulatory framework may not conform with other generally accepted accounting principles and rules.
BOARD OF DIRECTORSMadrid, 15 March 2017
CERMADIS MAHOU ANDINA
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS 7,141,821 85,093
NON-CURRENT ASSETS 73,697 7,928
NET DEFERRED TAX ASSETS (444,556) -
CURRENT ASSETS 5,881,180 3,309,868
PROVISIONS AND CONTINGENCIES (228,637) (140,631)
OTHER NON-CURRENT LIABILITIES (6,634,985) (169,021)
CURRENT LIABILITIES (7,711,506) (3,639,100)
SEPARATE NET ASSETS AND LIABILITIES (1,922,986) (545,863)
FAIR VALUE (1,423,009) (545,863)
GOODWILL 1,659,809 2,221,608
INVERSIÓN MAHOU, S.A. 236,800 1,675,745
NON-CONTROLLING INTERESTS (499,977) -
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MAHOU, S.A. AND SUBSIDIARIESDIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2016
COMPANY PERFORMANCE IN 2016 AND OUTLOOK FOR 2017
RESEARCH AND DEVELOPMENT ACTIVITIES
TREASURY SHARES
In 2016 Mahou and its subsidiaries consolidate the recovery trend initiated in 2014; this growth was strengthened by the sound performance of the Spanish economy -which grew by 3.2% and contributed to the positive results of the beer and water businesses in Spain- and the diversification projects undertaken.
The focus on value and the strength of the Group’s brands made it possible for revenue to grow by 3.7% compared to 2015, placing it at EUR 1,221 million compared with EUR 1,178 million in 2015. The major increase in volume favoured a higher share of beer volume in the food and drink channel in Spain. At international level, growth was positive in many of the countries where the presence of the Group’s brands is significant, although it was adversely affected by economic instabilities in developing countries.
The strategy of purchasing management, together with the efficiency projects, led to savings that have been reflected in an improvement in margins.
The drop in profit from operations is due to the change in accounting criteria relating to the amortisation of goodwill, which, if excluded, would have grown above 2%. This growth was also achieved thanks to the strong investment made in the Group’s
brands and the commitment to innovation and premiumisation.
With respect to operations, the Group continued to implement its improvement plan, making significant investments at all the Spanish and international plants, and logistics optimisation projects, which will ensure productivity and efficiency levels that will strengthen the Group’s competitiveness in the future.
The company continues to focus on growth, people development and job creation, as reflected by the fact that at 31 December 2016 there is a team of 2,999 people, up 207 on 2015.
Together with the strengthening of organic growth, the Company as part of its diversification and internationalisation strategy, invested in the distribution of Cermadis, with the objective of being closer to the end customer, and in Nomada Brewing, which is a further example of the commitment to innovation and continued advancement in the craft brewing world.
For FY2017, strong investment is expected in innovation and premiumisation projects -with a vision at long term- so an improvement in earnings is not expected.
The main risks the Company faces are those inherent to its business activity.
In line with its commitment to research and development, the Group is continuing to make significant efforts to improve
its industrial processes and create new products.
At 31 December 2016, the Group did not hold any treasury shares.
FINANCIAL RISK MANAGEMENT
INFORMATION ON THE ENVIROMENT
AVERAGE PERIOD OF PAYMENT TO SUPPLIERS
As indicated in Note 11, financial risk management is coordinated by Mahou, S.A.’s Financial Department, which has established
the mechanisms required to control exposure to interest rate and exchange rate fluctuations and credit and liquidity risk.
Note 19 to the consolidated financial statements details the main environmental
activities performed by the Group.
Mahou San Miguel’s policy is to observe the maximum period of payment to suppliers established by law. Where payment periods exceeding the maximum payment period have been arranged in historic agreements,
they have been brought into line with the aforementioned legislation. Furthermore, measures are being adopted to reduce the administrative processes and foster payment by electronic and technological means.
EVENTS AFTER THE REPORTING PERIOD
No subsequent events took place which might affect the consolidated financial statements and the directors’ report other than those contained in Note 22.
As in previous years, we wish to express our appreciation for the excellent work performed by the Group’s entire workforce and for the efforts made to accomplish our achievements.
BOARD OF DIRECTORSMadrid, 15 March 2017
Translation of a report originally issued in Spanish, In the event of a discrepancy, the Spanish-language version prevails.