HALF-YEAR REPORT 2020

notes to the half-year report

as at June 30, 2020

General principles

This unaudited, consolidated half-yearly financial statement of the Feintool Group is based on the individual financial statements of the Group companies as of June 30, 2020, which were prepared in accordance with uniform accounting policies, and released for publication by the Board of Directors on August 13, 2020.

With the exception of the changes to the accounting principles outlined below, the consolidated half-year result has been created according to the same valuation guidelines as the annual financial statement of December 31, 2019 and corresponds to the International Financial Reporting Standards (IFRS) in accordance with IAS 34 Interim Financial Reporting and the requirements of SIX Swiss Exchange. This half-yearly report does not include all the information and disclosures that are disclosed in the annual report of the Feintool Group as of December 31, 2019, and for that reason should be read in conjunction with it.

The consolidated half-yearly financial statement is shown in Swiss francs (CHF), rounded to the nearest thousand. It is produced in German and English. The half-yearly financial statement in German is the authoritative version.

CHANGES TO THE ACCOUNTING PRINCIPLES

With the exception of newly issued or revised Standards and Interpretations, which are applicable or have been modified in the reporting year, essentially the same accounting policies were applied as in the previous year.

On January 1, 2020, Feintool introduced the following new (adapted) Standards and Interpretations:

  • Amendments to References to the Conceptual Framework in IFRS Standards
  • IFRS 3 – Amendments Definition of a Business (January 1, 2020)
  • IAS 1 and 8 – Amendments Definition of material (January 1, 2020)
  • Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7 (January 1, 2020)
  • Feintool is either unaffected by these changes, or the changes have no material effect on its financial position, results of operations or cash flows.

    FUTURE CHANGES TO ACCOUNTING PRINCIPLES

    Feintool constantly examines the effects of newly published accounting principles on the Group’s financial position, results of operations or cash flows.

  • IFRS 17 – Insurance Contracts (January 1, 2021)
  • IAS 1 – Classification of Liabilities as Current or Non-current (January 1, 2022)
  • Feintool is assessing the impacts of the revised Standards and Interpretations. Based on its initial findings, Feintool does not foresee any significant impacts on its financial position, results of operations or cash flows.

    key estimates

    The preparation of the consolidated half-yearly financial statements requires that the management makes assessments and assumptions which influence the amounts of assets and liabilities, the statement of contingent receivables and liabilities, as well as income and expenditure. Areas in which estimates have a significant influence on the carrying amount include the calculation of provisions, the economic useful life of the fixed assets, the assumptions of the “value in use” calculation for goodwill, the expected future cash flow from capitalized development costs, the valuation of long-term construction contracts, the assessment of expected and deferred taxes, and the actuarial assumptions in the calculation of pension obligations. These estimates may differ from the actual results and hence have a significant impact on the Group’s financial position, results of operations or cash flows.

    Management and Board of Directors believe that the planning principles and assumptions are realistic.

    IMPACT OF THE COVID-19 PANDEMIC

    On March 11, 2020, the World Health Organization (WHO) declared an outbreak of the coronavirus (SARS-CoV-2) a pandemic due to its rapid global spread. The governments of many countries adopted far-reaching and drastic measures to contain or slow down the spread of the pandemic.

    Feintool introduced extensive precautionary measures with the aim of providing its employees safe working conditions while at the same time ensuring that the company could continue to supply its customers. Teams at both the local and global level are constantly adapting the measures to the changing needs and regulations imposed by the various authorities.

    Fortunately, only very few Feintool employees have been affected by COVID-19 to date, which has had no effect on the company’s performance. On the other hand, “stay-at-home” orders imposed by the US states of Ohio and Tennessee forced Feintool to largely stop production in the United States during the months of April and May. In addition, demand also collapsed completely in Europe due to all major automobile manufacturers suspending production, which indirectly led to Feintool also temporarily halting production in Europe as well. Demand has improved slightly at present, but volatility remains high and it is extremely difficult to issue any reliable forward-looking statements.

    Based on these conditions, the Board of Directors of Feintool International Holding AG has resolved to propose to the Annual General Meeting of Shareholders that no dividend be paid for the 2019 financial year in order to preserve liquidity.

    During the month of March, it became apparent that Feintool was likely to breach individual financial covenants in its financial agreements over the course of 2020. In June, Feintool signed an amendment to the agreement with six banks that essentially increases the credit line specified in the relevant agreement by CHF 30 million to CHF 120 million and suspends the critical covenants until December 30, 2021. Feintool is convinced that this financing will help safeguard its liquidity.Feintool also examined the impact of the COVID-19 pandemic on these semiannual financial statements. Feintool’s considerations are based on several scenarios.

    In this context, Feintool examined whether there were one or more events that would trigger an impairment of assets. As of June 30, 2020, there is no need to recognize any impairments.

    In some countries, Feintool has employee benefit obligations that include defined benefit components. The COVID-19 pandemic led to higher volatility and overall lower prices on the stock and bond markets, which has had a negative impact on the employee benefit obligations. The short-time working arrangements introduced in various countries had only an immaterial effect on pension obligations.

    As of June 30, 2020, Feintool received a loan of CHF 7.8 million under the PPP program in the United States to soften the impact of the COVID-19 pandemic. Under certain circumstances, this loan may not have to be repaid in full. Feintool is currently unable to assess whether and to what extent it can make use of this financial aid. In addition, Feintool has received government reimbursements for short-time work and very modest support for research and development expenses in various countries.

    Feintool’s Board of Directors and Executive Board are convinced that they have taken appropriate measures to mitigate the impact of the COVID-19 pandemic as far as possible and to safeguard the company’s future viability as a going concern. However, it is still not possible to conclusively assess the effects of the pandemic on the company’s net assets, financial position, and earnings situation.

    CONTINGENT LIABILITIES/PURCHASE COMMITMENTS

    The contingent liabilities arising from received funding, which has certain conditions attached, amount to CHF 3.0 million (previous year CHF 3.7 million).

    Feintool owns properties at some locations that are either contaminated or suspected of being contaminated. Under the supervision of the local authorities, Feintool is remediating these plots of land to remove the corresponding pollution and contaminants. Based on our current assessment, these activities are not expected to have a significant impact on the Feintool Group’s net assets, financial position, or results of operations.

    At one location in Switzerland, a neighbor filled a suit due to excessive noise emissions from a production site. Together with the responsible authorities, Feintool is currently examining structural and organizational modifications with the aim of reducing the effects of the emissions. Feintool does not expect these modifications to have a material impact on the Group’s financial position, results of operations or cash flows.

    At the end of the reporting period, Feintool was not involved in any other court proceedings. However, disputes relating to product liability, promotional activities, labor law and unfair dismissals, anti-trust law, securities trading, sales and marketing practices, health and safety, environmental and tax-related claims, state investigations and copyright law are always a possibility. Such proceedings could result in substantial claims being brought against Feintool that may not be covered by insurance policies. Feintool believes, however, that any such proceedings would not have a significant effect on the Group’s financial position, operating results or cash flows.

    The Feintool Group has undertaken to purchase property, plant and equipment amounting to CHF 36.7 million (previous year CHF 30.0 million).

    BASIS OF CONSOLIDATION

    The consolidated half-yearly financial statements encompass the half yearly financial statement of Feintool International Holding AG, Lyss (Switzerland), in addition to the half-yearly financial statements of all Group companies in which Feintool International Holding AG directly or indirectly owns more than 50 % of the voting rights or which it controls in any other way. A list of all the subsidiaries is contained in the Annual Financial Report of December 31, 2019, page 90.

    FINANCIAL COVENANTS

    Feintool has a syndicated loan of CHF 120 million (previous year EUR 90 million), a promissory note in the amount of EUR 65 million (previous year EUR 65 million), bilateral credit loans and several leasing and rental contracts (more details in the Annual Financial Report of December 31, 2019 note 20). On June 30, 2020, the company had utilized CHF 77.7 million of the syndicated loan.

    The syndicated loan, the promissory note loan, and the bilateral loan agreements contain covenants customary in the market, in particular:

  • A minimum equity ratio
  • A minimum profitability level
  • A minimum amount of liquid assets plus unused lines of credit with banks
  • In the event that the group or individual companies fail to comply with these covenants, the banks would have the right to terminate the loans at short notice. As of June 30, 2020, all of the covenants were met. As of June 30, 2020, Feintool had CHF 68.0 million (previous year: CHF 41.5 million) of unused, confirmed lines of credit with banks.

    Seasonality

    The business segments of Feintool are subject to no significant seasonal fluctuations. The earnings arising from contract assets recognized over a specific period of time are distributed over the period.

    The Feintool Group used the following exchange rates in the half-years:

    06/30/2020

    06/30/2019

    Closing rate

    Average rate

    Closing rate

    Average rate

    China

    CNY 100

    13.4218

    13.6248

    14.1721

    14.6443

    Eurozone

    EUR 1

    1.0651

    1.0643

    1.1105

    1.1277

    Japan

    JPY 100

    0.8827

    0.8963

    0.9058

    0.9092

    Czech Republic

    CZK 100

    3.9832

    4.0175

    4.3640

    4.3917

    USA

    USD 1

    0.9512

    0.9645

    0.9758

    0.9977

    1 Segment information

    1.1 Products and services 1st HY 2020 in CHF 1 000

    Fineblanking Technology

    System Parts

    Total segments

    Finance/Other

    Eliminations

    Total Group

    Net sales

    22 927

    197 513

    220 440

    -8 177

    212 263

    - Intersegment income

    -5 499

    -2 678

    -8 177

    8 177

    Total net sales – Group 1)

    17 428

    194 835

    212 263

    212 263

    EBITDA

    -2 772

    14 442

    11 670

    -3 056

    -617

    7 997

    Depreciation and amortization

    -838

    -23 776

    -24 614

    -1 919

    1 115

    -25 418

    Operating profit (EBIT)

    -3 610

    -9 334

    -12 944

    -4 975

    498

    -17 421

    Financial expenses

    -8 816

    Financial income

    6 288

    Income taxes

    2 422

    Net income attributable to Feintool Holding shareholders

    -17 527

    Assets

    66 394

    581 830

    648 224

    265 459

    -227 539

    686 144

    Net working capital 2)

    9 203

    64 632

    73 835

    20 259

    -18 696

    75 398

    Investments in property, plant and equipment/intangible assets (incl. leases)

    500

    22 202

    22 702

    644

    -1 859

    21 487

    Number of employees

    164

    2 170

    2 334

    29

    2 363

    1.2 Geographical areas 1st HY 2020

    Switzerland

    Europe excl. Switzerland

    America

    Asia

    Total

    Total net sales – Group 3)

    1 178

    122 774

    56 635

    31 676

    212 263

    thereof Germany

    84 587

    thereof USA

    41 014

    thereof Japan

    12 153

    thereof China

    18 637

    Fixed and intangible assets

    55 321

    220 466

    73 884

    89 151

    438 822

    1.3 Products and services 1st HY 2019 in CHF 1 000

    Fineblanking Technology

    System Parts

    Total segments

    Finance/Other

    Eliminations

    Total Group

    Net sales

    43 231

    299 395

    342 626

    -10 771

    331 855

    - Intersegment income

    -9 097

    -1 674

    -10 771

    10 771

    Total net sales – Group 1)

    34 134

    297 721

    331 855

    331 855

    EBITDA

    2 122

    35 638

    37 760

    -2 173

    -772

    34 815

    Depreciation and amortization

    -874

    -23 322

    -24 196

    -1 191

    1 113

    -24 274

    Operating profit (EBIT)

    1 248

    12 316

    13 564

    -3 364

    341

    10 541

    Financial expenses

    -17 333

    Financial income

    13 715

    Income taxes

    -2 263

    Net income attributable to Feintool Holding shareholders

    4 660

    Assets

    78 828

    610 141

    688 969

    270 731

    -234 305

    725 395

    Net working capital 2)

    9 518

    100 188

    109 706

    33 373

    -37 984

    105 095

    Investments in property, plant and equipment/intangible assets (incl. leases)

    589

    23 020

    23 609

    952

    -594

    23 967

    Number of employees

    177

    2 519

    2 696

    29

    2 725

    1.4 Geographical areas 1st HY 2019

    Switzerland

    Europe excl. Switzerland

    America

    Asia

    Total

    Total net sales – Group 3)

    5 093

    187 593

    95 983

    43 186

    331 855

    thereof Germany

    127 876

    thereof USA

    69 335

    thereof Japan

    17 046

    thereof China

    21 580

    Fixed and intangible assets

    59 043

    226 964

    80 911

    87 469

    454 386

    The following footnotes are applicable to the 2020 and 2019 half-year periods.

    1) Total Net Sales include “Sales from products transferred over time” about CHF 7.5 million (prior year CHF 18.5 million). The net sales have been recognized in the Fineblanking Technology Segment. The remaining net sales in this segment mainly consist of tool sales and services.

    2) Net working capital comprises trade receivables, inventories, net assets of construction contracts and prepaid expenses and accrued income less trade payables, advance payments received from customers and accrued expenses and deferred income. The remaining receivables and liabilities is included in the calculation for “Finances/Other”.

    3) Net sales is allocated to countries based on the customer’s domicile.

    The following explanations on the segment information apply to the financial years 2020 and 2019.

    The Fineblanking Technology segment comprises the development, manufacture and sale of presses, tools, peripheral systems and all related services.

    The System Parts segment develops, produces and sells high-precision system components and assemblies using fineblanking and forming technology as well as electro lamination sheet stamping. The segment also sells production-specific tools to third-party customers. The production and internal sale of tools is also included in this segment.

    “Finances/Other” essentially comprises the figures for Feintool International Holding AG, the German sub-holding company Feintool Holding GmbH and the real estate company included in the sub-holding company HL Holding AG.

    The operating profit/loss comprises all operating income and expenses directly attributable to the individual segments. This includes all cross-segment expenses, which are charged directly. Feintool’s financing is undertaken at the Group level. Financial expenses and income, financial liabilities as well as taxes, are therefore reported only at the Group level and do not appear in the segment reports.

    There is no reconciliation of data in management reports and data contained in the financial reports, as internal and external reporting are subject to the same valuation principles.

    2 Financial result and derivative financial instruments

    1st HY 2020

    1st HY 2019

    2.1 Financial expenses

    in CHF 1 000

    in CHF 1 000

    Interest expense

    1 589

    1 802

    Other finance costs 1)

    633

    398

    Foreign exchange losses

    6 594

    15 133

    Total financial expenses

    8 816

    17 333

    1) Besides bank charges, other financial expenses include annual amortization of establishing cost for the promissory note/syndicated loan, market making costs and valuation expenses from hedging.

    1st HY 2020

    1st HY 2019

    2.2 Financial income

    in CHF 1 000

    in CHF 1 000

    Interest income

    58

    87

    Foreign exchange gains

    6 230

    13 628

    Total financial income

    6 288

    13 715

    2.3 Fair value hierarchy

    Feintool has measured financial instruments at fair value and uses the following hierarchy to determine fair value:

    Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

    Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)

    Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

    Feintool holds only financial instruments in Level 2. These include currency forwards. Detailed information is disclosed in part “Derivative financial instruments outstanding”.

    Fair values

    2.4 Derivative financial instruments outstanding

    in CHF 1 000

    positive

    negative

    Contract volumes

    Futures contracts

    14

    49

    3 501

    Currency instruments

    14

    49

    3 501

    Total derivative financial instruments as at 06/30/2020

    14

    49

    3 501

    Futures contracts

    179

    45

    18 808

    Currency instruments

    179

    45

    18 808

    Total derivative financial instruments as at 06/30/2019

    179

    45

    18 808

    Currency instruments primarily relate to the hedging of foreign-currency risks in euros. The life of the foreign exchange futures is a few months.

    2.5 Fair Values

    The carrying amounts of the financial assets and liabilities do not differ materially from their fair values.

    3 INCOME TAXES

    Due to the loss at most locations, Feintool generated deferred tax assets of CHF 2.4 million. In countries with short deduction periods for losses carried forward or other significant hurdles to deducting losses carried forward, these were recognized very conservatively. As such, the deduction rate was recognized at a comparatively low level of 12.1 %.

    4 equity

    1st HY 2020

    1st HY 2019

    4.1 Authorized capital

    in CHF 1 000

    in CHF 1 000

    Start of period

    1 482

    1 482

    Expired

    -1 482

    End of period

    1 482

    The remaining amount of “authorized capital” created on April 24, 2018, in the amount of kCHF 1 482 , expired on April 24, 2020.

    06/30/2020

    06/30/2019

    4.2 Major shareholders

    Date of notification

    Number

    Share of capital

    Number

    Share of capital

    Artemis Beteiligungen I AG und Michael Pieper

    09/20/2018

    2 473 349

    50.32 %

    2 245 949

    50.32 %

    Geocent AG1)

    07/15/2013

    400 285

    8.14 %

    400 285

    8.97 %

    1) The notice dated July 15, 2013, comprised 400 285 shares or 8.97 % of the corresponding share capital. Following the capital increase on September 20, 2018, 400 285 shares correspond to a capital share of 8.14 %.

    5 dividend

    A dividend was not distributed for the 2019 financial year (previous year: CHF 9.805 million).

    6 Events after the balance sheet date

    There were no significant events after the balance sheet date.

    addresses of our operating companies

    as at June 30, 2020

    Company

    Address

    Phone/Fax

    Mail

    Switzerland

    Feintool International Holding AG

    Industriering 8
    3250 Lyss
    Switzerland

    Phone +41 32 387 51 11
    Fax +41 32 387 57 81

    feintool-fih@feintool.com

    Feintool Technologie AG

    Industriering 3
    3250 Lyss
    Switzerland

    Phone +41 32 387 51 11
    Fax +41 32 387 57 80

    feintool-ftl@feintool.com

    Feintool Technologie AG

    Grünfeldstrasse 25
    8645 Jona
    Switzerland

    Phone +41 55 225 21 11
    Fax +41 55 225 24 04

    feintool-ftl@feintool.com

    Feintool System Parts Lyss AG

    Industriering 53
    3250 Lyss
    Switzerland

    Phone +41 32 387 51 11
    Fax +41 32 387 57 79

    feintool-pbel@feintool.com

    Europe

    Feintool System Parts Ettlingen GmbH

    Englerstrasse 18
    76275 Ettlingen
    Germany

    Phone +49 7243 320 20
    Fax +49 7243 320 240

    feintool-pbee@feintool.com

    Feintool System Parts Jena GmbH

    Löbstedter Strasse 85
    07749 Jena
    Germany

    Phone +49 3641 506 100
    Fax +49 3641 506 300

    feintool-pbej@feintool.com

    Feintool System Parts Jessen GmbH

    Rehainer Strasse 14
    06917 Jessen
    Germany

    Phone +49 3537 272 0
    Fax +49 3537 272 222

    feintool-psej@feintool.com

    Feintool System Parts Most GmbH

    Havran 164
    435 01 Havran
    Czech Republic

    Phone +420 733 589 070

    feintool-pbem@feintool.com

    Feintool System Parts Obertshausen GmbH

    Ringstrasse 10
    63179 Obertshausen
    Germany

    Phone +49 6104 401 0
    Fax +49 6104 401 204

    feintool-pfef@feintool.com

    Feintool System Parts Ohrdruf GmbH

    Ringstrasse 13
    99885 Ohrdruf
    Germany

    Phone +49 3624 335 0
    Fax +49 3624 335 200

    feintool-pfeo@feintool.com

    Feintool System Parts Oelsnitz GmbH

    Hoffeldstrasse 2
    09376 Oelsnitz
    Germany

    Phone +49 3729 830 299 0
    Fax +49 3729 830 299 111

    feintool-pbeo@feintool.com

    Company

    Address

    Phone/Fax

    Mail

    Americas

    Feintool Equipment Corp.

    6833 Creek Road
    Cincinnati, OH 45242, USA

    Phone +1 513 791 00 66
    Fax +1 513 791 15 89

    feintool-ftu@feintool.com

    Feintool Cincinnati, Inc.

    11280 Cornell Park Drive
    Cincinnati, OH 45242, USA

    Phone +1 513 247 01 10
    Fax +1 513 247 00 60

    feintool-pbuc@feintool.com

    Feintool Tennessee, Inc.

    2930 Old Franklin Road
    Antioch, TN 37013, USA

    Phone +1 615 641 77 70
    Fax +1 615 641 79 95

    feintool-pfut@feintool.com

    Asia

    Feintool Japan Co., Ltd. (Equipment)

    Atsugi Plant, 260-53,
    Hase, Atsugi City
    Kanagawa Prefecture,
    243-0036 Japan

    Phone +81 46 247 74 51
    Fax +81 46 247 20 08

    feintool-ftj@feintool.com

    Feintool Japan Co., Ltd. (System Parts)

    Atsugi Plant, 260-53,
    Hase, Atsugi City
    Kanagawa Prefecture,
    243-0036 Japan

    Phone +81 46 248 44 41
    Fax +81 46 247 20 08

    feintool-pbja@feintool.com

    Feintool Japan Co., Ltd. (System Parts)

    Tokoname Plant, 178 Ikeda, Aza
    Kume, Tokoname City
    Aichi Prefecture,
    479-0002 Japan

    Phone +81 569 44 04 00
    Fax +81 569 44 04 35

    feintool-pbjt@feintool.com

    Feintool Automotive System Parts (Tianjin) Co., Ltd

    No 216 Jingsi Road, Tianjin Kong
    Gang Economic Zone
    300308 Tianjin, P. R. China

    Phone +86 22 5926 58 38
    Fax +86 22 5926 58 38

    feintool-pfct@feintool.com

    Feintool Precision System Parts (Taicang) Co., Ltd.

    No 15 Qingdao East Road
    Taicang 215400, Jiangsu
    Province, P. R. China

    Phone +86 512 5351 51 86
    Fax +86 512 5351 54 32

    feintool-pbct@feintool.com

    Feintool Fineblanking Technology (Shanghai) Co., Ltd.

    Bld. No. 27,
    No. 1525 Minqiang Road,
    Shentian High-Tech Park,
    Songjiang District
    201612 Shanghai, P. R. China

    Phone +86 21 6760 15 18
    Fax +86 21 5778 66 56

    feintool-ftc@feintool.com

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