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