Financial statements

The Annual Report is available in Dutch, English and French PDF versions. The three versions are audited and official. We have used the revised timetable for the introduction of ESEF (European Single Electronic Format) reporting, but we have made unofficial XHTML versions available in Dutch, English and French. The statutory auditor has not audited these XHTML versions. We have made every reasonable effort to avoid discrepancies between the different language and format versions. However, should such discrepancies exist, the PDF versions will take precedence.

Thousands of Euros

Notes

2019

2020

Turnover

F9

17,485,080

20,710,116

Other operating income

F9

121,078

80,602

Operating income

17,606,158

20,790,718

Raw materials and consumables

F9

(15,639,139)

(18,819,323)

Payroll and related benefits

F10

(775,919)

(798,481)

Depreciation and impairments

F9

(307,567)

(362,497)

Other operating expenses

F9

(413,795)

(506,587)

Operating expenses

(17,136,420)

(20,486,887)

Income (loss) from other financial assets

F12

706

761

Result from operating activities

470,444

304,592

Financial income

F11

4,808

4,044

Financial expenses

F11

(56,427)

(77,801)

Foreign exchange gains and losses

F11

(31,618)

(30,445)

Share in result of companies accounted for using the equity method

F17

8,705

(5,332)

Profit (loss) before income tax

395,912

195,058

Income taxes

F13

(96,692)

(59,131)

Profit (loss) from continuing operations

299,220

135,927

Profit (loss) of the period

299,220

135,927

of which minority share

11,429

5,397

of which Group share

287,791

130,530

(EUR)

Basic earnings per share from continuing operations

F39

1.20

0.54

Diluted earnings per share from continuing operations

F39

1.19

0.54

Dividend pay-out per share

0.75

0.25

On 30 April 2020 the ordinary shareholders’ meeting approved to reduce the dividend for 2019 to 0.375 per share, which corresponded to the amount of the interim dividend for 2019 which had been already paid out in the second half of 2019. Therefore, there was no dividend payout in the first half of 2020. The Supervisory Board will propose a gross annual dividend for the financial year 2020 of 0.75 per share at the Annual General Meeting on 29 April 2021. This compares to a full dividend of 0.375 p.s. paid out for the financial year 2019. Taking into account the interim dividend of 0.25 per share paid out on 25 August 2020 and subject to shareholder approval, a gross amount of 0.50 per share will be paid out on 5 May 2021.

The notes F1 through Parent company separate summarized financial statements are an integral part of these consolidated financial statements

Thousands of Euros

Notes

2019

2020

Profit (loss) of the period from continuing operations

299,220

135,927

Items in other comprehensive income that will not be reclassified to P&L

Changes due to remeasurements of post employment benefit obligations

(71,921)

(25,198)

Changes in deferred taxes directly recognized in other comprehensive income

19,869

7,258

Items in other comprehensive income that may be subsequently reclassified to P&L

Changes in financial assets at FV through OCI reserves

(9)

(4,193)

Changes in cash flow hedge reserves

(27,958)

17,321

Changes in deferred taxes directly recognized in other comprehensive income

8,897

(3,456)

Changes in currency translation differences

9,444

(122,258)

Other comprehensive income from continuing operations

F23

(61,678)

(130,525)

Total comprehensive income for the period

237,541

5,402

of which Group share

225,312

2,952

of which minority share

12,230

2,450

The deferred tax impact on the consolidated statement of comprehensive income is due to the cash flow hedge reserves for -3.5 million and to employee benefit reserves for 7.3 million.

The notes F1 through Parent company separate summarized financial statements are an integral part of these consolidated financial statements

Thousands of Euros

Notes

31/12/2019

31/12/2020

Non-current assets

2,810,228

2,895,694

Intangible assets

F14, F15

370,859

346,888

Property, plant and equipment

F16

2,094,672

2,163,661

Investments accounted for using the equity method

F17

150,642

139,839

Financial assets at fair value through Other Comprehensive Income

F18

10,897

8,352

Loans granted

F18

2,192

3,252

Trade and other receivables

F20

12,038

11,765

Deferred tax assets

F21

168,927

221,938

Current assets

4,213,162

5,445,199

Loans granted

F18

2

80

Inventories

F19

2,462,330

2,718,092

Trade and other receivables

F20

1,433,659

1,677,167

Income tax receivables

F21

45,447

39,553

Cash and cash equivalents

F22

271,724

1,010,307

Total assets

7,023,390

8,340,893

Equity of the Group

2,660,464

2,621,856

Group shareholders' equity

2,593,474

2,557,189

Share capital and premiums

1,384,273

1,384,273

Retained earnings

1,678,355

1,749,662

Currency translation differences and other reserves

F23

(284,453)

(367,825)

Treasury shares

(184,701)

(208,921)

Minority interest

66,998

64,674

Non-current liabilities

1,686,801

2,359,901

Provisions for employee benefits

F27

392,651

426,356

Financial debt

F24

1,151,083

1,705,154

Trade and other payables

F25

24,120

23,505

Deferred tax liabilities

F21

11,461

22,846

Provisions

F29, F30

107,487

182,040

Current liabilities

2,676,124

3,359,136

Financial debt

F24

564,063

719,177

Trade and other payables

F25

1,916,348

2,418,929

Income tax payable

F21

131,483

160,734

Provisions

F29, F30

64,230

60,296

Total equity & liabilities

7,023,390

8,340,893

The notes F1 through Parent company separate summarized financial statements are an integral part of these consolidated financial statements

Thousands of Euros

Share capital & premiums

Reserves

Currency translation & other reserves

Treasury shares

Minority interest

Total for continuing operations

Balance at the beginning of 2019

1,384,273

1,610,882

(227,644)

(158,103)

49,927

2,659,336

Change in accounting policies

-

(34,110)

-

-

544

(33,566)

Restated balance at the beginning of 2019

1,384,273

1,576,772

(227,644)

(158,103)

50,471

2,625,770

Result of the period

-

287,791

-

-

11,428

299,220

Other comprehensive income for the period

-

-

(62,480)

-

802

(61,678)

Total comprehensive income for the period

-

287,791

(62,480)

-

12,231

237,543

Changes in share-based payment reserves

-

-

8,211

-

-

8,211

Capital increase

-

-

-

-

15,541

15,541

Dividends

-

(186,394)

-

-

(11,246)

(197,640)

Transfers

-

179

(2,540)

2,361

-

-

Changes in treasury shares

-

-

-

(28,959)

-

(28,959)

Balance at the end of 2019

1,384,273

1,678,348

(284,453)

(184,701)

66,997

2,660,464

Result of the period

-

130,530

-

-

5,397

135,927

Other comprehensive income for the period

-

-

(127,578)

-

(2,947)

(130,525)

Total comprehensive income for the period

-

130,530

(127,578)

-

2,450

5,402

Changes in share-based payment reserves

-

-

10,108

-

-

10,108

Convertible Bond - conversion rights*

-

-

37,743

-

-

37,743

Capital increase

-

-

-

-

27

27

Dividends

-

(60,141)

-

-

(4,800)

(64,941)

Transfers

-

917

(3,645)

2,727

-

-

Changes in treasury shares

-

-

-

(26,947)

-

(26,947)

Balance at the end of 2020

1,384,273

1,749,655

(367,825)

(208,921)

64,674

2,621,856

The legal reserve of 55.0 million which is included in the retained earnings is not available for distribution. The share capital of the Group as at 31 December 2020 was composed of 246,400,000 shares with no par value.

*The conversion rights embedded in the 500 million convertible bond issued on 23 June 2020 were valued at 37.7 million net of transaction costs and deferred taxes. This value according to IFRS rules will not be remeasured over time, nor at conversion nor at maturity.

The notes F1 through Parent company separate summarized financial statements are an integral part of these consolidated financial statements.

Thousands of Euros

Notes

2019

2020

Profit (loss) from continuing operations

299,220

135,927

Adjustments for profit of equity companies

(8,705)

5,332

Adjustment for non-cash transactions

F34

207,302

449,023

Adjustments for items to disclose separately or under investing and financing cashflows

F34

129,568

116,051

Change in working capital requirement

F34

(78,441)

(103,756)

Cashflow generated from operations

548,946

602,576

Dividend received

11,454

2,026

Tax paid during the period

(86,661)

(78,955)

Government grants received

5,444

2,673

Net operating cashflow

F34

479,182

528,320

Acquisition of property, plant and equipment

F16

(529,487)

(391,475)

Acquisition of intangible assets

F14

(58,362)

(44,060)

Acquisition of new subsidiaries, net of cash acquired

F8

(188,138)

(156)

Acquisition of financial assets

F18

(2,375)

(1,633)

New loans extended

F18

(126)

(752)

Sub-total acquisitions

(778,489)

(438,076)

Disposal of property, plant and equipment

11,777

1,475

Disposal of intangible assets

9,329

6,619

Disposal of subsidiaries and associates, net of cash disposed

910

518

Repayment of loans

F18

6,442

0

Sub-total disposals

28,457

8,613

Net cashflow generated by (used in) investing activities

F34

(750,032)

(429,463)

Capital increase (decrease) minority

15,541

27

Own shares

(28,959)

(26,947)

Change in lease liability

F24

(16,536)

(19,801)

Interest received

4,608

3,392

Interest paid

(44,158)

(59,689)

New loans and repayments

F24

517,106

806,036

Dividends paid to Umicore shareholders

(186,387)

(60,141)

Dividends paid to minority shareholders

(11,246)

(4,800)

Net cashflow generated by (used in) financing activities

F34

249,969

638,076

Effect of exchange rate fluctuations

2,997

25,465

Total net cashflow of the period

(17,884)

762,399

Net cash and cash equivalents at the beginning of the period for continuing operations

F22

257,114

239,230

Net cash and cash equivalents at the end of the period for continuing operations

F22

239,230

1,001,630

of which cash and cash equivalents

271,724

1,010,307

of which bank overdrafts

(32,493)

(8,678)

The notes F1 through Parent company separate summarized financial statements are an integral part of these consolidated financial statements.

The company’s consolidated financial statements and the management report prepared in accordance with article 3:33 of the Belgian Companies and Associations Code set forth in the sections labelled About us through Management Responsibility Statement for the year ended 31 December 2020 were authorized for issue by the Supervisory Board on 12 March 2021. They have been prepared in accordance with the legal and regulatory requirements applicable to the consolidated financial statements of Belgian companies. They include those of the company, its subsidiaries and its interests in companies accounted for using the equity method.

The Group presents its annual consolidated financial statements in accordance with all International Financial Reporting Standards (IFRS) adopted by the European Union (EU).

The consolidated financial statements are presented in thousands of euros, rounded to the nearest thousand, and have been prepared on a historical cost basis, except for those items that are measured at fair value.

F2.1 PRINCIPLES OF CONSOLIDATION AND SEGMENTATION
F2.1.1 SUBSIDIARIES

Subsidiaries are all entities (including structured 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 over 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.

Note F5 lists all significant subsidiaries of the company at the closing date.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognizes any minority interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the minority interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.

Any contingent consideration to be transferred by the group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in profit or loss. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies. The line “other operating income” and “other financial income” of the income statements include, depending on the nature of the underlying transactions, the currency translation differences due to intercompany transactions to be translated from the transaction currency into functional currency which may differ from euro for some entities and regions.

IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations) does not specify the treatment for the elimination of inter-company transactions between discontinued and continued operations. As an accounting policy Umicore opts not to eliminate the intercompany transactions within the income statement between the discontinued and continued operations. For the balance sheet presentation however, IFRS 10 (Consolidated Financial Statements) overrides IFRS 5 and requires all intercompany balances to be eliminated including between the discontinued and continued operations.

F2.1.2 CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES WITHOUT CHANGE OF CONTROL

Transactions with minority interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners.

The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to minority interests are also recorded in equity.

F2.1.3 DISPOSAL OF SUBSIDIARIES

When the group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

F2.1.4 ASSOCIATES

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition.

The group’s investment in associates includes goodwill identified on acquisition. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate. The group’s share of post-acquisition profit or loss is recognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to “share of profit/(loss) of associates” in the income statement.

Profits and losses resulting from upstream and downstream transactions between the group and its associate are recognized in the group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognized in the income statement.

F2.1.5 JOINT ARRANGEMENTS

The group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. The group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the group’s share of the postacquisition profits or losses and movements in other comprehensive income.

When the group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealized gains on transactions between the group and its joint ventures are eliminated to the extent of the group’s interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the group.

F2.1.6 SEGMENT REPORTING

Note F7 provides the Company’s segment information, in line with IFRS 8. Umicore is organized in business units. Operating segments under IFRS 8 at Umicore are differentiated by their growth drivers in the areas of Catalysis, Energy & Surface Technologies, and Recycling.

The Catalysis segment provides automotive catalysts for gasoline and diesel light and heavyduty diesel applications, including on-road and non-road vehicles. The business group also offers stationary catalysis for industrial emissions control and produces precious metalsbased compounds and catalysts for use in the pharmaceutical and fine chemicals industries.

The Energy & Surface Technologies segment is focused on products that are found in applications used in the production and storage of clean energy and in a range of applications for surface technologies that bring specific properties and functionalities to end products. All the activities offer a closed loop service for the customers. The Recycling segment treats complex waste streams containing precious and other specialty metals. The operations can recover 20 of these metals from a wide range of input materials ranging from industrial residues to end-oflife materials. Other activities include production of precious metals-based materials that are essential for applications as diverse as high-tech glass production, electrics and electronics.

Corporate covers corporate activities, shared operational functions and the Group’s Research, Development & Innovation unit. Umicore’s minority share in Element Six Abrasives and Ieqsa is also included in Corporate.

Operating segments are reported in a manner consistent with the internal reporting provided to the supervisory board and the management board.

The segment results, assets and liabilities include items directly attributable to the segment as well as those elements that can reasonably be allocated to a segment.

The pricing of inter-segment sales is based on an arm’s length transfer pricing system. In the absence of relevant market price references, ‘cost plus’ mechanisms are used.

Associate companies are allocated to the business group with the closest fit from a market segment perspective.

F2.2 INFLATION ACCOUNTING

For the reported period, there is one subsidiary in the Umicore Group having a functional currency belonging to a hyperinflationary economy in Argentina. However, in view of significance to the Group, this is not material for IAS 29 to be applied.

F2.3 FOREIGN CURRENCY TRANSLATION

Functional currency: items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity. The consolidated financial statements are presented in euros which is the functional currency of the parent. To consolidate the Group and each of its subsidiaries, the financial statements are translated as follows:

  • Assets and liabilities at the year-end rate as published by the European Central Bank.

  • Income statements at the average exchange rate for the year.

  • The components of shareholders’ equity at the historical exchange rate.

Exchange differences arising from the translation of the net investment in foreign subsidiaries, joint ventures and associated entities at the period-end exchange rate are recorded as part of the shareholders’ equity under “currency translation differences”.

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as local currency assets and liabilities of the foreign entity and are translated at the closing rate.

F2.4 FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are recognized during the period in the functional currency of each entity at exchange rates prevailing at the date of transaction. The date of a transaction is the date at which the transaction first qualifies for recognition. For practical reasons a rate that approximates the actual rate at the date of the transaction is used at some operations, for example, an average rate for the week or the month in which the transactions occur.

Subsequently, monetary assets and liabilities denominated in foreign currencies are translated at the closing rate at the end of the reporting period.

Gains and losses resulting from the settlement of foreign currency transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognized in the income statement as a financial result.

In order to hedge its exposure to certain foreign exchange risks, the Company has entered into certain forward contracts (see Note F2.21, Financial instruments).

F2.5 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at historical cost, less accumulated depreciation and impairment losses. Cost includes all direct costs and appropriate allocation of indirect costs incurred to bring the asset to working condition for its intended use.

Borrowing costs that are directly attributable to investments are capitalized together with the costs of the assets in accordance with IAS 23. All borrowing costs that cannot be linked directly to an investment are recognized as expenses in the period when incurred.

The straight-line depreciation method is applied through the estimated useful life of the assets.

Useful life is the period of time over which an asset is expected to be used by the company.

Repair and maintenance costs are expensed in the period in which they are incurred, if they do not increase the future economic benefits of the asset. Otherwise they are classified as separate components of items of property, plant and equipment. Those major components of items of property, plant and equipment that are replaced at regular intervals are accounted for as separate assets as they have useful lives different from those items of property, plant and equipment to which they relate. Umicore’s PPE, being complex and highly customized industrial assets, typically do not have an individual resale value if put outside the overall context of the operations. Therefore, no residual value is taken into account when determining the depreciable value.

The typical useful life per main type of property, plant and equipment are as per table below. For material newly acquired or constructed assets, the useful life is separately assessed at the moment of the investment request and can deviate from the above standards.

Management determines the estimated useful lives and related depreciation charges for property, plant and equipment. Management uses standard estimates based on a combination of physical durability and projected product life or industry life cycles. These useful lives could change significantly as a result of technical innovations, market developments or competitor actions. Management will increase the depreciation charge where useful lives are shorter than previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

Land use rights are part of the Property, Plant and Equipment and are typically amortized over the contractual period.

years

Land

Non-depreciable

Buildings

- Industrial buildings

20

- Improvements to buildings

10

- Other buildings such as offices and laboratories

40

- Investment properties

40

Plant, machinery and equipment

10

- Furnaces

7

- Small equipment

5

Furniture and vehicles

- Vehicles

5

- Mobile handling equipment

7

- Computer equipment

3 - 5

- Furniture and office equipment

5 - 10

F2.6 INTANGIBLE ASSETS & EQUITY TRANSACTION EXPENSES
F2.6.1 EQUITY TRANSACTION EXPENSES

Expenses for formation and capital increase are deducted from the share capital.

F2.6.2 GOODWILL

Goodwill represents the excess of the cost of an acquisition of a subsidiary, associate or jointly controlled entity over the Group’s share in the fair value of the identifiable assets and liabilities of the acquired entity at the date of acquisition. Goodwill is recognized at cost less any accumulated impairment losses.

Goodwill from associates and joint ventures is presented in the balance sheet on the line “Investments accounted for under the equity method”, together with the investment itself.

To assess impairment, goodwill is allocated to a cash generating unit (CGU). At each balance sheet date, these CGUs are tested for impairment, meaning an analysis is performed to determine whether the carrying amount of goodwill allocated to the CGU is fully recoverable.

If the carrying amount is not fully recoverable, an appropriate impairment loss is recognized in the income statement. These impairment losses are never reversed.

The excess of the Group’s interest in the fair value of the net identifiable assets acquired over the cost of acquisition is recognized in the income statement immediately.

F2.6.3 RESEARCH AND DEVELOPMENT

Research costs related to the prospect of gaining new scientific or technological knowledge and understanding are recognized in the income statement as an incurred expense.

Development costs are defined as costs incurred for the design of new or substantially improved products and for the processes prior to commercial production or use. They are capitalized if, among others, the following conditions are met:

  • the intangible asset will give rise to future economic benefits, or in other words, the market potential has been clearly demonstrated.

  • the expenditures related to the process or product can be clearly identified and reliably measured.

In case it is difficult to clearly distinguish between research or development costs, the costs are considered as being research. If development costs are capitalized they are amortized using a straight-line method over the period of their expected benefit, in general five years.

F2.6.4 CO2 EMISSION RIGHTS

Within the framework of the Kyoto protocol, a third emission trading period started, covering 2013-2020. Therefore, the Flemish Government granted emission rights to the Flemish sites of certain companies, including Umicore. Each year, at the end of February, one fifth of these emission rights is put on an official registry account. The release of emission rights to this registry account entails the capitalization in the intangible assets, which is in line with the guidance of the Belgian Accounting Standards Commission. Gains on the recognition of emission rights at fair value are deferred until the certificates are used. Emission rights owned are subject to impairment testing but are not depreciated. If, at a certain closing date, it appears that the closing market price is below the carrying value, a write-down is booked. At each closing date, the group estimates the actual use of rights for the period and recognizes a provision for the rights that will have to be restituted to the Government. The charge related to the impairment loss or the recognition of provisions are fully compensated in the income statement by the release of deferred revenue. Historically, Umicore owns the required rights to ensure its normal operating activities.

F2.6.5 OTHER INTANGIBLE ASSETS

All the following types are recorded at historical cost, less accumulated amortization and impairment losses:

  • Concessions, patents, licenses: are amortized over the period of their legal protection with a minimum of 5% (in general over 5 years).

  • Customer portfolios: are typically amortized over a period of five years.

  • ERP software is typically amortized over a period of ten years.

  • Smaller software is typically amortized over a period of five years.

In case of an earn-out component, a remeasurement is foreseen, adapting the carrying amount of the asset and the amortization accordingly.

Umicore has currently no intangible asset with an indefinite useful live.

F2.7 LEASE

IFRS 16 sets out the principles for the recognition, measurement, presentation, and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model, similar to the accounting for finance leases under IAS 17. At the commencement date of a lease, lessees recognize a lease liability (i.e. a liability to make lease payments), and a right-of-use asset (i.e. an asset representing the right to use the underlying asset over the lease term).

The lease liabilities are recognized at the present value of the remaining lease payments (see note F24).

The right-of-use asset is depreciated over the term of the lease (see note F16). Interest expense is recognized on the lease liability (see note F11). The lease liability is remeasured upon the occurrence of certain events (e.g. a change in the lease term or a change in future lease payments resulting from a change in index). Such remeasurements of the lease liability will generally be recognized as an adjustment to the right-of-use asset.

The Group applies the lease recognition exemptions for short-term leases and leases for which the underlying asset is of low value. The Group elects, by class of underlying asset, not to separate non-lease components from lease components and instead accounts for each lease component and any associated non-lease component as one single lease component.

The group leases metals to and from third parties for specified periods for which the group receives or pays fees. Metal lease contracts are typically concluded for less than one year.

The metal leases from and to third parties are still reported as off-balance sheet commitments, as not in the scope of IFRS 16.

F2.8 FINANCIAL ASSETS AT FAIR VALUE THROUGH OCI, LOANS AND NON-CURRENT RECEIVABLES

All movements in financial assets at fair value through OCI, loans and receivables are accounted for at trade date.

Financial assets at fair value through OCI are carried at fair value. Unrealized gains and losses from changes in the fair value of such assets are recognized in equity as financial assets at fair value through OCI reserves (Other Comprehensive Income). When the assets are sold or impaired, the accumulated fair value adjustments are also included in the OCI. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

Loans and receivables are carried at amortized cost less any impairment.

All write-downs are recorded on a separate account and are netted with the carrying amounts when all chances of recovery are depleted. Own shares are deducted from equity.

F2.9 INVENTORY

Inventories are classified as:

  1. Base products (gross values)

    1. Permanently tied up metal inventories (not hedged)

    2. Commercially available metal inventories (hedged)

    3. OTher base products inventories (not hedged)

  2. Consumables (gross values)

  3. Write down and impairments

  4. Advances paid

  5. Contracts in progress

Inventories are carried at cost. Cost comprises direct purchase or manufacturing costs and an appropriate allocation of overheads.

Base products (gross values) are mostly metal-containing products on which Umicore is exposed to price fluctuation risks. Most of these inventories follow Umicore’s metal accounting rules and are classified in two inventory categories that reflect their specific nature and business use: the permanently tied up metal inventories and the commercially available metal inventories. The latter inventories are subject to an active and systematic hedging process to minimize the effects of market price fluctuations on the financial performance of the Group. Conversely, the permanently tied up metal inventories are typically not hedged. Next to these categories, the other base product inventories consist of materials used in the manufacturing processes to obtain the marketable basis products. These inventories are also typically not hedged. More details on the hedging mechanisms can be found in note F3.

Individualized or weighted average valuation is applied on the initial at cost valuation per category of inventory complemented with the following fair value principles:

  • On the permanently tied up metal inventories : In view of their permanent nature, Umicore opted to apply the measurement and recognition rules of Property, Plant and Equipment (IAS 16) and Impairment of Assets (IAS 36). The valuation is based on the “historical cost less any accumulated depreciation and accumulated impairment” principle. As the inventories are considered to have an unlimited useful life, no depreciations are applied. Instead they are subject to Umicore’s annual impairment testing of the CGUs carrying these inventories. Any impairments booked are classified under the caption Write downs & Impairments.

  • On the commercially available metal inventories : as they are hedged, see note F3, Umicore applies the mark-to-market valuation principles. The classification of these mark-to-markets depends if Umicore obtained IFRS 9 Fair Value hedge accounting, see note F2.21.1 transactional risks – fair value hedging.

  • On the other Base products, LOCOM (lower of cost or net realizable value, meaning the estimated selling price less the estimated costs of completion and the estimated cost necessary to make the sale) and slow moving principles are applied. Any write-downs booked are classified under the caption Write downs & Impairments.

Consumables (gross values) are products that are not used in a direct way in the manufacturing processes (for example: packaging material). They are valued using the weighted-average cost method and are submitting to LOCOM. Any write-downs booked are classified under the caption Write downs & Impairments

Write-downs & Impairments are any impairments or write downs booked on the Base products and Consumables are captured under this line item.

Advances paid are down-payments on transactions with suppliers for which the physical delivery has not yet taken place and are booked at nominal value.

Contracts in progress are valued using the percentage-of-completion method.

F2.10 TRADE AND OTHER RECEIVABLES

Trade and other receivables are measured at amortized cost, i.e. at the net present value of the receivable amount. Unless the impact of discounting is material, the nominal value is taken. Receivables are written down for irrecoverable amounts. All write-downs are recorded on a separate account and are netted with the carrying amounts when all chances of recovery are depleted.

Trade receivables of which substantially all the risks and rewards have been transferred are derecognized from the balance sheet. The positive fair value of derivative financial instruments is included under this heading.

Trade and other receivables are subject to a new impairment methodology, referred to as the Expected Credit Loss (ECL) model, measuring the expected credit losses based on shared credit risk characteristics. Umicore has established an allowance matrix based on different customer and sector ratings, ageing balances, macro-economic and regional factors and historical loss patterns.

The Group may undertake certain linked contracts to sell or buy metal and commit to repurchase or sell the metal in the future. An asset representing the metal which the Groups has committed to sell or a liability representing the obligation to repurchase the metal are recognized in trade and other receivables or trade and other payables, respectively. Accordingly, principal cash flows in respect of sale and repurchase agreements are shown as cash flows from operating activities in the cash flow statement rather than cash flows from financing activities as long the financing is short term in time and the underlying transactions are not rolled over. Consistently interest paid and received are shown as cash flows from operating activities and presented as other income in the income statement in line with lease and factoring fees. No revenues are recognized in respect of the sale leg or costs are recognized in respect of the purchase leg if it regards the same metals and quantities engaged with the same party.

F2.11 CASH AND CASH EQUIVALENTS

Cash includes cash-in-hand and cash with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash, have maturity dates of three months or less and are subject to an insignificant risk of change in value.

These items are carried in the balance sheet at nominal value or amortized cost. Bank overdrafts are included in the current liabilities on the balance sheet.

F2.12 IMPAIRMENT OF NON-FINANCIAL ASSETS

Property, plant and equipment and other non-current assets, including intangible assets and financial assets not held for trading, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated.

The recoverable amount is the higher of an asset’s net selling price and value in use. To estimate the recoverable amount of individual assets the company often determines the recoverable amount of the cash-generating unit (CGU) to which the asset belongs.

Whenever the carrying amount of an asset exceeds its recoverable value, an impairment loss is recognized as an expense immediately.

A reversal of impairment losses is recognized when there is an indication that the impairment losses recognized for the asset or for the CGU no longer exist or have decreased. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

F2.13 SHARE CAPITAL AND RETAINED EARNINGS

A. Repurchase of share capital: When the company purchases some of its own shares, the consideration paid, including any attributable transaction costs net of income taxes, is deducted from the total shareholders’ equity as treasury shares. No gain or loss shall be recognized in profit or loss on the purchase, sale, issue or cancellation of own shares. When such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.

B. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds of the issue, net of tax.

C. Dividends of the parent company payable on ordinary shares are only recognized as a liability following approval by the shareholders.

F2.14 MINORITY INTERESTS

Minority interests include a proportion of the fair value of identifiable assets and liabilities recognized upon acquisition of a subsidiary that is attributable to third parties, together with the appropriate proportion of subsequent profits and losses.

In the income statement, the minority share in the Group’s profit or loss is presented separately from the Group’s consolidated result.

F2.15 PROVISIONS

Provisions are recognized in the balance sheet when:

  • There is a present obligation (legal or constructive) as a result of a past event.

  • It is probable that an outflow of resources will be required to settle the obligation.

  • A reliable estimate can be made on the amount of the obligation.

A constructive obligation is an obligation that derives from company actions where, by an established pattern of past practice or published policies, the company has indicated that it will accept certain responsibilities and, as a result, the company has created a valid expectation that it will discharge those responsibilities.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period and taking into account the probability of the possible outcome of the event. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. The result of the yearly discounting of the provision, if any, is accounted for as a financial result.

The main types of provision are the following:

1. PROVISIONS FOR EMPLOYEE BENEFITS (SEE NOTE F2.16, EMPLOYEE BENEFITS)

2. ENVIRONMENTAL OBLIGATIONS

Environmental provisions are based on legal and constructive obligations from past events, in accordance with the company’s environmental approach and applicable legal requirements.

The full amount of the estimated obligation is recognized at the moment the event occurs.

When the obligation is production/activity related, the provision is recognized gradually depending on normal usage/production level.

3. OTHER PROVISIONS

These include provisions for litigation, onerous contracts, warranties, exposure to equity investments and restructuring. A provision for restructuring is recognized when the company has approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced publicly before the end of the reporting period. Any restructuring provision only includes the direct expenditure arising from the restructuring which is necessarily entailed and is not associated with the ongoing activities of the Company.

F2.16 EMPLOYEE BENEFITS
F2.16.1 SHORT-TERM EMPLOYEE BENEFITS

These include wages, salaries and social security contributions, paid annual leave and sick leave, bonuses and non-monetary benefits, and are taken as an expense in the relevant period.

All company managers are eligible for bonuses that are based on indicators including personal performance and key financial targets. The amount of the bonus is recognized as an expense, based on an estimation made at the end of the reporting period.

F2.16.2 POST-EMPLOYMENT BENEFITS (PENSIONS, MEDICAL CARE)

The company has various pension and medical care schemes in accordance with the conditions and practices of the countries it operates in. The schemes are generally funded through payments to insurance companies or trustee-administered funds.

2.16.2.1 DEFINED BENEFIT PLANS

The company has accounted for all legal and constructive obligations both under the formal terms of defined benefit plans and under the company’s informal practices.

The amount presented in the balance sheet is based on actuarial calculations (using the projected unit credit method) and represents the present value of the defined benefit obligations netted with the fair value of the plan assets.

The past service costs are immediately recognized in the income statement since IAS 19 revised.

All remeasurements as a result of changes in the actuarial assumptions of post-employment defined benefit plans are recognized through other comprehensive income (OCI) in the period in which they occur and are disclosed in the statement of comprehensive income as post-employment benefit reserves.

In Belgium, in line with the Belgian legislation applicable to 2nd pillar pension plans (so-called “Law Vandenbroucke”), all Belgian Defined Contribution plans, for which the legal minimum guaranteed return is applicable have to be considered under IFRS as Defined Benefit plans. Liabilities and costs of these plans are therefore calculated following the Projected Unit Credit Method.

In Germany two defined contribution pension plans exist which are externally financed via the “Pensionskasse Degussa” (PKD) or the support fund “Unterstützungskasse Degussa” (RUK).The PKD and RUK plans secures the inflation and guaranteed interest rate adjustments of the benefits. In recent years, due to the low interest rate environment, there is a risk of shortfalls in the self-funding at the DKP and RUK to honor these adjustments. In case of such shortfalls the PKD and RUK would call upon Umicore to contribute the extra funding required. For this reason, the PKD and RUK plans are recognized as defined benefit obligation plans under IFRS. Management applied a best estimate simplified method to calculate the shortfall risk and recognized this as an additional obligation.

2.16.2.2 DEFINED CONTRIBUTION PLANS

The company pays contributions to publicly or privately administered insurance plans.

The payments are recognized as expenses as they fall due and as such are included in personnel costs.

F2.16.3 OTHER LONG-TERM EMPLOYEE BENEFITS (JUBILEE PREMIUMS)

These benefits are accrued for their expected costs over the period of employment using an accounting methodology similar to that for defined benefit pension plans. These obligations are in general valued annually by independent qualified actuaries. All remeasurements as a result of changes in the actuarial assumptions are immediately recognized in the income statement.

F2.16.4 TERMINATION BENEFITS (PRE-RETIREMENT PLANS, OTHER TERMINATION OBLIGATIONS)

These benefits arise as a result of the company’s decision to terminate an employee’s employment before the normal retirement date or of an employee’s decision to accept voluntary redundancy in exchange for those benefits. When they are reasonably predictable in accordance with the conditions and practices of the countries the company operates in, future obligations are also recognized.

These benefits are accrued for their expected costs over the period of employment, using an accounting methodology similar to that for defined benefit pension plans. In general, these obligations are valued annually by independent qualified actuaries. All remeasurements as a result of changes in the actuarial assumptions are immediately recognized in the income statement.

Different stock option and share programs allow company employees and company senior management to acquire or obtain shares of the company.

The option or share exercise price equals the market price of the (underlying) shares at the date of the grant. When the options are exercised, shares are delivered to the beneficiaries from existing own shares. For the share programs, shares are delivered to the beneficiaries from existing own shares. In both cases, the equity is increased by the amount of the proceeds received corresponding to the exercise price.

The options and shares are typically vested at the moment of the grant and their fair value is recognized as an employee benefit expense with a corresponding increase in equity as share based payment reserves. For the options, the expense to be recognized is calculated by an actuary, using a valuation model which takes into account all features of the stock options, the volatility of the underlying stock and an assumed exercise pattern.

As long as the options granted have not been exercised, their value is reported in the Statement of Changes in Equity as ‘share based payments reserve’. The value of the options exercised during the period is transferred to ‘retained earnings’.

F2.16.6 PRESENTATION

The impact of employee benefits on results is booked under operating results in the income statement, except for the interest and discount rate impacts which are classified under financial results.

F2.17 FINANCIAL LIABILITIES

All movements in financial liabilities are accounted for at trade date.

Borrowings are initially recognized as proceeds received, net of transaction costs.

Subsequently they are carried at amortized cost using the effective interest rate method.

Amortized cost is calculated by taking into account any issue costs, and any discount or premium on issue. Any differences between cost and redemption value are recognized in the income statement upon redemption.

As from 2019, the financial debt also contains the lease liability as per IFRS 16 (see note F2.23.1).

The convertible bond is considered as a compound instrument. It contains a liability and a equity component. This instrument is convertible into shares at the option of the holder. Each component is, therefore, accounted for separately. The liability element is determined by fair valuing the cash flows excluding any equity component. The residual is assigned to equity. The equity component is not remeasured, nor at conversion nor at maturity. Note, finally, that the convertible bond is a zero coupon instrument.

F2.18 TRADE AND OTHER PAYABLES

Trade payables are measured at amortized cost, i.e. at the net present value of the payable amount. Unless the impact of discounting is material, the nominal value is taken.

The Group may undertake certain linked contracts to sell or buy metal and commit to repurchase or sell the metal in the future. An asset representing the metal which the Groups has committed to sell or a liability representing the obligation to repurchase the metal are recognized in trade and other receivables or trade and other payables, respectively. Accordingly, principal cash flows in respect of sale and repurchase agreements are shown as cash flows from operating activities in the cash flow statement rather than cash flows from financing activities as long the financing is short term in time and the underlying transactions are not rolled over. Consistently interest paid and received are shown as cash flows from operating activities and presented as other income in the income statement in line with lease and factoring fees. No revenues are recognized in respect of the sale leg or costs are recognized in respect of the purchase leg if it regards the same metals and quantities engaged with the same party.

The negative fair value of derivative financial instruments is included under this heading.

F2.19 INCOME TAXES

Taxes on profit or loss of the year include current and deferred tax. Such taxes are calculated in accordance with the tax regulations in effect in each country the company operates in.

Current tax is the expected tax payable on the taxable income of the year, using tax rates enacted at the end of the reporting period, and any adjustment to tax payable (or receivable) in respect of previous years.

The tax payable is determined based on tax laws and regulations that apply in each of the numerous jurisdictions in which the Group operates. The income tax positions taken are considered by the Group to be supportable and are intended to withstand challenge from tax authorities. However, it is accepted that some of the position can be uncertain and include interpretation of complex tax laws.

Tax provisions are recognized where the precise impact of the tax law and regulations on taxes payable with respect to profit arising in those jurisdiction is unclear and could trigger a tax adjustment represented by a future flow of funds to a tax authority or a consequent adjustment to a deferred tax asset. Uncertain tax positions are assessed periodically, implying a detail assessment following the interpretation of IFRIC 23, considering uncertainties individually or collectively, based on which approach provided the best predictions of the resolution of the uncertainties with the tax authorities; assuming that the tax authority will examine the position (if entitled to do so) and will have full knowledge of all the relevant information; and recognizing an Uncertain Tax Position or UTP (or group of UTPs) using either the most likely amount or the expected value, depending on which is thought to give a better prediction of the resolution of each (group of) UTP(s), to reflect the likelihood of an adjustment being realised on examination. The estimation and judgements in relation to uncertain tax positions are reassessed if the facts and circumstances on which those estimates and judgements were based have changed or as a result of new information that affects the initial assessments. In the measurement of the Uncertain tax positions, the Group considers the statute of limitation applicable in each jurisdiction, addionally interest and penalties are included in the assessment.

Deferred taxes are calculated using the liability method on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. These taxes are measured using the rate prevailing at the end of the reporting period or future applicable tax rates formally announced by the government in the country the Company operates in.

Deferred tax assets are only recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are offset and presented net only if they relate to income taxes levied by the same taxation authority on the same taxable entity.

F2.20 REVENUE RECOGNITION
F2.20.1 REVENUE RECOGNITION FROM CONTRACTS WITH CUSTOMERS

Despite the complexity of several processes within each business unit, the performance obligations are rather straightforward, those being:

  • Catalysis: the delivery of the goods in accordance with contract specifications. These specifications have been predefined and validated through samples. This latter is not considered as a significant stream for further analysis under IFRS 15.

  • Recycling: the return of the refined metals back to the client in accordance with the contract either in their pure metal content or as part of a (semi)finished product and the sale of metal (including boni) towards the customers.

  • Energy and Surface Technologies: the delivery of the products according to specification agreed in the sales order received.

Umicore has carefully considered the satisfaction of the performance obligation and concludes that for sales within Catalysis the revenue is recognized at a point of time when the control transfers to the customer. Despite the products being customized, the considerations for over time have not been met given that the customer does not control the production process nor has the Group the entitlement to be paid prior to delivery of the goods. The control is therefore transferred based upon the usual delivery terms (incoterms) and the customer accepting the goods upon delivery.

For sales within Recycling, the revenue is recognized at a point in time when the control of the refined products or metal is back in the hands of the customers (refinery) or in the hands of the customers (sale of metal, including boni), embarked by the delivery.

For sales within Energy and Surface Technologies the revenue is recognized at a point in time when the control is transferred to the customer, this moment being driven by the delivery of the products according to the incoterms.

Some of the contracts do contain commercial discounts and rebates, however frequency is relatively low, and magnitude is not significant. If applicable, these are recognized in the same period the sale is established.

There are no additional warranty agreements sold to clients on top of legal requirements, therefore these are not considered as a separate performance obligation.

Consequently, the transaction price identified within the agreement is allocated in full to the performance obligation.

There are no significant contract balances where either the Group has performed the performance obligation for which no billing occurred yet, or alternatively has received advance payments for which the performance obligation has not been satisfied.

The revenue from contracts with customers is further detailed in note F7 and F9.

The assessment in view of impairment losses is captured under the expected credit loss model as detailed in note F20.

F2.20.2 GOVERNMENT GRANTS

A government grant is accounted for in the balance sheet initially as deferred income when there is reasonable assurance that it will be received and that the company will comply with the conditions attached to it. Grants are recognized in the income statement over the period necessary to match them with the costs they are intended to compensate.

F2.21 FINANCIAL INSTRUMENTS

The company uses derivative financial and commodity instruments primarily to reduce the exposure to adverse fluctuations in foreign exchange rates, commodity prices, interest rates and other market risks. The company uses mainly spot and forward contracts to cover the metal and currency risk, and swaps to hedge the interest rate risk. The operations carried out on the futures markets are not of a speculative nature.

F2.21.1 TRANSACTIONAL RISKS – FAIR VALUE HEDGING

Derivative financial and commodity instruments are used for the protection of the fair value of underlying hedged items (assets, liabilities and firm commitments) and are recognized initially at fair value at trade date. The hedged items (physical commitments and commercially available inventory, primarily) are, under Umicore’s economical hedging policies, initially valued at fair value by applying mark-to-market.

Where possible Umicore documents hedge accounting according to the criteria set out in IFRS 9. The bottom layer or the net position approach for the fair value hedge on groups of closed portfolios of foreign exchange risk and commodity risk exposures are applied. Under the bottom layer approach, a layer representing the nominal amount of an exposure that has historically been present on a constant and continuous basis is defined. This layer is further split into smaller unit of accounts, sublayers, which are designated as hedged items. The sublayers are then hedged by hedging instruments that are designated as hedging multiples of such sublayers

Under the net position approach, hedging is applied based on a group of items with offsetting risk positions, the net position being the hedged item hedged by a hedging instrument.

In both approaches, it regards closed hedged portfolios in which items cannot be added, removed or replaced without treating each change as the transition to a new portfolio. In both approaches, the exposures cover a group of both on balance and off balance foreign exchange and commodity positions, that is, either trade payables, inventories and purchase commitments or trade receivables and sales commitments exposed to the variability of foreign currencies or commodity prices.

In the absence of reaching the IFRS 9 bottom layer criteria or the net position criteria for closed portfolios or in the absence of market-based derivatives and so obtaining fair value hedge accounting at inception as defined under IFRS 9, the hedged items are kept at cost and are subject to IAS 37 principles. In practice this means that Umicore offsets any initially booked material positive mark-to-markets with provisions for onerous contracts and reclassifies the negative mark-to-markets under the provisions for onerous contracts.

When there is a consistent practice of trading of commodities through the use of commodity contracts by a dedicated subsidiary or a cash generating unit (CGU) of the Group and by which the entity takes delivery of the underlying commodity to sell it within a short period after delivery for the purpose of generating a profit from short-term fluctuations in price or trading margins, the inventory is valued at fair value through the income statement and the related physical and / or commodity commitments are classified as derivatives and measured at fair value through the income statement.

F2.21.2 STRUCTURAL RISKS – CASH FLOW HEDGING

Derivative financial and commodity instruments used for the protection of future cash flows are designated as hedges under cash-flow hedge accounting. The effective portion of changes in the fair value of hedging instruments which qualify as cash flow hedges are recognized in the shareholders equity as hedging reserves until the underlying forecasted or committed transactions occur (i.e. affect the income statement). At that time the recognized gains and losses on the hedging instruments are transferred from equity to the income statement.

When the underlying hedged transactions are no longer probable or the hedges become ineffective, the corresponding hedging instrument will immediately be terminated and all profits or losses including those which were deferred in equity, are immediately recognized in the income statement.

In the absence of obtaining cash-flow hedge accounting at inception as defined under IFRS 9, then the fair value of the related hedging instruments is recognized in the income statement instead of the equity and this prior to the occurrence of the underlying forecasted or committed transactions.

F2.21.3 EMBEDDED DERIVATIVES

Executory contracts (the “host contract”) may sometimes contain embedded derivatives.

Embedded derivatives cause some or all of the cash flows that would otherwise be expected from the host contract, to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, or another variable. If it is concluded that such a derivative is not closely related to the host contract, it is separated from the host contract and accounted for under the rules of IFRS 9 (fair value through profit or loss). The host contract is accounted for using the rules applicable to executory contracts, which effectively means that such a contract is not recognized in the balance sheet or profit and loss before delivery on the contract takes place.

F2.22 ADJUSTMENTS

The adjustments to the result relate to restructuring measures, impairment of assets linked to restructuring measures and other income or expenses arising from events or transactions that are clearly distinct from the ordinary activities of the company such as discontinuation of activities and environmental provisions that relate to historical pollution or linked to non-active sites.

Each of the Group’s activities is exposed to a variety of risks that are financial or non-financial in nature but have the potential to impact the financial performance of the Group. Financial risks include changes in metal prices, in foreign currency exchange rates, in certain market-defined commercial conditions, and in interest rates as well as credit and liquidity risks. The Group’s overall risk management program seeks to mitigate risks and potential adverse effects on the financial performance of the Group, including through the use of hedging and insurance instruments.

F3.1 CURRENCY RISK

Umicore’s currency risk can be split into three distinct categories: structural, transactional and translational risks.

F3.1.1 STRUCTURAL RISK

A portion of Umicore’s revenues are structurally denominated in US dollar (USD), while many of the related operations are located outside the USD zone (particularly in Europe and Asia).

Any change in the USD exchange rate against the EUR or other currencies which are not pegged to the USD will have an impact on the results.

A large portion of such structural currency exposure derives from US dollar denominated metal prices linked to the recycling and refining operations.

An increasing portion of the structural risk exposure stems from non-metal related revenues denominated in USD such as product premiums and refining charges. This increase is particularly related to the accelerating growth in battery materials activities in Asia.

Next to the sensitivity USD vs EUR, there is also a structural and increasing sensitivity to certain other currency pairs such as the USD and EUR vs the Korean won (KRW), the Chinese yuan (CNY), the Canadian dollar (CAD), the South African rand (ZAR) and the Brazilian real (BRL).

Structural currency hedging

Umicore’s hedging policy allows for hedging forward its structural currency exposure, either in conjunction with the hedging of structural metal price exposure or in isolation, typically when a currency exchange rate or a metal price denominated in EUR is above its historical average and at a level where attractive margins can be secured.

In relation to the structural risk, the Group assesses the hedge effectiveness through a critical terms match between the hedged item (future probable cash flows) and the hedging instrument including amount and maturity. The Group applies a prudent approach in the application of structural hedging, never up to 100 %, avoiding thereby ineffectiveness arising from difference in maturity between hedged item and hedging instrument or changes in exposure amounts.

At the end of 2020, Umicore had structural currency hedging in place relating to its non-metal related currency sensitivity including the following pairs of currencies: EUR/USD, USD/KRW, USD/CNY, EUR/CNY, EUR/ZAR and USD/CAD.

F3.1.2 TRANSACTIONAL RISK

The company is also subject to transactional risks in respect of currencies, i.e. the risk of currency exchange rates fluctuating between the time the price is fixed with a customer or supplier and the time the transaction is settled. The Group’s policy is to hedge the transactional risk to the maximum extent possible, primarily through forward contracts.

In relation to the transactional risk, the Group assesses the hedge effectiveness through a critical terms match between the hedged item (Balance sheet items and commitments) and the hedging instrument including amount and maturity. The Group hedges transactional risks to the maximum extent up to 100 %. Any ineffectiveness can arise from difference in maturity between hedged item and hedging instrument or changes in exposure amounts, but this is not expected to be material.

F3.1.3 TRANSLATIONAL RISK

Umicore is an international company and has foreign operations which do not have the EUR as their functional currency. When the results and the balance sheets of these operations are consolidated into Umicore’s Group accounts the translated amount is exposed to variations in the value of such local currencies against the EUR, predominantly the KRW, CNY, USD, BRL and ZAR. While Umicore does not systematically hedge its translational currency exposures, it may enter into ad hoc translational hedges.

F3.2 METAL PRICE RISK

Umicore’s metal price risk can be split into three distinct categories: structural, transactional and inventory risks.

In relation to the structural and transactional risk, for the purpose of assessing our hedge effectiveness we apply a critical terms match between the hedged item and the hedging instrument including in terms of quantity and maturity. Hedge ratio is 100% whereby our sources of ineffectiveness could be a difference in maturity between hedged item and financial instrument or a change in exposure.

F3.2.1 STRUCTURAL RISK

Umicore is exposed to structural metal related price risks. Those risks relate mainly to the impact that metal prices have on surplus metals recovered from materials supplied for treatment or any other revenue component that fluctuates with the metal price. Umicore’s policy allows hedging of such metal price exposure, typically if forward metal prices expressed in the functional currency of the concerned businesses are above their historical average and at a level where attractive margins can be secured. The extent to which metal price risk can be hedged depends on the availability of hedging instruments and sufficient associated market liquidity.

The Recycling segment recycles platinum, palladium, rhodium, gold and silver and a wide range of other base and specialty metals. In this segment the short-term sensitivity of revenues and operating profits to metals prices is particularly material. However, given the variability of the raw-material feed over time and the variable duration of the supply contracts negotiated, it is not suitable to provide a fixed sensitivity to any particular metal. In general terms, higher metals prices tend to be earnings enhancing for the Recycling business (and vice versa). Umicore also has a metal price sensitivity in its other business segments (Catalysis, Energy & Surface Technologies) linked primarily to the revenue components that are metal price related and depending on the metals used in these segments. Also, in these cases a higher metal price tends to carry short term benefits for the profitability of each business (and vice versa). However, other commercial conditions which are largely independent of the metal price, such as product premiums, are also significant and independent drivers of revenues and profitability. Finally, sustained high metal prices could in some cases increase other risks such as the risk of substitution or the risk of supply chain disruptions.

Structural metal price hedging

For some metals Umicore hedges part of its forward metal exposure. This hedging is based on documentation demonstrating a high probability of future metal price based cash flows originating from commercial contracts. Umicore hedged part of its forward metal exposure. Over the course of 2020 and early 2021, Umicore entered into additional forward contracts, thereby securing a substantial portion of its structural future price exposure to certain precious metals and providing increased earnings visibility. For 2021 and 2022, approximately two thirds of the expected gold and palladium exposure and somewhat less than half of the expected silver exposure have been locked-in. In addition, close to one third of the expected platinum exposure for 2021 has been hedged. In spite of the absence of a liquid futures market, Umicore entered in recent months into forward contracts locking in a minority of its expected 2022 and 2023 rhodium exposure. Finally, Umicore also hedged the majority of its expected lead exposure for 2021 and 2022.

In relation to the structural risk, the Group assesses the hedge effectiveness through a critical terms match between the hedged item (future probable cash flows) and the hedging instrument amongst others amount and maturity. The Group applies a prudent approach in the application of structural hedging, never up to 100 %, avoiding thereby ineffectiveness arising from difference in maturity between hedged item and hedging instrument or changes in exposure amounts.

F3.2.2 TRANSACTIONAL RISK

The Group faces transactional price risks on metals. The majority of its metal-based transactions use third party metal market references, such as the London Metal Exchange. If the underlying metal price were to be constant, the price Umicore pays for the metal contained in the raw materials purchased would be passed through to the customer as part of the price charged for the product. However, because of the lapse of time between the conversion of purchased raw materials into products and the sale of products, the volatility in the reference metal price creates differences between the price paid for the contained metal and the price received.

Accordingly, there is a transactional exposure to any fluctuations in price between the moment raw materials are purchased (i.e., when the metal is “priced in”) and the moment the products are sold (i.e. when the metal is “priced out”).

The Group’s policy is to hedge the transactional risk to the maximum extent possible, primarily through forward contracts.

In relation to the transactional risk, the Group assesses the hedge effectiveness through a critical terms match between the hedged item (Balance sheet items and commitments) and the hedging instrument amongst others amount and maturity. The Group hedges transactional risks to the maximum extent up to 100 %. Any ineffectiveness of such hedges can arise from difference in maturity between hedged item and hedging instrument or changes in exposure amounts, but this is not expected to be material.

The accelerating growth in battery materials in recent years substantially increased the exposure to specific related metals such as cobalt or nickel. Increasing volumes, the vulnerability to the associated price volatility and in the case of certain metals such as cobalt the absence of a liquid paper forward market result in increased metal risks. For cobalt, Umicore’s transactional hedging policy aims to match to a maximum extent the pricing in and pricing out of the contracted metal. Such physical back-to-back hedging allows management of transactional risks related to cobalt in a volatile market.

The Group’s economical transactional metal hedging policy prescribes that mark-to-market valuation principles are initially applied on all elements of the transactional hedging position, hedging instruments as well as hedged items. Where possible this happens under IFRS 9 hedge accounting criteria. When IFRS 9 hedge accounting cannot be applied or obtained, Umicore offsets any material positive mark-to-markets with provisions for onerous contracts and reclassifies the negative mark-to-markets under the provisions for onerous contracts.

F3.2.3 METAL INVENTORY RISK

The group faces metal price risks on its permanently tied up metal inventories. This risk is related to the market metal price moving below the carrying value of these inventories.

Umicore tends not to hedge against this risk.

F3.3 INTEREST RATE RISK

Interest rate risks arise from changes in prevailing market interest rates, which can lead to changes in the fair value of fixed-rate debt instruments and in changes in interest payments for variable-rate debt instruments. This risk is managed by regularly assessing the debt profile of the Group and by entering into interest rate swaps. At the end of December 2020, the Group’s gross financial debt stood at 2,424 million, of which 1,609 million carrying a fixed interest rate. The outstanding interest rate swaps totaled 40 million and will expire in 2023.

F3.4 CREDIT RISK

Credit risk and concentration of credit risk

Credit risk is the risk of non-payment by any counterparty in relation to sales of goods or metal lease operations. In order to manage its credit exposure, Umicore has determined a credit policy with credit limit requests, approval procedures, continuous monitoring of the credit exposure and dunning procedure in case of delays. The credit risk resulting from sales is, to a certain extent, covered by credit insurance, letters of credit or similar secure payment means. Umicore entered into several credit insurance agreements with different insurers. One global credit insurance contract has been put in place on a world-wide basis. This contract protects the insured activities against insolvency, political and commercial risks with an individual deductible per invoice of 5% and foresees an indemnification cap set at regional or country levels. Umicore has determined that in a certain number of cases where the cost of credit insurance is disproportionate in relation to the risk to be insured, no such global credit insurance coverage will be sought. For those businesses, characterized by a significant level of customer concentration or by a specific and close relationship with the customers, specific insurance contracts may be set up for a certain period. It should be noted that some sizeable transactions, such as the sales of precious metals by Recycling, have a limited credit risk as payment before delivery is a widely accepted practice. Umicore may further limit selected credit risks by entering into without recourse receivables discounting arrangements or particularly in China by without recourse bank draft discounting. Regarding its risk exposure to financial institutions such as banks and brokers, Umicore is also establishing internal credit lines. Specific limits are set, per financial instrument, covering the various risks to which the Group is exposed when transacting with such counterparties. In accordance with IFRS 9, impairments for expected credit losses on receivables are measured and recognized, applying a simplified approach.

F3.5 LIQUIDITY RISK

Liquidity risk relates to the ability to service and refinance debt (including notes issued) and to fund operations. The Group manages liquidity risk by maintaining adequate sources of funding, by ensuring a sufficient diversification of such funding sources, by matching as close as possible the maturity profiles of financial assets and liabilities and by staggering the maturities of financing sources. Sources of funding include a.o. operating cash flows, committed and uncommitted bank facilities including Chinese bank draft lines, metal lease lines, commercial paper issuance and long term private debt placements.

F3.6 TAX RISK

The tax charge included in the financial statements is the Group’s best estimate of its tax liability but, until such time as audits by tax authorities are concluded, there is a degree of uncertainty regarding the final tax liability for the period. The Group’s policy is to submit tax returns within the statutory time limits and engage tax authorities to ensure that the Group’s tax affairs are as current as possible and that any differences in the interpretation of tax legislation and regulation are resolved as quickly as possible. Given the scale and the international nature of the Group’s business, VAT, sales tax and intra- Group transfer pricing are an inherent tax risk as it is for other international businesses. Changes in tax laws or in their application with respect to matters such as transfer pricing, VAT, foreign dividends, R&D tax credits and tax deductions, could increase the Group’s effective tax rate and adversely affect its net results. Based on these tax risks described, management performed a detailed assessment for uncertain tax positions which resulted in provisions recorded for these uncertainties in line with IFRIC 23.

F3.7 CAPITAL RISK MANAGEMENT

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may for example adjust the amount of dividends paid to shareholders, return capital to shareholders, buy back its own shares or issue new shares.

The Group monitors its capital structure primarily on the basis of the gearing ratio and the net financial debt over adjusted EBITDA ratio. The gearing ratio is calculated as net financial debt divided by the sum of net financial debt and total Group equity. Net financial debt is calculated as non-current financial debt plus current financial debt less cash and cash equivalents.

The figures for the presented periods are detailed under the note F24 on Financial Debt.

In an ordinary course of business operating environment, the group aims for a capital structure equivalent to investment-grade credit rating status. The group could consider temporarily exceeding the equivalent level of indebtedness in the case of an extraordinary event, such as for example a major acquisition.

F3.8 STRATEGIC AND OPERATIONAL RISKS

Umicore faces certain strategic and operational risks that are not necessarily financial in nature but which have the potential to impact the financial performance of the Group. These include a.o. technology risks, supply risks, the risk of product substitution by customers, security of supply related risks (such as for selected critical metals), operational risks related to critical production installations, information system availability and cyber security risks, risks from legal disputes and proceedings, risks related to metal trading activities, asset impairment risks due to a change in the asset’s underlying business context & outlook, etc. In some cases a direct link exists between financial and operational risks. For example, a potential continuity of supply risk for certain critical raw materials or metals due to sudden or extreme physical supply tightness could substantially enhance financial risks and in particular metal price-related risks. In the past, certain metals such as for example rhodium or cobalt showed high price volatility related to supply tightness considerations. Please refer to the chapter about Managing Risk Effectively for a description of some of these risks and an outline of Umicore’s general approach to risk management.

Umicore does not expect a material direct financial impact from the Brexit.

The COVID-19 outbreak in 2020 resulted in higher financial risks for Umicore. In response to decreased volumes in certain business segments, the recoverable amounts of some individual non-current assets (PPE, IP and capitalized development costs) within such segments was assessed and impairments on these individual assets were accounted for. In addition, Umicore assessed its production footprint resulting in some restructuring measures. We refer to the Adjustments section of note F9 for more details. COVID-19 also triggered potentially higher liquidity and credit risks that the Group managed effectively in 2020. Umicore’s sources of funding were increased and further diversified and we refer to note F24 Financial debt for more details. Credit risks were closely monitored and the Group faced no material credit losses in 2020; we refer to note F20 Trade and other receivables for more details. As the COVID-19 pandemic extends into 2021, related risks remain relevant.

Estimates and judgments used in developing and applying the consolidated entity’s financial statements are continually evaluated and are based on historical experience and other factors, including the expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results.

Assumptions and estimates are applied when:

  • Assessing the need for and measurement of impairment losses.

  • Accounting for pension obligations.

  • Recognizing and measuring provisions for tax, environmental, warranty and litigation risks, product returns, onerous contracts and restructuring.

  • Determining inventory write-downs.

  • Assessing the extent to which deferred tax assets will be realized.

  • Useful lives of Property, Plant and Equipment and Intangible assets excluding goodwill.

The critical estimates and judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below.

F4.1 IMPAIRMENT TESTING

The Group performs an impairment test on the carrying value of its cash generating units whenever certain external or internal triggering events suggest a potential impairment risk for such unit. The Group performs annual impairment tests on the goodwill carried by its cash generating units. An impairment loss is recognized when the carrying value exceeds the recoverable amount in a structural way. The recoverable amount is the higher of the fair value less costs to sell and its value in use in accordance with the accounting policy. This value in use is calculated by discounting related future free cash flows (DCF model) to calculate their present value. These calculations require the use of and are sensitive to estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. Internal estimates of future business performance are based on an analysis of a combination of factors including: market growth projections, market share estimates, competitive landscape, pricing and cost evolution. Such analysis combines both internally-generated estimates and data from external sources.

As at 31 December 2020, the carrying amount of the goodwill for the consolidated entity was 156.0 million (156.7 million in 2019). We refer to note F15 Goodwill for more details on the annual goodwill impairment testing.

F4.2 REHABILITATION OBLIGATIONS

Provision is made for the anticipated costs of future rehabilitation of industrial sites and surrounding areas to the extent that a legal or constructive obligation exists in accordance with accounting policy 2.15. These provisions include future cost estimates associated with reclamation, plant closures, waste site closures, monitoring, demolition, decontamination, water purification and permanent storage of historical residues. These future cost estimates are discounted to their present value. The calculation of these provision estimates requires assumptions such as application of environmental legislation, plant closure dates, available technologies and engineering cost estimates and specifically related to the Hoboken Green Zone, the purchase cost of houses. A change in any of the assumptions used may have a material impact on the carrying value of rehabilitation provisions.As at 31 December 2020, the carrying amount of rehabilitation provisions was 108.2 (58.0 million in 2019). We refer to note F29 Environmental provisions for more details.

F4.3 DEFINED BENEFIT OBLIGATIONS

An asset or liability in respect of defined benefit plan is recognized on the balance sheet in accordance with accounting policy 2.16. The present value of a defined benefit obligation is dependent upon a number of factors that are determined on an actuarial basis.

The consolidated entity determines the appropriate discount rate to be used at the end of each year. The consolidated entity’s employee benefit obligations are discussed in more detail in Note F27. At 31 December 2020, a liability with respect to employee benefit obligations of 426.4 million was recognized (392.6 million in 2019).

F4.4 RECOVERY OF DEFERRED TAX ASSETS

Deferred tax assets are recognized for deductible temporary differences, unused tax losses and fair value reserves entries only if it is probable that future taxable profits (based on Group operational plans) are available to use those temporary differences and losses. The actual tax results in future periods may differ from the estimate made at the time the deferred taxes are recognized.

Other assumptions and estimates are disclosed in the respective notes relevant to the item where the assumptions or estimates were used for measurement.

F4.5 PROVISIONS FOR OTHER LIABILITIES AND CHARGES

As mentioned under notes 2.21.1 and 3.2.2., Umicore’s policy is to hedge to the maximum extent possible its transactional metal price risk, applying IFRS 9 based fair value hedge accounting to the extent there are market-based derivatives available.

In the absence of such market-based derivatives or in the absence of obtaining fair value hedge accounting at all, the hedged items are kept at cost and are subject to the IAS 37 principles, in particular the onerous contract judgment.

The onerous contract provision decisions related to replicate maximally the IFRS 9 fair valuation on Umicore’s metal transactional positions are based on the one hand on an assessment of the level of commitment expected from a third party to honor its contractual obligations towards Umicore (in the event the metal price at the close would be substantially higher (lower) than the contracted metal price in the case of Umicore purchases (sales)) and on the other hand on the commitment of Umicore to honor itself contractual transactional metal obligations out of the money

Both in 2019 and 2020, the market volatility in the cobalt price and in 2020 as well in the nickel price triggered such risk assessments.

The amount of such onerous contract provisions stood at 20.0 million end 2020 (24.1 million end 2019).

The fast growth of Umicore’s battery materials sales for transport applications in particular is increasing the group’s exposure to the automotive industry end market. This industry has a practice of applying warranty and recall settlements related to potential product quality events (irrespective of whether any legal obligation exists). In view thereof, Umicore continued in 2020 its dedicated provisioning model for battery materials as introduced in 2018.

As at 31 December 2020, the carrying amount of the provisions for other liabilities and charges amount to 80.1 million (80.7 million in 2019).

F4.6 PROVISIONS FOR UNCERTAINTY OVER INCOME TAX TREATMENTS

As mentioned under the note F.2.19, Umicore makes a detail assessment of all tax uncertainties within the group as per IFRIC 23. In the measurement of the uncertain tax positions, the Group has considered the statute of limitation taking into account the tax law and regulations that are applied in the correspondent country, resulting in a range of three to seven years. The resolution of the tax positions taken by the Group can take considerable period of time to conclude and, in some cases, it is difficult to predict the outcome. The estimates made reflects where the Group: is involved in routine tax audits; has identified potential tax exposures related to transfer pricing ; or is involved in discussions with tax authorities. The estimation of the tax liability and income tax expense includes the corresponding penalties and late payment interests. Most of the uncertain tax positions are measured using the the expected value, consisting to the sum of the probability - weighted outcome of a range of potential outcomes, nevertheless the most likely amount has also been used in a limited number of uncertain tax positions. Group provision for uncertainty over tax treatments at December 2020 amounting to 114.9 million (2019 : 91.4 million) results in an increase of those liabilities by 23.5 million. This provision was booked under Income Tax Payable in the consolidated balance sheet. The movement of the year corresponds from remeasurement and roll-forward of existing uncertaint tax positions; reversal of uncertain tax position based on mitigation actions taken and on the expiration of the statute of limitation; and the recognition of newly uncertain tax positions.

Below is a list of the main operating companies included in the consolidated financial statements

% INTEREST IN

% INTEREST IN

2019

2020

For continuing operations

Argentina

Umicore Argentina S.A.

100.00

100.00

Australia

Umicore Marketing Services Australia Pty Ltd.

100.00

100.00

Austria

Oegussa GmbH

91.29

91.29

Belgium

Todini (BE 0834.075.185)

100.00

100.00

-

Umicore Financial Services (BE 0428.179.081)

100.00

100.00

-

Umicore Marketing Services Belgium (BE 0402.964.625)

100.00

100.00

-

Umicore Specialty Materials Brugge (BE 0405.150.984)

100.00

100.00

-

Umicore Holding Belgium (BE 0731.571.921)

100.00

100.00

Brazil

Coimpa Industrial Ltda

100.00

100.00

-

Umicore Brasil Ltda

100.00

100.00

-

Clarex

100.00

100.00

-

Umicore Shokubai Brasil Industrial Ltda

60.00

60.00

-

Umicore Catalisadores Ltda.

100.00

100.00

Canada

Umicore Canada Inc.

100.00

100.00

-

Umicore Autocat Canada Corp.

100.00

100.00

-

Umicore Precious Metals Canada Inc.

100.00

100.00

China

Umicore Marketing Services (Shanghai) Co., Ltd.

100.00

100.00

-

Umicore Marketing Services (Hong Kong) Ltd.

100.00

100.00

-

Umicore Autocat (China) Co. Ltd.

100.00

100.00

-

Umicore Changxin Surface Technology (Jiangmen) Co., Ltd.

80.00

80.00

-

Jiangmen Umicore Changxin New Materials Co., Ltd.

90.00

90.00

-

Umicore Shokubai (China) Co Ltd

60.00

60.00

-

Umicore Platinum Engineered Materials (Suzhou) Co., Ltd.

100.00

100.00

-

Umicore Catalyst (China) Co., Ltd.

100.00

100.00

Denmark

Umicore Denmark ApS

100.00

100.00

Finland

Umicore Finland OY

100.00

100.00

France

Umicore France S.A.S.

100.00

100.00

-

Umicore IR Glass S.A.S.

100.00

100.00

-

Umicore Autocat France S.A.S.

100.00

100.00

-

Umicore Specialty Powders France S.A.S.

100.00

100.00

-

Umicore Marketing Services France

100.00

100.00

-

Todini France S.A.S.

100.00

100.00

Germany

Umicore AG & Co. KG (*)

100.00

100.00

-

Allgemeine Gold- und Silberscheideanstalt AG

91.21

91.21

-

Umicore Galvanotechnik GmbH

91.21

91.21

-

Todini Deutschland GmbH

100.00

100.00

-

Umicore Shokubai Germany GmbH

60.00

60.00

Italy

Todini and CO. S.P.A.

100.00

100.00

India

Umicore Autocat India Pvt LTD

100.00

100.00

-

Umicore India Private Limited

100.00

100.00

-

Todini Metals and Chemicals India Private Limited

70.00

70.00

Japan

Umicore Japan KK

100.00

100.00

-

Umicore Shokubai Japan Co Ltd

60.00

60.00

South Korea

Umicore Korea Ltd.

100.00

100.00

-

Umicore Marketing Services Korea Co., Ltd.

100.00

100.00

-

Ordeg Co.,Ltd.

100.00

100.00

Liechtenstein

Umicore Thin Film Products AG

100.00

100.00

Luxemburg

Umicore International

100.00

100.00

-

Umicore Autocat Luxembourg

100.00

100.00

Mexico

Todini Atlántica S.A. de C.V.

70.00

70.00

Netherlands

Schöne Edelmetaal BV

91.21

91.21

Philippines

Umicore Specialty Chemicals Subic Inc.

78.20

78.20

Poland

Umicore Autocat Poland sp. z o.o.

100.00

100.00

-

Todini Europe sp. z o.o.

70.00

70.00

-

Umicore Poland Sp. z o.o.

100.00

100.00

Portugal

Umicore Marketing Services Lusitana Metais Lda

100.00

100.00

South Africa

Umicore Marketing Services Africa (Pty) Ltd.

100.00

100.00

-

Umicore Catalyst South Africa (Pty) Ltd.

65.00

65.00

Spain

Todini Quimica Ibérica, S.L.

100.00

100.00

Sweden

Umicore Autocat Sweden AB

100.00

100.00

Switzerland

Allgemeine Suisse SA

91.21

91.21

Taiwan

Umicore Thin Film Products Taiwan Co Ltd

100.00

100.00

Thailand

Umicore Precious Metals Thailand Ltd.

91.21

91.21

-

Umicore Autocat (Thailand) Co., Ltd.

100.00

100.00

-

Umicore Shokubai (Thailand) Co., Ltd.

60.00

60.00

United Kingdom

Umicore Coating Services Ltd.

100.00

100.00

-

Umicore Marketing Services UK Ltd

100.00

100.00

USA

Umicore USA Inc.

100.00

100.00

-

Umicore Autocat USA Inc.

100.00

100.00

-

Umicore Precious Metals NJ LLC

100.00

100.00

-

Umicore Precious Metal Chemistry USA LLC

100.00

100.00

-

Umicore Precious Metals USA Inc.

100.00

100.00

-

Umicore Optical Materials USA Inc.

100.00

100.00

-

Umicore Shokubai USA Inc

60.00

60.00

-

Palm Commodities International

100.00

100.00

-

Umicore Electrical Materials USA Inc.

100.00

100.00

-

Umicore Specialty Materials Recycling, LLC.

100.00

100.00

-

Umicore Catalyst USA, LLC

100.00

100.00

(*) Umicore AG & Co. KG, with its registered office in Hanau, Germany, is exempt from its obligation to prepare, audit and publish annual and consolidated financial statements and a management and group management report in accordance with sections 264b and 291 of the German Commercial Code (HGB).

For the main currencies applicable within the Group’s consolidated entities and investments, the prevailing rates used for translation into the Group’s presentation currency (€), are as set out below. All subsidiaries, associates and joint-ventures have as functional currency the currency of the country in which they operate, except for Element Six Abrasives (United Kingdom) where the functional currency is the US dollar.

CLOSING RATES

AVERAGE RATES

2019

2020

2019

2020

American Dollar

USD

1.123

1.227

1.119

1.142

UK Pound Sterling

GBP

0.851

0.899

0.878

0.890

Canadian Dollar

CAD

1.460

1.563

1.485

1.530

Swiss Franc

CHF

1.085

1.080

1.112

1.071

Japanese Yen

JPY

121.940

126.490

122.006

121.846

Brazilian Real

BRL

4.528

6.377

4.416

5.889

South African Rand

ZAR

15.777

18.022

16.176

18.765

Chinese Yuan

CNY

7.821

8.023

7.735

7.875

Thai Baht

THB

33.415

36.727

34.757

35.708

Korean Won (100)

KRW

12.963

13.360

13.053

13.456

BUSINESS GROUP INFORMATION 2019

Thousands of Euros

Notes

Catalysis

Energy & Surface Technologies

Recycling

Corporate & Unallocated

Eliminations

Total Continued

Total segment turnover

4,539,213

2,938,485

11,319,935

58,778

(1,371,330)

17,485,081

External turnover

4,444,620

2,877,280

10,104,403

58,778

-

17,485,081

Inter-segment turnover

94,593

61,205

1,215,532

-

(1,371,330)

-

Total segment revenues (excluding metals)

1,459,902

1,225,408

680,981

-

(5,667)

3,360,624

External revenues

1,458,227

1,225,242

677,155

-

-

3,360,624

Inter-segment revenues

1,675

166

3,826

-

(5,667)

-

Operating result

F9

184,884

149,065

190,086

(53,588)

-

470,447

Adjusted

185,270

177,164

188,069

(52,371)

-

498,131

Adjustments

(386)

(28,099)

2,017

(1,217)

-

(27,684)

Equity method companies

F9

-

5,382

-

3,323

-

8,705

Adjusted

-

5,382

-

5,407

-

10,789

Adjustments

-

-

-

(2,084)

-

(2,084)

EBIT

F9

184,884

154,447

190,086

(50,265)

-

479,152

Adjusted

185,270

182,546

188,069

(46,964)

-

508,920

Adjustments

(386)

(28,099)

2,017

(3,301)

-

(29,768)

Depreciation and amortisation

F9

78,507

88,300

62,313

14,918

-

244,038

Adjusted

78,507

88,300

62,313

14,918

-

244,038

EBITDA

F9

263,390

242,747

252,399

(35,346)

-

723,190

Adjusted

263,776

270,846

250,382

(32,045)

-

752,959

Consolidated total assets

2,747,773

3,781,786

1,345,517

808,926

(1,660,612)

7,023,390

Segment assets

2,747,773

3,747,271

1,345,517

692,799

(1,660,612)

6,872,748

Investments in associates

-

34,515

-

116,127

-

150,642

Consolidated total liabilities

1,254,284

1,435,241

947,340

2,386,672

(1,660,612)

4,362,925

Capital Employed at 31/12 of previous year

F31

1,264,885

1,769,135

546,396

221,997

-

3,802,413

Capital Employed at 30/06

F31

1,314,779

1,982,482

481,776

195,514

-

3,974,551

Capital Employed at 31/12

F31

1,536,950

2,323,770

405,422

175,849

-

4,441,991

Average Capital Employed in first half year

F31

1,289,832

1,875,809

514,086

208,756

-

3,888,482

Average Capital Employed in second half year

F31

1,425,864

2,153,126

443,599

185,682

-

4,208,271

Average Capital Employed in the year

F31

1,357,848

2,014,467

478,842

197,219

-

4,048,377

ROCE

F31

13.64%

9.06%

39.28%

-23.81%

0.00%

12.57%

Capital expenditure

F34

103,960

348,217

82,023

18,990

-

553,189

Total R&D expenditure

F9

146,624

45,619

8,313

9,989

-

210,546

R&D recognized in operating expenses

F9

132,011

30,687

8,313

4,875

-

175,885

R&D capitalized as intangible assets

F34

14,614

14,933

-

5,114

-

34,660

BUSINESS GROUP INFORMATION 2020

Thousands of Euros

Notes

Catalysis

Energy & Surface Technologies

Recycling

Corporate & Unallocated

Eliminations

Total Continued

Total segment turnover

5,916,870

2,811,050

13,903,640

25,676

(1,947,120)

20,710,116

External turnover

5,783,840

2,750,410

12,150,190

25,676

-

20,710,116

Inter-segment turnover

133,030

60,640

1,753,450

-

(1,947,120)

-

Total segment revenues (excluding metals)

1,364,210

1,045,040

836,000

-

(6,530)

3,238,720

External revenues

1,362,640

1,044,940

831,140

-

-

3,238,720

Inter-segment revenues

1,570

100

4,860

-

(6,530)

-

Operating result

F9

96,338

(41,118)

310,900

(61,528)

-

304,592

Adjusted

153,688

70,422

361,815

(57,894)

-

528,030

Adjustments

(57,350)

(111,539)

(50,915)

(3,634)

-

(223,438)

Equity method companies

F9

-

4,874

-

(10,206)

-

(5,332)

Adjusted

-

4,874

-

3,457

-

8,331

Adjustments

-

-

-

(13,663)

-

(13,663)

EBIT

F9

96,338

(36,244)

310,900

(71,734)

-

299,260

Adjusted

153,688

75,295

361,815

(54,437)

-

536,361

Adjustments

(57,350)

(111,539)

(50,915)

(17,297)

-

(237,101)

Depreciation and amortisation

F9

80,496

110,457

62,949

14,040

-

267,941

Adjusted

80,496

110,457

62,949

14,040

-

267,941

EBITDA

F9

176,834

74,213

373,849

(57,694)

-

567,201

Adjusted

234,184

185,752

424,764

(40,397)

-

804,302

Consolidated total assets

3,447,098

3,376,191

1,643,894

1,568,336

(1,694,627)

8,340,892

Segment assets

3,447,098

3,337,762

1,643,894

1,466,927

(1,694,627)

8,201,054

Investments in associates

-

38,429

-

101,410

-

139,839

Consolidated total liabilities

1,814,687

1,260,177

1,215,316

3,123,485

(1,694,627)

5,719,038

Capital Employed at 31/12 of previous year

F31

1,536,950

2,323,770

405,422

175,849

-

4,441,991

Capital Employed at 30/06

F31

1,560,188

2,189,523

578,205

124,696

-

4,452,611

Capital Employed at 31/12

F31

1,727,443

2,133,138

446,861

149,138

-

4,456,580

Average Capital Employed in first half year

F31

1,548,569

2,256,646

491,813

150,273

-

4,447,301

Average Capital Employed in second half year

F31

1,643,815

2,161,330

512,533

136,917

-

4,454,596

Average Capital Employed in the year

F31

1,596,192

2,208,988

502,173

143,595

-

4,450,948

ROCE

F31

9.63%

3.41%

72.05%

-37.91%

0.00%

12.05%

Capital expenditure

F34

63,798

251,688

71,577

16,105

-

403,169

Total R&D expenditure

F9

138,742

58,269

10,186

15,766

-

222,964

R&D recognized in operating expenses

F9

125,275

43,636

10,186

11,499

-

190,596

R&D capitalized as intangible assets

F34

13,468

14,633

-

4,267

-

32,368

GEOGRAPHICAL INFORMATION 2019

Thousands of Euros

Notes

Europe

of which Belgium

Asia-Pacific

North America

South America

Africa

Total

Total segment turnover

8,061,295

149,183

4,850,973

3,862,500

528,751

181,563

17,485,081

Total non current assets

1,311,600

576,778

1,115,273

144,541

48,186

7,438

2,627,038

Capital expenditure

F34

206,051

156,049

316,729

18,012

12,395

2

553,189

GEOGRAPHICAL INFORMATION 2020

Thousands of Euros

Notes

Europe

of which Belgium

Asia-Pacific

North America

South America

Africa

Total

Total segment turnover

11,115,296

156,181

5,016,465

3,881,278

561,411

135,667

20,710,116

Total non current assets

1,389,895

564,209

1,109,045

112,075

45,590

4,726

2,661,333

Capital expenditure

F34

274,403

100,914

104,880

8,829

14,750

306

403,169

Revenues (excluding metal) per business group

%

Adjusted EBITDA per Business Group

%

Adjusted EBIT per Business group

%

Capital employed, average per business group

%

capital expenditure per business group

%

R&D expenditure per business group

%

Turnover by region

%

Non-current assets by region

%

Capital expenditure by region

%

Employee compensation & benefits by region

%

Income taxes by region

%

Segment information is presented in respect of the Group’s business segments as defined below.

The segment results, assets and liabilities include items directly attributable to the segment as well as those elements that can reasonably be allocated to a segment.

The pricing of inter-segment sales is based on an arm’s length transfer pricing system. In the absence of relevant market price references, ‘cost plus’ mechanisms are used. Segment turnover and revenue (without metals) is taking into account intragroup operations. Those are mainly related to recycling services and sales of refined metal from the recycling segment to the other group segments and are important to assess the performance of the segments concerned.

Since these transactions cannot be considered as external operations, they are eliminated at the group level, to present a net view.

The Group’s business segments have no single external customer that amounts to 10 per cent or more of the Group’s revenue.

Umicore determined segments as the accurate level of detail to split the product sales since the underlying business, competences and technologies, application and product characteristics and customer portfolio within each individual segment are similar. Moreover, obtaining information at a more disaggregated level would result in excessive costs and efforts compared to the added value for an external reader of the consolidated financial statements.

BUSINESS GROUPS

The Group is organized into the following reporting segments:

CATALYSIS

The segment in 2020 includes the Automotive Catalysts and Precious Metals Chemistry business units. Catalysis provides automotive catalysts for gasoline and diesel light and heavy-duty diesel applications, including on-road and non-on road vehicles. The business group also offers stationary catalysis for industrial emissions control and produces precious metals-based compounds and catalysts for use in fuel cell applications and in the pharmaceutical and fine chemicals industries.

ENERGY & SURFACE TECHNOLOGIES

The segment includes the Cobalt & Specialty Materials, Electro-Optic Materials, Electroplating and Rechargeable Battery Materials business units. Energy & Surface Technologies’ products are found in applications used in the production and storage of clean energy and in a range of applications for surface technologies that bring specific properties and functionalities to end products. All the activities offer a closed loop service for the customers. This segment includes the associates Ganzhou Yi Hao Umicore Industries and Jiangmen Chancsun Umicore Industry.

RECYCLING

The segment consists of the business units Precious Metals Refining, Jewelry & Industrial Metals and Precious Metals Management. Recycling treats complex waste streams containing precious and other specialty metals. The recycling operations can recover 20 of these metals from a wide range of input materials ranging from industrial residues to end-of-life materials.

Other activities include production of precious metals-based materials that are essential for applications as diverse as high-tech glass production, electrics and electronics.

CORPORATE

Corporate covers corporate activities, shared operational functions and the Group’s Research, Development & Innovation unit. Umicore’s shareholdings in Element Six Abrasives and Ieqsa are also included in Corporate.

In the geographical segment information, the figures presented as non-current assets exclude the amounts for long term investments, non-current loans granted, deferred tax assets and assets for employee benefits as required by IFRS 8. Performance of the segments is reviewed by the chief operating decision maker based on the adjusted EBIT/ operating result. As illustrated in the table above, the difference between the adjusted operating result and the operating result as presented in the Income Statement consists of the adjustments for which definitions are given in the glossary.

Associate companies are allocated to the business group with the closest fit from a market segment perspective.

At the end of November 2019, Umicore completed the acquisition of the cobalt refining and cathode precursor activities in Kokkola, Finland, from Freeport Cobalt. A preliminary opening balance sheet was prepared as of 1 December 2019 but was still subject to adjustments on a number of restatements over the coming 11 months. Following the final opening balance sheet as per the end of November 2019, the net value of the assets bought represented a total of 226.6 million (€227.3 million in 2019) and the total purchase price has been adjusted to 242.6 million (€241.9 million in 2019). This results in a goodwill of 16.0 million (€14.5 million in 2019). The main lines of the balance sheet that have been updated since 2019 are "Property, plant and equipment" (see note F16), "Inventories", Cash", "Provisions for environment" (see note F29) and "Trade payables". Those are reflected under the lines "acquisition through business combinations" of the corresponding impacted notes.

Thousands of Euros

2019

2020

Sales

17,336,517

20,565,648

Services

148,564

144,468

Turnover

17,485,081

20,710,116

Re-invoicing of costs to third parties

39,283

42,654

Operating grants

10,262

19,865

Royalties and license fees

9,003

6,168

Emission rights income

5,468

5,207

Insurance recovery

27,025

21,580

Various interests and penalties for late payments

1,209

1,167

Gains on disposals of assets

9,744

2,647

Translation difference on intercos Elimination

9,578

(25,567)

Tax incentive

1,645

4,247

Other

7,862

2,633

Other operating income

121,078

80,602

Operating income of continuing operations

17,606,159

20,790,718

Raw materials and consumables used

(15,639,139)

(18,819,323)

Payroll and related benefits

(775,919)

(798,481)

Depreciation of fixed assets

(244,038)

(267,941)

Impairment loss on fixed assets

(23,602)

(87,543)

Inventory and bad debt provisions

(39,926)

(7,013)

Depreciation and impairment results

(307,567)

(362,497)

Services and outsourced refining and production costs

(404,292)

(370,526)

Royalties, licence fees, consulting and commissions

(41,347)

(41,606)

Taxes other than income taxes

(20,769)

(19,332)

Provisions (increase/use and reversals)

54,871

(74,128)

Capital losses on disposal of assets

(2,258)

(996)

Other operating expenses

(413,795)

(506,588)

Operating expenses of continuing operations

(17,136,420)

(20,486,888)

Turnover refers to turnover from customers as per IFRS 15. The further disaggregation is detailed in note F7. As described in the accounting policy 2.20, the revenue from contracts with customers are recognized at a point in time. The increase in turnover in 2020 is mainly related to the increase of metal prices.

Services mainly include the revenues from tolling contracts. Some reclassifications have been done between services and sales in 2019 to align with the reclassification done in 2020.

The line “other operating income” of the income statements include the currency translation differences due to intercompany transactions to be translated from the transaction currency into functional currency which may differ from euro for some entities and regions. Those currency translation effects on intercompany eliminations moved substantially this year, mainly related to the variation of the USD compared with the EUR.

The increase in raw materials and consumables used is also mainly related to the increase of metal prices. Raw materials and consumables used include water, gas and electricity for 99.7 million in 2020 (100.2 million in 2019) for continuing operations.

The impairment losses of fixed assets have increased compared with 2019. Those impairments are mainly related to the restructuring initiatives in Cobalt & Specialty materials and to the consolidation of the North American automotive catalyst production in Catalysis. It also includes in Catalysis some impairments on selected capitalized developments costs and licence agreements.

The line provisions contains the movements in the environmental provisions and in the provisions for other liabilities and charges which are detailed in the notes F29 and F30.

R&D EXPENDITURE

Thousands of Euros

Notes

2019

2020

R&D recognized in Other operating expenses

175,885

190,596

R&D capitalized as intangible assets

F14

34,660

32,368

Total R&D expenditure for continuing operations

210,546

222,964

Total R&D expenditure for continuing operations was 223.0 million in the fully consolidated companies in 2020 (210.6 million in 2019). The part of the R&D expenditures that is directly recognized in operating expenses amounts to 190.6 million in 2020 (175.9 million in 2019).

ADJUSTMENTS INCLUDED IN THE RESULT

2019

2020

Thousands of Euros

Notes

Total

Adjusted

Adjustments

Total

Adjusted

Adjustments

Turnover

17,485,080

17,485,080

-

20,710,116

20,710,116

-

Other operating income

121,078

118,217

2,861

80,602

79,494

1,108

Operating income

17,606,158

17,603,297

2,861

20,790,718

20,789,611

1,108

Raw materials and consumables used

(15,639,139)

(15,639,139)

-

(18,819,323)

(18,781,872)

(37,451)

Payroll and related benefits

(775,919)

(775,701)

(218)

(798,481)

(798,131)

(350)

Depreciation and impairment results

(307,567)

(283,690)

(23,877)

(362,496)

(274,435)

(88,062)

of which depreciation and amortisation

(244,038)

(244,038)

-

(267,941)

(267,941)

-

Other operating expenses

(413,795)

(407,708)

(6,087)

(506,587)

(407,485)

(99,102)

Operating expenses

(17,136,420)

(17,106,238)

(30,182)

(20,486,887)

(20,261,923)

(224,964)

Income from other financial investments

706

1,069

(363)

761

342

419

Result from operating activities

470,444

498,129

(27,684)

304,592

528,030

(223,438)

Net contribution from equity method companies

8,705

10,789

(2,084)

(5,332)

8,331

(13,663)

EBIT

479,152

508,920

(29,768)

299,260

536,361

(237,101)

EBITDA

723,190

752,959

(29,768)

567,201

804,302

(237,101)

Finance cost

F11

(83,238)

(83,238)

-

(104,202)

(104,202)

-

Income taxes

F13

(96,692)

(102,538)

5,846

(59,131)

(102,729)

43,598

Net result

299,219

323,142

(23,923)

135,927

329,430

(193,503)

of which minority shares

11,428

11,428

-

5,397

7,023

(1,626)

of which group shares

287,791

311,714

(23,923)

130,530

322,407

(191,877)

ADJUSTMENTS PER SEGMENT AND NATURE INCLUDED IN THE RESULT

2019

2020

Thousands of Euros

Total

Catalysis

Energy & Surface Technologies

Recycling

Corporate & Unallocated

Total

Catalysis

Energy & Surface Technologies

Recycling

Corporate & Unallocated

Other operating income

2,861

-

-

48

2,813

1,108

-

1,108

-

-

Operating income

2,861

-

-

48

2,813

1,108

-

1,108

-

-

Raw materials and consumables used

-

-

-

-

-

(37,451)

-

(37,451)

-

-

Payroll and related benefits

(218)

-

-

(218)

-

(350)

-

(350)

-

-

Depreciation and impairment results

(23,877)

(386)

(24,217)

726

-

(88,062)

(36,565)

(51,161)

27

(362)

Other operating expenses

(6,087)

-

(3,882)

1,461

(3,666)

(99,102)

(20,785)

(23,781)

(50,942)

(3,594)

Operating expenses

(30,182)

(386)

(28,099)

1,969

(3,666)

(224,964)

(57,350)

(112,743)

(50,915)

(3,957)

Income from other financial investments

(363)

-

-

-

(363)

419

-

96

-

322

Result from operating activities

(27,684)

(386)

(28,099)

2,017

(1,217)

(223,438)

(57,350)

(111,539)

(50,915)

(3,634)

Net contribution from equity method companies

(2,084)

-

-

-

(2,084)

(13,663)

-

-

-

(13,663)

EBIT

(29,768)

(386)

(28,099)

2,017

(3,301)

(237,101)

(57,350)

(111,539)

(50,915)

(17,297)

Related to restructuring

(26,414)

(386)

(28,099)

2,017

54

(128,190)

(22,702)

(99,960)

-

(5,528)

Related to environment

(907)

-

-

-

(907)

(55,788)

-

-

(50,915)

(4,873)

Related to asset impairments

-

-

-

-

-

(45,303)

(28,628)

(8,219)

-

(8,456)

Other

(2,447)

-

-

-

(2,447)

(7,820)

(6,020)

(3,360)

-

1,560

Adjustments had a negative impact of 237 million on EBIT in 2020 of which 72 million were already recognized in the first half. Of this total, 112 million were related to Energy & Surface Technologies. The latter including 56 million charges linked to the restructuring initiatives in Cobalt & Specialty Materials, a resulting 34 million impairment charge linked to the rightsizing of permanently tied up cobalt inventories in that same business unit as well as a 15 million impairment in Rechargeable Battery Materials due to a site reconfiguration in Korea. Catalysis accounted for 57 million charges of which 55 million were already recognized in the first half, linked mainly to the consolidation of the North American automotive catalyst production and some impairments including selected capitalized development costs and license agreements. In Recycling, a charge of 51 million was accounted for, comprising a 50 million provision to cover costs related to the intention to buy houses closest to the Hoboken plant and create a green zone.

These costs comprise an estimated purchase value of the houses (based on third party appraisal) to be demolished as well as an estimate of demolition and landscaping costs. Concertation with the city council and residents is ongoing and might result in adjustments to this cost estimate. Finally, EBIT adjustments also include 14 million charges linked to restructuring, property, plant and equipment and goodwill impairments in Element Six Abrasives, a JV in which Umicore has a 40% stake. Of the total adjustments, 147 million have a non-cash nature. Restructuring-related charges account for 128 million of the total, environmental items for 56 million and selected asset impairments for 45 million. After tax, the adjustments to net group earnings over the period correspond to - 192 million.

Thousands of Euros

2019

2020

Wages, salaries and direct social advantages

(576,097)

(589,707)

Other charges for personnel

(40,318)

(50,594)

Temporary staff

(10,781)

(7,607)

Share-based payments

(8,211)

(10,108)

Employee salaries

(635,407)

(658,016)

Employer's social security

(102,364)

(97,698)

Defined benefit contributions

(36,692)

(21,438)

Contribution to defined contribution plan

(11,805)

(10,299)

Employer's voluntary contributions (other)

(4,120)

(4,381)

Pensions paid directly to beneficiaries

(3,974)

(3,486)

Provisions for employee benefits (-increase / + use and reversals)

18,444

(3,164)

Pensions and other benefits

(38,147)

(42,768)

Payroll and related benefits of continuing operations

(775,919)

(798,481)

AVERAGE HEADCOUNT IN CONSOLIDATED COMPANIES

2019

2020

Executives and managerial staff

1,934

2,009

Non managers

8,852

8,997

Total for continuing operations

10,786

11,006

SHARE-BASED PAYMENTS

Thousands of Euros

Notes

2019

2020

Date of grant

11-02-2019

10-02-2020

Share price at the date of grant (Belgium & Other)

F28

34.08

42.05

Share price at the date of grant (France)

F28

36.78

NA

Number of stock options granted

F28

1,221,000

1,168,375

Valuation model

Present Economic Value

Assumed volatility (% pa)

25.00

25.00

Risk-free interest rate (% pa)

(0.370)

(0.620)

Dividend increase (% pa)

10.00

10.00

Rate of pre-vesting forfeiture (%pa)

NA

NA

Rate of post-vesting leaving (%pa)

7.50

7.50

Minimum gain threshold (% pa)

15.00

15.00

Proportion who exercise given minimum gain achieved (% pa)

100.00

100.00

Fair value per granted instrument determined at the grant date (EUR)

5.09

6.46

Total fair value of options granted

6,211

7,548

52.000 shares granted at 42,05 EUR

-

2,187

10.000 shares granted at 37,33 EUR

-

373

43.700 shares granted at 34,08 EUR

1,489

-

7.400 shares granted at 33,30 EUR

246

-

10.000 shares granted at 26,43 EUR

264

-

Total fair value of shares granted

2,000

2,560

Share-based payments

8,211

10,108

The Group recognized a share-based payment expense of 10.1 million during the year for continuing operations.

The part of this expense related to stock options is calculated by an external actuary using the Present Economic Value model which takes into account all features of the stock option plans and the volatility of the underlying stock. This volatility has been determined using the historical volatility of the Group shareholders’ return over different averaging periods and different terms. For the calculation of the option value based on the lattice model, weekly steps were introduced, therefore focusing on a weekly term of volatility. The observed volatility calculated over a 5 year period amounted approximately to 25% despite a recent increase. Hence, the retained volatility assumption was maintained at 25%. No other market condition has been included on the basis of calculation of fair market value.

The free share part of the expense is valued at the market price of the shares at the grant date. In 2020, shares have been granted to top management resulting in an extra charge of 2.6 million for continuing operations.

The defined contribution plans of the Group in some countries like the USA, Canada, South Africa and Germany are directly recognized in the income statement under the line “Contribution to defined contribution plans”.

The cash discounts that the authorities give back to Umicore Belgium on the social security contributions, relating to incentives regarding a.o. shift premiums, overtime and R&D are disclosed under the item “Employer’s social security”.

Thousands of Euros

2019

2020

Interest income

4,585

3,749

Interest expenses

(45,627)

(61,659)

Discounting of non-current provisions

(5,942)

(3,146)

Foreign exchange gains and losses

(31,618)

(30,445)

Other financial income

222

295

Other financial expenses

(4,858)

(12,996)

Total of continuing operations

(83,238)

(104,202)

The net interest charge in 2020 totaled 57.9 million, in line with the increase of the average financial debt as well as fees and costs linked to the issuance of new debt instruments. The net interest charge contains 0.8 million interest related to leases as per IFRS 16 and 5.2 million being the phantom interest component of the convertible bond. These higher net interest charges were partly offset by lower foreign exchange costs and lower discounting expenses.

The discounting of non-current provisions relates mainly to employee benefits provisions and to a lesser extent to environmental provisions. This amount is influenced by the present value of these liabilities, which in turn is influenced by changes in the discount rate, by the cash-out profile and by the recognition of new non-current liabilities. Most of the discounting results in 2020 were booked in Germany and to a lesser extent in Belgium.

Foreign exchange results include realized exchange results and the unrealized translation adjustments on monetary items using the closing rate of the period. In 2020, the forex result is mainly explained by the cost of forward points in hedging instruments and by the impact from metal fixations. They also include fair value gains and losses on other currency financial instruments (see Note F33). Other financial expenses include payment discounts, bank expenses and other financial fees incurred.

Thousands of Euros

2019

2020

Capital gains and losses on disposal of financial investments

547

517

Dividend income

133

230

Interest income from financial assets

26

14

Total for continuing operations

706

761

Thousands of Euros

2019

2020

Income tax expense

Recognized in the income statement

Current income tax

(113,229)

(115,672)

Deferred income tax

16,537

56,542

Total tax expense for continuing operations

(96,692)

(59,131)

Relationship between tax expense (income) and accounting profit

Result from operating activities

470,444

304,592

Financial result

(83,238)

(104,202)

Profit (loss) before income tax of consolidated companies for continuing operations

387,206

200,390

Weighted average theoretical tax rate (%)

24.81

25.48

Income tax calculated at the weighted average theoretical tax rate for continuing operations

(96,076)

(51,055)

Tax effect of :

Expenses not deductible for tax purposes

(4,276)

(4,383)

Tax-exempted revenues

4,797

3,457

Dividends from consolidates companies & Associates

(1,596)

(267)

Gains & Losses taxed at a reduced rate

-

37

Tax incentives and tax holidays

15,758

14,563

Tax computed on other basis

(1,377)

(1,657)

Utilisation of previously unrecognized tax losses

1,443

4,349

Write down (or reverse of previous write down) of DTA

(3,817)

6,050

Change in applicable tax rate

3,720

(31)

Other tax credits (excluding R&D tax credits)

585

958

Non recoverable foreign withholding taxes

(11,552)

(12,003)

Previous years adjustments

(114)

988

Other (including IFRIC 23)

(4,187)

(20,135)

Tax expense at the effective tax rate for the year

(96,692)

(59,129)

The weighted average theoretical tax rate evolved from 24.8% in 2019 to 25.5% in 2020 for the continuing operations. Excluding the impact of adjustments, the adjusted effective tax rate for 2020 was 24.2%. This compares to the 24.7% in 2019.

Thousands of Euros

Development expenses capitalized

Concessions, patents, licences, etc.

Software

CO2 emission rights

Other intangible assets

Total

At the beginning of previous year

Gross value

131,273

107,319

140,054

11,106

60,584

450,336

Accumulated amortisation

(83,920)

(37,639)

(114,124)

-

(19,839)

(255,522)

Net book value at the beginning of previous year

47,353

69,680

25,930

11,106

40,745

194,814

. acquisition through business combinations

-

-

-

-

8,223

8,223

. additions

34,660

1,495

1,115

4,925

16,167

58,362

. disposals

-

(6,483)

-

-

-

(6,483)

. amortisation charged (included in "Depreciation and impairments")

(11,129)

(9,878)

(9,464)

-

(5,742)

(36,214)

. impairment losses recognized (included in "Depreciation and impairments")

(2,771)

-

(497)

-

-

(3,268)

. emission rights allowances

-

-

-

3,184

-

3,184

. translation differences

282

5

82

(2)

251

619

. other movements

(14,627)

(90)

9,783

(0)

(150)

(5,085)

At the end of previous year

53,768

54,730

26,949

19,213

59,494

214,154

Gross value

151,880

101,229

149,792

19,213

85,216

507,329

Accumulated amortisation

(98,113)

(46,499)

(122,842)

-

(25,721)

(293,176)

Net book value at the end of previous year

53,768

54,730

26,949

19,213

59,494

214,154

. acquisition through business combinations

-

82

40

-

(23)

98

. additions

13,784

50

5,404

-

24,821

44,060

. disposals

-

(2,336)

(3)

(4,009)

(217)

(6,564)

. amortisation charged (included in "Depreciation and impairments")

(12,708)

(9,334)

(8,267)

-

(4,901)

(35,209)

. impairment losses recognized (included in "Depreciation and impairments")

(17,299)

(8,529)

(1,485)

-

-

(27,313)

. emission rights allowances

-

-

-

697

-

697

. translation differences

(450)

(6)

(346)

(3)

(908)

(1,712)

. other movements

1,422

50

4,401

(0)

(3,186)

2,687

At the end of the year

38,517

34,707

26,694

15,898

75,081

190,897

Gross value

157,704

98,840

150,989

15,898

103,637

527,068

Accumulated amortisation

(119,187)

(64,134)

(124,295)

-

(28,556)

(336,172)

Net book value for continuing operations

38,517

34,707

26,694

15,898

75,081

190,897

The line “Additions” for 44.1 million mainly contains capitalized expenses in internally generated developments for 32.4 million (see note F9), of which 18.6 million are still shown under the category “Other intangible assets” as “Intangible assets under construction”. The “Additions” also contain capitalized expenses in new information systems for around 10.3 million.
The acquisitions through business combination are related to the subsequent opening balance sheet adjustments in Finland (see note F8). Impairment losses have been taken mainly in Catalysis and are related to selected capitalized development costs and license agreements.
The line ‘other movements’ mainly includes the transfer between intangible assets in progress (included under “other intangible assets”) and the other categories of intangible assets and to a lesser extent transfer from tangible assets.
The other intangible assets category contain intangible assets in progress for 53.9 million (mainly capitalized development costs and in less extent the information systems) but also some business portfolio and customers’ list acquired during the business combinations for 20.6 million.
There are no pledges on, or restrictions to, the title on intangible assets, other than disclosed in note F35.

Thousands of Euros

31/12/2019

31/12/2020

At the end of the previous year

Gross value

158,457

169,915

Accumulated impairment losses

(15,966)

(13,210)

Net book value at the end of previous year

142,491

156,705

. acquisition through business combinations

14,549

1,499

. impairment losses (included in "Depreciation and impairment results")

(1,422)

-

. translation differences

1,087

(2,214)

At the end of the year

156,705

155,990

Gross value

169,915

165,627

Accumulated impairment losses

(13,210)

(9,637)

Net book value for continuing operations

156,705

155,990

This table includes goodwill related to fully consolidated companies only. Goodwill relating to companies accounted for by the equity method is detailed in note F17.

The change of the period relates mainly to the final adjustment of the goodwill in Finland following the finalization of the opening balance sheet exercise (see note F8).

The goodwill accounted in each of the primary segments is as follows:

Thousands of Euros

Catalysis

Energy & Surface Technologies

Recycling

Total

31/12/2019

50,037

88,357

18,311

156,705

31/12/2020

49,999

87,737

18,254

155,990

Management tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in note F2. Such impairment tests are performed at a cash generating unit level, which may vary in scope from a total business unit to an individual plant but never a full segment scope. The recoverable amounts of cash-generating units to which goodwill is allocated have been determined based on value-in-use calculations by means of discounted cash flow modelling on the basis of the Group’s operational plans which typically look forward 5 years, followed by a long term projection. On macroeconomic and external indicators such as currency and metal prices, the testing uses typically prevailing market conditions at the time the plans are drafted. The rates used are typically the ones observed on international exchanges in the last quarter of the year unless a normalization is considered appropriate. The 2020 goodwill impairment testing indicated sufficient headroom in the respective cash generating units and hence no goodwill impairments were recognized. The 2020 impairment testing used an average tax rate of 25.0% (unchanged versus 2019) and a weighted average cost of capital post-tax of 7% which was reviewed down from the 8.5% used in 2019 and prior years to reflect the Group’s lowered weighted cost of funding driven a.o. by the decrease in market interest rates in recent years. A uniform WACC rate was applied across cash generating units with unit-specific risk factors considered to be reflected in the underlying cash flow projections. Terminal values were determined on the basis of a perpetual growth rate of on average 2% (same as in 2019). Inflation rates were based on guidance from national and international institutes such as the NBB or ECB.

Thousands of Euros

Land and buildings

Plant, machinery and equipment

Furniture and vehicles

Other tangible assets

Construction in progress and advance payments

Total

At the beginning of previous year without leasing

Gross value

973,873

2,090,262

226,496

14,678

388,791

3,694,100

Accumulated depreciation

(491,424)

(1,431,137)

(158,858)

(13,715)

-

(2,095,133)

Net book value at the beginning of previous year without leasing

482,450

659,125

67,638

964

388,791

1,598,967

. acquisition through business combinations

31,638

75,142

517

-

20,426

127,724

. additions

16,393

36,164

9,535

69

467,326

529,487

. disposals

(1,509)

(2,772)

(419)

(10)

(2,369)

(7,079)

. depreciations (included in "Depreciation and impairments")

(37,030)

(135,690)

(18,086)

(228)

-

(191,035)

. net impairment losses recognized (included in "Depreciation and impairments")

(2,454)

(16,169)

(289)

-

-

(18,911)

. translation differences

1,642

944

71

12

(1,844)

825

. other movements

168,212

231,710

16,534

314

(410,962)

5,809

At the end of previous year without leasing

659,342

848,457

75,500

1,120

461,368

2,045,788

At the beginning of the year without leasing

Gross value

1,189,490

2,402,378

242,362

15,070

461,369

4,310,669

Accumulated depreciation

(530,148)

(1,553,922)

(166,862)

(13,950)

-

(2,264,881)

Net book value at the beginning of the year without leasing

659,343

848,457

75,500

1,120

461,369

2,045,788

. acquisition through business combinations

3,510

(798)

548

-

876

4,136

. additions

20,663

32,588

7,852

364

330,009

391,475

. disposals

(10)

(938)

(176)

(20)

(134)

(1,278)

. depreciations (included in "Depreciation and impairments")

(43,501)

(148,434)

(19,154)

(194)

-

(211,282)

. net impairment losses recognized (included in "Depreciation and impairments")

(15,053)

(44,416)

(654)

(312)

-

(60,435)

. translation differences

(18,017)

(20,505)

(2,321)

(54)

(16,266)

(57,164)

. other movements

88,832

154,714

20,807

-

(267,820)

(3,466)

At the end of the financial year without leasing

695,767

820,668

82,403

903

508,033

2,107,775

Gross value

1,242,294

2,478,662

260,590

23,522

508,033

4,513,101

Accumulated depreciation

(546,526)

(1,657,994)

(178,187)

(22,619)

-

(2,405,326)

Net book value for continuing operations without leasing

695,767

820,668

82,403

903

508,033

2,107,775

Gross value

3,300

43

31

-

-

3,374

Accumulated depreciation

(399)

(20)

(31)

-

-

(450)

Net book value at the beginning of previous year for leasing

2,901

23

-

-

-

2,924

. change in accounting policies

25,788

77

11,396

-

-

37,262

. acquisition through business combinations

2,681

-

-

500

-

3,181

. additions

15,466

21

6,780

-

-

22,266

. depreciations (included in "Depreciation and impairments")

(11,063)

(44)

(5,722)

-

-

(16,829)

. translation differences

72

0

8

-

-

80

At the end of previous year for leasing

35,845

77

12,462

500

-

48,884

Leasing at begining of the year

Gross value

47,341

135

18,175

500

-

66,152

Accumulated amortisation

(11,496)

(58)

(5,713)

-

-

(17,268)

Net book value at the beginning of the year for leasing

35,845

77

12,462

500

-

48,884

. additions

17,901

1,034

8,578

144

-

27,657

. depreciations (included in "Depreciation and impairments")

(12,726)

(724)

(6,765)

(142)

-

(20,357)

. translation differences

(1,133)

(10)

(99)

(0)

-

(1,242)

. transfer

979

(35)

-

-

-

944

At the end of the financial year for leasing

40,866

342

14,176

502

-

55,886

Gross value

67,193

1,055

24,865

637

-

93,750

Accumulated amortisation

(26,327)

(713)

(10,689)

(135)

-

(37,864)

Net book value for leasing

40,865

342

14,176

502

-

55,886

Tangible asset including leasing

Gross value

1,309,486

2,479,718

285,456

24,159

508,033

4,606,851

Accumulated amortisation

(572,854)

(1,658,707)

(188,876)

(22,754)

-

(2,443,190)

Net book value for continuing operations including leasing

736,633

821,010

96,580

1,405

508,033

2,163,661

The reduction in capital expenditures (line “Additions”) compared to 2019 reflects the decision taken shortly after the start of the COVID-19 outbreak to postpone selected investment projects with the exception of safety and license to operate investments, awaiting more clarity on market outlook. Taking into account the continued investment in Rechargeable Battery Materials’ greenfield plant in Poland, Energy & Surface Technologies accounted for close to two thirds of the Group’s capex. Spending for this strategic project will continue into 2021.

The acquisitions through business combination are related to the subsequent adjustments of the opening balance sheet of the acquired cobalt refining and cathode precursor activities at Kokkola at the end of December 2019 (Finland) (see note F8).

The changes in accounting policies in 2019 are related to the introduction of IFRS 16.

Impairments on property, plant and equipment are mainly related to the restructuring initiatives in Cobalt & Specialty Materials and in Catalysis the consolidation of the North American automotive catalyst production.

The line ‘other movements’ mainly includes the transfer between tangible assets in progress and the other categories and to a lesser extent transfer to intangible assets.
There are no pledges on, or restrictions to, the title on property, plant and equipment, other than disclosed in note F35.

The investments in companies accounted for using the equity method are composed mainly of the following associates and joint ventures:

Country

Measurement currency

Percentage

Percentage

2019

2020

For continuing operations

Associates

IEQSA

Peru

PEN

40.00

40.00

Ganzhou Yi Hao Umicore Industries

China

CNY

40.00

40.00

Element Six Abrasives

United Kingdom

USD

40.22

40.22

Jiangmen Chancsun Umicore Industry Co.,LTD

China

CNY

40.00

40.00

The elements recognized in Other Comprehensive Income for investments accounted for using the equity method are mainly related to employee benefits reserves and translation reserves.

Investments in associates are accounted for in accordance with the equity method and represent approximately 1.7% of Umicore’s consolidated balance sheet total. Umicore has no individual material investments in associates. Considering the objectives of the IFRS 12 disclosure requirements, the most significant associate is Element Six Abrasives, in which Umicore holds 40.22%. Element Six Abrasives is a synthetic diamond materials group, part of De Beers Group, its majority shareholder. The group operates worldwide with primary manufacturing facilities in Ireland, Germany, the UK, the US and South Africa. Element Six Abrasives is on an adjusted results basis a profitable group, generating positive cash flow. The group’s functional currency is USD. Umicore is represented in the Board of Directors and the audit committee of Element Six Abrasives. Besides its equity share in this company, Umicore has no other commitments, guarantees or obligations arising from its involvement in this associate. Adjustments and material contingencies, if any, in respect of the financial statements of Element Six Abrasives, are separately disclosed under the relevant captions of Umicore’s consolidated financial statements (see note F36 for pending file qualified as contingent liability at Element Six Abrasives and note F9 for adjustments).

Thousands of Euros

Net book value

Goodwill

Total

At the end of previous year

104,653

45,989

150,642

. profit for the year

(5,332)

-

(5,332)

. dividends

(1,796)

-

(1,796)

. change in other reserves

1,536

-

1,536

. translation differences

(4,379)

(833)

(5,210)

At the end of the year for continuing operations

94,683

45,156

139,839

Umicore’s share in the aggregated balance sheet and profit and loss items of the associates and joint ventures would have been as follows:

Thousands of Euros

31/12/2019

31/12/2020

Assets

231,747

214,719

Liabilities

108,620

101,894

Turnover

251,313

195,889

Net result

8,705

(5,332)

In the above table, there are no more assets and liabilities related to joint ventures.

Thousands of Euros

Financial assets at FV through OCI

Loans granted

Non-current financial assets

At the beginning of previous year

8,028

2,627

. increase

2,375

126

. decrease

-

(114)

. translation differences

3

72

. fair value recognized in equity

(9)

-

. other movements

500

(520)

At the end of previous year

10,897

2,192

. increase

1,633

753

. reversals of impairment losses (included in "Income from other financial instruments")

2

-

. translation differences

(45)

(79)

. fair value recognized in equity

(4,193)

-

. other movements

59

386

At the end of the financial year for continuing operations

8,352

3,252

Current financial assets

. increase

-

92

. decrease

-

(1)

. translation differences

-

(12)

At the end of the financial year for continuing operations

-

80

The increase and fair value recognized in equity of the financial assets at fair value through OCI are related to movements in non-consolidated entities. The new loans granted are related to convertible loans to non-consolidated entities.

Thousands of Euros

31/12/2019

31/12/2020

Analysis of inventories

Base products - gross value

2,469,632

2,706,918

.Permanently tied up metal inventories (not hedged)

862,215

775,213

.Commercially available metal inventories (hedged) (*)

1,176,095

1,477,096

.Other base products inventories (not hedged)

431,322

454,609

Consumables - gross value

87,030

102,163

Write-downs

(101,960)

(105,715)

Advances paid

6,173

7,222

Contracts in progress

1,454

7,503

Total inventories for continuing operations

2,462,330

2,718,092

* applying Umicore's transactional metal hedging - see note F2.21.1 and F3.2.2

Inventories have increased by 255.8 million compared with December 2019. This increase is mainly due to higher metal prices impacting the value of the commercially available metal inventories. The decrease of the permanently tied up metal inventories is predominantly linked to the rightsizing of the cobalt permanently tied up metal inventories linked to the restructuring initiatives in Cobalt & Specialty Materials. This rightsizing brought a 34 million impairment charge classified under Adjustments.

The total gross book value of Umicore’s permanently tied-up metal inventories at 31 December 2020 compares to a value of 3,008 million when applying the 31 December market prices (2,135 million at end December 2019).

As per the accounting policy with regards to permanently tied-up metal inventories (see Chapter 2.9), the permanently tied-up metal inventories are considered to have an unlimited useful life (no depreciations are applied) and are instead subject to Umicore’s annual impairment testing of the CGU’s carrying these inventories. Applying the LOCOM principle on permanently tied-up metal inventories on 31 December 2020 would have given rise to a non-cash impairment charge of 110.5 million for the Group.

The change in inventory recognized in Raw Materials and Consumables in the income statements is a positive amount of 378 million (representing the cash movements on inventory balances).

There are no pledges on, or restrictions to, the title on inventories.

Thousands of Euros

Notes

31/12/2019

31/12/2020

Non current

Cash guarantees and deposits

8,893

8,370

Other receivables maturing > 1 year

1,972

2,574

Assets employee benefits

1,173

820

Total for continuing operations

12,038

11,764

Current

Trade receivables (at cost)

1,171,835

1,366,686

Trade receivables (write down)

(22,983)

(22,319)

Other receivables (at cost)

180,336

177,008

Other receivables (write down)

(207)

(207)

Interest receivable

156

495

Fair value receivable financial instruments held for cash-flow hedging

F33

19,699

45,091

Fair value receivable - financial instruments related to FV hedging

F33

47,495

23,442

Deferred charges and accrued income

37,327

86,973

Total for continuing operations

1,433,658

1,677,167

Compared to 31 December 2019, trade receivables substantially increased driven mainly by a substantial increase in Catalysis, fueled by higher metal prices.

Total

Not due

Overdue between

Thousands of Euros

0-30 days

30-60 days

60-90 days

> 90 days

Ageing balance analysis at the beginning of the year

Trade receivables (w/o doubtful and securitized receivables) - at cost

1,131,666

928,369

160,856

22,261

5,549

14,632

Other receivables - at cost

180,336

179,925

595

(340)

-

157

Loss allowance

12,794

5,431

901

17

1,497

4,948

Expected loss rate

0.98%

0.49%

0.56%

0.08%

26.98%

33.46%

Ageing balance analysis at the end of year

Trade receivables (w/o doubtful and securitized receivables) - at cost

1,328,476

1,161,303

137,088

21,569

4,384

4,131

Other receivables - at cost

177,007

176,020

(0)

-

223

765

Loss allowance

14,888

9,412

1,291

334

240

3,611

Expected loss rate

0.99%

0.70%

0.94%

1.55%

5.21%

73.75%

CREDIT RISK – TRADE RECEIVABLES

Thousands of Euros

Trade receivables (write-down)

Other receivables (write-down)

Total

At the beginning of previous year

(22,577)

(247)

(22,824)

. Impairment losses recognized in P&L

(9,373)

-

(9,373)

. Reversal of impairment losses

9,705

39

9,744

. Impairment written off against asset carrying amount

83

-

83

. Other movements

(850)

(0)

(850)

. Translation differences

30

1

31

At the end of previous year

(22,983)

(207)

(23,190)

At the beginning of the financial year

(22,983)

(207)

(23,190)

. Impairment losses recognized in P&L

(3,943)

342

(3,602)

. Reversal of impairment losses

4,328

-

4,328

. Impairment written off against asset carrying amount

48

-

48

. Other movements

(408)

(346)

(755)

. Translation differences

639

5

644

At the end of the financial year for continuing operations

(22,320)

(207)

(22,526)

The group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on historical payment profiles of sales and the corresponding credit losses experienced. The historical loss rates are adjusted to reflect current and forward-looking information on macro-economic factors affecting the ability of the customers to settle the receivables. The group has identified macro-economic factors, Probability of Default (PD) and Loss Given Default (LGD) to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.

In principle, Umicore uses credit insurance as a means to mitigate the credit risk related to trade receivables. In 2020, two credit insurance policies with two different insurers were in place. At closing, 355 million of the group's outstanding invoices were covered by a policy where indemnification in case of non-payment amounts to 95% with an indemnification cap set at regional or country level. The other policy covered 272 million of trade invoices with a global annual deductible of 5 million, a maximum indemnity per year of 70 million and an indemnification in case of non-payment of 90%. The Group also managed credit exposure by selling invoices to financial institutions without recourse (and hence derecognized) (301 million end of 2020 compared to 213 million end of 2019), partly covered by the above credit insurance policies.

Specifically in China, Umicore reduces credit risk by discounting bank acceptance drafts it receives from its customers without recourse (and hence derecognized) (245 million end of year 2020 compared to 185 million end of 2019).

Finally, some of our businesses function without credit insurance and instead internal credit limits are set based on available financial information and business knowledge. Theses limits are duly reviewed and approved by management.

Thousands of Euros

31/12/2019

31/12/2020

Tax assets and liabilities

Income tax receivables

45,447

39,553

Deferred tax assets

168,927

221,938

Income tax payable

(131,483)

(160,734)

Deferred tax liabilities

(11,461)

(22,846)

Assets

Liabilities

Net

Thousands of Euros

2019

2020

2019

2020

2019

2020

At the end of preceding financial year

132,855

168,927

(6,225)

(11,461)

126,630

157,466

Change in accounting policies

(39)

-

-

-

(39)

-

Deferred tax recognized in the P&L

15,207

59,688

1,330

(3,146)

16,537

56,542

Deferred tax recognized in equity

21,502

(12,208)

7,276

3,632

28,778

(8,576)

Acquisitions through business combination

-

-

(14,972)

(359)

(14,972)

(359)

Translation adjustments

142

(6,199)

(152)

218

(10)

(5,981)

Transfer

(1,201)

11,722

1,201

(11,722)

-

-

Other movements

461

8

81

(8)

542

-

At the end of financial year for continuing operations

168,927

221,938

(11,461)

(22,846)

157,466

199,092

Assets

Liabilities

Net

Thousands of Euros

2019

2020

2019

2020

2019

2020

Deferred tax in respect of each type of temporary difference

Intangible assets

16,412

22,144

(17,894)

(11,043)

(1,482)

11,101

Goodwill on fully consolidated companies

-

-

(561)

(514)

(561)

(514)

Property, plant and equipment

11,554

11,506

(33,516)

(29,644)

(21,962)

(18,138)

Long term receivables

1,087

1,371

(31)

(181)

1,056

1,190

Inventories

72,552

41,534

(37,403)

(33,159)

35,149

8,375

Trade and other receivables

8,424

8,212

(11,930)

(25,600)

(3,506)

(17,388)

Group Shareholder's equity

-

-

(4,032)

(6,148)

(4,032)

(6,148)

Long Term Financial Debt and other payable

9,109

11,688

(5,172)

(18,023)

3,937

(6,335)

Provisions Employee Benefits

81,392

89,764

(8,245)

(8,267)

73,147

81,497

Provisions for Environment

12,697

26,150

(384)

(378)

12,313

25,772

Provisions for other liabilities and charges

9,480

12,968

(463)

(583)

9,017

12,385

Current Financial Debt

539

40

(344)

(1,080)

195

(1,040)

Current Provisions for Environment

2,323

1,969

-

-

2,323

1,969

Current Provisions for Other Liabilities & Charges

9,079

9,952

(8)

(8)

9,071

9,944

Trade and other payables

36,431

67,076

(5,262)

(1,309)

31,169

65,767

Total deferred tax due to temporary differences

271,079

304,374

(125,245)

(135,937)

145,834

168,437

Tax losses to carry forward

56,598

70,257

-

-

56,598

70,257

Investments deductions

1,156

867

-

-

1,156

867

Other

5,002

3,389

-

-

5,002

3,389

Deferred tax assets not recognized

(51,124)

(43,858)

-

-

(51,124)

(43,858)

Total tax assets/liabilities

282,711

335,029

(125,245)

(135,937)

157,466

199,092

Compensation of assets and liabilities within same entity

(113,784)

(113,091)

113,784

113,091

-

Net amount

168,927

221,938

(11,461)

(22,846)

157,466

199,092

2019

2020

2019

2020

Thousands of Euros

Base

Base

Tax

Tax

Amount of deductible temporary differences, unused tax losses or tax credits for which no deferred tax asset is recognized in the balance sheet

Expiration date with no time limit

187,883

158,635

51,124

43,858

The changes of the period in temporary differences are charged to the income statement except those arising from events that were recognized directly in the other comprehensive income.

The main movements in deferred tax recognized directly in the other comprehensive income are deferred taxes generated by temporary differences included within the lines “Trade and other receivables” (negative by 6.1 million), “Provisions for employee benefits” (positive by 8.0 million), long-term financial debt (negative by 12.6 million) and “Trade and other payables” (positive by 2.8 million).

Deferred tax assets are only recognized to the extent that their utilization is probable, i.e. if a tax benefit is expected in future periods. The Group assesses a recoverability in a range of 5 to 10 years. The actual tax results in future periods may differ from the estimate made at the time the deferred taxes are recognized.

Unrecognized deferred tax assets of 43.9 million mainly arise from tax losses (39.6 million).

In accordance with IAS 12, a deferred tax liability on untaxed reserves of the Belgian companies, amounting potentially to 37.5 million, has not been recognized as management anticipates that this liability will not be incurred in a foreseeable future.

Group current income tax payable at December 2020 amounting 160,7 million (2019 : 131,5 million) include uncertain tax positions of 114.9 million (91.4 million in 2019).

Thousands of Euros

31/12/2019

31/12/2020

Cash and cash equivalents

Short-term investments : bank term deposits

25,524

373,904

Short-term investments : term deposits (other)

7

5

Cash-in-hands and bank current accounts

246,192

636,397

Total cash and cash equivalents

271,724

1,010,307

Bank overdrafts

32,493

8,678

Net cash as in Cash Flow Statement for continuing operations

239,231

1,001,629

All cash and cash equivalents are fully available for the Group.

Liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed and uncommitted credit facilities and the ability to close out market positions.

Due to the dynamic nature of the underlying businesses, the group aims to maintain funding flexibility through committed credit lines. Excess liquidities are invested for very short periods and are spread over a limited number of banks, all enjoying a satisfactory credit rating.

The increase in term deposit amount mainly stems from the cash proceeds of the convertible bond issuance (500 million nominal).

The detail of the Group’s share in currency translation differences and other reserves is as follows:

Thousands of Euros

Conversion rights recognized in equity

Financial assets at FV through OCI reserves

Cash flow hedge reserves - Commodities

Cash flow hedge reserves - Currencies

Cash flow hedge reserves - IRS

Deferred taxes directly recognized in OCI

Changes in post employment benefits, arising from changes in actuarial assumptions

Share-based payment reserves

Currency translation differences

Total

Balance at the beginning of previous year

-

1,150

(3,925)

3,411

(586)

58,663

(226,884)

31,600

(91,073)

(227,644)

Remeasurements recognized in other comprehensive income

-

(129)

(28,728)

1,937

(101)

28,587

(70,605)

8,211

-

(60,828)

Remeasurements derecognized out of other comprehensive income

-

-

(1,212)

174

-

(145)

-

-

-

(1,183)

Transfer from/to retained earnings

-

-

-

-

-

-

-

(2,540)

-

(2,540)

Other movements

-

120

-

-

-

-

-

-

-

120

Exchange differences

-

-

-

(29)

-

(11)

(539)

-

8,200

7,621

Balance at the end of previous year

-

1,141

(33,865)

5,493

(687)

87,094

(298,028)

37,271

(82,873)

(284,454)

Balance at the beginning of the year

-

1,141

(33,865)

5,493

(687)

87,094

(298,028)

37,271

(82,873)

(284,454)

Remeasurements recognized in other comprehensive income

50,324

(4,198)

(20,951)

7,972

(84)

(513)

(27,632)

10,108

-

15,026

Remeasurements derecognized out of other comprehensive income

-

-

27,054

2,707

-

(8,057)

-

-

-

21,704

Transfer from/to retained earnings

-

-

-

-

-

-

-

(2,737)

-

(2,737)

Other movements

-

-

-

-

-

868

(1,775)

-

-

(908)

Exchange differences

-

5

74

549

-

(204)

2,403

-

(119,284)

(116,457)

Balance at the end of the year

50,324

(3,052)

(27,688)

16,721

(771)

79,187

(325,033)

44,642

(202,157)

(367,826)

The net losses recognized in the OCI regarding cash flow hedges (13.1 million) are the changes in fair value of new cash flow hedging instruments or existing ones at opening but which have not yet expired at year end. The net losses derecognized from OCI (29.8 million) are the fair values of the cash-flow hedging instruments existing at the opening which expired during the year. The total impact incurred at expiration of the cash-flow hedges during the year represents a loss of 54.8 million, recognized in the income statement. This amount includes the mentioned net losses derecognized from OCI (29.8 million) and the fair value changes incurred in the course of the year on expired existing cash-flow hedges and on new instruments contracted during the year (25.0 million).

New net remeasurements as a result of changes in the actuarial assumptions on the defined post-employment benefit plans have been recognized in OCI for -27.6 million. The 2020 shares and stock option plans have led to a share-based payment reserve increase of 10.1 million (refer to note F10 on employee benefits). 2.7 million, linked to exercised options and free shares plans, have been transferred to retained earnings.

The conversion rights embedded in the 500 million convertible bond issued on 23 June 2020 were valued at 50.3 million net of transaction costs and have been recognized in equity (see note F2.17).

Thousands of Euros

Bank loans

Lease liability

Other loans

Total

Non-current

At the beginning of previous year

705,004

3,843

708,846

. Change in accounting policies

-

37,262

-

37,262

. Acquisition through business combinations

-

3,181

-

3,181

. Increase

400,579

22,266

6

422,851

. Decrease

-

(16,536)

(291)

(16,827)

. Translation differences

37

89

-

126

. Transfers

(4,354)

1

(4,353)

At the end of previous year

1,101,266

46,262

3,555

1,151,083

. Increase

125,000

27,657

494,360

647,017

. Decrease

-

(19,801)

(304)

(20,105)

. Translation differences

(146)

(1,251)

5

(1,392)

. Transfers

(21,120)

-

(4)

(21,124)

. Conversion rights recognized in equity

-

-

(50,324)

(50,324)

At the end of the financial year for continuing operations

1,205,000

52,865

447,289

1,705,154

Current portion of long-term financial debts

At the end of the preceding financial year

3,545

-

154

3,700

. Increase / decrease

(12,151)

-

0

(12,151)

. Translation differences

(526)

-

(0)

(526)

. Transfers

30,922

-

4

30,926

At the end of the financial year for continuing operations

21,790

-

158

21,948

Thousands of Euros

Short term bank loans

Bank overdrafts

Short term loan : commercial paper

Other loans

Total

Current

At the end of the preceding financial year

244,933

32,493

282,936

-

560,363

. Increase / decrease

346,873

(22,392)

(148,654)

914

176,742

. Transfers

(9,802)

-

-

-

(9,802)

. Translation differences

(27,738)

(1,424)

-

(910)

(30,072)

At the end of the financial year for continuing operations

554,266

8,678

134,282

4

697,230

Net financial debt at 31 December 2020 stood at 1,414.0 million, slightly down compared with 1,443,4 million at the start of the year.

On June 15, 2020, Umicore and the European Investment Bank (“EIB”) concluded a 125 million loan agreement (fair value of €126 million). The proceeds of the loan, which has a maturity of eight years, will finance part of Umicore’s investment in cathode materials plant in Nysa, Poland. Once completed, this greenfield plant will supply the European operations of Umicore’s global battery cell and automotive customers.

On June 16, 2020, Umicore issued senior unsecured convertible bonds (the “Bonds”) with a contractual maturity of 5 years, under Umicore’s authorized capital, for an aggregate principal amount of 500 million. The net proceeds will be used for general corporate purposes and to fund Umicore’s strategic developments in the areas of clean mobility and materials recycling. Unless previously converted, redeemed or repurchased and cancelled, the Bonds will be redeemed at 100% of their principal amount on June 23, 2025. At inception, Umicore determined the bonds met the IFRS definition of a compound financial instrument. At the date of issuance, the equity portion of the Bonds representing the option to convert the instrument into ordinary shares is valued 50.3 million (net of transaction costs).

The transaction costs that relate to the issuance of the Bonds were allocated to the liability and equity components of the instrument in proportion to the allocation of the proceeds.

The fair value of the financial liability component of the convertible bond as of December 31,2020 amounted to444.1 million.

On October 2, 2020, Umicore received confirmation from Banque de France, as foreseen by art. D.213-2 of “Code monétaire et financier” of the French law, that the conditions as described in the financial documentation of its NEU commercial paper (no longer than 1 year maturity) and NEU medium term note (maximum 3 years maturity), for a maximum amount of 600 million each, fulfill the requirements of the law.

On December 31, 2020, an amount of 45 million was outstanding on the NEU CP program and no amount was outstanding on the NEU MTN program.

An amount of €89,75 million was outstanding on the Belgian Commercial Paper programme (out of 600 million available under the program).

The financial debt includes the US private debt placements issued in 2019 (390 million; fair value of 413.8 million) and in 2017 (360 million; fair value 394.0 million) and also the Schuldschein issued in 2017 ( 330 million; fair value 342.2 million).

On 31 December 2020, there were no outstanding advances under the 300 million Syndicated Bank Credit Facility maturing in October 2022 and no outstanding advances under the 495 million Syndicated Bank Credit Facility maturing in April 2025.

The aforementioned Syndicated Bank Credit Facilities and the long term debt instruments require the Company to comply with certain financial covenants. Umicore has not faced any breach of those covenants in 2020 or in previous years.

The long-term debts mainly include debt instruments in EUR.

The average interest rate on the average gross debt amounted to 1.91% for full year 2020 (2.11% for full year 2019).

The line "new loans and repayment of loans" in the consolidated statement of cash flow do not include the movements on bank overdrafts and the currency translation differences.

The net gearing ratio end of 2020 of 35.0% (35.2% in 2019) and the net financial debt over adjusted EBITDA ratio of 1.76x (compared to 1.92x end of 2019) position the Group well within its targeted capital structure limits.

Thousands of Euros

Type of Interest

Due within 1 year

Due between 1 and 5 years

Due beyond 5 years

Total

Gross Financial debt of previous year

Lease Liabilities

-

38,087

8,174

46,262

Credit Institutions

Fixed/Floating

281,126

24,820

-

305,946

Commercial Papers

Floating

282,936

-

-

282,936

Schuldschein

Fixed/Floating

-

287,000

43,000

330,000

US Private Placement

Fixed

-

-

750,000

750,000

Total

564,062

349,907

801,174

1,715,144

Thousands of Euros

Type of Interest

Due within 1 year

Due between 1 and 5 years

Due beyond 5 years

Total

Gross Financial debt of the year

Lease Liabilities

-

40,478

12,387

52,865

Credit Institutions

Fixed/Floating

584,895

3,190

-

588,085

Commercial Papers

Floating

134,282

-

-

134,282

Schuldschein

Fixed/Floating

-

287,000

43,000

330,000

US Private Placement

Fixed

-

-

750,000

750,000

EIB Loan

Fixed

-

-

125,000

125,000

Convertible Bond

Fixed

-

444,100

-

444,100

Total

719,177

774,768

930,387

2,424,332

Thousands of Euros

EUR

Other currencies

Total

Analysis of long term debts by currencies (including current portion)

Bank loans

1,205,000

21,790

1,226,790

Other loans

447,445

2

447,447

Non-current financial debts (including current portion)

1,652,445

21,792

1,674,237

Thousands of Euros

2019

2020

Non current financial debt

1,151,083

1,705,154

Current portion of non current financial debt

3,700

21,948

Current financial debt

560,363

697,230

Cash and cash equivalents

(271,724)

(1,010,307)

Net financial debt

1,443,422

1,414,024

Gross outstanding debt

Short term bank loans

23.8%

Long term bank loans

49.7%

Commercial paper

5.5%

Bank overdrafts

0.4%

Lease liability

2.2%

Convertible Bond

18.3%

Other bank facilities

0.1%

Millions of Euros

2019

2020

Net financial debt

1,443.4

1,414.0

Equity

2,660.5

2,621.9

Total

4,103.9

4,035.9

Gearing ratio (%)

35.2

35.0

Thousands of Euros

Notes

31/12/2019

31/12/2020

Non-current

Long-term trade payables

2,579

-

Other long-term debts

5,520

5,682

Investment grants and deferred income from grants

16,021

17,823

Total for continuing operations

24,120

23,505

Current

Trade payables

1,466,140

1,896,099

Advances received on contracts in progress

15,448

32,180

Tax payable (other than income tax)

26,190

38,317

Payroll and related charges

125,252

135,835

Other amounts payable

56,399

39,733

Dividends payable

11,657

11,618

Accrued interest payable

7,856

9,109

Fair value payable financial instrument held for cash flow hedging

F33

48,829

57,957

Fair value payable - financial instruments related to FV hedging

F33

18,670

38,296

Accrued charges and deferred income

139,907

159,784

Total for continuing operations

1,916,348

2,418,928

Compared to 31 December 2019, trade payables increased, driven mainly by a substantial increase in Catalysis, fueled by higher metal prices. Trade payables include bank acceptance drafts issued by Umicore in China. Bank acceptance drafts are a commonly used form of payment in China, often preferred by suppliers in view of their transferrability, their use as financing collateral or their ability to be discounted. End of 2020, Umicore issued 280 million of bank acceptance drafts in China (compared to 196 million end of 2019). Trade payables end of 2020 include contracted metals to be repurchased for an amount of 230 million (compared to 206 million end of 2019). The tax payables (other than income tax) mainly include VAT payables.

PREVIOUS FINANCIAL YEAR

Earliest contractual maturity

Thousands of Euros

< 1 Month

1 to 3 Months

3 Months to 1 Year

1 to 5 Years

> 5 years

Total

Financial debt

153,186

192,344

218,525

349,908

801,174

1,715,137

Current

153,186

192,344

218,525

-

-

564,055

Short term bank loans

130,764

56,370

57,799

-

-

244,933

Bank overdrafts

21,188

-

11,305

-

-

32,493

Short-term loan: commercial paper

-

134,155

148,781

-

-

282,936

Other loans

(7)

-

0

-

-

(7)

Current portion of long-term bank loans

1,229

1,793

523

-

-

3,545

Current portion of other long-term loans

13

26

116

-

-

154

Non-current

-

-

-

349,908

801,174

1,151,082

Bank loans

-

-

-

308,267

793,000

1,101,267

Lease liability

-

-

-

38,087

8,174

46,261

Other loans

-

-

-

3,554

-

3,555

Trade and other payables

1,343,059

323,292

231,717

29,510

12,891

1,940,469

Current

1,343,059

323,292

231,717

18,281

-

1,916,349

Trade payables

1,113,438

216,335

136,367

-

-

1,466,140

Advances received on contracts in progress

5,092

8,720

1,636

-

-

15,448

Tax payable (other than income tax )

22,491

3,700

(0)

-

-

26,190

Payroll and related charges

43,063

26,409

55,780

-

-

125,252

Other amounts payable

25,106

16,656

14,638

-

-

56,400

Dividends payable

11,657

-

-

-

-

11,657

Accrued interest payable, third parties

6,165

1,390

300

-

-

7,856

Fair value payable financial instrument held for cash flow hedging

399

9,372

20,778

18,281

-

48,829

Fair value payable - financial instruments related to FV hedging

8,198

8,252

2,219

-

-

18,670

Accrued charges and deferred income

107,450

32,457

0

-

-

139,907

Non-current

-

-

-

11,229

12,891

24,120

Long-term trade payables

-

-

-

-

2,579

2,579

Other long-term debts

-

-

-

1,192

4,328

5,520

Investment grants and deferred income from grants

-

-

-

10,037

5,984

16,021

FINANCIAL YEAR

Earliest contractual maturity

(EUR thousand)

< 1 Month

1 to 3 Months

3 Months to 1 Year

1 to 5 Years

> 5 years

Total

Financial debt

274,765

90,870

353,542

774,766

930,387

2,424,330

Current

274,765

90,870

353,542

-

-

719,177

Short term bank loans

231,384

55,590

267,293

-

-

554,266

Bank overdrafts

8,678

-

-

-

-

8,678

Short-term loan: commercial paper

25,000

35,250

74,032

-

-

134,282

Other loans

-

4

-

-

-

4

Current portion of long-term bank loans

9,691

-

12,099

-

-

21,790

Current portion of other long-term loans

13

26

119

-

-

158

Non-current

-

-

-

774,766

930,387

1,705,153

Bank loans

-

-

-

287,000

918,000

1,205,000

Lease liability

-

-

-

40,478

12,387

52,865

Other loans

-

-

-

447,288

0

447,288

Trade and other payables

1,377,057

362,626

659,330

32,008

11,409

2,442,430

Current

1,377,057

362,626

659,330

19,912

-

2,418,925

Trade payables

1,105,279

246,622

544,198

-

-

1,896,099

Advances received on contracts in progress

13,586

18,199

395

-

-

32,180

Tax payable (other than income tax )

35,188

2,591

539

-

-

38,317

Payroll and related charges

38,663

41,765

55,407

-

-

135,835

Other amounts payable

28,760

4,627

6,346

-

-

39,733

Dividends payable

11,618

-

-

-

-

11,618

Accrued interest payable, third parties

6,960

1,653

496

-

-

9,109

Fair value payable financial instrument held for cash flow hedging

471

9,324

28,631

19,527

-

57,953

Fair value payable - financial instruments related to FV hedging

16,119

17,902

3,890

385

-

38,296

Accrued charges and deferred income

120,413

19,943

19,428

-

-

159,784

Non-current

-

-

-

12,096

11,409

23,505

Other long-term debts

-

-

-

1,182

4,500

5,682

Investment grants and deferred income from grants

-

-

-

10,914

6,909

17,823

The Group has various legal and constructive defined benefit obligations, the vast majority of them being “final pay” plans linked to the Belgian and German operations

Thousands of Euros

Post-employment benefits, pensions and similar

Post-employment benefits - other

Termination benefits early retirement & similar

Other long-term employee benefits

Total

At the end of the previous year

347,160

3,806

26,546

15,137

392,650

. Increase (included in "Payroll and related benefits")

27,668

(106)

6,157

1,335

35,054

. Reversal (included in "Payroll and related benefits")

(63)

-

-

(7)

(70)

. Use (included in "Payroll and related benefits")

(25,943)

(170)

(4,985)

(723)

(31,820)

. Interest and discount rate impacts (included in "Finance cost - Net")

3,175

9

23

110

3,317

. Translation differences

(72)

(282)

(444)

(24)

(822)

. Transfers

747

(467)

(210)

(26)

44

. recognized in other comprehensive income

28,162

(159)

(0)

0

28,004

At the end of the financial year for continuing operations

380,834

2,633

27,087

15,802

426,356

Thousands of Euros

31/12/2019

Movements 2020

31/12/2020

Belgium

67,478

28,095

95,573

Germany

297,653

3,090

300,743

Subtotal

365,131

31,185

396,316

Other entities

27,519

2,522

30,040

Total for continuing operations

392,650

33,707

426,356

The first table shows the balances and the movements in provisions for employee benefits of the fully consolidated subsidiaries only.

The termination benefits mainly concern mainly Belgian pre-retirement plans and some severance pay schemes in Korea. Other long-term benefits mainly concern jubilee premium in Belgium and Germany.

The lines “Increase”, “Reversal” and “Use” of employee benefits provisions can be linked with the line “Provisions for employee benefits” of the note F10. The amount recognized in OCI originates mainly from a decrease in discount rates on the pension plans. A reconciliation with the note F23 and the Statement of Comprehensive income is provided in the tables below.

The defined contribution plans of the Group in some countries like in the USA, Canada, South Africa and Germany are not part of this note as the amounts are directly recognized in the income statement under the line “Contribution to defined contribution plans” (see note F10).

The following disclosure requirements under IAS 19 amended were derived from the reports obtained from external actuaries.

Umicore defined benefit pension schemes for the 2 major countries are the following:

BELGIUM

Characteristics of the Defined Benefit plansUmicore companies in Belgium operate defined benefit plans that provide retirement or long-term employee benefits which are related to salary and age or length of service. These retirement and long term benefit plans represent a defined benefit obligation of 314.0 million and assets for 218.5 million. They foresee in lump sum or monthly payments upon retirement or pre-retirement and benefits in case of reaching a number of years of service or in case of death or disability prior to retirement.

The net provisions for pension of 95.5 million can be broken down in post-employment defined benefit plans (67.2 million of which 172.9 million is the obligation and 105.7 million relates to plan assets), termination benefits plan (6.3 million of obligation not funded), jubilee premium (3.5 million, not funded) and post-employment defined contributions plans and bonus saving plans with guaranteed return and therefor treated as Defined Benefit plans (18.6 million of which 131.3 million is the obligation and 112.7 million relates to plan assets).

Funding The post-employment plans are externally funded through either insurance companies or a self-administrated institution for occupational retirement provision (“IORP”). For the IORP, the necessary governance processes for risk management are in place. One of the risk measures is to perform on a regular basis a “Continuity Test” in which the consequences of strategic investment policies are analyzed in terms of risk- and-return profiles and solvency measures. A statement of investment principles and funding policy are derived from this. The purpose is to have a well-diversified asset allocation to control the risk.

Fair values of plan assets The fair values of the equity and debt instruments are determined based on quoted market prices in active markets (level 1 fair value classification). The plans hold no direct positions in Umicore shares or bonds, nor do they own any property used by an Umicore entity. Investments are well diversified so that the failure of any single investment would not have a material impact on the overall level of assets.

GERMANY

Characteristics of the Defined Benefit plansThe post-employment benefits are mainly unfunded pension plans of defined benefit type providing retirement, disability and death benefits. All benefit plans are based on final or final average pay excluding the deferred compensation plans. The benefits of the deferred compensation plan are based on annual converted salary and provide a guaranteed interest of 3.0% p.a. (6.0% p.a. for salary conversions before 2014). All post-employment plans represent a defined benefit obligation of 308.3 million and assets for 7.6 million.

The net provisions for pension of 300.7 million mainly includes the Degussa pension defined benefit plans, including the contribution plan where the inflation and interest rate adjustments of the benefits are guaranteed (224.1 million), the closed and open compensation plans (62.0 million), a jubilee premium plan (7.0 million) and other termination benefits (7.8 million).

Funding As mentioned above, the post-employment benefits are mainly unfunded plans. A minor part is funded by pledged reinsurance contracts.

Fair values of plan assets All plan assets relate to pledged insurance contracts and have no quoted market price.

The most significant risks related to the defined benefit plans are:

  • Asset volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit.

  • Changes in bond yields: A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plan’s bond holdings.

  • Salary risk: The majority of the plans’ benefit obligations are calculated by reference to the future salaries of plan members. As such, any salary increase of plan members higher than expected will lead to higher liabilities.

  • Longevity risk: All pension plans beside the new deferred compensation plan as from 2014 provide life annuities which involve the risk of longevity i.e. the risk that the payment period of the pension increases due to the increase in life expectancy. The company uses mortality rates which depend on the year of birth to include this risk in the pension obligation.

  • Risk of cash outflow: Since death as active and disability benefits are provided there is a risk of cash outflow before retirement.

  • Legislation risks: If the law which define the benefit changes, it can result in a change of the obligations.

Some additional risks are related to Germany only:

  • In Germany two defined contribution pension plans exist which are externally financed via the “Pensionskasse Degussa” (PKD) or the support fund “Unterstützungskasse Degussa” (RUK). With respect to the required pension adjustments of pensions paid by these plans, there is a risk that these adjustments cannot be fully borne by the PKD or RUK and therefore can result in additional unfunded pension obligations. This part of the PKD and RUK plans is therefore considered as a Defined Benefit Plan and the risk of the additional obligation expected until end of 2023 has been included in the defined benefit obligation and is yearly reviewed (additional obligation of 5.1 million for PKD and 0.9 million for RUK at the end of 2020).

  • The closed deferred compensation plan provides a guaranteed interest rate of 6% which increases the risk for a pension cost in addition to the converted salary. The plan was closed at 31 December 2013 and replaced by a plan with no significant risk in this respect.

And some risks are related to Belgium only:

  • Because of the Belgian legislation applicable to 2nd pillar pension plans (so-called “Law Vandenbroucke”), all Belgian Defined Contribution plans have to be considered under IFRS as Defined Benefit plans. Law Vandenbroucke states that in the context of defined contribution plans, the employer must guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions. However, shortly before year-end 2015, a change in the Belgian Law was enacted resulting in a decrease of the guaranteed return from 3.25 % to a minimum interest rate defined based upon the Belgian 10-year interest rate but within the range 1.75% – 3.25%. The new rate (currently 1.75%) applies for the years after 2015 on future contributions and also on the accumulated past contributions as at 31 December 2015 if the financing organization does not guarantee a certain result on contributions until retirement age. If the organization does guarantee such a result, the rates 3.25/3.75% still apply. Because of this minimum guaranteed return, the employer is exposed to a financial risk: further contributions could be required if the return on assets would not be sufficient to reach the minimum benefits to be paid. The group has plans that are financed through insurance contract as well as one plan financed through an IORP. The related defined benefit obligations have been aggregated with the other obligations for defined benefit plans. The Projected Unit Credit (PUC) methodology has been used. Total defined benefit obligations related to those plans amounts to 131.3 million as at the end of December 2020 and related plan assets to 112.7 million.

Thousands of Euros

2019

2020

Change in benefit obligation

Benefit obligation at beginning of the year

549,052

651,685

Current service cost

32,958

34,591

Interest cost

9,908

6,246

Plan Participants' Contributions

946

905

Remeasurements - changes in demographic assumptions

1,133

1,556

Remeasurements - changes in financial assumptions

81,769

29,185

Remeasurements - experience adjustments

3,032

2,942

Benefits paid from plan/company

(24,272)

(26,873)

Expenses paid

(3,773)

(1,819)

Plan combinations

74

157

Exchange rate changes

858

(1,353)

Benefit obligation at end of the year

651,685

697,222

Thousands of Euros

2019

2020

Change in plan assets

Fair value of plan assets at the beginning of the year

216,101

259,952

Expected return on plan assets

3,740

2,349

Remeasurements on plan assets

17,138

5,398

Employer contributions

49,291

32,473

Member contributions

946

905

Benefits paid from plan/company

(24,272)

(26,873)

Expenses paid

(3,823)

(1,870)

Net transfer in/(out) (including the effect of any business combinations/divestitures)

87

(76)

Exchange rate changes

744

(568)

Fair value of plan assets at the end of the year

259,952

271,690

Pension plans mainly in Belgium, Korean, Liechtenstein,and Japan are wholly or partly funded with assets covering a substantial part of the obligations. All other plans have no material funding or are unfunded.

Thousands of Euros

2019

2020

Amount recognized in the balance sheet

Defined benefit obligations

651,685

697,222

Fair value of plan assets

259,952

271,690

Funded Status

391,733

425,532

Net liability (asset)

391,733

425,532

Components of pension costs

Amounts recognized in profit and loss statement

Current service cost

32,958

34,591

Interest cost

9,908

6,246

Interest income on plan assets

(3,740)

(2,349)

Remeasurement of Other Long Term Benefits

(1,890)

277

Administrative expenses and taxes

51

51

Total pension cost recognized in P&L account

37,287

38,816

Amounts recognized in other comprehensive income

Cumulative remeasurements at opening

199,949

270,082

Remeasurements of the year

70,882

28,004

Minorities

(772)

37

Other movements

-

1,775

Exchange differences

23

(69)

Total recognized in the OCI at subsidiaries

270,082

299,829

Remeasurements at associates and joint ventures

27,944

25,202

Total recognized in the OCI

298,026

325,030

Remeasurements recognised in Other comprehensive income as per Note F23 (w/o Minorities)

(70,605)

(27,632)

Currency translation differences as per Note F23 (w/o Minorities)

(539)

2,403

Reameasurements related to Minorities (including ctd's on Minorities )

(776)

32

Total Remeasurement shown in OCI

(71,921)

(25,198)

.Currency translation differences as per Note F23 (w/o Minorities)

539

(2,403)

.Currency translation differences related to Minorities

4

5

.Remeasurements related to equity companies

496

(409)

Total remeasurements shown in note F27

(70,882)

(28,004)

Remeasurements (recognized in other comprehensive income)

Effect of changes in demographic assumptions

1,070

1,433

Effect of changes in financial assumptions

80,772

29,124

Effect of experience adjustments

5,859

2,677

(Return) on plan assets (excluding interest income)

(17,015)

(5,230)

Total remeasurements included in Other Comprehensive Income

70,686

28,004

The interest cost and return on plan assets as well as the discount rate impact on the nonpost- employment benefit plans, are recognized under the finance cost in the income statement (see note F11). All other elements of the expense of the year are classified under the operating result in the “wages, salaries and direct social advantages”.

Remeasurements of the year recognized in OCI originate mainly from a change in discount rates on the pension plans and differences between the expected and actual return on plan assets.

2019

2020

PRINCIPAL ACTUARIAL ASSUMPTIONS

Weighted average assumptions to determine benefit obligations at year end

Discount rate (%)

0.95

0.78

Rate of compensation increase (%)

2.60

2.55

Rate of price inflation (%)

1.78

1.75

Rate of pension increase (%)

1.30

1.30

Weighted average assumptions used to determine net cost

Discount rate (%)

1.85

0.95

Rate of compensation increase (%)

2.85

2.60

Rate of price inflation (%)

1.78

1.78

Rate of pension increase (%)

1.36

1.30

2020

Fair value of all plan assets

Fair Value of plan assets with quoted market price

Plan assets

Cash and cash equivalents

25,629

25,624

Equity instruments

37,215

37,204

Debt instruments

104,902

104,786

Real estate

6,083

6,078

Assets held by insurance company

92,047

79,106

Other

5,814

4,542

Total plan assets

271,690

257,340

Assumptions are recommended by the local actuaries in line with the IAS19 revised. The standard reference for the Eurozone is iBOXX AA Index yield and similar indexes are used for the other regions. Mortality tables used are country specific.

Other plan assets are predominantly invested in insurance contracts and bank term deposits. The expected long-term rate of return on assets assumptions is documented for the individual plans as recommended by the local actuaries.

2020

Valuation trend +0,25%

Valuation trend -0,25%

Sensitivity to trend rate assumptions on discount rate

Present value of defined benefit obligation

658,818

709,792

Weighted average duration of benefit obligation (in years)

14.18

15.63

Sensitivity to trend rate assumptions on inflation rate

Present value of defined benefit obligation

672,805

642,411

Sensitivity to trend rate assumptions on salary increase rate

Present value of defined benefit obligation

691,403

670,934

Thousands of Euros

2019

2020

BALANCE SHEET RECONCILIATION

Balance sheet liability (asset) as of previous year

332,951

391,734

Pension expense recognized in P&L in the financial year

37,287

38,816

Amounts recognized in SoCI

70,686

28,004

Employer contributions via funds in the financial year

(37,964)

(20,633)

Employer contributions paid directly in the financial year

(11,327)

(11,840)

Amounts recognized due to plan combinations

(13)

233

Exchange rate adjustment - (gain)/loss

114

(785)

Balance sheet liability (asset) as of end of the year

391,734

425,529

Provisions for employee benefits in non current liabilites as per Balance Sheet

392,651

426,356

Asset employee benefit in non current asset (note F20)

(744)

(820)

Other

(173)

(7)

Net obligation on BalanceSheet

391,734

425,529

At 31 December

Thousands of Euros

2016

2017

2018

2019

2020

Present value of defined benefit obligation

521,153

552,021

549,052

651,685

697,222

Fair value of plan assets

183,246

209,774

216,101

259,952

271,690

Deficit (surplus) in the plan

337,907

342,247

332,951

391,733

425,532

Experience adjustments on plan assets

(16,036)

(5,286)

4,410

(17,138)

(5,398)

Experience adjustments on plan liabilities

14,861

4,611

5,967

3,032

2,942

Thousands of Euros

2020

EXPECTED CASH FLOWS FOR FOLLOWING YEAR

Expected employer contributions

34,132

Expected total benefit payments

Year 1

31,359

Year 2

25,960

Year 3

25,600

Year 4

20,150

Year 5

29,209

Next 5 years

160,840

Plan

Expiry date

Exercise

Exercise price EUR (the exercise price may be higher in certain countries)

Number of options still to be exercised

ISOP 2014

10/02/2021

all working days of Euronext Brussels

16.14

101,750

15.80

3,000

16.49

7,875

112,625

ISOP 2015

09/02/2022

all working days of Euronext Brussels

17.29

344,315

18.90

10,000

19.50

24,750

379,065

ISOP 2016

04/02/2023

all working days of Euronext Brussels

16.63

720,750

720,750

ISOP 2017

13/02/2024

all working days of Euronext Brussels

25.50

977,000

27.04

23,750

1,000,750

ISOP 2018

08/02/2025

all working days of Euronext Brussels

40.90

1,182,625

1,182,625

ISOP 2019

10/02/2026

all working days of Euronext Brussels

34.08

1,216,000

36.78

5,000

1,221,000

ISOP 2020

09/02/2027

all working days of Euronext Brussels

42.05

1,168,375

1,168,375

Total

5,785,190

ISOP refers to “Incentive Stock Option Plan” (worldwide plan for managers).

The stock options, which are typically vested at the time of the grant, are foreseen to be settled with treasury shares. Options which have not been exercised before the expiry date elapse automatically.

2019

2020

Number of share options

Weighted average exercise price

Number of share options

Weighted average exercise price

DETAILS OF THE SHARE OPTIONS OUTSTANDING DURING THE YEAR

Outstanding at the beginning of the year

5,356,854

24.14

5,641,250

27.42

Granted during the year

1,221,000

34.09

1,168,375

42.05

Exercised during the year

936,604

17.37

1,024,435

18.25

Outstanding at the end of the year

5,641,250

27.42

5,785,190

32.00

Exercisable at the end of the year

5,641,250

27.42

5,785,190

32.00

The options outstanding at the end of the year have a weighted average contractual life until January 2025.

The details concerning the calculation of the fair value of the options granted are detailed under note F10 on Payroll and related Benefits.

Thousands of Euros

Provisions for soil clean-up & site rehabilitation

Other environmental provisions

Total

At the end of previous year

57,992

10,089

68,081

. Acquisition through business combinations

-

2,079

2,079

. Increase (included in "Other operating expenses")

54,479

7,703

62,182

. Reversal (included in "Other operating expenses")

(353)

(197)

(550)

. Use (included in "Other operating expenses")

(1,777)

(6,501)

(8,278)

. Discounting (included in "Finance cost -Net")

53

-

53

. Translation differences

(2,156)

-

(2,156)

. Other movements

(0)

(38)

(38)

At the end of the financial year for continuing operations

108,238

13,136

121,374

Of which - Non Current

105,093

7,165

112,258

Of which - Current

3,145

5,971

9,116

Provisions for environmental legal and constructive obligations are recognized and measured by reference to an estimate of the probability of future cash outflows as well as to historical data based on the facts and circumstances known at the end of the reporting period. The actual liability may differ from the amounts recognized.

Provisions increased overall by 53.3 million, with additional provisions which are higher than the uses and reversals of existing provisions.

The acquisitions through business combinations are related to the subsequent corrections of the opening balance sheet in Finland during the course of 2020 (note F8).

The new provisions for soil and groundwater remediation are mainly related to new provisions taken in Belgium at the Hoboken and Olen sites. In Recycling, a charge of 50.9 million was accounted for, comprising a 50.0 million provision to cover costs related to the intention to buy houses closest to the Hoboken plant and create a green zone. These costs comprise an estimated purchase value of the houses (based on third party appraisal) to be demolished as well as an estimate of demolition and landscaping costs. Concertation with the city council and residents is ongoing and might result in adjustments to this cost estimate.

Most of the uses of provisions for soil and groundwater remediation for the period are linked to the realization of site remediation programs in France, in the USA and in Belgium.

Early 2020, the Federal Agency for Nuclear Control issued guiding principles for the permanent remediation and storage of the legacy radioactive material related to Umicore’s Olen site in Belgium. Joint working groups have been established, including governmental agencies such as NIRAS/ONDRAF, OVAM, FANC and Umicore to elaborate a roadmap describing the different steps that need to be taken to reach a permanent storage solution. This exercise will include an update of the estimated future remediation and storage costs and the dedicated existing environmental provisions once the technical aspects will have been determined. Developing and implementing this detailed roadmap is currently expected to take several years. Umicore will in the meantime continue the monitoring works to guarantee that no risks are emanating from those remnants, neither for the workers on site, nor for the surrounding population.

The movements of the other environmental provisions are mainly related to the need for and adjustment of CO2 emission rights in Belgium.

Management expects the most significant cash outflows on these projects for non-current elements to take place within 10 years.

Thousands of Euros

Provisions for reorganisation & restructuring

Provisions for litigation

Provisions for onerous contracts IFRS 9

Provisions for other liabilities and charges

Total

At the end of the previous year

22,945

3,288

24,105

53,293

103,631

. Increase (included in "Other operating expenses")

39,590

-

-

24,819

64,409

. Reversal (included in "Other operating expenses")

(3,111)

-

(2,650)

(16,552)

(22,313)

. Use (included in "Other operating expenses")

(9,888)

(569)

(528)

(9,190)

(20,175)

. Translation differences

(2,100)

(32)

(964)

(1,489)

(4,585)

. Transfers

(6,581)

-

-

6,572

(9)

At the end of the financial year for continuing operations

40,856

2,686

19,963

57,454

120,958

Of which - Non Current

29,154

945

-

39,683

69,782

Of which - Current

11,703

1,741

19,963

17,773

51,180

Provisions for reorganization and restructuring and other liabilities and charges are recognized and measured by reference to an estimate of the probability of future outflow of cash as well as to historical data based on the facts and circumstances known at the end of the reporting period. The actual liability may differ from the amounts recognized.

Provisions increased overall by 17.3 million.

Additional provisions for reorganization and restructuring have been taken for the restructuring initiatives in Cobalt & Specialty Materials in Belgium, in the USA and in France for 9.4 million. 14.7 million have been booked as well in Rechargeable Battery Materials linked to a site reconfiguration in Korea and 13.9 million in Catalysis related to the consolidation of the North American automotive catalysts production.

The uses of provisions for reorganization and restructuring relate to the execution of the previously announced restructurings in the USA and in Germany.

The provisions for litigation are not including the tax provisions related to IFRIC 23 as those are booked under the line Income tax payable.

The provisions for onerous contracts related to IFRS 9 are linked to the introduction of IFRS 9 for fair value hedging. The Group’s economical transactional metal hedging policy prescribes that mark-to-market valuation principles are initially applied on all elements of the transactional hedging position, hedging instruments as well as hedged items. Where possible this happens under IFRS 9 hedge accounting criteria. When IFRS 9 hedge accounting cannot be applied or obtained, Umicore offsets under IAS 37 principles any material positive mark-to-markets with provisions for onerous contracts and reclassifies the negative mark-to-markets under the provisions for onerous contracts (see also Notes F2.21.1, F3.2.2 and F4.5). The movement in 2020 on the IFRS 9 related onerous contract provisions amounted to net decrease of 4.1 million.

The other provisions for liabilities and charges include other onerous contracts provisions of 12.7 million (net increase of 9.5 million compared with 2019) and provisions for warranty and quality recall risks of 32.8 million (net decrease of 10.3 million compared with 2019) that are mainly linked to risks related to automotive end market applications in both Catalysis and Energy & Surface Technologies (the latter referring to the dedicated provisioning model for battery materials introduced in 2018).

No reliable estimation could be made regarding the expected timing of cash outflows related to the non-current part of the provisions for other liabilities and charges.

Thousands of Euros

Notes

31/12/2019

30/06/2020

31/12/2020

Intangible assets

F14,F15

370,859

345,630

346,888

Property, plant and equipment

F16

2,094,672

2,082,292

2,163,661

Investments accounted for under the equity method

F17

150,642

144,233

139,839

Financial assets at FV through OCI

F18

10,897

10,480

8,352

Inventories

F19

2,462,330

2,516,570

2,718,092

Non current receivable (excluding assets employee benefits)

F20

10,865

9,815

10,945

Adjusted current accounts receivable

1,405,810

1,281,869

1,611,461

Income tax receivable

45,447

39,076

39,553

Assets included in capital employed

6,551,521

6,429,964

7,038,790

Non-current trade and other payables

F25

24,120

21,246

23,505

Adjusted current accounts payable

1,867,518

1,807,704

2,360,975

Translation reserves

F23

(82,870)

(154,151)

(202,148)

Non-current provisions

F29,F30

107,487

106,666

182,040

Current provisions

F29,F30

64,230

50,721

60,296

Income tax payable

131,483

147,874

160,734

Liabilities included in capital employed

2,111,969

1,980,060

2,585,401

Capital employed

4,439,552

4,449,904

4,453,389

Eliminations

2,439

2,707

3,191

Capital employed as published

4,441,991

4,452,611

4,456,580

Average Capital Employed in half year preceding closing date

4,208,271

4,454,596

Average Capital Employed in year preceding closing date

4,048,377

4,450,948

Adjusted EBIT in year preceding closing date

F9

508,920

536,361

ROCE in year preceding closing date

12.57%

12.05%

The adjusted current account receivables included in the “Capital Employed” do not take into account the margin calls (20.6 million at the end of 2020) and the gains booked on the mark-to-market value of strategic hedging instruments (45.1 million in 2020). The adjusted current account payables included in the “Capital Employed” do not take into account the losses booked on the mark-to-market value of strategic hedging instruments (58.0 million at the end of 2020).

Average capital employed for the half years is calculated as the average of the capital employed at the end of the period and at the end of the preceding period. Average capital employed for the year is calculated as the average of the capital employed of both half years.

AS AT THE END OF PREVIOUS YEAR

Carrying amount

Thousands of Euros

Level

Fair value

Fair value hedge accounting (*)

Cash Flow hedge accounting

Loans, receivables and payables

Financial assets at FV through OCI

ASSETS

Financial assets at fair value through Other Comprehensive Income

10,897

-

-

-

10,897

Financial assets at fair value through Other Comprehensive Income - Shares

1

10,897

-

-

-

10,897

Loans granted

2,192

-

-

2,192

-

Loans to associates and non consolidated affiliates

2,192

-

-

2,192

-

Trade and other receivables

1,445,696

47,495

19,699

1,378,502

-

Non-current

Cash guarantees and deposits

8,893

-

-

8,893

-

Other receivables maturing in more than 1 year

1,972

-

-

1,972

-

Assets employee benefits

1,173

-

-

1,173

-

Current

Trade receivables (at cost)

1,171,835

-

-

1,171,835

-

Trade receivables (write-down)

(22,983)

-

-

(22,983)

-

Other receivables (at cost)

180,336

-

-

180,336

-

Other receivables (write-down)

(207)

-

-

(207)

-

Interest receivable

2

156

-

-

156

-

Fair value of financial instruments held for cash-flow hedging

2

19,699

-

19,699

-

-

Fair value receivable - financial instruments related to FV hedging

47,495

47,495

-

-

-

Deferred charges and accrued income

37,327

-

-

37,327

-

Cash and cash equivalents

271,723

-

-

271,723

-

Short-term investments: bank term deposits

25,524

-

-

25,524

-

Short-term investments: term deposits (other)

7

-

-

7

-

Cash-in-hand and bank current accounts

246,192

-

-

246,192

-

Total of financial instruments (Assets)

1,730,508

47,495

19,699

1,652,417

10,897

Liabilities

Financial debt

1,753,145

-

-

1,715,146

-

Non-current

Bank loans

1,139,266

-

-

1,101,266

-

Lease liability

46,262

-

-

46,262

-

Other loans

3,555

-

-

3,555

-

Current

Short term bank loans

248,478

-

-

248,478

-

Bank overdrafts

32,493

-

-

32,493

-

Short term loan: commercial paper

282,936

-

-

282,936

-

Other loans

155

-

-

155

-

Trade and other payables

1,940,468

18,670

48,829

1,872,969

-

Non-current

Long term trade payables

2,579

-

-

2,579

-

Other long term debts

5,520

-

-

5,520

-

Investments grants and deferred income from grants

16,021

-

-

16,021

-

Current

Trade payables

1,466,140

-

-

1,466,140

-

Advances received on contracts in progress

15,448

-

-

15,448

-

Tax - other than income tax - payable

26,190

-

-

26,190

-

Payroll and related charges

125,252

-

-

125,252

-

Other amounts payable

56,399

-

-

56,399

-

Dividends payable

11,657

-

-

11,657

-

Accrued interest payable

7,856

-

-

7,856

-

Fair value financial instrument held for cash flow hedging

2

48,829

-

48,829

-

-

Fair value payable - financial instruments related to FV hedging

2

18,670

18,670

-

-

-

Accrued charges and deferred income

139,907

-

-

139,907

-

Total of financial instruments (Liabilities)

3,693,613

18,670

48,829

3,588,115

-

(*) see note F33.2 paragraph 1 for IFRS 9 classification of financial instruments for currency and commodity hedging.

AS AT THE END OF THE FINANCIAL YEAR

Carrying amount

Thousands of Euros

Level

Fair value

Fair value hedge accounting (*)

Cash Flow hedge accounting

Loans, receivables and payables

Financial assets at FV through OCI

Assets

Financial assets at fair value through Other Comprehensive Income

8,352

-

-

-

8,352

Financial assets at fair value through Other Comprehensive Income - Shares

1

8,352

-

-

-

8,352

Loans granted

3,332

-

-

3,332

-

Loans to associates and non consolidated affiliates

3,332

-

-

3,332

-

Trade and other receivables

1,688,931

23,442

45,091

1,620,398

-

Non-current

Cash guarantees and deposits

8,370

-

-

8,370

-

Other receivables maturing in more than 1 year

2,574

-

-

2,574

-

Assets employee benefits

820

-

-

820

-

Current

Trade receivables (at cost)

1,366,686

-

-

1,366,686

-

Trade receivables (write-down)

(22,319)

-

-

(22,319)

-

Other receivables (at cost)

177,008

-

-

177,008

-

Other receivables (write-down)

(207)

-

-

(207)

-

Interest receivable

495

-

-

495

-

Fair value of financial instruments held for cash-flow hedging

2

45,091

-

45,091

-

-

Fair value receivable - financial instruments related to FV hedging

2

23,442

23,442

-

-

-

Deferred charges and accrued income

86,973

-

-

86,973

-

Cash and cash equivalents

1,010,306

-

-

1,010,306

-

Short-term investments: bank term deposits

373,904

-

-

373,904

-

Short-term investments: term deposits (other)

5

-

-

5

-

Cash-in-hand and bank current accounts

636,397

-

-

636,397

-

Total of financial instruments (Assets)

2,710,921

23,442

45,091

2,634,036

8,352

Liabilities

Financial debt

2,495,431

-

-

2,424,331

-

Non-current

Bank loans

1,276,100

-

-

1,205,000

-

Lease liability

52,865

-

-

52,865

-

Other loans

447,289

-

-

447,289

-

Current

Short term bank loans

576,056

-

-

576,056

-

Bank overdrafts

8,678

-

-

8,678

-

Short term loan: commercial paper

134,282

-

-

134,282

-

Other loans

162

-

-

162

-

Trade and other payables

2,442,433

38,296

57,957

2,346,180

-

Non-current

Other long term debts

5,682

-

-

5,682

-

Investments grants and deferred income from grants

17,823

-

-

17,823

-

Current

Trade payables

1,896,099

-

-

1,896,099

-

Advances received on contracts in progress

32,180

-

-

32,180

-

Tax - other than income tax - payable

38,317

-

-

38,317

-

Payroll and related charges

135,835

-

-

135,835

-

Other amounts payable

39,733

-

-

39,733

-

Dividends payable

11,618

-

-

11,618

-

Accrued interest payable

9,109

-

-

9,109

-

Fair value financial instrument held for cash flow hedging

2

57,957

-

57,957

-

-

Fair value payable - financial instruments related to FV hedging

2

38,296

38,296

-

-

-

Accrued charges and deferred income

159,784

-

-

159,784

-

Total of financial instruments (Liabilities)

4,937,864

38,296

57,957

4,770,511

-

(*) see note F33.2 paragraph 1 for IFRS 9 classification of financial instruments for currency and commodity hedging.

Loans and debt have been issued at market rates which would not create any major differences with effective interest expenses. All categories of financial instruments of Umicore are at fair value except the non-current bank and other loans for which the carrying amounts differ from the fair value (see note F24). The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques, mainly discounted cash-flow, using market assumptions prevailing at the end of the reporting period. In particular, the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange, metal and energy contracts is determined using quoted forward exchange, metal and energy rates at the end of the reporting period. The fair value of quoted financial assets held by the Group is their quoted market price at the end of the reporting period. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

F32.1 FAIR VALUE HIERARCHY

The Group adopted the amendment to IFRS 7 for financial instruments which are measured in the balance sheet at fair value, with effect from January 2009. This amendment requires disclosures of fair value measurements by level, based on the following fair value measurement hierarchy:

  • Level 1: fair value based on quoted prices in active markets for identical assets or liabilities.

  • Level 2: fair value based on inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

  • Level 3: fair value for the asset or liability valuation are based on unobservable inputs.

In the Group, the fair values on financial assets at fair value through OCI are measured as level 1.

All the metal, energy and foreign currency derivatives are measured as level 2.

F32.2 SENSITIVITY ANALYSIS ON FINANCIAL INSTRUMENTS

Umicore is sensitive to commodity prices, foreign currency and interest rate risk on its financial instruments.

F32.2.1 COMMODITY PRICES

The fair value on financial instruments related to cash flow hedging sales would have been 18.2 million lower/higher if the metal prices would strengthen/weaken by 10%.

The fair value on financial instruments related to cash flow hedging purchases would have been 3.0 million higher/lower if the energy prices would strengthen/weaken by 10%. The fair value on financial instruments related to cash flow hedging purchases would have been 7.9 million higher/lower if the metal prices would strengthen/weaken by 10%.

The fair value on other commodity sales financial instruments would have been 32.3 million lower/higher and the fair value on other commodity purchases financial instruments would have been 3.6 million higher/lower if the metal prices would strengthen/weaken by 10%.

F32.2.2 FOREIGN CURRENCY

The fair value of forward currency contracts related to cash flow hedging would have been 11.7 million higher if the EUR would strengthen against USD by 10% and would have been 16.1 million lower if the EUR would weaken against USD by 10%.

The fair value of forward currency contracts related to cash flow hedging would have been 0.9 million lower if the EUR would strengthen against ZAR by 10% and would have been 1.1 million higher if the EUR would weaken against ZAR by 10%.

The fair value of forward currency contracts related to cash flow hedging would have been 4.0 million lower if the USD would strengthen against KRW by 10% and would have been 4.9 million higher if the USD would weaken against KRW by 10%.

The fair value of forward currency contracts related to cash flow hedging would have been 3.8 million higher if the EUR would strengthen against CNY by 10% and would have been 4.2 million lower if EUR would weaken against CNY by 10%.

The fair value of forward currency contracts related to cash flow hedging would have been 9.0 million lower if the USD would strengthen against CNY by 10% and would have been 10.6 million higher if USD would weaken against CNY by 10%.

The fair value of forward currency contracts related to cash flow hedging would have been 5.4 million lower if the USD would strengthen against BRL by 10% and would have been 6.9 million higher if USD would weaken against BRL by 10%.

The fair value of forward currency contracts related to cash flow hedging would have been 2.0 million lower if the USD would strengthen against CAD by 10% and would have been 2.5 million higher if USD would weaken against CAD by 10%.

The fair value of other forward currency contracts sold would have been 56.3 million higher if the EUR would strengthen against USD by 10% and would have been 68.8 million lower if the EUR would weaken against USD by 10%.

The fair value of other forward currency contracts bought would have been 11.6 million lower if the EUR would strengthen against USD by 10% and would have been 14.1 million higher if the EUR would weaken against USD by 10%.

The fair value of net position of current assets and liabilities exposed to USD would have been 18.9 million lower if the EUR would strengthen against USD by 10% and would have been 23.2 million higher if the EUR would weaken against USD by 10%.

The fair value of other forward currency contracts sold would have been 36.7 million higher if the EUR would strengthen against CNY by 10% and would have been 44.9 million lower if the EUR would weaken against CNY by 10%.

The fair value of net position of current assets and liabilities exposed to CNY would have been 29.8 million lower if the EUR would strengthen against CNY by 10% and would have been 36.4 million higher if the EUR would weaken against CNY by 10%.

The fair value of other forward currency contracts sold would have been 18.1 million higher if the CNY would strengthen against USD by 10% and would have been 22.1 million lower if the CNY would weaken against USD by 10%.

The fair value of other forward currency contracts bought would have been 12.0 million lower if the EUR would strengthen against PLN by 10% and would have been 14.6 million higher if the EUR would weaken against PLN by 10%.

The fair value of net position of current assets and liabilities exposed to PLN would have been 12.3 million lower if the EUR would strengthen against PLN by 10% and would have been 15.0 million higher if the EUR would weaken against PLN by 10%.

The fair value of other forward currency contracts sold would have been 7.7 million higher if the EUR would strengthen against HKD by 10% and would have been 9.4 million lower if the EUR would weaken against HKD by 10%.

The fair value of other forward currency contracts bought would have been 9.6 million lower if the KRW would strengthen against USD by 10% and would have been 7.9 million higher if the KRW would weaken against USD by 10%.

The fair value of net position of current assets and liabilities exposed to KRW would have been 10.0 million lower if the EUR would strengthen against KRW by 10% and would have been 12.2 million higher if the EUR would weaken against KRW by 10%.

Umicore hedges its structural and transactional commodity (metal and energy), currency and interest rate risks using respectively commodity derivatives (mainly quoted on the London Metal Exchange), currency derivatives and Interest Rate Swaps with reputable brokers and banks.

Notional or Contractual amount

Fair value

Thousands of Euros

31/12/2019

31/12/2020

31/12/2019

31/12/2020

Forward commodities sales

186,117

131,855

(41,403)

(49,786)

Forward commodities purchases

(76,930)

(86,877)

7,538

22,099

Forward currency contracts sales

319,897

641,320

(829)

12,606

Forward currency contracts purchases

(64,264)

(79,688)

6,250

2,986

Forward IRS contracts

40,000

40,000

(687)

(771)

Total fair value impact subsidiaries

(29,130)

(12,866)

recognized under trade and other receivables

19,699

45,091

recognized under trade and other payables

(48,829)

(57,957)

Total fair value impact associates and joint ventures

72

1,114

Total

(29,058)

(11,752)

The principles and documentation on the hedged risks as well as the timing related to the Group’s cash flow hedging operations are included in note F3 Financial risk management.

The fair values of the effective hedging instruments are in the first instance recognized in the fair value reserves recorded in equity and are derecognized when the underlying forecasted or committed transactions occur (see note F23).

The forward commodities sales contracts are set up to hedge primarily the following commodities: gold, silver, palladium, platinum nickel, lead and copper. The forward commodity purchase contracts are set up to hedge primarily the electricity, gas and fuel oil price risks and the commodity nickel. The forward currency contracts are set up to hedge USD towards EUR, KRW, CNY, BRL and CAD as well as EUR towards ZAR and CNY. The terms and conditions of the forward contracts are common market conditions. In those circumstances whereby the hedge accounting documentation as defined under IFRS 9 is not available, financial instruments used to hedge structural risks for metals and currencies are measured as if they were held for trading. However, such instruments are being used to hedge future probable cash-flows and are not speculative in nature. Umicore did not face any ineffectiveness on cash flow hedging in P&L in 2019 and 2020.

The fair values of the hedging instruments reflect the difference between the contract rates and the closing rates. The total fair value of financial instruments for cash-flow hedging has a negative impact on the fair value reserves in equity at end of 2020. This negative impact is most significant for commodities sold, while commodities purchased and forward currency contracts offset part of this negative impact. The majority of the hedging instruments have their maturity within the next two years.

Notional or Contractual amount

Fair value

Thousands of Euros

31/12/2019

31/12/2020

31/12/2019

31/12/2020

Forward commodities sales

389,955

303,729

28,666

(19,549)

Forward commodities purchases

(390,761)

(33,687)

(937)

1,891

Forward currency contracts sales

1,346,766

1,532,188

2,818

5,342

Forward currency contracts purchases

(613,466)

(536,554)

(1,723)

(2,539)

Total fair value impact subsidiaries

28,824

(14,854)

recognized under trade and other receivables

47,495

23,442

recognized under trade and other payables

(18,670)

(38,296)

Total

28,824

(14,854)

The principles and documentation related to the Group’s transactional hedging are included in note F3 “Financial Risk Management”. Under Umicore’s economical hedging policy, financial instruments for currency and commodity hedging are used to protect the fair value of underlying hedged items (assets, liabilities and firm commitments) and are recognized at fair value at closing date. Umicore obtained for the fair value hedging of its currency risk exposures hedge accounting under the criteria of IFRS 9 (see note F2.21.1). For the fair value hedging of its commodity risk exposures, Umicore did not obtain hedge accounting under the criteria of IFRS 9. In that latter case, the financial instruments are measured at fair value as if they were held for trading. However, such instruments are being used to cover existing transactions, considered as hedged items under Umicore transactional hedging risk policy (primarily inventory and firm commitments) and so these commodity hedging instruments held for trading are not speculative in nature. The accounting treatment of hedged items in absence of IFRS 9 hedge accounting is further described in note F30 on Provisions for other Liabilities and Charges.

The fair values are immediately recognized in the income statement under Other Operating income for the commodity instruments and the Net Finance cost for the currency instruments.

The fair values of the hedging instruments reflect the difference between the contract rates and the closing rates. The booking of the fair value movements on financial instruments under fair value hedging had a negative impact on the operating income at the end of 2020. Most of the fair values of the hedging instruments are not significant as the closing rates do not materially differ from the strike rates. Only for the commodities sold the fair values are significant. These concern metal hedging instruments of which most have their maturity within the next year. However, in view of the intent of the Group policy on transactional hedging, the net impact on operating income of fair value movements on both hedging instruments and hedged items is neutral. The forward commodities sales contracts are set up to hedge primarily the following commodities: gold, silver, palladium, platinum, nickel, lead and copper. The forward commodity purchase contracts are set up to hedge primarily gold, silver, nickel, lead and copper. The forward currency contracts are set up to hedge USD towards EUR, KRW, CNY, BRL and CAD as well as EUR towards CNY, ZAR, CAD, CHF, JPY, THB, DKK and PLN.

AS AT THE END OF PREVIOUS YEAR

Earliest contractual maturity (undiscounted) - notional amounts

Earliest contractual maturity (undiscounted) - fair value

Thousands of Euros

< 1 Month

1 to 3 Months

3 Months to 1 Year

1 to 5 Years

Total

< 1 Month

1 to 3 Months

3 Months to 1 Year

1 to 5 Years

Total

FINANCIAL INSTRUMENTS ASSETS (FAIR VALUE)

Commodity risk

Total forward sales (CFH)

1,099

2,078

9,231

2,286

14,694

119

245

1,002

25

1,391

Total forward purchases (CFH)

-

-

-

64,264

64,264

-

-

-

9,764

9,764

Total forward sales (FV Hedging)

49,076

59,043

131,159

-

239,279

8,620

10,327

14,812

-

33,760

Total forward purchases (FV Hedging)

16,865

270,499

-

-

287,364

233

7,370

-

-

7,603

FX Risk

Forward currency contracts sales (CFH)

3,828

7,480

33,933

67,372

112,613

77

153

680

1,383

2,294

Forward currency contracts purchases (CFH)

-

-

-

64,264

64,264

-

-

-

6,250

6,250

Forward currency contracts sales (FV Hedging)

621,600

85,064

170,640

-

877,304

3,608

760

1,053

-

5,421

Forward currency contracts purchases (FV Hedging)

244,968

9,171

593

-

254,732

567

140

4

-

711

FINANCIAL INSTRUMENTS LIABILITIES (FAIR VALUE)

Interest Rate Risk

Interest rate swaps

-

-

-

40,000

40,000

-

-

-

(687)

(687)

Commodity risk

Total forward sales (CFH)

-

26,944

53,907

90,572

171,423

-

(8,634)

(16,467)

(17,694)

(42,795)

Total forward purchases (CFH)

-

-

10,372

2,295

12,667

-

-

(2,125)

(101)

(2,226)

Total forward sales (FV Hedging)

20,221

82,057

48,397

-

150,676

(372)

(3,303)

(1,418)

-

(5,094)

Total forward purchases (FV Hedging)

45,294

38,073

20,030

-

103,397

(4,700)

(3,849)

9

-

(8,540)

FX Risk

Forward currency contracts sales (CFH)

15,419

30,481

125,662

35,723

207,284

(399)

(738)

(2,186)

200

(3,123)

Forward currency contracts sales (FV Hedging)

313,853

145,539

10,071

-

469,462

(1,543)

(949)

(110)

-

(2,603)

Forward currency contracts purchases (FV Hedging)

237,483

22,170

98,779

301

358,733

(1,582)

(151)

(701)

(0)

(2,434)

AS AT THE END OF THE FINANCIAL YEAR

Earliest contractual maturity (undiscounted) - notional amounts

Earliest contractual maturity (undiscounted) - fair value

Thousands of Euros

< 1 Month

1 to 3 Months

3 Months to 1 Year

1 to 5 Years

Total

< 1 Month

1 to 3 Months

3 Months to 1 Year

1 to 5 Years

Total

Financial Instruments Assets

Commodity risk

Total forward sales (CFH)

-

249

661

743

1,653

-

6

7

(4)

9

Total forward purchases (CFH)

2,719

5,547

35,851

42,760

86,877

1,007

2,081

10,155

8,855

22,099

Total forward purchases (FV Hedging)

15,741

14,752

-

-

30,493

1,151

780

-

-

1,931

FX Risk

Forward currency contracts sales (CFH)

32,269

55,116

260,213

204,150

551,748

1,452

2,436

11,856

4,254

19,997

Forward currency contracts purchases (CFH)

3,336

6,807

28,824

33,226

72,194

103

210

1,042

1,632

2,986

Forward currency contracts sales (FV Hedging)

594,604

522,845

173,820

-

1,291,269

6,530

5,360

5,008

-

16,897

Forward currency contracts purchases (FV Hedging)

98,242

10,145

1,786

630

110,803

4,478

124

4

8

4,614

Financial Instruments Liabilities

Interest Rate Risk

Interest rate swaps

-

-

-

40,000

40,000

-

-

-

(771)

(771)

Commodity risk

Total forward sales (CFH)

288

15,247

46,867

67,800

130,202

(13)

(8,268)

(24,383)

(17,131)

(49,795)

Total forward sales (FV Hedging)

44,004

162,083

97,642

-

303,729

(6,675)

(11,827)

(1,047)

-

(19,549)

Total forward purchases (FV Hedging)

3,195

-

-

-

3,195

(40)

-

-

-

(40)

FX Risk

Forward currency contracts sales (CFH)

3,148

8,156

34,112

39,750

85,167

(458)

(927)

(4,381)

(1,626)

(7,391)

Forward currency contracts sales (FV Hedging)

92,962

56,711

91,247

-

240,920

(7,111)

(3,228)

(1,216)

-

(11,555)

Forward currency contracts purchases (FV Hedging)

211,408

144,148

51,452

18,743

425,751

(2,293)

(2,847)

(1,628)

(385)

(7,153)

F34.1 DEFINITIONS

The cash flow statement identifies operating, investing and financing activities for the period.

Umicore uses the indirect method for the operating cash flows. The net profit and loss is adjusted for:

  • the effects of non-cash transactions such as provisions, impairment losses, mark to market, etc., and the variance in operating capital requirements.

  • items of income or expense associated with investing or financing cash flows.