ANNUAL GENERAL MEETING 2021
MANAGEMENT PROPOSAL
22 April 2021
IR CONTACTS:ri@wilsonsons.com.br+55 21 3504-4122
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INDEX
Documents:
1. Call Notice
2. Clarification regarding distribution to Shareholders
3. Voting Instructions
4. Management Discussion & Analysis (2020)
5. Financial Statements (2020)
6. Curriculum Vitae of the Chairman and Deputy Chairman and of the Board members.
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of W ilson Sons Limited, incorporated in Bermuda (the "Company"), issuer of Brazilian Depositary Receipts ("BDRs") traded on São Paulo Stock Exchange (B3 ticker symbol: WSON33), will be held on Thursday, 22 April 2021 at 10:00 hrs (Bermuda time) at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
The General Meeting shall discuss and resolve the following proposals of the Board of Directors:
1. Receipt of the financial statements for the year ended 31 December 2020 and the report of the auditors thereon.
2. Pursuant to Company Bye-law 15.3 (a), no sums should be credited to the Legal Reserve.
3. Pursuant to Company Bye-law 15.3 (b), no sums should be set aside to the Contingency Reserve.
4. Pursuant to Company Bye-law 15, US$0.54 per share be made available to be distributed to members.
5. Appointment of Ernst & Young as auditors of the Company, to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting at which the Company's financial statements are presented.
6. Delegation of authority to the Board of Directors to fix the auditor's remuneration.
7. Pursuant to Company Bye-law 34.1, the number of Directors shall be seven (7).
8. To amend the Company Bye-laws to provide for the annual re election of directors, by amending Bye-laws 34.2 and 34.3 of the Bye-laws of the Company in the manner following:
(i) By deleting Bye-law number 34.2 in its entirety and substituting the following new Bye-law number 34.2: "Except in the case of a casual vacancy, directors shall be elected by the Members at the annual general meeting or any special general meeting called for that purpose."
(ii) By deleting Bye-law number 34.3 in its entirety and substituting the following new Bye-law number 34.3: "A Director shall hold office for such term as the Members may determine or, in the absence of such determination, until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated."
9. That Mr. Jose Francisco Gouvea Vieira be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting.
10. That Mr. C laudio Frischtak b e elected and appointed as Independent Director of the Company until the conclusion of the 2022 Annual General Meeting.
11. That Mr. Mauro Moreira be elected and appointed as Independent Director of the Company until the conclusion of the 2022 Annual General Meeting.
12. That Mr. Cezar Baião be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting.
13. That Mr. F ernando Fleury Salek be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting.
14. That Mr. C hristopher Townsend be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting.
15. That Mr. W illiam Henry Salomon be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting.
16. The appointment of Mr. Jose Francisco Gouvea Vieira to serve as Chairman until the conclusion of the 2022 Annual General Meeting.
17. The appointment of Mr. Cezar Baião to serve as Deputy Chairman until the conclusion of the 2022 Annual General Meeting.
18. To amend that Bye-law 41(g) of the Bye-laws of the Company in the manner following, namely:
By deleting Bye-law number 41(g) in its entirety and substituting the following new Bye-law number 41(g): "delegate any of its powers (including the power to sub-delegate) to a committee (except as otherwise provided for in these Bye-laws) appointed by the Board which may consist partly or entirely of non-Directors, provided that the Board shall have an Audit Committee which shall consist of at least three (3) members of which (1) the majority of members must be independent members; (2) at least one (1) member must also be an independent director of the Company; (3) at least one (1) member must have recognised experience in corporate accounting matters, under the terms of the applicable regulations and will be given the title of Financial Specialist at the time of his appointment; and (4) the following persons are not allowed to act as members of the Audit Committee: officers of the Company (but for the director noted in (2) above), officers of the Company's subsidiaries, officers of the Company's controlling shareholder, provided further every such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, so far as the same are applicable and are not superseded by directions imposed by the Board;"
The financial statements for the year 2020 and the report of the auditors thereon are available on the Company's website:www.wilsonsons.com.br/ir.
Only shareholders entered in the Company's Register of Members on the close of Business on 1 2 March 2021 will be |
entitled to participate in the Special General Meeting. In order to vote the shares you are holding, we kindly ask you to return the enclosed Proxy/Answer Form to the Company Secretary, Mr. Malcolm Mitchell, 2 Church Street, Hamilton HM 11, Bermuda or electronic mail tomalcolm.mitchell@conyersdill.com. Your Proxy/Answer Form must be received by the Company no later than 1 9 April 2021 |
o
Hamilton,12 March 2021
By order of the Board of Directors of Wilson Sons Limited.
Malcolm Mitchell
Secretary
2
Legal - 9496295.1
Clarification of distribution to Shareholders (Proposal #4)
Pursuant to Company Bye-law 15, the proposed amount of U S$0.54000000 per BDR is equivalent to US$38.764.526,40 considering 71,786,160 s hares outstanding in 1 2 March 2021 and is subject to the approval by the Annual General Meeting of Shareholders. Payment will be made on the 2 3 April 2021 v ia international transfer to all the shareholders who directly participate in the capital of the issuer or through the depositary bank in Brazil who will then send the funds to BDR holders.
The final exchange rate to be used for the payment in Brazil, in R$, will be disclosed on 2 6 April 2021 v ia announcement to shareholders, which explains why it is not yet possible to report the final amount per BDR in R$. The estimated amount to be paid in R$ is R $3.01806000 p er BDR converted at the PTAX selling exchange rate of R$5.5890 p ublished by the Brazilian Central Bank on 1 2 March 2021. The ex-dividend trading date will be 2 3 April
2021.
Fernando Fleury Salek
Legal Representative in Brazil and Investor Relations
VOTING INSTRUCTIONS ______________________________________________________________________________________
For the Annual General Meeting of Wilson Sons Limited (the "Company") to be held on 22 April 2021 at 10:00 hrs at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
I am/we are the beneficial owner of __________________ (please indicate number) of the Company's shares.
The voting instructions below shall be applicable to all the shares registered under my/our name entered in the Company´s Register of Members on the close of Business on 12 March 2021.
Shareholders' Resolutions (Items pursuant to Agenda)
Acceptance of the Board of Directors' ProposalRejection of the Board of Directors' Proposal
Abstention
1) Receipt of the financial statements for the year ended 31 December 2019 and the report of the auditors thereon
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2) Pursuant to Company Bye-law 15.3 (a), no sums be credited to the Legal Reserve (please check only one)
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3) Pursuant to Company Bye-law 15.3 (b), no sums be set aside to the Contingency Reserve (please check only
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4) Pursuant to Company Bye-law 15, US$0.54 per share be made available to be distributed to members at the discretion of the Board (please check only one)
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5) Appointment of Ernst & Young as auditors of the Company, to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting at which the Company's financial statements are presented (please check only one).
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6) Delegation of authority to the Company's Board of Directors to establish the auditors' remuneration (please
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7) Pursuant to Company Bye-law 34.1, that the number of Directors shall be seven (7) (please check only one)
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8) To amend the Company Bye-laws to provide for the annual re election of directors, by amending Bye-laws 34.2 and 34.3 of the Bye-laws of the Company in the manner following:
(i) By deleting Bye-law number 34.2 in its entirety and substituting the following new Bye-law number 34.2: "Except in the case of a casual vacancy, directors shall be elected by the Members at the annual general meeting or any special general meeting called for that purpose."
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(ii) By deleting Bye-law number 34.3 in its entirety and substituting the following new Bye-law number 34.3: "A Director shall hold office for such term as the Members may determine or, in the absence of such determination, until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated." (please check only one)
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9) That Mr. Jose Francisco Gouvea Vieira be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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10) That Mr. Claudio Frischtak be elected and appointed as Independent Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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11) That Mr. Mauro Moreira be elected and appointed as Independent Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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12) That Mr. Cezar Baião be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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13) That Mr. Fernando Fleury Salek be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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14) That Mr. Christopher Townsend be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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15) That Mr. William Henry Salomon be elected and appointed as Director of the Company until the conclusion of the 2022 Annual General Meeting. (please check only one)
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16) The appointment of Mr. Jose Francisco Gouvea Vieira to serve as Chairman until the conclusion of the 2022 Annual General Meeting. (please check only one)
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17) The appointment of Mr. Cezar Baião to serve as Deputy Chairman until the conclusion of the 2022 Annual General Meeting. (please check only one)
18) To amend that Bye-law 41(g) of the Bye-laws of the Company in the manner following, namely: (please check only one)
By deleting Bye-law number 41(g) in its entirety and substituting the following new Bye-law number 41(g): "delegate any of its powers (including the power to sub-delegate) to a committee (except as otherwise provided for in these Bye-laws) appointed by the Board which may consist partly or entirely of non-Directors, provided that the Board shall have an Audit Committee which shall consist of at least three (3) members of which (1) the majority of members must be independent members; (2) at least one (1) member must also be an independent director of the Company; (3) at least one (1) member must have recognised experience in corporate accounting matters, under the terms of the applicable regulations and will be given the title of Financial Specialist at the time of his appointment; and (4) the following persons are not allowed to act as members of the Audit Committee: officers of the Company (but for the director noted in (2) above), officers of the Company's subsidiaries, officers of the Company's controlling shareholder, provided further every such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, so far as the same are applicable and are not superseded by directions imposed by the Board;"(please check only one)
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In the absence of instructions (or should the above instructions not be clear), your voting rights will not be exercised.
Date:
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Signature of Beneficial Owner: ____________________
Name of Beneficial Owner: ____________________
Address of Beneficial Owner: ____________________
Only shareholders entered in the Company's Register of Members on the close of Business on 12 March 2021 will be entitled to participate in the Annual General Meeting. In order to vote the shares you are holding, we kindly ask you to return the enclosed Proxy/Answer Form to the Company Secretary, Mr. Malcolm Mitchell, 2
Church Street, Hamilton HM 11, Bermuda or electronic mail tomalcolm.mitchell@conyersdill.com. Your Proxy/Answer Form must be received by the Company no later than 09 April 2021.
The Annual General Meeting will be held in English. The financial statements for the year 2020, the auditor's report, and all other documents relevant to the exercise of votes will be available on the Company's websitewww.wilsonsons.com.br/ir.
The following are the comments on the financial performance of the Company in 2020. All information contained herein, except as otherwise indicated, is expressed in U.S. dollars (US$) and is in accordance with International Financial Reporting Standards - IFRS. The operational and financial performance of Wilson Sons is driven by three main factors: (i) Brazilian international trade flow, (ii) The dynamics of the Brazilian oil and gas industry, and (iii) The growth of the Brazilian economy.
Chairman of the Board of Wilson Sons Holdings Brasil Statement:
Wilson Sons 2020 EBITDA of US$141.6 million increased 0.2% against 2019 (US$141.3 million) remaining very resilient despite the Covid-19 pandemic. In R$ terms EBITDA grew 31.9%.
Container terminal results were impacted by lower import volumes in the 4Q20 with business confidence and Brazilian economic indicators remaining soft. The Salvador terminal reported a 2.4% increase in annual operating volumes, and civil works to extend the terminal's principal quay were completed in October. The Rio Grande terminal was certified with a 15-metre draft for the navigation channel in 4Q20 allowing the terminal to receive larger super-post-Panamax vessels, further increasing the terminal's competitiveness as a hub port and potentially attracting more transshipment volume. Although the Rio Grande terminal showed a 2.5% decrease in annual operating volumes, transshipment, likely to benefit from deeper draft, was up 5.6% against the prior year.
Towage results continued to be solid despite the competitive environment and Covid-19 pandemic. We recently approved the construction of six new 80-tonne tugboats to be delivered by our shipyard between 2022 and 2024. These new vessels will further expand the capacity of our towage fleet to attend the larger ships now calling in Brazil. Furthermore, reinforcing the company's commitment to sustainability, the tugs are IMO Tier III certified, which attests to the elimination of nitrogen oxide (NOx) emissions by vessel engines. This standard is already a requirement for some European and American Ports.
Our oil services businesses including offshore support vessels ("OSV") and support bases still face weak demand although we expect a recovery in the medium term. We continue to explore alternative revenue streams for base areas and our off-hire vessels, which are well positioned to profit from the expected recovery in the industry.
The outlook heading into 2021 remains a challenge with the persisting effects of Covid-19. Exchange rate volatility remains an item to be monitored. We expect trade flows to return with a faster recovery than oil and gas services. Debt standstill agreements have benefitted a number of businesses through this unique period.
In this context we reaffirm our commitment to the safety and well-being of our employees, clients, suppliers and the communities where we operate to ensure the continuity of the essential services that we provide. All our operations and facilities are applying rigorous health and safety protocols established by Brazilian authorities and agencies, and we are closely monitoring the evolution of the pandemic in the country.
Net revenue:
Group revenue for the year in BRL terms increased by 13.3% while in USD terms revenue was 13% lower at US$352.8 million (2019: US$406.1 million). The decline in revenue is principally due to the negative impact of BRL devaluation against the US$, with volume declines in logistics revenues due to the end of a specific high value contract, lower offshore support base revenues against a backdrop of lower demand in the oil and gas sector, and the overall impact of Covid-19 on operations and trading volumes.
Towage and agency services revenue at US$181.7 million was US$12.9 million higher than the prior year (2019: US$168.8 million) with increased volumes in ports that operate larger ships, a focus on improving the revenue mix and the full year impact of firming market prices from the end of the prior year. Harbour towage manoeuvres performed in the year decreased 0.4% to 52,873 (2019: 53,088). Special operations revenues increased US$3.2 million to US$14.5 million (2019: US$11.2 million). Special operations are project based, with current year revenue increases being driven by support to two vessels that suffered damage in accidents. Ship agency revenue at US$8.1 million was 12% lower than the prior year (2019: US$9.2 million).
Port terminals revenue at US$140.2 million was US$47.0 million lower than the prior year, (2019: US$187.2 million) principally due to the higher average USD/BRL exchange rate and the reduction in economic activity of Covid-19 on both imports and exports and oil and gas support base activity. Container volumes handled fell 1.0% to 1,017,600 TEUs (2019: 1,027,600 TEUs) mainly due to lower volumes in imports and cabotage flows. Due to the decrease in container volumes handled, lower import warehouse revenue and the higher average USD/BRL exchange rate in the year, container terminal revenue declined 21.2% to US$132.2 million (2019: US$167.8 million). Revenue at our offshore support base decreased US$11.3 million to US$8.0 million (2019: US$19.4 million) mainly due to reduced or delayed activity as the oil and gas sector managed to reduce oil demand and currency impacts.
Revenue at our logistics business was 37% lower at US$28.6 million (2019: US$45.7 million) primarily as a result of the ending of a large warehousing contract at one of our logistics centres, the impact of Covid-19 on import volumes driving lower demand for logistics services and the lower average BRL exchange rate. Third-party shipyard revenue was US$2.3 million lower at US$2.2 million (2019: US$4.5 million). The shipyard continues to provide important vessel construction and maintenance services for our towage and joint venture offshore vessel fleets.
All Group revenue is derived from Wilson Sons' operations in Brazil.
Operating profit:
Operating profit of US$80.3 million was US$5.1 million higher than prior year (2019: US$75.2 million) principally due to the negative impact of the BRL devaluation against the US$, lower revenues being offset by reduced operating costs and no impairment charges in the current financial year (2019: US$13.0 million). Operating margin for the year was 22.1% (2019: 18.5% - excluding the impairment charge) principally due to the increase in foreign exchange losses on monetary items, negatively offsetting lower operating costs as the Company implemented cost savingsstrategies in the face of Covid-19 and lower depreciation expense.
Raw materials and consumables used were US$6.0 million lower at US$19.3 million (2019: US$25.3 million) reflecting lower shipyard activity. Employee expenses were US$30.4 million lower at US$108.9 million (2019: US$139.3 million) principally due to the effect of the stronger average USD/BRL exchange rate. Amortisation of right-of-use assets was $10.7 million (2019: US$12.4 million).
Employee expenses as a percentage of revenue declined from 34.6% in 2019 to 31.2% in the current year. Other operating expenses were US$4.9 million lower at US$87.7 million (2019: US$92.6 million) largely driven by a weaker BRL exchange rate throughout 2020. Depreciation and amortisation expense at US$50.6 million was US$3.1 million lower than the comparative period (2019: US$53.7 million) due to the devaluation of the BRL during the year.
Share of results of joint ventures:
The share of results of joint ventures is Wilson Sons' 50% share of net profit for the period from our offshore joint ventures. Our joint ventures had 18 offshore support vessels under contract out of a total fleet of 23 at year end. Operating profit for a 50% share in the joint ventures in the year decreased US$3.4 million to US$5.5 million compared to US$8.9 million in 2019. Revenue was 7% lower at US$60.8 million (2019: US$65.5 million) while operating days at 5,356 days were 4.4% higher than the prior year (2019: 5,128). The reduction in operating profit, driven by lower revenues and increased exchange losses on monetary items of US$9.1 million for the period resulted in a loss for the year of US$4.2 million (2019: US$0.6 million profit).
Finance costs:
Finance costs for the year at US$10.4 million were US$1.4 million lower than the prior year (2019: US$11.8 million) as interest on lease liabilities decreased US$3.1 million to US$12.8 million (2019: US$15.9 million). Exchange losses on foreign currency borrowings were zero (2019: US$0.8 million) as the Group repaid borrowings in currencies other than the functional currencies of the subsidiaries in the prior period. Interest on bank loans and overdrafts decreased US$0.5 million to US$10.3 million (2019: US$10.8 million) due to lower variable interest rates.
Exchange rates:
The Group reports in USD and has revenues, costs, assets and liabilities in both BRL and USD. Therefore, movements in the USD/BRL exchange rate influence the Group's results both positively and negatively from year to year. During 2020 the BRL depreciated 28.9% against the USD from R$4.03 at 1 January 2020 to R$5.20 at the year end. In 2019 the BRL depreciated 4.0% against the USD from R$3.87 at 1 January 2019 to R$4.03 at the year end. The principal effects from the movement of the BRL against the USD on the income statement are set out in the table below:
Exchange Gains (Losses) (in millions of US$) | 2020 | 2019 |
Exchange gains (losses) on monetary items (i) | (7.4) | (1.6) |
Exchange Gains (Losses) on Foreign Currency Borrowings | - | 0.2 |
Deferred taxes on retranslation of fixed assets (ii) | (14.0) | 0.6 |
Deferred taxes on exchange variance on loans (iii) | 15.1 | (2.0) |
Total | (6.3) | (2.8) |
(i)This arises from the translation of BRL denominated monetary items in USD functional currency entities.
(ii) The Group's fixed assets are located in Brazil and therefore future tax deductions from depreciation used in the Group's tax calculations are denominated in BRL. When the BRL depreciates against the US Dollar the future tax deduction in BRL terms remains unchanged but is reduced in US Dollar terms.
(iii)Deferred tax credit arising from the exchange losses on USD denominated borrowings in Brazil.
The movement of the BRL against the USD in 2020 resulted in a negative impact of US$6.3 million on the income statement in the year compared with a US$2.8 million negative impact in 2019.
A currency translation adjustment loss of US$51.8 million (2019: US$11.1 million) on the translation of operations with a functional currency other than USD is included in other comprehensive expenses for the year and recognised inother comprehensive income.
The average USD/BRL exchange rate during 2020 was 30.6% higher than prior year at 5.16 (2019: 3.95). A higher average exchange rate negatively affects BRL denominated revenues and positively impacts BRL denominated costs when converted into our USD reporting currency.
Profit Before Tax
Profit before tax for the year decreased US$6.3 million to US$47.1 million compared to US$53.4 million in 2019. The decline in profit before tax is primarily due to the US$4.7 million negative movement of results from joint ventures.
Taxation
The tax charge for the year at US$26.6 million was US$5.1 million higher than prior year (2019: US$21.5 million). This represents an effective tax rate for the year of 36.0% (2019: 26.0%) compared with the corporate tax rate prevailing in Brazil of 34%. The higher effective tax rate is principally due to higher net expenses not included in determining taxable profit. Net expenses not included in determining taxable profit were higher due to higher foreign exchange losses and losses at our joint ventures.
A more detailed breakdown is provided in note 8 of the financial accounts.
Profit for the Year
Profit attributable to equity holders of the parent company for the year is US$19.5 million (2019: US$30.5 million) after deducting profit attributable to non-controlling interests of US$1.1 million (2019: US$1.5 million).
Earnings Per Share
Earnings per share for the year were US$0.271 compared with US$0.427 in 2019.
Cash Flow
Net cash inflow from operating activities for the period at US$114.5 million was US$3.4 million higher than prior year (2019: US$111.1 million) mainly due to the lower operating profit in the year offset by improvements in working capital balances. Capital expenditure in the year at US$62.5 million was US$27.0 million lower than the prior year (2019: US$89.5 million) as capital expenditure in 2019 on the expansion of Wilson Sons Salvador container terminal contributed to higher spend. This work has now been completed.
The Group drew down new loans of US$51.5 million (2019: US$113.6 million) to finance capital expenditure, while making loan repayments of US$25.7 million in the year (2019: US$85.9 million). Dividends of US$38.7 million were paid to shareholders (2019: US$38.5 million) with a further US$1.3 million paid to non-controlling interests in our subsidiary (2019: US$$1.2 million).
Cash and cash equivalents at 31 December 2020 decreased US$5.7 million from the prior year end to US$58.7 million, (2019: US$63.6 million) of which US$53.8 million was denominated in Brazilian Real (2019: US$35.7 million). Wilson Sons held a further US$39.6 million in USD denominated fixed rate certificates which are classified as financial assets at fair value through profit or loss (2019: US$14.1 million).
Balance Sheet
Equity attributable to shareholders of the parent company at the balance sheet date was US$67.0 million lower at US$429.9 million compared with US$496.9 million at 31 December 2019. The main movements in equity in the year were profits for the period of US$19.5 million, less dividends paid of US$38.7 million and a negative currency translation adjustment of US$51.9 million. The currency translation adjustment arises from exchange differences on the translation of operations with a functional currency other than USD.
Net Debt and Financing
The Group's borrowings are used principally to finance vessel construction and the development of our container terminal business.
Borrowings are mainly long-term with defined repayment schedules payable over different periods of up to 18 years. At 31 December 2020 all the Group's borrowings are denominated in BRL with 65% linked to the USD and the remaining 35% denominated in BRL. The Group's borrowings denominated in BRL linked to the USD loans are fixed rate loans while BRL denominated debt is variable rate. A significant portion of the Group's Brazilian pricing is denominated in USD which acts as a natural hedge to our long-term exchange rate exposure. In addition to borrowings, the Group has lease liabilities of US$157.9 million (2019: US$194.1 million).
Net debt including lease liabilities at 31 December 2020 was US$402.2 million (2019: US$451.4 million) as set out in the following table:
Net Debt (in millions of US$) | 2020 | 2019 |
Debt | ||
Short-term | 76.9 | 52.9 |
Long-term | 423.7 | 476.3 |
Total debt | 500.6 | 529.1 |
Short term investments | (39.6) | (14.1) |
Cash and cash equivalents | (58.7) | (63.6) |
Net debt | 402.2 | 451.4 |
* |
The Group's reported borrowings do not include US$208.2 million (2019: US$218.9 million) of net debt from the Company's 50% share of borrowings in our Offshore Vessel joint venture.
Consolidated Financial Statements Wilson Sons Limited
Years ended 31 December 2020 and 2019 with Independent Auditors' Report
Wilson Sons Limited
Consolidated financial statements
31 December 2020 and 2019
Contents
Report on the audit of the consolidated financial statements ................................................................ 1
Consolidated statements of income and other comprehensive income ................................................ 7
Consolidated statements of financial position ....................................................................................... 8
Consolidated statements of changes in equity ..................................................................................... 9
Consolidated statements of cash flows .............................................................................................. 11
Notes to the consolidated financial statements .................................................................................. 12
Centro Empresarial PB 370
Praia de Botafogo, 370 6º ao 10º andar - Botafogo 22250-040 - Rio de Janeiro - RJ - Brasil Tel: +55 21 3263-7000 ey.com.br
Independent auditor's report on consolidated financial statements
To the Board of Directors and shareholders of
Wilson Sons Limited
Opinion
We have audited the consolidated financial statements of Wilson Sons Limited (the "Company"), which comprise the statement of financial position as at December 31, 2020, and the statements of profit or loss, of comprehensive income, of changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of Wilson Sons Limited as at December 31, 2020, and its consolidated financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants, the professional standards issued by the Brazil's National Association of State Boards of Accountancy (CFC) and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter, including any commentary on the findings or outcome of our procedures, is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
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Service revenue recognition
The Company's revenues arise mainly from towage services, container handling and port operations. As mentioned in Note 4.3, the Company recognises revenues under the accrual basis of accounting and to the extent that control of the services is transferred to customers for an amount that reflects the consideration to which the Company expects to be entitled in exchange for these services. Therefore, the Company recognises revenue as the performance obligations are satisfied.
The Company's revenue recognition process was considered as a key audit matter due to the following factors, among others: (i) the significant number of transactions; (ii) revenue generation at different jurisdictions; (iii) the materiality of the amounts involved; and (iv) the need for manual inputs, which are subject to management's judgment and subjectivity.
How we addressed the matter in our audit
Our audit procedures included, among others: (i) obtaining an understanding of the procedures and controls designed and implemented by the Company relating to the revenue recognition process to assist the selection and application of audit procedures applicable to the circumstances, which included checking the correlation among revenue, accounts receivable and cash considering all book entries, by using data analysis tools, focusing on the identification and investigation of accounting records that are inconsistent with our expectations prepared based on our knowledge of the Company and the industry; (ii) inspecting significant new or renewed contracts, and/or amendments to significant contracts in force; we have analyzed clauses that may have a material impact on revenue recognition, such as those containing provisions on minimum volume guarantees, surcharges, or discounts and other performance obligations, and we have sent balance confirmation letters to customers in order to assess the existence of outstanding balances at year-end, as well as whether they are reliable; (iii) testing cut-off of sales and their recognition upon effective delivery of the services provided during the period prior to and after the reporting date; (iv) performing substantive analytical procedures to identify and investigate unusual business patterns and perform additional audit procedures where actual results are not in line with our expectations; and (iv) reviewing the adequacy of the disclosures included in Note 4 to the financial statements.
Based on the result of our audit procedures, which is consistent with the management's assessment, we consider that the Company's revenue recognition policies for revenues deriving from sales and services and their respective disclosures in the financial statements are acceptable in the context of the financial statements as a whole.
Impairment risk to intangible assets relating to business combinations
As mentioned in Notes 10 and 11, the Company recognised goodwill and intangible assets in respect of the acquisitions made in prior years, including the acquisitions of Tecon Rio Grande, Tecon Salvador and Brasco Caju (Briclog). There are inherent risks and uncertainty involved in forecasting and discounting future cash flows in this industry, which are the basis of impairment testing. In addition, the magnitude of the goodwill and intangible assets balances and continued economic uncertainty in Brazil which could give rise to possible weakening of demand or variability of the cost base in the industry, we determined that this is a key audit matter.
How we addressed the matter in our audit
Our audit procedures included, among others: (i) using valuation model specialists to help us evaluate and test the model used to measure the recoverable amount and assumptions, particularly the data used to determine the discount rates used by the Company management; (ii) assessing the reasonableness of the projections and methodology used by the Company, and comparing the assumptions (such as gross revenue, operating expenses, net operating income, growth rate in perpetuity, among others) with internal and external sources, segment information and historical data, as well as assessing the effects of the current COVID-19 pandemic on the assumption used; (iii) validating the information used in the calculations; (iv) conducting a retrospective review of previous projections to identify any potential inconsistency in estimates in the future; (v) performing an independent calculation sensitizing the main assumptions used; and (vi) reviewing the adequacy of the disclosures included in Notes 10 and 11 to the financial statements.
Based on the result of the audit procedures performed on the impairment testing of goodwill and intangible assets, which is consistent with management's assessment, we consider that the criteria and assumptions adopted by management, as well as the related disclosures in the respective notes are acceptable in the context of the financial statements as a whole.
Provisions for tax, labour and civil risks
As mentioned in Note 20, the Company is party to a high volume of legal claims arising from civil proceedings, labour claims and tax legislation. These resultant contingent liabilities are potentially significant and the application of accounting standards to determine the amount, if any, to be recognised as a liability or disclosed, is inherently subjective. In making these decisions, Management use their judgment and, where appropriate, are supported by their external legal consultants in order to make the judgements and to determine their best estimate of the provisions to be recorded or amounts to be disclosed in the financial statements. This is one of the key areas that our audit concentrated on, since inappropriate evaluations of the possible outcome on material claims may materially impact the Company's financial position and result for the year.
How we addressed the matter in our audit
Our audit procedures included, among others: (a) obtaining an understanding, with the executive officers and internal legal advisors, about the basis of judgments and estimates, questioning the rationale considered for the latest corroborative information available, and assessing the communication with the Company's external advisors for the cases for which such involvement was considered necessary; (b) obtaining direct formal confirmations from the Company's external lawyers for all litigations; (c) involving our specialists in tax matters to assist us in evaluating the Company's significant tax positions and related likelihood of losses, as well as the correspondence with taxation authorities; and (d) reviewing the adequacy of the disclosures included by the Company in Note XX to the consolidated financial statements.
Based on the result of the audit procedures performed on the provision for contingencies and their disclosure, which is consistent with management's assessment, we consider the criteria and assumptions used by management for recognition and measurement of that provision, as well as the respective disclosures in Note 20, acceptable in the context of the consolidated financial statements as a whole.
Other information accompanying the consolidated financial statements and the auditor's report
Management is responsible for such other information, which comprise the Management Report.
Our opinion on the consolidated financial statements does not cover the Management Report and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the Management Report, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's and its subsidiaries' financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identified and assessed the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designed and performed audit procedures responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and its subsidiaries' internal control.
Evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Concluded on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluated the overall presentation, structure and content of the financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the scope and timing of the planned audit procedures and significant audit findings, including deficiencies in internal control that we may have identified during our audit.
We also provided those charged with governance with a statement that we have complied with relevant ethical requirements, including applicable independence requirements, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Rio de Janeiro, March 12, 2021.
ERNST & YOUNG
Auditores Independentes S.S. CRC-2SP015199/O-6
Diogo Afonso da Silva Accountant CRC-1RJ114783/O-8
Consolidated statements of income and other comprehensive income For the years ended 31 December 2020 and 2019
Notes | 31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | ||
Revenues | 4 | 352,792 | 406,128 | 1,815,562 | 1,602,226 |
Raw materials and consumables used | (19,266) | (25,290) | (98,601) | (99,781) | |
Employee charge and benefits expense | 5 | (108,882) | (139,286) | (557,816) | (549,115) |
Amortisation of right-of-use | 13.1 | (10,706) | (12,389) | (55,046) | (48,813) |
Depreciation and amortisation expenses | (50,617) | (53,733) | (259,983) | (211,960) | |
Service costs and rentals | 6 | (61,678) | (65,778) | (318,620) | (259,767) |
Energy, water and communication | (10,352) | (14,454) | (53,092) | (56,961) | |
Insurance | (2,632) | (3,325) | (13,664) | (13,177) | |
Other operating expenses | (8,443) | (3,988) | (43,459) | (17,299) | |
Impairment loss | 11 | - | (13,025) | - | (53,530) |
Reversal of impairment | 12 | 382 | - | 1,969 | - |
Profit (loss) on disposal of property, plant and equipment | (317) | 294 | (2,011) | 1,223 | |
Results from operating activities | 80,281 | 75,154 | 415,239 | 293,046 | |
Share of result of joint ventures | 26.2 | (4,142) | 564 | (19,212) | 2,310 |
Finance income | 7 | 6,694 | 6,865 | 31,956 | 27,477 |
Finance costs | 7 | (10,374) | (11,824) | (53,372) | (47,050) |
Interests on lease liabilities | 7 | (12,836) | (15,912) | (65,950) | (62,809) |
Exchange gain (loss) on translation | 7 | (12,494) | (1,454) | (57,357) | (6,145) |
Income before tax | 47,129 | 53,393 | 251,304 | 206,829 | |
Income tax expense | 8 | (26,577) | (21,481) | (133,473) | (85,415) |
Net income for the year | 20,552 | 31,912 | 117,831 | 121,414 | |
Income for the year attributable to: | |||||
Owners of the Company | 19,491 | 30,454 | 112,331 | 115,696 | |
Non-controlling interests | 1,061 | 1,458 | 5,500 | 5,718 | |
20,552 | 31,912 | 117,831 | 121,414 | ||
Other comprehensive income | |||||
Items that will never affect profit or loss | |||||
Exchange differences on translation | (51,824) | (11,139) | 312,332 | 42,896 | |
Post-employment benefits | 351 | (1,168) | 1,827 | (4,875) | |
Items that are or may be reclassified to profit or loss | |||||
Effective portion of changes in fair value of cash flow hedges | (35) | 689 | 313 | (206) | |
Total comprehensive income (loss) for the year | (30,956) | 20,294 | 432,303 | 159,229 | |
Total comprehensive income for the year attributable to: | |||||
Owners of the Company | (31,831) | 18,865 | 426,767 | 153,528 | |
Non-controlling interests | 875 | 1,429 | 5,536 | 5,701 | |
(30,956) | 20,294 | 432,303 | 159,229 | ||
Earnings per share | |||||
Basic (cents per share) | 24 | 27.17c | 42.74c | 156.59c | 162.36c |
Diluted (cents per share) | 24 | 26.36c | 41.17c | 151.90c | 156.42c |
The accompanying notes are an integral part of the consolidated financial statements.
7
Consolidated statements of financial position At 31 December 2020 and 2019
Notes | 31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | ||
Assets | |||||
Non-current assets | |||||
Goodwill | 11 | 13,429 | 14,089 | 69,786 | 56,792 |
Other intangible assets | 12 | 16,967 | 22,312 | 88,172 | 89,935 |
Right-of-use assets | 13.1 | 149,278 | 189,011 | 775,753 | 761,847 |
Property, plant and equipment | 14 | 579,138 | 627,049 | 3,009,606 | 2,527,446 |
Deferred tax assets | 9 | 29,716 | 31,874 | 154,425 | 128,473 |
Investment in joint ventures | 26.3 | 26,185 | 30,334 | 136,076 | 122,267 |
Intergroup loans | 30,460 | 30,132 | 158,289 | 121,453 | |
Recoverable taxes | 16 | 11,006 | 26,501 | 57,195 | 106,817 |
Escrow deposits | 4,905 | 9,407 | 25,489 | 37,917 | |
Other trade receivables | 17 | 9 | 354 | 46 | 1,427 |
Total non-current assets | 861,093 | 981,063 | 4,474,837 | 3,954,374 | |
Current assets | |||||
Inventories | 15 | 11,764 | 10,507 | 61,134 | 42,351 |
Operational trade receivables | 17 | 38,767 | 47,154 | 201,461 | 190,064 |
Other trade receivables | 17 | 6,944 | 9,577 | 36,087 | 38,602 |
Recoverable taxes | 16 | 22,479 | 25,047 | 116,815 | 100,956 |
Short-term investments | 18 | 39,590 | 14,077 | 205,735 | 56,740 |
Cash and cash equivalents | 18 | 58,737 | 63,647 | 305,241 | 256,542 |
Total current assets | 178,281 | 170,009 | 926,473 | 685,255 | |
Total assets | 1,039,374 | 1,151,072 | 5,401,310 | 4,639,629 | |
Equity and liabilities | |||||
Share capital | 24 | 9,971 | 9,918 | 27,099 | 26,860 |
Capital reserves | 93,932 | 90,649 | 207,681 | 193,055 | |
Profit reserve and derivatives | 1,828 | 1,852 | 2,976 | 2,608 | |
Share options | 14,000 | 13,794 | 34,443 | 33,040 | |
Retained earnings | 474,933 | 493,764 | 1,058,633 | 1,156,140 | |
Translation reserve | (164,724) | (113,093) | 903,432 | 591,100 | |
Equity attributable to owners of the Company | 429,940 | 496,884 | 2,234,264 | 2,002,803 | |
Non-controlling interests | 330 | 616 | 1,715 | 2,479 | |
Total equity | 430,270 | 497,500 | 2,235,979 | 2,005,282 | |
Non-current liabilities | |||||
Bank loans | 19 | 283,989 | 298,342 | 1,475,806 | 1,202,527 |
Deferred tax liabilities | 9 | 50,987 | 52,036 | 264,964 | 209,742 |
Post-employment benefits | 23.2 | 1,641 | 2,369 | 8,526 | 9,547 |
Provisions for tax, labour and civil risks | 20 | 9,560 | 14,643 | 49,680 | 59,022 |
Lease liabilities | 13.2 | 139,702 | 172,210 | 725,989 | 694,126 |
Total non-current liabilities | 485,879 | 539,600 | 2,524,965 | 2,174,964 | |
Current liabilities | |||||
Bank loans | 19 | 58,672 | 36,636 | 304,901 | 147,669 |
Salaries, provisions and social contribution | 16,516 | 18,544 | 85,829 | 74,744 | |
Operational trade payables | 21 | 16,830 | 19,477 | 87,460 | 78,506 |
Taxes payable | 22 | 6,232 | 9,848 | 32,386 | 39,693 |
Other trade payables | 21 | 6,669 | 6,990 | 34,658 | 28,174 |
Current tax liabilities | 114 | 539 | 594 | 2,171 | |
Lease liabilities | 13.2 | 18,192 | 21,938 | 94,538 | 88,426 |
Total current liabilities | 123,225 | 113,972 | 640,366 | 459,383 | |
Total liabilities | 609,104 | 653,572 | 3,165,331 | 2,634,347 | |
Total equity and liabilities | 1,039,374 | 1,151,072 | 5,401,310 | 4,639,629 |
The accompanying notes are an integral part of the consolidated financial information.
Wilson Sons Limited
Consolidated statements of changes in equity For the years ended 31 December 2020 and 2019
(Amounts expressed in thousands of U.S. Dollars and Brazilian Reais, unless otherwise noted)
NotesCapital reservesShare capital US$
Share premiumOthers US$
Additional paid-in capital Derivatives
US$
US$
Balance at 1 January 2019
Net income for the year Post-employment benefits
Effective portion of changes in fair value of cash flow hedges
Other comprehensive income
Total comprehensive income (expense) for the year
Share options
Tax incentive reserve (Adene) Capital increase
Dividends
Balance at 31 December 2019
Net income for the year Post-employment benefits
Effective portion of changes in fair value of cash flow hedges
Other comprehensive income
Total comprehensive income (expense) for the year
Share options Capital increase Dividends
Balance at 31 December 2020 (Continues)
9,916
24
68,876
24
28,383
9,918
(7,138)
- - - - - - - 2 -
- - - - - - - 131 -- - - - - - 397 - -
- - - - - - - - -
69,007
28,780
(7,138)
53
-
-
-
-
-
-
-
- - - - - - 3,283 -
- - - - - - - -- - - - - - - -
9,971
72,290
28,780
(7,138)
US$
(821)
(132)
(167)
(35)
(35)
- - 689
- 689 - - - -- -
- - -
-
Profit reserve
US$ 1,984
1,984
1,995
- - - - - - 11 -
- - - - - - - -
Share options
Retained | ||
earnings | ||
US$ | ||
502,946 | ||
30,454 | - | |
(1,164) | - | |
- | - | |
- | (11,114) | |
29,290 | (11,114) | |
- | - | |
- | - | |
- | - | |
(38,472) | - | |
493,764 | (113,093) | |
- | 19,491 | - |
- | 344 | - |
- | - | - |
- | - | (51,631) |
- | 19,835 | (51,631) |
206 | - | |
- | (11) | |
- | (38,655) | |
14,000 | 474,933 |
US$ 13,424
13,794
- - - - - 370 - - -
Translation |
reserve |
US$ |
(101,979) |
Attributable | Non- | ||
to owners of | controlling | ||
the Company | interests | Total | |
US$ | US$ | US$ | |
515,591 | 523 | 516,114 | |
30,454 | 1,458 | 31,912 | |
(1,164) | (4) | (1,168) | |
689 | - | 689 | |
(11,114) | (25) | (11,139) | |
18,865 | 1,429 | 20,294 | |
370 | - | 370 | |
397 | - | 397 | |
133 | - | 133 | |
(38,472) | (1,336) | (39,808) | |
496,884 | 616 | 497,500 | |
19,491 | 1,061 | 20,552 | |
344 | 7 | 351 | |
(35) | - | (35) | |
(51,631) | (193) | (51,824) | |
(31,831) | 875 | (30,956) | |
- | 206 | - | 206 |
- | 3,336 | 19 | 3,355 |
- | (38,655) | (1,180) | (39,835) |
(164,724) | 429,940 | 330 | 430,270 |
9
Wilson Sons Limited
Consolidated statements of changes in equity For the years ended 31 December 2020 and 2019
(Amounts expressed in thousands of U.S. Dollars and Brazilian Reais, unless otherwise noted)
Share | Share | ||
Notes | capital | premium | Others |
R$ | R$ | R$ | |
Balance at 1 January 2019 | 26,852 | 139,502 | 76,018 |
Net income for the year | - | - | - |
Post-employment benefits | - | - | - |
Effective portion of changes in fair value of cash | |||
flow hedges | - | - | - |
Other comprehensive income | - | - | - |
Total comprehensive income for the year | - | - | - |
Share Options | - | - | - |
Tax incentive reserve (Adene) | - | - | 1,597 |
Capital increase | 8 | 535 | - |
Dividends | - | - | - |
Balance at 31 December 2019 | 24 | 26,860 | |
Net income for the year | - | ||
Post-employment benefits | - | ||
Effective portion of changes in fair value of cash | |||
flow hedges | - | ||
Other comprehensive income | - | ||
Total comprehensive income for the year | - | ||
Share options | - | ||
Capital increase | 239 | ||
Dividends | - | ||
Balance at 31 December 2020 | 24 | 27,099 |
Attributable | Non- | |||||||||
Additional | Profit | Share | Retained | Translation | to owners of | controlling | ||||
paid- in capital | Derivatives | reserve | Options | earnings | Reserve | the Company | interests | Total | ||
R$ | R$ | R$ | R$ | R$ | R$ | R$ | R$ | R$ | ||
(24,597) | (536) | 3,350 | 32,159 | 1,196,861 | 548,204 | 1,997,813 | 2,028 | 1,999,841 | ||
- | - | - | - | 115,696 | - | 115,696 | 5,718 | 121,414 | ||
- | - | - | - | (4,858) | - | (4,858) | (17) | (4,875) | ||
- | (206) | - | - | - | - | (206) | - | (206) | ||
- | - | - | - | - | 42,896 | 42,896 | - | 42,896 | ||
- | (206) | - | - | 110,838 | 42,896 | 153,528 | 5,701 | 159,229 | ||
- | - | - | 881 | - | - | 881 | - | 881 | ||
- | - | - | - | - | - | 1,597 | - | 1,597 | ||
- | - | - | - | - | - | 543 | - | 543 | ||
- | - | - | - | (151,559) | - | (151,559) | (5,250) | (156,809) | ||
77,615 | (24,597) | (742) | 3,350 | 33,040 | 1,156,140 | 591,100 | 2,002,803 | 2,479 | 2,005,282 | |
- | - | - | - | - | - | 112,331 | - | 112,331 | 5,500 | 117,831 |
- | - | - | - | - | - | 1,791 | - | 1,791 | 36 | 1,827 |
- | - | - | 313 | - | - | - | - | 313 | - | 313 |
- | - | - | - | - | - | - | 312,332 | 312,332 | - | 312,332 |
- | - | - | 313 | - | - | 114,122 | 312,332 | 426,767 | 5,536 | 432,303 |
- | - | - | - | - | 1,403 | - | - | 1,403 | - | 1,403 |
14,626 | - | - | - | 55 | (55) | - | 14,865 | 100 | 14,965 | |
- | - | - | - | - | - | (211,574) | - | (211,574) | (6,400) | (217,974) |
77,615 | (429) | 3,405 | 34,443 | 1,058,633 | 903,432 | 2,234,264 | 1,715 | 2,235,979 |
Capital reserves
140,037
154,663
The accompanying notes are an integral part of the consolidated financial statements.
(24,597)
10
Condensed statements of cash flows
For the years ended 31 December 2020 and 2019
Note | 31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | ||
Net cash generated by operating activities | 29 | 114,492 | 111,070 | 588,494 | 437,397 |
Cash flow from investing activities | |||||
Interest received | 1,749 | 3,372 | 8,936 | 13,477 | |
Proceeds on disposal of property, plant and equipment | 1,259 | 819 | 6,652 | 3,151 | |
Purchases of property, plant and equipment | (58,360) | (85,687) | (299,970) | (338,532) | |
Other intangible assets | (1,085) | (1,545) | (5,509) | (6,215) | |
Short-term investment | (25,513) | 15,033 | (131,588) | 59,321 | |
Capital increase - Joint venture | (23) | (3,527) | (121) | (13,508) | |
Net cash used in investing activities | (81,973) | (71,535) | (421,600) | (282,306) | |
Cash flow from financing activities | |||||
Capital increase by issuance of new shares under | |||||
employee share option plan | 3,336 | 133 | 14,865 | 543 | |
Capital increase - non controlling interest | 19 | - | 100 | - | |
Dividends paid | (38,655) | (38,472) | (211,574) | (151,559) | |
Dividends paid - non controlling interest | (1,180) | (1,336) | (6,400) | (5,250) | |
Repayments of borrowings | (25,725) | (85,856) | (125,350) | (337,929) | |
Repayments of leases obligations | (6,345) | (6,424) | (32,840) | (25,413) | |
Derivative payments | - | (339) | - | (1,277) | |
New borrowings obtained | 51,455 | 113,629 | 271,022 | 453,922 | |
Net cash used in financing activities | (17,095) | (18,665) | (90,177) | (66,963) | |
Net increase in cash and cash equivalents | 15,424 | 20,870 | 76,717 | 88,128 | |
Cash and cash equivalents at the beginning of the year | 63,647 | 39,924 | 256,542 | 154,699 | |
Effect of foreign exchange rate changes | (20,334) | 2,853 | (28,018) | 13,715 | |
Cash and cash equivalents at the end of the year | 58,737 | 63,647 | 305,241 | 256,542 |
The accompanying notes are an integral part of the consolidated financial statements.
11
Notes to the consolidated financial statements Years ended 31 December 2020 and 2019
1. General information
Wilson Sons Limited (the "Group" or "Company") is a limited company incorporated in Bermuda under the Companies Act 1981. The address of the registered office is Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda. The Group is one of the largest providers of integrated port and maritime logistics and supply chain solutions in Brazil. With a business track record of over 180 years, the Company has developed an extensive national network and provides a comprehensive set of services related to domestic and international trade, as well as to the oil and gas industry.The Company's principal activities are divided into the following segments: towage and shipping agency, container terminals and offshore support bases, offshore support vessels, logistics and shipyards.
2. Significant accounting policies and critical accounting judgements 2.1. Significant accounting policies
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board - IASB.
Basis of preparation
The consolidated financial statements are presented in US Dollars, which is the Company's functional currency, because that is the currency of the primary economic environment in which the Group operates. Entities with a functional currency other than US Dollars are included in accordance with the accounting policies described below. All financial statements presented in dollar have been rounded to the nearest thousands, except when otherwise indicated.
The consolidated financial statements have been prepared on the historical cost basis except for derivatives that are measured at fair values, as explained in the accounting policies.
As allowed by IAS 21 - The Effects of Changes in Foreign Exchange Rates, the Company also presents consolidated financial statements considering the Brazilian Real (R$) as presentation currency. The following procedures have been applied:
Assets and liabilities for each statement of financial position presented have been translated at the closing, exchange rate at the date of that statement of financial position;
Income and expenses for each statement of comprehensive income or separate income statement presented have been translated at average rate for the period, and
All resulting exchange differences have been recognised as foreign currency translation in other comprehensive income.
Change in functional currency
In accordance with as IAS 21, the functional currency of an entity reflects the underlying transactions, events and conditions that are relevant to the entity. Accordingly, once the functional currency is determined, it can be changed only if there is a change to those underlying transactions, events and conditions.
The Group considers the following factors in determining the functional currency of each entity:
The currency that mainly influences sales prices for goods and services; and
The currency that mainly influences costs of providing goods or services.
Following trends over the recent years, there have been changes in relation to underlying transactions, events and circumstances, mainly related to the flow of generation of revenues of Wilson Sons Shipping Services Ltda (previously named Wilson Sons Comércio Indústria e Agência de Navegação Ltda). The main reason for the change is due to the start of the shipping agency operations. As a result, the Company changed the functional currency of Wilson Sons Shipping Services Ltda (from US Brazilian Reais to Dollars) as of the first quarter of 2020.
As stipulated by IAS 21, when there is a change in an entity's functional currency, the entity shall apply the translation procedures applicable to the new functional currency prospectively from the date of the change.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The financial statements of subsidiaries are included in the consolidated financial statements.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if these results in the non-controlling interests have a deficit balance.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity.
Interests in investments
Interests in joint ventures
A joint venture is a contractual agreement where the Group has rights to the net assets of the contractual arrangement, and not entitled to specific assets and liabilities arising from the agreement.
Investments in joint venture entities are accounted for using the equity method. After initial recognition, the financial statements include the Group's share in the profit or loss for the year and other comprehensive income of the investee until the date that significant influence or joint control ceases.
Interests in joint operations
A joint operation is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, which is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.
The joint operations assets and any liabilities incurred jointly are recognised in the financial statements of the relevant entity and classified according to their nature. The Group's share of the assets, liabilities, income and expenses of joint operations are combined with the equivalent items in the consolidated financial statements on a line-by-line basis.
The consolidated financial statements include the accounts of joint ventures and joint operations which are listed in Note 26.
Foreign currency
The functional currency for each Group entity is determined as the currency of the primary economic environment in which it operates. Transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are not retranslated.
On consolidation, income and expense items of entities with a functional currency other than US Dollars are translated into US Dollars, the Group's presentational currency, at average rates of exchange for the period. Balance sheet items are translated into US Dollars at year end exchange rates. Exchange differences arising on consolidation of entities with functional currencies other than US Dollars are classified as other comprehensive income.
Employee Benefits
Short-term employee benefits
Obligations of short-term employee benefits are recognised as personnel expenses when the corresponding service is provided. The liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Stock option plan
For equity-settled share-based payment transactions, the Group measures the options granted, and the corresponding increase in equity, directly, at the fair value of the option grant.
Subsequent to initial recognition and measurement the estimate of the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied is revised during the vesting period. The cumulative amount recognised is based on the number of equity instruments for which the service and non-market conditions are expected to be satisfied. No adjustments are made in respect of market conditions.
Defined health benefit plans
The Group's net obligation regarding defined health benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees receive in return for their service in the current period and prior periods. That health benefit is discounted to determine its present value.
The calculation of the liability of the defined health benefit plan is performed annually by a qualified actuary using the projected unit credit method.
Remeasurements of the net defined health benefit obligation, which include actuarial gains and losses, are immediately recognised in other comprehensive income. The Group determines the net interest on the net amount of defined benefit liabilities for the period by multiplying them by the discount rate used to measure the defined health benefit obligation. Defined benefit liabilities for the period take into account the balance at the beginning of the period covered by the financial statements and any changes in the defined health benefit net liability during the period due to the payment of contributions and benefits. Net interest and other expenses related to defined health benefit plans are recognised in income.
When the benefits of a plan are increased, the portion of the increased benefit relating to past services rendered by employees is recognised immediately in income. The Group recognises gains and losses on the settlement of a defined health benefit plan when settlement occurs.
Other long-term employee benefits
The Group's net obligation in respect of other long-term employee benefits is the amount of future benefit that employees receive in return for the service rendered in the current year and previous years. That benefit is discounted to determine its present value. Remeasurements are recognised in the income statement.
Benefits of termination of employment relationship
The benefits of termination of employment relationship are recognised as an expense when the Group can no longer withdraw the offer of such benefits and when the Group recognises the costs of restructuring. If payments are settled after 12 months from the balance sheet date, then they are discounted to their present values.
Taxation
Income tax and social contribution expense represent the sum of current tax and deferred tax.
The current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because it excludes or includes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's current tax expense is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is the tax expected to be payable or recoverable on temporary differences and tax losses (i.e. differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit). Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences and tax losses to the extent that it is probable that taxable profits will be available against which those assets can be utilised.
Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
The Company offsets current tax assets against current tax liabilities when these items are in the same entity and relate to income taxes levied by the same taxation authority and the taxation authority permits the company to make or receive a single net payment. In the consolidated financial statements, a deferred tax asset of one entity in the Group cannot be offset against a deferred tax liability of another entity in the Group as there is no legally enforceable right to offset tax assets and liabilities between Group companies.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items charged or credited directly to equity, in which case the tax is also taken directly to equity.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation of assets, other than freehold land and assets under construction, over their estimated useful lives, using the straight-line method as follows.
Buildings: | 25 to 60 years |
Leasehold improvements: | (*) |
Vessels: | 25 years |
Vehicles: | 5 years |
Plant and Equipment: | 5 to 30 years |
(*) shorter of the rental period or useful life of underlying asset |
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Assets in the course of construction are carried at cost, less any recognised impairment loss. Costs include professional fees and the borrowing costs for qualifying assets. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for intended use.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, except when there is no reasonable certainty that the Group will obtain ownership by the end of the lease term in which the asset shall be fully depreciated over the shorter of the lease term and its useful life.
Docking costs are capitalised and depreciated over the period in which the economic benefits are received which is over the period to the next scheduled dry docking or the end of the vessels useful life (if applicable). Docking costs are presented under Vessels category.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds, if applicable, and the carrying amount of the asset and is recognised in the consolidated statement of comprehensive income.
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses.
Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives as follows.
Concession right: Computer software:
10 to 33 years |
3 to 5 years |
10 to 33 years
The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. There are no indefinite life intangible assets.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
Leased assets
The Group as a lessee
For any new contracts, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group;
The Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract;
The Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Group measures the lease liability at the present value of the lease payments unpaid at that date, using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee's incremental borrowing rate. Generally the Group applies the incremental borrowing rate. For a portfolio of leases with similar characteristics, lease liabilities are discounted using single discount rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Variable lease payments not related to an index or rate are expensed as incurred.
In accessing certain commitments related to rent of buildings, the Group cannot readily determinate the lease term as, in general, these can be terminated with no penalty every year. For these cases, the Group defined a standard lease term of 5 years. For machinery which the Group cannot readily determinate the lease term, the Group defines the lease term as the useful life of the machinery.
Subsequent to initial measurement, the carrying amount of liability is reduced to reflect the lease payments made and increased to reflect the interest. If there is a change in the expected cashflows arising from and index or rate, the lease liability is readily remeasured. If the modification is related to change in the amounts 18
to be paid, the discount rate is not reassessed. Otherwise, if a modification is made to a lease the Group revises the discount rate as if a new lease arrangement is made.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use. When the right-of-use asset is reduced to zero, the amount is recognised in the profit or loss.
The Group amortises the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use and lease liabilities have been presented with theses nomenclatures.
Impairment
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
Goodwill is tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, 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 amortisation, if no impairment loss had been recognised. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle and comprises direct materials and, where applicable, directly attributable labour costs and those overheads that have been incurred in bringing the inventories to their presentlocation and condition. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Financial instruments
Financial assets and liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
a. Financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through profit or loss (FVTPL), and fair value through other comprehensive income (OCI). The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow and the Group's business model for managing them.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Financial assets at amortised cost
The following instruments have been classified and measured at amortised cost using the effective interest method, less any impairment loss:
Cash and cash Equivalents / Investments: Cash and cash equivalents comprise cash on hand and other short-term highly liquid cash equivalents with maturities of less than 90 days which are subject to an insignificant risk of changes in value; and Investments comprise cash in hand and other investments with more than 90 days of maturity.
Trade Receivables: Trade receivables, insurance receivables and other amounts receivable are stated at the present value of the amounts due, reduced by the impairment loss.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss. Changes in fair value are recognised in the profit or loss under "financial income" or "financial expenses", depending on the results obtained.
Fixed income investment and exchange funds have been classified as FVTPL.
Impairment of financial assets
Financial assets that are measured at amortised cost are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Objective evidence of impairment could include:
Significant financial difficulty of the issuer or counterparty;
Default or delinquency in interest or principal payments;
It becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
The disappearance of an active market for that financial asset due to financial difficulties.
For trade receivables, the Group applies a simplified approach in calculation an allowance for expected credit losses (ECLs). Details are disclosed in Note 17.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, reflecting the impact of collateral and guarantees, discounted at the financial asset's original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralized borrowing for the proceeds received.
b. Financial liabilities
Financial liabilities are classified as either "FVTPL" or "other financial liabilities".
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
Other financial liabilities are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortisation cost, using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
There are no financial liabilities classified at FVTPL.
Other financial liabilities
Bank loans: Interest-bearing bank loans, obligations under finance leases are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on the accruals basis to the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Trade Payables: Trade payables and other amounts payable are measured at fair value, net of transaction costs.
Derivatives
One of the Group's subsidiaries held derivatives to hedge foreign currency exposure arising from capital expenditure denominated in Real. These derivatives were marked to market at the end of every month. This swap was settled in January 2019.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value, with gains or losses reported in the income statement. The Group does not have embedded derivatives for the periods presented.
Hedge Accounting (Cash flow hedge)
The Group seeks to apply hedge accounting (cash flow hedge) in order to manage volatility in profit or loss. When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the derivatives reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, plant and equipment purchases) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial carrying amount of the asset or liability. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Revenue
Revenue is measured at fair value of the consideration received or receivable for goods and services provided in the normal course of business net of trade discounts and other sales related taxes.
Shipyard revenue
Revenue related to services and construction contracts is recognised throughout the period of the project when the work in proportion to the stage of completion of the transaction contracted has been performed.
Port terminals revenue
Revenue from providing container movement and associated services is recognised on the date that the services have been performed.
Offshore support bases revenue
Revenue from providing vessel turnarounds is recognised on the date that the services have been performed.
Towage revenue
Revenue from towage services is recognised on the date that the services have been performed.
Ship agency and logistics revenues
Revenue from providing agency and logistics services is recognised when the services have been agreed performed.
Interest income
Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income
Dividend income from investments is recognised when the shareholders rights to receive payment have been established.
Construction contracts
Construction contracts in progress represent the gross amount expected to be collected from customers for contract work performed to date. When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably, has been agreed with the customer and consequently is considered probable.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent it is probable contract costs incurred will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Construction contracts in progress are presented as part of trade and other payables and trade and other receivables in the statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings and recognised losses.
Finance income and finance costs
Finance income comprises interest income on funds invested; fair value gains on financial assets recognised through profit or loss and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and deferred consideration, fair value losses on financial assets at fair value through profit or loss and contingent consideration, losses on hedging instruments that are recognised in profit or loss.
Segment reporting
Segment results that are reported for the Group include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company's headquarters), head office expenses and tax assets and liabilities.
2.2. Changes in accounting policies and disclosures
Several amendments and interpretations apply for the first time in 2020 but do not have an impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued, but are not yet effective.
Amendments to IFRS 16 COVID-19 Related Rent Concessions
On 28 May 2020, the IASB issued COVID-19-Related Rent Concessions - amendment to IFRS 16 Leases. The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification.
The amendment applies to annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted. This amendment impacted US$0.02 million (R$0.1 million) in discounts obtained and US$0.2 million (R$1.0 million) in payment deferrals from 2020 to 2021.
Other amendments
The following new or amended standards are not expected to have a significant impact on the Group's consolidated financial statements:
Amendments to IFRS 3
The amendments to IFRS3 clarify that, to be considered a business, an integrated set of activities and assets must include, at least, an inflow of funds and a substantive process that together contribute significantly to the capacity to generate the outflow of funds. Moreover, it clarified that a business can exist without including all the inflows of funds and processes necessary to create outflows of funds. These amendments had no impact on the Company's individual and consolidated financial statements but may impact future periods if the Group enters into any business combination.
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument.
These amendments have no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships.
Amendments to IAS 1 and IAS 8 Definition of Material
The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Group.
Conceptual Framework for Financial Reporting issued on 29 March 2018.
The revised standard outlines some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts.
These changes did not affect the financial statements of the Company.
2.3. Critical accounting judgments and key sources of estimation uncertainty
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In the process of applying the Group's accounting policies, which are described above, management has made the following judgments, estimates and assumptions that have the most significant effect on the amounts recognised in the financial statements as mentioned below.
a. Provision for tax, labour and civil risks - Judgment
In the normal course of business in Brazil the Group is exposed to legal cases. Provisions for legal cases are made when the Group's management, together with their legal advisors, consider the outcome of a financial settlement against the Group is probable. Provisions are measured at the management's best estimate of the expected expenditure required to settle the obligation based upon legal advice received. For labour claims the provision is based on prior experience and management's best knowledge of the relevant facts and circumstances.
The amount of provisions for tax, labour and civil risks at the end of the reporting period was US$9.6 million (R$49.7 million) (2019: US$14.6 million (R$59.0 million)). Details are disclosed in Note 20.
b. Impairment loss on non-financial assets Judgment and Estimation
Impairment losses occur when book value of an asset or cash generating unit exceeds its recoverable value, which is the highest of fair value less selling costs and value in use. Calculation of fair value less selling costs is based on information available on similar assets' selling transactions or market prices less additional costs to dispose of the asset. The value-in-use calculation is based on the discounted cash flow model. The recoverable value of the cash-generating unit is defined as the higher of the fair value less sales costs and value in use.
The main non-financial assets for which this assessment was made are goodwill recorded by the Company and the tangible assets of offshore support bases.
Goodwill
The goodwill associated with each cash-generating unit "CGU" (Tecon Salvador and Tecon Rio Grande) is attributed to the Port Terminals segment. Details are disclosed in Note 10 and 11.
Tangible assets
Due to the impairment loss recognised in 2019 attributed to offshore support bases, the Company expanded the impairment procedures for the tangible assets of this CGU. Details are disclosed in Note 10 and 12.
c. Fair value of derivatives - Estimation
As described in Note 27, the Company may use derivative contracts to manage risk. For derivative financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the instruments.
Due to a new financing agreement with BNDES, the only swap of the Group was settled in January 2019.
d. Provision for expected credit losses of trade receivables and contract assets - Estimation
The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns.
The provision matrix is initially based on the Group's historical observed default rates. The Group will calibrate, when appropriate, the matrix to adjust the historical credit loss experience with forward-looking information.
The Group's management will update the default rate per business every six months.
The amount of provision for expected credit losses of trade receivables and contract assets at the end of the reporting period was US$0.5 million (R$2.9 million) (2019: US$0.8 million (R$3.4 million)). Details are disclosed in note 17.
2.4. Standards issued but not yet effective
The Group has listed all new standards and interpretations issued by the IASB, but not yet effective.
The Company is currently assessing the impacts of these new standards on the Group's consolidated financial statements and therefore the disclosures have not been made:
Insurance Contracts (IFRS 17);
Amendments to IAS 1: Classification of Liabilities as Current or Non-current;
Reference to the Conceptual Framework - Amendments to IFRS 3;
Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16;
Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37; and
IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter.
3. Segment information Reportable segments
For management purposes, the Group is currently organised into five reportable segments: towage and agency services, port terminals, offshore vessels, logistics and shipyards. These divisions are reported for the purposes of resource allocation and assessment of segment performance.
Finance costs relating to liabilities were allocated to reporting segments based on the loans taken to finance the acquisition or the construction of fixed assets in that segment. Finance income arising from bank balances held by Brazilian operating segments, including foreign exchange differences on such balances, were also allocated to the reporting segments.
Administrative and financial expenses are presented as non-segmented activities.
Segment information relating to these businesses is presented below:
2020
Towage and | Container | |||
shipping | terminals and | Offshore | Non | |
agency | offshore | support | segmented | |
services | support bases | vessels | Logistics Shipyard | activities |
US$ | US$ | US$ |
US$ 181,71828,616
- | 6,671 | - | (4,434) | 352,792 |
(8,717) | (17,549) | 4,019 | 80,281 | |
(10) | 6,284 | 55 | 6,694 | |
(121) | (118) | - | (12,836) | |
(615) | (1,071) | - | (10,374) | |
(9,463) | (12,454) | 4,074 | 63,765 | |
- | - | - | (4,142) |
31 December 2020
Revenue
Operating profit Finance income
Interest on lease liabilities Finance costs
Operating profit (loss) adjusted by finance income and cost
Share of result of joint ventures
Exchange gain (loss) on translation Profit before tax
Other information: Capital expenditures Amortisation of right-of-use Depreciation and amortisation
Balance sheet
Segment assets Segment liabilities
54,680 267 (322) (5,783)
48,842 -
(4,118) | (24) |
--
- | - | - | - | - | - | (12,494) |
- | - | - | - | - | - | 47,129 |
(12,626)(1,463)
(47,661) | - | (130) | (991) | (1,078) | - | (62,486) |
(6,016) | - | (2,471) | (46) | (710) | - | (10,706) |
(15,551) | - | (775) | (4,011) | (1,247) | 2,071 | (50,617) |
(31,104)
338,504
(267,023)
Towage and shipping agency services
31 December 2019 Revenue
140,221
46,633
(289) (10,215) (2,883)
33,246 -
US$
US$
- - - - -
1,215 387 (2,060)
(22)
(480)
Elimination ConsolidatedUS$
US$
485,712 (229,777)
25,968
37,851
76,931
- (30,239) (36,455)
74,408 (45,610)
- 1,039,374
- (609,104)
2019
Container terminals and offshore support bases
Offshore support vessels
Logistics ShipyardNon segmented activities
Elimination ConsolidatedUS$
US$ 168,76545,691
US$
187,167
US$
US$
US$
-25,075
US$
US$
-(20,570)
406,128
Operating profit 46,235
5,779 | (4,968) | (21,566) | 3,397 | |
531 | 68 | 4,561 | (2) | |
(2,733) | (160) | (200) | - | |
(23) | (558) | (33) | - | |
3,554 | (5,618) | (17,238) | 3,395 | |
587 | (23) | - | - | - |
46,277 | - |
1,076 | - |
- | |
- | |
- | |
Finance income 631
Interest on lease liabilities (258)
Finance costs (6,222)
Operating profit (loss) adjusted by finance
income and cost
Share of result of joint ventures
Exchange gain (loss) on translation Profit before tax
Other information: Impairment loss Capital expenditures Amortisation of right-of-use Depreciation and amortisation
Balance sheet
Segment assets Segment liabilities
40,386 -
(12,561) (4,988)
75,154 6,865 (15,912) (11,824)
29,804 -54,283 564
--
- | - | - | - | - | - | (1,454) |
- | - | - | - | - | - | 53,393 |
(13,025) | - | - | - | - | (13,025) | ||
(23,253) | (63,618) | - | (516) | (1,070) | (1,025) | - | (89,482) |
(546) | (7,569) | - | (3,219) | (49) | (1,006) | - | (12,389) |
(30,474) | (20,670) | - | (1,223) | (4,296) | (460) | 3,390 | (53,733) |
-
-(267,968)
353,894
581,092 (270,280)
30,054 | 57,332 | 79,573 | 49,128 | - | 1,151,073 |
- | (41,584) | (36,190) | (37,550) | - | (653,572) |
2020
Towage and | Container | ||
shipping | terminals and | Offshore | Non |
agency | offshore | support | segmented |
services | support bases | vessels | activities |
R$ | R$ | R$ |
R$
31 December 2020 Revenue
Operating profit Finance income
R$ 939,254146,367
284,967(45,874)
816
Interest on lease liabilities (1,687)
Finance costs (29,800)
Operating profit (loss) adjusted by finance
income and cost
(19,090)Share of result of joint ventures
Exchange gain (loss) on translation Profit before tax
Other information: Capital expenditures
254,296
-
--
- | - | - | - | - | - | (57,357) |
- | - | - | - | - | - | 251,304 |
Amortisation of right-of-use (7,734)
Depreciation and amortisation (160,239)
Balance sheet
Segment assets Segment liabilities
(65,215)
(244,711) | - | (651) | (5,456) | (5,034) | - | (321,067) |
(30,794) | - | (12,629) | (237) | (3,652) | - | (55,046) |
(79,514) | - | (3,950) | (20,602) | (6,427) | 10,749 | (259,983) |
(1,387,640)
1,759,098134,949399,787
386,676 | - | 5,401,310 |
(237,020) | - | (3,165,331) |
718,548
238,544 (1,518)
(52,478) (14,560)
169,988
-
Logistics Shipyard
-
R$ 34,495
- - - -
6,4661,878
(10,566)
(111)
(68) (618) (3,169)
-(2,333) (49,729)
(122)
-(1,194,082)
2,524,100
196,700- (157,143) (189,446)
Elimination Consolidated
-R$ (23,102)R$ 1,815,562
(90,554) 30,563 (601) (5,732)
21,690 285 - -415,239 31,956 (65,950) (53,372)
(66,324)
21,975
327,873
-
-(19,212)
2019
Towage and | Container | ||
shipping | terminals and | Offshore | Non |
agency | offshore | support | segmented |
services | support bases | vessels | activities |
R$ | R$ | R$ |
R$
Logistics Shipyard
Elimination Consolidated
31 December 2019
Revenue
R$ 667,164179,235
738,317
-
R$ 96,831
-R$ (79,321)R$ 1,602,226
Operating profit Finance income
Interest on lease liabilities Finance costs
2,571 (1,012) (24,529)
Operating profit (loss) adjusted by finance income and cost
160,490
183,460(20,205)
180,735 | - | (85,453) | 12,078 | 293,046 | ||
5,950 | - | 2,091 | 277 | 16,596 | (8) | 27,477 |
- | (10,784) | (633) | (786) | - | (62,809) | |
- | (87) | (2,614) | (79) | 408 | (47,050) | |
- | 13,651 | (23,175) | (69,722) | 12,478 | 210,664 |
22,431
(49,594) (20,149)
116,942
Share of result of joint ventures
Exchange gain (loss) on translation Profit before tax
---
- | - | - | - | - | - | (6,145) |
- | - | - | - | - | - | 206,829 |
-2,425
(115)
--
-2,310
Other information: Impairment LossCapital expenditures (90,997)
Amortisation of right-of-use (2,150)
Depreciation and amortisation (120,290)
-
(53,530) | (53,530) | |||||
(250,719) | - | (2,046) | (4,254) | (4,120) | - | (352,136) |
(29,826) | - | (12,689) | (193) | (3,955) | - | (48,813) |
(81,359) | - | (4,828) | (16,936) | (1,812) | 13,265 | (211,960) |
----
-
Balance sheet
Segment assets Segment liabilities
(1,080,097)
1,426,439121,139320,735
198,020 | - | 4,639,629 |
(151,351) | - | (2,634,347) |
2,342,208(1,089,417)
231,088- (167,612) (145,870)
Geographical information
The Group's operations are mainly located in Brazil where it earns income and incurs expenses. The Group earns income on cash and cash equivalents and short-term investments in Bermuda and in Brazil. The Group, through its participation in an Offshore Vessel Joint Venture in Panama, earns income in that country and in Uruguay.
4. Revenues
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Towage and agency services | ||||
Harbour Manoeuvres | 159,134 | 148,330 | 823,890 | 586,059 |
Special Operations | 14,462 | 11,194 | 73,572 | 44,618 |
Ship Agency | 8,122 | 9,241 | 41,792 | 36,487 |
Total | 181,718 | 168,765 | 939,254 | 667,164 |
Port Terminals | ||||
Container Handling | 71,401 | 92,341 | 366,270 | 364,383 |
Warehousing | 28,727 | 33,545 | 146,678 | 132,356 |
Ancillary services | 18,534 | 21,607 | 95,515 | 85,377 |
O&G Support Base | 8,045 | 19,357 | 41,114 | 75,944 |
Other services | 13,514 | 20,317 | 68,971 | 80,257 |
Total | 140,221 | 187,167 | 718,548 | 738,317 |
Logistics | ||||
Logistics | 28,616 | 45,691 | 146,367 | 179,235 |
Total | 28,616 | 45,691 | 146,367 | 179,235 |
Shipyard | ||||
Technical assistance / dry-docking | 2,237 | 4,505 | 11,393 | 17,510 |
Total | 2,237 | 4,505 | 11,393 | 17,510 |
Total | 352,792 | 406,128 | 1,815,562 | 1,602,226 |
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Timing of revenue recognition | ||||
At a point in time | 350,555 | 401,623 | 1,804,169 | 1,584,716 |
Over time | 2,237 | 4,505 | 11,393 | 17,510 |
Total | 352,792 | 406,128 | 1,815,562 | 1,602,226 |
4.2. Contract balance | ||||
The following is an analysis of the Group's revenues from continuing operations for the year (excluding investment income - Note 7).
4.1. Disaggregated revenue information
Set out below is the disaggregation of the Group's revenue from contracts with customers:
Trade receivables are generally received within 30 days. The carrying amount of operational trade receivables at the end of reporting period was US$38.8 million (R$201.5 million) (2019: US$47.2 million (R$190.1 million)). These amounts include US$10.4 million (R$54.0 million) (2019: US$12.4 million (R$49.8 million)) of contract assets (unbilled accounts receivables). Details are disclosed in Note 17.
There are no other contract assets and liabilities recognised for the period presented.
4.3. Performance obligations
Information about the Group's performance obligation is summarised below:
When performance obligation
Performance obligation | is typically satisfied |
Towage and shipping agency services | |
Harbour Manoeuvres | At a point in time |
Special Operations | At a point in time |
Ship Agency | At a point in time |
Container terminals offshore support bases | |
Container handling | At a point in time |
Warehousing | At a point in time |
Ancillary services | At a point in time |
Offshore support base | At a point in time |
Other services | At a point in time |
Logistics | |
Logistics | At a point in time |
Shipyard | |
Ship construction contracts | Over time |
Technical assistance / dry-docking | Over time |
The majority of the Group's performance obligations are satisfied at a point in time upon delivery of the service and payment is generally due within 30 days upon completion of services.
The performance obligation of ship construction contracts is satisfied over time and the revenue related to services and construction contracts is recognised when the work in proportion to the stage of completion of transactions contracted has been performed. On 31 December 2020 there are no warranties or refunds obligations applied to ship construction contracts.
There are no significant judgements on both scenarios of performance obligations.
5. Employee charges and benefits expenses
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Salaries and benefits | (86,910) | (110,135) | (445,844) | (434,272) |
Payroll taxes | (21,198) | (28,056) | (107,957) | (110,584) |
Pension costs | (647) | (725) | (3,362) | (2,806) |
Long-term incentive plan | (127) | (370) | (653) | (1,453) |
Total | (108,882) | (139,286) | (557,816) | (549,115) |
6. Service costs and rentals
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Tug rentals | (22,967) | (15,268) | (119,878) | (60,426) |
Service costs | (21,953) | (27,259) | (112,938) | (107,924) |
Freight | (7,031) | (10,868) | (36,009) | (42,642) |
Port expenses | (6,172) | (8,164) | (31,504) | (32,184) |
Vessel rentals | (1,320) | (1,777) | (6,741) | (6,988) |
Equipment rentals | (1,142) | (941) | (5,812) | (3,715) |
Container minimum contractual movement | (717) | (950) | (3,782) | (3,782) |
Building rentals | (159) | (220) | (844) | (870) |
Vehicle rentals | (110) | (195) | (561) | (758) |
Terminal rentals | (107) | (136) | (551) | (478) |
Total | (61,678) | (65,778) | (318,620) | (259,767) |
7. | Finance income and finance costs | |||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Interest on investments | 1,078 | 1,733 | 5,609 | 6,767 |
Exchange gain on investments | 5,050 | 820 | 23,713 | 3,424 |
Other interest income | 566 | 4,312 | 2,634 | 17,286 |
Total finance income | 6,694 | 6,865 | 31,956 | 27,477 |
Interest on bank loans | (10,262) | (10,813) | (52,808) | (42,643) |
Exchange loss on loans | - | (778) | - | (3,585) |
Other interest | (112) | (233) | (564) | (822) |
Total finance costs | (10,374) | (11,824) | (53,372) | (47,050) |
Interest on lease liabilities | (12,836) | (15,912) | (65,950) | (62,809) |
Exchange gain (loss) on translation | (12,494) | (1,454) | (57,357) | (6,145) |
8. | Income tax expense | |||
Income tax recognised in profit or loss: | ||||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Current | ||||
Brazilian taxation | ||||
Income tax | (20,912) | (16,734) | (108,937) | (67,186) |
Social contribution | (8,276) | (6,155) | (43,147) | (24,833) |
Total Brazilian current tax | (29,188) | (22,889) | (152,084) | (92,019) |
Deferred tax | ||||
Total deferred tax | 2,611 | 1,408 | 18,611 | 6,604 |
Total income tax expense | (26,577) | (21,481) | (133,473) | (85,415) |
33 |
Brazilian income tax is calculated at 25% of the taxable profit for the period. Brazilian social contribution taxes are calculated at 9% of the taxable profit for the period.
The income tax expense for the period can be reconciled to the accounting profit as follows:
9.
Unrealised | Non- | ||||
Tax | foreign | Other | monetary | ||
depreciation | exchange | taxes | items | Total | |
US$ | US$ | US$ | US$ | US$ | |
At 1 January 2019 | (38,328) | 32,174 | 36,386 | (52,032) | (21,800) |
Charge (credit) to income | (587) | (1,978) | 3,381 | 592 | 1,408 |
Exchange differences | 1,641 | (817) | (720) | 126 | 230 |
At 31 December 2019 | (37,274) | 29,379 | 39,047 | (51,314) | (20,162) |
Charge (credit) to income | (638) | 15,135 | 2,086 | (13,972) | 2,611 |
Other adjustment | - | - | 58 | - | 58 |
Exchange differences | 8,429 | (8,057) | (4,779) | 629 | (3,778) |
At 31 December 2020 | (29,483) | 36,457 | 36,412 | (64,657) | (21,271) |
The following deferred tax assets and liabilities were recognised by the Group during the current and prior reporting periods:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Profit before tax | 47,129 | 53,393 | 251,304 | 206,830 |
Tax at the standard Brazilian tax rate (34%) | (16,024) | (18,154) | (85,443) | (70,322) |
Utilization of net operating losses | - | 506 | - | 2,096 |
Exchange variation on loans | 14,631 | 804 | 68,454 | 4,172 |
Tax effect of share of results of joint ventures | (1,408) | 192 | (6,532) | 785 |
Tax effect of foreign exchange gain or loss on | ||||
monetary items | (4,248) | (494) | (19,501) | (2,089) |
Effect of different tax rates in other jurisdictions | (429) | (210) | (2,240) | (837) |
Retranslation of non-current asset valuation | (13,972) | 592 | (60,747) | 1,073 |
Share option scheme | (43) | (126) | (222) | (494) |
Non-deductible expenses | (2,018) | (1,701) | (10,798) | (6,666) |
Net operating losses of the year | (2,869) | (1,712) | (13,236) | (6,851) |
Leasing | 108 | 133 | 530 | 525 |
Impairment Brasco | - | (1,438) | - | (5,908) |
Resolution of tax litigation | 209 | 126 | 1,130 | 493 |
Others | (514) | 1 | (4,868) | (1,392) |
Income tax expense | (26,577) | (21,481) | (133,473) | (85,415) |
Deferred taxes |
Unrealised | Non- | ||||
Tax | foreign | Other | monetary | ||
depreciation | exchange | taxes | items | Total | |
R$ | R$ | R$ | R$ | R$ | |
At 1 January 2019 | (148,524) | 124,671 | 140,994 | (201,612) | (84,471) |
Charge (credit) to income | (1,725) | (6,251) | 13,507 | 1,073 | 6,604 |
Translation adjustment to Brazilian real | - | - | 2,890 | (6,292) | (3,402) |
At 31 December 2019 | (150,249) | 118,420 | 157,391 | (206,831) | (81,269) |
Charge (credit) to income | (2,970) | 71,038 | 11,290 | (60,747) | 18,611 |
Other adjustment | - | - | 303 | - | 303 |
Translation adjustment to Brazilian real | - | - | 20,239 | (68,423) | (48,184) |
At 31 December 2020 | (153,219) | 189,458 | 189,223 | (336,001) | (110,539) |
Certain tax assets and liabilities have been offset on an entity-by-entity basis. After offset, deferred tax balances are disclosed in the balance sheet as follows:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Deferred tax liabilities | (50,987) | (52,036) | (264,964) | (209,742) |
Deferred tax assets | 29,716 | 31,874 | 154,425 | 128,473 |
Total | (21,271) | (20,162) | (110,539) | (81,269) |
Deferred taxes over Net Operating Losses |
At the end of the reporting period, the Group has a US$64.4 million (R$334.8 million) (2019: US$64.1 million (R$258.4 million)) balance of tax losses carryforward available to be utilised against future taxable profits.
Brazil has no tax consolidation rules, and it applies ring fencing on a legal entity basis in determining the utilisation of net operating losses (NOL) to carryforward.
Out of US$21.6 million (R$112.5 million) (2019: US$21.3 million (R$86.0 million)) total deferred tax assets from net operating losses, US$14.7 million (R$76.4 million) (2019: US$15.1 million (R$60.7 million)) was recognised for accounting purposes at the end of reporting period and is expected to be utilised against the cash-generating entities future taxable profits.The Company expects to recover the deferred tax assets between three and five years.
Deferred taxes over non-monetary items
As disclosed in Note 2 ("Basis of Preparation"), under the IAS 21 the US dollar is the functional currency for the Company and non-monetary items are re-measured using historical exchange rates. Changes in exchange rates and indexing for tax purposes will create differences between the Brazilian Reais cost of those items (tax basis) and the equivalent US dollar amount.
The deferred tax liability or asset for those differences are recognised to neutralise the effect of changes in exchange rates on non-monetary items that were measured at historical BRL/USD versus the exchange rates at the period close.
10. Impairment Test of the Cash Generate Units 10.1. Tecon Rio Grande and Tecon Salvador
The cash flows of these CGUs are derived from operating budgets, historical and prospective data, and include the following forecast assumptions: (i) revenue; (ii) costs and expenses; (iii) investments; (iv) projection period and (v) discount rate.
The key assumptions used in determining value in use relate to growth rate, discount rate and inflation rate. Further assumptions include sales and operating margins which are based on past experience taking into account the effect of known, or likely, changes in market or operating conditions. Projected volumes for Tecon Rio Grande and Tecon Salvador were based on the expected performance of the Brazilian economy until reaching operating capacity for each.
The discount rate was based on weighted average cost of captal ("WACC"), whereas the growth rate for projection, is based on the inflation rate only after reaching operating capacity.
The estimated average growth rate used does not exceed the historical average for Tecon Rio Grande and Tecon Salvador and the discount rate used in 2020 was 8.4% (2019: 9.3%).
Review tests were performed on these CGUs and conlcuded that there are not factors that indicate impairment, since the recoverable amount significantly exceeded the book value.
10.2. Offshore support bases
In 2019 the Company recognised an impairment loss of US$ 13.3 million (R$ 53.5 million), of which US$ 12.8 million (R$ 51.6 million) related to Goodwill and the remaining against other intangible assets. Goodwill for this CGU was then fully written-off.
Due to the impairment loss recognised in 2019 attributed to offshore support bases, the Company expanded the impairment procedures for the tangible assets of this CGU.
The Company determines its cash flow bases on the budgets and historical and prospective data, including the following main assumptions: (i) revenue; (ii) costs and expenses; (iii) investments; (iv) projection period and (v) discount rates based on weighted average cost of capital ("WACC").
(i) Revenue
Occupancy rate
The projected quantity of vessel turnarounds considers the estimated pace of growth in oil & gas offshore exploration and production, based on data from Brazilian Petroleum National Agency (ANP), Energy Research Agency (EPE, subordinated to Ministry of Energy), Oil Companies' releases and specialised industry reports. In the market reports reviewed there is a consensus that in the next 10 years there will be significant increases in oil exploration and production activities in Brazil.
Based on the specialised industry reports, management estimates that the oil companies will undertake about 6,729 berthing operations per year until 2024 for the exploration blocks and oil fields located in the Company's area of influence (southern region of Campos Basin and Santos Basin), thus representing an increase of 1,840 annual berths compared to 2019 (4,888 berths/ year).
The Company predicts it will sucessfully capture part of the above metioned increase in demand for berthing space considering the competitive landscape in the service Guanabara Bay area and expects to reach from 2026 onwards operating levels attained prior to the economic and oil and gas market crises. In predicting its expected growth over the period to 2024, the Company has taken account of current tender activity and expected tender activity to come, and has identified those projects it expects to secure based on an assessment of competitive advantage. The average of growth rate is 23% each year until 2024.
Longer term growth rates after 2024 are aligned with the expected growth in the Brazilian oil and gas sector, and the region in which the Company operates which gives raise to an average growth rate after 2024 of 15% per annum.
Due to the impact of the COVID-19 pandemic and the resultant oil price shock during 2020 a number of Oil Companies have sought postponement of their start date for exploration and development of oil fields in Brazil and the ANP has granted concessions in this regard. The Company has made adjustments to their previous forecasts to take account of new information available, principally by amending the cashflow by delaying them by one year to take account of the impacts of the economic crises and the above mentioned postponements. The Company does not expect any impairment losses to arise if the current low-activity scenario due to project postponements lasts until 2023.
Sales prices
In the short term (2021-2023), the Company's financial projections do not consider an increase with regard to the pricing currently in place. For the long term (2024-2030), the projections consider the 2023 unit price adjusted for inflation over time.
Stress testing
The Company prepared a stress testing considering the following scenarios taking account of the different growth rates forecast to 2024 and longer term:
Revenue aggregate: the revenue would have to decrease by 5.3% each year (not compounded) in the model to achieve break even.
Revenue short term (2021-2023): the revenue would have to decrease 12.0% (not compounded) from 2021 to 2023 in the model to achieve break even.
The short term revenue is a sensitive assumption to be extremely dependent from the results of tenders submitted and tenders expected to be submitted that the Company expects to have a high change of securing. Revenue growth rates below those outlined in the above sensitivity would lead to impairment.
For the aggregate revenue, the Company expects to reach 21% of market share until 2021.
(ii) Costs and expenses
For all years forecast, variable costs are forcast to increase in line with forecast increases in activity. For the period to 2023, the Company forecasts that fixed costs will not increase above current levels. For the long term (2024-2030), the projections are adjusted for inflation over time.
(iii) Investments
As per IAS 36, the company is required to include in the estimated cash outflows only the investment required to maintain the level of economic rewards expected from the assets in their current conditions. The Company did not include any expansion investment in the model.
(iv) Projection period
The Company has prepared the cash flow projection considering a period over a 10 year period plus a perpetuity. The oil and gas industry life cycle is at least 10 years, due to the life cycle of investment in an oil field from exploration to sustainable production.
(v) Discount rates
The discount rate represents the current market assessment of the risks specific to the CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the CGU and its operating segments and is a weighted average cost of capital (WACC). The WACC takes into account both cost of debt and equity. The cost of equity is derived from the expected return on investment by potential investors. The cost of debt is based on an assessment of the interest-bearing borrowings the CGU is able to borrow in the market. Segment-specific risk is incorporated by applying beta factors. The beta factors are evaluated annually based on publicly available market data.
The Company has determined the discount rate using reputable sources to capture macroeconomic assumptions and information from comparator companies in the oilfield and the maritime services sector in which Brasco operates. The discount rate used was 11.3% (2019: 14.5%). The reduction in discount rate from 2019 to 2020 was principally driven by a reduction of cost of equity due to the macroeconomic assumptions update over the last twelve months (i.e. decrease in risk free rate, unleveraged beta, Country Risk Premium, reduction in Equity Risk Premium and amendments to the debt/equity ratio). In addition, for 2019 a specific risk premium was included in the WACC recognising inherent risks in the forecast cashflows.
Stress testing
The discount rate would have to increase by 0.9% (ie. to 12.2%) for the impairment the model to achieve break even.
The Company, having carried out the impairment tests above, concluded that no impairment needed to be recorded, since the recoverable amount exceeded the book value, the carrying value of Brasco's assets of US$46.3 million (R$240.0 million) was lower than the the value in use of US$57.2 million (R$296.8 million).
In addition, the Company reverted the impairment of US$0.4 million (R$2.0 million) related to intangible assets other than goodwill recognised in 2019.
However, according to the stress testing scenarios above, the Company would need to record an impairment loss if at least one of this following scenarios was to occur in isolation:
Revenue aggregate would have to decrease by more than 5.3% each year;
Revenue short term (2021 - 2023) would have to decrease by more than 12.0% each year; and
Discount rate would have to increase by more than 0.9%.
11. Goodwill
Cost | |
At 1 January 2019 | 13,307 |
Impairment | (12,537) |
Exchange differences | (770) |
At 31 December 2019 | - |
Impairment | - |
Exchange differences | - |
At 31 December 2020 | - |
Carrying amount | |
31 December 2020 | - |
31 December 2019 | - |
Offshore Support Base | |
R$ | |
Cost | |
At 1 January 2019 | |
Impairment | |
Exchange differences | |
At 31 December 2019 | |
Impairment | |
Exchange differences | |
At 31 December 2020 | |
Carrying amount | |
31 December 2020 | |
31 December 2019 |
Offshore Support Base |
US$ |
Salvador | |||
Rio Grande | Container | ||
Container Terminal | Terminal | Total | |
US$ | US$ | US$ | |
11,728 | 2,480 | 27,515 | |
- | - | (12,537) | |
(119) | - | (889) | |
11,609 | 2,480 | 14,089 | |
- | - | - | |
(660) | - | (660) | |
10,949 | 2,480 | 13,429 | |
10,949 | 2,480 | 13,429 | |
11,609 | 2,480 | 14,089 | |
Salvador | |||
Rio Grande | Container | ||
Container Terminal | Terminal | Total | |
R$ | R$ | R$ | |
51,561 | 45,444 | 9,610 | 106,615 |
(51,561) | - | - | (51,561) |
- | 1,350 | 388 | 1,738 |
- | 46,794 | 9,998 | 56,792 |
- | - | - | - |
- | 10,106 | 2,888 | 12,994 |
- | 56,900 | 12,886 | 69,786 |
- | 56,900 | 12,886 | 69,786 |
- | 46,794 | 9,998 | 56,792 |
The goodwill associated with each cash-generating unit "CGU" (Tecon Salvador and Tecon Rio Grande) is attributed to the Port Terminals segment. The movement in goodwill balances in the year is due to the depreciation of the Brazilian Real against the US Dollar.
Each CGU is assessed for impairment annually and whenever there is an indication of impairment. The carrying value of goodwill has been assessed with reference to its value in use reflecting the projected discounted cash flows of each CGU to which goodwill has been allocated.
In 2019, as a result of impairment test it was concluded that carrying value of Brasco's assets of US$83.6 million (R$337.2 million) exceeded the value in use of US$70.4 million (R$283.7 million). As a result of this analysis, an impairment charge of US$13.0 million (R$53.5 million) was recognised in 2019 of which US$12.5 million (R$51.6 million) was recognised against Goodwill and the remainder was recognised against other intangible assets. The reason for the impairment charge arising last year was an increase in the discount rate applied to the cash flows.
Details of the impairment test are disclosed in Note 10.
12. Other intangible assets
Cost | |
At 1 January 2019 | 42,349 |
Additions | 1,545 |
Transfers to property, plant and equipment | (72) |
Disposals | (927) |
Exchange differences | (475) |
At 31 December 2019 | 42,420 |
Additions | 1,085 |
Transfers from property, plant and equipment | 99 |
Disposals | (43) |
Exchange differences | (2,454) |
At 31 December 2020 | 41,107 |
Accumulated amortisation | |
At 1 January 2019 | 31,708 |
Charge for the year | 2,822 |
Disposals | (926) |
Impairment - constitution | - |
Exchange differences | (278) |
At 31 December 2019 | 33,326 |
Charge for the year | 2,394 |
Disposals | (42) |
Impairment - reversal | - |
Exchange differences | (1,330) |
At 31 December 2020 | 34,348 |
Carrying amount | |
31 December 2020 | 6,759 |
31 December 2019 | 9,094 |
Applications and | ||
software | Lease Right | Total |
US$ | US$ | US$ |
21,724 | 64 | 64,137 |
- | - | 1,545 |
- | - | (72) |
(422) | (1) | (1,350) |
(841) | (2) | (1,318) |
20,461 | 61 | 62,942 |
- | - | 1,085 |
- | - | 99 |
- | - | (43) |
(4,448) | (14) | (6,916) |
16,013 | 47 | 57,167 |
6,961 | - | 38,669 |
558 | - | 3,380 |
(422) | - | (1,348) |
488 | - | 488 |
(281) | - | (559) |
7,304 | - | 40,630 |
430 | - | 2,824 |
- | - | (42) |
(382) | - | (382) |
(1,500) | - | (2,830) |
5,852 | - | 40,200 |
10,161 | 47 | 16,967 |
13,157 | 61 | 22,312 |
Other US$
Applications and
Cost | |
At 1 January 2019 | 164,095 |
Additions | 6,215 |
Transfers to property, plant and equipment | (215) |
Disposals | (3,838) |
Foreign currency effect in respect of | |
translation into Brazilian Real | 4,727 |
At 31 December 2019 | 170,984 |
Additions | 5,509 |
Transfers from property, plant and equipment | 604 |
Disposals | (107) |
Foreign currency effect in respect of | |
translation into Brazilian Real | 36,629 |
At 31 December 2020 | 213,619 |
Accumulated amortisation | |
At 1 January 2019 | 122,864 |
Charge for the year | 11,131 |
Disposals | (3,834) |
Impairment - constitution | - |
Foreign currency effect in respect of | |
translation into Brazilian Real | 4,168 |
At 31 December 2019 | 134,329 |
Charge for the year | 12,331 |
Disposals | (104) |
Impairment - reversal | |
Foreign currency effect in respect of | 31,942 |
translation into Brazilian Real | |
At 31 December 2020 | 178,498 |
Carrying amount | |
31 December 2020 | 35,121 |
31 December 2019 | 36,655 |
software | Lease Right | Total |
R$ | R$ | R$ |
84,175 | 247 | 248,517 |
- | - | 6,215 |
- | - | (215) |
(1,724) | (3) | (5,565) |
25 | - | 4,752 |
82,476 | 244 | 253,704 |
- | - | 5,509 |
- | - | 604 |
- | - | (107) |
189 | 2 | 36,820 |
82,665 | 246 | 296,530 |
26,970 | - | 149,834 |
2,200 | - | 13,331 |
(1,724) | - | (5,558) |
1,969 | - | 1,969 |
25 | - | 4,193 |
29,440 | - | 163,769 |
2,200 | - | 14,531 |
- | - | (104) |
(1,969) | (1,969) | |
189 | - | 32,131 |
29,860 | - | 208,358 |
52,805 | 246 | 88,172 |
53,036 | 244 | 89,935 |
Other R$
As mentioned in Note 10, after concluding the impairment tests, the Company reverted an impairment loss (provision) of US$0.4 million (R$2.0 million) related to intangible assets other than goodwill which was previously recognised in 2019.
13. Lease arrangements 13.1. Right-of-use
Operational | Vehicles, plant | |||||
Right-of-use by class of asset | assets | Vessels | Buildings | and equipment | Total | |
US$ | US$ | US$ | US$ | US$ | ||
Cost or valuation | ||||||
At 1 January 2019 | 178,841 | 4,525 | 6,714 | 4,053 | - | 194,133 |
Contractual amendments | 14,748 | 173 | (218) | (269) | - | 14,434 |
Additions | - | - | 65 | 161 | - | 226 |
Transfers from property, plant and equipment | - | - | - | - | 9,798 | 9,798 |
Terminated contracts | - | - | - | (144) | (318) | (462) |
Exchange differences | (7,563) | (217) | (112) | (161) | (417) | (8,470) |
At 31 December 2019 | 186,026 | 4,481 | 6,449 | 3,640 | 9,063 | 209,659 |
Contractual amendments | 9,376 | 52 | 201 | 83 | - | 9,712 |
Additions | 1,553 | 3,504 | 19 | 124 | - | 5,200 |
Transfers from property, plant and equipment | - | - | - | - | 495 | 495 |
Terminated contracts | - | - | (200) | (73) | (1,838) | (2,111) |
Exchange differences | (42,245) | (759) | (772) | (501) | (1,244) | (45,521) |
At 31 December 2020 | 154,710 | 7,278 | 5,697 | 3,273 | 6,476 | 177,434 |
Accumulated amortisations | ||||||
At 1 January 2019 | - | - | - | - | - | - |
Charge for the year | 8,422 | 2,321 | 1,473 | 959 | 367 | 13,542 |
Transfers from property, plant and equipment | - | - | - | - | 7,969 | 7,969 |
Terminated contracts | - | - | - | (22) | (309) | (331) |
Exchange differences | (153) | (45) | (4) | (22) | (308) | (532) |
At 31 December 2019 | 8,269 | 2,276 | 1,469 | 915 | 7,719 | 20,648 |
Charge for the year | 7,280 | 2,995 | 1,099 | 787 | 275 | 12,436 |
Transfers from property, plant and equipment | - | - | - | - | 471 | 471 |
Terminated contracts | - | - | (70) | (36) | (1,825) | (1,931) |
Exchange differences | (1,810) | (521) | (77) | (116) | (944) | (3,468) |
At 31 December 2020 | 13,739 | 4,750 | 2,421 | 1,550 | 5,696 | 28,156 |
Carrying amount | ||||||
31 December 2020 | 140,971 | 2,528 | 3,276 | 1,723 | 780 | 149,278 |
31 December 2019 | 177,757 | 2,205 | 4,980 | 2,725 | 1,344 | 189,011 |
Finance Leases US$
Operational | Vehicles, plant | |||||
Right-of-use by class of asset | assets | Vessels | Buildings | and equipment | Total | |
R$ | R$ | R$ | R$ | R$ | ||
Cost or valuation | ||||||
At 1 January 2019 | 692,975 | 17,533 | 26,016 | 15,701 | - | 752,225 |
Contractual amendments | 56,503 | 530 | (852) | (1,055) | - | 55,126 |
Additions | - | - | 258 | 613 | - | 871 |
Transfers from property, plant and equipment | - | - | - | - | 37,967 | 37,967 |
Terminated contracts | - | - | - | (797) | (1,231) | (2,028) |
Foreign currency effect in respect of | ||||||
translation into Brazilian Real | 337 | - | 471 | 212 | (210) | 810 |
At 31 December 2019 | 749,815 | 18,063 | 25,893 | 14,674 | 36,526 | 844,971 |
Contractual amendments | 41,612 | 280 | 1,039 | 454 | - | 43,385 |
Additions | 8,280 | 18,949 | 106 | 654 | - | 27,989 |
Transfers from property, plant and equipment | - | - | - | - | 2,434 | 2,434 |
Terminated contracts | - | - | (820) | (336) | (5,307) | (6,463) |
Foreign currency effect in respect of | ||||||
translation into Brazilian Real | 4,277 | 529 | 2,551 | 1,550 | 2 | 8,909 |
At 31 December 2020 | 803,984 | 37,821 | 28,769 | 16,996 | 33,655 | 921,225 |
Accumulated amortisations | ||||||
At 1 January 2019 | - | - | - | - | - | - |
Charge for the year | 33,329 | 9,173 | 5,820 | 3,785 | 1,444 | 53,551 |
Transfers from property, plant and equipment | - | - | - | - | 30,878 | 30,878 |
Terminated contracts | - | - | - | (138) | (1,196) | (1,334) |
Foreign currency effect in respect of | ||||||
translation into Brazilian Real | 1 | - | 1 | 44 | (17) | 29 |
At 31 December 2019 | 33,330 | 9,173 | 5,821 | 3,691 | 31,109 | 83,124 |
Charge for the year | 37,579 | 15,689 | 5,697 | 4,068 | 1,407 | 64,440 |
Transfers from property, plant and equipment | - | - | - | - | 2,328 | 2,328 |
Terminated contracts | - | - | (272) | (165) | (5,318) | (5,755) |
Foreign currency effect in respect of | ||||||
translation into Brazilian Real | 486 | (178) | 500 | 462 | 65 | 1,335 |
At 31 December 2020 | 71,395 | 24,684 | 11,746 | 8,056 | 29,591 | 145,472 |
Carrying amount | ||||||
31 December 2020 | 732,589 | 13,137 | 17,023 | 8,940 | 4,064 | 775,753 |
31 December 2019 | 716,485 | 8,890 | 20,072 | 10,983 | 5,417 | 761,847 |
Operational assets |
Finance Leases
R$
The main lease commitments for operational assets are described below:
Rio Grande container terminal
The Rio Grande container terminal lease was signed on 3 February 1997 for a period of 25 years renewable for a further 25 and, in view of the compliance with the contractual requirements and advanced investments in the expansion works of the terminal, construction of a third berth of docking and of the annual volume handled together with other considerations, the Rio Grande container terminal was granted the right to renew of the lease for the period between 2022 and 2047 as set forth in the first amendment signed on 7 March 2006.
Among the commitments set forth in the Lease Agreement and its Addendum, the following are highlighted:
Monthly payment for facilities and leased areas;
Payment by container moved, with a commitment for minimum contractual movement (MMC); and
Pay per tonne in general cargo handling and unloading.
Salvador container terminal
Tecon Salvador S.A. has the right to lease and operate the Container and Heavy and Unitized Cargo Terminal (Liaison Quay) in the Port of Salvador for 25 years early renewed in 2016 for a further 25 years to March 2050.
The total lease term of 50 years, until March 2050, is provided in the Second Addendum to the Rental Agreement. This addendum provides for the expansion of the lease area through the completing minimum investments.
As a result of the lease agreement with CODEBA, the Company has the following commitments:
Payment of monthly instalments readjusted for the minimum periodicity established in the contract;
Payment for the lease of the existing area and the area added under the terms of the second contractual addendum; and
Payment of minimum contractual movement - MMC.
Wilson Sons shipyards
Wilson Sons shipyards lease commitments mainly refer to a 60-year lease right of its operational asset from June 2008 (30 years, renewable for a further period of 30 years, under Group's sole option). Management intention is to exercise its renewal option.
Offshore support bases
Offshore support base lease commitments mainly refer to a 30-year lease right to operate in a sheltered area at Guanabara Bay, Rio de Janeiro, Brazil with a privileged position to service the Campos and Santos oil producing basins.
Logistics
Logistics lease commitments mainly refer to the bonded terminals and distribution centres located in Santo André and Suape with terms between eighteen and twenty-four years.
Vessels
Chartering of vessels for maritime transport between container terminals and towage operations.
The payments related to the quantity of vessel trips were not included in the measurement of lease liabilities because they relate to variable payments.
Buildings
The Group has lease commitments for its headquarters, branches and commercial offices in several Brazilian cities.
Vehicles, plant and equipment
Rental contracts mainly refer to forklifts, other operating equipment and vehicles for operational, commercial and administrative activities.
Finance Leases
Lease contracts previously classified under IAS 17 and substantially represented by Machines and Equipment.
13.2. Lease liabilities
flows | 31/12/2020 |
US$ | |
Within one year | 19,153 |
In the second year | 17,365 |
In the third to fifth years (inclusive) | 49,353 |
After five years | 292,766 |
Total undiscounted lease liabilities | 378,637 |
Adjustment to present value | (220,743) |
Total lease liabilities | 157,894 |
Inflation adjustment of the lease liabilities |
The breakdown of lease libilities by maturity is as follows: |
Maturity analysis - contractual undiscounted cash |
Lease liabilities by class of asset | Discount Rate | 31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 |
US$ | US$ | R$ | R$ | ||
Operational assets | 5.17% - 9.33% | 150,513 | 183,895 | 782,175 | 741,227 |
Buildings | 4.41% - 8.88% | 2,932 | 5,072 | 15,235 | 20,443 |
Vessels | 7.75% - 9.25% | 2,759 | 2,294 | 14,337 | 9,246 |
Vehicles, plant and equipment | 5.12% - 12.9% | 1,690 | 2,827 | 8,780 | 11,393 |
Finance leases | - | - | 60 | - | 243 |
Total | 157,894 | 194,148 | 820,527 | 782,552 | |
Total current | 18,192 | 21,938 | 94,538 | 88,426 | |
Total non-current | 139,702 | 172,210 | 725,989 | 694,126 | |
31/12/2019 | 31/12/2020 | 31/12/2019 | |||
US$ | R$ | R$ | |||
22,918 | 99,533 | 92,374 | |||
20,456 | 90,239 | 82,451 | |||
60,954 | 256,471 | 245,687 | |||
371,236 | 1,521,418 | 1,496,339 | |||
475,564 | 1,967,661 | 1,916,851 | |||
(281,416) | (1,147,134) | (1,134,299) | |||
194,148 | 820,527 | 782,552 |
The table below presents the lease liabilities balance considering the projected future inflation in the discounted payment flows. For the purposes of this calculation, all other assumptions were maintained.
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Actual flow | 378,637 | 475,564 | 1,967,661 | 1,916,851 |
Embedded interest | (220,743) | (281,416) | (1,147,134) | (1,134,299) |
Lease liabilities | 157,894 | 194,148 | 820,527 | 782,552 |
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Inflated flow | 400,017 | 506,078 | 2,078,767 | 2,039,847 |
Embedded interest | (236,886) | (304,730) | (1,231,027) | (1,228,275) |
Lease liabilities | 163,131 | 201,348 | 847,740 | 811,572 |
13.3. Amounts recognised in profit or loss | ||||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Amortisation of right-of-use | (12,436) | (13,542) | (64,440) | (53,551) |
Amortisation of PIS and COFINS | 1,730 | 1,153 | 9,394 | 4,738 |
Interest on lease liabilities | (14,096) | (16,799) | (72,761) | (66,452) |
Interest on PIS and COFINS | 1,260 | 887 | 6,811 | 3,643 |
Variable lease payments not included in the | ||||
measurement of lease liabilities (1) | (2,037) | (2,727) | (10,523) | (10,770) |
Expenses relating to short-term leases | (23,392) | (15,852) | (122,078) | (62,654) |
Expenses relating to low-value assets | (1,093) | (908) | (5,568) | (3,593) |
Total | (50,064) | (47,788) | (259,165) | (188,639) |
(1) The amount refers to payments which exceeded the minimum forecast volumes of the Rio Grande container terminal and Salvador container terminals and payments related to the quantity of vessel trips were not included in the measurement of lease liabilities.
The Group is not able to estimate the future cash outflows to variable lease payments due to operational, economics and exchange rate variabilities.
13.4. Amounts recognised in the statement of cash flows
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Amortisation - lease liability | (6,345) | (6,424) | (32,840) | (25,413) |
Interest paid - lease liability | (14,111) | (16,806) | (72,826) | (66,482) |
Short-term leases paid | (23,392) | (15,852) | (122,078) | (62,654) |
Variable lease payments paid | (2,037) | (2,727) | (10,523) | (10,770) |
Low-value | (1,093) | (908) | (5,568) | (3,593) |
Total | (46,978) | (42,717) | (243,835) | (168,912) |
14. Property, plant and equipment
Land and | Vehicles, plant | Assets under | |||
buildings | Vessels | and equipment | construction | Total | |
US$ | US$ | US$ | US$ | US$ | |
Cost or valuation | |||||
At 1 January 2019 | 282,506 | 488,722 | 230,564 | 10,133 | 1,011,925 |
Additions | 40,320 | 14,450 | 27,325 | 5,842 | 87,937 |
Transfers | 212 | 15,712 | (241) | (15,683) | - |
Transfers to right-of-use | - | - | (9,798) | - | (9,798) |
Transfers from intangible assets | (11) | (22) | 105 | - | 72 |
Disposals | (294) | (2,501) | (9,067) | - | (11,862) |
Exchange differences | (9,301) | - | (7,662) | - | (16,963) |
At 31 December 2019 | 313,432 | 516,361 | 231,226 | 292 | 1,061,311 |
Additions | 25,901 | 10,216 | 25,284 | - | 61,401 |
Transfers | 148 | (124) | (24) | - | - |
Transfers to right-of-use | - | - | (495) | - | (495) |
Transfers to intangible assets | - | - | (99) | - | (99) |
Disposals | (3,725) | (969) | (4,039) | - | (8,733) |
Exchange differences | (56,443) | - | (42,819) | - | (99,262) |
At 31 December 2020 | 279,313 | 525,484 | 209,034 | 292 | 1,014,123 |
Accumulated depreciation | |||||
At 1 January 2019 | 87,135 | 192,820 | 129,519 | - | 409,474 |
Charge for the year | 8,018 | 26,741 | 15,594 | - | 50,353 |
Elimination on construction contracts | - | 128 | - | - | 128 |
Transfers to right-of-use | - | - | (7,969) | - | (7,969) |
Disposals | (234) | (2,320) | (8,195) | - | (10,749) |
Exchange differences | (2,974) | - | (4,001) | - | (6,975) |
At 31 December 2019 | 91,945 | 217,369 | 124,948 | - | 434,262 |
Charge for the year | 6,774 | 29,030 | 11,989 | - | 47,793 |
Elimination on construction contracts | - | 13 | - | - | 13 |
Transfers to right-of-use | - | - | (471) | - | (471) |
Disposals | (2,400) | (829) | (3,928) | - | (7,157) |
Exchange differences | (16,691) | - | (22,764) | - | (39,455) |
At 31 December 2020 | 79,628 | 245,583 | 109,774 | - | 434,985 |
Carrying amount | |||||
31 December 2020 | 199,685 | 279,901 | 99,260 | 292 | 579,138 |
31 December 2019 | 221,487 | 298,992 | 106,278 | 292 | 627,049 |
Land and | Vehicles, plant | Assets under | |||
buildings | Vessels | and equipment | construction | Total | |
R$ | R$ | R$ | R$ | R$ | |
Cost or valuation | |||||
At 1 January 2019 | 1,094,656 | 1,893,695 | 893,392 | 39,265 | 3,921,008 |
Additions | 159,292 | 56,478 | 107,429 | 22,722 | 345,921 |
Transfers | 850 | 59,372 | (952) | (59,270) | - |
Transfers to right-of-use | - | - | (37,967) | - | (37,967) |
Transfers from intangible assets | (40) | (89) | 344 | - | 215 |
Disposals | (1,196) | (10,306) | (35,607) | - | (47,109) |
Foreign currency effect in respect of | |||||
translation into Brazilian Real | 9,791 | 82,147 | 5,360 | (1,540) | 95,758 |
At 31 December 2019 | 1,263,353 | 2,081,297 | 931,999 | 1,177 | 4,277,826 |
Additions | 128,547 | 52,762 | 134,249 | - | 315,558 |
Transfers | 794 | (614) | (180) | - | - |
Transfers to right-of-use | - | - | (2,434) | - | (2,434) |
Transfers to intangible assets | - | - | (604) | - | (604) |
Disposals | (21,269) | (5,151) | (25,004) | - | (51,424) |
Foreign currency effect in respect of | |||||
translation into Brazilian Real | 80,081 | 602,490 | 48,253 | 341 | 731,165 |
At 31 December 2020 | 1,451,506 | 2,730,784 | 1,086,279 | 1,518 | 5,270,087 |
Accumulated depreciation | |||||
At 1 January 2019 | 337,631 | 747,137 | 501,863 | - | 1,586,631 |
Charge for the year | 31,587 | 105,693 | 61,349 | - | 198,629 |
Elimination on construction contracts | - | 484 | - | - | 484 |
Transfers to right-of-use | - | - | (30,877) | - | (30,877) |
Disposals | (954) | (9,561) | (32,227) | - | (42,742) |
Foreign currency effect in respect of | |||||
translation into Brazilian Real | 2,343 | 32,390 | 3,522 | - | 38,255 |
At 31 December 2019 | 370,607 | 876,143 | 503,630 | - | 1,750,380 |
Charge for the year | 34,659 | 149,451 | 61,342 | - | 245,452 |
Elimination on construction contracts | - | 67 | - | - | 67 |
Transfers to right-of-use | - | - | (2,328) | - | (2,328) |
Disposals | (13,968) | (4,386) | (24,407) | - | (42,761) |
Foreign currency effect in respect of | |||||
translation into Brazilian Real | 22,506 | 254,933 | 32,232 | - | 309,671 |
At 31 December 2020 | 413,804 | 1,276,208 | 570,469 | - | 2,260,481 |
Carrying amount | |||||
31 December 2020 | 1,037,702 | 1,454,576 | 515,810 | 1,518 | 3,009,606 |
31 December 2019 | 892,746 | 1,205,154 | 428,369 | 1,177 | 2,527,446 |
Land and buildings with a net carrying amount of US$0.2 million (R$1.1 million) (2019: US$0.2 million (R$0.6 million)) and plant and equipment with a net carrying amount of US$0.1 million (R$0.5 million) (2019: US$0.2 million (R$0.6 million)) have been pledged as collateral for various tax lawsuits.
The Group has pledged assets with a carrying amount of approximately US$253.6 million (R$1.318 billion) (2019: US$269.3 million (R$670.3 million)) to secure loans granted to the Group.
The amount of borrowing costs capitalised in 2020 is US$3.0 million (R$15.6 million) (2019: US$2.3 million (R$7.4 million)) at an average interest rate of 2.76%.
On 31 December 2020, the Group had contractual commitments to suppliers for the acquisition and construction of property, plant and equipment amounting to US$1.6 million (R$8.3 million) (2019: US$3.0 million (R$12.2 million)). The amount mainly refers to investments in the Salvador container terminal with some smaller amounts related to the Rio Grande container terminal and Offshore support bases.
15. Inventories
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Operating materials | 9,404 | 9,228 | 48,870 | 37,196 |
Raw materials for construction contracts (external customers) | 2,360 | 1,279 | 12,264 | 5,155 |
Total | 11,764 | 10,507 | 61,134 | 42,351 |
16. Recoverable taxes | ||||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
PIS and COFINS recoverable | 8,226 | 18,467 | 42,748 | 74,438 |
Judiciary bond recoverable | 2,192 | 2,698 | 11,394 | 10,874 |
FUNDAF recoverable | - | 4,578 | - | 18,452 |
Other recoverable taxes | 588 | 758 | 3,053 | 3,053 |
Total recoverable taxes non-current | 11,006 | 26,501 | 57,195 | 106,817 |
PIS and COFINS recoverable | 12,700 | 11,764 | 66,000 | 47,415 |
Income tax and social contribution recoverable | 6,987 | 7,877 | 36,310 | 31,749 |
Judiciary bond recoverable | 1,333 | 1,911 | 6,929 | 7,702 |
ISS recoverable | 934 | 1,264 | 4,853 | 5,093 |
FUNDAF recoverable | 237 | 1,954 | 1,232 | 7,876 |
INSS recoverable | 203 | 238 | 1,057 | 960 |
Other recoverable taxes | 85 | 39 | 434 | 161 |
Total recoverable taxes current | 22,479 | 25,047 | 116,815 | 100,956 |
Total | 33,485 | 51,548 | 174,010 | 207,773 |
The Group reviews taxes and levies impacting its business to ensure that payments are accurately made. In the event tax credits arise, the Group intends to use them in future years within their legal term. If the Company does not utilise the tax credit within their legal term, a reimbursement of such amounts will be requested from the Brazilian Internal Revenue Service ("Receita Federal do Brasil"). In December 2020, there was the write-off of PIS and COFINS tax credits amounting to US$3.4 million (R$18.5 million) due to the forfeiture and remote prospects of realising these credits.
17. Operational and other trade receivables
31/12/2020
31/12/2019
31/12/2020
31/12/2019
US$
US$
R$
R$
Other trade receivables
9
354
46
1,427
Total other non-current trade receivables
9
354
46
1,427
Receivable for services rendered Expected credit losses
39,321
47,991
204,340
193,438
(554)
(837)
(2,879)
(3,374)
Total operational current trade receivables
38,767
47,154
201,461
190,064
Prepayment
3,992
6,452
20,746 26,007
Insurance indenisation receivable Employee credits
995
1,972
5,171 7,948
1,099
799
5,710 3,222
Other trade receivables
858
354
4,460 1,425
Total other current trade receivables
6,944
9,577
Total
45,720
57,085
Total current Total non-current
45,711
56,731
9
354
36,087 237,594 237,548 46
38,602 230,093 228,666 1,427
Trade receivables disclosed are classified as financial assets measured at amortised cost. The aging list of receivables for services rendered is as follows:
31/12/2020
31/12/2019
31/12/2020
31/12/2019
US$
US$
R$
R$
Current
32,730
37,146
170,092
149,723
Overdue:
01 to 30 days
4,800
7,641
24,942 30,799
31 to 90 days
852
1,434
4,426 5,781
91 to 180 days More than 180 days
197
694
1,026 2,799
742
1,076
3,854 4,336
Total
39,321
47,991
204,340
193,438
Generally, interest of one percent per month plus a two percent penalty is charged on overdue balances. Allowances for expected credit losses are recognised as a reduction of receivables and are recognised whenever a loss is expected. As of 1 January 2018, due to the application of IFRS 9, the Group has recognised an allowance taking into account an expected credit loss model that involves historical evaluation of effective loss over billing cycles. The period over review is 3.5 years, being renewed every 180 days. The measurement of default rate shall consider the recoverability of receivables and will apply according of payment profile of the debtors. The Group calibrates, when appropriate, the matrix to adjust the historical credit loss experience with forward-looking information. The provision matrix is disclosed in Note 27. Due to the COVID-19 pandemic, the Company has reviewed the variables that make up the methodology of measurement of estimated losses, and has not observed an increase in customer default due to the outbreak. Also due to the COVID-19 pandemic, the Company created a Credit Committee to monitor, and, if necessary, propose solutions for exposure to customers in fragile situations, which also contributed to a decrease in default.
Changes in allowance for expected credit losses are as follows:
US$ | R$ | |
At 1 January 2019 | 1,490 | 5,773 |
Decrease in allowance | (562) | (2,399) |
Exchange difference | (91) | - |
At 31 December 2019 | 837 | 3,374 |
Decrease in allowance | (99) | (495) |
Exchange difference | (184) | - |
At 31 December 2020 | 554 | 2,879 |
18. Cash and cash equivalents and short-term investments | ||
Cash and cash equivalents |
Cash and cash equivalents comprise cash on hand, bank accounts and short-term investments that are highly liquid and readily convertible to known amounts of cash, and which are subject to an immaterial risk of changes in value.
US dollar-denominated cash and cash equivalents refer principally to investments in time deposits placed with major financial institutions, Real-denominated cash and cash equivalents refer principally to investments in deposit certificates and Brazilian treasury bonds.
Short-term investments
Short-term investments comprise investments with maturity dates of more than 90 days but less than 365 days.
The breakdown of cash and cash equivalents and short-term investments is as follows:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Denominated in US dollar: | ||||
Short-term investments | 39,590 | 14,077 | 205,735 | 56,740 |
Exchange funds | - | 16,292 | - | 65,666 |
Cash and bank | 4,958 | 11,666 | 25,767 | 47,027 |
Total | 44,548 | 42,035 | 231,502 | 169,433 |
Denominated in Brazilian Real: | ||||
Fixed income investments | 47,057 | 34,739 | 244,543 | 140,020 |
Cash and bank | 784 | 950 | 4,072 | 3,829 |
Deposit certificates | 5,938 | - | 30,859 | - |
Total | 53,779 | 35,689 | 279,474 | 143,849 |
Total | 98,327 | 77,724 | 510,976 | 313,282 |
Total cash and cash equivalents | 58,737 | 63,647 | 305,241 | 256,542 |
Total short-term investments | 39,590 | 14,077 | 205,735 | 56,740 |
Exclusive investment fund
The Group has investments in an exclusive investment fund managed by Itaú BBA S.A. that is consolidated in these financial statements. These highly liquid investments are readily convertible to known amounts of cash and are marked to fair value on a daily basis in profit and loss. This fund's financial obligations are limited to Itaú BBA SA's service fees, audit fees and other minor administrative expenses.
19. Bank loans Guarantees
Loans with BNDES and Banco do Brasil rely on a corporate guarantee from Wilson, Sons de Administração e Comércio Ltda. or Wilport Operadores Portuários Ltda. For some contracts, the corporate guarantee is additional to pledge of the respective tugboat or lien on the logistics equipment.
The loan agreement for both the Salvador and Rio Grande container terminals from Bradesco for equipment acquisition relies on a corporate guarantee from Wilport Operadores Portuários Ltda.
The loan agreement from Itaú for equipment acquisition relies on a corporate guarantee from Wilport Operadores Portuários Ltda.
BNDES - Real | 6.15% - 9.48% |
BNDES - FMM linked to US Dollar¹ | 2.07% - 4.08% |
BNDES - Real | 8.22% |
BNDES - FMM linked to US Dollar¹ | 5.00% |
BNDES - FMM Real¹ | 8.10% |
BNDES - Finame Real | 5.50% |
Total BNDES | |
Bradesco - NCE - Real | 2.83% - 3.20% |
China Construction Bank - Real | 5.65% |
Santander - Real | 6.44% |
Itaú - NCE - Real | 3.38% |
Santander - Real | 6.44% |
Total others | |
Total |
Interest rate - | ||||
% p.a. | Business | 31/12/2020 | ||
US$ | US$ | R$ | R$ | |
Towage | 117,781 | 117,919 | 612,070 | 475,296 |
Container Terminals | 47,632 | 29,793 | 247,528 | 120,087 |
Shipyards | 27,060 | 28,403 | 140,625 | 114,484 |
Offshore support | ||||
bases | 7,545 | 10,014 | 39,211 | 40,362 |
Towage | 1,605 | 2,242 | 8,339 | 9,037 |
Towage | 805 | 1,064 | 4,181 | 4,288 |
Container Terminals | - | 35 | - | 142 |
202,428 | 189,470 | 1,051,954 | 763,696 | |
Towage | 75,795 | 79,535 | 393,885 | 320,579 |
Container terminals | 38,660 | 50,043 | 200,907 | 201,710 |
Container terminals | 13,666 | - | 71,020 | - |
Container terminals | 6,153 | - | 31,977 | - |
Container terminals | 4,056 | 15,930 | 21,076 | 64,211 |
Towage | 1,903 | - | 9,888 | - |
140,233 | 145,508 | 728,753 | 586,500 | |
342,661 | 334,978 | 1,780,707 | 1,350,196 |
31/12/2019 31/12/2020 31/12/2019
2.00% - 4.00% |
Secured borrowings
BNDES - FMM linked to US Dollar¹
2.30% - 3.71%
Banco do Brasil - FMM linked to US Dollar¹
(¹) As agents of the Merchant Marine Fund (Fundo da Marinha Mercante - FMM), Banco Nacional de Desenvolvimento Econômico e Social ("BNDES") and
Banco do Brasil ("BB") finance the construction of tugboats and shipyard facilities.
The breakdown of bank overdrafts and loans by maturity is as follows:
31/12/2020
US$
Within one year
In the second year
In the third to fifth years (including) After five years
Total
Total current Total non-current
Changes in bank loans are as follows:
At 1 January 2019 Additions
Principal amortisation Interest amortisation Accrued interest (¹) Other provisions Exchange difference Translation adjustment to real At 31 December 2019 Additions
Principal amortisation Interest amortisation Accrued interest (¹) Exchange difference Translation adjustment to real
At 31 December 2020
(¹) It includes capitalised interest
The analysis of borrowings by currency is as follows:
At 31 December 2020
Bank loans
Total
At 31 December 2019
Bank loans
58,672
44,707
96,250
143,032
342,661
31/12/2019
US$
36,636
41,492
106,523
150,327
334,978
58,672
36,636
283,989
298,342
(85,856) (337,929)
(11,840) (44,866)
13,062 50,027
624 2,490
(1,947)
(25,725) (125,350)
(8,569) (43,554)
Real US$
120,420 120,420
31/12/2020
R$
304,901 147,669
232,329 167,243
500,182 429,362
743,295 605,922
1,780,707 304,901 1,475,806
US$
307,306 113,629
- 334,978 51,455
13,840 (23,318)
-342,661
Real linked to US Dollars
US$
222,241 222,241
Total
106,879 106,879
228,099 228,099
31/12/2019
R$
1,350,196 147,669 1,202,527
R$
1,190,749 453,922
- 35,803 1,350,196 271,022
71,261 - 257,132 1,780,707
Total US$
342,661 342,661
334,978 334,978
Real linked
Real | to US Dollars | Total | |
R$ | R$ | R$ | |
At 31 December 2020 | |||
Bank loans | 625,788 | 1,154,919 | 1,780,707 |
Total | 625,788 | 1,154,919 | 1,780,707 |
At 31 December 2019 | |||
Bank loans | 430,800 | 919,396 | 1,350,196 |
Total | 430,800 | 919,396 | 1,350,196 |
Loan agreement for civil works |
In December 2018, the subsidiary Tecon Salvador S.A. signed a US$67.9 million (R$263.1 million) financing agreement with BNDES, to be used for civil works during the terminal's expansion.
Due to the new contract, the loan agreement with IFC was repaid on 30 January 2019.
Undrawn credit facilities
At 31 December 2020, the Group had available US$19.1 million (R$99.3 million) (2019: US$104.3 million (R$420.6 million)) of undrawn borrowing facilities available in relation to (i) the Salvador Terminal expansion, and (ii) the dry-docking, maintenance and repair of tugs. Additionally, the Group has US$9.4 million (R$ 48.8 million) in contracted financing for the future construction of tugboats which is pending amendment to the contract related to vessel specification changes.
Fair value
Management estimates the fair value of the Group's borrowings as follows:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Bank loans | ||||
BNDES | 202,428 | 189,470 | 1,051,954 | 763,696 |
Banco do Brasil | 75,795 | 79,535 | 393,885 | 320,579 |
Bradesco - NCE | 40,577 | 50,043 | 210,867 | 201,710 |
China Construction Bank | 13,657 | - | 70,970 | - |
Santander | 8,045 | - | 41,806 | - |
Itaú | 4,060 | 15,930 | 21,100 | 64,211 |
Total | 344,562 | 334,978 | 1,790,582 | 1,350,196 |
Covenants |
Wilson, Sons de Administração e Comércio Ltda. ("WSAC") as corporate guarantor has to comply with annual loan covenants for Wilson Sons Estaleiros, Brasco Logística Offshore and Saveiros Camuyrano Serviços Marítimos S.A. in respect of loan agreements signed with BNDES.
Wilport Operadores Portuários Ltda. as corporate guarantor for loan agreements signed with Bradesco for both Tecon Salvador S.A and Tecon Rio Grande and BNDES for Tecon Salvador S.A has to comply with annual loan covenants including ratios of debt service coverage, net debt ratio over EBITDA and equity over total assets. For the BNDES agreements the Salvador container terminal has to comply with the debt service coverage ratio covenant. The ratios will be determinated excluding impacts of IFRS 16.
At 31 December 2020, the Company was in compliance with all clauses for the above-mentioned loan contracts.
20. Provisions for tax, labour and civil risks
Labour claims |
R$ |
At 1 January 2019 | 13,813 |
Increase in provision in the year | 1,326 |
Unused amounts reversed | (2,957) |
Utilisation of provisions | (921) |
Exchange difference | (557) |
At 31 December 2019 | 10,704 |
Increase in provision in the year | 904 |
Unused amounts reversed | (663) |
Utilisation of provisions | (572) |
Exchange difference | (2,388) |
At 31 December 2020 | 7,985 |
Labour claims |
US$ |
Tax cases | Civil cases | Total | ||
US$ | US$ | US$ | ||
2,838 | 684 | 17,335 | ||
399 | 1,455 | 3,180 | ||
(61) | (307) | (3,325) | ||
(993) | (11) | (1,925) | ||
(73) | 8 | (622) | ||
2,110 | 1,829 | 14,643 | ||
82 | 11 | 997 | ||
(488) | (1,012) | (2,163) | ||
(21) | (51) | (644) | ||
(481) | (404) | (3,273) | ||
1,202 | 373 | 9,560 | ||
Tax cases | Civil cases | Total | ||
R$ | R$ | R$ | ||
At 1 January 2019 | 53,521 | 10,997 | 2,650 | 67,168 |
Increase in provision in the year | 5,224 | 1,598 | 5,969 | 12,791 |
Unused amounts reversed | (11,919) | (244) | (1,236) | (13,399) |
Utilisation of provisions | (3,681) | (3,845) | (12) | (7,538) |
At 31 December 2019 | 43,145 | 8,506 | 7,371 | 59,022 |
Increase in provision in the year | 4,532 | 428 | 41 | 5,001 |
Unused amounts reversed | (3,448) | (2,538) | (5,259) | (11,245) |
Utilisation of provisions | (2,735) | (152) | (211) | (3,098) |
At 31 December 2020 | 41,494 | 6,244 | 1,942 | 49,680 |
In the ordinary course of business in Brazil, the Group is exposed to numerous local legal claims. It is the Group's policy to vigorously contest such claims, many of which appear to have little substance or merit, and to manage such claims through its lawyers.
In addition to the cases for which the Group booked provisions there are other tax, civil and labour disputes amounting to US$77.4 million (R$402.2 million) (2019: US$103.6 million (R$417.5 million)) with probability of loss estimated by the legal counsels as possible.
The breakdown of possible claims is described as follows:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Tax cases | 58,809 | 78,258 | 305,611 | 315,434 |
Civil cases | 13,318 | 14,223 | 69,208 | 57,330 |
Labour claims | 5,264 | 11,108 | 27,354 | 44,775 |
Total | 77,391 | 103,589 | 402,173 | 417,539 |
The main probable and possible claims against the Group are described below:
Tax cases - The Group defends itself against government tax assessments considered inappropriate or the Company considers it has a chance of successfully defending its position.
Labour claims - Most claims involve payment of health risks, additional overtime and other allowances.
Civil and environmental cases - Indemnification claims involving material damages, environmental and shipping claims and other contractual disputes.
Procedure for classification of legal liabilities identifies claims as probable, possible or remote, as assessed with the assistance of external lawyers:
Upon receipt of notices of new judicial lawsuits, external lawyers generally classify the claim as possible, recorded at the total amount involved. Wilson Sons uses the criteria of the estimated value at risk and not the total order value involved in each process.
Exceptionally, if there is sufficient knowledge from the beginning that there is very high or very low risk of loss, the lawyer may classify the claim as a probable loss or remote loss.
During the course of the lawsuit and considering, for instance, its first judicial decision, legal precedents, arguments of the claimant, thesis under discussion, applicable laws, documentation for the defense and other variables the lawyer may re-classify the claim as a probable loss or remote loss.
When classifying the claim as a probable and possible loss, the lawyer estimates the amount at risk for such claim.
Management are not able to give an indication when the provisions are likely to be utilised as the majority of provisions involve litigations the resolution of which is highly uncertain as to timing.
21. Operational and other trade payables
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Operational trade payables | ||||
Trade payables | 16,039 | 18,567 | 83,349 | 74,838 |
Advance from customers | 791 | 910 | 4,111 | 3,668 |
Total operational trade payables | 16,830 | 19,477 | 87,460 | 78,506 |
Other trade payables | ||||
Accruals | 5,757 | 5,891 | 29,918 | 23,744 |
Other advances | 573 | 864 | 2,978 | 3,483 |
Other trade payables | 339 | 235 | 1,762 | 947 |
Total other trade payables | 6,669 | 6,990 | 34,658 | 28,174 |
Total | 23,499 | 26,467 | 122,118 | 106,680 |
22. | Taxes payable | |||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
INSS payable | 1,885 | 4,041 | 9,798 | 16,290 |
PIS and COFINS payable | 1,676 | 1,686 | 8,709 | 6,795 |
Income tax payable | 1,121 | 1,365 | 5,828 | 5,501 |
ISS payable | 541 | 1,853 | 2,812 | 7,468 |
FGTS payable | 483 | 668 | 2,508 | 2,693 |
Other taxes payable | 526 | 235 | 2,731 | 946 |
Total | 6,232 | 9,848 | 32,386 | 39,693 |
23. | Stock options plan and post-employment benefits |
23.1. Stock option plan
The shareholders in special general meeting approved grant of options to eligible participants to be selected by the board on the 8 January 2014 including increase in the authorised capital of the Company through the creation of up to 4,410,927 new shares. The options provide participants with the right to acquire shares via Brazilian Depositary Receipts ("BDR") in Wilson Sons Limited at a predetermined fixed price not less than the three-day average mid-price for the days preceding the date of option issuance. The stock option plan is detailed below:
07 ESO - 3 Year | 10/01/2014 | 10/01/2017 | 10/01/2024 |
07 ESO - 4 Year | 10/01/2014 | 10/01/2018 | 10/01/2024 |
07 ESO - 5 Year | 10/01/2014 | 10/01/2019 | 10/01/2024 |
07 ESO - 3 Year | 13/11/2014 | 13/11/2017 | 13/11/2024 |
07 ESO - 4 Year | 13/11/2014 | 13/11/2018 | 13/11/2024 |
07 ESO - 5 Year | 13/11/2014 | 13/11/2019 | 13/11/2024 |
07 ESO - 3 Year | 11/08/2016 | 11/08/2019 | 11/08/2026 |
07 ESO - 4 Year | 11/08/2016 | 11/08/2020 | 11/08/2026 |
07 ESO - 5 Year | 11/08/2016 | 11/08/2021 | 11/08/2026 |
07 ESO - 3 Year | 15/05/2017 | 15/05/2020 | 15/05/2027 |
07 ESO - 4 Year | 15/05/2017 | 15/05/2021 | 15/05/2027 |
07 ESO - 5 Year | 15/05/2017 | 15/05/2022 | 15/05/2027 |
07 ESO - 3 Year | 09/11/2017 | 09/11/2020 | 09/11/2027 |
07 ESO - 4 Year | 09/11/2017 | 09/11/2021 | 09/11/2027 |
07 ESO - 5 Year | 09/11/2017 | 09/11/2022 | 09/11/2027 |
Total |
Original | Exercise | Total | ||||
Options series Grant date vesting date Expiry date | price | Number | Expired | Exercised | Vested | subsisting |
(R$) | ||||||
31.23 | 961,653 | (178,695) | (192,505) | 590,453 | - | 590,453 |
31.23 | 961,653 | (178,695) | (192,506) | 590,452 | - | 590,452 |
31.23 | 990,794 | (184,110) | (186,099) | 620,585 | - | 620,585 |
33.98 | 45,870 | (17,490) | (3,630) | 24,750 | - | 24,750 |
33.98 | 45,870 | (17,490) | (3,630) | 24,750 | - | 24,750 |
33.98 | 47,260 | (18,020) | (3,740) | 25,500 | - | 25,500 |
34.03 | 82,500 | - | (5,000) | 77,500 | - | 77,500 |
34.03 | 82,500 | - | (5,000) | 77,500 | - | 77,500 |
34.03 | 85,000 | - | - | - | 85,000 | 85,000 |
38.00 | 20,130 | - | - | 20,130 | - | 20,130 |
38.00 | 20,130 | - | - | - | 20,130 | 20,130 |
38.00 | 20,740 | - | - | - | 20,740 | 20,740 |
40.33 | 23,760 | (11,880) | - | 11,880 | - | 11,880 |
40.33 | 23,760 | (11,880) | - | - | 11,880 | 11,880 |
40.33 | 24,480 | (12,240) | - | - | 12,240 | 12,240 |
3,436,100 | (630,500) | (592,110) | 2,063,500 | 149,990 | 2,213,490 |
Outstanding not vested
The options terminate on their expiry date or immediately on the resignation of the director or senior employee, whichever is earlier. Options lapse if not exercised within 6 months of the date that the participant ceases to be employed or hold office by reason of, amongst others, injury, disability, retirement or dismissal without cause.
Movements during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:
NumberWAEP (R$)
At 1 January 2019 | 2,755,940 | 31.96 |
Exercised during the year | (17,400) | 31.23 |
Expired during the year | (36,000) | 40.33 |
At 31 December 2019 | 2,702,540 | 31.85 |
Exercised during the year 1 | (475,050) | 31.23 |
Expired during the year | (14,000) | 33.98 |
At 31 December 2020 | 2,213,490 | 31.96 |
¹ The weighted average share price at the date of exercise of these options was R$45.76 (2019: R$40.87). |
The following fair value expense of the grant to be recorded as a liability in the respective accounting periods was determined using a binomial model based on the assumptions detailed below:
Total
Projected IFRS2 | Projected IFRS2 | |
Period commencing | fair value expense US$ | fair value expense R$ |
2014 | 2,826 | 7,507 |
2015 | 3,296 | 7,848 |
2016 | 3,409 | 8,234 |
2017 | 2,331 | 5,811 |
2018 | 1,303 | 3,388 |
2019 | 370 | 1,129 |
2020 | 206 | 652 |
2021 | 99 | 316 |
2022 | 27 | 85 |
13,867 | 34,970 | |
10 January 2014 |
Closing share price (in Real) Expected volatility Expected life Risk free rate Expected dividend yield
13 November 2014 | 11 August 2016 | 16 May 2017 | 9 November 2017 | |
R$30.05 | R$33.50 | R$32.15 | R$38.00 | R$38.01 |
28.00% | 29.75% | 31.56% | 31.82% | 31.82% |
10 years | 10 years | 10 years | 10 years | 10 years |
10.8% | 12.74% | 12.03% | 10.17% | 10.17% |
1.7% | 4.8% | 4.8% | 4.8% | 4.8% |
Expected volatility was determined by calculating the historical volatility of the Company's share price. The expected life used in the model has been adjusted based on management's best estimate for exercise restrictions and behavioural considerations.
23.2. Post-employment benefits
The Group operates a private medical insurance scheme for its employees which require the eligible employees to pay fixed monthly contributions. In accordance with regulation of the Brazilian law, eligible employees with greater than ten years' service acquire the right to remain in the plan following retirement or termination of employment, generating a post-employment commitment for the Group. Ex-employees remaining in the plan will be liable for paying the full cost of their continued scheme membership. The present value of actuarial liabilities in 31 December 2020 is US$1.6 million (R$8.5 million) (2019: US$2.4 million (R$9.5 million). The future actuarial liability for the Group relates to the potential increase in plan costs resulting from additional claims as a result of the expanded membership of the scheme.
Actuarial assumptions
The calculation of the liability generated by the post-employment commitment involves actuarial assumptions. The following are the principal actuarial assumptions at the reporting date:
Economic and financial assumptions
Annual interest rate
Estimated inflation rate in the long-term Aging factor
31/12/2020 | 31/12/2019 |
7.90% | 6.76% |
3.50% | 3.50% |
Based on the experience Based on the experienceof Wilson Sons (1)of Wilson Sons (1)
Health care cost trend rate
6.09% a.a
6.09% a.a
(¹) The amount of current contributions of both retirees and medical costs used in the actuarial valuation, in monthly amounts per health care provider, may vary between R$117.06 and R$12,036.51 (absolute value).
Biometric and demographic assumptions
31/12/2020
31/12/2019
Employee turnover | 21.27% | 21.27% |
Mortality table | AT-2000 | AT-2000 |
Disability table | Álvaro Vindas | Álvaro Vindas |
Retirement age | 100% at 62 | 100% at 62 |
Employees who opt to keep the health plan after | ||
retirement and termination | 23% | 23% |
Family composition before retirement: | ||
Probability of marriage | 80% of the participants | 80% of the participants |
Age difference for active participants | Man 3 years older than the woman | Man 3 years older than the woman |
Family composition before retirement | Composition of the family group | Composition of the family group |
Sensitivity analysis |
The present value of future liabilities may change depending on market conditions and actuarial assumptions. Changes on a relevant actuarial assumption, keeping the other assumptions constant, would have affected the defined benefit obligation as shown below:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
CiPBO(*) - discount rate + 0.5% | (225) | (379) | (1,167) | (1,529) |
CiPBO(*) - discount rate - 0.5% | 260 | 532 | 1,353 | 2,144 |
CiPBO(*) - Health Care Cost Trend Rate + 0.5% | 264 | 449 | 1,371 | 1,810 |
CiPBO(*) - Health Care Cost Trend Rate - 0.5% | (229) | (383) | (1,191) | (1,545) |
CiPBO(*) - Aging factor + 0.5% | 151 | 213 | 786 | 859 |
CiPBO(*) - Aging factor - 0.5% | (151) | (213) | (786) | (859) |
(*) CiPBO means Change in Projected Benefit Obligation. | ||||
24. Equity | ||||
Share Capital | ||||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
71,736,110 common shares issued and fully paid | 9,971 | 9,918 | 27,099 | 26,860 |
In 2019, eligible members also exercised their options and acquired 17,400 shares via Brazilian Depositary Receipts ("BRD"), increasing the Company's capital and share premium by US$0.01 million (R$0.01 million) and US$0.2 million (R$0.5 million) respectively.
In 2020, eligible members also exercised their options and acquired 475,050 shares via Brazilian Depositary Receipts ("BRD"), increasing the Company's capital and share premium by US$0.05 million (R$0.2 million) and US$3.3 million (R$14.6 million) respectively.
Dividends
The Board has approved a dividend policy defined in 2015 proposing a distribution of a target amount of 50% of the Company's net profit, provided that:
The dividend policy will not compromise the policy for growth of the Company whether it be, through acquisition of other companies, or by reason of development of new business.
The Board of Directors considers that the payment of such dividend would be in the interests of the Company and in compliance with the laws to which the Company is subject.
Amounts recognised as distributions to equity holders in the year:
Final dividend paid for the year ended 31 December 2019 of US$0.54 (2018: US$0.54) per share
Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
31/12/2019 | ||||
US$ | ||||
38,472 | ||||
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Profit for the period attributable to owners of the Company | 19,491 | 30,454 | 112,331 | 115,696 |
Weighted average number of common shares | 71,736,110 | 71,261,060 | 71,736,110 | 71,261,060 |
Basic earnings per share (cents per share) | 27.17 | 42.74 | 156.59 | 162.36 |
Weighted average number of common shares | 73,949,600 | 73,963,600 | 73,949,600 | 73,963,600 |
Diluted earnings per share (cents per share) | 26.36 | 41.17 | 151.90 | 156.42 |
Capital reserves |
31/12/2020
US$
38,655
The capital reserves arise principally from transfers from revenue which in prior periods were required by law to be transferred to capital reserves and other profits not available for distribution, share premium on incoming IPO issues and gains/losses on purchase and sale of non-controlling interest.
Profit reserve
An amount equal to 5% of the Company's net profit for the current year is to be credited to a retained earnings account to be called "profit reserve" until such account equals 20% of the Company's paid up share capital.
Additional paid in capital
The additional paid in capital arises from purchase of non-controlling interests in Brasco, sales of shares to non-controlling interests of Tecon Salvador S.A. in 2011 and the purchase of non-controlling interests in Tecon Salvador S.A. in 2016.
Translation reserve
The translation reserve arises from exchange differences on the translation of operations with a functional currency other than the US Dollar.
25. Subsidiaries
Details of the Company's subsidiaries, and other entities and operations under its control, at the end of the reporting period are as follows:
Place of | |||
incorporation | |||
and operation | 31/12/2020 | 31/12/2019 | |
Holding companies | |||
Wilson Sons Holdings Brasil Ltda. | Brazil | 100% | 100% |
WS Participações Ltda.(1) | Brazil | - | 100% |
WS Participaciones S.A. | Uruguay | 100% | 100% |
Wilson, Sons Administração de Bens Ltda. (2) | Brazil | - | 100% |
Towage | |||
Saveiros Camuyrano Serviços Marítimos S.A. | Brazil | 100% | 100% |
Shipyards | |||
Wilson, Sons Shipping Services Ltda. | Brazil | 100% | 100% |
Wilson, Sons Estaleiros Ltda. | Brazil | 100% | 100% |
Shipping agency | |||
Wilson, Sons Agência Marítima Ltda. | Brazil | 100% | 100% |
Transamérica Visas Serviços de Despachos Ltda. .(3) | Brazil | - | 100% |
Dock Market Soluções Ltda(4) | Brazil | 90% | - |
Logistics | |||
Wilson, Sons Logística Ltda. | Brazil | 100% | 100% |
EADI Santo André Terminal de Carga Ltda. | Brazil | 100% | 100% |
Allink Transportes Internacionais Ltda.(5) | Brazil | 50% | 50% |
Offshore support bases | |||
Wilson Sons Serviços Marítimos Ltda. | Brazil | 100% | 100% |
Container terminal | |||
Tecon Rio Grande S.A. | Brazil | 100% | 100% |
Tecon Salvador S.A. | Brazil | 100% | 100% |
Wilport Operadores Portuários Ltda. | Brazil | 100% | 100% |
Proportion of ownership interest
(1) In January 2020 the subsidiary WS Participações Ltda was dissolved.
(2) In February 2020 the subsidiary Wilson, Sons Administração de Bens Ltda. was merged into Wilson, Sons de Administração e Comércio Ltda.
(3) In September 2020 the subsidiary Transamérica Visas Serviços de Despachos Ltda.was closed down.
(4) In August 2020 the Company incorporated the subsidiary Dock Market Soluções Ltda, in which holds 90% interest in its capital.
(5) The Group considers that it controls the subsidiary Allink Transportes Internacionais Ltda., despite having 50% of shares, as evaluation of control under IFRS 10. Allink Transportes Internacionais Ltda controls 100% of Allink Serviços e Gerenciamento de Cargas Ltda. In May 2020 Allink resolved to pay dividends amounting to US$0.1 million (R$0.8 million) in reference to the formally agreed profit incentive plan of the managing shareholder. As agreed in such incentive plan the Company and other shareholders renounced their rights in the managing shareholders favor.
26. Joint ventures and joint operations
The Group holds the following significant interests in joint operations and joint ventures at the end of the reporting period:
Place of incorporation and operationProportion of ownership interest
31/12/2020
31/12/2019
Towage
Consórcio de Rebocadores Barra de Coqueiros (1)
Consórcio de Rebocadores Baia de São Marcos (2)Brazil Brazil
- 50%
50% 50%
Offshore support vessels
Wilson, Sons Ultratug Participações S.A. (3)
Atlantic Offshore S.A. (4)
Brazil Panamá
50% 50%
50% 50%
Logistics
Porto Campinas, Logística e Intermodal Ltda
Brazil
50% 50%
(1) In November 2020 the Consortium was a dissolved.
(2) Joint operation.
(3) Wilson, Sons Ultratug Participações S.A. controls Wilson, Sons Offshore S.A. and Magallanes Navegação Brasileira S.A. These latter two companies are indirect joint ventures of the Company.
(4) Atlantic Offshore S.A. controls South Patagonia S.A. This Company is indirect joint venture of Wilson Sons Limited.
26.1. Joint operations
The following amounts are included in the Group's financial information as a result of proportional consolidation of joint operations listed above:
Income | ||||
Expenses | ||||
Net income | ||||
Intangible assets | 2 | 13 | 10 | 53 |
Right of use | - | 3 | - | 14 |
Property, plant & equipment | 1,842 | 2,619 | 9,571 | 10,557 |
Inventories | 186 | 482 | 967 | 1,941 |
Trade and other trade receivables | 990 | 2,365 | 5,145 | 9,531 |
Cash and cash equivalents | 1,408 | 874 | 7,319 | 3,524 |
Total assets | 4,428 | 6,356 | 23,012 | 25,620 |
Trade and other trade payables | (4,237) | (6,235) | (22,020) | (25,132) |
Deferred tax liabilities | (191) | (118) | (992) | (477) |
Obligations under finance leases | - | (3) | - | (11) |
Total liabilities | (4,428) | (6,356) | (23,012) | (25,620) |
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 |
US$ | US$ | R$ | R$ |
4,067 | 13,310 | 19,061 | 52,769 |
(2,449) | (7,397) | (11,971) | (29,199) |
1,618 | 5,913 | 7,090 | 23,570 |
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 |
US$ | US$ | R$ | R$ |
26.2. Joint ventures
The following amounts are not consolidated in the Group's financial information as they are considered as joint ventures. The Group's interests on joint ventures are equity accounted.
31/12/2020
31/12/2019
Statements of profit or lossInvestee's adjusted profit or loss (1)
Eliminations EliminationsPro forma eliminationsfrom IFRS 16
(2)
CombinedInvestee's adjusted profit or loss (1)
Pro forma eliminationsfrom IFRS 16
(2)
Combined
US$
US$
US$
US$
Revenue
121,616
(10,409)
111,207
Raw materials and consumable used Employee benefits expense Right-of-use
(7,080)
(36,031)
(10,446)
Depreciation and amortisation expenses Other operating expenses
(40,753)
(16,233)
- - - - 10,409
(7,080)
(36,031)
9,954
(492)US$ 130,911 (7,590) (40,594) (10,205)
US$ (10,759)
US$
- - -
US$ 120,152 (7,590) (40,594)
9,721
(484)
(40,753)
(39,636) - (39,636)
(7,924)
(13,748)
(15,037)
Loss on disposal of property, plant and equipment
-
Results from operating activities
11,073
Finance income
65
Interest on lease liabilities Finance costs
(563)
(16,852)
Exchange gain (loss) on translation
(16,998)
Loss before tax
(23,275)
Income tax expense
14,991
Loss for the period Participation Equity result
(8,284)
50%
(4,142)
- - - - - - - - - - -
-
-
(2)
2,030
13,103
17,847
-
65
747
531 -
(32)
(1,163)
(16,852)
(17,073)
(1,440)
(18,438)
(2,073)
1,121 (399)
(22,154) 14,592
(1,715)
722 - -
(7,562)
- -
2,843 1,128 50% 564
10,759 - - - - - - - - - - -
(10,030) (14,308)
- (309)
(2) 17,538
- 1,065
747 (98)
- (17,073)
517 (1,556)
1,273 (118)
1,155 - -
(442) 2,725 2,283 - -
31/12/2020
31/12/2019
Statements of profit or lossInvestee's adjusted profit or loss (1)
Eliminations EliminationsPro forma eliminationsfrom IFRS 16
(2)
CombinedInvestee's adjusted profit or loss (1)
Pro forma eliminationsfrom IFRS 16
(2)
Combined
R$
R$
R$
R$
Revenue
625,504
(53,573)
571,931
R$ 518,049
R$ (42,459)
R$
-R$ 475,590
Raw materials and consumable used Employee benefits expense Right-of-use
(36,245)
-
(36,245)
(29,710) - - (29,710)
(184,897)
-
(184,897)
(159,986)
(53,825)
-51,287
(2,538)
(40,307)
Depreciation and amortisation expenses Other operating expenses
(209,729)
-
(209,729)
(156,380)
(84,143)
53,573
(40,468)
(71,038)
(59,655)
- - - 42,459
- (159,986) 38,378 (1,929)
- (156,380) (39,537) (56,733)
Loss on disposal of property, plant and equipment
-
-
-
-
(7)
Results from operating activities
56,665
-
10,819
67,484
72,004
Finance income
313
-
-
313
2,901
Interest on lease liabilities Finance costs
(2,827)
-
(86,794)
-
2,676 -
(151)
(4,561)
(86,794)
(67,313)
Exchange gain (loss) on translation
(77,974)
-
(7,636)
(85,610)
(9,336)
Loss before tax
(110,617)
Income tax expense
72,193
Loss for the period Participation Equity result
(38,424)
50%
(19,212)
- - - - -
5,859 (2,106)
(104,758)
70,087
3,753 - -
(34,671)
- -
(6,305) 10,925 4,620 50% 2,310
- - - - - - - - - -
- (1,159)
- 4,191
(7) 70,845 2,901 (370)
- (67,313)
2,040 (7,296)
5,072 (473)
4,599 - -
(1,233) 10,452 9,219 - -
(1) The joint venture profit of the period is positively impacted by the elimination of profit margin on construction/dry-docking contracts amounting to US$3,714 (R$19,152) (2019: US$3,714 (R$14,654)). Without this impact, the joint venture result of the period would have been a loss of US$11,998 (R$57,576) (2019: 2,586 (R$10,034)).
(2) Elimination related to the chartering of Atlantic Offshore S.A. vessels by Wilson, Sons Offshore S.A. and that entered for the latter company, within the scope of IFRS 16.
31/12/2020
31/12/2019
Investee's | Investee's | ||||||
adjusted | adjusted | ||||||
Statements of financial position | profit or loss | Combined | profit or loss | Combined | |||
US$ | US$ | US$ | US$ | US$ | |||
Right-of-use | 9,784 | - | 617 | 20,280 | - | (19,120) | 1,160 |
Property, plant and equipment | 568,444 | - | 568,444 | 596,213 | - | - | 596,213 |
Long-term investment | 2,133 | - | 2,133 | 2,185 | - | - | 2,185 |
Other assets | 10,373 | - | 10,373 | 11,753 | - | - | 11,753 |
Trade and other trade receivables | 37,942 | (1,717) | 36,225 | 35,182 | (665) | - | 34,517 |
Derivative | - | - | - | 3 | - | - | 3 |
Cash and cash equivalents | 15,219 | - | 15,219 | 21,183 | - | - | 21,183 |
Total assets | 643,895 | (1,717) | 633,011 | 686,799 | (665) | (19,120) | 667,014 |
Bank loans | 423,762 | - | 423,762 | 440,561 | - | - | 440,561 |
Lease liability | 10,081 | - | 192 | 20,685 | - | (20,275) | 410 |
Other non-current liabilities | 31,646 | - | 31,646 | 39,884 | - | - | 39,884 |
Trade and other trade payables | 98,145 | (1,717) | 96,428 | 93,305 | (665) | - | 92,640 |
Equity | 80,261 | - | 80,983 | 92,364 | - | 1,155 | 93,519 |
Total liabilities and equity | 643,895 | (1,717) | 633,011 | 686,799 | (665) | (19,120) | 667,014 |
31/12/2020 | |||||||
Investee's | Investee's | ||||||
adjusted | adjusted | ||||||
Statements of financial position | profit or loss | Combined | profit or loss | Combined | |||
R$ | R$ | R$ | R$ | ||||
Right-of-use | 50,845 | 3,209 | 81,743 | 4,675 | |||
Property, plant and equipment | 2,954,033 | 2,954,033 | 2,403,157 | 2,403,157 | |||
Long-term investment | 11,085 | 11,085 | 8,807 | 8,807 | |||
Other assets | 53,908 | 53,908 | 47,371 | 47,371 | |||
Trade and other trade receivables | 197,173 | 188,250 | 141,808 | 139,128 | |||
Derivative | - | - | 12 | 12 | |||
Cash and cash equivalents | 79,092 | 79,092 | 85,383 | 85,383 | |||
Total assets | 3,346,136 | 3,289,577 | 2,768,281 | 2,688,533 | |||
Bank loans | 2,202,164 | 2,202,164 | 1,775,769 | 1,775,769 | |||
Lease liability | 52,388 | 999 | 83,375 | 1,651 | |||
Other non-current liabilities | 164,455 | 164,455 | 160,763 | 160,763 | |||
Trade and other trade payables | 510,032 | 501,109 | 376,084 | 373,404 | |||
Equity | 417,097 | 420,850 | 372,290 | 376,946 | |||
Total liabilities and equity | 3,346,136 | 3,289,577 | 2,768,281 | 2,688,533 |
(*)Elimination related to the chartering of Atlantic Offshore S.A. vessels by Wilson, Sons Offshore S.A. and that entered for the latter company, within the scope of IFRS 16.
Pro forma Eliminations eliminations from IFRS 16*
Pro forma Eliminations eliminations from IFRS 16*US$
US$
US$
(9,167)
- - - - - -
(9,167)
- (9,889)
- - 722
(9,167)
31/12/2019
Pro forma Eliminations eliminations from IFRS 16*Pro forma Eliminations eliminations from IFRS 16*R$
R$
R$
R$
- - - - (8,923)
(47,636)
- -
- - - - - -
- - - - (2,680)
(77,068)
- -
- - - - - -
(8,923)
(47,636)
(2,680)
(77,068)
- - -
- (51,389)
(8,923)
-
- - 3,753
- - -
- (81,724)
(2,680)
-
- - 4,656
(8,923)
(47,636)
(2,680)
(77,068)
We have not separately disclosed all material Joint Ventures because they belong to the same economic group and are managed on a unified basis. Wilson Sons Limited holds a non-controlling interest in Wilson, Sons Ultratug Participações S.A and Atlantic Offshore S.A.
Wilson, Sons Ultratug Participações S.A is a controlling shareholder of Wilson, Sons Offshore S.A. and Magallanes Navegação Brasileira S.A, while the Atlantic Offshore S.A. is a controlling shareholder of South Patagonia S.A.
Guarantees
Loan agreements of Wilson, Sons Ultratug Participações S.A. and subsidiaries with the BNDES are guaranteed by a lien on the financed supply vessels and in the majority of the contracts a corporate guarantee from both Wilson Sons Administração e Comércio and Remolcadores Ultratug Ltda, each guaranteeing 50% of its subsidiary's debt balance with the BNDES. The loan agreements, equivalent to 50%, amount to US$170.7 million (R$887.2 million) (2019: US$176.5 million (R$711.4 million)).
Wilson, Sons Ultratug Participações S.A. subsidiary's loan agreement with Banco do Brasil is guaranteed by a pledge on the financed offshore support vessels. The security package also includes a standby letter of credit issued by Banco de Crédito e Inversiones - Chile for part of the debt balance, assignment of Petrobras' long-term contracts and a corporate guarantee issued by Inversiones Magallanes Ltda - Chile. A cash reserve account of US$2.1 million (R$11.1 million), classified as a long term investment is required to be maintained until full repayment of the loan agreement. The loan agreements, equivalent to 50%, amount to US$25.7 million (R$133.7 million) (2019: US$28.2 million (R$113.7 million)).
The loan agreements for Atlantic Offshore from Deutsche Verkehrs-Bank "DVB" and Norddeutsche Landesbank Girozentrale Trade "Nord/LB" for the financing of the offshore support vessels is guaranteed by a pledge on the vessels, the shares of Atlantic Offshore and a corporate guarantee for half of the credit from Wilson, Sons de Administração e Comércio Ltda. and Remolcadores Ultratug Ltda, which is the partner in the business, guarantee the other half of the loans. The loan agreements, equivalent to 50%, amount to US$10.7 million (R$55.6 million) (2019: US$11.7 million (R$47.2 million)).
Covenants
On 31 December 2020 Wilson, Sons Ultratug Participações S.A.'s subsidiary was not in compliance with one of the covenants ratios. On the assumption of a non-attainment, the joint venture's subsidiary has to increase its capital, within a year, in the amount necessary to reach the ratio (US$5.8 million (R$30.0 million)). As the capital will be increased, management's understanding is that there is no breach of a clause or event that prompts negotiation or a waiver letter from Banco do Brasil. There are no other capital commitments for any of the joint ventures or joint operations.
Atlantic Offshore S.A. has to comply with specific financial covenants on its two loan agreements with Deutsche Verkehrs-Bank "DVB" and Norddeutsche Landesbank Girozentrale Trade "Nord/LB". At 31 December 2020 the subsidiary was in compliance with all loan agreement clauses.
Provisions for tax, labour and civil risks
In its ordinary course of business in Brazil, Wilson, Sons Ultratug Offshore S.A. (WSUT) remains exposed to numerous local legal claims. It is the WSUT policy to vigorously contest such claims, many of which appear to have little substance in merit, and to manage such claims through its legal counsel.
WSUT booked provisions related to labour claims amounting to US$0.1 million (R$0.4 million) (2019: US$0.1 million (R$0.4 million)), whose probability of loss was estimated as probable.
In addition to the cases for which WSUT booked the provision, there are other tax, civil and labour disputes amounting to US$6.1 million (R$31.8 million) (2019: US$15.5 million (R$62.5 million)) whose probability of loss was estimated by the legal counsel as possible.
The breakdown of possible losses is described as follows:
31/12/2020
US$
Tax cases Labour claims Civil claims
Total
Insurance coverage
5,611
505
4
31/12/2019
US$
7,192
8,304
6
6,120
15,502
31/12/2020
R$
29,158 28,990
2,624 33,471
20 31,802
The main insurance coverage in 31 December 2020 that the Joint Ventures contracted:
Risks
31/12/2019
R$
22 62,483
Subject
Maritime Hull TotalPlatform Supply Vessels
Coverage
US$
649,625 649,625
Coverage
R$
3,375,907 3,375,907
Wilson Sons Limited
Notes to the consolidated financial statements Years ended 31 December 2020 and 2019
(Amounts expressed in thousands of U.S. Dollars and Brazilian Reais, unless otherwise noted)
67
26.3. Investment in joint ventures
The investments accounted for by the equity accounting method are shown as follows:
Elimination of | |||||||||
profit on | Investee's | ||||||||
Number of | Ownership | Share | shareholders' | Construction | adjusted | Equity in | Book value | ||
Currency | shares | interest - % | capital | equity | Contracts | profit or loss | subsidiaries | of investment | |
Wilson, Sons Ultratug Participações S.A. | US$ | 102,469,250 | 50.00 | 40,138 | 71,844 | (27,890) | (12,160) | (6,080) | 21,977 |
Atlantic Offshore S.A. | US$ | 1,000 | 50.00 | 8,010 | 7,983 | - | 3,924 | 1,962 | 3,991 |
Porto Campinas Logística e Intermodal Ltda | US$ | 6,285,862 | 50.00 | 1,853 | 434 | - | (48) | (24) | 217 |
Total | 80,261 | (27,890) | (8,284) | (4,142) | 26,185 | ||||
Wilson, Sons Ultratug Participações S.A. | R$ | 102,469,250 | 50.00 | 102,469 | 373,353 | (144,936) | (58,331) | (29,166) | 114,208 |
Atlantic Offshore S.A. | R$ | 1,000 | 50.00 | 18,345 | 41,486 | - | 20,151 | 10,076 | 20,741 |
Porto Campinas Logística e Intermodal Ltda | R$ | 6,285,862 | 50.00 | 6,286 | 2,258 | - | (244) | (122) | 1,127 |
Total | 417,097 | (144,936) | (38,424) | (19,212) | 136,076 | ||||
31/12/2019 | |||||||||
Investee's | Elimination of | ||||||||
adjusted | profit on | Investee's | |||||||
Number of | Ownership | Share | shareholders' | Construction | adjusted | Equity in | Book value | ||
Currency | shares | interest - % | capital | equity | Contracts | profit or loss | subsidiaries | of investment | |
Wilson, Sons Ultratug Participações S.A. | US$ | 102,469,250 | 50.00 | 40,138 | 87,708 | (31,696) | (3,000) | (1,500) | 28,006 |
Atlantic Offshore S.A. | US$ | 1,000 | 50.00 | 8,010 | 4,096 | - | 4,188 | 2,094 | 2,048 |
Porto Campinas Logística e Intermodal Ltda | US$ | 6,043,862 | 50.00 | 1,807 | 560 | - | (60) | (30) | 280 |
Total | 92,364 | (31,696) | 1,128 | 564 | 30,334 | ||||
Wilson, Sons Ultratug Participações S.A. | R$ | 102,469,250 | 50.00 | 102,469 | 353,525 | (127,757) | (11,709) | (5,854) | 112,884 |
Atlantic Offshore S.A. | R$ | 1,000 | 50.00 | 18,345 | 16,508 | - | 16,560 | 8,280 | 8,254 |
Porto Campinas Logística e Intermodal Ltda | R$ | 6,043,862 | 50.00 | 6,044 | 2,257 | - | (231) | (116) | 1,129 |
Total | 372,290 | (127,757) | 4,620 | 2,310 | 122,267 |
31/12/2020 Investee's adjusted
The reconciliation of the investment in joint ventures' balance, including the impact of profit recognised by joint ventures:
Investments
27.
US$ | R$ | |
At 1 January 2019 | 26,528 | 102,791 |
Share of result of joint ventures considering the elimination of profit margin on | ||
construction/dry-docking contracts | 564 | 2,310 |
Capital increase | 3,527 | 13,508 |
Elimination on construction contracts | 156 | 609 |
Post-employment benefits | (51) | (205) |
Derivatives | (380) | (1,469) |
Foreign currency loss in respect of translation into Brazilian Reais | (10) | 4,723 |
At 31 December 2019 | 30,334 | 122,267 |
Share of result of joint ventures considering the elimination of profit margin on | ||
construction/dry-docking contracts | (4,142) | (19,212) |
Capital increase | 23 | 121 |
Elimination on construction contracts | 45 | 234 |
Post-employment benefits | 24 | 121 |
Derivatives | (36) | (91) |
Foreign currency loss in respect of translation into Brazilian Reais | (63) | 32,636 |
At 31 December 2020 | 26,185 | 136,076 |
Financial instruments and risk assessment |
a. Capital risk management
b. Categories of financial instruments
68
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | US$ | US$ | |
Financial assets classified as amortised cost | ||||
Cash and bank | 5,742 | 12,616 | 5,742 | 12,616 |
Short-term Investments | 39,590 | 14,077 | 39,590 | 14,077 |
Deposit certificates | 5,938 | - | 5,938 | - |
Operational trade receivables | 38,767 | 47,154 | 38,767 | 47,154 |
Intergroup loans | 30,460 | 30,132 | 30,460 | 30,132 |
Total financial assets - amortised cost | 120,497 | 103,979 | 120,497 | 103,979 |
Financial assets classified as FVPL | ||||
Fixed income investments | 47,057 | 34,739 | 47,057 | 34,739 |
Exchange funds | - | 16,292 | - | 16,292 |
Total financial assets - FVPL | 47,057 | 51,031 | 47,057 | 51,031 |
Total | 167,554 | 155,010 | 167,554 | 155,010 |
Financial liabilities classified as amortised cost | ||||
Bank loans | 342,562 | 334,978 | 342,661 | 334,978 |
Trade payables | 16,039 | 18,567 | 16,039 | 18,567 |
Lease liabilities | 157,894 | 194,148 | 157,894 | 194,148 |
Total financial instruments - amortised cost | 516,495 | 547,693 | 516,594 | 547,693 |
Total | 516,495 | 547,693 | 516,594 | 547,693 |
Fair value
The Group manages its capital to ensure that its entities will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the debt and equity balance. The Group's capital structure consists of debt (which includes the borrowings disclosed in Note 19), cash and cash equivalents and short-term investments disclosed in Note 18, and equity attributable to owners of the parent company comprising issued capital, reserves and retained earnings as disclosed in Note 24.
Book value
Fair value
Book value
c.
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
R$ | R$ | R$ | R$ | |
Financial assets classified as amortised cost | ||||
Cash and bank | 29,839 | 50,856 | 29,839 | 50,856 |
Short-term Investments | 205,735 | 56,740 | 205,735 | 56,740 |
Deposit certificates | 30,859 | - | 30,859 | - |
Operational trade receivables | 201,461 | 190,064 | 201,461 | 190,064 |
Intergroup loans | 158,289 | 121,453 | 158,289 | 121,453 |
Total financial assets - amortised cost | 626,183 | 419,113 | 626,183 | 419,113 |
Financial assets classified as FVPL | ||||
Fixed income investments | 244,543 | 140,020 | 244,543 | 140,020 |
Exchange funds | - | 65,666 | - | 65,666 |
Total financial assets - FVPL | 244,543 | 205,686 | 244,543 | 205,686 |
Total | 870,726 | 624,799 | 870,726 | 624,799 |
Financial liabilities classified as amortised cost | ||||
Bank loans | 1,790,583 | 1,350,196 | 1,780,707 | 1,350,196 |
Trade payables | 83,349 | 74,838 | 83,349 | 74,838 |
Lease liabilities | 820,527 | 782,552 | 820,527 | 782,552 |
Total financial instruments - amortised cost | 2,694,459 | 2,207,586 | 2,684,583 | 2,207,586 |
Total | 2,694,459 | 2,207,586 | 2,684,583 | 2,207,586 |
Financial risk management objectives |
The Group monitors and manages financial risks related to the operations. A financial risk committee meets regularly to assess financial risks and decide mitigation based on guidelines stated in the Group's financial risk policy.
These risks include market risk, credit risk and liquidity risk. The primary objective is to minimise exposure to those risks by using financial instruments and by assessing and controlling the credit and liquidity risks. The Group may use derivatives and other financial instruments for hedging purposes only.
d. Foreign currency risk management
The operating cash flows are exposed to currency fluctuations because they are denominated partially in Brazilian Real. These proportions vary according to the characteristics of each business.
Cash flows from investments in fixed assets are denominated partly in Brazilian Real. These investments are subject to currency fluctuations between the moment when those goods or services are acquired and the actual payment date. The resources and their application are monitored with purpose of matching the currency cash flows and payment dates.
In general terms, the Group seeks to neutralise the currency risk of operating cash flows by matching revenues and expenses. Furthermore, the Group seeks to generate an operating cash surplus in the same currency in which the debt service of each business is denominated.
The Group has part of its debt and part of its cash and cash equivalents denominated in Brazilian Real.
69
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting dates are as follows:
Assets
Liabilities
31/12/2020
31/12/2019
31/12/2020
31/12/2019
US$
US$
US$
US$
Amounts denominated in Real
156.099
173,593
354.244
381,839
Assets
Liabilities
31/12/2020
31/12/2019
31/12/2020
31/12/2019
R$
R$
R$
R$
Amounts denominated in Real
811.200
699,582
1.840.902
1,539,080
Foreign currency sensitivity analysis
The sensitivity analysis presented in the following sections estimates the impacts of the Brazilian Real devaluation against the US Dollar based on the position at 31 December 2020. Three exchange rate scenarios are contemplated: the likely scenario (Probable) and two scenarios of deterioration of 25% (Possible) and 50% (Remote) in the exchange rate. The Group uses the Brazilian Central Bank's "Focus" report to determine the probable scenario.
31/12/2020 Exchange rates (1)
Probable scenario | Possible scenario (25%) | Remote scenario (50%) |
R$5.2000 / US$1.00 | R$6.5000 / US$1.00 | R$7.8000 / US$1.00 |
(1)
Possible | Remote | |||||
Amount | Probable | scenario | scenario | |||
Operation | Risk | US$ | Result | scenario | (25%) | (50%) |
Total assets | R$ | 156,099 | Exchange effects | (99) | (31,299) | (52,099) |
Total liabilities | R$ | 354,244 | Exchange effects | 225 | 71,029 | 118,231 |
126 | 39,730 | 66,132 | ||||
Possible | Remote | |||||
Amount | Probable | scenario | scenario | |||
Operation | Risk | R$ | Result | scenario | (25%) | (50%) |
Total assets | R$ | 811,200 | Exchange effects | (515) | (162,652) | (270,743) |
Total liabilities | R$ | 1,840,902 | Exchange effects | 1,168 | 369,115 | 614,413 |
653 | 206,463 | 343,670 |
Information source: Focus BACEN, report from 8 January 2021.
70
31/12/2019
Exchange rates (1)
Probable scenario | Possible scenario (25%) | Remote scenario (50%) |
R$4.0500 / US$1.00 | R$5.0625 / US$1.00 | R$6.0750 / US$1.00 |
(1)
Possible | Remote | |||||
Amount | Probable | scenario | scenario | |||
Operation | Risk | US$ | Result | scenario | (25%) | (50%) |
Total assets | R$ | 173,593 | Exchange effects | (827) | (35,374) | (58,406) |
Total liabilities | R$ | 381,839 | Exchange effects | 1,820 | 77,824 | 128,493 |
993 | 42,450 | 70,087 | ||||
Possible | Remote | |||||
Amount | Probable | scenario | scenario | |||
Operation | Risk | R$ | Result | scenario | (25%) | (50%) |
Total assets | R$ | 699,582 | Exchange effects | (3,334) | (142,583) | (235,416) |
Total liabilities | R$ | 1,539,080 | Exchange effects | 7,334 | 313,684 | 517,916 |
4,000 | 171,101 | 282,500 |
Information source: Focus BACEN, report from 17 January 2020.
Derivative financial instruments
The Group may enter into derivative contracts to manage risks arising from exchange rate fluctuations, all such transactions are carried out within the guidelines set by the Financial Risk Committee.
Group uses exchange rate hedges to limit its exposure that may result from the variation of the U.S. Dollar against the Brazilian Real or other exchange rates and there are no current outstanding contracts.
e. Interest rate risk management
The Group holds most of its debts linked to fixed rates and most of which are with the FMM (Merchant Marine Fund).
Other loans exposed to floating rates are as follows:
TJLP (Brazilian Long Term Interest Rate) for Brazilian Real-denominated funding through Finame credit line to port operations and Logistics operations;
DI (Brazilian Interbank Interest Rate) for Brazilian Real-denominated funding in logistics operations; and
IPCA (Brazilian National Consumer Prices) for Brazilian Real-denominated funding in port operations and offshore support bases.
The Group's Brazilian Real-denominated investments yield interest rates corresponding to the DI daily fluctuation for privately-issued securities and/or "Selic-Over" government-issued bonds. The US Dollar-denominated investments are short-term time deposits.
Interest rate sensitivity analysis
The Group does not currently fair value account for financial assets or liabilities through profit or loss. Therefore, a change in interest rates at the reporting date would not change the profit or loss result. The
71
Group uses the Brazilian Central Bank's "Focus" BM&F (Bolsa de Mercadorias e Futuros), Bloomberg and Brazilian Economic and Social Development Bank (BNDES) data to estimate the probable scenarios.
The following analysis concerns a possible fluctuation of revenue or expenses linked to the transactions and scenarios shown, without considering their fair value.
31/12/2020 | |||
CDI(1), TJLP(2), IPCA(3), Libor (4), and DI - BM&F(5) | |||
Transaction | Probable scenario | Possible scenario (25%) | Remote scenario (50%) |
Loans - CDI Loans - TJLP Loans - IPCA Investments - Libor 12 Investments - CDI | 2.95% 4.39% 4.31% 1.36% 2.95% | 3.69% 5.49% 5.39% 1.44% 3.69% | 4.43% 6.59% 6.47% 1.53% 4.43% |
Possible | Remote | |||||
Amount | Probable | Scenario | scenario | |||
Transaction | Risk | US$ | Result | scenario | (25%) | (50%) |
Loans - CDI | CDI | 64,439 | Interest | - | - | - |
Loans - TJLP | TJLP | 841 | Interest | (440) | (746) | (1.050) |
Loans - IPCA | IPCA | 55,141 | Interest | - | (6) | (12) |
Loans - Fixed | None | 222,240 | None | - | (415) | (825) |
Total loans | 342,661 | (440) | (1.167) | (1.887) | ||
Investments | Libor | 39,997 | Income | - | 15 | 31 |
Investments | CDI | 52,995 | Income | 218 | 619 | 1.020 |
Total investments | 92,992 | 218 | 634 | 1.051 | ||
Net income | (222) | (533) | (836) | |||
Possible | Remote | |||||
Amount | Probable | Scenario | scenario | |||
Transaction | Risk | R$ | Result | scenario | (25%) | (50%) |
Loans - CDI | CDI | 334,868 | Interest | (2,284) | (3,875) | (5,457) |
Loans - TJLP | TJLP | 4,369 | Interest | - | (31) | (62) |
Loans - IPCA | IPCA | 286,552 | Interest | - | (2,155) | (4,288) |
Loans - Fixed | None | 1,154,918 | None | - | - | - |
Total loans | 1,780,707 | (2,284) | (6,061) | (9,807) | ||
Investments | Libor | 207,852 | Income | - | 80 | 160 |
Investments | CDI | 275,400 | Income | 1,130 | 3,215 | 5,299 |
Total investments | 483,252 | 1,130 | 3,295 | 5,459 | ||
Net income | (1,154) | (2,766) | (4,348) |
(1) Information source: B3 (Brasilia Bolsa Balcão), report from 8 January 2021.
(2) Information source: BNDES (Banco Nacional de Desenvolvimento Econômico e Social), report from 8 January 2021.
(3) Information source: IPCA (Índice de Preços ao Consumidor Amplo), report from 8 January 2021.
(4) Information source: Bloomberg, report from 8 January 2021.
(5) Information source: BM&F (Bolsa de Mercadorias e Futuros), report from 6 January 2021.
The net effect was obtained by assuming a 12-month period starting 31 December 2020 in which interest rates vary and all other variables are held constant. The scenarios express the difference between the weighted scenario rate and actual rate.
72
31/12/2019 | |||
CDI (1), TJLP(2) , IPCA(3) , Libor (4) and Di - BM&F(5) | |||
Transaction | Probable scenario | Possible scenario (25%) | Remote scenario (50%) |
Loans - CDI Loans - TJLP Loans - IPCA Investments - Libor 12 Investments - CDI | 4.50% 5.09% 4.31% 3.17% 4.50% | 5.63% 6.36% 5.39% 3.67% 5.63% | 6.75% 7.64% 6.47% 4.16% 6.75% |
Possible
Remote
Amount | Probable | scenario | scenario | |||
Transaction | Risk | US$ | Result | scenario | (25%) | (50%) |
Loans - CDI | CDI | 65,974 | Interest | (47) | (574) | (1,095) |
Loans - TJLP | TJLP | 1,190 | Interest | - | (10) | (20) |
Loans - IPCA | IPCA | 39,680 | Interest | - | (317) | (632) |
Loans - Fixed | None | 228,134 | None | - | - | - |
Total loans | 334,978 | (47) | (901) | (1,747) | ||
Investments | Libor | 24,153 | Income | - | 56 | 111 |
Investments | CDI | 34,739 | Income | 36 | 468 | 901 |
Total investments | 58,892 | 36 | 524 | 1,012 | ||
Net income | (11) | (377) | (735) | |||
Possible | Remote | |||||
Amount | Probable | scenario | scenario | |||
Transaction | Risk | R$ | Result | scenario | (25%) | (50%) |
Loans - CDI | CDI | 265,921 | Interest | (190) | (2,313) | (4,415) |
Loans - TJLP | TJLP | 4,798 | Interest | - | (40) | (79) |
Loans - IPCA | IPCA | 159,940 | Interest | - | (1,279) | (2,547) |
Loans - Fixed | None | 919,537 | None | - | - | - |
Total loans | 1,350,196 | (190) | (3,632) | (7,041) | ||
Investments | Libor | 97,355 | Income | - | 225 | 449 |
Investments | CDI | 140,021 | Income | 145 | 1,886 | 3,632 |
Total investments | 237,376 | 145 | 2111 | 4,081 | ||
Net income | (45) | (1,521) | (2,960) |
(1) Information source: B3 (Brasil Bolsa Balcão), report from 13 January 2020.
(2) Information source: BNDES (Banco Nacional de Desenvolvimento Econômico e Social), report from 14 January 2020.
(3) Information source: IPCA (Índice de Preços ao Consumidor Amplo), report from 13 January 2020.
(4) Information source: Bloomberg, report from 14 January 2020.
(5) Information source: BM&F (Bolsa de Mercadorias e Futuros), report from 13 January 2020.
The net effect was obtained by assuming a 12-month period starting 31 December 2019 in which interest rates vary and all other variables are held constant. The scenarios express the difference between the weighted scenario rate and actual rate.
73
Derivative financial instruments
The Group may enter into derivative contracts to manage risks arising from interest rate fluctuations. All such transactions are carried out within the guidelines set by the Financial Risk Committee. Generally, the Group seeks to apply hedge accounting in order to manage volatility in profit or loss.
The Group uses cash flow hedges to limit its exposure that may result from the variation of floating interest rates. In January 2019 Tecon Salvador S.A. settled an outstanding interest rate swap agreement to hedge a portion of its outstanding floating-rate debt with IFC as the underlying debt was also settled at that time.
f. Liquidity risk management
The Group manages liquidity risk by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities, continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Liquidity risk is the risk that the Group will encounter difficulty in fulfilling obligations associated with its financial liabilities that are settled with cash payments or other financial assets. The Group's approach in managing liquidity is to ensure that the Group always has sufficient liquidity to fulfil the obligations that expire, under normal and stress conditions, without causing unacceptable losses or risk damage to the reputation of the Group.
The Group ensures that it has sufficient cash reserves to meet the expected operational expenses, including financial obligations. This practice excludes the potential impact of extreme circumstances that cannot be reasonably foreseen, such as natural disasters. For these cases, it is the Company's practice to create a multidisciplinary crisis committee to address the most appropriate actions.
The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Weighted average | Less than | More than | |||
effective interest rate | 12 months | 1-5 years | 5 years | Total | |
31 December 2020 | % | US$ | US$ | US$ | US$ |
Variable interest rate instruments | 2.78% | 35,923 | 61,088 | 42,972 | 139,983 |
Fixed interest rate instruments | 2.75% | 31,136 | 100,087 | 131,858 | 263,081 |
Lease liability (IFRS 16) | 8.77% | 19,153 | 66,718 | 292,766 | 378,637 |
86,212 | 227,893 | 467,596 | 781,701 | ||
Weighted average | Less than | More than | |||
effective interest rate | 12 months | 1-5 years | 5 years | Total | |
31 December 2020 | % | R$ | R$ | R$ | R$ |
Variable interest rate instruments | 2.78% | 186,681 | 317,456 | 223,313 | 727,450 |
Fixed interest rate instruments | 2.75% | 161,804 | 520,122 | 685,226 | 1,367,152 |
Lease liability (IFRS 16) | 8.77% | 99,533 | 346,710 | 1,521,418 | 1,967,661 |
448,018 | 1,184,288 | 2,429,957 | 4,062,263 |
74
g.
Weighted average | Less than | More than | |||
effective interest rate | 12 months | 1-5 years | 5 years | Total | |
31 December 2019 | % | US$ | US$ | US$ | US$ |
Variable interest rate instruments | 3.07% | 18,362 | 81,187 | 32,264 | 131,813 |
Fixed interest rate instruments | 2.75% | 30,869 | 101,423 | 138,093 | 270,385 |
Lease liability (under IAS 17) | 3.17% | 67 | 11 | - | 78 |
Lease liability | 8.80% | 22,851 | 81,399 | 371,236 | 475,486 |
72,149 | 264,020 | 541,593 | 877,762 | ||
Weighted average | Less than | More than | |||
effective interest rate | 12 months | 1-5 years | 5 years | Total | |
31 December 2019 | % | R$ | R$ | R$ | R$ |
Variable interest rate instruments | 3.07% | 74,012 | 327,240 | 130,047 | 531,299 |
Fixed interest rate instruments | 2.75% | 124,424 | 408,806 | 556,611 | 1,089,841 |
Lease liability (under IAS 17) | 3.17% | 270 | 44 | - | 314 |
Lease liability | 8.80% | 92,104 | 328,094 | 1,496,339 | 1,916,537 |
290,810 | 1,064,184 | 2,182,997 | 3,537,991 | ||
Credit risk |
The Group's credit risk can be attributed mainly to balances such as cash and cash equivalents, short term investments, debt securities, loans, trade receivables and other trade receivables. The disclosure in the balance sheet is shown net of the allowance for bad debts.
The Group invests temporary cash surpluses in government and private bonds, according to regulations approved by management, which follow the Group policy on credit risk concentration. Credit risk on investments in non-government backed bonds is mitigated by investing only in assets issued by leading financial institutions. The Group stipulates a cash allocation limit per bank, in addition to investment rules according to rating classification. The Company invests in banks with rating classification BBB (limited to a maximum of 15%), from A to AA (limited to a maximum of 40%) or AAA (limited to a minimum of 40% and maximum of 100%).
The Group's sales policy follows the criteria for credit sales set by management, which seeks to mitigate any loss due to customer default.
Nota | 31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | ||
Cash and cash equivalents | 18 | 58,737 | 63,647 | 305,241 | 256,542 |
Short-term investments | 18 | 39,590 | 14,077 | 205,735 | 56,740 |
Operational trade receivables | 17 | 38,767 | 47,154 | 201,461 | 190,064 |
Other receivables | 17 | 6,952 | 9,931 | 36,129 | 40,029 |
Exposed to credit risk | 144,046 | 134,809 | 748,566 | 543,375 | |
Operational trade receivables |
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision matrix is initially based on the Group's historical observed default rates. The Group evaluates the concentration of risk with respect to trade receivables and contract assets as low, as historically trade receivables are generally received in 30 days.
Based on historical experience, the Company considers a financial asset in default when contractual payments are 180 days past due. So that, it is possible to consider that a default rate should be the average of the default after 180 days, net of the recoverability percentage of these receivables.
75
01 to 30 | 31 to 90 | 91 to 180 | More than | |||
31 December 2020 | Current | days | days | days | 180 days | Total |
US$ | US$ | US$ | US$ | US$ | US$ | |
Expected credit loss rate | 0.09% | 0.09% | 3.30% | 12.77% | 62.48% | |
Receivables for services rendered | 32,730 | 4,800 | 852 | 197 | 742 | 39,321 |
Accumulated credit loss | (35) | (4) | (28) | (25) | (462) | (554) |
01 to 30 | 31 to 90 | 91 to 180 | More than | |||
31 December 2020 | Current | days | days | days | 180 days | Total |
R$ | R$ | R$ | R$ | R$ | R$ | |
Expected credit loss rate | 0.09% | 0.09% | 3.30% | 12.77% | 62.48% | |
Receivables for services rendered | 170,092 | 24,942 | 4,426 | 1,026 | 3,854 | 204,340 |
Accumulated credit loss | (171) | (23) | (146) | (131) | (2,408) | (2,879) |
01 to 30 | 31 to 90 | 91 to 180 | More than | |||
31 December 2019 | Current | days | days | days | 180 days | Total |
US$ | US$ | US$ | US$ | US$ | US$ | |
Expected credit loss rate | 0.19% | 0.19% | 1.78% | 12.11% | 60.38% | |
Receivables for services rendered | 37,146 | 7,641 | 1,434 | 694 | 1,076 | 47,991 |
Accumulated credit loss | (63) | (15) | (26) | (84) | (649) | (837) |
01 to 30 | 31 to 90 | 91 to 180 | More than | |||
31 December 2019 | Current | days | days | days | 180 days | Total |
R$ | R$ | R$ | R$ | R$ | R$ | |
Expected credit loss rate | 0.19% | 0.19% | 1.78% | 12.11% | 60.38% | |
Receivables for services rendered | 149,723 | 30,799 | 5,781 | 2,799 | 4,336 | 193,438 |
Accumulated credit loss | (254) | (60) | (103) | (339) | (2,618) | (3,374) |
h. Fair value of financial instruments
The Group's financial instruments are recorded in balance sheet accounts at 31 December 2020 and 31 December 2019 at amounts consistent with the fair value at those dates. These instruments are managed though operating strategies aimed to obtain liquidity, profitability and security. The control policy consists of ongoing monitoring of rates agreed versus those in force in the market, and confirmation of whether its short-term financial investments are being properly marked to market by the institutions dealing with its funds.
The determination of estimated realisable values of the Group's financial assets and liabilities relies on information available in the market and relevant assessment methodologies. Nevertheless, considerable judgment is required when interpreting market data to derive the most adequate estimated realisable value.
All the Group's financial instruments (as disclosed in note 27 b) are considered as level 2 under the IFRS 7 hierarchy as fair values are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
i. Criteria, assumptions and limitations used when computing fair values
Cash and cash equivalents
The fair values of the bank current account balances are consistent with book balances.
Investments
The fair values of the short-term investments are consistent with book balances.
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Trade and other trade receivables/payables
According to management estimates the fair values of the trade receivables and trade payables are consistent with book balances.
Bank and loans
Fair value of loan arrangements was calculated at their present value determined by future cash flows and at interest rates applicable to instruments of similar nature, terms and risks or at market quotations of these securities. Fair value measurements recognised in the consolidated financial statements are grouped into levels based on the degree to which the fair value is observable.
The fair values of BNDES, BB, Bradesco, CCB, Itaú and Santander financing arrangements are considered similar to their carrying amounts as the Group has to date not identified comparable instruments.
28. Related-party transactions
Transactions between the Company and its related party subsidiaries have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates, joint ventures, other investments and other related parties are disclosed below.
There are no repayment terms and it is not the intention of the parties the loan would be repaid within one year.
Expenses | Expenses | |||||
US$ | R$ | |||||
Joint operations and joint ventures: | ||||||
1. Allink Transportes Internacionais Ltda. | - | - | (223) | - | - | (1,141) |
2. Consórcio de Rebocadores Baía de São | 7,977 | 756 | (821) | |||
Marcos | 1,535 | 150 | (154) | |||
3. Wilson, Sons Ultratug and subsidiaries | 10,346 | 506 | - | 53,765 | 2,596 | - |
4. Atlantic Offshore S.A. | 20,167 | - | - | 104,800 | - | - |
Other: | ||||||
5. Gouvêa Vieira Advogados | - | - | (51) | - | - | (255) |
6. CMMR Intermediação Comercial Ltda. | - | - | (6) | - | - | (27) |
At 31 December 2020 | 32,048 | 656 | (434) | 166,542 | 3,352 | (2,244) |
At 31 December 2019 | 32,672 | 1,054 | (486) | 131,690 | 4,087 | (1,910) |
1. Allink Transportes Internacionais Ltda, is 50% owned by the Group and rents terminal warehousing from the Group. Allink Transportes Internacionais Ltda controls
Assets (liabilities)RevenuesAssets (liabilities)Revenues
US$
US$
R$
R$
100% of Allink Serviços e Gerenciamento de Cargas Ltda. Mr Augusto Cezar Baião is a minority shareholder of Allink Transportes Internacionais Ltda.
2. The transactions with the joint operations are disclosed as a result of proportionate amounts not eliminated on consolidation.
3. Related party loan with Wilson, Sons Ultratug (interest - 0.3% per month with no maturity); advance for future capital increase and other trade payables and receivables from Wilson, Sons Offshore and Magallanes.
4. Related party loan with Atlantic Offshore S.A. (with no interest and with no maturity).
5. Mr. J.F. Gouvêa Vieira is a partner with the law firm Gouvêa Vieira Advogados, Fees were paid to Gouvêa Vieira Advogados for legal services.
6. Mr. C.M. Marote is a shareholder and director of CMMR Intermediação Comercial Ltda. Fees were paid to CMMR Intermediação Comercial Ltda. for consultancy services to the Wilson Sons towage segment.
The Company has adopted the policy of netting the assets and liabilities of the Group related party transactions.
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29. Notes to the consolidated statement of cash flows
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Income before tax | 47,129 | 53,393 | 251,304 | 206,829 |
Less: Finance income | (6,694) | (6,865) | (31,956) | (27,477) |
Add: Exchange loss on translation | 12,494 | 1,454 | 57,357 | 6,145 |
Add: Share of result of joint ventures | 4,142 | (564) | 19,212 | (2,310) |
Add: Finance costs | 10,374 | 11,824 | 53,372 | 47,050 |
Add: Interests on lease liabilities | 12,836 | 15,912 | 65,950 | 62,809 |
Operating income from operations | 80,281 | 75,154 | 415,239 | 293,046 |
Adjustments for: | ||||
Amortisation of right-of-use | 12,436 | 12,389 | 64,440 | 48,813 |
Depreciation and amortisation expenses | 50,617 | 53,733 | 259,983 | 211,960 |
Impairment loss | - | 13,025 | - | 53,530 |
Reversal of impairment | (382) | - | (1,969) | - |
Gain on disposal of property, plant and equipment | 317 | (294) | 2,011 | (1,223) |
Provision equity-settled share-based payment | 206 | 370 | 1,403 | 689 |
Post-employment benefits | 134 | 109 | 686 | 431 |
Increase in provisions | (1,030) | (421) | (5,300) | (1,648) |
Operating cash flows before movements in working capital | 142,579 | 154,065 | 736,493 | 605,598 |
Changes in assets and liabilities: | ||||
Inventories | (1,257) | 368 | (6,483) | 1,452 |
Trade and other trade receivables | 11,057 | 15,733 | 56,818 | 61,971 |
Trade and other trade payables | (8,612) | (2,192) | (44,419) | (8,653) |
Other non-current assets | 22,565 | (4,623) | 116,385 | (18,240) |
Cash generated by operations | 166,332 | 163,351 | 858,794 | 642,128 |
Income taxes paid | (29,137) | (23,324) | (153,807) | (92,201) |
Interest paid - borrowings | (8,569) | (11,840) | (43,554) | (44,866) |
Interest paid - leasing | (14,111) | (16,806) | (72,826) | (66,482) |
Interest paid - others | (23) | (311) | (113) | (1,182) |
Net cash from operating activities | 114,492 | 111,070 | 588,494 | 437,397 |
Non-cash transactions |
During the current period, the Group entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Additions to fixed assets | ||||
Capitalised interest | 3,041 | 2,250 | 15,588 | 7,389 |
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30. Compensation of key management personnel
Compensation of the Group's statutory directors of the Brazilian subsidiary and the Board of Directors is set out below in aggregate for each of the categories:
31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
US$ | US$ | R$ | R$ | |
Short-term employee benefits | (8,989) | (9,003) | (46,814) | (35,358) |
Post-employment benefits and social charges | (1,075) | (1,455) | (5,413) | (5,749) |
Stock Option | (127) | (370) | (653) | (1,453) |
Total | (10,191) | (10,828) | (52,880) | (42,560) |
31. Insurance coverage |
The main insurance coverage contracted by the Group in force at 31 December 2020 is detailed below:
Risks
Subject
CoverageCoverage
US$
R$
Maritime CR Maritime Hull Port Operator CR Automobile Property (Multiline)CR - Protection and civil responsibility (shipowners)(1) 6,000,000 31,180,200
Tugs
256,679 1,333,884
Port operator civil responsibility (including chattels and real estate), terminals (including chattels and real estate), logistics operations Damage to the vehicle
80,000 100% FIPE
415,736 100% FIPE
Buildings, machines, furniture and fixtures, goods and raw materials
24,208 125,800
Managers and directors Managers' civil responsibility
9,621 50,000
Builder Risk Cyber risk RCTR-C Environmental CR Ship repair CR Agency Services CRShipbuilding
29,249 152,000
Data privacy and security
2,886 15,000
Civil responsibility of the freight carrier Civil environmental responsibility
2,694 14,000
1,924 10,000
Civil responsibility for repair of third-party vessels CR - Protection and loss of income (agency services)
962 5,000
500 2,598
Total
6,408,723
33,304,218
(1) Available limit to all P&I Club members.
(2) The FIPE Table (Economic Research Institute Foundation) expresses the average prices of vehicles in the Brazilian market.
32. Coronavirus outbreak ("COVID-19") 32.1. General context
On 11 March 2020 the World Health Organization declared the COVID-19 outbreak a global pandemic and governmental authorities in various jurisdictions imposed lockdowns and precautionary restrictions to contain the virus, reducing the operational activity of several sectors.
Governments worldwide announced measures to provide both financial and non-financial assistance to disrupted industries and the affected business organisations. In Brazil the Executive and Legislative branches have published several normative acts to prevent and contain the pandemic as well as to mitigate the respective impacts on the economy, such as the postponement of tax and social charge payments.
Since June 2020 several countries have reduced the number of new COVID-19 cases and some regions began to gradually relax physical distancing restrictions and re-open businesses, although maintaining some level of social distancing and other precautionary measures.
Although the final impact on the global economy and financial markets is still uncertain, some industries were severely affected by the reduction in demand for services and goods.
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Wilson Sons provides port and maritime logistics services which have been established as essential activities by the Brazilian government under Decree No. 10.282/2020, limiting the negative effects of COVID-19 on the Company's results in the full year of 2020. The Company does not predict any material impact on its long-term performance as the global economy is expected to gradually recover in the coming years.
a. Liquidity
On 31 December 2020 the Company's cash, cash equivalents and short-term investments amounted to US$98.3 million (R$511.0 million), In the first quarter of 2020 the Company signed financing agreements totalling US$24.6 million denominated in Brazilian Real to reinforce short-term liquidity given the volatility caused by the COVID-19 crisis on global markets.
Additionally, in the second quarter of 2020 the Brazilian National Economic and Social Development Bank (BNDES) granted Wilson Sons eligibility for the COVID-19 standstill agreement, with the postponement of loan repayment instalments (principal + interests) that occured between May 2020 and October 2020. This delayed US$10.3 million for the Group's consolidated companies and US$9.9 million regarding the Company's 50% share in the offshore support vessel joint venture. Loan repayments are to be made according to the remaining terms of the contracts included in the scheme.
Furthermore, in the first quarter of 2021 the Company has signed for a second five-month standstill to delay approximately US$7.5 million for the Group's consolidated companies and US$8.9 million regarding the Company's 50% share in the offshore support vessel joint venture between January 2021 and May 2021.
Additionally, in the last quarter of 2020 the Company signed a COVID-19 related standstill with the Banco do Brasil delaying payment of approximately US$3.7 million for the Group's consolidated companies and US$1.9 million regarding the Company's 50% share in the offshore support vessel joint venture.
b. Covenants
As of 31 December 2020 the Company was in compliance with all restrictive financial clauses.
c. Estimated Credit Losses
In view of the current scenario of economic uncertainties caused by the COVID-19 pandemic and in compliance with Memorandum Circulars CVM/SNC/SEP/No. 02/2020 and No. 03/2020, the Company has reviewed the variables that make up the methodology of measurement of estimated losses, and has not observed an increase in customer default due to the outbreak. It is worth mentioning that the management continues to monitor the economic scenario and assess potential impacts that could affect the Company's performance, and consequently, the measurement of estimated losses.
d. Impairment
The effectiveness of the implemented precautionary actions have allowed the maintenance of the Company's activities, despite the fact that the scenario has been quite adverse. Thus, management's best judgement is that it is not necessary to constitute accounting provisions caused by uncertainties and risks of losses related to COVID-19 in its operations.
The events and conditions generated by the dissemination of COVID-19 did not generate uncertainties related to the Company's operational continuity, the impairment of non-current assets financial statements, realization of deferred taxes, non-current assets, fixed assets, inventories, intangible assets and accounts receivable from third parties / customers and there was no need for
80
a general review of the budget plan for Wilson Sons or its subsidiaries, for the year ending 31 December 2020 and subsequent years.
Management will continue to carefully monitor short-term fluctuations in macroeconomic assumptions related to the impacts of COVID-19 and any impact they may have on the Company's expected cash flows or weighted average cost of capital.
e. Lease arrangements
At this time, there have been no long-term changes in the scope of the Company's leases and right-of-use assets, including adding or terminating the right to use one or more underlying assets, or extending or reducing the term of the contractual leases. The Company has obtained some short-term reductions and postponements of lease payments, which according to the amendment to the IFRS 16 rules should not be considered lease adjustments, as disclosed in Note 2.2.
f. Going Concern
The Company has concluded on the appropriate use of the going concern basis of accounting. As previously mentioned, the Company has stress tested a number of scenarios and implemented several actions to ensure the continuity of its businesses, and at this time, the outbreak has not yet caused any changes in the circumstances that would indicate a going concern risk.
32.2. COVID-19 Response efforts
Since January 2020 Wilson Sons has been implementing several measures and protocols to ensure (i) the health, safety and well-being of its employees, clients and partners, (ii) the safe continuity of all its operations, and (iii) the financial strength and resilience of its business. Additionally, a COVID-19 crisis committee was created to manage risks and responses in alignment with the interests of all stakeholders.
Workforce Safety:
Remote-work routine for all administrative staff;
Physical isolation of operational employees over 60 years old, with controlled exceptions;
Extensive travel restrictions prohibiting international travel (since March 2020) and limiting domestic travel to business-critical movements;
Non-essential internal events were cancelled or postponed;
Employee participation in external events is prohibited;
In-person meetings are prohibited and must be held remotely;
Non-business third-party visits to the Company's operations and facilities are prohibited, with controlled exceptions;
Reinforced hygiene measures and the use of masks;
Mandatory quarantine period until completely recovered in the event of employee contamination or direct contact with infected people;
Stricter measures for OSV crews (pre-boarding tests) and tugboat crews (medical checkups);
Other containment measures in accordance with the protocol established by the Brazilian Ministry of Health;
Reinforced succession plans;
Flu vaccine campaign; and
COVID-19 testing in specific operations.
Business Continuity:
Individual business continuity plans;
Monitored quarantine for symptomatic and infected employees (reported cases);
81
Increased inventory for critical materials with short supply risk (~80 key suppliers monitored on a weekly basis);
Internal and external communication campaign;
Monitored remote-work routine (mental health, adherence, productivity, engagement, leadership, etc); and
HSE protocol with protective measures and contingency plans (actions for suspected/confirmed cases, use of masks, mandatory temperature measurement, and other items included in workforce safety).
Financial Resilience:
Austerity:
- Variable cost reductions (travel bans, hiring freezes, and restrictions on discretionary spend);
- Capex and Opex reductions;
- Administrative expense reductions;
- Personnel cost reductions;
- Contingency expense reductions;
- Corporate project reductions and postponements; and
- Substitution of judicial deposits.
Liquidity:
- Temporary dividend reduction (as announced);
- Tax payment deferrals in line with government incentives;
- Debt amortisation postponements;
- Payables extensions and receivables anticipations; and
- New debt issuance, credit facility agreements, and pre-approved credit limits.
Revenue:
- New revenue streams and business/service development; and
- Credit & Commercial Strategy workgroup to mitigate credit default risk.
33. Opinion of the audit committee
Pursuant to the legal provisions, the audit committee of Wilson Sons Limited has reviewed the Financial Statements for the fiscal year ending 31 December 2020. On the basis of the aforementioned review and further considering the information and clarifications provided by the Company's management and by ERNST & YOUNG Auditores Independentes, received during the course of the fiscal year, the Audit Committee recommends that the Board of Directors approve the Financial Statements (including explanatory notes) for the fiscal year ending 31 December 2020.
Although the members of the audit committee have already been chosen and are working in accordance with their functions, they will only be appointed members of the audit committee when the body is officially established at the next Annual General Meeting, which will take place in April 2021.
34. Approval of the financial information
The consolidated financial statements were approved by the board of directors and authorised for issue on 12 March 2021.
Directors Declaration
In compliance with article 25, section V of CVM Instruction 480 of 7 December 2009, the Directors of Wilson Sons Limited declare that they have reviewed, discussed and agreed with the consolidated financial statements and the views expressed in the independent auditor's review report.
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Chairman, Deputy Chairman, and Re-election of Board Members (Proposals #9, #10, #11, #12, #13, #14, #15, #16 and #17)
José Francisco Gouvêa Vieira (Chairman): received a Law Degree from the Catholic University of Rio de Janeiro in
1972. He holds a Masters degree in Law from Columbia University, New York (1978). He has been a Partner with Gouvêa Vieira Advogados since 1971 and has been with the Company since 1991. He has served as Chairman of the Board (1997) and Director of Wilson, Sons de Administração e Comércio (1992), Ocean Wilsons Holdings Limited (1997) and of Ocean Wilsons (Investments) Limited (1997). He served as a Director of various companies, including PSA Peugeot Citroen Brazil, Lafarge Brazil, Ultrapar, Cetip, Concremat - Engenharia e Tecnologia S.A (member of China Communication and Construction Company). He is a member of the Corporate Governance Committee of the American Chamber of Commerce - São Paulo (2005) and honorary consul to the Kingdom of Morocco in Rio de Janeiro (2007).
William Henry Salomon (Deputy Chairman): graduated from Magdalene College Cambridge with a degree in law and then qualified at the English Bar. He was Chairman of Rea Brothers PLC and subsequently became Deputy Chairman of the investment division of Close Brothers PLC. In 1999 Mr. Salomon established Hansa Capital, an FCA regulated investment manager and adviser. He is Chairman of Hanseatic Asset Management LBG and Senior Partner of Hansa Capital Partners LLP as well as a Director of Hansa Investment Company Limited. He is also Chairman of ScotGems PLC. In addition he is Deputy Chairman of Ocean Wilsons Holdings Limited, the company which holds the controlling interest in Wilson Sons.
Cezar Baião (Deputy Chairm an and Board Member): graduated in Economics from the Catholic University of Rio de Janeiro (PUC-Rio). Having joined Wilson Sons in 1994 as CFO, served as CEO of the Brazilian operations for 20 years.During his term, Wilson Sons became the largest integrated provider of port and maritime logistics services in Brazil. From 1982 to 1989, he served as Money Market Manager at JP Morgan and also as Finance Director of Grupo Lachmann, between 1989 and 1994. He is a member of the board of directors of the Brazilian Association of Public-Use Container Terminals (ABRATEC) and board member of Rio de Janeiro Industrial Center (CIRJ).
Fernando Fleury Salek (CEO of Brazilian Operations and Board Member): i s an economist educated at PUC-Rio specialising in Corporate Finance, International Finance and Marketing. He joined Wilson Sons in 2016 as CFO of Brazilian Subsidiaries. With a solid experience in leadership roles for capital-intensive companies, he served as BG Group Finance Vice President in Brazil where he was responsible for the Planning and Budgeting departments, Accounting including Audit, Risk Management, Tax and IT. Previously, Salek worked at BHP Billiton, where for six years he served as Vice President of Corporate Finance in Netherlands and subsequently in Great Britain.
Claudio Frischtak (Independent Board Member appointed by Minority Shareholders): is the head of Inter.B -
Consultoria Internacional de Negócios, a financial and economic consulting firm based in Rio de Janeiro, Brazil. Mr.
Frischtak was formerly a Principal Economist at the World Bank where he worked from 1984 to 1991. Mr. Frischtak's graduate work in economics was undertaken at the University of Campinas, Brazil and at Stanford University (1980-84). While at the World Bank he was an Adjunct Professor at the Department of Economics at Georgetown University (1987-1990). He has published over 100 academic policy papers (including edited books), and has worked extensively on issues related to infrastructure, industrial organisation and regulatory/competition policy, and innovation and technological change.
Mauro Moreira (Independent Board Member): g raduated in Accounting and Business & Management. He completed the Strategic Leadership for Partners at Harvard University, Vevey, Switzerland. With 39 years of experience in auditing and consulting, he served 24 years as an audit partner, being six at Arthur Andersen and 18 at Ernst &Young, where he was the Rio de Janeiro Office Managing Partner and member of EY´s Americas Assurance Partner Forum. He has significant knowledge in US GAAP, IFRS and SOX Matters, serving local and international companies such as Coca-Cola, Grupo Globo, Telefónica and TIM. He is an Effective Board Member of the Regional Accounting Council of Rio de Janeiro (CRCRJ) and a member of the Brazilian Institute of Independent Auditors (IBRACON). In addition, he served as Director of the American Chamber of Commerce (AMCHAM).
Christopher Townsend ( Board Member): i s a German and British citizen. He is a qualified solicitor and has an MA from Peterhouse College, University of Cambridge, and an MBA from London Business School. He is an investment director of Hansa Capital GmbH and has been a non-executive director of Ocean Wilsons Holdings Limited since 2011. He previously worked at Coller Capital Limited and as a solicitor at Ashurst Morris Crisp.
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Wilson Sons Ltd. published this content on 23 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 March 2021 05:08:03 UTC.