notes to the half-year report
as at June 30, 2022
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, 2022, which were prepared in accordance with uniform accounting policies, and released for publication by the Board of Directors on August 22, 2022.
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, 2021 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-year report does not include all the information and disclosures that are disclosed in the annual report of the Feintool Group as of December 31, 2021, 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, 2022, Feintool introduced the following new (adapted) Standards and Interpretations:
- IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract
- Annual Improvements to IFRS Standards 2018-2020
- IAS 16 – Property, Plant and Equipment
- IFRS 3 – Reference to the Conceptual Framework
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, 2023)
- IAS 1 – Classification of Liabilities as Current or Non-current (January 1, 2023)
- IAS 8 – Definition of Accounting Estimate (January 1, 2023)
- IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies (January 1, 2023)
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.
increase in share capital
On May 13, 2022, the Feintool Group concluded a capital increase. The transaction resulted in the creation of 9 829 684 new Feintool shares with a par value of CHF 10 each at the transaction price of CHF 20.51 each. Further information is provided in Note 5.1.
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.
impacts of OECD global minimum tax rate
To address concerns about uneven profit distribution and tax contributions of large multinational corporations, various agreements have been reached at the global level, including an agreement by over 135 jurisdictions to introduce a global minimum tax rate of 15 %. In December 2021, the Organisation for Economic Co-operation and Development (OECD) released a draft legislative framework that is expected to be used by individual jurisdictions that signed the agreement to amend their local tax laws. Once changes to the tax laws in any juridiction in which the Feintool Group operates are enacted or substantivly enacted, Feintool may be subject to the top-up tax. At the date when the interim financial statements were authorised for issue, none of the jurisdictions in which the Feintool Group operates had enacted or substantively enacted the tax legislation related to the top-up tax, and therefore Feintool is unable to determine the potential impact.
CONTINGENT LIABILITIES/PURCHASE COMMITMENTS
The contingent liabilities arising from received funding, which has certain conditions attached, amount to CHF 4.6 million (previous year CHF 3.8 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 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 10.0 million (previous year CHF 31.8 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, 2021, page 90.
On March 1, 2022, Feintool Holding GmbH, Bayreuth, Germany, acquired 100 % of the shares of the German company Kienle + Spiess GmbH, located in Sachsenheim, Germany, with its subsidiary Kienle + Spiess Hungary Kft., located in Tokod, Hungary.
As of January 1, 2021, HL Holding AG was absorbed by System Parts Lyss AG.
FINANCIAL COVENANTS
Feintool has a syndicated loan of CHF 120 million (previous year CHF 120 million), a promissory note in the amount of EUR 75 million (previous year EUR 75 million), bilateral credit loans and several leasing and rental contracts (more details in the Annual Financial Report of December 31, 2021 note 19). On June 30, 2022, the company had utilized CHF 0 of the syndicated loan (previous year CHF 68.6 million).
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
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, 2022, all of the covenants were met. As of June 30, 2022, Feintool had CHF 246.0 million (previous year: CHF 67.4 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 2022 and 2021 half-year periods.
During the six months ended June 30, 2022, the Feintool Group has changed its internal organisation and the composition of its operating segment, which resulted in a change in reportable segment. Accordingly, Feintool has restated the previously reported segment information ended June 30, 2021 and as at December 31, 2021.
1) Total Net Sales include “Sales from products transferred over time” about CHF 3.3 million (prior year CHF 9.4 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) In the 2020 financial year, Feintool received a loan of USD 8.4 million under the PPP program in the United States to mitigate the impact of the COVID-19 pandemic. In the first half of 2021, the government assured the company that this loan would not have to be repaid. Feintool also received CHF 3.0 million in immediate aid from the Swiss government in the first half of 2021 to mitigate the effects of the COVID-19 pandemic.
3) Due to capacities no longer required at a plant, an impairment loss on manufacturing equipment totaling CHF 8.3 million was recognized in the first half of 2021.
Segment reporting is in accordance with internal reporting, and the one-time effects demonstrated have thus been factored into the group performance assessment by the Board of Directors and the management.
4) 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”.
5) Net sales is allocated to countries based on the customer’s domicile.
The following explanations on the segment information apply to the financial years 2022 and 2021.
The Fineblanking Technology segment comprises the development, manufacture and sale of presses, tools, peripheral systems and all related services.
The System Parts Europe, USA and Asia segments develop, produce and sell high-precision system components and assemblies using fineblanking and forming technology as well as electro lamination sheet stamping. The segments also sell production-specific tools to third-party customers. The production and internal sale of tools is also included in this segments.
“Finances/Other” essentially comprises the figures for Feintool International Holding AG, the German sub-holding company Feintool Holding GmbH.
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 acquisition of investments
On March 1, 2022, Feintool Holding GmbH, Bayreuth, Germany, acquired 100 % of the shares of the German company Kienle + Spiess GmbH, located in Sachsenheim, Germany, with its subsidiary Kienle + Spiess Hungary Kft., located in Tokod, Hungary.
Kienle + Spiess is one of the leading suppliers in rotors and stators for highly efficient electric drives. With this acquisition, Feintool is significantly expanding its latest business pillar, electric sheet stamping and its production capacity.
In its first four months as part of the Feintool Group, Kienle + Spiess generated net sales of CHF 82.4 million and operating earnings (EBIT) of CHF 5.7 million. If the acquisition had taken place on January 1, 2022, the consolidated net sales of the Feintool Group would have amounted to CHF 447.4 million and the operating earnings (EBIT) to CHF 13.5 million.
The purchase price allocation, in particular the item “Intangible assets”, is not yet final, because not all information is available yet. A change in the valuation of the customer orders and relationships contained therein is possible in the twelve months from the acquisition date.
1) The trade receivables comprise gross contractual amounts due of kCHF 37 819, of which kCHF 348 was expected to be uncollectable at the date of acquisition.
2) In intangible assets is mainly the value of customer contracts and relationships, as well as value of technology contained.
1) Goodwill at historical rates on the acquisition date. For the Feintool Group, goodwill represents the value that it would have had to pay in order to independently set up a profitable operation for the production of rotors and stators for highly efficint electric drives in the automobile. With its acquisition, Feintool is positioning itself as one of Europe's leading manufacturers of motor cores for battery electric vehicles (BEV) and hybrids (HEV), industrial drives and regenerative energies. Goodwill is not a tax deductible. The costs incurred by the Feintool Group for the acquisition of Kienle + Spiess amounted to around CHF 1.5 million. In particular, this includes the fees of external lawyers and advisers. The costs were recognized in other operating expenses and amounted in financial year 2021 as well as in the first half year 2022 to around CHF 0.7 million each.
3 Financial liabilities
1) This item includes the borrowing of interest-bearing debt of kCHF 162 508 (previous year kCHF 15 916), the repayment of interest-bearing lease liabilities of kCHF 7 290 (previous year repayment kCHF 8 332) and the repayment of interest-bearing debt of kCHF 270 040 (previous year kCHF 49 961).
4 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.
4.3 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.
Currency instruments primarily relate to the hedging of foreign-currency risks in euros. The life of the foreign exchange futures is a few months.
4.5 Fair Values
The carrying amounts of the financial assets and liabilities do not differ materially from their fair values.
5 equity
On May 13, 2022, the Feintool Group concluded a capital increase. The transaction resulted in the creation of 9 829 684 new Feintool shares with a par value of CHF 10 each at the transaction price of CHF 20.51 each.
Information on significant shareholders are based on the shareholders register or on notifications received by Feintool. A disclosure obligation exists if a person or group(s) is/are subject to the disclosure requirement when reaching, exceeding or falling below the threshold of 3, 5, 10, 15, 20, 25, 33.3, 50 or 66.6 percent of the voting rights of Feintool International Holding AG. Disclosure reports made during the reporting year in accordance with Art. 120 of the Financial Market Infrastructure and Market Conduct in Securities and Derivatives Trading (FinMIA) and the provisions of the Financial Market Infrastructure Ordinance (FinMIO) can be viewed on the reporting and publication platform of SIX Swiss Exchange (https://www.six-exchange-regulation.com/de/home/publications/significant-shareholders.html).
6 dividend
On the occasion of the Annual General Meeting of Feintool International Holding AG on April 28, 2022, the shareholders approved the distribution of a dividend of CHF 1.00 (previous year CHF 0) per share for financial year 2021. This led to a dividend payout of CHF 4.9 Mio. (previous year: kCHF 0).
7 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, 2022