Effects on the Group’s performance and liquidity
The COVID-19 pandemic had a strong impact—worldwide and at the macroeconomic level—on the business year 2020/21. Due to the restrictions on air travel, the globally declining demand for energy, and the production stoppages at automotive manufacturers especially during the first lockdown, the aerospace, oil and natural gas as well as automotive industries were hit hard by the fallout of the COVID-19 pandemic. The automotive segment has already stabilized, whereas aerospace as well as oil and natural gas are still feeling the brunt of the COVID-19 pandemic. In comparison to the previous year, revenue declined due to the production stoppages and capacity reductions, particularly in the aforementioned segments. Aside from the consistent implementation of programs to optimize both costs and working capital, investing activities were sharply curtailed during the business year 2020/21, and investments that were not absolutely necessary were postponed. These postponements of investments do not have a negative effect on the voestalpine Group’s current business. The measures described above led to a highly positive liquidity position as of March 31, 2021 (see the consolidated statement of cash flows).
The Group used various support measures during the business year 2020/21 as a consequence of the worldwide COVID-19 crisis. Short time work was in operation at individual Austrian Group companies as of the close of the reporting period. A few foreign Group facilities applied programs similar to the Austrian short time work model to some of their employees. Resulting refunds were recognized as income in the consolidated income statement as of March 31, 2021 (see Note 3. Other operating income). The number of employees subject to short time work significantly decreased between the time the first lockdown ended and the close of the business year. In addition, domestic and foreign subsidiaries utilized deferrals of social security contributions, non-wage costs, and taxes during the business year, most of which were already paid as the year wore on.
Personnel reduction programs were put in place at some domestic and foreign Group facilities. For details, see Note 19. Provisions.
Effects on uncertainties in accounting estimates and assumptions
In terms of both accounting and valuation, COVID-19 may impact many areas of the Consolidated Financial Statements of voestalpine AG and/or increase uncertainties in accounting estimates and make assumptions more difficult.
- For example, the economic situation might trigger reviews of the need to recognize impairment losses and conduct impairment tests, especially in connection with units to which goodwill is allocated, cash-generating units to which no goodwill is allocated, and non-current assets. See also Note 11. Impairment losses and reversal of impairment losses.
- The COVID-19 crisis may trigger greater bad debt losses. As of March 31, 2021, however, no material risks were identified in this connection. In this respect, see also Note 24. Financial instruments.
- COVID-19 may affect revenue recognition. However, no facts have been identified for the business year just ended that could lead to adjustments in revenue recognition or to writedowns of existing contract assets. The aerospace segment’s customers did not encounter any payment difficulties as of March 31, 2021, despite the challenging environment. While aircraft manufacturers did postpone some of the orders they had previously placed, this did not affect revenue previously recognized as per IFRS 15.
- No idle capacity costs resulting from shortfalls in capacity utilization, production shutdowns, and supply chain interruptions will be recognized in connection with the measurement of inventories. See also Note B. Summary of Accounting Policies, section entitled “Inventories.”
- IFRS 16: voestalpine has reviewed whether the COVID-19 pandemic materially affects the assessment of lease terms. This is not the case. The simplification option under IFRS 16 regarding rent concessions did not have a material effect.
- As regards the setting-up of provisions, no material obligations or facts requiring the recognition of provisions have been identified on account of COVID-19.
- Due to the COVID-19 pandemic, a more detailed review of the capitalization of deferred tax assets from temporary differences or loss carryforwards was conducted as to the probability of income to be taxed in the future.
There are no going concern uncertainties for the voestalpine Group. The Group’s equity as of March 31, 2021, is EUR 5,649.9 million. The Group is also reporting very good liquidity (see the consolidated statement of cash flows) as well as cash and cash equivalents of EUR 1,159.7 million.
The accounting policies applied to the Consolidated Financial Statements are consistent with those of the previous year with the exceptions listed below.
The following new and revised Standards and Interpretations were adopted for the first time in the business year 2020/21:
Standard |
|
Content |
|
Effective date1 |
|||
---|---|---|---|---|---|---|---|
|
|
|
|
|
|||
Framework, amendments |
|
Amendments to References to the Conceptual Framework |
|
January 1, 2020 |
|||
IFRS 3, amendments |
|
Definition of a Business |
|
January 1, 2020 |
|||
IAS 1 and IAS 8, amendments |
|
Definition of Material |
|
January 1, 2020 |
|||
IFRS 9, IAS 39, and IFRS 7, amendments |
|
Interest Rate Benchmark Reform |
|
January 1, 2020 |
|||
IFRS 16, amendments |
|
COVID-19-Related Rent Concessions |
|
June 1, 2020 |
|||
|
|
|
|
|
|||
|
The application of the aforementioned revisions did not have any material effects on the Consolidated Financial Statements.
Trade payables from bills of exchange and trade payables from reverse factoring agreements: Reclassification pursuant to IAS 1.41
Given the clarification pursuant to the December 2020 IFRIC Update regarding supply chain finance, trade payables as well as trade payables from reverse factoring agreements that are securitized via bills of exchange are shown in a separate line item in the statement of financial position. To date, such liabilities were included in the line item, “Trade and other payables,” and were disclosed and described in Note 21. Liabilities from bills of exchange accepted and drawn and/or Trade Payables with reverse factoring agreements. The previous year’s figures for the affected items were adjusted retrospectively. The changes in presentation do not affect earnings per share or any other items in the Consolidated Financial Statements.
The following new and revised Standards and Interpretations had already been published as of the reporting date, but their application was not yet mandatory for the business year 2020/21 or they have not yet been adopted by the European Union:
Standard |
|
Content |
|
Effective date |
|||||
---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|||||
IFRS 4, amendments |
|
Insurance Contracts – Deferral of IFRS 9 |
|
January 1, 2021 |
|||||
IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16, amendments |
|
Interest Rate Benchmark Reform – Phase 2 |
|
January 1, 2021 |
|||||
IFRS 16, amendments |
|
COVID-19-Related Rent Concessions |
|
April 1, 20212 |
|||||
IFRS 3, amendments |
|
Reference to the Conceptual Framework |
|
January 1, 20222 |
|||||
IAS 16, amendments |
|
Property, Plant and Equipment – Proceeds before Intended Use |
|
January 1, 20222 |
|||||
IAS 37, amendments |
|
Onerous Contracts – Cost of Fulfilling a Contract |
|
January 1, 20222 |
|||||
Various standards, amendments |
|
Annual Improvements to International Financial Reporting Standards, 2018-2020 Cycle |
|
January 1, 20222 |
|||||
IAS 1, amendments |
|
Classification of Liabilities as Current or Non-current |
|
January 1, 20232 |
|||||
IFRS 17 |
|
Insurance Contracts |
|
January 1, 20232 |
|||||
IAS 1, amendments |
|
Disclosure of Accounting policies |
|
January 1, 20232 |
|||||
IAS 8, amendments |
|
Definition of Accounting Estimates |
|
January 1, 20232 |
|||||
IAS 12, amendments |
|
Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
|
January 1, 20232 |
|||||
IFRS 10 and IAS 28, amendments |
|
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture |
|
Postponed by the IASB |
|||||
|
|
|
|
|
|||||
|
These Standards—to the extent they have been adopted by the European Union—will not be adopted early by the Group. From today’s perspective, the new and revised Standards and Interpretations are not expected to have any material effects on the voestalpine Group’s net assets, financial position, and results of operations.
The annual financial statements of all fully consolidated entities are prepared based on uniform accounting policies. For entities included using the equity method (associates and joint ventures), local accounting policies and different reporting dates (see “Investments” appendix to the Notes) were maintained for time reasons and cost/benefit considerations if the relevant amounts were immaterial.
Upon initial consolidation, assets, liabilities, and contingent liabilities are measured at their fair value as of the acquisition date. Any excess of the cost over the net of the assets acquired and liabilities assumed is recognized as goodwill. If the net of the assets acquired and liabilities assumed exceeds the cost, the difference is recognized in profit or loss in the acquisition period. The hidden reserves and/or hidden losses attributed to the non-controlling interests are also accounted for.
All intra-Group profits, receivables, and payables as well as income and expenses are eliminated.
Pursuant to IAS 21, annual financial statements prepared in foreign currencies that are included in the Consolidated Financial Statements are translated into euros using the functional currency method. The relevant national currency is the functional currency in all cases because—in financial, economic, and organizational terms—these entities all run their businesses independently. Assets and liabilities are translated using the exchange rate on the reporting date. Income and expenses are translated using the average exchange rate for the business year.
Equity is translated using the historical exchange rate. Currency translation differences are recognized directly in equity in the currency translation reserve.
In the individual financial statements of consolidated entities, foreign currency transactions are translated into the functional currency of the given entity using the exchange rate on the transaction date. Foreign exchange gains and losses resulting from translation as of the transaction date and reporting date are recognized in the consolidated income statement.
Currency exchange rates (ECB fixing) of key currencies have changed as follows:
|
|
USD |
|
GBP |
|
BRL |
|
SEK |
|
PLN |
---|---|---|---|---|---|---|---|---|---|---|
Closing exchange rate |
|
|
|
|
|
|
|
|
|
|
03/31/2020 |
|
1.0956 |
|
0.8864 |
|
5.7001 |
|
11.0613 |
|
4.5506 |
03/31/2021 |
|
1.1725 |
|
0.8521 |
|
6.7409 |
|
10.2383 |
|
4.6508 |
|
|
|
|
|
|
|
|
|
|
|
Average annual rate |
|
|
|
|
|
|
|
|
|
|
2019/20 |
|
1.1113 |
|
0.8752 |
|
4.5727 |
|
10.6510 |
|
4.3033 |
2020/21 |
|
1.1675 |
|
0.8927 |
|
6.3121 |
|
10.3490 |
|
4.4981 |
The preparation of the Consolidated Financial Statements in accordance with IFRS requires management to make accounting estimates and assumptions that may significantly affect the recognition and measurement of assets and liabilities, the recognition of other obligations as of the reporting date, and the recognition of income and expenses during the business year.
The following assumptions entail significant risks of triggering material adjustments of assets and liabilities in future periods:
- Recoverability of assets
The assessment of the recoverability of intangible assets, goodwill as well as property, plant and equipment is based on assumptions concerning the future. The determination of the recoverable amounts in the course of the impairment tests is based on several assumptions. In the reporting period, the continued clarification of an assumption served to enhance the precision with which the tax effects are determined. The net cash flows correspond to the figures in the most current business plan at the time the Consolidated Financial Statements are prepared. See B. Summary of Accounting Policies (the section entitled “Impairment testing of goodwill, other intangible assets, and property, plant and equipment”); as well as Note 9. Property, plant and equipment; Note 10. Goodwill and other intangible assets; and Note 11. Impairment losses and reversal of impairment losses.
- Recoverability of financial instruments
Alternative actuarial models are used to measure the recoverability of financial instruments for which there is no active market. The parameters used to determine the fair values are based partially on assumptions concerning the future. See B. Summary of Accounting Policies (the section entitled “Financial instruments”) as well as Note 24. Financial instruments.
- Determining lease terms and discount rates
An assessment of the term of each and every lease and the discount rate to be applied is made to determine lease liabilities. The estimated term of a lease is based on the lease’s non-cancelable term. Lease periods comprising options to terminate or renew are included in the assessment if the non-exercise of termination options or the exercise of renewal options is deemed to be reasonably certain. This requires management to make a judgment. All facts and circumstances that represent an economic incentive to exercise or not to exercise a given option must be considered. Following initial recognition, the lease term shall be reassessed if there is a significant event or a significant change in circumstances that the company can control and that has an effect on its decision whether to exercise or not to exercise the given option.
The incremental borrowing rate in its capacity as a maturity-dependent, risk-free interest rate is used as the discount rate for measuring the lease liabilities, taking into account the respective currency and the company’s credit rating. This requires making an assessment when no observable interest rates are available (e.g., subsidiaries that do not engage in financial transactions) or when the interest rates must be adjusted to reflect the terms and conditions of the given lease (e.g., consideration of the repayment structure).
- Pensions and other employee obligations
The measurement of existent severance payment and pension obligations is based on assumptions regarding interest rates, the retirement age, life expectancy, and future salary/wage increases. See B. Summary of Accounting Policies (section entitled “Pensions and other employee obligations”) as well as Note 18. Pensions and other employee obligations.
- Assets and liabilities associated with acquisitions
Acquisitions require making estimates in connection with the determination of the fair value of identified assets, liabilities, and contingent consideration. All available information on the circumstances as of the acquisition date is applied. The fair values of buildings and land are typically determined by external experts or intra-Group experts. Intangible assets are measured using appropriate valuation methods depending on the type of asset and the availability of information. These measurements are closely connected to assumptions about the future development of the estimated cash flows as well as the applied discount rates.
Information on acquisitions made during the reporting period is reported under D. Acquisitions and other additions to the scope of consolidation.
- Other provisions
Other provisions for present obligations arising from past events, which lead to an outflow of resources embodying economic benefits, are stated at the amount that reflects the most probable value based on reliable estimates. Provisions are discounted if the effect is material. Details concerning provisions follow from B. Summary of Accounting Policies (section entitled “Other provisions”) as well as Note 19. Provisions.
- Income taxes
Income tax expense represents the total of current tax expenses and deferred taxes. The current tax expense is determined based on the taxable income using the currently applicable tax rates. The deferred taxes are determined based on the respective local income tax rates. Future fixed tax rates are also considered in the deferral. The recognition and measurement of actual and deferred taxes is subject to numerous uncertainties.
Given its international activities, the voestalpine Group is subject to different tax regulations in the respective tax jurisdictions. The tax items presented in the Consolidated Financial Statements are determined based on the relevant tax regulations and, because of their complexity, may be subject to different interpretations by taxpayers, for one, and local finance authorities, for another. Because varying interpretations of tax laws may lead to additional tax payments for past years as a result of comprehensive tax audits, they are included in the analysis based on management’s assessment.
Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible differences and/or tax losses carried forward but not yet applied may be utilized. This assessment requires making assumptions regarding future taxable income and thus is subject to uncertainties. It is made on the basis of the planning for a five-year period. Changes in future taxable income may result in lower or higher deferred tax assets.
Further information follows from B. Summary of Accounting Policies (section entitled “Income taxes”) as well as Note 8. Income taxes and Note 13. Deferred taxes.
- Legal risks
As an internationally active company, the voestalpine Group is exposed to legal risks. The outcome of present or future legal disputes is generally not predictable and may have a material effect on the Group’s net assets, financial position, and results of operations. In order to reliably assess potential obligations, management continually reviews the underlying information and assumptions; both internal and external legal counsel is used for further evaluation. Provisions are recognized to cover probable present obligations, including a reliable estimate of legal costs. The option to record a contingent liability is considered if the future outflow of resources is not probable or if the company has no control over the confirmation of actual events.
Both the estimates and the underlying assumptions are reviewed on an ongoing basis. The actual figures may differ from these assumptions and estimates if the stated parameters differ from reporting date expectations. Revisions are recognized through profit or loss in the period in which the estimates are revised, and the assumptions are adjusted accordingly.
In the voestalpine Group, revenue is realized when a customer obtains control over goods or services. See the disclosures in Note 2. Operating Segments regarding the type of goods and services offered by the individual business segments.
As a rule, revenue is recognized at the time the goods or services are delivered, taking into account the stipulated terms and conditions. This is generally the time at which risks and opportunities are transferred in accordance with the stipulated Incoterms. The payment terms typically are between 30 and 60 days.
The transaction price corresponds to the contractually stipulated consideration, taking into account any variable components. Variable consideration is recognized only if it is highly probable that there will be no material revenue reversals in the future.
Revenue from series products that satisfy the revenue recognition criteria of IFRS 15.35 (c) is recognized over time. This mainly concerns products of the automotive and aerospace segments for which there are no alternative uses, because they are developed and produced specifically for a customer based on the latter’s specific requirements and thus may generally not be used for any other purpose or where any alternative use would result in significant losses. Furthermore, a legally or contractually enforceable claim to payment of consideration, including a reasonable margin, applies to any components under construction as well as to finished goods, provided the company is not responsible for any termination of the contract.
Where revenue is recognized over time, such recognition must be prorated based on the ratio of the costs incurred to the estimated total costs. This method is the most reliable way to reflect progress in performance. Expected losses under a contract are recognized immediately. The cash flows are obtained in accordance with the contractual arrangements. The payment terms typically are between 30 and 90 days.
The claims of the voestalpine Group to consideration for completed performance not yet billed as of the reporting date are recognized as contract assets in trade and other receivables. The contract liabilities presented in trade and other payables concern primarily consideration received from customers in advance for performance not yet delivered.
Investment grants are treated as deferred items and recognized as income over the useful life of the asset. Cost subsidies are recognized on an accrual basis, in line with the associated expenses. Government grants of EUR 138.0 million (2019/20: EUR 27.3 million) for capital expenditures, research and development, and promotion of job opportunities were recognized as income in the reporting period. See Note 3. for any income from short time work grants and other government grants for personnel expenses contained therein. See also Chapter B. Summary of Accounting Policies, specifically, the section on the effects of the COVID-19 pandemic.
Operating expenses are recognized when goods or services are used or when the expense is incurred. In the business year 2020/21, expenses for research and development were EUR 153.3 million (2019/20: EUR 174.4 million).
Property, plant and equipment are measured at cost less accumulated depreciation and any impairment losses.
The cost of self-constructed property, plant and equipment includes direct costs and appropriate portions of materials and indirect labor costs required for production as well as borrowing costs in case of qualifying assets. The capitalization date is the date from which expenditures for the asset and borrowing costs are incurred and activities necessary to prepare the asset for its intended use or sale are undertaken.
Depreciation is recognized on a straight-line basis over the expected useful life. Land is not subject to depreciation. The expected depreciation for each asset category is as follows:
Buildings |
|
2.0% – 20.0% |
---|---|---|
Plant and equipment |
|
3.3% – 25.0% |
Fixtures and fittings |
|
5.0% – 20.0% |
The Group determines at lease inception whether a given lease satisfies the definition of a lease as per IFRS 16. As of the commencement date, the Group recognizes an asset for the right of use granted as well as a lease liability. The right of use is depreciated over the lease term on a straight-line basis. However, the right of use is depreciated over the asset’s economic life if a transfer of title is stipulated or if it is reasonably certain that a purchase option will be exercised. The right of use must also be tested for impairment.
For the most part, the following depreciation/amortization periods are applied to right-of-use assets:
Right-of-use assets related to land, land rights, and buildings |
|
13 – 600 months |
---|---|---|
Right-of-use assets related to plant and equipment |
|
13 – 72 months |
Right-of-use assets related to fixtures and fittings |
|
13 – 96 months |
The lease liability is measured using the incremental borrowing rate, provided the interest rate underlying the lease cannot be readily determined.
In subsequent measurements, the lease liability is measured using the effective interest method and adjusted. The associated interest expense is included in finance costs. The lease liability is remeasured if, for example, future lease payments will change due to changes in an index or interest rate or if there is a change in the assessment regarding the exercise of a purchase, renewal, or termination option. The carrying amount of the right-of-use asset is generally adjusted directly in equity subsequent to such remeasurement.
In the statement of financial position, the Group recognizes right-of-use assets, which do not satisfy the definition of investment property, in property, plant and equipment, and lease liabilities in financial liabilities.
The Group has elected the option not to determine a right-of-use asset or lease liability for leases with terms up to 12 months (short-term leases) and for leases where the underlying asset is of low value. In the voestalpine Group, leased assets whose cost does not exceed EUR 5,000 are considered low-value assets.
No separation is made with respect to contracts containing both lease and non-lease components; this does not apply to land and buildings, however.
IFRS 16 is not applied to intangible asset leases.
The Group does not act as a lessor.
All acquisitions are accounted for using the purchase method. Goodwill arises from the acquisition of subsidiaries and equity investments in associates and joint ventures.
Goodwill is allocated to cash generating units (CGUs) or groups of cash generating units and, pursuant to IFRS 3, is not amortized but tested for impairment at least annually as well as additionally if circumstances indicate possible impairment. The carrying amount of investments in associates and joint ventures also includes the carrying amount of goodwill.
Negative goodwill arising from an acquisition is immediately recognized as income.
On disposal of a subsidiary, the goodwill associated with the subsidiary is included in the determination of the profit or loss on disposal based on the relative value pursuant to IAS 36.86.
Expenses for research activities that are undertaken with the prospect of gaining new scientific or technical insights are immediately recognized as an expense. Pursuant to IAS 38.57, development expenditure is capitalized from the date on which the relevant criteria are satisfied. This means that the expenses incurred are not capitalized subsequently if all of the above conditions are met only at a later date. Expenditures for internally generated goodwill and brands are immediately recognized as an expense.
Other intangible assets are stated at cost less accumulated amortization and impairment losses. In the case of a business combination, the fair value as of the acquisition date is the acquisition cost. Amortization is recognized on a straight-line basis over the expected useful life of the asset. The maximum useful life based on previous transactions is as follows:
Backlog of orders |
|
1 year |
---|---|---|
Customer relations |
|
15 years |
Technology |
|
10 years |
Software |
|
10 years |
CGUs or groups of CGUs to which goodwill has been allocated and other intangible assets with an indefinite useful life are tested for impairment at least annually as well as additionally if circumstances indicate possible impairment. All other assets and CGUs are tested for impairment if there are any indications of impairment. Impairment testing is generally based on the value in use approach.
For the purpose of impairment testing, assets are grouped at the lowest levels at which cash flows are independently generated (CGUs). Goodwill is allocated to those CGUs or groups of CGUs that are expected to benefit from synergies of the related acquisition, and this must be on the lowest level at which the goodwill in question is monitored for internal management purposes.
An impairment loss is recognized at the amount by which the carrying amount of the asset or cash generating unit (CGU) exceeds the recoverable amount. The recoverable amount is the higher of the fair value less cost to sell and the value in use. Impairment losses recognized for CGUs or groups of CGUs to which goodwill has been allocated are applied first against the carrying amount of the goodwill. Any remaining impairment loss reduces the carrying amounts of the assets of the CGU or groups of CGUs on a pro rata basis. If the goodwill impairment test is carried out for a group of CGUs and if this results in an impairment, the individual CGUs included in this group are also tested for impairment and any resulting impairment of assets is recognized at this level first. Subsequently, this is followed by another impairment test for the CGUs at the Group level.
If there is any indication that an impairment loss recognized for an asset, a CGU, or a group of CGUs (excluding goodwill) in earlier periods no longer exists or may have declined, the recoverable amount must be estimated and then recognized (reversal of impairment). In this respect, see Note 11. Impairment losses and reversal of impairment losses.
IFRS 9 contains three measurement categories which—with the exception of a few measurement choices—must always be considered mandatory:
- Measured at amortized cost (Amortized Cost, AC);
- Measured at fair value through other comprehensive income (Fair Value through Other Comprehensive Income, FVOCI); and
- Measured at fair value through profit or loss (Fair Value through Profit or Loss, FVTPL).
At this time, measurement at FVOCI is not applied in the voestalpine Group.
Other financial assets
The other financial assets include non-current receivables and loans that are measured at amortized cost. Equity instruments held (especially equity investments) are measured at FVTPL, because the option to elect measurement at FVOCI was not utilized.
All other current and non-current financial assets (particularly securities) must be measured at FVTPL, because they are either allocated to a business model oriented toward active purchases and sales or do not satisfy the cash flow requirement (cash flows at specified dates comprising solely payments of interest and principal).
Trade and other receivables
Trade and other receivables are always recognized at amortized cost. Identifiable risks are mainly covered by buying credit insurance. Interest-free or low-interest receivables with a remaining term of more than one year are recognized at their discounted present value. Sold receivables are derecognized in accordance with the provisions of IFRS 9 (see Note 29. Disclosures of transactions not recognized in the statement of financial position).
Trade receivables held for sale under an existent factoring agreement are measured at FVTPL, because they are allocated to the “sale” business model.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash at banks, and checks and are carried at amortized cost.
Loss allowance
The voestalpine Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost and on contract assets (portfolio loss allowance, stage 1 and stage 2). The Group applies the simplified approach to trade receivables and contract assets, pursuant to which any impairment determined with respect to such financial assets must, under certain conditions, equal the lifetime expected credit losses.
Historical data derived from actual historical credit losses in the past five years are used as the basis for the estimated expected credit losses. Differences between the economic conditions at the time the historical data were collected, the current conditions, and the Group’s view of the economic conditions over the expected maturities of the receivables must be considered. There is no significant concentration of default risks, given the existent credit insurances and a diversified customer portfolio that is dominated by very good to good credit ratings. Loss allowances on an individual basis are recognized for receivables with impaired credit ratings (stage 3). Note 24. Financial instruments contains additional information on impairment.
Derivative financial instruments
The voestalpine Group uses derivative financial instruments exclusively for the purpose of hedging the interest rate, foreign currency, and raw materials price risks. Derivative financial instruments are carried at fair value through profit or loss (FVTPL). Hedge accounting as defined in IFRS 9 is used for some of the Group’s derivative financial instruments. Consequently, gains or losses resulting from changes in the value of derivative financial instruments are recognized either in profit or loss or in other comprehensive income (for the effective portion of a cash flow hedge). Positive fair values from derivative financial instruments are shown in trade and other receivables. Negative fair values from derivative financial instruments are shown in trade and other payables.
The derivative transactions are marked to market daily by determining the value that would be realized if the hedging position were closed out (liquidation method). Observable currency exchange rates and raw materials prices as well as interest rates are the inputs for determining the fair values. The fair values are calculated based on the inputs using generally accepted actuarial formulas.
Unrealized profits or losses from hedged transactions are treated as follows:
- If the hedged asset or liability has already been recognized in the statement of financial position, or if an obligation not recognized in the statement of financial position is hedged, the unrealized profits and losses from the hedged transaction are recognized through profit or loss. At the same time, the hedged item is also measured at fair value, regardless of the initial valuation method used. Any resulting unrealized profits and losses are offset against the unrealized results of the hedged transaction in the income statement so that, in sum, only the ineffective portion of the hedged transaction is recognized in profit or loss for the period (fair value hedges).
- If a future transaction is hedged, the effective portion of the unrealized profits and losses accumulated up to the reporting date is recognized in other comprehensive income. Ineffective portions are recognized through profit or loss. If the transaction results in the recognition of a non-financial asset or a liability in the statement of financial position, the amount recognized in other comprehensive income is considered in the determination of the carrying amount of this item. Otherwise, the amount reported in other comprehensive income is recognized through profit or loss in keeping with the effectiveness of the future transaction or existent obligation (cash flow hedges).
Trade and other liabilities
Liabilities (except liabilities from derivative financial instruments) are recognized at amortized cost.
Subsidiaries, joint ventures, and associates that are not included in these Consolidated Financial Statements by way of full consolidation or the equity method are recognized in other financial assets and other equity investments. These other assets are measured at amortized cost.
Income tax expense represents the total of current tax expenses and deferred taxes. The current tax expense is determined based on the taxable income using the currently applicable tax rates.
Pursuant to IAS 12, all temporary differences between the income tax base and the Consolidated Financial Statements are included in deferred taxes. Deferred tax assets on unused tax loss carryforwards are recognized to the extent that sufficient taxable (deferred) temporary differences between carrying amounts are available or to the extent that, based on the planning, sufficient taxable profit will be available against which the tax loss carryforwards can be offset.
In accordance with IAS 12.39 and IAS 12.44, deferred taxes arising on differences resulting from investments in subsidiaries, associates, and joint ventures are generally not recognized. Deferred tax liabilities are recognized for planned dividend payments subject to withholding tax.
Deferred taxes are determined based on the respective local income tax rates. Future fixed tax rates are also considered in the deferral. Deferred tax assets and deferred tax liabilities are offset when they relate to the same tax authority and when there is a claim to offsetting.
Inventories are measured at the lower of cost and the net realizable value. The net realizable value is the estimated selling price less estimated costs of completion and sale. In exceptional cases, the replacement cost of raw materials and supplies may serve as the basis of measurement in accordance with IAS 2.32.
The cost of inventories of the same type is determined using the weighted average price method or a similar method. The cost includes directly attributable costs and all pro-rated material and production overheads based on normal capacity utilization. Borrowing costs, general administrative expenses, and distribution costs are not capitalized.
Free certificates are measured at zero cost over the entire holding period, as the rights have been allocated free of charge. Purchased emission certificates are recognized in current assets at their actual cost and measured at fair value as of the reporting date (limited by the actual cost).
In case of any under-allocation, amounts for CO2 emission certificates are included in other provisions. The measurement is based on the rate prevailing on the reporting date (or the carrying amount) of the relevant certificates.
Pensions and other employee obligations include provisions for severance payments, pensions, and long-service bonuses and are recognized in accordance with IAS 19 using the projected unit credit method.
Actuarial gains and losses from severance and pension provisions are recognized directly in other comprehensive income in the year in which they are incurred. Actuarial gains and losses from provisions for long-service bonuses are recognized immediately in profit or loss.
Severance obligations
Employees of Austrian entities whose employment started before January 1, 2003, are entitled to severance payment if their employment contract is terminated by the employer or if they retire. The amount to be paid depends on the number of years of service and the employee’s salary or wage at the time employment ends. A contribution-based system is provided for employees whose employment started after December 31, 2002. The contributions to external employee pension funds are recognized as expenses.
Defined contribution plans
Defined contribution plans do not entail further obligations on the company’s part once the premiums have been paid to the managing pension fund or insurance company.
Defined benefit plans
Under defined benefit plans, the company promises a given employee that they will be paid a pension in a specified amount. The pension payments begin upon retirement (or disability or death) and end upon the death of the former employee (or that of their survivors). Widow’s and widower’s pensions (equivalent to between 50% and 75% of the old age pension) are paid to the surviving spouse until their death or remarriage. Orphan’s pensions (equivalent to between 10% and 20% of the old age pension) are paid to dependent children until the completion of their education, but at most up to the age of 27.
Longevity thus is the central risk to the Group under the defined benefit pension plans. All measurements are based on the most recent mortality tables. Given a relative decrease or increase of 10% in mortality, the defined benefit obligation (DBO) of pensions changes by +4.1% or –3.6% as of the reporting date. Other risks such as the risk of rising medical costs do not materially affect the scope of the obligation.
Almost all of the Group’s pension obligations concern claims that have already vested.
Austria
The amount of the pension is based either on a certain percentage of the final salary depending on the years of service or on a fixed, valorized amount per year of service. The majority of the obligations under defined benefit plans is transferred to a pension fund, but the liability for any shortfalls rests with the company.
Germany
There are different pension schemes in Germany, whose benefit rules may be described as follows:
- A certain percentage of the final salary depending on the years of service;
- A rising percentage of a fixed target pension depending on the years of service;
- A stipulated, fixed pension amount;
- A fixed, valorized amount per year of service that is linked to the average salary in the company;
- A fixed, valorized amount per year of service.
A small part of the pensions are financed by insurance companies, but liability for the obligations themselves rests with the given companies.
In all countries with significant defined benefit plan obligations, the employee benefits are determined based on the following parameters:
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2019/20 |
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2020/21 |
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|
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|
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Interest rate (%) |
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1.50 |
|
0.80 |
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Salary/wage increases (%)1 |
|
3.00 |
|
3.00 |
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Pension benefit increases (%)1 |
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2.25 |
|
2.00 |
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|
|
|
|
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Retirement age men/women |
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|
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|
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Austria |
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max. 62 years |
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max. 62 years |
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Germany |
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63 – 67 years |
|
63 – 67 years |
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|
|
|
|
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Mortality tables |
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|
|
|
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Austria |
|
AVÖ 2018-P |
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AVÖ 2018-P |
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Germany |
|
Heubeck-Richttafeln 2018 G |
|
Heubeck-Richttafeln 2018 G |
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|
|
|
|
|
|||
|
Net interest expenses resulting from employee benefits are included under finance costs in the consolidated income statement.
Long-service bonus obligations
In most of the Group’s Austrian companies, employees are entitled to payment of a long-service bonus, which is based either on a collective agreement or a provision in a works agreement. This is a one-time payment that is made when the respective service anniversary has been reached; depending on the length of service, the bonus generally equates to between one and three monthly salaries.
Other provisions related to present obligations arising from past events, which lead to an outflow of resources embodying economic benefits, are stated at the amount that reflects the most probable value based on a reliable estimate. Provisions are discounted where the effect is material.
The assumptions underlying the provisions are reviewed on an ongoing basis. The actual figures may deviate from the assumptions if the underlying parameters as of the reporting date have not developed as expected. As soon as better information is available, changes are recognized through profit or loss and the assumptions are adjusted accordingly.
Note that we are invoking the safeguard clause under IAS 37.92, pursuant to which information on provisions is not disclosed if doing so could seriously and adversely impact the company’s interests.
Contingent liabilities are present obligations arising from past events (where it is not probable that an outflow of resources will be required to settle the obligation) or possible obligations arising from past events (whose existence or non-existence depends on less certain future events that the company cannot control in full). A contingent liability must also be recognized if, in extremely rare cases, an existent liability cannot be recognized in the statement of financial position as a provision because the liability cannot be reliably estimated.
As regards possible obligations, note that pursuant to IAS 37.92 information on contingent liabilities is not disclosed if doing so could seriously and adversely impact the company’s interests.
The employee shareholding scheme of the Group’s Austrian companies is based on the appropriation of a portion of employees’ salary and wage increases under collective bargaining agreements over several business years. The business year 2000/01 was the first time employees were granted voestalpine AG shares in return for a reduction by 1% of their salary or wage increase.
In each of the business years 2002/03, 2003/04, 2005/06, 2007/08, 2008/09, 2014/15, and 2018/19, between 0.3 percentage points and 0.5 percentage points of the increases under collective agreements were used to provide voestalpine AG shares to employees in addition to the amounts agreed until the given date. The actual amounts follow from the contributions, which are determined on the basis of the collective agreements as of November 1 in each of the years 2002, 2003, 2005, 2007, 2008, 2014, and 2018, as well as from application of the annual increase in the contributions by 3.5%. In the business years 2012/13, 2013/14, 2016/17, and 2017/18, additional contributions of between 0.27 percentage points and 0.43 percentage points of the pay increases under collective agreements for 2012, 2013, 2016, and 2017, respectively, were used for the shareholding scheme for those Austrian Group companies that participated in the employee shareholding scheme from a later date.
The Works Council and each company enter into an agreement to implement the Austrian employee shareholding scheme. Shares are acquired by voestalpine Mitarbeiterbeteiligung Privatstiftung (a private foundation that manages the company’s employee shareholding scheme), which transfers the shares to employees according to the wages and salaries they have waived. The value of the consideration provided is independent of share price fluctuations. Therefore, IFRS 2 does not apply to the allocation of shares based on collective bargaining agreements that stipulate lower salary or wage increases.
An international participation model that was developed for Group companies outside Austria was initially implemented in the business year 2009/10 in several companies in Great Britain and Germany. Due to the highly positive experience gained in these pilot projects, the model was expanded in these two countries and introduced step by step in the Netherlands, in Poland, in Belgium, in the Czech Republic, in Italy, in Switzerland, in Romania, in Sweden, and in Spain in the subsequent business years. In the business year 2020/21, a total of 93 companies in these 11 countries participated in the international employee shareholding scheme.
As of March 31, 2021, the voestalpine Mitarbeiterbeteiligung Privatstiftung held approximately 14.1% (March 31, 2020: 12.9%) of voestalpine AG’s shares for employees. In addition, active and former employees of voestalpine hold approximately 0.7% (March 31, 2020: 1.9%) of the shares of voestalpine AG, the voting rights of which are exercised by the foundation. On the whole, therefore, as of March 31, 2021, the voting rights of 14.8% (March 31, 2020: 14.8%) of the share capital of voestalpine AG are bundled in the foundation.
- From investing activities: outflow/inflow of liquid assets from investments/disinvestments;
- From operating activities: outflow/inflow of liquid assets not affected by investment, disinvestment, or financing activities.
- From financing activities: outflow/inflow of liquid assets from capital expenditures and capital contributions.