Exhibit 99.3

Audited financial statements of Jacob Holm as of December 31, 2020 and 2019 and for the years then ended and related notes thereto.

 

 

Report of Independent Auditors

To the Board of Directors of

PMM Holding (Luxembourg) AG

We have audited the accompanying consolidated financial statements of PMM Holding (Luxembourg) AG and its subsidiaries (the “Company”), which comprise the consolidated balance sheet as of 31 December 2020 and 2019 and the related consolidated income statements, statements of comprehensive income, of changes in equity and of cash flows for the years then ended and the related notes to the consolidated financial statements.

Responsibility of the Board of Directors of the Company for the consolidated financial statements

The Board of Directors of the Company is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as issued by the IASB; this includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the Company, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg

T : +352 494848 1, F : +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)

R.C.S. Luxembourg B 65 477—TVA LU25482518

 

 

 

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PMM Holding (Luxembourg) AG as of 31 December 2020 and 2019, and the results of its operations and cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the IASB.

 

PricewaterhouseCoopers, Société coopérative		Luxembourg, 23 September 2021

Represented by

/s/ Patrick Schon

PMM Holding (Luxembourg) AG

Consolidated Income Statement 1 January—31 December

 

		Note		2020				2019
				EUR ’000				EUR ’000
Revenue		4			353.904				304.100
Cost of goods sold		5			(296.752	)			(281.566	)
Gross profit					57.152				22.534
Sales and marketing expenses		5			(7.540	)			(6.782	)
Administrative expenses		5			(18.909	)			(17.114	)
Operating profit / loss					30.703				(1.362	)
Other operating income and expenses		10			(50	)			127
Profit / loss before financial income and expenses and special items					30.653				(1.235	)
Special items, net		6			(1.694	)			(267	)
Financial income		11			219				2.203
Financial expenses		12			(14.008	)			(7.752	)
Profit / loss before tax					15.170				(7.051	)
Tax on result for the year		13			(4.626	)			(616	)
Net profit / loss for the year					10.544				(7.667	)

Consolidated Statement of Comprehensive Income 1 January—31 December

 

		2020				2019
		EUR ’000				EUR ’000
Statement of Comprehensive Income 1 January—31 December
Net profit / loss for the year			10.544				(7.667	)
Items that may be subsequently reclassified to profit or loss
Exchange adjustment, foreign companies			(4.351	)			1.935
Comprehensive income			6.193				(5.732	)

PMM Holding (Luxembourg) AG

Consolidated Balance Sheet at 31 December

 

		Note				2020				2019				January 1 2019
						EUR ’000				EUR ’000				EUR ’000
Assets
Goodwill							0				0				0
Customer lists, know-how, patents, licenses and trademarks							2.279				2.530				2.672
Software							1.603				1.932				2.274
Intangible fixed assets under construction							552				131				182
Intangible fixed assets			14				4.434				4.593				5.128
Land and buildings			15				27.450				30.177				29.636
Plant and machinery			15				67.807				76.285				73.077
Other fixtures and fittings, tools and equipment			15				1.674				1.676				1.970
Property, plant and equipment under construction			15				12.143				3.576				4.822
Right of use assets			16				5.680				8.039				9.936
Property, plant and equipment							114.754				119.753				119.441
Other receivables							488				535				211
Deferred tax asset			23				464				499				731
Non-current assets							120.140				125.380				125.511
Inventories			17				24.235				25.812				25.914
Corporation tax			18				499				817				319
Trade receivables			19				32.387				28.041				45.511
Bonds and shares at fair value through profit or loss							0				0				9.232
Other receivables			19				7.002				5.446				6.041
Prepayments							704				575				462
Receivables and others							40.592				34.879				61.565
Cash at bank and in hand							20.606				13.935				10.708
Current assets							85.433				74.626				98.187
Total assets							205.573				200.006				223.698
Equity and liabilities
Share capital			20				323				323				323
Share premium and similar premiums							64.792				64.792				64.792
Legal reserve							32				32				32
Exchange adjustments							1.511				5.862				3.927
Retained earnings							(42.750	)			(53.294	)			(38.727	)
Equity							23.908				17.715				30.347
Bond			21				127.077				126.743				126.406
Lease liabilities			22				4.316				6.551				8.163
Provisions for other staff obligations			24				1.520				1.281				971
Provisions for other liabilities and charges			25				0				0				873
Non-current liabilities							132.913				134.575				136.413
Current portion of non-current liabilities							0				0				50
Current portion of lease liabilities			22				1.690				1.722				1.773
Credit institutions			26				9.930				7.709				17.868
Trade payables							19.594				17.740				23.710
Payables, plant and machinery							105				343				230
Payables to shareholder			33				251				7.093				80
Corporation tax			27				3.796				405				1.905
Other payables							13.386				12.704				11.322
Current liabilities							48.752				47.716				56.938
Total liabilities							181.665				182.291				193.351
Total equity and liabilities							205.573				200.006				223.698

PMM Holding (Luxembourg) AG

Consolidated Statement of Changes in Equity

 

		Note				Share capital				Share premium and similar premiums				Legal reserve				Exchange adjustments				Retained earnings				Total
						EUR ’000				EUR ’000				EUR ’000				EUR ’000				EUR ’000				EUR ’000
Equity
Equity at 1 January 2020							323				64.792				32				5.862				(53.294	)			17.715
Comprehensive income for the year							0				0				0				(4.351	)			10.544				6.193
Dividend							0				0				0				0				0				0
Equity at 31 December 2020			20				323				64.792				32				1.511				(42.750	)			23.908
Equity at 1 January 2019							323				64.792				32				3.927				(38.727	)			30.347
Comprehensive income for the year							0				0				0				1.935				(7.667	)			(5.732	)
Dividend							0				0				0				0				(6.900	)			(6.900	)
Equity at 31 December 2019			20				323				64.792				32				5.862				(53.294	)			17.715

PMM Holding (Luxembourg) AG

Consolidated Cash Flow Statement

 

		Note				2020				2019
						EUR ’000				EUR ’000
Net profit / loss for the year							10.544				(7.667	)
Adjustments of non-cash items			28				29.927				25.284
Change in working capital			29				(1.058	)			13.585
Cash flows from operating activities before financial income and expenses and tax							39.413				31.202
Financial income received							213				1.086
Financial expenses paid							(7.791	)			(7.403	)
Corporation income tax paid							(925	)			(2.364	)
Cash flows from operating activities							30.910				22.521
Purchase of intangible fixed assets							(1.056	)			(1.222	)
Purchase of property, plant and equipment							(16.327	)			(15.494	)
Purchase of financial fixed assets							(7	)			(320	)
Sale of property, plant and equipment							185				309
Sale of financial fixed assets							19				0
Sale of bonds and shares at fair value through profit and loss							0				9.236
Cash flows from investing activities							(17.186	)			(7.491	)
Decrease in payables to related parties							(6.842	)			0
Increase in payables to related parties							0				7.013
Repayment of non-current loans credit institutions							0				(50	)
Repayment of non-current loans lease liabilities							(1.689	)			(1.773	)
Change in credit institutions			30				2.221				(10.333	)
Dividend paid							0				(6.900	)
Cash flows from financing activities							(6.310	)			(12.043	)
Change in cash and cash equivalents							7.414				2.987
Cash and cash equivalents at 1 January							13.935				10.708
Exchange adjustment of cash at bank and in hand at 1 January							(743	)			240
Cash and cash equivalents at 31 December							20.606				13.935

Cash-flow related to non-recourse factoring is presented in change in working capital as part of cash-flow from operations. Cash-flow related to recourse factoring is presented as change in credit institutions in cash-flow from financing activities.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements

1 Accounting Policies

General information

PMM Holding (Luxembourg) AG (‘the Company’) and its subsidiaries (together, ‘the Group’) manufacture and sell nonwoven products in roll-goods or converted form. The Group has manufacturing plants in Europe and in the US and sell its products globally.

Basis of preparation

The consolidated financial statements of PMM Holding (Luxembourg) AG have been prepared in accordance with International Financial Reporting Standards as issued by the IASB (IFRS).

The Consolidated Financial Statements for 2020 and 2019 are presented in EUR ’000 unless stated otherwise.

First time adoption of IFRS (IFRS 1)

This is the first Consolidated Financial Statements of PMM Holding (Luxembourg) AG prepared in accordance with IFRS as issued by the IASB. The subsidiary Jacob Holm & Sons AG prepared consolidated financial statements under IFRS in previous years, and the Group has in accordance with IFRS elected to use reported figures of the subgroup as the carrying amounts of the respective items in Group’s IFRS opening balance as of 1 January 2019. The PMM Holding (Luxembourg) AG figures were added to this and consolidated. The additional entity did not have any material impact to the consolidated PMM Holding (Luxembourg) AG Group as a whole.

Change of accounting estimates

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the companies’ accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.

The Group reviewed the useful life’s of its buildings and machinery equipment early 2020 and revised these for some of the larger assets. The total impact on 2020 was an annual reduction of building depreciations of EUR 432k and a reduction of machinery equipment depreciations of EUR 5.939k.

New standards, amendments and interpretations

The Group has adopted the following new standards and amendments to standards and interpretations that are effective for the financial year 2020:

 

•

Amendments to IAS 1 and IAS 8 “Definition of Material”

 

•

Amendments to IFRS 3 “Business Combinations”

 

•

Amendment to “References to the Conceptual Framework in IFRS Standards”

 

•

Interest rate benchmark reform (Amendment to IFRS 9, IAS 39 and IFRS 7)

The implementation has not had a significant impact on recognition, measurement or disclosures in the annual report 2020 and is not expected to have significant impact on the financial reporting for future periods.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

The group has applied the following IFRS standard for the first time, with effect from 1 January 2019:

 

•

IFRS 16: Leases

The group has changed its accounting policies following the adoption of IFRS 16. The effect of adoption of IFRS 16 is material.

IFRS 16 has been adopted using the modified retrospective method. By using this method the cumulative effect of initially applying the standard is recognized at the date of initial application January 1, 2019.

On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019.

In applying IFRS 16 for the first time, PMM Holding (Luxembourg) AG has used the following practical expedients permitted by the standard:

 

•

applying a single discount rate to a portfolio of leases with reasonably similar characteristics

 

•

accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases

 

•

excluding initial direct costs for the measurement of the lease assets at 1 January 2019

 

•

using hindsight in determining the lease term where the contract contains options to extend or terminate the lease

PMM Holding (Luxembourg) AG has elected not to reassess whether a contract is or contains a lease at 1 January 2019. For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.

The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 4.625%.

Under the new accounting standard, the right of use of a leased asset must be recognised as an asset in the balance sheet, while the corresponding lease liability must be recognised in the interest bearing debt. Obviously, the increase in total assets will affect the key ratios that the balance sheet items involved are a part of.

After transition the group has applied the recognition exemptions allowed by IFRS 16. This means that low value leases or leases, where the lease term is initially 12 months or less, are recognized as rental expenses in the statement of profit or loss. In addition, the lease and non-lease components are not separated for all asset classes.

In the income statement, the lease payment is broken down into a depreciation component and an interest component. As a result, the operating profit before depreciation (EBITDA) has improved by the amount of the lease payment, while depreciation charges will increase by the amount of the estimated depreciation component and financial expenses will increase by the estimated interest component.

For 2019, this means the group’s right-of-use assets and net interest bearing debt at year start has increased by EUR 9.9 million and EBITDA has increased by about EUR 2.1 million, while depreciation charges increased by about EUR 1.8 million and financial expenses increased by about EUR 0.5 million. The result for 2019 is negatively impacted by approx. EUR 0.2 million from IFRS 16.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

New standards, amendments and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2021, and have not been applied in preparing the consolidated financial statement.

The IASB has approved further new standards and interpretations that are not relevant to PMM Holding (Luxembourg) AG and will have no effect on the Financial Statements.

Consolidated Financial Statements

The Consolidated Financial Statements comprise the Parent Company PMM Holding (Luxembourg) AG and its subsidiaries. Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The Consolidated Financial Statements are prepared on the basis of the Financial Statements of the Parent Company and the group companies by combining items of a uniform nature, and elimination is made of intercompany income and expenses, intercompany accounts as well as profits and losses on transactions between the consolidated companies. The results of foreign group companies are translated into EUR at average exchange rates. The balance sheets are translated into EUR at the exchange rates at the balance sheet date. Exchange adjustments in this connection are made over the statement of comprehensive income.

Business combinations

On acquisition of subsidiaries including acquisition of subsidiaries under common control, the acquisition method is applied.

Purchase price of acquired assets, liabilities and contingent liabilities are initially measured at fair value at the time of acquisition. Identifiable intangible fixed assets are recognised if they can be separated and the fair value can be measured reliably. Deferred tax is recognised on re-measurements made. Any remaining positive differences between the cost and the fair value of assets, liabilities and contingent liabilities acquired are recognised in intangible fixed assets in the balance sheet as goodwill. Goodwill is not amortised, but is tested for impairment on an annual basis.

Profit or loss on the sale of subsidiaries are calculated as the difference between the selling price net of selling expenses and the carrying amount of net assets with addition of goodwill and accumulated exchange adjustments recognised in equity at the time of sale. Acquisition-related costs are charged as expenses in the consolidated income statement.

Foreign currencies

The Group operates in different countries and generates revenue in different currencies. Management has concluded that Euro (EUR) is the functional currency of the Company and has decided to present the Consolidated Financial Statements of the Group in EUR.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

Transactions in foreign currencies are initially recognised at the exchange rates at the dates of transaction. Exchange differences arising due to differences between the transaction date rates and the rates at the dates of payment are recognised in financial income and expenses in the income statement.

Receivables, payables and other monetary items in foreign currencies are translated at the exchange rates at the balance sheet date. Differences between the exchange rates at the balance sheet date and the rates at the time of the establishment of the receivable or payable or recognition in the most recent Consolidated Financial Statements are recognised in financial income and expenses in the income statement.

Balance sheet items including goodwill for consolidated companies that do not have EUR as their functional currency are translated into EUR at the exchange rates at the balance sheet date, whereas the income statements of these companies are translated at average exchange rates for the month. Exchange adjustments arising on the translation of the opening equity at year-end rates and net profit for the year at year-end rates are recognised directly in equity under a separate reserve for exchange adjustments.

Income Statement

Revenue and recognition of income

The Group manufactures nonwoven products for performance applications in hygiene, personal care, beauty care, health care and industrial end-use. As a manufacturer of nonwoven products the Group uses natural and synthetic raw materials and hydro-entangles them to a nonwoven fabric. The fabrics are sold as roll goods to converters who produce the finished product sold to end users. The Group performs selected captive finishing activities for specialty applications itself through its own converting assets at the production sites.

Revenue from the sale of goods for resale and own produced finished goods is recognised in the income statement if control has been transferred to the buyer before year-end. Finished goods is primarily made up of nonwoven roll-goods which requires converting by the customer and secondarily of completed nonwoven products which are ready for use.

Control generally passes when the customer takes possession of the goods, at which time the Group has a right to receive payment for the goods. In most cases, delivery takes place outside of the production plants or warehouses operated by the Group.

The terms of payment set out in the Group’s sales agreements with customers depend on the underlying performance obligation and on the underlying customer relationship. For the sale of goods for which control passes at a specific point in time, the terms of payment will typically be from one to three months.

Revenue is measured excluding VAT and other taxes and duties charged on behalf of third parties. All rebates and discounts granted are deducted from revenue.

Cost of goods sold

Cost of goods sold comprises costs incurred to achieve revenue for the year. Cost comprises raw materials, consumables, direct labour costs and indirect production costs such as maintenance and depreciation, etc, as well as operation, administration and management of factories and distribution expenses including salaries to distribution staff.

Cost of goods sold also includes research and development costs that do not qualify for capitalisation as well as amortisation of capitalised development costs.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

Sales and marketing expenses

Sales and marketing expenses comprise costs in the form of salaries to sales staff, advertising and marketing expenses as well as operation of motor vehicles, depreciation, etc.

Administrative expenses

Administrative expenses comprise expenses for management, administrative staff, office expenses, depreciation, etc.

Other operating income and expenses

Other operating income and other operating expenses comprise items of a secondary nature to the core activities of the companies, including gains and losses on disposals of intangible fixed assets and property, plant and equipment as well as subsidies received which do not directly relate to the purchase of non-current assets.

Special items

Special items comprise income and expenses outside normal operations which are at the same time non-recurring income and expenses. Special items comprise income and expense arising from events and transactions such as due diligence re. potential acquisitions, integration costs and larger restructuring or organisational changes.

Financial income and expenses

Financial income and expenses comprise interest income and expense including amortisation of transaction cost and premium/discounts (effective interest method), financial expenses in respect of leases, realised and unrealised exchange adjustments and fair value changes on securities.

Financial expenses directly attributable to purchases, construction or production of a qualifying asset are included as part of the expenses relating to the asset. All other financial expenses are recognised in expenses in the financial year in which they were incurred.

A qualifying asset is an asset for which considerable time is required to make it ready for its intended use or for sale.

Tax on profit for the year

Tax for the year consists of current tax for the year and deferred tax for the year. The tax attributable to the profit for the year is recognised in the income statement, whereas the tax attributable to items recognised in other comprehensive income is recognised in other comprehensive income and tax attributable to equity transactions is recognised directly in equity.

Any changes in deferred tax due to changes to tax rates are recognised in the income statement.

Balance Sheet

Intangible fixed assets

Goodwill represents the excess of the cost of an acquisition over the fair value of identifiable net assets of the acquired enterprise. Goodwill is measured at historical cost less accumulated impairment losses. Goodwill is not amortised. The carrying amount of goodwill is allocated to the Group’s operating segments. The allocation is completed no later than at the end of the reporting period following the acquisition.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

Goodwill is tested for impairment annually or on indication of impairment. In the event of impairment, the carrying amount is written down to the value in use. Impairment charges on goodwill are not reversed.

Customer lists, know-how, patents and licenses, trademarks and software are measured at cost less accumulated amortisation. Amortisation is made on a straight-line basis over the expected useful life, which are:

 

Customer lists, know-how, patents and licenses			3 – 10 years
Trademarks			20 years
Software			3 – 10 years

Property, plant and equipment

Property, plant and equipment are recognised at cost less accumulated depreciation and less any accumulated impairment losses.

Cost comprises the purchase price and costs which are directly attributable to the acquisition up until the time when the asset is ready for use. In the case of assets of own construction, cost comprises directly attributable costs for labour, materials, components and sub-suppliers. The cost price of new product lines comprise costs related to the commissioning of the production line up until the point in time where the production line is ready for commercial production. Commissioning costs comprise costs such as test runs and repair and maintenance activities. Borrowing costs directly attributable to the acquisition, construction or production of the asset are included in the cost of the asset.

The initial estimate of the costs of dismantling assets for which there is a legal obligation to dismantle at the end of the useful life of the asset is included as part of the cost price of the asset.

Government grants received are set off against the cost of assets qualifying for the subsidy.

Financial expenses directly attributable to purchases, construction or production of a qualifying asset are included as part of the cost relating to the asset. A qualifying asset is an asset for which considerable time is required to make it ready for its intended use or for sale.

Depreciation based on cost reduced by any residual value is calculated on a straight-line basis over the expected useful lives of the assets, which are:

 

Buildings			30 – 50 years
Plant and machinery			10 – 15 years
Other fixtures and fittings, tools and equipment			3 – 10 years

Spare parts included in plant and machinery are depreciated over 5 years.

Gains or losses from the sale of property, plant and equipment are calculated as the difference between the selling price net of selling expenses and the carrying amount at the time of the sale. Gains or losses from current replacement of property, plant and equipment are recognised in other operating income and expenses in the income statement.

Impairment of fixed assets

The carrying amounts of intangible assets and property, plant and equipment are reviewed on an annual basis to determine whether there is any indication of impairment other than that expressed by amortisation and depreciation. If so, an impairment test is carried out to determine whether the recoverable amount is lower than the carrying amount, and the asset is written down to its lower recoverable amount.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

The asset is written down to its recoverable amount if this is lower than the carrying amount. The recoverable amount of the asset is calculated as the higher of net selling price and value in use. Where a recoverable amount cannot be determined for the individual asset, the assets are assessed in the smallest group of assets for which a reliable recoverable amount can be determined based on a total assessment.

Impairment losses are reversed to the extent that changes have taken place in the assumptions or estimates leading to the write-down for impairment. Impairment losses are only reversed to the extent that the new carrying amount of the asset does not exceed the carrying amount which the asset would have had, had it not been written down for impairment. Impairment on goodwill is not reversed.

Financial assets

Other receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

Inventories

Inventories are measured at the lower of cost under the FIFO method and net realisable value. The net realisable value of inventories is calculated at the amount expected to be generated by sale in the process of normal operations with deduction of selling expenses and costs of completion. The net realisable value is determined allowing for marketability, obsolescence and development in expected sales.

The cost of goods for resale, raw materials and consumables equals cost including freight, duty etc.

The cost of finished goods and work in progress comprises the cost of raw materials, consumables and direct labour as well as directly attributable labour and production costs. These costs also comprise maintenance and depreciation of the machinery, factory buildings and equipment used in the manufacturing process as well as costs of production management.

Receivables

Receivables are measured at amortised cost. Provisions for bad debts are made in accordance with the simplified expected credit loss-model, under which total losses are recognised immediately in the income statement at the same time as the receivable is recognised in the balance sheet in the amount of the lifetime expected credit loss on the receivable. Impairment write-downs on receivables are recognised in the income statement under sales and marketing expenses.

Dividend

Dividend is recognised as a liability at the time of adoption at the Annual General Meeting. Dividend expected to be paid for the year is disclosed as a separate equity item.

Corporation tax and deferred tax

Current tax liabilities and receivables are recognised in the balance sheet as tax calculated on the taxable income for the year adjusted for tax on taxable income for prior years and for taxes paid on account.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

Deferred tax is measured according to the balance sheet liability method in respect of all temporary differences between the carrying amount and the tax base of assets and liabilities.

However, deferred tax is not recognised in respect of temporary differences concerning goodwill not deductible for tax purposes and other items where temporary differences—apart from business acquisitions—have arisen at the time of acquisition without affecting the profit for the year or the taxable income.

Deferred tax assets, including the tax base of tax loss carry-forwards, are recognised at the value at which they are expected to be utilised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction.

Deferred tax is measured on the basis of the tax rules and tax rates in the respective countries that will be effective under the legislation at the balance sheet date when the deferred tax is expected to crystallise as current tax. Any changes in deferred tax due to changes to tax rates are recognised in the income statement unless the deferred tax relates to equity entries.

Staff obligations

Wages and salaries, social security contributions, paid absence and sickness absence, bonuses and non-monetary contributions are recognised in the financial year in which the Group’s employees have performed the related work. Expenses relating to the Group’s long-term staff benefits are accrued so that they follow the performance of work by the employees concerned.

The Group’s pension schemes comprise defined contribution plans.

Moreover, provisions are made for seniority based bonuses earned over the employment period under the projected unit credit method. The effect of re-measuring the liability due to changes in actuarial assumptions is recognised in the income statement.

Provisions

Provisions are recognised when—as a result of an event occurred before or on the balance sheet date—the Company has a legal or constructive obligation and it is probable that economic benefits must be given up to settle the obligation. Provisions comprise mainly dismantling cost related to assets held on leased land.

Provisions are measured at Management’s best estimate of the amount at which the liability is expected to be settled. At the measurement of provisions, discounting is made of the expenses necessary to settle the liability if this has a material effect on the measurement of the liability.

Leases

If a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration, the contract is or contains a lease.

Each contract is assessed at inception whether it is or contains a lease. If the contract is a lease, the Group, as a lessee, recognizes in accordance with IFRS 16 Leases the right-of-use assets and lease liabilities for the rights and obligations created by leases.

The Group applies the recognition exemptions allowed by IFRS 16. This means that low value asset leases and short-term leases are recognized as expenses in the statement of profit or loss.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

The recognition exemptions allows that leases, where the lease term is initially 12 months or less and the leases do not contain any purchase options, are recognized as rental expenses on straight-line basis in the statement of profit or loss.

Gains arising from modifications in lease contracts are recognized as other operating income and losses as other operating expenses.

Financial liabilities

Financial liabilities are recognised at the date of borrowing at fair value less related transaction costs paid. Subsequently, financial liabilities are measured at amortised cost using the effective interest method. Any difference between the proceeds initially received and the nominal value is recognised in the income statement under Financial expenses over the term of the loan.

Cash Flow Statement

The cash flow statement shows cash flows for the year broken down by operating, investing and financing activities, changes for the year in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year.

Cash flows from operating activities

Cash flows from operating activities are calculated as the net profit for the year adjusted for non-cash operating items, changes in working capital, financial income/expenses and corporation tax paid.

Cash flows from investing activities

Cash flows from investing activities comprise cash flows from acquisitions and disposals of intangible fixed assets, property, plant and equipment as well as financial fixed asset investments.

Cash flows from financing activities

Cash flows from financing activities comprise cash flows from the raising and repayment of non-current liabilities as well as payments to and from shareholders.

Cash and cash equivalents

Cash and cash equivalents comprise the item “Cash at bank and in hand” under current assets.

The cash flow statement cannot be immediately derived from the information provided in these financial statements.

2 Consolidation method

The method applied is full consolidation and the following 100% controlled entities have been included in the consolidation:

Jacob Holm & Sons AG, Picassoplatz 8, CH-4052 Basel

Jacob Holm & Sønner Holding A/S, c/o Accura Advokatpartnerselskab, Tuborg Boulevard 1, DK-2900 Hellerup

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

Jacob Holm & Sønner A/S, c/o Accura Advokatpartnerselskab, Tuborg Boulevard 1, DK-2900 Hellerup

Jacob Holm Industries (America) Inc., 1265 Sand Hill Road, Candler, NC 28715, USA

Jacob Holm Industries (France) SAS, Rue Henri Seiller, Zone Industrielle, 68360 Soultz, France

Sontara AG, Picassoplatz 8, CH-4052 Basel

Sontara Old Hickory Inc., 850 New Burton Road, Suite 201, Dover, County of Kent, Delaware, 19904, USA

Sontara Asturias S.A.U., Polígono Industrial- DuPont - Valle de Tamon; 33469 Carreño Asturias, Spain

Sontara Japan GK, 14/F Kamiyacho MT Building, 4-3-20 Toranomon, Minato-ku, Tokyo 105-0001, Japan

Jacob Holm Mexico SA De CV, Bosque de Ciruelos No. 180, PP 101, Colonia Bosques de las Lomas, Delegación Miguel Hidalgo, México, Distrito Federal, 11700

Sontara Americas Inc., 850 New Burton Road, Suite 201, Dover, County of Kent, Delaware, 19904, USA

Sontara South Asia Sdn Bhd, 12th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Sontara Argentina S.R.L., Maipu 1210, piso 8° Ofic.850, CABA CP 1006, Buenos Aires, Argentina

Sontara Nonwovens (Shanghai) Co., Ltd., Room 503-07, Floor 5, Building 1, No. 1438, Hongqiao Road, Changning District, Shanghai, China

Sontara Korea Co., Ltd., Room #601, Hanjin building, 6, Teheran-ro 103-gil, Gangnam-gu, 06173 Seoul, Korea

TWIG America Inc., 850 New Burton Road, Suite 201, Dover, County of Kent, Delaware, 19904, USA

3 Significant accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that Management believes are reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by nature, seldom equal the actual outcome. The estimates and assumptions that have a significant risk of resulting in a material adjustment to the carrying amounts of assets within the next financial year are discussed below.

Impairment test—Property Plant and Equipment (PPE)

An impairment test has been performed on PPE related to the Jacob Holm Industries CGU’s PPE in the USA. In Management’s view, the assumptions applied reflect the market conditions existing as of 31 December 2020. The impairment test is a complex process that requires significant Management judgement in determining various assumptions, such as cash-flow projections including remaining useful life and capex needed during the remaining useful life and the applied discount rate.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

Reassessment of useful life—Property Plant and Equipment (PPE)

The Group reviewed the useful life’s of its buildings and machinery equipment early 2020 and revised these for some of the larger assets. The total impact on 2020 was an annual reduction of building depreciations of EUR 432k and a reduction of machinery equipment depreciations of EUR 5.939k.

The review was initiated due to the fact that it became obvious that some of the buildings and machinery equipment was depreciated to a point where it had a low book value although technically and economically it was assumed to continue to be competitive against newer equipment.

4 Revenue

 

		2020				2019
		EUR ’000				EUR ’000
Sale of goods			353.804				304.002
Royalties			40				49
Other			60				49
			353.904				304.100
Geographic allocation
Revenue
EU			107.371				90.572
USA/Canada			189.620				166.189
APAC			46.470				37.576
Other			10.443				9.763
Total revenue			353.904				304.100

5 Expenses classified by type

 

		2020				2019
		EUR ’000				EUR ’000
Production costs			282.202				269.267
Distribution costs			14.550				12.299
Cost of goods sold			296.752				281.566
Sales and marketing expenses			7.540				6.782
Administrative expenses			18.909				17.114
Other income and expenses			50				(127	)
Special items, net			1.694				267
			324.945				305.602
Classified by type as follows:
Expenses for raw materials and consumables			187.434				168.906
Other external expenses			70.809				66.575
Staff expenses			55.434				50.974
Depreciation and amortisation			11.268				19.147
			324.945				305.602

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

6 Special items, net

Special items, costs:

 

		2020				2019
		EUR ’000				EUR ’000
Release of dismantling accrual regarding assets held on leased land			0				(892	)
Restructuring and strategic projects			1.246				0
Organizational right-sizing costs			314				685
Due diligence			134				474
			1.694				267

Special items for 2020 are staff expenses and external third party costs respectively. The restructuring and strategic projects relates to defining the future structure and strategy of the Group.

Special items for 2019, are expenses for raw materials and consumables, staff expenses and external third party costs respectively. The dismantling accrual could be released as the company acquired the leased land during 2019.

7 Staff expenses

Staff expenses are included in the Group’s production costs, distribution costs, sales and marketing and administrative expenses as follows:

 

		2020				2019
		EUR ’000				EUR ’000
Wages and salaries			43.413				39.607
Pensions defined contribution plans			2.095				1.843
Other social security expenses			9.926				9.524
			55.434				50.974

Key management compensation

Key management consist of the executive and supervisory board as well as the executive management team.

 

		2020				2019
		EUR ’000				EUR ’000
Salaries and other short-term employee benefits			2.198				1.388
			2.198				1.388
Thereof to the executive board			500				518
Thereof to the supervisory board			10				10
Average number of full-time employees			745				692

Staff expenses are distributed on the individual cost groups as follows:

 

		2020				2019
		EUR ’000				EUR ’000
Cost of goods sold			39.923				37.482
Sales and marketing expenses			5.942				4.762
Administrative expenses			9.569				8.730
			55.434				50.974

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

8 Fee to auditors appointed at the general meeting

 

		2020				2019
		EUR ’000				EUR ’000
Audit fee			362				334
Tax consultancy			196				381
Other assurance statements			0				0
Non-audit services			10				16
Total			568				731
Fee to other audit firms
Audit fee			16				21
Tax consultancy			21				24
Non-audit services			61				58
Total			98				103

9 Depreciation and amortisation

Depreciation and amortisation for the year are specified as follows:

 

		2020				2019
		EUR ’000				EUR ’000
Customer lists, know-how, patents, licences and trademarks			414				352
Software			777				1.555
Buildings			1.396				1.977
Plant and machinery			6.279				12.650
Other fixtures and fittings, tools and equipment			593				789
Right-of-use assets			1.809				1.824
			11.268				19.147

Depreciation, amortisation and impairment losses are distributed on the individual cost groups as follows:

 

		2020				2019
		EUR ’000				EUR ’000
Cost of goods sold			9.933				16.979
Sales and marketing expenses			60				58
Administrative expenses			1.275				2.110
			11.268				19.147

10 Other operating income and expenses

 

		2020				2019
		EUR ’000				EUR ’000
Other operating income:
Subsidies			107				12
Gains on disposals of non-current assets			24				61
Management fee			87				87
			218				160

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

		2020				2019
		EUR ’000				EUR ’000
Other operating expenses:
Loss on disposals of non-current assets			(268	)			(33	)
			(268	)			(33	)
			(50	)			127

11 Financial income

 

		2020				2019
		EUR ’000				EUR ’000
Interest			12				254
Gain and value adjustments on financial assets			0				696
Exchange adjustments			169				1.230
Other			38				23
			219				2.203

Interest and exchange adjustments relate to loans granted and receivables measured at amortised cost.

12 Financial expenses

 

		2020				2019
		EUR ’000				EUR ’000
Interest			6.217				6.484
Interest regarding lease liabilities			340				515
Amortized financing costs			337				405
Interest shareholder and related party			86				73
Exchange adjustments			6.956				246
Other			72				29
			14.008				7.752

Interest and exchange adjustments relate to loans received and payables measured at amortised cost.

13 Tax on profit for the year

 

		2020				2019
		EUR ’000				EUR ’000
Current tax on profit for the year			4.719				1.031
Change in deferred tax			(6	)			249
Change in tax previous years			(87	)			(664	)
			4.626				616
Tax on profit for the year is specified as follows:
Calculated 24,94% tax on profit for the year before tax			3.783				(1.759	)

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

		2020				2019
		EUR ’000				EUR ’000
Tax effect of:
Higher/lower tax rate in foreign companies			(2.563	)			240
Tax on non-deductible expenses and non-taxable income			(63	)			38
Non-capitalized and adjustment of valuation of deferred tax asset			3.556				2.761
Adjustment of tax previous years			(87	)			(664	)
			4.626				616
Effective tax rate for the year			30.49	%			(8.74	)%

The effective tax rate for the prior year is mainly influenced by the change in taxes from prior years as well as non-capitalized tax losses of Jacob Holm Industries (America) Inc.

14 Intangible fixed assets

 

		Goodwill				Customer lists, know- how, patents, licenses and trademarks				Software				Intangible fixed assets under construction
		EUR ’000				EUR ’000				EUR ’000				EUR ’000
2020
Cost at 1 January			43				4.691				10.904				131
Exchange adjustment at year-end rate			0				(1	)			(142	)			(11	)
Additions for the year			0				155				1				868
Transfer between items			0				0				436				(436	)
Disposals for the year			0				(22	)			(320	)			0
Cost at 31 December			43				4.823				10.879				552
Accumulated amortisation at 1 January			43				2.161				8.972				0
Exchange adjustment at year-end rate			0				(9	)			(153	)			0
Amortisation for the year			0				414				777				0
Disposals for the year			0				(22	)			(320	)			0
Accumulated amortisation at 31 December			43				2.544				9.276				0
Carrying amount at 31 December			0				2.279				1.603				552
Amortised over							10 years				3-10 years

Goodwill relates to the acquisition of Sontara Argentina in May 2015 and has been fully impaired in 2018.

 

		Goodwill				Customer lists, know- how, patents, licenses and trademarks				Software				Intangible fixed assets under construction
		EUR ’000				EUR ’000				EUR ’000				EUR ’000
2019
Cost at 1 January			43				4.416				9.592				182
Exchange adjustment at year-end rate			0				145				272				6
Additions for the year			0				0				90				1.156
Transfer between items			0				130				1.083				(1.213	)
Disposals for the year			0				0				(133	)			0
Cost at 31 December			43				4.691				10.904				131

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

		Goodwill				Customer lists, know- how, patents, licenses and trademarks				Software				Intangible fixed assets under construction
		EUR ’000				EUR ’000				EUR ’000				EUR ’000
Accumulated amortisation at 1 January			43				1.744				7.318				0
Exchange adjustment at year-end rate			0				65				232				0
Amortisation for the year			0				352				1.555				0
Disposals for the year			0								(133	)			0
Accumulated amortisation at 31 December			43				2.161				8.972				0
Carrying amount at 31 December			0				2.530				1.932				131
Amortised over							10 years				3-5 years

Goodwill relates to the acquisition of Sontara Argentina in May 2015 and has been fully impaired in 2018.

15 Property, plant and equipment

 

		Land and buildings				Plant and machinery				Other fixtures and fittings, tools and equipment				Property, plant and equipment under construction
		EUR ’000				EUR ’000				EUR ’000				EUR ’000
2020
Cost at 1 January			53.287				198.903				9.542				3.576
Exchange adjustment at year-end rate			(3.153	)			(12.253	)			(371	)			(247	)
Additions for the year			0				869				51				14.461
Transfer between items			742				4.331				570				(5.643	)
Disposals for the year			(154	)			(4.791	)			(79	)			(4	)
Cost at 31 December			50.722				187.059				9.713				12.143
Accumulated depreciation at 1 January			23.110				122.618				7.866				0
Exchange adjustment at year-end rate			(1.159	)			(6.939	)			(341	)			0
Depreciation for the year			1.396				6.279				593				0
Disposals for the year			(75	)			(2.706	)			(79	)			0
Accumulated depreciation at 1 January			23.272				119.252				8.039				0
Carrying amount at 31 December			27.450				67.807				1.674				12.143
Depreciated over			30-50 years				5-20 years				3-10 years

The carrying amount of buildings at 31 December 2020 includes interest of EUR 754k. The interest capitalized relates to assets completed in 2015.

The carrying amount of plant and machinery at 31 December 2020 includes interest of EUR 1.289k. The interest capitalized relates to assets completed in 2015.

The Group reviewed the useful life’s of its buildings and machinery equipment early 2020 and revised these for some of the larger assets. The total impact on 2020 was an annual reduction of building depreciations of EUR 432k and a reduction of machinery equipment depreciations of EUR 5.939k.

PMM Holding (Luxembourg) AG

Notes to the Consolidated Financial Statements—(Continued)

 

As per 31 December 2020 the Group has performed an impairment test of property, plant and equipment in the US related to the CGU Jacob Holm Industries’ US- activities. The test was made due to past performance leading to high operating losses. The conclusion was that there was no need for impairment.

The impairment test was performed as a value in use calculation discounting the expected cash-flows for 5 years and assumes a terminal growth of 2.0%. The growth rate is based on realistic assumptions.

The cash flow projections are based on the budget for 2021 adjusted for full year effect of the expected improvements in 2021 and increasing quantities in 2022 and 2023.

The discount rate applied is based on a risk-adjusted after tax rate discount rate (weighted average cost of capital) of 7.0% (2019: 7.3%).

Cash flow projections for 2021 is negative due to expected additional CAPEX of approximately USD 21 million to get the production facilities back on historical performance and increase the production volume as estimated in the budget. In 2023 EBITDA less CAPEX is estimated at USD 8.9 million.

Based on the forecasts prepared, there is approx. 7% or USD 6 million of available headroom. The weighted average cost of capital can increase to 7.6% or EBITDA can reduce by USD 0.6 million each year without getting into impairment.

 

		Land and buildings				Plant and machinery				Other fixtures and fittings, tools and equipment				Property, plant and equipment under construction
		EUR ’000				EUR ’000				EUR ’000				EUR ’000
2019
Cost at 1 January			50.513				181.802				9.003				4.822
Exchange adjustment at year-end rate			800				3.000				129				77
Additions for the year			0				458				41				15.140
Transfer between items			1.994				14.028				441				(16.463	)
Disposals for the year			(20	)			(385	)			(72	)			0
Cost at 31 December			53.287				198.903				9.542				3.576
Accumulated depreciation at 1 January			20.877				108.725				7.033				0
Exchange adjustment at year-end rate			263				1.553				105				0
Depreciation for the year			1.977				12.650				789				0
Disposals for the year			(7	)			(310	)			(61	)			0
Accumulated depreciation at 1 January			23.110				122.618				7.866				0
Carrying amount at 31 December			30.177				76.285				1.676				3.576
Depreciated over			30-50 years				5-15 years				3-10 years

The carrying amount of buildings at 31 December 2019 includes interest of EUR 868k.

The carrying amount of plant and machinery at 31 December 2019 includes interest of EUR 1.649k.

As per 31 December 2019 the Group has performed an impairment test of property, plant and equipment in the US related to the CGU Jacob Holm Industries’ US- activities. The conclusion was that there was no need for impairment.