Exhibit 1
|
|
|
|
|
|
|
|
|
|
|
NEWS |
|
|
For Release: IMMEDIATE |
Hadera Paper Ltd.
Reports Financial Results for Fiscal Year Ended December 31, 2008
Hadera, Israel, March 11, 2009
Hadera Paper Ltd. (AMEX:AIP) (the Company or Hadera Paper) today
reported financial results for the year ended December 31, 2008. The Company, its
subsidiaries and associated companies are referred to hereinafter as the
Group.
As a result of the transition to
reporting according to IFRS, the Company presented its financial statements for 2008, as
well as the comparison figures for the year ended December 31, 2007, according to IFRS.
Since the Companys share in the
earnings of associated companies constitutes a material component in the companys
statement of income (primarily on account of its share in the earnings of Mondi Hadera
Paper Ltd. (Mondi Hadera) and Hogla-Kimberly Ltd. (H-K)), before
the presentation of the consolidated data below, the aggregate data which include the
results of all the companies in the Hadera Paper Group (including the associated companies
whose results appear in the financial statements under earnings from associated
companies) is being presented, without considering the rate of holding therein and
net of mutual sales.
Aggregate sales amounted to NIS
3,229.1 million in 2008, as compared with NIS 3,124.3 million in the corresponding period
last year.
Aggregate operating profit in 2008
amounted to NIS 203.0 million, as compared with NIS 183.8 million in 2007. The significant
improvement in the aggregate operating profit is attributed to the performance improvement
at some of the Israeli companies on the one hand, coupled with the continuing trend of a
lower operating loss in Turkey on the other hand.
The Consolidated Data set forth below
excluding the results of operation of the associated companies: Mondi Hadera, H-K.
Consolidated Data include the sales turnover of Carmel Containers Systems Ltd.
(Carmel) and Frenkel- C.D. Ltd. (Frenkel- C.D.) that were
consolidated as of September 2008 due to the completion of transaction for the acquisition
of Carmel shares.
Consolidated sales during 2008
amounted to NIS 673.5 million, as compared with NIS 583.6 million in 2007.
Operating profit amounted to NIS 35.4
million in 2008, as compared with NIS 71.1 million in 2007. Most of the erosion in the
profit was due to changes in the dollar exchange rate, which negatively impacted the
selling prices, to dumping prices of competing imports and to the apparent slowdown in the
operations during the final quarter of 2008, as a result of the financial crisis.
The net profit attributed to the
Companys shareholders in 2008 amounted to NIS 69.7 million, as compared with net
profit of NIS 31.5 million in 2007, and was affected by the improvement in the
profitability of some of the Groups companies in Israel, from recording profit from
the allocation of excess negative cost as a result of the acquisition of Carmel and
Frenkel CD whose net impact on the net profit attributed to the Companys
shareholders amounted to NIS 10.6 million and from the significant reduction of the
Companys share in the losses of the operations in Turkey (KCTR). On the other hand,
the net profit decreased as a result of recording an expenditure of NIS 10.0 million from
the valuation of a PUT option at Mondi.
The net profit attributed to the
shareholders of the company in the fourth quarter this year amounted to NIS 10.2 million,
as compared with net profit attributed to the companys shareholders of NIS 17.5
million in the corresponding quarter last year.
Basic earnings per share amounted to
NIS 13.77 per share ($3.62 per share) in 2008, as compared with basic earnings per share
of NIS 7.63 per share ($1.98 per share) in 2007.
The inflation rate in 2008 amounted
to 3.8%, as compared with an inflation rate of 3.4% in 2007.
Mr. Avi
Brener, Chief Executive Officer of the Company said that In view of the
global recession, the Company formulated in recent months an action plan which
includes aggressive measures to improve efficiency, cut current investments,
cut general expenses. True to this date, there is no material impact as a
result of the escalation of the global financial crisis, on the Companys
business results, its financial robustness or the value of its assets. In the
first half of 2008, input prices rose for energy, fibers, chemicals and
commodities, a trend that was reversed in the second half of the year due to
the global crisis. The Companys transition, at the end of 2007, to using
natural gas, has led to NIS 46 million in Group-wide (including associated
companies) energy-cost savings in 2008. These savings were partially offset as
a result of the increase in electricity prices in 2008. In the second half of
2008, the global paper market, particularly Europe, saw the start of a trend of
slowing demand that led to surplus production in the market, which increased
the importing of fine paper and packaging paper from Europe at dumping prices.
In order to avoid erosion of its gross margin, the Group filed two complaints,
with the Supervisor of Anti-Dumping Charges at the Israeli Ministry of
Industry, Trade and Employment, regarding dumping imports of packaging paper
and fine paper from several European nations to Israel. In both cases, the
Supervisor decided to launch an investigation. There is no certainty that the
above complaints would be accepted, and the Company is currently unable to
estimate the impact of such acceptance on its business results. The average
revaluation of the NIS against the US$ coupled with the revaluation of the NIS
against the euro had a positive impact on the Company with regard to imported
inputs while, on the other hand, serving to erode the selling prices in the
main operating segments of the Company whose prices are denominated in US$. In
the fourth quarter, the trend in input prices was reversed and prices started
to decline due to the aforementioned crisis which served to somewhat
offset the looming slowdown in operations in both local and export markets. The
overall business range and currency operations of the Hadera Paper Group,
including its associated companies, is relatively balanced and the Companys
exposure to sharp fluctuations in exchange rates is therefore low.
In the reported period, KCTR
continued to implement its strategic plan formulated by the Company together with the
international partner, Kimberly Clark.
Financial expenses in 2008 amounted
to NIS 15.0 million, as compared with NIS 22.2 million in the corresponding period last
year.
2
The companys share in the
earnings of associated companies totaled NIS 51.3 million in 2008, as compared with NIS
0.9 million in 2007. The Companys share in the earnings of associated companies
amounted to NIS 14.7 million in the fourth quarter of the year, as compared with NIS 7.9
million in the corresponding quarter last year.
The following principal changes were
recorded in the Companys share in the earnings of associated companies, in relation
to 2007:
|
|
The
Companys share in the net profit of Mondi Hadera (49.9%) rose by NIS 0.6 million.
The increased income was primarily attributed to the improvement in Mondis
operating profit, which grew from NIS 33.6 million last year to NIS 34.1 million this
year primarily due to a quantitative increase in sales, operating efficiency and
lower energy costs due to the transition to using natural gas at the Hadera site. The net
profit also increased as a result of the decrease in financial expenses this year in
relation to last year, primarily on account of the impact of the revaluation of the NIS
against the dollar. |
|
|
The
companys share in the net earnings of H-K Israel (49.9%) increased by approximately
NIS 12.3 million. The improved operating profit originated from a quantitative increase
in sales, improved selling prices net of the impact of higher raw material prices, the
continuing implementation of efficiency measures and the continuing trend of raising the
proportion of some of the premium products out of the products basket, while innovating
products and empowering the Companys brands. |
|
|
The
Companys share in the losses of KCTR Turkey (49.9%) decreased by NIS 48.0 million.
The significant decrease in the loss is attributed to the growth in the volumes of
operation that led to a significant reduction in the operating loss, from NIS 73.7
million last year to approximately NIS 33.4 million this year. In 2007, the Company
recorded a non-recurring loss in respect of termination of trade agreements with
distributors following the transition to distribution by Unilever, amounting to
approximately NIS 6 million, of which the Companys share amounts to approximately
NIS 3 million. Moreover, the tax asset that was recorded in previous years in Turkey, in
the sum of approximately NIS 26.8 million was reduced, of which our share is NIS 13.4
million. Moreover, due to the increase in the shareholders equity of KCTR through a
financial influx from Hogla, the bank loans were repaid, while significantly reducing the
financial expenses, thereby leading to an additional reduction in the net loss. |
|
|
The
Companys share in the loss of Carmel (36.21% before August 31, 2008 the date
of consolidation), increased by NIS 6.4 million. This increase is attributed to the sharp
erosion in the operating margin as a result of lower demand for packaging due to the
slowdown in industrial exports on account of the erosion of currency exchange rates vis-à-vis
the NIS, coupled with the damages of the cold spell in the agricultural sector. On the
other hand, the prices of imported raw materials did not decrease in NIS terms, due to
hedging transactions on exchange rates. |
3
This report contains various
forward-looking statements based upon the Board of Directors present expectations
and estimates regarding the operations and plans of the Group and its business
environment. The Company does not guarantee that the future results of operations will
coincide with the forward-looking statements and these may in fact differ considerably
from the present forecasts as a result of factors that may change in the future, such as
changes in costs and market conditions, failure to achieve projected goals, failure to
achieve anticipated efficiencies and other factors which lie outside the control of the
Company as well as certain other risks detailed from time to time in the Companys
filings with the Securities and Exchange Commission. The Company undertakes no obligation
for publicly updating the said forward-looking statements, regardless of whether these
updates originate from new information, future events or any other reason.
|
Hadera PAPER LTD.
|
|
SUMMARY OF RESULTS
|
|
(AUDITED)
|
|
except per share amounts
|
|
NIS IN THOUSANDS (1)
|
|
2008
|
2007
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
| 673,484 |
|
| 583,650 |
|
| | |
Net earnings attributed to the Company's | | |
shareholders | | |
| 69,710 |
|
| 31,535 |
|
| | |
Basic net earnings per share attributed to | | |
the Company's shareholders | | |
| 13.77 |
|
| 7.63 |
|
| | |
Fully diluted earnings per share attributed | | |
to the Company's shareholders | | |
| 13.77 |
|
| 7.62 |
|
|
|
|
(1) |
The
representative exchange rate at December 31, 2008 was NIS 3.802=$1.00. |
(2) |
The
net profit attributed to the Companys shareholders in 2008 was affected
by the improvement in the profitability of some of the Groups companies
in Israel, from recording profit from the allocation of excess negative cost as
a result of the acquisition of Carmel and Frenkel CD whose net impact on
the net profit attributed to the Companys shareholders amounted to NIS
10.6 million and the significant reduction of the Companys share in the
losses of the operations in Turkey (KCTR), as compared with 2007. On the other
hand, the net profit decreased as a result of recording an expenditure of NIS
10.0 million from the valuation of a PUT option at Mondi |
(3) |
The
net profit in 2007 was affected by the growth in the Companys share in
the losses of the operations in Turkey (KCTR), amounting to approximately NIS
11.8 million (from NIS 52.0 million last year to NIS 63.8 million this year),
as compared with the preceding year. In 2007, the net profit included earnings
from the realization of surplus cost at an associated company in the amount of
NIS 2.5 million, a loss from the amortization of a tax asset at an associated
company in the sum of NIS 13.4 million and a capital loss from the sale of
cardboard machines (machine 6) and hub machines in the sum of NIS 2.4 million. |
Contact:
Lea Katz, Adv.
Corporate Secretary and
Chief of Legal Department
Hadera Paper Ltd. Group
Tel:+972-4-6349408
Leak@aipm.co.il
4
Exhibit 2
Translation from Hebrew
March 11, 2009
MANAGEMENT DISCUSSION
We are honored to present the
consolidated financial statements of the Hadera Paper Group Ltd. (Hadera Paper
or The Company) (formerly American Israeli Paper Mills
AIPM) for the year 2008. The Company, its consolidated subsidiaries and its
associated companies hereinafter: The Group.
A. |
Description
of the Corporations Business |
|
Hadera
Paper deals in the manufacture and sale of packaging paper, corrugated board packaging,
consumer goods packaging and unique packaging for industry, recycling of paper and
plastic waste and in the marketing of office supplies through subsidiaries. The
Company also holds associated companies that deal in the manufacture and marketing of
fine paper, in the manufacture and marketing of household paper products, hygiene
products, disposable diapers and complementary kitchen products. |
|
The
companys securities are traded on the Tel Aviv Stock Exchange and on the American
Stock Exchange, AMEX. |
|
a. |
Updating
of data to comply with IFRS |
|
As
a result of the transition to reporting according to IFRS, the Company presented its
financial statements for 2008, as well as the comparison figures for the year ended
December 31, 2007, according to IFRS. Accordingly, the data appearing in the Management
Discussion and the comparison figures are presented according to IFRS. |
|
b. |
Principal
Current Operations |
|
Global
financial markets suffered a considerable upheaval in 2008, an upheaval that reached new
highs during the period between September and October 2008, with the collapse of several
large financial entities in the United States and elsewhere around the world, along with
global stock markets. This economic and financial crisis came in the wake of the subprime
mortgage crisis, that began in the second half of 2007 and affected additional financial
sectors. The global economic and financial crisis resulted inter alia in severe damage to
global capital markets, downturns and fierce fluctuations in stock exchanges both in
Israel and worldwide and in the worsening of the credit crunch that started in the wake
of the subprime mortgage crisis. Following the said events, several nations initiated
various measures in order to stabilize and prevent an additional deterioration of
financial markets, by way of injecting funds into financial institutions while also
lowering interest rates. However, there is still no certainty that these measures have
indeed tamed the crisis or prevented its deterioration and there is no certainty that
they will in fact do so. |
1
|
Over
the last several months, the said financial crisis began to materialize in the form of a
real economic crisis, as various economies around the world, including the United States,
central economies in Europe and the Israeli market as well, entered into a recession,
accompanied by the discontinuation of numerous operations and mass employee layoffs in
various market sectors, including industry, services and high-tech. |
|
As
of the report date, it would seem that the direct economic repercussions of the
aforementioned crisis have yet to run their course, and a concern exists that Israels
economy may slide into recession, similar to other economies around the world. |
|
In
view of the global recession, the Company formulated in recent months an action plan
which includes aggressive measures to improve efficiency, cut current investments, cut
general expenses (regarding the waiver of senior executive wages see Section K,
below), continued measures for improved efficiency across the group, focus on purchasing
operations in order to reduce expenses related to the purchase of raw materials, services
and products as well as focused management of operational working capital and control of
customer credit exposure. Along with these actions, the Company continues to identify
business opportunities to enable accelerated growth and improved margins in its various
sectors of operation in Israel and overseas. |
|
Alongside
the said global financial crisis, several events occurred in the Israeli economy in the
second half of 2008, including significant fluctuations in the exchange rates of
principal currencies vis-à-vis the NIS. |
|
These
market developments and fluctuations may potentially have adverse effects on the business
results of the Company and its investee companies, including an effect on their
liquidity, the value of their assets, the ability to divest assets, the state of their
business, their financial indicators and standards, their credit rating, ability to
distribute dividends, ability to raise financing for their current operations and
long-term plans, as well as on their financing terms. |
|
True
to the date of publication of the financial statements, there is no material impact as a
result of the escalation of the crisis, on the Companys business results, its
financial robustness or the value of its assets. |
2
|
In
the course of the third quarter, the Company conducted two offerings in the total sum of
NIS 426 million, by way of issuing to the public series of debentures that render it
possible for the company to promote the long-term strategic projects on which it is
focusing. The Company does not currently anticipate difficulties in raising additional
financing in case of need. |
|
The
above information constitutes forward-looking information as defined in the Securities
Law, based on the companys estimates at the date of this report. These estimates
may not materialize in whole or in part or may materialize in a different
manner, inter alia on account of factors that lie outside the control of the company,
such as the global crisis in credit and banking markets.
As at the date of publication of
these financial statements, no material changes have occurred to the Companys risk
management policy. |
|
In
the first half of 2008, input prices rose for energy, fibers, chemicals and commodities
a trend that was reversed in the second half of the year due to the global crisis.
The Companys transition, in the fourth quarter of 2007, to using natural gas, has
led to NIS 46 million in Group-wide energy-cost savings in 2008, as compared with last
year primarily due to the transition to steam production using natural gas and to
self-generation of electricity based on gas rather than on fuel oil. These savings were
partially offset as a result of the increase in electricity prices in 2008, by an average
rate of 17% in relation to 2007, as mentioned above. |
|
In
the second half of 2008, the global paper market and particularly in Europe saw
the start of a trend of slowing demand, that led to surplus production in the market. Due
to the said surplus production, the importing of fine paper and packaging paper from
Europe at dumping prices rose in the second half of 2008. In order to avoid erosion of
its gross margin, the Company announced on January 15, 2009, that it had filed a
complaint, as a manufacturer of packaging paper, with the Supervisor of Anti-Dumping
Charges and Homogenization Charges at the Ministry of Industry, Trade and Employment
(hereinafter: The Supervisor), regarding dumping imports of packaging paper
from several European nations to Israel. Upon review of the complaint, the Supervisor
decided to launch an investigation of this issue. On February 26, 2009, the company
announced that the associated company Mondi Hadera Paper had filed a complaint to the
supervisor, regarding the dumping imports of fine paper from several European nations to
Israel. Upon review of the complaint, the Supervisor decided to launch an investigation
of this issue. According to the Company announcement, there is no certainty that the
above complaints would be accepted, and the Company is currently unable to estimate the
impact of such acceptance on its business results. |
|
The
average revaluation of the NIS against the US$ amounting to approximately 13% in
2008 as compared with 2007 coupled with the revaluation of the NIS against the
euro had a positive impact on the Company with regard to imported inputs while, on the
other hand, serving to erode the selling prices in the main operating segments of the
Company whose prices are denominated in US$. In the most recent quarter, the trend in
input prices was reversed and prices started to decline due to the aforementioned crisis
which served to somewhat offset the looming slowdown in operations in both local
and export markets. |
3
|
The
overall business range and currency operations of the Hadera Paper Group, including its
associated companies, is relatively balanced and the Companys exposure to sharp
fluctuations in exchange rates is therefore low. |
|
The
above information pertaining to trends in the paper market constitutes forward-looking
information as defined in the securities law, based on the companys estimates at
the date of this report. These estimates may not materialize in whole or in part
or may materialize in a different manner, inter alia on account of factors that lie
outside the control of the company, such as changes in global raw material prices and
changes in the supply and demand of global paper products. |
|
The
sharp fluctuations in global fuel prices in 2008 had no material impact on the Company,
due to the transition to the use of natural gas instead of fuel oil in its production
processes, which began in the fourth quarter of 2007. This fact served to improve the
Groups competitive capability vis-à-vis its European competitors and
partially offset the aforementioned impact of the price erosion. |
|
The
inflation rate in 2008 amounted to 3.8%, as compared with an inflation rate of 3.4% in
2007. |
|
Considerable
volatility was recorded in 2008 in the exchange rate of the US dollar in relation to the
NIS, throughout the year. The US dollar exchange rate fell by 1.1% in 2008, in addition
to a 9% decrease in 2007. |
|
2. |
Principal
Current Operations |
|
In
the course of the reported period and despite the sharp change in the business
environment, the aggregate sales turnover continued to grow, as illustrated by a 3.3%
increase in relation to the aggregate sales turnover in the corresponding period last
year. |
|
Implementation
and Assimilation of Organization-Wide Processes |
|
In
the course of the reported period, the Group companies continued to implement and
assimilate organization-wide processes that are intended to empower Group-company
operations and support continued growth and increased profitability in organizational
development, Group purchasing, B2B marketing, development and innovation. The gradual and
successful implementation of these brands will enable the company to better deal with the
challenging business environment, while improving profitability. |
|
In
parallel to the ongoing operations, the Company is working to successfully implement the
strategic plans that are intended to lead to continued growth in operations and improved
profitability over the coming years: |
4
|
a. |
Expanding
the recycled packaging paper manufacturing network |
|
The
investment in the project for the construction of the new manufacturing network, totaling
NIS 690 million was approved on October 15, 2007 by the Companys Board of
Directors. The Company has selected the most highly advanced technologies in this area,
from the leading suppliers in the sector, in order to amplify its competitive advantage
and potential for profitability in the long term. |
|
The
implementation of the project is advancing as planned and the Company has completed the
signing of central agreements for the purchasing of the main manufacturing equipment. The
construction of the structure for the machine is advancing at the site, in preparation
for receiving the equipment whose arrival will begin towards the end of the year. |
|
In
parallel, the Amnir Recycling Industries Ltd. (Amnir), a Companys
subsidiary, is continuing preparations for the expansion of the collection of cardboard
and newspaper waste and is continuing to accumulate inventories toward the planned
operation of the new machine toward the end of 2009. |
|
As
part of this project, the company is investing in the reorganization of the principal
site in Hadera, including an expansion of the energy system and the adaptation of the
traffic routes and upgrading of environmental systems, as required. |
|
As
part of the preparations for financing the project, additional capital of approximately
NIS 211 million was raised in November 2007, by way of a private placement of shares to
the controlling shareholders and to institutional investors. In the course of July 2008,
the Company raised a net sum of approximately NIS 306 million, after deducting the
offering expenses. In August 2008, the Company raised approximately NIS 120 million,
after deducting offering expenses, by way of issuing debentures to institutional
investors and to the public. The capital that was raised is intended to serve for
covering the payments to the suppliers of equipment for Machine 8 and constitutes most of
the sum necessary for financing this project. In addition to the above measures, the
Company is continuing to explore additional ways to complete the remaining necessary
project financing. |
|
b. |
Innovative
development of high-quality recycled paper |
|
Over
the past year, the packaging paper and recycling division launched the rapid development
of paper types based on 100% recycled fibers, whose superior quality would allow them to
replace pulp-based packaging paper in the corrugated board industry in Israel and
overseas.
The technological and operational development process is currently in advanced
stages and is meant to increase the volume of the potential market for packaging paper
for the local corrugated board industry, from 170,000 tons per annum at the present time,
to approximately 250,000 tons per annum in the coming years. |
|
The
development of new paper types is based on the characterization of fibers, developing and
implementing new chemical additives and using these advanced manufacturing technologies,
both in the existing production lines and in the new production line, to render it
possible to gradually launch new products, as early as in 2009 and throughout 2010. |
5
|
According
to the plan, the cost of the new paper types will be competitive as compared with the
cost of pulp-based paper and will allow for a gradual improvement in the profitability of
the sector. According to laboratory tests, the indications from the development process
in the production lines and initial markets tests, it appears that the probability for
success in this area is relatively high. |
|
The
above information pertaining to the innovative developments in the paper market
constitutes forward-looking information as defined in the Securities Law, based on the
companys estimates at the date of this report. These estimates may not materialize
in whole or in part or may materialize in a different manner, inter alia on
account of factors that lie outside the control of the company. |
|
The
new power plant project, intended to supply steam and electricity to the production
system in Hadera and to sell surplus electricity to Israel Electric Company (IEC) and/or
to private consumers, is on hold, awaiting the business stabilization of potential gas
sources in order to conclude the contract to acquire the required gas at a price range
that would allow the Company to be competitive with expected IEC rates. The Company is
working to extend the existing production license, for the purpose of building a 230 MW
power station, to be constructed on an 80,000 m(2) plot of land that was
acquired for this purpose, in immediate proximity to the Companys site in Hadera. |
|
Discovery
of additional natural gas deposits at Tamar-1 and progress made by the Egyptian gas
franchisee (EMG) improve the likelihood of renewed negotiations to kick off the project. |
|
The
above information pertaining to trends in the energy sector, based on natural gas,
constitutes forward-looking information as defined in the Securities Law, based on the
companys estimates at the date of this report. These estimates may not materialize
in whole or in part or may materialize in a different manner, inter alia on
account of factors that lie outside the control of the company, such as the size of the
actual gas reservoir, as well as changes in gas prices worldwide. |
|
d. |
The
Strategic Investment in Turkey |
|
In
2008, Kimberly Clark Turkey, KCTR, a wholly-owned Hogla Kimberly subsidiary (49.9% of
which is held by the company) continued to implement its strategic plan GBP (Global
Business Plan) that was formulated together with the international partner, Kimberly
Clark. The plan is intended to introduce Kimberly Clarks global brands to Turkey,
on the basis of local manufacturing. If fully implemented, KCTR will grow to become a
company with annual sales in the area of $300 million, by 2015. |
6
|
The
sales turnover of KCTR amounted to approximately $115.0 million in 2008, as compared with
$63.3 million in 2007, representing an increase of 81.7%. |
|
In
the course of 2008, the company continued to empower its brands and especially the Huggies® and
Kotex® brands, was realizing constant growth in both market share and rising
awareness toward the companys products. In parallel, the volume of exports to
Kimberly-Clark in various other countries in Europe and Africa also increased. |
|
The
companys continuing marketing and advertising operations are being felt in the
gradual strengthening of the brands, as expressed by consumer studies that are being
conducted regularly, alongside consistent growth in sales, while curtailing the operating
loss and a considerable reduction in the Companys net loss. |
|
As
part of the strategic plan, the Company intends to continue its marketing and sales
promotion efforts, while launching new products that will support the establishment of
the brands and the creation of customer loyalty. |
|
Moreover,
In the course of 2008, the Company continued to promote the collaboration with Unilever
and expanded the number of points of sale in the Turkish market that sell KCTR brands. |
|
The
continuing high level of competition in the markets where the company is working to
penetrate and empower its brands calls for regular and significant investments in
advertising and sales promotion. |
|
All
of the expenses detailed above associated with the penetration of products, advertising,
expansion of the distribution network and more are regularly recorded as an
expenditure in the KCTR statements of income. KCTR recorded an operating loss of
approximately NIS 33.4 million (approximately $9.3 million) in 2008, as compared with NIS
74 million (approximately $17.9 million) in 2007. |
|
The
implementation of the strategic business plan, while strengthening the brands and
recording a gradual growth in the Unilever distribution and sales platforms, in
combination with increased exports and continuing cost reductions at the diaper plant
are rendering it possible to maintain the trend of improving gross margins as
mentioned above in 2008 as well. |
|
The
above information pertaining to the KCTR business plans and their implementation
constitutes forward-looking information as defined in the securities law, based on the
companys estimates at the date of this report. These estimates may not materialize
in whole or in part or may materialize in a different manner, inter alia on
account of factors that lie outside the control of the company, such as market
conditions, legislation and various costs. |
7
B. |
Analysis
of the Companys Financial Situation |
|
Starting
September 1, 2008, the financial statements of Carmel Container Systems Ltd. (Carmel)
and Frenkel- CD Ltd. (Frenkel- C.D.) (an associated company of Carmels
and of the Company), are being consolidated within the companys financial
statements, as a result of the fact that the holding rate in Carmel has increased from
36.2% to 89.3%, and at Frenkel CD, indirectly, from 37.93% to 52.72% (for details see
Note 15 to the financial statements). The analysis of the financial statements, as
described below, is affected by this consolidation. |
|
|
The
cash and cash equivalents item decreased from NIS 167.7 million as of December 31,
2007 to NIS 13.1 million as of December 31, 2008. The difference, together with
additional amounts that resulted from the private placement carried out last year and
from the issuance of several series of debentures in the third quarter of the year, was
deposited in euro-linked deposits in the amount of NIS 125.7 million and in NIS
deposits in the amount of 123.9 million, which have been designated for the payment of
amounts pertaining to the construction of the facility for the manufacturing of packaging
paper, and are presented under designated cash. |
|
|
The
balance of trade receivables in respect of packaging paper, recycling and cardboard,
increased from NIS 138.3 million as of December 31, 2007 to NIS 273.8
million as of December 31, 2008. This increase is primarily attributed to the
consolidation of the trade receivables of Carmel and Frenkel CD in the amount of NIS 186.1
million, net of the effect of the reduction in prices in NIS terms following the
devaluation of the dollar exchange rate, net of trade receivable balances at Carmel, that
were cancelled as a result of the consolidation of the financial statements. Accounts
receivable for the office supplies marketing activity rose from NIS 40.3 million as at
December 31, 2007 to NIS 45.1 million, as at December 31, 2008, as a result of growth in
the volume of operations. |
|
|
Accounts
receivable in the packaging paper, recycling and cardboard activity increased from NIS 91.3
million as of December 31, 2007 to NIS 95.1 million as of December 31, 2008. This
increase is primarily attributed to the consolidation of the accounts receivable of
Carmel and Frenkel CD in the amount of NIS 5.8 million. In the office supplies
marketing activity, the Other Accounts Receivable item increased from NIS 3.1 million on
December 31, 2007, to NIS 5.8 million on December 31, 2008. |
|
|
Inventories
in the packaging paper and recycling activity increased from NIS 51.2 million as of
December 31, 2007, to NIS 146.3 million as of December 31, 2008. This increase is
primarily due to the consolidation of Carmel and Frenkel CD inventories, amounting to NIS
87.2 million. Inventories in the office supplies marketing activity grew from NIS 18.4
million on December 31, 2007, to NIS 22.5 million on December 31, 2008, primarily due to
the increased share of products imported from Eastern Asia for the purpose of improving
profitability, as well as due to acquired inventories in conjunction with the acquisition
of the business operations of Yavne Pitango Ltd. in Northern Israel in early August, in
order to accelerate Company growth. |
8
|
|
Investments
in associated companies decreased from NIS 346.4 million on December 31, 2007 to NIS
318.1 million on December 31, 2008. This decrease, despite the Companys share in
the income of associated companies, amounting to NIS 51.3 million, was primarily due to
the initial consolidation of Carmel and Frenkel CD as of September 1, due to a larger
holding percentage which led to the removal of Carmel and of Frenkel CD from the
Investments in Associated Companies item, to the amount of NIS 49.8 million, as well as
due to the change in net capital reserves, amounting to NIS 28.1 million. |
|
|
Short-term
credit decreased from NIS 143.0 million on December 31, 2007 to NIS 77.7 million on
December 31, 2008. The decrease in this item was primarily due to the use of part of the
proceeds from the private placement to the shareholders in November of last year and of
proceeds from the offering of bond series in July and August of this year intended
for the repayment of short-term credit. |
|
|
Accounts
payable and other credit balances in the packaging paper, recycling and cardboard
activity increased from NIS 65.8 million as of December 31, 2007, to NIS 100.4
million as of December 31, 2008. This increase is primarily due to the consolidation of
accounts payable at Carmel and Frenkel CD, amounting to NIS 18.1 million, to an increase
in expenses payable in respect of interest on bonds from issuances during the third
quarter, and to the revaluation of the fair value of liabilities in respect of future
transactions for hedging payments to suppliers of Machine 8, due to the lower euro
exchange rate in 2008. In the office supplies marketing activity, the Other Accounts
Payable item increased from NIS 4.8 million on December 31, 2007, to NIS 5.6 million on
December 31, 2008. |
|
|
The
Companys shareholders equity increased from NIS 670.0 million on December 31,
2007, to NIS 757.6 million on December 31, 2008. This change was primarily due to the net
profit associated with Company shareholders in 2008, amounting to NIS 69.7 million, to a
positive capital reserve from transition to consolidation, amounting to NIS 15.9 million,
and to the addition of the minority interest amounting to NIS 26.3 million, offset by an
increase in net negative capital reserves, amounting to NIS 24.3 million. |
|
1. |
Investments
in Fixed Assets |
|
Investments
in fixed assets in 2008 amounted to NIS 230.1 million, as compared with NIS 83.4 million
in 2007, with investments in 2008 primarily including payments on account of purchases
from equipment vendors for the new packaging paper manufacturing network (Machine 8),
amounting to approximately NIS 191 million. Additional investments included were related
to environmental protection (wastewater treatment) and current investments in equipment
renewal, means of transportation and building maintenance at the Hadera site. |
|
Long-term
liabilities (including current maturities) amounted to NIS 785.3 million as at December
31, 2008, as compared with NIS 260.2 million as at December 31, 2007. Long-term
liabilities grew year-over-year, primarily as a result of the issuing of two debenture
series (Series 3 and Series 4) in the third quarter of this year, in the total sum of NIS
427 million, coupled with long-term loans assumed intended for financing payments on
account of Machine 8 and the consolidation of the loans of Carmel and Frenkel CD, in the
total sum of NIS 101.4 million. |
9
|
The
long-term liabilities include primarily four series of debentures and the following
long-term bank loans: |
|
Series
1 NIS 7.4 million, for repayment until 2009. |
|
Series
2 NIS 158.6 million, for repayment until 2013. |
|
Series
3 NIS 190.5 million, for repayment until 2018. |
|
Series
4 NIS 235.6 million, for repayment until 2020. |
|
Long-term
loans NIS 159.2 million. |
|
The
balance of short-term credit, as at December 31, 2008, amounted to approximately NIS 77.7
million, as compared with NIS 143.0 million at December 31, 2007. |
|
3. |
Financial
liabilities at fair value through the statement of income |
|
Put
option for shareholder at an associated company |
|
As
part of an agreement dated November 21, 1999 with Mondi Business Paper (hereinafter MBP,
formerly Neusiedler AG) Mondi Hadera acquired the Groups operation in fine paper
and issued MBP 50.1% of its shares. |
|
As
part of this agreement, MBP was granted the option to sell its holdings in Mondi Hadera
to the Company at a price 20% lower than its value (as defined in the agreement), or $20
million, less 20% the higher of the two. According to verbal understandings that
were reached in proximity to the signing of the agreement, between elements at the
company and elements at MBP, the latter can exercise the option only in the most
exceptional cases, such as those that paralyze production in Israel for long periods of
time. |
|
Due
to the extended period of time that has passed since these understandings were reached
and in view of recent changes in the management of MBP, the Company has decided to adopt
a conservative approach in this respect and to reflect the economic value of the option.
The value of the option was calculated according to IFRS and was recognized as a
liability that is measured at fair value, with changes in fair value being allocated to
the statement of income in accordance with IAS 39. |
|
The
difference between the value of the liabilities according to the agreement NIS
54.7 million as compared with the value of the liabilities through fair value
NIS 13.9 million amounts to NIS 40.8 million. |
|
The
liability on account of the Put option for shareholder at the associated company shares as at December
31, 2008, December 31, 2007, and as at January 1, 2007, amounts to NIS 13.9 million, NIS
3.9 million and NIS 1.6 million, respectively. |
|
On
account of the Put option, other expenses grew by NIS 10.0 million in 2008, as compared
with growth of NIS 2.3 million in 2007. |
|
The
principal factors responsible for the change in fair value in 2008 include the change in
the risk-free interest rate and the change in the standard deviation of the Hadera Paper
share that serve for calculating the value of the option as a result of
fluctuations in the price of the share during 2008 and in the risk-free,
dollar-denominated interest rate. |
10
|
Since
the Companys share in the earnings of associated companies constitutes a material
component in the companys statement of income (primarily on account of its share in
the earnings of Mondi Hadera PaperLtd. [Mondi Hadera] and Hogla-Kimberly Ltd.),
before the presentation of the consolidated data below, the aggregate data which include
the results of all the companies in the Hadera Paper Group (including the associated
companies whose results appear in the financial statements under earnings from
associated companies) is being presented, without considering the rate of holding
therein and net of mutual sales.
Regarding the consolidated data, see Section (3)
below. |
|
The
aggregate sales amounted to NIS 3,229.1 million in 2008, as compared with NIS 3,124.3
million in the corresponding period last year, representing growth of 3.4%. |
|
Aggregate
operating profit in 2008 amounted to NIS 203.0 million, as compared with NIS 183.8
million in 2007 representing a 10.4% increase. The significant improvement in the
aggregate operating profit is attributed to the performance improvement at some of the
Israeli companies on the one hand, coupled with the continuing trend of a lower operating
loss in Turkey on the other hand. |
|
For
the operations in Turkey see Section C7 below Companys share in the
earnings of associated companies. |
|
2. |
The
net profit and the Earnings per Share Attributed to the Companys Shareholders |
|
The
net profit attributed to the Companys shareholders in 2008 amounted to NIS 69.7
million, as compared with net profit of NIS 31.5 million in 2007, representing an
increase of 121.3%. |
|
The
net profit attributed to the Companys shareholders in 2008 was affected by the
improvement in the profitability of some of the Groups companies in Israel, from
recording profit from the allocation of excess negative cost as a result of the
acquisition of Carmel and Frenkel CD whose net impact on the net profit attributed
to the Companys shareholders amounted to NIS 10.6 million and the significant
reduction of the Companys share in the losses of the operations in Turkey (KCTR),
as compared with 2007 (see Strategic Investment in Turkey, above, and Section C7, below).
On the other hand, the net profit decreased as a result of recording an expenditure of
NIS 10.0 million from the valuation of a PUT option at Mondi. |
|
Regarding
details of the calculations of the surplus of assets fair value and liabilities resulting
from purchasing Carmel, see assessments of the value which were added to the financial
statements of the Company dated 30.9.08 |
11
|
The
net profit attributed to the shareholders of the company in the fourth quarter this year
amounted to NIS 10.2 million, as compared with net profit attributed to the companys
shareholders of NIS 17.5 million in the corresponding quarter last year. |
|
Basic
earnings per share amounted to NIS 13.77 per share ($3.62 per share) in 2008, as compared
with basic earnings per share of NIS 7.63 per share ($1.98 per share) in 2007. |
|
Diluted
earnings per share amounted to NIS 13.77 per share ($3.62 per share) in 2008, as compared
with diluted earnings per share of NIS 7.62 per share ($1.98 per share) in 2007. |
|
3. |
Analysis
of Operations and Profitability |
|
The
analysis set forth below is based on the consolidated data. |
|
The
consolidated sales during 2008 amounted to NIS 673.5 million, as compared with NIS 583.6
million in 2007, representing growth of 15.4%. |
|
Sales
of the packaging paper, recycling and cardboard activity in 2008 amounted to NIS 543.1
million, as compared with NIS 465.3 million in 2007. |
|
Higher
sales in the packaging paper, recycling and cardboard activity were primarily due to the
initial consolidation, starting in September, of sales by Carmel and Frenkel CD,
amounting to NIS 160.9 million on the one hand, and on the other hand to the decrease in
the sales of packaging paper and recycling due to the impact of the weaker dollar on the
selling prices, which was not offset by a rise in NIS-denominated prices (segment sales
are impacted by dollar-denominated import prices). |
|
Sales
of the Office Supplies Marketing activity in 2008 amounted to NIS 131.1 million, as
compared with NIS 119.0 million in 2007, representing growth of 10.2% due to continued
implementation of the growth plan in this segment. |
|
The
consolidated sales in the fourth quarter amounted to NIS 226.3 million, as compared with
NIS 154.9 million in the corresponding quarter last year, representing an increase of
46.5%, that is primarily attributed to the inclusion of the data of Carmel and Frenkel CD
in the fourth quarter, in the sum of NIS 119.9 million, that were not consolidated last
year, as mentioned above. Net of the sales of Carmel and Frankel CD, the sales amounted
to NIS 106.4 million, primarily as a result of the decrease in the sales of packaging
paper as a result of price erosion in dollar terms, coupled with the apparent slowdown in
the markets and the global financial crisis. |
|
The
cost of sales amounted to NIS 542.4 million or 80.5% of sales in 2008, as
compared with NIS 440.7 million or 75.5% of sales in 2007. |
|
The
gross profit totaled NIS 131.1 million in 2008 (approximately 19.5% of sales), as
compared with NIS 142.9 million (24.4% of sales) in 2007, representing a decrease of
approximately 8.3% in relation to 2007. |
12
|
The
decrease in the gross profit and gross margin in relation to 2007 is attributed primarily
to the erosion of the dollar-linked prices of packaging paper in light of the change in
the exchange rate, coupled with a decrease in the quantitative sales on the local market
as a result of the impact of the cold spell, the approximately 17% rise in electricity
prices and the rise in paper waste collection costs that were partially offset by
the continuing efficiency measures and the transition to manufacture using natural gas.
Additionally, the cost of sales included an amortization of approximately NIS 5.5 million
in excess cost, as a result of excess cost recorded from the sale of Carmel and Frenkel
CD. |
|
The
labor wages within the cost of sales amounted to NIS 149.2 million in 2008 (22.3% of
sales), as compared with NIS 115.7 million last year (approximately 19.8% of sales). |
|
The
labor wages within the general and administrative expenses amounted to NIS 73.9 million
in 2008 (approximately 11.0% of sales), as compared with the sum of NIS 58.3 million last
year (approximately 10.0% of sales). |
|
The
Increase in salary costs as compared to 2007 is attributed to additional salary expenses
of approximately NIS 50.0 million resulting from the consolidation of Carmel and
Frenkel CD and the increase in personal, primarily at Amnir and in the packaging paper
sector, as part of the preparations for and the execution of the expanded collection of
cardboard and newspaper waste that is to serve the upcoming operation of the new
packaging paper manufacturing network, coupled with a nominal increase of 4% in wages. |
|
Moreover,
the labor costs include an increase in labor expenses as detailed in Section 3 below, as
a result of expenses derived from the issue of options to executives and the allocation
of the expenses thereupon, at an accrued sum of NIS 4.9 million in 2008 an
expenditure that does not involve cash flows. |
|
As
part of the alignment with the global economic crisis, the Companys management
adopted a policy of mutually-agreed pay cuts for executives. In this capacity, senior
executives and managers have mutually agreed to cut their wages by 8% to 10% in 2009,
while senior employees have agreed that their wages be cut by 5%. |
|
3. |
Selling,
General and Administrative and Other Expenses |
|
Selling,
general and administrative expenses (including wages) and other expenses in 2008,
amounted to NIS 95.7 million or 14.3% of sales as compared with NIS 71.8
million or 12.3% of sales in 2007. Net of the revenues from attribution of
excess negative cost at a subsidiary and non-recurring expenses as set forth below,
selling, general and administrative and other expenses amounted to NIS 94.5 million.
The
increase in selling, general and administrative and other expenses was primarily
attributed to the consolidation of the expenses of Carmel and Frenkel CD in the Companys
financial statements, in the amount of NIS 17.3 million, along with the increase in
wages expenses as a result of NIS 4.9 million in wages expenses recorded in respect
of the option plan for executives approved in January this year, as well as the increase
in other expenses following the revaluation of a Mondi PUT option in the amount of NIS 10.0
million pursuant to IFRS. |
13
|
The
selling, general and administrative expenses amounted to NIS 37.8 million or 16.7%
of sales in the fourth quarter of the year, as compared with NIS 20.9 million, or
13.5% of sales, in the corresponding quarter last year. The growth is primarily
attributed to the inclusion of the expenses of Carmel and Frankel CD in the sum NIS 12.8
million in the quarter, as well as a result of recording an expenditure on account of a
PUT option on an associated company, in the sum of approximately NIS 4.3 million in the
fourth quarter. |
|
The
operating profit amounted to NIS 35.4 million or 5.3% of sales in 2008, as
compared with NIS 71.1 million or 12.2% of sales in 2007. Most of the
erosion in the profit was due to changes in the dollar exchange rate, which negatively
impacted the selling prices of packaging paper and recycling, as well as to the dumping
prices of competing imports, as set forth above, coupled with the apparent slowdown in
the operations of the various companies during the final quarter as a result of the
financial crisis. |
|
Operating
profit for the packaging paper, recycling and cardboard activity in 2008 amounted to
approximately NIS 32.1 million, as compared with NIS 70.4 million in 2007 primarily
due to the aforementioned impact of the exchange rate, at which segment sales are
denominated, as well as due to the dumping prices of competing imports, as set forth
above, and the impact of the severe cold spell on the demand for exported agricultural
produce. |
|
The
operating profit of the office supplies operations amounted to NIS 3.2 million, as
compared with a profit of NIS 0.7 million in 2007. |
|
The
operating loss amounted to NIS 2.6 million in the fourth quarter of the year, as compared
with approximately NIS 18.1 million in the corresponding quarter last year. This is
primarily attributable to the decrease in sales for exports as well as the development of
recycled products from pulp replacements, the influence of currency and the erosion of
selling prices, as well as the result of recording an expenditure on account of a PUT
option for an associated company in the sum NIS 4.3 million in the fourth quarter of the
year. Net of influence of the Put option and losses from companies consolidated during
the quarter, the operating profit for the quarter amounted to approximately NIS 5.5
million. |
|
The
financial expenses in 2008 amounted to NIS 15.0 million, as compared with NIS 22.2
million in the corresponding period last year, representing a decrease of 32.4%. |
|
The
total average of net interest-bearing liabilities, charged to the Companys
financial expenses, decreased by approximately NIS 85 million, between 2007 and 2008.
This decrease was primarily due to proceeds of the private placement received last year,
to the positive cash flows from operating activities in those years, offset by
investments in fixed assets. |
14
|
The
interest on the short-term credit decreased by approximately NIS 6.3 million, both as a
result of the decrease in the balance of short-term credit and as a result of the lower
interest rate between the two periods. The interest expenses in respect of CPI-linked
long-term liabilities (debentures) grew by approximately NIS 0.7 million, as compared
with 2007, despite the decrease in the balance of debentures following redemptions made
to the holders of the debentures both as a result of the increase in the costs of the
hedging transactions on the CPI-linked debentures against the increase in the CPI, which
grew by an annual rate of 2.6% in 2008, as compared with 1.3% in 2007, and as a result of
the valuation of the hedging transactions to their fair value, in accordance with
international standards. The actual index rose by approximately 3.8% in this period. |
|
Furthermore,
the Company recorded financial revenues in 2008 amounting to NIS 5.2 million in respect
of a dollar currency transaction executed in the third quarter of this year, as compared
with financial revenues of NIS 4.6 million from euro currency transactions executed in
late 2007. These revenues were offset last year by financial expenses amounting to NIS
2.3 million, primarily due to the impact of the revaluation of the NIS vis-à-vis
the USD by 9.0% in 2007, as compared with a 1.1% revaluation in 2008, applicable to USD
asset balances. |
|
Expenses
on taxes on income amounted to NIS 3.7 million in 2008, as compared with NIS 18.3 million
in 2007. The sharp decrease of approximately NIS 14.6 million is primarily
attributed to the sharp drop in taxable income (income after financial expenses, net of
non-recurring income of approximately NIS 14.6 million from the allocation of a
negative excess of cost), the inclusion of NIS 0.9 million in last years tax
expenses in respect of the closing of assessments for the years 2002 through 2005 and the
decrease in the current tax rate this year as compared with the preceding year. |
|
7. |
Companys
Share in Earnings of Associated Companies |
|
The
companies whose earnings are reported under this item (according to Hadera Papers
holdings therein), include primarily: Mondi Hadera, Hogla-Kimberly and Carmel Container
Systems (until August 31, 2008 the date of initial consolidation of the Carmel
financial statements). |
|
The
companys share in the earnings of associated companies totaled NIS 51.3 million in
2008, as compared with NIS 0.9 million in 2007. The Companys share in the earnings
of associated companies amounted to NIS 14.7 million in the fourth quarter of the year,
as compared with NIS 7.9 million in the corresponding quarter last year, representing an
increase of 86% in relation to the corresponding quarter last year. |
|
The
following principal changes were recorded in the Companys share in the earnings of
associated companies, in relation to 2007: |
|
|
The
Companys share in the net profit of Mondi Hadera Paper (49.9%) rose by NIS 0.6
million. The increased income was primarily attributed to the improvement in Mondis
operating profit, which grew from NIS 33.6 million last year to NIS 34.1 million this
year primarily due to a quantitative increase in sales, operating efficiency and
lower energy costs due to the transition to using natural gas at the Hadera site. The net
profit also increased as a result of the decrease in financial expenses this year in
relation to last year, primarily on account of the impact of the revaluation of the NIS
against the dollar. |
15
|
|
The
companys share in the net earnings of Hogla-Kimberly Israel (49.9%) increased by
approximately NIS 12.3 million. Hoglas operating profit grew from NIS 136.3 million
to NIS 169.0 million this year. The improved operating profit originated from a
quantitative increase in sales, improved selling prices net of the impact of higher raw
material prices, the continuing implementation of efficiency measures and the continuing
trend of raising the proportion of some of the premium products out of the products
basket, while innovating products and empowering the Companys brands. |
|
|
The
Companys share in the losses of KCTR Turkey (formerly: Ovisan) (49.9%)
decreased by NIS 48.0 million. The significant decrease in the loss is attributed to the
growth in the volumes of operation (see above Section A(2)(b)(3)(4) Strategic
Investment in Turkey) that led to a significant reduction in the operating loss,
from NIS 73.7 million last year to approximately NIS 33.4 million this year. In 2007, the
Company recorded a non-recurring loss in respect of termination of trade agreements with
distributors following the transition to distribution by Unilever, amounting to
approximately NIS 6 million ($1.5 million), of which the Companys share amounts to
approximately NIS 3 million. Moreover, the tax asset that was recorded in previous years
in Turkey, in the sum of approximately NIS 26.8 million (approximately $6.4 million) was
reduced, of which our share is NIS 13.4 million. Moreover, due to the increase in the
shareholders equity of KCTR through a financial influx from Hogla, the bank loans
were repaid, while significantly reducing the financial expenses, thereby leading to an
additional reduction in the net loss. |
|
The
Companys share in the loss of Carmel (36.21% as at August 31, 2008 the date
of consolidation), increased by NIS 6.4 million. This increase is attributed to the sharp
erosion in the operating margin as a result of lower demand for packaging due to the
slowdown in industrial exports on account of the erosion of currency exchange rates vis-à-vis
the NIS, coupled with the damages of the cold spell in the agricultural sector. On the
other hand, the prices of imported raw materials did not decrease in NIS terms, due to
hedging transactions on exchange rates. |
|
The
cash flows from operating activities in 2008 amounted to approximately NIS 113.9 million,
as compared with NIS 91.9 million in 2007. The increase in the cash flows from operating
activities in 2008, as compared with 2007, originated primarily as a result of the sharp
improvement in net profit as well as from the decrease in working capital in 2008, that
amounted to approximately NIS 41 million, as compared with a NIS 8.0 million decrease
last year. The decrease in working capital in 2008 originated primarily from the
reduction in the accounts receivable balance as a result of the lower dollar exchange
rate, that is affecting the selling prices in NIS, especially as regards packaging paper
and recycling. |
|
See
Section B2 Financial Liabilities and in the details of the table below. |
16
Debentures for institutional investors and the public
Series
|
Issue Date
|
Name of
Rating
Company
|
Rating
at time
of issue
and at
report
date
|
Total stated
value at issue
date
|
Interest
type
|
Stated
Interest
|
Registered
for trade
on stock
exchange
(Yes/No)
|
Interest payment
dates
|
Nominal par
value as at
Dec-31-08
|
Book value
of debenture
balances as
at Dec-31-08
|
Book value of
interest to be
paid as at
Dec-31-08
|
Market value as at Dec-31-08
|
In NIS
|
NIS millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1 |
|
|
| Apr-1992 |
|
| Maalot |
|
| AA- |
|
| 48,000,000 |
|
| Fixed |
|
| 3.8 |
% |
| No |
|
| Annual interest On June 10-30 In the years 1993-2009 |
|
| 3.25 |
|
| 7.42 |
|
| 0.1 |
|
| |
|
| | |
Series 2 | | |
| Dec-2003 |
|
| Maalot |
|
| AA- |
|
| 200,000,000 |
|
| Fixed |
|
| 5.65 |
% |
| No |
|
| Annual interest On December 21 In the years 2004-2013 |
|
| 142.9 |
|
| 158.6 |
|
| 0.3 |
|
| |
|
| | |
Series 3 | | |
| Jul-2007 |
|
| Maalot |
|
| AA- |
|
| 187,500,000 |
|
| Fixed |
|
| 4.65 |
% |
| Yes |
|
| Annual interest On July 10 In the years 2009-2018 |
|
| 187.5 |
|
| 190.5 |
|
| 4.1 |
|
| 182.4 |
|
| | |
Series 4 | | |
| Jul/Aug-2007 |
|
| Maalot |
|
| AA- |
|
| 235,557,000 |
|
| Fixed |
|
| 7.45 |
% |
| Yes |
|
| Semi-annual interest On January 10 and July 10 In the years 2009-2015 |
|
| 235.6 |
|
| 235.6 |
|
| 8.1 |
|
| 249.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. |
Series
1 Linked to the Consumer Price Index (CPI). Principal repayment
ends in June 2009. |
|
2. |
Series
2 Linked to the Consumer Price Index (CPI). Principal repaid in 7
annual installments, between Dec-21-2007 and Dec-21-2013. |
|
3. |
Series
3 Linked to the Consumer Price Index (CPI). Principal repaid in 9
annual installments, between July 2010 and July 2018. |
|
4. |
Principal
repaid in 6 annual installments, between July 2010 and July 2015. |
|
5. |
The
trustee of the debentures (Series 2) is Bank Leumi Le-Israel Trust
Corporation Ltd. The responsible contact person on behalf of Bank Leumi
Le-Israel Trust Corporation Ltd. is Ms. Idit Teuzer (telephone:
03-5170777). |
|
6. |
The
trustee of the public debentures (Series 3, 4) is Hermetic Trust Corporation
(1975) Ltd. The responsible contact people on behalf of Hermetic Trust
Corporation (1975) Ltd. are Mr. Dan Avnon and /or Ms. Merav Ofer-Oren
(telephone: -3-5272272). |
|
7. |
As
at the date of the report, the Company has met all of the terms and
undertakings of the trust notes and there exist no terms that constitute
just cause for demanding the immediate repayment of the debentures. |
17
F. |
Exposure
and Management of Market Risks |
|
The
Company conducts periodical discussions regarding market risks and exposure to exchange
rate and interest rate fluctuations, with the participation of the relevant factors, so
as to reach decisions in this matter. The individual responsible for the implementation
of market risk management policy at the Company is Israel Eldar, the Companys
Comptroller. |
|
2. |
Market
Risks to which the Company is Exposed |
|
Description
of Market Risks |
|
The
market risks reflect the risk of changes in the value of financial instruments affected
by changes in the interest rate, in the Consumer Price Index and in foreign currency
exchange rates. |
|
Approximately
half of the Companys sales are denominated in US dollars, whereas a significant
share of its expenses and liabilities are in NIS. The Company is therefore exposed to
fluctuations in the exchange rate of the NIS vis-à-vis the US dollar. This
exposure includes economic exposure (on account of surplus proceeds on payments in
foreign currency or linked thereto) and accounting exposure (on account of a surplus of
dollar-linked assets over foreign-currency-denominated liabilities). |
|
The
Company periodically reexamines the need for hedging on account of this exposure. True to
December 31, 2008, the Company entered into hedging transactions in the sum of 25 million
euro, in order to hedge the cash flows for the acquisition of fixed assets from equipment
vendors for Machine 8. |
|
Consumer
Price Index Risks |
|
The
Company is exposed to changes in the Consumer Price Index, pertaining to the debentures
issued by the Company, in the total sum of NIS 356.5 million. In early 2009, the Company
entered into hedging transactions for a period of one year, to protect itself against a
rise in the CPI, in the amount of NIS 250 million, pursuant to previous transactions that
were made in early 2008 and in August 2008 and terminated at the end of 2008. |
|
Most
of the Groups sales are made in Israel to a large number of customers and the
exposure to customer-related credit risks is consequently generally limited. The Group
regularly analyzes through credit committees that operate within the various
companies the quality of the customers, their credit limits and the relevant
collateral required, as the case may be. |
|
The
financial statements include provisions for doubtful debts, based on the existing risks
on the date of the statements. |
18
Sensitivity Analysis Tables
for Sensitive Instruments, According to Changes in Market Elements as at December 31,
2008:
Sensitivity to Interest Rates
|
Sensitive Instruments
|
Profit (loss) from changes
|
Fair value
As at
Dec-31-08
|
Profit (loss) from changes
|
|
Interest
rise
10%
|
Interest rise
5%
|
Interest
decrease
5%
|
Interest
decrease
10%
|
|
In NIS thousands
|
|
|
|
|
|
|
Series 1 Debentures |
|
|
| (16 |
) |
| (8 |
) |
| (7,537 |
) |
| 8 |
|
| 16 |
|
Series 2 Debentures | | |
| (1,866 |
) |
| (937 |
) |
| (155,637 |
) |
| 947 |
|
| 1,903 |
|
Series 3 Debentures | | |
| (3,979 |
) |
| (2,005 |
) |
| (195,959 |
) |
| 2,037 |
|
| 4,105 |
|
Series 4 Debentures | | |
| (3,956 |
) |
| (1,990 |
) |
| (269,078 |
) |
| 2,013 |
|
| 4,050 |
|
Other liabilities | | |
| (134 |
) |
| (57 |
) |
| (31,359 |
) |
| 68 |
|
| 136 |
|
Long-term loans and capital | | |
notes - granted | | |
| 212 |
|
| 106 |
|
| 49,355 |
|
| (106 |
) |
| (213 |
) |
The fair value of the loans is based
on a calculation of the present value of the cash flows, according to the
generally-accepted interest rate on loans with similar characteristics (4.5% in 2008).
Regarding the terms of the debentures and other liabilities See Note 8 to the
financial statements
Regarding long-term loans and capital notes granted See Note
4 to the financial statements
Sensitivity of -linked instruments to changes in the(euro)exchange rate
|
Sensitive Instruments
|
Profit (loss) from changes
|
Fair value as
at
Dec-31-08
|
Profit (loss) from changes
|
|
Rise in
10%
|
Rise in
5%
|
Decrease in
5%
|
Decrease in
10%
|
|
|
In NIS thousands
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
| 268 |
|
| 134 |
|
| 2,681 |
|
| (134 |
) |
| (268 |
) |
Designated deposits | | |
| 12,575 |
|
| 6,287 |
|
| 125,747 |
|
| (6,287 |
) |
| (12,575 |
) |
Other Accounts Receivable | | |
| 321 |
|
| 160 |
|
| 3,206 |
|
| (160 |
) |
| (321 |
) |
Supplier engagement | | |
transaction - Alstom | | |
| (92 |
) |
| (46 |
) |
| (922 |
) |
| 46 |
|
| 92 |
|
Other Accounts Payable | | |
| (2,397 |
) |
| (1,198 |
) |
| (23,969 |
) |
| 1,198 |
|
| 2,397 |
|
PUT options | | |
| - |
|
| - |
|
| (836 |
) |
| (2,088 |
) |
| (3,412 |
) |
NIS- forward transaction | | |
| 12,293 |
|
| 6,996 |
|
| 1,304 |
|
| (3,599 |
) |
| (8,896 |
) |
19
Sensitivity to the US Dollar Exchange Rate
|
Sensitive Instruments
|
Profit (loss) from changes
|
Fair value as
at
Dec-31-08
|
Profit (loss) from changes
|
|
Revaluation
of $
10%
|
Revaluation of
$
5%
|
Devaluation
of $
10%
|
Devaluation of
$
5%
|
|
In NIS thousands
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
| 233 |
|
| 116 |
|
| 2,327 |
|
| (116 |
) |
| (233 |
) |
Other Accounts Receivable | | |
| 1,472 |
|
| 736 |
|
| 14,722 |
|
| (736 |
) |
| (1,472 |
) |
Accounts Payable | | |
| (3,246 |
) |
| (1,623 |
) |
| (32,549 |
) |
| 1,623 |
|
| 3,246 |
|
Other accounts receivable reflect
primarily short-term customer debts.
Capital note See Note 4d to the financial
statements.
Accounts payable reflect primarily short-term liabilities to suppliers.
20
Sensitivity Analysis Tables
for Sensitive Instruments, According to Changes in Market Elements as at December 31,
2007:
Sensitivity to Interest Rates
|
Sensitive Instruments
|
Profit (loss) from changes
|
Fair value
As at
Dec-31-07
|
Profit (loss) from changes
|
|
Interest
rise
10%
|
Interest rise
5%
|
Interest
decrease
5%
|
Interest
decrease
10%
|
|
In NIS thousands
|
|
|
|
|
|
|
Series 1 Debentures |
|
|
| (54 |
) |
| (27 |
) |
| (14,336 |
) |
| 27 |
|
| 54 |
|
Series 2 Debentures | | |
| (2,370 |
) |
| (1,191 |
) |
| (191,537 |
) |
| 1,203 |
|
| 2,417 |
|
Other liabilities | | |
| (121 |
) |
| (60 |
) |
| (31,510 |
) |
| 61 |
|
| 122 |
|
Long-term loans and capital | | |
notes - granted | | |
| 186 |
|
| 93 |
|
| 48,644 |
|
| (188 |
) |
| (94 |
) |
The fair value of the loans is based
on a calculation of the present value of the cash flows, according to the
generally-accepted interest rate on loans with similar characteristics (4% in 2007).
Regarding the terms of the debentures and other liabilities See Note 8 to the
financial statements
Regarding long-term loans and capital notes granted See Note 4
to the financial statements
Sensitivity of -linked instruments to changes in the exchange rate
|
Sensitive Instruments
|
Profit (loss) from changes
|
Fair value as
at
Dec-31-07
|
Profit (loss) from changes
|
|
Rise in
10%
|
Rise in
5%
|
Decrease in
(euro)
5%
|
Decrease in
10%
|
|
|
In NIS thousands
|
|
|
|
|
|
|
NIS- forward transaction |
|
|
| (6,038 |
) |
| (4,028 |
) |
| (994 |
) |
| 3,741 |
|
| 8,439 |
|
See Note 12a to the financial
statements.
Sensitivity to the US Dollar Exchange Rate
|
Sensitive Instruments
|
Profit (loss) from changes
|
Fair value as
at
Dec-31-07
|
Profit (loss) from changes
|
|
Revaluation
of $
10%
|
Revaluation of
$
5%
|
Devaluation
of $
10%
|
Devaluation of
$
5%
|
|
In NIS thousands
|
|
|
|
|
|
|
Other Accounts Receivable |
|
|
| 1,272 |
|
| 636 |
|
| 12,720 |
|
| (636 |
) |
| (1,272 |
) |
Capital note | | |
| 242 |
|
| 121 |
|
| 2,421 |
|
| (121 |
) |
| (242 |
) |
Accounts Payable | | |
| (1,036 |
) |
| (518 |
) |
| (10,363 |
) |
| 518 |
|
| 1,036 |
|
Other accounts receivable reflect
primarily short-term customer debts.
Capital note See Note 4d to the financial
statements.
Accounts payable reflect primarily short-term liabilities to suppliers.
21
Linkage Base Report
Below are the balance sheet items,
according to linkage bases, as at December 31, 2008:
NIS millions
|
Unlinked
|
CPI-linked
|
In foreign
currency, or
linked thereto
(primarily US$)
|
-linked
|
Non-Monetary
Items
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
Cash and cash equivalents | | |
| 8.1 |
|
| |
|
| 2.3 |
|
| 2.7 |
|
| |
|
| 13.1 |
|
Short-term deposits and investments | | |
| 123.9 |
|
| |
|
| |
|
| 125.7 |
|
| |
|
| 249.6 |
|
Other Accounts Receivable | | |
| 396.0 |
|
| 0.9 |
|
| 15.8 |
|
| 3.2 |
|
| 3.9 |
|
| 419.8 |
|
Inventories | | |
| |
|
| |
|
| |
|
| |
|
| 168.8 |
|
| 168.8 |
|
Current tax assets | | |
| 6.3 |
|
| |
|
| |
|
| |
|
| |
|
| 6.3 |
|
Investments in Associated Companies | | |
| 53.0 |
|
| |
|
| |
|
| |
|
| 265.1 |
|
| 318.1 |
|
Deferred taxes on income | | |
| |
|
| |
|
| |
|
| |
|
| 29.8 |
|
| 29.8 |
|
Fixed assets, net | | |
| |
|
| |
|
| |
|
| |
|
| 767.6 |
|
| 767.6 |
|
Intangible Assets | | |
| |
|
| |
|
| |
|
| |
|
| 31.5 |
|
| 31.5 |
|
Other assets | | |
| |
|
| |
|
| |
|
| |
|
| 38.9 |
|
| 38.9 |
|
Assets on account of employee benefits | | |
| 0.6 |
|
| |
|
| |
|
| |
|
| |
|
| 0.6 |
|
| | |
Total Assets | | |
| 587.9 |
|
| 0.9 |
|
| 18.1 |
|
| 131.6 |
|
| 1,305.6 |
|
| 2,044.1 |
|
|
| |
| |
| |
| |
| |
| |
| | |
Liabilities | | |
Short-term credit from banks | | |
| 77.7 |
|
| |
|
| |
|
| |
|
| |
|
| 77.7 |
|
Other Accounts Payable | | |
| 240.3 |
|
| |
|
| 36.8 |
|
| 24.0 |
|
| |
|
| 301.1 |
|
Financial liability at fair value through the | | |
statement of income | | |
| |
|
| |
|
| 13.9 |
|
| |
|
| |
|
| 13.9 |
|
Deferred taxes on income | | |
|
|
|
|
|
|
|
|
|
|
|
|
| 76.6 |
|
| 76.6 |
|
Long-term loans, including current maturities | | |
| 124.0 |
|
| 35.2 |
|
| |
|
| |
|
| |
|
| 159.2 |
|
Notes (debentures) - including current | | |
maturities | | |
| 238.6 |
|
| 354.7 |
|
| |
|
| |
|
| |
|
| 593.3 |
|
Liabilities on account of employee benefits | | |
| 31.9 |
|
| |
|
| |
|
| |
|
| |
|
| 31.9 |
|
Other Liabilities | | |
| 32.8 |
|
| |
|
| |
|
| |
|
| |
|
| 32.8 |
|
Equity, funds and reserves | | |
| |
|
| |
|
| |
|
| |
|
| 757.6 |
|
| 757.6 |
|
Total liabilities and equity | | |
| 745.3 |
|
| 389.9 |
|
| 50.7 |
|
| 24.0 |
|
| 834.2 |
|
| 2,044.1 |
|
|
| |
| |
| |
| |
| |
| |
Surplus financial assets (liabilities) as at | | |
Dec-31-2008 | | |
| (157.4 |
) |
| (389.0 |
) |
| (12.6 |
) |
| 107.6 |
|
| 471.4 |
|
| |
|
*
As to hedging transactions associated with surplus CPI-linked liabilities, see Section
F(2), above.
22
Linkage Base Report
Below are the balance sheet items,
according to linkage bases, as at December 31, 2007:
NIS millions
|
Unlinked
|
CPI-linked
|
In foreign
currency, or
linked
thereto
(primarily
US$)
|
-linked
|
Non-Monetary
Items
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
Cash and cash equivalents | | |
| 2.6 |
|
| |
|
| 7.4 |
|
| 157.7 |
|
| |
|
| 167.7 |
|
| |
|
Other Accounts Receivable | | |
| 259.8 |
|
| 0.5 |
|
| 10.9 |
|
| 1.8 |
|
| |
|
| 273.0 |
|
| |
|
Inventories | | |
| |
|
| |
|
| |
|
| |
|
| 69.6 |
|
| 69.6 |
|
Investments in Associated Companies | | |
| 52.2 |
|
| |
|
| 2.4 |
|
| |
|
| 291.8 |
|
| 346.4 |
|
Deferred taxes on income | | |
| |
|
| |
|
| |
|
| |
|
| 20.6 |
|
| 20.6 |
|
Fixed assets, net | | |
| |
|
| |
|
| |
|
| |
|
| 405.2 |
|
| 405.2 |
|
Intangible Assets | | |
| |
|
| |
|
| |
|
| |
|
| 1.6 |
|
| 1.6 |
|
Other assets | | |
| |
|
| |
|
| |
|
| |
|
| 34.9 |
|
| 34.9 |
|
Assets on account of employee benefits | | |
| 0.9 |
|
| |
|
| |
|
| |
|
| |
|
| 0.9 |
|
Total Assets | | |
| 315.5 |
|
| 0.5 |
|
| 20.7 |
|
| 159.5 |
|
| 823.7 |
|
| 1,319.9 |
|
|
| |
| |
| |
| |
| |
| |
| | |
Liabilities | | |
Credit from Banks | | |
| 143.0 |
|
| |
|
| |
|
| |
|
| |
|
| 143.0 |
|
Other Accounts Payable | | |
| 164.7 |
|
| |
|
| 11.7 |
|
| 2.6 |
|
| |
|
| 179.0 |
|
Financial liability at fair value through the statement of income | | |
| |
|
| |
|
| 3.9 |
|
| |
|
| |
|
| 3.9 |
|
Deferred taxes on income | | |
| |
|
| |
|
| |
|
| |
|
| 40.5 |
|
| 40.5 |
|
Long-Term Loans | | |
| 33.5 |
|
| |
|
| |
|
| |
|
| |
|
| 33.5 |
|
Notes (debentures) | | |
| |
|
| 195.5 |
|
| |
|
| |
|
| |
|
| 195.5 |
|
Liabilities on account of employee | | |
| 22.4 |
|
| |
|
| |
|
| |
|
| |
|
| 22.4 |
|
benefits | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Other liabilities - including current | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
maturities | | |
| 31.2 |
|
| |
|
| |
|
| |
|
| |
|
| 31.2 |
|
Current tax liabilities | | |
| |
|
| |
|
| |
|
| |
|
| 0.9 |
|
| 0.9 |
|
Equity, funds and reserves | | |
| |
|
| |
|
| |
|
| |
|
| 670.0 |
|
| 670.0 |
|
Total liabilities and equity | | |
| 394.8 |
|
| 195.5 |
|
| 15.6 |
|
| 2.6 |
|
| 711.4 |
|
| 1,319.9 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
Surplus financial assets (liabilities) | | |
as at Dec-31-2007 | | |
| (79.3 |
) |
| (195.0 |
) |
| (4.9 |
) |
| 156.9 |
|
| 112.3 |
|
| |
|
23
|
Hadera
Paper is exposed to various risks associated with operations in Turkey, where
Hogla-Kimberly is active through its subsidiary, KCTR. These risks originate from
concerns regarding economic and political instability, high devaluation and elevated
inflation rates that have characterized the Turkish economy in the past and that may
recur and harm the KCTR operations. |
G. |
Forward-Looking
Statements |
|
This
report contains various forecasts that constitute forward-looking statements, as defined
in the Securities Law, based upon the Board of Directors present expectations and
estimates regarding the operations of the Group and its business environment. The Company
does not guarantee that the future results of operations will coincide with the
forward-looking statements and these may in fact differ considerably from the present
forecasts as a result of factors that may change in the future, such as changes in costs
and market conditions, failure to achieve projected goals, failure to achieve anticipated
efficiencies and other factors which lie outside the control of the Company. The Company
undertakes no obligation to publicly update such forward-looking statements, regardless
of whether these updates originate from new information, future events or any other
reason. |
H. |
Donations
and Contributions |
|
The
Hadera Paper Group, within the framework of its business and social commitment, invests
efforts and funds in community assistance and support, while focusing on providing help
to the weaker echelons of Israeli society and primarily teenagers. |
|
As
part of this policy, the Company makes contributions to various institutions active in
the said areas. The Groups contributions and activity through the Shenkar Foundation amounted to NIS 456 thousand in 2008.
In
parallel, through its employees, the Company also participates in volunteer activity in
the community, for promoting these same objectives. |
|
This
year the company focused on donations to youth clubs, community centers operating in the
afternoons with the intention of fortifying and enriching teenagers while granting
them a proper opportunity. During this year assistance was provided to two projects: children's club in the Eastern Worker neighborhood of Hadera and youth studying centers in Hadera. |
|
Moreover
the company is active in the granting of student scholarships, through the Shenkar
Foundation, that was established by the company together with its Austrian strategic
partner in Mondi Hadera. The
total contributions of the company through the Shenkar Foundation amounted to NIS 90
thousand. |
24
I. |
Members of the Board of
Directors Possessing Financial Skills and Qualifications |
|
The
minimum number of company directors possessing accounting and financial qualifications
and skills was determined to be two for the company, in consideration of the nature of
the accounting and financial issues that are raised in the preparation of the companys
financial statements, in view of the companys areas of operation and in
consideration of the composition of the board of directors as a whole, that includes
individuals possessing business, management and professional experience that enables them
to deal effectively with the tasks of managing the company, including reporting duties. |
|
The
members of the companys board of directors who possess accounting and financial
qualifications and skills are: |
|
Avi Yehezkel
|
Holds a degree in Economics from Tel Aviv University and a Mastersdegree in
Law from Bar-Ilan University. External director at Bank Yahav. Served as a Knesset member
between 1992-2003, also served as Chairman of the Economics Committee, Chairman of the
Defense Budget Committee, Chairman of the Capital Market Sub-Committee, Chairman of the
Banking Sub-Committee and member of the Finance Committee. |
|
Ari Bronshtein
|
Holds a Bachelor's degree in Management and Economics from Tel Aviv
University and a Masters degree in Management, Accounting and Finance from
Tel Aviv University. Serves as VP of Discount Investments Ltd.; Director at Elron
Electronic Industries Ltd. Former VP of Economics and Business Development and Director
of Finance and Investments at Bezeq The Israel Telecommunications Company Ltd. |
|
Itzhak Manor |
Holds an MBA from Hebrew University. Serves as director at various publicly-traded
and privately-held companies within the IDB Group; Chairman of companies in the
David Lubinsky Group Ltd.; member of the Balance Sheet Committee at Israel Union
Bank Ltd. |
|
Amos Mar-Haim |
Holds a BA in economics and an MBA from Hebrew University. Formerly served
and currently serves as Chairman or Deputy Chairman at publicly-traded or privately-held
companies. Member of the Israeli Accounting Standards Board. |
|
Amir Makov |
Holds a Law degree from Hebrew University and an Engineering
degree from the Haifa Technion.Serves as Chairman of the Israel Petroleum and Gas Institute, served as CEO of
Haifa Chemicals Ltd., Sonol Israel Ltd.. Served and serves as a director of
various publicly-traded and privately-held companies including Leumi Card Ltd.,
Dead Sea Works Ltd., Dead Sea Bromine Ltd. and more. |
25
J. |
The
Companys Internal Auditor |
|
a. |
Auditors
Name: Eli Greenbaum In the position since: July 16, 2006 Credentials: CPA |
|
b. |
The
Auditor is employed by the Company. |
|
c. |
The
Companys Audit Committee has approved the appointment of the Auditor
on March 7, 2006. The Auditor is a CPA by training and has dealt in
Treasury positions at the Company for 20 years and consequently possesses
the necessary skills for the job. |
|
d. |
The
Internal Auditor is supervised by the General Manager. |
|
e. |
The
work plan for internal auditing is annual. The work plan is determined on
the basis of: A five-year plan, covering numerous issues that were
approved by the Audit Committee according to the auditing needs of the
Company and covers issues that the Internal Auditor believes warrant his
examination and consideration in the course of the current year. The work
plan is determined by the Internal Auditor and the Audit Committee. The
work plan is approved by the Audit Committee. The judgment of the Internal
Auditor in terms of deviations from the audit program, subject to the
approval of the Companys Audit Committee. The Internal Auditor
participated in a meeting of the Audit Committee that discussed and
approved an engagement in the form of a rental agreement with Gav-Yam,
Bayside Land Corporation Ltd., a publicly-traded company indirectly
controlled by the Companys controlling shareholder. For further
details, see the Companys reports dated September 25, 2008. |
|
f. |
The
Internal Auditing program includes auditing topics in corporations that
constitute significant holdings of the Company. |
|
g. |
Scope
of employment: Full-time job as Auditor, plus an assistant. The auditing
hours number a total of 370 monthly hours, totaling 4,100 hours annually,
divided equally between the corporation and its investee companies: |
Audited body
|
Estimated hours of audit annually
|
|
|
|
|
|
|
|
|
Internal auditing at the Company |
370 hours |
Auditing at investee companies |
3,730 hours |
Total hours |
4,100 hours |
|
The
internal auditor conducts his audit in accordance with acceptable professional standards
for internal audit in Israel and overseas, and according to the Companys Board of
Directors, based on the assessment of the Companys Audit Committee, the internal
auditor complies with the requirements set forth in those standards. |
|
h. |
The
Company declares that it has granted the Internal Auditor free, constant and
direct access to all the information at the disposal of the Company and
the investee companies. |
26
|
i. |
Audit
reports were submitted in writing and discussed on the following dates: |
Submitted
|
Discussed
|
|
|
|
|
|
|
|
|
Mar-6-08 |
Mar-10-08 |
May-6-08 |
May-11-08 |
Aug-5-08 |
Aug-7-08 |
Nov-6-08 |
Nov-10-08 |
|
j. |
The
scope of employment of the Internal Auditor is determined according to a
cycle that renders it possible to audit all the significant topics at the
Company, once every few years.
|
|
This
scope of activity, the nature, the continuity of operation and the work
plan of the Internal Auditor are reasonable according to the
estimation of the Companys Audit Committee, while rendering it
possible to realize the Internal Audit objectives of the organization. |
|
k. |
The
Auditor is employed by the Company. The Board of Directors believes that the
compensation received by the Internal Auditor does not influence his
professional judgment. |
K. |
Senior
Employee Compensation |
|
In
determining the compensation and bonuses of senior employees, the directors and
Compensation Committee took into consideration the position and standing of each
executive and his contribution to the operations and business of the Company. Labor wage
expenses and benefits granted to senior executives and position holders are reasonable
and reflect the companys accomplishments, based on its results as compared with
2007 and as compared with market standards. |
|
The
implementation of IFRS in the financial statements had a negative impact on the financial
statements for 2008, see Section C(3)3, above. |
|
In
January 2008, the board of directors decided to adopt a senior employee stock option
plan. In the first quarter of 2008, a sum of 250,500 stock options were allocated to
senior employees at associated and consolidated companies, and on January 8, 2009 a
sum of 34,000 options were granted, out of the 35,250 allocated to the trustee, for
future granting to the Group. Total general expenses for this program are estimated at
NIS 15.5 million. The plans impact on the consolidated financial statements is
estimated at NIS 13.8 million. |
|
As
part of the alignment with the global economic crisis, the Companys management
adopted a policy of mutually-agreed pay cuts for executives. In this framework, the
senior executives and position holders mutually consent to waiving between 8% and 10% of
their wages in 2009. |
27
|
In
2008, fees paid to the Companys auditing CPA, inclusive of audit services including
audits of internal auditing for financial reporting amounted to approximately $326
thousand, compared to $312 thousand in 2007. The hours invested by the auditing CPAs on
account of these services amounted to 7,190 hours and 7,800 hours in the years 2008 and
2007, respectively. |
|
Below
are details of the total fee payable to the auditing CPA of the Company and its
subsidiaries in the reported year and in the preceding year: |
|
2008
|
2007
|
|
Thousands of
$
|
Hours
|
Thousands of
$
|
Hours
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate auditing and auditing of tax reports for |
|
|
| |
|
| |
|
| |
|
| |
|
the company (including shelf prospectus in 2008). | | |
| 206,000 |
|
| 5,140 |
|
| 150,000 |
|
| 4,510 |
|
Auditing of internal auditors | | |
| 73,000 |
|
| 1,200 |
|
| 120,000 |
|
| 2,400 |
|
IFRS Auditing services | | |
| - |
|
| - |
|
| 22,000 |
|
| 440 |
|
Miscellaneous | | |
| 46,800 |
|
| 850 |
|
| 20,000 |
|
| 450 |
|
Total | | |
| 325,800 |
|
| 7,190 |
|
| 312,000 |
|
| 7,800 |
|
|
The
Company chose not to adopt in its Article of Association provision with regard to the
percentage of external board members. |
N. |
Negligibility
procedure |
|
1. |
On
August 5, 2008, the amendment to Securities Regulations (Periodic and
Immediate Reports), 1970 (hereinafter: the Periodic Report regulations)
became effective. In conjunction with this amendment, reporting
requirements applicable to public companies in respect of transactions
with a controlling shareholder or transactions with another person in
which a controlling shareholder has a personal interest (hereinafter:
transactions with a controlling shareholder) were expanded to
also include transactions which are not exceptional transactions, as
defined by the Companies Law, except for transactions classified as
negligible in the most recent financial statements. |
|
On
March 8, 2009, the Companys Board of Directors resolved to adopt rules and
guidelines for categorizing a transaction of the Company or of one of its consolidated
subsidiaries with a controlling shareholder (controlling shareholder
transaction) as a negligible transaction as set forth in Regulation
64(3)(d)(1) of the Securities Regulations (Preparation of Annual Financial Statements),
1993. These rules and guidelines shall also serve to examine the extent of disclosure in
the periodical reports and the prospectus ( including shelf prospectus reports) regarding
a transaction of the Company, Corporation under its control and any affiliated company,
with a controlling shareholder, or in whose approval a controlling shareholder possesses
a personal interest, as set forth in Regulation 22 of the Periodic Report Regulations and
in Regulation 54 of the Securities Regulations ( Prospectus Details and Prospectus Draft
Form and Shape) 1969, as well as for the purpose of submitting an immediate
report regarding a said transaction of the company, as stipulated in Regulation 37(a)(6)
of the Periodic Report Regulations. |
28
|
2. |
The
Company and its consolidated and affiliated companies, in the normal course
of their business, execute or may execute transactions with interested
parties, as well as undertakings to conduct transactions with interested
parties in relation to the purchase or sale of products or services,
including transactions of the following types and having the following
attributes: Transactions related to money management deposited with
Provident Funds and Continuing Education Funds, telecommunication
services, leasing and rental of real estate assets, financial services
(including portfolio management and investment consulting), banking
services, economic consulting services, tourism services, advertising and
marketing campaigns, legal services, purchasing, purchase and rental of
vehicles, vehicle garage services, waste treatment, archive services,
dispatch services, administrative services and engagements with equipment
vendors for regular use, product sales, rental of heavy mechanical
equipment, transportation services and earthwork, purchasing gift coupons
and various types of insurance. |
|
3. |
In
the absence of any special qualitative considerations arising from the
circumstances, a transaction with an interested party shall be deemed
negligible if it is not an exceptional transaction and if the applicable
benchmark calculated for (one or more) transactions is less than one
percent (1%). |
|
Any
interested party transaction classified as a negligible transaction, one or more of the
criterions relevant to the specific transaction will be calculated based on the recent
annual consolidated financial statements of the Company: (a) Sales ratio total
sales covered by the interested party transaction divided by total annual sales; (b)
Sales cost ratio cost of the interested party transaction divided by the total
cost of annual sales; (c) Earnings ratio the actual or projected profit or losses
attributed to the interested party transaction divided by the average annual profit or
loss in the last three years, calculated on the basis of the last 12 quarters for which
reviewed or audited financial statements were published; (d) Assets ratio the
amount of assets covered by the interested party transaction divided by total assets; (e)
Liabilities ratio the liability covered by the interested party transaction
divided by total liabilities; |
|
Thus,
for example, the applicable benchmark for a transaction involving the purchase of goods
or services would typically be the ratio of cost of sales. |
|
In
cases where, at the Companys discretion, all the aforementioned quantitative
benchmarks are not applicable for evaluation of the negligibility of the transaction with
an interested party, the transaction shall be deemed negligible, in accordance with
another applicable benchmark to be determined by the Company, provided that the
applicable benchmark calculated for said transaction is less than one percent (1%). |
|
4. |
The
negligibility of the transaction should also be reviewed in qualitative
aspects; thus, for example, a transaction with an interested party shall
not usually be deemed negligible if it is conceived as a significant event
by the Companys management, and if it serves as a basis for making
managerial decisions, or if in the course of the transaction with an
interested party, the latter is expected to receive benefits which are
important to disclose publicly. |
29
|
5. |
The
negligibility of a transaction will be examined on an annual basis for the
purpose of reporting within the framework of a periodical report,
financial statements and a prospectus (including shelf prospectus
reports), while consolidating all of the transactions of the same type
with the relevant controlling shareholder, or with corporations controlled
by the same shareholder. For the purposes of immediate reporting, the
negligibility of the transaction will be examined as a single transaction
provided that separate transactions, that are in fact interconnected, and
that are in fact part of the same engagement (for example: conducting
negotiations regarding the entirety of the transactions), shall be
examined as a single transaction. It is hereby clarified that separate
transactions made frequently and repeatedly every period, that are not
interconnected (such as the purchase of inventories every period from a
controlling shareholder, on the basis of ad hoc orders, and where there
exists no undertaking for the said purchase), shall be examined on an
annual basis for the purpose of reporting as part of a periodical report,
financial statements and a prospectus (including shelf prospectus reports)
and on the basis of the specific transaction for the purposes of immediate
reporting. In general, the Company shall assume that all of the
transactions classifiers negligible by its investee companies, are indeed
negligible at the Company level as well. |
O. |
Detailed
processes undertaken by the Companys supreme supervisors, prior to
the approval of the financial statements |
|
The
Companys Board of Directors has appointed the Companys Audit Committee to
serve as a Balance Sheet Committee and to supervise the completeness of the financial
statements and the work of the CPAs and to offer recommendations regarding the approval
of the financial statements and the discussion thereof prior to said approval. The
Committee consists of three directors, of which two possess accounting and financial
expertise. The meetings of the Balance Sheet Committee, as well as the board meetings
during which the financial statements are discussed and approved, are attended by the
companys auditing CPAs, who are instructed to present the principal findings if
there are any that surfaced during the audit or review process, as well as by the
Internal Auditor. |
|
The
Committee conducts its examination via detailed presentations from company executives and
others, including: CEO Avi Brener, and CFO Shaul Glicksberg. The material
issues in the financial reports, including any extraordinary transactions if any,
the material assessments and critical estimates implemented in the financial statements,
the reasonability of the data, the financial policy implemented and the changes therein,
as well as the implementation of proper disclosure in the financial statements and the
accompanying information. The Committee examines various aspects of risk assessment and
control, as reflected in the financial statements (such as reporting of financial risks),
as well as those affecting the reliability of the financial statements. In case
necessary, the Committee demands to receive comprehensive reviews of matters with
especially relevant impact, such as the implementation of international standards. |
30
|
The
approval of the financial statements involves several meetings, as necessary: The first
is held by the Audit Committee to discuss the material reporting issues in depth and at
great length, whereas the second is held by the Board of Directors to discuss the actual
results. Both meetings are held in proximity to the approval date of the financial
statements. As to the supreme supervision regarding the impact of the transition to
international financial reporting standards, the Committee held a detailed discussion
regarding the said disclosure and the accounting policy implemented in its respect. |
By: /s/ Zvika Livnat
Zvika Livnat Chairman of the Board of Directors |
By: /s/ Avi Brener
Avi Brener General Manager |
31
Exhibit 3
HADERA PAPER LTD
CONSOLIDATED FINANCIAL
STATEMENTS
AS OF DECEMBER 31, 2008
HADERA PAPER LTD
CONSOLIDATED
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008
TABLE OF CONTENTS
HADERA PAPER LTD
|
|
|
|
|
Brightman Almagor Zohar
Haifa Office
5 Ma'aleh Hashichrur Street
Haifa, 33284
P.O.B. 5648, Haifa 31055
Israel
|
|
|
|
|
|
Tel: +972 (4) 860 7373
Fax: +972 (4) 867 2528
Info-haifa@deloitte.co.il
www.deloitte.com
|
Report of Independent
Registered Public Accounting Firm
To the shareholders of
Hadera Paper ltd.
We have audited the accompanying
consolidated balance sheets of Hadera Paper Ltd. (the Company) as of
December 31, 2008 and 2007, and the related consolidated statements of operations,
consolidated statement of recognized income and expenses and consolidated cash flows of
the Company for each of the two years in the period ended December 31, 2008. These
financial statements are the responsibility of the Companys board of directors and
management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We did not audit the financial statements of certain subsidiaries, whose assets constitute
approximately 20% of total consolidated assets as of December 31, 2008, and whose revenues
constitute approximately 25% of total consolidated revenues for the year ended December
31, 2008.
Likewise we did not audit the
financial statements of certain associated companies, the Companys interest in which
as reflected in the balance sheets as of December 31, 2007 is 45,933 Thousands NIS, and
the Companys share in their profits or losses is a net amount of 1,440 and 7,627
Thousands NIS, for the years ended December 31, 2008 and 2007 respectively. The financial
statements of those companies were audited by other Independent registered Public
Accounting Firms whose reports have been furnished to us, and our opinion, insofar as it
relates to amounts included for those companies, is based solely on the reports of the
other independent auditors.
We conducted our audits in accordance
with auditing standards generally accepted in Israel including those prescribed by the
Israeli Auditors (Mode of Performance) Regulations, 1973 and the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates
made by the Companys board of directors and management, as well as evaluating the
overall financial statement presentation. We believe that our audits and the reports of
the other independent auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit
and the reports of other independent auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of the
Company and its subsidiaries as of December 31, 2008 and 2007, and the results of
operations, changes in shareholders equity and cash flows of the Company on
consolidated basis, for each of the two years in the period ended December 31, 2008, in
conformity with international financial reporting standards and in accordance with the
Israeli Securities Regulations (Preparation of Annual Financial Statements), 1993.
Brightman Almagor &
Co.
Certified Public
Accountants
A Member Firm of Deloitte
Touche Tohmatsu
Tel-Aviv, Israel
March
11, 2009
F - 2
HADERA PAPER LTD
CONSOLIDATED BALANCE SHEETS
|
|
December 31
|
|
Note
|
2 0 0 8
|
2 0 0 7
|
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
| |
|
| |
|
| |
|
Cash and cash equivalents | | |
| 2e |
|
| 13,128 |
|
| 167,745 |
|
Designated deposits | | |
| 2e |
|
| 249,599 |
|
| - |
|
Accounts receivable: | | |
| 13a |
|
| |
|
| |
|
Trade receivables | | |
| |
|
| 318,926 |
|
| 178,553 |
|
Other receivables | | |
| |
|
| 100,888 |
|
| 94,415 |
|
Current tax assets | | |
| |
|
| 6,271 |
|
| - |
|
Inventories | | |
| 13b |
|
| 168,755 |
|
| 69,607 |
|
|
|
| |
| |
| | |
| |
|
| 857,567 |
|
| 510,320 |
|
|
|
| |
| |
Non-Current Assets | | |
Fixed assets | | |
| 5 |
|
| 767,542 |
|
| 405,231 |
|
Investments in associated companies | | |
| 4 |
|
| 318,101 |
|
| 346,403 |
|
Deferred tax assets | | |
| 11 |
|
| 29,848 |
|
| 20,622 |
|
Deferred lease expenses | | |
| 6 |
|
| 36,344 |
|
| 34,900 |
|
Other intangible assets | | |
| 7 |
|
| 31,519 |
|
| 1,578 |
|
Other assets | | |
| |
|
| 2,549 |
|
| - |
|
Employee benefit assets | | |
| 9 |
|
| 624 |
|
| 861 |
|
|
|
| |
| |
| | |
| |
|
| 1,186,527 |
|
| 809,595 |
|
|
|
| |
| |
| | |
| |
|
| 2,044,094 |
|
| 1,319,915 |
|
|
|
| |
| |
Current Liabilities | | |
Credit from banks | | |
| 8b, 13c |
|
| 77,655 |
|
| 143,015 |
|
Current maturities of long-term notes and long term loans | | |
| 8a, b |
|
| 76,469 |
|
| 42,775 |
|
Trade payables | | |
| 13d |
|
| 195,020 |
|
| 108,409 |
|
Other payables and accrued expenses | | |
| 13d |
|
| 106,062 |
|
| 70,585 |
|
Other financial liabilities | | |
| 8c |
|
| 32,770 |
|
| - |
|
Financial liabilities at fair value through profit and loss | | |
| 2p(2) |
|
| 13,904 |
|
| 3,901 |
|
Current tax liabilities | | |
| |
|
| - |
|
| 908 |
|
|
|
| |
| |
| | |
| |
|
| 501,880 |
|
| 369,593 |
|
|
|
| |
| |
Non-Current Liabilities | | |
Loans from banks and others | | |
| 8b |
|
| 121,910 |
|
| 28,127 |
|
Notes | | |
| 8a |
|
| 554,124 |
|
| 158,134 |
|
Other financial liabilities | | |
| 8c |
|
| - |
|
| 31,210 |
|
Deferred tax liabilities | | |
| 11 |
|
| 76,641 |
|
| 40,515 |
|
Employee benefit liabilities | | |
| 9 |
|
| 31,910 |
|
| 22,365 |
|
|
|
| |
| |
| | |
|
|
|
| 784,585 |
|
| 280,351 |
|
|
|
| |
| |
Capital and reserves | | |
| 10 |
|
| |
|
| |
|
Issued capital | | |
| |
|
| 125,267 |
|
| 125,267 |
|
Reserves | | |
| |
|
| 299,949 |
|
| 308,267 |
|
Retained earnings | | |
| |
|
| 306,097 |
|
| 236,437 |
|
|
|
| |
| |
Capital and reserves attributed to shareholders | | |
| |
|
| 731,313 |
|
| 669,971 |
|
Minority Interests | | |
| |
|
| 26,316 |
|
| - |
|
Total capital and reserves | | |
| |
|
| 757,629 |
|
| 669,971 |
|
|
|
| |
| |
| | |
| |
|
| 2,044,094 |
|
| 1,319,915 |
|
|
|
| |
| |
Z. Livnat Chairman of the Board of Directors |
A. Brener Chief Executive Officer |
S. Gliksberg Chief Financial and Business Development Officer |
Approval date of the financial
statements: March 11, 2009.
The accompanying notes are an
integral part of the financial statements
F - 3
HADERA PAPER LTD
CONSOLIDATED INCOME
STATEMENTS
|
|
Year ended December 31
|
|
Note
|
2 0 0 8
|
2 0 0 7
|
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
Revenue |
|
|
| 13e |
|
| 673,484 |
|
| 583,650 |
|
Cost of sales | | |
| 13f |
|
| 542,387 |
|
| 440,739 |
|
|
|
| |
| |
| | |
Gross profit | | |
| |
|
| 131,097 |
|
| 142,911 |
|
|
|
| |
| |
| | |
| 13g |
|
| |
|
| |
|
Selling, marketing, general and administrative expenses | | |
Selling and marketing expenses | | |
| |
|
| 45,674 |
|
| 31,344 |
|
| | |
General and administrative expenses | | |
| |
|
| 54,970 |
|
| 35,991 |
|
| | |
Other (income) expenses, net | | |
| 13k |
|
| (4,898 |
) |
| 4,467 |
|
|
|
| |
| |
| | |
Total expenses | | |
| |
|
| 95,746 |
|
| 71,802 |
|
|
|
| |
| |
| | |
Profit from ordinary operations | | |
| |
|
| 35,351 |
|
| 71,109 |
|
|
|
| |
| |
| | |
Finance income | | |
| |
|
| 12,069 |
|
| 10,648 |
|
Finance expenses | | |
| |
|
| 27,112 |
|
| 32,817 |
|
|
|
| |
| |
| | |
Finance expenses, net | | |
| 13j |
|
| 15,043 |
|
| 22,169 |
|
|
|
| |
| |
Profit after financial expenses | | |
| |
|
| 20,308 |
|
| 48,940 |
|
| | |
Share in profit of associated companies, net | | |
| 4 |
|
| 51,315 |
|
| 856 |
|
|
|
| |
| |
Profit before taxes on income | | |
| |
|
| 71,623 |
|
| 49,796 |
|
| | |
Taxes on income | | |
| 11 |
|
| 3,663 |
|
| 18,261 |
|
|
|
| |
| |
| | |
Profit for the year | | |
| |
|
| 67,960 |
|
| 31,535 |
|
| | |
Attributed to: | | |
Company shareholders | | |
| |
|
| 69,710 |
|
| 31,535 |
|
Minority interests | | |
| |
|
| (1,750 |
) |
| - |
|
| | |
| | |
| |
|
| 67,960 |
|
| 31,535 |
|
|
|
| |
| |
|
NIS
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning for regular share of NIS 0.01 par value (see note 14): |
|
|
| |
|
| |
|
Primary attributed to Company shareholders | | |
| 13.77 |
|
| 7.63 |
|
|
| |
| |
| | |
Fully diluted attributed to company shareholders | | |
| 13.77 |
|
| 7.62 |
|
|
| |
| |
| | |
Number of share used to compute the primary earnings per share | | |
| 5,060,774 |
|
| 4,132,728 |
|
|
| |
| |
| | |
Number of share used to compute the fully diluted earnings per share | | |
| 5,060,774 |
|
| 4,139,533 |
|
|
| |
| |
The accompanying notes are an
integral part of the financial statements
F - 4
HADERA PAPER LTD
CONSOLIDATED STATEMENT
OF RECOGNIZED INCOME AND EXPENSES
|
|
Year ended
December 31
|
|
Note
|
2 0 0 8
|
2 0 0 7
|
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
Exchange differences arising on translation of foreign operations |
|
|
| 10 |
|
| (25,996 |
) |
| 3,810 |
|
Profit (loss) on cash flow hedges, net | | |
| 10 |
|
| (5,564 |
) |
| (652 |
) |
Actuarial profit (loss) and defined benefit plans, net | | |
| 10 |
|
| (1,808 |
) |
| - |
|
Reevaluation from step acquisition | | |
| 10 |
|
| 17,288 |
|
| - |
|
|
|
| |
| |
Net income (loss) recognized directly in equity | | |
| |
|
| (16,080 |
) |
| 3,158 |
|
|
|
| |
| |
Transfer to profit or loss from equity on cash flow hedges, net | | |
| 10 |
|
| 1,467 |
|
| 17 |
|
Profit for the year | | |
|
|
|
| 67,960 |
|
| 31,535 |
|
|
|
| |
| |
Total recognized income and expense for the period | | |
| |
|
| 53,347 |
|
| 34,710 |
|
|
|
| |
| |
| | |
Attributed to: | | |
Company shareholders | | |
| |
|
| 55,115 |
|
| 34,710 |
|
Minority interests | | |
| |
|
| (1,768 |
) |
| - |
|
|
|
| |
| |
| | |
| |
|
| 53,347 |
|
| 34,710 |
|
|
|
| |
| |
The accompanying notes are an
integral part of the financial statements
F - 5
HADERA PAPER LTD
CONSOLIDATED CASH
FLOWS STATEMENTS
|
Year ended
December 31
|
|
2 0 0 8
|
2 0 0 7
|
|
NIS in thousands
|
|
|
|
|
|
|
Cash flows - operating activities |
|
|
| |
|
| |
|
Net Profit for the year | | |
| 67,960 |
|
| 31,535 |
|
Taxes on income recognized in profit and loss | | |
| 3,663 |
|
| 18,261 |
|
Finance expenses recognized in profit and loss | | |
| 15,043 |
|
| 22,169 |
|
Capital loss on sale of fixed assets | | |
| (284 |
) |
| 1,403 |
|
Capital loss on sale investment in associated company | | |
| - |
|
| 28 |
|
Share in profit of associated companies | | |
| (51,315 |
) |
| (856 |
) |
Depreciation and amortization | | |
| 59,784 |
|
| 36,138 |
|
Share based payments expense | | |
| 4,913 |
|
| - |
|
Gain from negative goodwill | | |
| (14,664 |
) |
| - |
|
|
| |
| |
| | |
| 85,100 |
|
| 108,678 |
|
|
| |
| |
| | |
Changes in assets and liabilities: | | |
Decrease (Increase) in trade and other receivables | | |
| 66,805 |
|
| (5,416 |
) |
Increase in inventories | | |
| (19,868 |
) |
| (7,498 |
) |
Increase (Decrease) in trade and other payables | | |
| (15,804 |
) |
| 18,646 |
|
Increase in financial liabilities at fair value through profit and loss | | |
| 10,003 |
|
| 2,289 |
|
Increase (Decrease) in employee benefit liabilities | | |
| (4,182 |
) |
| 2,913 |
|
|
| |
| |
| | |
| 36,954 |
|
| 10,934 |
|
|
| |
| |
| | |
Tax Payments | | |
| (8,182 |
) |
| (27,755 |
) |
|
| |
| |
| | |
Net cash generated by operating activities | | |
| 113,872 |
|
| 91,857 |
|
|
| |
| |
The accompanying notes are an
integral part of the financial statements
F - 6
HADERA PAPER LTD
CONSOLIDATED CASH
FLOWS STATEMENTS
|
Year ended
December 31
|
|
2 0 0 8
|
2 0 0 7
|
|
NIS in thousands
|
|
|
|
|
|
|
Cash flows - investing activities |
|
|
| |
|
| |
|
Acquisition of fixed assets | | |
| (230,053 |
) |
| (83,363 |
) |
Acquisition of subsidiaries | | |
| (70,567 |
) |
| - |
|
Proceeds from sales of fixed assets | | |
| 825 |
|
| 31,415 |
|
Investment in designated deposits | | |
| (255,244 |
) |
| - |
|
Interest received | | |
| 7,764 |
|
| 1,716 |
|
Prepaid leasing expenses | | |
| (2,622 |
) |
| (2,596 |
) |
Acquisition of other assets | | |
| (2,770 |
) |
| - |
|
Associated companies: | | |
Granting of loans and shares purchasing | | |
| (422 |
) |
| (318 |
) |
Collection of loans | | |
| 2,851 |
|
| 2,893 |
|
Proceeds from sale of investment of associated companies | | |
| - |
|
| 27,277 |
|
|
| |
| |
Net cash used in investing activities | | |
| (550,238 |
) |
| (22,976 |
) |
|
| |
| |
| | |
Cash flows - financing activities | | |
Proceeds from private share allocating | | |
| - |
|
| 211,645 |
|
Proceeds from issuing notes | | |
| 424,617 |
|
| - |
|
Short-term bank credit - net | | |
| (111,444 |
) |
| (59,988 |
) |
Borrowings received from banks | | |
| 39,448 |
|
| - |
|
Repayment of borrowings from banks | | |
| (11,801 |
) |
| (5,212 |
) |
Interest Paid | | |
| (20,360 |
) |
| (24,994 |
) |
Redemption of notes | | |
| (38,904 |
) |
| (37,167 |
) |
|
| |
| |
| | |
Net cash generated by financing activities | | |
| 281,556 |
|
| 84,284 |
|
|
| |
| |
| | |
Increase (decrease) in cash and cash equivalents | | |
| (154,810 |
) |
| 153,165 |
|
Cash and cash equivalents beginning of period | | |
| 167,745 |
|
| 13,621 |
|
Net foreign exchange difference | | |
| 193 |
|
| 959 |
|
|
| |
| |
Cash and cash equivalents end of period | | |
| 13,128 |
|
| 167,745 |
|
|
| |
| |
The accompanying notes are an
integral part of the financial statements
F - 7
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 |
|
DESCRIPTION OF BUSINESS AND GENERAL |
|
A. |
Description
Of Business |
|
Hadera
Paper Limited (former American Israeli Paper Mills Limited) and its subsidiaries
(hereafter the Company) are engaged in the production and sale of paper packaging,
in paper recycling activities and in the marketing of office supplies. The Company also
has holdings in associated companies that are engaged in the productions and sale of
paper and paper products including the handling of solid waste (the Company and its
investee companies hereafter the Group). Most of the Groups sales are
made on the local (Israeli) market. For segment information, see note 19. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company |
- |
Hadera Paper Limited. |
|
|
|
The Group |
- |
the Company and its Subsidiaries. |
|
|
|
Related Parties |
- |
as defined by IAS 24. |
|
|
|
Interested Parties |
- |
as defined in the Israeli Securities law and Regulations 1968. |
|
|
|
Controlling Shareholder |
- |
as defined in the Israeli Securities law and Regulations 1968. |
|
|
|
NIS |
- |
New Israeli Shekel. |
|
|
|
CPI |
- |
the Israeli consumer price index. |
|
|
|
Dollar |
- |
the U.S. dollar. |
|
|
|
Subsidiaries |
- |
companies in which the Company control, (as defined by IAS 27) directly or indirectly, and whose financial statements are fully consolidated with those of the Company. |
|
|
|
Associated Companies |
- |
companies in which the Group has significant
influence, and the Group investments in them,
directly or indirectly are included in the
financial statements using the equity method. |
|
|
|
Affiliated Companies |
- |
Subsidiaries and associated companies. |
F - 8
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
A. |
Applying
International Accounting Standards (IFRS) |
|
The
consolidated financial statements have been prepared using accounting policies consistent
with International Financial Reporting Standards (hereafter IFRS). |
|
The
principal accounting policies described in the following notes were applied in accordance
to the IFRS, in a manner consistent with previous reporting periods presented in these
consolidated financial statements and in accordance to the opening balance sheet. |
|
(2) |
First
term IFRS standards adoption |
|
According
to standard No. 29 Adoption of International Financial Reporting Standards IFRS
(standard No. 29), the Company applies International Financial Reporting
Standards and interpretations of the committee of the International Accounting Standard
Board (IASB) Starting January 1, 2008. |
|
In
compliance with the above mentioned, the consolidated financial statements, as of
December 31, 2008 and for the year then ended, have been prepared under accounting
policies consistent with International are the first consolidated Financial Reporting
Standards. |
|
In
these consolidated financial statements the Company applied IFRS 1 First
time Adoption of International Financial Reporting Standards (IFRS No. 1),
which determines instructions for first time implementation of IFRS. |
|
According
to IFRS No. 1 the effective date for implementing IFRS standards is commencing January 1,
2007. |
|
The
Company has applied in a retroactive manner the IFRS standards for all reporting periods
presented in the financial statements. The Company implemented the IFRS standards which
have been published as of the preparation date of the Financial Statements and expected
to be affective as of December 31, 2008. |
|
In
implementing the transitional rules as above, the Group elected to apply the following
concessions permitted by IFRS 1: |
|
The
rules of IFRS 2, which deals with share based payments, were not retroactively applied
with regard to capital instruments which had been granted prior to November 7, 2002 and
vested before the transition date. |
|
2. |
Translation
differences |
|
The
company elected to desist from retroactively applying the rules of IAS 21 for translation
differences accumulated as of January 1, 2007 with respect to foreign operations. As a
result, accumulated translation differences have not been included in the Opening Balance
Sheet. |
|
3. |
Deemed
cost for items of fixed assets |
|
IFRS
1 permits the measurement of items of fixed assets as of the transition date to the IFRS,
or at an earlier date, on the basis of a revaluation executed according to previously
applied generally accepted accounting principles, as deemed cost as of the date of the
revaluation, if, in general, the revaluation was comparable to cost or undepreciated cost
according to the IFRS, adjusted for changes such as changes in the index of prices. |
|
Through
December 31, 2007, the company adjusted its financial statements to changes in the rate
of exchange of the dollar, in accordance with the rules of Accounting Opinion 36 of the
Institute of Certified Public Accountants. |
F - 9
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
A. |
Applying
International Accounting Standards (IFRS) (Cont.) |
|
(2) |
First
term IFRS standards adoption (cont.) |
|
3. |
Deemed
cost for items of fixed assets (cont.) |
|
For
purposes of the transition to reporting pursuant to the IFRS, the company chose to apply
the concession in IFRS 1 as above and to measure the items of its fixed assets acquired
or constructed through December 31, 2003 at deemed cost as
of that date, based on their amounts, as adjusted to changes in the rate of exchange of
the dollar up to that date. |
|
Prior
to the adoption of the IFRS, the Group prepared its financial statements according to
accounting principles generally accepted in Israel. The latest annual financial
statements of the company according to accounting principles generally accepted in Israel
were prepared as of December 31, 2007 and for the year ended on that date. Comparative
figures for that period were restated in these financial statements pursuant to the IFRS. |
|
See
Note 21 with respect to the material differences between reporting pursuant to the IFRS
and reporting according to Israeli generally accepted accounting principles, as they are
relevant to the Group. |
|
B. |
The
financial statements are drawn up in conformity with accounting principles
generally accepted in Israel and in accordance with the Israeli Securities
(Preparation of Annual Financial Statements) Regulations, 1993, except for
regulations that do not allow for the implementation of IFRS standards, or
permissible regulations there under. |
|
Until
December 31, 2003, Israel was considered a country in which hyper-inflation conditions
exist. Therefore, non-monetary balances in the balance sheet were presented on the
historical nominal amount and were adjusted to changes in the exchange rate of the U.S.
dollar. As of December 31, 2003 when the economy ceases to be hyper-inflationary and the
Company no longer adjusted its financial statements to the U.S. dollar, the adjusted
amounts as of this date were used as the historical costs. The financial statements were
edited on the basis of the historical cost, except for: |
|
|
Derivative
financial instruments measured by fair value. |
|
|
Inventories
are stated at the lower of cost and net realizable value. |
|
|
Property,
plant and equipment and intangibles assets are presented at the lower of the cost less
accumulated amortizations and the recoverable amount. |
|
|
Liabilities
to employees as described in note 2W below. |
|
The
individual financial statements of each Group entity are presented in the currency of the
primary economic environment in which the entity operates (its functional currency). For
the purpose of the consolidated financial statements, the results and financial position
of each entity are expressed in the New Israeli Shekel (NIS), which is the
functional currency of the Company and the presentation currency for the consolidated
financial statements, see note 2Y (3) as follows with regard to the exchange rate and the
changes in them during the reported period. |
F - 10
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
D. |
Foreign
currencies (cont.) |
|
In
preparing the financial statements of the individual entities, transactions in currencies
other than the entitys functional currency (foreign currencies) are recorded at the
rates of exchange prevailing at the dates of the transactions. At each balance sheet
date, monetary items denominated in foreign currencies are retranslated at the rates
prevailing at the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated. |
|
Exchange
differences are recognised in profit or loss in the period which they were created,
except for exchange differences on transactions entered into in order to hedge certain
foreign currency risks (Hedge accounting details are set out in Note 2Q below) and for
rate differences of loans taken in different currency then NIS (see note 2M below). |
|
For
the purpose of presenting consolidated financial statements, the assets and liabilities
of the Groups foreign operations of affiliated company (mainly because of its
investment in a subsidiary company that presents its financial statements in
foreign currency) are expressed in NIS using exchange rates prevailing at the balance
sheet date. Income and expense items are translated at the average exchange rates for the
period, unless exchange rates fluctuated significantly during that period, in which case
the exchange rates at the dates of the transactions are used. |
|
Goodwill
and fair value adjustments arising on the acquisition of a foreign operation are treated
as assets and liabilities of the foreign operation and translated at the closing rate. |
|
E. |
Cash
and cash equivalents |
|
Cash
and cash equivalents include deposits that can be withdrawn anytime as well as short-term
bank deposits that are not restricted in use, with a maturity of three months. |
|
Deposits
that are restricted in use or whose maturity at the time of investment, is greater than
three months but less than one year are classified under designated deposits. |
|
F. |
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
results of subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the effective date of acquisition or up to the
effective date of disposal, as appropriate. |
|
Where
necessary, adjustments are made to the financial statements of subsidiaries to bring
their accounting policies into line with those used by other members of the Group. |
|
All
intra-group transactions, balances, income and expenses are eliminated in full on
consolidation. |
|
For
the effect of the issuance of IAS 27 (revised) Consolidated and Separate Financial
Statements see note 2Z below. |
F - 11
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
F. |
Basis
of consolidation (Cont.) |
|
Minority
interests in net assets (except for goodwill) of consolidated subsidiaries are presented
separately under the Groups shareholders equity. Minority interests include
the sum of these interests on the date of the business combination (see below) as well as
the share of minority shareholders in the changes that occurred in the capital of the
consolidated company subsequent to the date of the business combination. Losses of
consolidated subsidiaries that relate to minority, which exceed the minority interests in
the shareholders equity of the consolidated subsidiary, are allocated to minority
interests up to the amount in which the minority has a valid obligation and ability to
perform additional investments to cover the losses. |
|
Acquisitions
of consolidated subsidiaries and activities are measured by using the purchase method.
The cost of a business combination is measured based on the aggregate fair value (as of
the date of exchange) of the assets acquired, liabilities incurred and capital
instruments issued by the group in exchange for obtaining control in the acquired
company, plus any acquisition costs incurred to the group which directly relate to the
business combination. The identifiable assets of the acquired company, liabilities and
contingent liabilities that meet the recognition criteria in accordance with IFRS 3
regarding business combinations are recognized at fair value on the date of acquisition,
except for non-current assets (or disposal groups) that are classified as held for sale
in accordance with IFRS 5 regarding non-current assets held for sale and discontinued
activities, which are recognized and measured at fair value net of selling costs. |
|
Goodwill
arising from the business combination is recognized as an asset and initially measured at
cost, which represents the excess cost of the business combination over the groups
interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities that were recognized. If, after re-assessment, the total groups
interests in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognized exceed the cost of the business combination, the excess must be
immediately recognized in the statement of income. |
|
In
business combinations, where control is obtained after several exchange transactions
(acquisition in stages) the assets, liabilities and contingent liabilities of the
acquired company will be measured at fair value on the date in which control was
obtained, while the difference between their fair value on the date of the acquisitions
that preceded the business combination and their fair value on the date of the business
combination shall be carried to a Capital reserve from reevaluation from step
acquisition, which is transferred to retained earnings on the date in which the
item in respect of which has been created is amortized or retired to income statement. |
|
The
interests of minority shareholders in the acquired company are initially measured on the
date of the business combination in accordance with their pro rata share in the net fair
value of the assets, liabilities and contingent liabilities that were recognized. As to
the accounting policy with respect to minority interest see note 2(F)2 above. |
|
As
to the publication of IFRS 3 (amended) Business Combinations, see note 2Z
below. |
F - 12
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
H. |
Investments
in associated companies |
|
An
associated company is an entity over which the Group has significant influence and that
is neither a subsidiary nor an interest in joint venture. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but
is not control or joint control over those policies. |
|
The
financial statements of the consolidated companies adopted to the accounting policies of
the group. |
|
The
results and assets and liabilities of associates are incorporated in these financial
statements using the equity method of accounting. Under the equity method, investments in
associates are carried in the consolidated balance sheet at cost as adjusted for
post-acquisition change in the Groups share of the net assets of the associate,
less any impairment in the value of individual investments. Losses of an associate in
excess of the Groups interest in that associate (which includes any long-term
interest that, in substance, form part of the Groups net investment in the
associate) are recognized only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate. |
|
Where
a group entity transacts with an associate of the Group material, profits and losses are
eliminated to the extent of the Groups interest in the relevant associate. |
|
Goodwill
arising on the acquisition of a subsidiary or a jointly controlled entity represents the
excess of the cost of acquisition over the Groups interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities of the subsidiary or
jointly controlled entity recognized at the date of acquisition. |
|
Goodwill
is initially recognized as an asset at cost and is subsequently measured at cost less any
accumulated impairment losses. |
|
For
the purpose of impairment testing, goodwill is allocated to each of the Groups
cash-generating units expected to benefit from the synergies of the combination.
Cash-generating units to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less than the carrying amount of
the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then, the remaining impairment loss is allocated to
the other assets of the unit pro-rata on the basis of the carrying amount of each asset
in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent
period. |
|
On
disposal of a subsidiary or a jointly controlled entity, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal. |
F - 13
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
J. |
Property,
plant and equipment |
|
Property,
plant and equipments are tangible items, which are held for use in the manufacture or
supply of goods or services, or leased to others, which are predicted to be used for more
than one period. The Company presents its property, plant and equipments items according
to the cost model. |
|
Under
the cost method a property, plant and equipment are presented at the balance sheet
at cost (net of any investment grants), less any accumulated depreciation and any
accumulated impairment losses. The cost includes the cost of the assets acquisition
as well as costs that can be directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the manner intended by
management. |
|
Spare
parts which are not used on a current basis are designated for use in the context of
specific items of fixed assets, where necessary. The reason for holding them is to
prevent delays in the manufacturing process and to avoid a shortage in spare parts in the
future. The spare parts that are not used on a current basis have not been installed on
items of fixed assets and are, therefore, not available for use in their present state.
In the light of this, spare parts that are not being used currently are presented with
fixed assets and are depreciated beginning from the date that they are installed on the
items of fixed assets for which they were purchased. |
|
Depreciation
is calculated using the straight-line method at rates considered adequate to depreciate
the assets over their estimated useful lives. The depreciation starts once the asset is
ready for use and takes into consideration of the anticipated scrap value at the end of
the assets useful lives. |
|
The annual depreciation and amortization rates are:
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings |
10-50 |
|
Machinery and equipment |
7-20 |
|
Motor vehicles |
5-7 |
|
Office furniture and equipment |
3-17 |
|
Scrap
value, depreciation method and the assets useful lives are being reviewed by management
in the end of every financial year. Changes are handled as a change of estimation and are
applied from here on. |
|
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 and the carrying
amount of the asset and is recognized in income statement. |
F - 14
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
(1) |
Intangible
assets, except for goodwill |
|
Intangible
assets are defined as identifiable, non-monetary assets without physical substance.
Intangible assets with an indefinite useful life are not amortized. Instead they are
tested for impairment once a year or more frequently if indications exist that there may
a decline in the value of the asset in accordance with the provisions of IAS 36. The
useful life of intangible assets with an indefinite useful life is estimated at the end
of each reporting year. The accounting treatment with respect to the useful life of an
intangible asset that has changed from indefinite to finite, is carried out prospectively. |
|
Intangible
assets with a definite useful life are amortized using the straight line method over the
estimated useful life of the assets subject to an impairment test. The accounting
treatment of the change in the estimated useful life of an intangible asset with a finite
life, is carried out prospectively. |
|
As
to the accounting treatment of goodwill see note 2I. |
|
The
useful life which is used to amortize intangible assets with a finite useful life is as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relations |
5-10 years |
|
Software |
3 years |
|
(2) |
Intangible
assets acquired under a business combination |
|
Intangible
assets acquired under a business combination are identified and recognized separately
from goodwill when the meet with the definition of intangible asset and their fair value
can be measured reliably. The cost of these intangible assets is their fair value on the
date of the business combination. |
|
In
subsequent periods to the initial recognition, intangible assets acquired under a
business combination are presented at cost less any accumulated amortization and
subsequent accumulated impairment loss. The amortization of intangible assets with a
finite life is calculated based on the straight line method over the estimated useful
life of these assets. The estimated useful life and method of amortization are tested at
the end of each reporting year while the effect of changes in the estimates useful life
is accounted for prospectively. |
|
As
to the amendment of IAS 38 Intangible Assets under the improvements to
International Financial Reporting Standards see note 2Z. |
F - 15
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
L. |
Impairment
of value of tangible and intangible assets, excluding goodwill |
|
At
each balance sheet date, the Group examines the book value of its tangible and intangible
assets for the purpose of determining whether there are any indications that point
towards losses from impairment of value of these assets. Should there be any such
indications, the recoverable amount of the asset is estimated for the purpose of
determining the amount of the loss from impairment of value that was created, if at all.
If it is not possible to estimate the recoverable value of an individual asset, the Group
estimates the recoverable value of the cash- generating unit to which the asset is
relevant. Shared assets are also allocated to individual cash generating units to the
extent that a reasonable and consistent basis can be identified for such allotment.
Should allocating the shared assets to individual cash generating units on the above
basis not be feasible, the shared assets are allocated to the smallest groups of cash
generating units as to which a reasonable and consistent basis for allocation can be
identified. |
|
Intangible
assets with an indefinite useful life and intangible assets that are still not available
for use are tested for impairment once a year or more frequently if indications exist
that there may a decline in the value of the asset. |
|
The
recoverable amount is the higher of the sales price of the asset, less selling costs, and
of its utility value. In estimating utility value, an approximation of future cash flows
is discounted to their present value, using a pre- tax discount rate which reflects the
current market estimates of the value of money over time and the specific risks for the
asset for which the estimate of future cash flows has not been adjusted. |
|
If
the carrying value of the asset (or of the cash generating unit) exceeds recoverable
amount, the book value of the asset (or of the cash generating unit) is reduced to its
recoverable amount. The impairment loss is recognized immediately to as an expense in the
statement of income. |
|
If
an impairment loss that was recognized in previous periods is reversed, the book value of
the asset (or of the cash generating unit) will be restored back to the estimate of the
up to date recoverable value but not to exceed the book value of the asset (or of the
cash generating unit) that would have existed, had a related impairment loss not been
recognized in prior periods. The reversal of the loss from impairment of value is
immediately recognized in the statement of income. |
|
As
to the impairment of goodwill see note 2I. As to the impairment of investment in an
affiliate company, see note 2H. |
|
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 assed to the costs 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
capitalization. |
|
The
rest of the borrowing costs are recognized in profit or loss. |
|
For
the effect of the issuance of IAS 23 (revised) Borrowing costs see Note 2Z
below. |
F - 16
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Inventories
are assets held for sale in the ordinary course of business, in the process of production
for such sale or in the form of materials or supplies to be consumed in the production
process or in the rendering of services. |
|
Inventories
are stated at the lower of cost and net realizable value. Cost of inventories includes
all the cost of purchase, direct labor, fixed and variable production over heads and
other cost that are incurred, in bringing the inventories to their present location and
condition. |
|
Net
realizable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale. |
|
Inventories
that purchased on differed settlement terms, which contains a financing element, are
stated in purchase price for normal credit terms. The difference between the purchase
price for normal credit terms and the amount paid is recognized as interest expense over
the period of the financing. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost determined as follows: |
|
|
Raw, auxiliary materials and others |
Based on weighted-average basis. |
|
Finished products and products in process |
Based on overhead absorption costing. |
|
The
spare parts that are in continuous use, are not associated with the specific fixed
assets. Some of these spare parts are even sold to the Groups affiliated companies,
as needed, and are part of the inventory. Based on the experience accumulated by the
Company, these spare parts are held for no longer than 12 months. In light of the above,
the spare parts that are in continuous use are presented in inventory clause, and
recognized in the profit and loss report when used. |
|
Investments
are recognized and derecognized on trade date where the purchase or sale of an investment
is under a contract whose terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at fair value, plus
transaction costs, except for those financial assets classified as at fair value through
profit or loss, which are initially measured at fair value. |
|
Financial assets are classified into loans and receivables and to financial
assets through profit and loss. The classification of those categories arises
from the reason of the financial assets holding and it is determined at its
initial recognition.
|
F - 17
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
O. |
Financial
assets (Cont.) |
|
(2) |
Loans
and receivables |
|
Trade
receivables, loans, and other receivables that have fixed or determinable payments that
are not quoted in an active market are classified as loans and receivables. Loans and
receivables are measured at amortized cost using the effective interest method, less any
impairment. Interest income is recognized by applying the effective interest rate, except
for short-term receivables when the recognition of interest would be immaterial. |
|
(3) |
Financial
assets at FVTPL |
|
Financial
assets are classified as at FVTPL where the financial asset is either held for trading or
it is designated as at FVTPL. |
|
A
financial asset is classified as held for trading if: |
|
|
it
has been acquired principally for the purpose of selling in the near
future; or |
|
|
it
is a part of an identified portfolio of financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or |
|
|
it
is a derivative that is not designated and effective as a hedging instrument. |
|
Financial
assets at FVTPL are stated at fair value, with any resultant gain or loss recognized in
profit or loss. The net gain or loss recognized in profit or loss incorporates any
dividend or interest earned on the financial asset. |
|
(4) |
Impairment
of financial assets |
|
Financial
assets, except for financial assets classified as at fair value through profit or loss,
are assessed for indicators of impairment at each balance sheet date. |
|
Financial
assets are impaired where 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 impacted. |
|
Objective
evidence of impairment could include: |
|
|
Significant
financial difficulty of the issuer or counterparty; or |
|
|
Default
or delinquency in interest or principal payments; or |
|
|
It
becoming probable that the borrower will enter bankruptcy or financial re-organization. |
|
For
certain financial assets, such as customers as to which no indications of value
impairment have been identified, the company evaluates value impairment on a specific
basis, in reliance on past experience and changes in the level of delinquency in
payments, as well as economic changes related to the sector and the economic environment
in which it operates. |
|
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 recognized in profit or loss. |
F - 18
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
P. |
Financial
liabilities and equity instruments issued by the Group |
|
(1) |
Classification
as debt or equity |
|
Debt
and equity instruments are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangement. |
|
An
equity instrument is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity instruments issued by the Group are
recorded at the proceeds received, net of direct issue costs. |
|
Financial
liabilities are classified as either financial liabilities at FVTPL or Other
financial liabilities for the published IAS 32 (amended), financial instruments:
present an IAS-1: presentation of financial statements see note 2Z as follows. |
|
(2) |
Options
to sell sales of an investee |
|
The
company has an obligation that is derived from an option that it gave for the sale of
shares of an investee, which provide the holder thereof with the right to sell its
holdings in the investee in consideration of a variable amount of cash. |
|
The
value of the option was computed according to the economic value of the option and is
presented with non current liabilities, and classified as a liability at fair value
through operations. |
|
Any
gain or loss that results from changes in the fair value of the option is recognized in
operations. |
|
See
Note 4B (3) below for further details on the conditions of the option. |
|
(3) |
Other
financial liabilities |
|
Other
financial liabilities (capital note issued to an investee), are initially measured at
fair value, net of transaction costs. Other financial liabilities are subsequently
measured at amortized cost using the effective interest method. |
|
The
effective interest method is a method of calculating the amortized 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.
Financial liabilities which stand for immediately payment, presented at their full value. |
|
For
the treatment at CPI-linked other financial liabilities see note 2P (4) below. |
|
(4) |
CPI-linked
liabilities |
|
The
Company has liabilities that are linked to the Consumer Price Index (hereinafter the
CPI), which are not measured at fair value under the statement of income. The Company
determines the effective interest rate in respect of these liabilities as a real rate
with the addition of linkage differences in line with actual changes in the CPI until the
balance sheet date. |
F - 19
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Q. |
Derivative
financial instruments |
|
The
Group enters into a variety of derivative financial instruments to manage its exposure to
foreign exchange rate risk, including foreign exchange forward contracts on exchange
rate, options on exchange rate and contracts on the CPI due to notes. |
|
Derivatives
are initially recognized at fair value at the date a derivative contract is entered into
and are subsequently remeasured to their fair value at each balance sheet date. The
resulting gain or loss is recognized in profit or loss immediately unless the derivative
is designated and effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship. The Group
designates certain derivatives as hedges of highly probable forecast transactions or
hedges of foreign currency risk of firm commitments (cash flow hedges). |
|
A
derivative is presented as a non-current asset or a non-current liability if the
remaining maturity of the instrument is more than 12 months and it is not expected to be
realised or settled within 12 months. Other derivatives are presented as current assets
or current liabilities. |
|
The
Group designates certain hedging instruments, which include derivatives, and
non-derivatives in respect of foreign currency risk, as cash flow hedges. |
|
At
the inception of the hedge relationship, the entity documents the relationship between
the hedging instrument and the hedged item, along with its risk management objectives and
its strategy for undertaking various hedge transactions. Furthermore, at the inception of
the hedge and on an ongoing basis, the Group documents whether the hedging instrument
that is used in a hedging relationship is highly effective in offsetting changes in fair
values or cash flows of the hedged item. |
|
The
Group implements cash flow hedge accounting both in respect of future transactions,
foreign currency deposits and options transactions on foreign currency that are designed
to secure payments for the acquisition of fixed assets in foreign currency in respect of
future transactions for the purchase or sale of foreign currency that are designed to
secure payments for imports and which are linked to foreign currency and in respect of
future transaction on the Consumer Price Index, which are designed to secure payments on
CPI-linked bonds. |
|
The
effective part of the changes in the value of financial instruments designed for cash
flow hedging is immediately recognized in shareholders equity under the headline
capital reserve in respect of cash flow hedging and the non-effective
part is immediately recognized in the statement of income. |
F - 20
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Q. |
Derivative
financial instruments (Cont.) |
|
(2) |
Hedge
accounting (Cont.) |
|
Hedge
accounting for cash flows is discontinued when the hedging instrument expires, sold or
realized of when the hedging relations no longer meet the threshold conditions for
hedging. After the discontinuation of hedge accounting, the amounts carried to
shareholders equity are carried to the income statement while the hedged item or
the hedged projected transactions are recorded in the income statement. |
|
When
hedging a forecasted transaction on non-monetary assets (fixed income), the capital
reserve is added to the initial cost of the hedged item immediately upon the initial
recognition of said item and recorded in the income statement over the period of
amortization of the fixed asset in respect of which it was recorded. |
|
Revenue
is measured at the fair value of the consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates and other similar allowances. |
|
Revenue
from the sale of goods is recognised when all the following conditions are satisfied: |
|
|
The
Group has transferred to the buyer the significant risks and rewards of ownership
of the goods; |
|
|
The
Group retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold |
|
|
The
amount of revenue can be measured reliably; |
|
|
It
is probable that the economic benefits associated with the transaction will flow
to the entity; and |
|
|
The
costs incurred or to be incurred in respect of the transaction can be measured reliably. |
|
Interest
revenue is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that assets
net carrying amount. |
|
Revenue
is recognized when the Groups right to receive the payment is established. |
|
(4) |
Reporting
of revenues on a gross basis or a net basis |
|
The
Companys revenues as an agency or intermediary from providing electricity, water,
steam, and logistical services to the Group without bearing the risks and returns that
derive from the transaction are presented on a net basis. |
F - 21
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Leases
are classified as finance leases whenever the term of the lease transfer substantially
all the risks and rewinds of ownership to the lessee. All other leases are classified as
operating leases. |
|
Leases
of land from the Israel Lands Administration |
|
Leases
of land from the Israel Lands Administration are classified as operating leases. The
deferred lease payments that were made on the date of the start of the lease are
presented in the balance sheet with Deferred lease expenses, and are amortized on the
straight line basis over the balance of the lease period, including the extension option. |
|
The
company has land lease rights from the Municipality of Tel Aviv which comply with the
definition of investment real estate, and, pursuant to IAS 40, have been classified as
operating leases and not as investment real estate. |
|
Provisions
are recognized when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount of the obligation. The
amount recognized as a provision is the best estimate of the consideration required to
settle the present obligation at the balance sheet date, taking into account the risks
and uncertainties surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present bligation,
its carrying amount is the present value of those cash flows. |
|
When
some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, the receivable is recognized as an asset if it is virtually
certain that reimbursement will be received and the amount of the receivable can be
measured reliably. |
|
U. |
Share
Based payments |
|
In
accordance with IFRS 2 and IFRIC 11, equity-settled share based payments to employees and
others providing similar services are measured at the fair value of the equity
instruments at the grant date. The Company determines the fair value of equity-settled
share-based transaction according to the Black-Scholes model. Details regarding the
determination of the fair value of share-based transactions are set out in note 10. |
|
The
fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Groups
estimate of equity instruments that will eventually vest. At each balance sheet date, the
Group revises its estimate of the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any, is recognized in profit or loss
over the remaining vesting period, with a corresponding adjustment to the equity-settled
employee benefits reserve. |
|
For
the effect of the issuance of amendment to IFRS 2 Share Based Payment- Vesting and
Revocation Conditions, see note 2Z below. |
F - 22
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Income
tax expense represents the sum of the tax currently payable and change in deferred tax
excluding deferred tax as result of transaction that was attribute directly to the equity. |
|
The
tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the income statement because it excludes 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 Groups liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the balance sheet date. |
|
Deferred
tax is recognised on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences, and
deferred tax assets are generally recognised for all deductible temporary differences to
the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised. Such 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. |
|
The
carrying amount of deferred tax assets is reviewed at each balance sheet date 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 realised, based on tax rates
(and tax laws) that have been enacted or substantively enacted by the balance sheet date.
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 reporting date, to
recover or settle the carrying amount of its assets and liabilities. |
|
Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis. |
F - 23
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
(1) |
Post-Employment
Benefits |
|
The
Groups post-employment benefits include: benefits to retirees and liabilities for
severance and retirement benefits. The Groups post-employment benefits are
classified as either defined contribution plans or defined benefit plans. Most of the
Groups employees have signed Section 14 to the Severance Law, 1963, pursuant to
which the Groups regular deposits with pension funds and/or insurance policies
exempt it from any further obligations to the workers, for whom said amounts were
deposited. The Groups deposits under the Defined Contribution Plan are carried to
the income statements on the date of the provision of work services, in respect of which
the Group is obligated to make the deposit and no additional provision in the financial
statements is required. |
|
Expenses
in respect of a Defined Benefit Plan are carried to the income statement in accordance
with the Projected Unit Credit Method, while using actuarial estimates that are performed
at each balance sheet date. The current value of the Groups obligation in respect
of the defined benefit plan is determined by discounting the future projected cash flows
from the plan by the market yields on government bonds, denominated in the currency in
which the benefits in respect of the plan will be paid, and whose redemption periods are
approximately identical to the projected settlement dates of the plan. |
|
Actuarial
profits and losses are carried to the statement of recognized income and expenses on the
date they were incurred. The Past Service Cost is immediately recognized in the Groups
income statement to the extent the benefit has vested. A past service cost which has not
yet vested is amortized on a straight-line basis over the average vesting period until
the benefit becomes vested. |
|
The
Groups liability in respect of the Defined Benefit Plan which is presented in the
Groups balance sheet, includes the current value of the obligation in respect of
the defined benefit, with the addition (net of) actuarial profits (losses), which were
not yet recognized and less past service cost that was not yet recognized, net of the
fair value of the plans assets. A net plan, which is created from said calculation,
is limited to the amount of the actuarial losses and past service cost that were not yet
recognized with the addition of the current value of available economic benefits in the
shape of returns from the plan or in the shape of reduction in future contributions to
the plan. |
|
(2) |
Other
long term employee benefits |
|
Other
long term employee benefits are benefits which it is anticipated will be utilized or
which are to be paid during a period that exceeds 12 months from the end of the period in
which the service that creates entitlement to the benefit was provided. |
|
Other
employee benefits of the company include liabilities for vacation pay. These liabilities
are recorded to operations in accordance with the projected unit credit method, through
the use of actuarial estimates which are performed at each balance sheet date. The
present value of the companys obligation for vacation pay was determined by means
of the capitalization of anticipated future cash flows from the program at market yields
of government bonds, denominated in the currency in which the benefits for vacation will
be paid and having redemption dates nearly identical to the forecasted payment dates of
the vacation pay. |
|
Gains
and losses are recorded to the statement of operations at the time that they are created.
Past service cost is immediately recognized in the financial statements of the company. |
F - 24
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
W. |
Employee
benefits (Cont.) |
|
(3) |
Short
term employee benefits |
|
Short
term employee benefits are benefits which it is anticipated will be utilized or which are
to be paid during a period that does not exceed 12 months from the end of the period in
which the service that creates entitlement to the benefit was provided. |
|
Short
term company benefits include the companys liability for short term absences,
payment of grants, bonuses and compensation. These benefits are recorded to the statement
of operations when created. The benefits are measured on a non capitalized basis. The
difference between the amount of the short term benefits to which the employee is
entitled and the amount paid is therefore recognized as an asset or liability. |
|
The
computation of basic net income per share is generally based on earnings available for
distribution to holders of ordinary shares, divided by the weighted average number of
ordinary shares outstanding during the period. |
|
In
computing diluted net incomeper share, the weighted average number of shares to be
issued, assuming that all dilutive potential shares are converted into shares, is to be
added to the average number of ordinary shares used in the computation of the basic
income (loss) per share. Potential shares are taken into account, as above, only when
their effect is dilutive (reducing net income per share from continuing activities). |
|
Y. |
Exchange
Rates and Linkage Basis |
|
(1) |
Foreign
currency balance, or balances linked to foreign currency are included in
the financial statements according to the exchange rate announced by the
Bank of Israel on the balance sheet date. |
|
(2) |
Balances
linked to the CPI are presented according to index of the last month of
the report period (the index of the month of the financial reports). |
|
(3) |
Following
are the changes in the representative exchange rates of the Euro and the
U.S. dollar vis-a-vis the NIS and in the Israeli Consumer Price Index (CPI): |
|
|
Representative
exchange rate of
the dollar
(NIS per $1)
|
Representative
exchange rate of
the Euro (NIS per
1)
|
CPI
"in respect of"
(in points)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of: |
|
|
| |
|
| |
|
| |
|
|
December 31, 2008 | | |
| 3.802 |
|
| 5.297 |
|
| 198.42 |
|
|
December 31, 2007 | | |
| 3.846 |
|
| 5.659 |
|
| 191.15 |
|
|
|
%
|
%
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) during the: |
|
|
| |
|
| |
|
| |
|
|
Year ended December 31, 2008 | | |
| (1.1 |
) |
| (6.39 |
) |
| 3.8 |
|
|
Year ended December 31, 2007 | | |
| (9.0 |
) |
| 1.7 |
|
| 3.4 |
|
F - 25
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Z. |
Adoption
of new and revised Standards and interpretations |
|
(1) |
New
effective standards and interpretations, which are implemented in these financial
statements |
|
|
IFRS
2, IFRIC 11 - "Group and Treasury Share Transactions" |
|
IFRIC
11 provides guidance on applying IFRS 2 with respect to certain arrangements of
share-based payments involving an entitys own equity instruments as well as
arrangements involving the parent companys equity instruments. The interpretation
stipulates the method of classification of these arrangements as share-based payment
transaction that are settled with equity instruments or as share-based payment
transactions that are settled in cash. |
|
|
IAS
19, IFRIC 14 The limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction |
|
IFRIC
14 determines the meaning of refunds from the plan or reductions in future
contributions to the plan during the calculation of the a defined benefit asset
that will be recognized in respect of a defined benefit plan, and clarifies how an asset
or liability guidance in respect of a pension plan could be affected by statutory or
contractual funding requirements. The provisions of IFRIC 14 apply to annual reporting
periods commencing on January 1, 2008 |
|
The
implementation of IFRIC 14 does not have any impact on the Groups financial
statements. |
|
(2) |
Standards,
Amended Standards and Clarifications that have been Published but not yet Become
Effective, and have not been Adopted by the Company in Early Adoption |
|
|
IAS
1 (Amended) Presentation of Financial Statements |
|
The
standard stipulates the presentation required in the financial statements, and itemizes a
general framework for the structure of the financial statements and the minimal contents
which must be included in the context of the report. Changes have been made to the
existing presentation format of the financial statements, and the presentation and
disclosure requirements for the financial statements have been broadened, including the
presentation of an additional report in the framework of the financial statements known
as the report of comprehensive income, and the addition of a balance sheet as
of the beginning of the earliest period that was presented in the financial statements,
in cases of changes in accounting policy by means of retroactive implementation, in cases
of restatement and in cases of reclassifications. |
|
The
standard will be effective for reporting periods beginning from January 1, 2009. The
standard permits earlier application. |
|
At
this stage, the management of the Group is unable to assess the effect of the standard on
its financial condition and operating results. |
F - 26
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Z. |
Adoption
of new and revised Standards and interpretations (cont.) |
|
(2) |
Standards,
Amended Standards and Clarifications that have been Published but not yet
Become Effective, and have not been Adopted by the Company in Early
Adoption (cont.) |
|
IAS
23 (Amended) Borrowing Costs |
|
The
standard stipulates the accounting treatment of borrowing costs. In the context of the
amendment to this standard, the possibility of immediately recognizing borrowing costs
related to assets with an uncommon period of eligibility or construction in the statement
of operations was cancelled. The standard will apply to borrowing costs that relate to
eligible assets as to which the capitalization period began from January 1, 2009. The
standard permits earlier implementation. |
|
The
companys management estimates that the implementation of the Standard is not
expected to have a material effect on the Companys financial statements. |
|
IFRS
8, Operating Segments |
|
The
standard, which replaces IAS 14, details how an entity must report on data according to
segments in the annual financial statements. The standard, among other things, stipulates
that segmental reporting of the company will be based on the information that management
of the company uses for purposes of evaluating performance of the segments, and for
purposes of allocating resources to the various operating segments. The standard will
apply to annual reporting periods commencing on January 1, 2009, with restatement of
comparative figures for prior reporting periods. The standard permits earlier adoption. |
|
At
this stage, the management of the Group is unable to assess the effect of the standard on
its financial condition and operating results. |
|
IAS
27 (Amended) Consolidated and Separate Financial Statements |
|
The
standard prescribes the rules for the accounting treatment of consolidated and separate
financial statements. Among other things, the standard stipulates that transactions with
minority shareholders, in the context of which the company holds control of the
subsidiary before and after the transaction, will be treated as capital transactions. In
the context of transactions, subsequent to which the company loses control in the
subsidiary, the remaining investment is to be measured as of the date that control is
lost, at fair value, with the difference as compared to book value to be recorded to the
statement of operations. The minority interest in the losses of a subsidiary, which
exceed its share in shareholders equity, will be allocated to it in every case,
while ignoring its obligations and ability to make additional investments in the
subsidiary. |
|
The
provisions of the standard apply to annual financial reporting periods which start on
January 1, 2010 and thereafter. Earlier adoption is permitted, on the condition that it
will be done simultaneous with early adoption of IFRS 3 (amended). The standard will be
implemented retrospectively, excluding a number of exceptions, as to which the provisions
of the standard will be implemented prospectively |
|
The
companys management estimates that the implementation of the Standard is not
expected to have a material effect on the Companys financial statements. |
F - 27
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Z. |
Adoption
of new and revised Standards and interpretations (cont.) |
|
(2) |
Standards,
Amended Standards and Clarifications that have been Published but not yet
Become Effective, and have not been Adopted by the Company in Early
Adoption (cont.) |
|
IFRS
3 (Amended) Business Combinations |
|
The
new standard stipulates the rules for the accounting treatment of business combinations.
Among other things, the standard determines measurement rules for contingent
consideration in business combinations which is to be measured as a derivative financial
instrument. The transaction costs directly connected with the business combination will
be recorded to the statement of operations when incurred. Minority interests will be
measured at the time of the business combination to the extent of their share in the fair
value of the assets, including goodwill, liabilities and contingent liabilities of the
acquired entity, or to the extent of their share in the fair value of the net assets, as
aforementioned, but excluding their share in goodwill. |
|
As
for business combinations where control is achieved after a number of acquisitions
(acquisition in stages), the earlier purchases of the acquired company will be measured
at the time that control is achieved at their fair value, while recording the difference
to the statement of operations. |
|
The
standard will apply to business combinations that take place from January 1, 2010 and
thereafter. Earlier adoption is possible, on the condition that it will be simultaneous
with early adoption of IAS 27 (amended). |
|
The
companys management estimates that the implementation of the Standard is not
expected to have a material effect on the Companys financial statements. |
|
Amendment
to IFRS 2, Share Based Payment- Vesting and Revocation Conditions |
|
The
amendment to the standard stipulates the conditions under which the measurement of fair
value must be considered on the date of the grant of a share based payment and explains
the accounting treatment of instruments without terms of vesting and revocation. The
provisions of the standard apply to annual financial reporting periods which start on
January 1, 2009 and thereafter. Earlier adoption is permitted. |
|
The
companys management estimates that the implementation of the Standard is not
expected to have a material effect on the Companys financial statements. |
|
Amendment
to IAS 32, Financial Instruments: Presentation, and IAS 1, Presentation of Financial
Statements |
|
The
amendment to IAS 32 changes the definition of a financial liability, financial asset and
capital instrument and determines that certain financial instruments, which are
exercisable by their holder, will be classified as capital instruments. |
|
The
provisions of the standard apply to annual financial reporting periods which start on
January 1, 2009 and thereafter. Earlier adoption is permitted. |
|
At
this stage, the management of the Group is unable to assess the effect of the standard on
its financial condition and operating results. |
F - 28
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Z. |
Adoption
of new and revised Standards and interpretations (cont.) |
|
(2) |
Standards,
Amended Standards and Clarifications that have been Published but not yet
Become Effective, and have not been Adopted by the Company in Early
Adoption (cont.) |
|
IFRIC
16 Hedges of a Net Investment in a Foreign Operation |
|
This
interpretation establishes the nature of the hedged risk and the amount of the hedged
item under the hedges of a net investment in a foreign operation. In addition, the
interpretation stipulates that the hedging instrument may be held by any entity within
the group, and the amount to be reclassified from equity to profit or loess when the
entity disposes of the foreign operation, for which the accounting method of hedges of a
net investment in a foreign operation has been implemented. |
|
The
provisions of the interpretation apply to annual reporting periods commencing on January
1, 2009. An early adoption is permitted. |
|
The
Groups management estimates that the implementation of the interpretation will not
have any impact on the financial statements of the Group. |
|
(3) |
Improvement
to International Financial Reporting Standards (IFRS) 2008 |
|
In
May 2008 the IASB published a series of improvements for IFRS. |
|
Improvements
include amendments to some of the standards, which change the manner of presentation,
recognition and measurement of different items in the financial statements. |
|
In
addition, amendments have been made to terms that have a negligible impact, if any, on
the financial statements. |
|
Most
of the amendments will become effective as of the annual reporting period commencing
January 1, 2009 or thereafter, with an option for early adoption. The implementation of
most amendments will be carried out by retrospective adjustment of comparative figures. |
|
Some
of the amendments to the standards are expected, under relevant circumstances, to have a
material impact on the financial statements. The prominent amendments are the new or
amended requirements with respect to the following: |
|
|
Amendment
to IAS 28 Investments in Associated Companies, which stipulates that the
impairment of investment in an associated company shall be treated as an impairment of a
single asset and that the amount of impairment can be cancelled in subsequent periods. |
|
The
amendment will apply to annual periods commencing on January 1, 2009. This amendment
allows for the early implementation while implementing the amendments relating to Section
4 in IAS 32 Financial Instruments: Presentation, Section 1 in IAS 31 Rights
in Joint Transactions and Section 3 in IFRS 7 Financial Instruments:
Disclosure. The amendments can be applied retrospectively. |
|
At
this stage the Groups management cannot assess the effect of implementation of the
amendment on its financial statements. |
|
|
Amendment
IAS 38 Intangible Assets, which stipulates that payments in respect of
advertising and sales promotion activities will be recognized as an asset until the date
in which the entity has the right to access the acquired goods or in the event of a
receipt of services,the date of receipt of the services. |
F - 29
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Z. |
Adoption
of new and revised Standards and interpretations (cont.) |
|
(3) |
Improvement
to International Financial Reporting Standards (IFRS) 2008 (cont.) |
|
The
amendment will apply to annual periods commencing on January 1, 2009 and shall be carried
out retroactively. The amendment allow for early adoption. The Groups management
estimates that the effect of implementing the amendment on the Groups financial
statements is immaterial. |
|
|
Amendment
to IAS 19 Employee Benefits |
|
a. |
Curtailments
and negative past service costs |
|
The
amendment changes the definitions in the Standard and makes the following distinction:
curtailments may be created when reducing the degree of link between future wage
increases and benefits to be paid in respect of past services. In contrast, when the plan
amendment relates to past services and leads to a reduction in the present value of
defined plan obligation, the amendment will meet the definition of negative past service
cost. That is, the amendment stipulates that when a plan amendment reduces the benefits
to which the employee is entitled, the effect of the reduction in respect of future
services falls under the definition of curtailment, whereas the reduction in benefits to
which the employee is entitled in respect of past services constitutes negative past
service costs. |
|
The
amendments will apply on changes in benefits that occurred as of January 1, 2009 and are
to be applied prospectively. Early implementation is permitted. |
|
The
amendment cancels the existing inconsistency and changes the definition of Return
on Plan Assets.
The defined was amended so as to clarify that plan management costs
should be deducted from the calculation of the return on plan assets only to the extent
that they are not included in the actuarial assumptions used to measure the liabilities
in respect of a defined benefit. |
|
The
amendment shall apply to annual reporting periods commencing on January 1, 2009 and shall
be applied prospectively. Early implementation is permitted. |
|
c. |
Amendments
to the definitions of Short-term Employee Benefits and Other Long-term Employee
Benefits |
|
Short-term
employee benefits are employee benefits which fall due wholly within twelve months after
the end of the period in which the employees render the related service.
Other long-term
employee benefits are employee benefits which do not fall due wholly within twelve months
after the end of the period in which the employees render the related service. |
|
As
a result, there was a lack of clarity regarding the method of classification of employee
benefits, such as absence of payment to which the employee is entitled, but which is not
expected to be used within 12 months of the end of the period. |
F - 30
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 |
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|
Z. |
Adoption
of new and revised Standards and interpretations (cont.) |
|
(3) |
Improvement
to International Financial Reporting Standards (IFRS) 2008 (cont.) |
|
Under
the amendment, the definitions of short-term employee benefits and long-term
employee benefits were changed so as to determine that for the purpose of
establishing whether the employee benefit is short term or long term, the expected date
of using the benefit should be examined. As a result, entities will have to examine the
need to bifurcate employee benefits, such as entitlement to compensation in respect of
short-term absences, into the aforementioned two categories.
The amendment shall apply to
annual reporting periods commencing on January 1, 2009 and shall be applied
prospectively. Early implementation is permitted. |
|
|
Amendment
of IFRS 1 First-time adoption of International Financial Reporting Standards and
IAS 27 Consolidated and Separate Financial Statements |
|
This
amendment stipulates, inter alia, the method of measurement of investments in
subsidiaries, companies under joint control and associated companies on the date of the
first-time adoption of IFRS and the method of recognition of revenue from dividends
received from said companies. The provisions of the amendment apply to the separate
financial statements of the entity. |
|
The
provisions of the amendment apply to annual reporting periods commencing on January 1,
2009. |
|
The
Company elected for an early adoption of the amendment to IFRS 1 (hereinafter IFRS
1) which permits an entity, for presentation in the separate financial statements,
to measure the companys investments in subsidiaries and in associated companies at
deemed cost as of January 1, 2007. |
|
|
Amendment
of IAS 39 Financial instruments: Recognition and Measurement |
|
The
amendment, inter alia, stipulates that inflation may be hedged if changes in
inflation are a contractually specified portion of cash flows of a recognized financial
instrument. The amendments make clear that the intrinsic value, not the time value of
acquired options, can be used as a hedging instrument of a one-sided risk arising from a
forecast transaction. The provisions of the amendment apply to annual reporting periods
commencing on January 1, 2010 or thereafter. Early adoption of the amendment is permitted. |
|
At
this stage, the companys management is unable to estimate the effect of
implementing the amendment on its financial condition and operating results. |
F - 31
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 3 |
|
CRITICAL
ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY |
|
In
the application of the Groups accounting policies, which are described in Note 2
above, management is required to make judgments, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these
estimates. |
|
The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods. |
|
B. |
Critical
judgments in applying accounting policies |
|
The
following are the critical judgments, apart from those involving estimations (see below),
that the management have made in the process of applying the entitys accounting
policies and that have the most significant effect on the amounts recognized in financial
statements: |
|
|
Deferred
taxes- the company recognizes deferred tax assets for all of the deductible temporary
differences up to the amount as to which it is anticipated that there will be taxable
income against which the temporary difference will be deductible. During each period, for
purposes of calculation of the utilizable temporary difference, management uses estimates
and approximations as a basis which it evaluates each period. |
|
|
Approximation
of length of life of items of fixed assets- each period, the companys management
evaluates salvage values, depreciation methods and length of useful lives of the fixed
assets. |
|
|
Measuring
provisions and contingent liabilities and contingent liabilities- see C(1) below. |
|
|
Measuring
obligation for defined benefits and employee benefits- see C(2) below. |
|
|
Measuring
share based payments- see NOTE 10 below. |
|
|
Measuring
the fair value of an option to sell shares of an associated company see C(3)
below. |
|
|
Measuring
the fair value on account of the allocation of the cost of acquisition see C(4)
below. |
|
C. |
Key
sources of estimation uncertainty . |
|
1. |
Provisions
for legal proceeding |
|
Against
the company and its subsidiaries there are 5 claims pending and open in a total amount of
approximately NIS 10,680 thousands (December 31, 2007: NIS 23,124 thousands), in respect
of them a provision was credited in a sum of NIS 28 thousands (December 31, 2007: NIS 300
thousands was recorded). For purposes of evaluating the legal relevance of these claims,
as well as determining the reasonableness that they will be realized to its detriment,
the companys management relies on the opinion of legal and professional advisors.
After the companys advisors expound their legal position and the probabilities of
the company as regards the subject of the claim, whether the company will have to bear
its consequences or whether it is will be able to rebuff it, the company approximates the
amount which it must record in the financial statements, if at all. |
F - 32
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 3 |
|
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont.) |
|
C. |
Key
sources of estimation uncertainty (cont.) |
|
1. |
Provisions
for legal proceeding (cont.) |
|
An
interpretation that differs from that of the legal advisors of the company as to the
existing legal situation, a varying understanding by the companys management of the
contractual agreements as well as changes derived from relevant legal rulings or the
addition of new facts may influence the value of the overall provision with respect to
the legal proceedings that are pending against the company and, thus material affect the
companys financial condition and operating results. |
|
The
present value of the companys obligation for the payment of benefits to pensioners
and severance pay to employees that are not covered under Section 14 to the Severance Pay
Law is based upon a great amount of data, which are determined on the basis of an
actuarial estimation, through the utilization of a large number of assumptions, including
the capitalization rate. Changes in the actuarial assumptions could affect the book value
of the obligation of the company for employees benefits payments, vacation and
severance pay. The company approximates the capitalization rate once annually, on the
basis of the capitalization rate of government bonds. Other key assumptions are
determined on the basis of conditions present in the market, and on the basis of the
cumulative past experience of the company. |
|
3. |
Fair
value of an option to sell shares of an associated company |
|
As
stated in note 2P (2), the company has a liability that arises from an option to sell
shares of an associated company, which is classified as a fair value liability through
profit or loss. In establishing the fair value of the option, the company bases its
decision on the valuation of an independent external expert with the required expertise
and experience. This valuation is carried out once a quarter. |
|
The
company strives to establish a fair value that is as objective as possible, but at the
same time the process of establishing the fair value includes some objective elements,
since changes in the assumptions used in determining the fair value can have a material
impact on the financial situation and operating results of the company. |
|
4. |
Measurement
at fair value on account of the allocation of the cost of acquisition |
|
For
the purpose of allocating the cost of acquisition and determining the fair value of the
tangible and intangible assets and the liabilities of the consolidated subsidiaries at
the date of consolidation, the Companys management based itself primarily on
valuations prepared by external and independent real-estate appraisers and assessors,
possessing the required know-how, experience and expertise. |
|
The
fair value was determined according to generally-accepted valuation methods, including:
Proposed market prices in active markets, discounting of cash flows and the comparison of
selling prices of similar assets and company assets in the immediate proximity. When the
discounted cash flows method was employed, the interest rate for discounting the net cash
flows expected from the assets possesses a material impact on its fair value. |
F - 33
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 3 |
|
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont.) |
|
C. |
Key
sources of estimation uncertainty (cont.) |
|
4. |
Measurement
at fair value on account of the allocation of the cost of acquisition (cont.) |
|
In
determining the fair value, the business/operational risk associated with the companys
operations is taken into account, to the extent relevant. Part of the said risk is the
risk associated with the nature of the sector wherein the company operates, while part of
the risk stems from the Companys specific characteristics. |
|
The
Group strives to determine a fair value that is as objective as possible, yet the process
of estimating the fair value also includes subjective elements, originating inter alia
from the past experience of the Companys management and its understanding of
expected events in the market wherein the Group operates at the date when the fair value
was determined. |
|
In
light of the above, and in view of the aforementioned in the preceding paragraph, the
setting of the fair value of the Group calls for employing judgment. Changes in the
assumptions that serve for setting the fair value can materially affect the Groups
situation and results of operation. |
|
For
additional details regarding the Groups use of measurement of fair value on account
of the allocation of cost of acquisition, see Note 15. |
NOTE 4 |
|
INVESTMENTS IN ASSOCIATED COMPANIES: |
|
a. |
Details
of Subsidiaries and Associated Companies |
|
Percentage of direct and indirect holding in shares
conferring equity and voting rights
|
|
%
|
|
|
|
|
|
|
Main subsidiaries: * |
|
|
| |
|
| | |
| |
Amnir Recycling Industries Limited | | |
| 100.00 |
|
Graffiti Office Supplies and Paper Marketing Ltd. | | |
| 100.00 |
|
Attar Marketing Office Supplies Ltd. | | |
| 100.00 |
|
Hadera Paper Industries Ltd. | | |
| 100.00 |
|
Carmel Container Systems Limited | | |
| 89.30 |
|
Frenkel C.D. Limited** | | |
| 52.74 |
|
Main associated companies: | | |
Hogla-Kimberly Ltd. | | |
| 49.90 |
|
Mondi Hadera Paper Ltd. | | |
| 49.90 |
|
* |
Not
including dormant companies. |
** |
Frenkel
C.D. Limited is partly held through the Company in the rate of 27.85% and partly held
through Carmel Container Systems Limited (in the rate of 24.86%) the holding in voting
shares of C.D. Packaging Systems Limited is 52.74%. |
F - 34
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 4 |
|
INVESTMENTS IN ASSOCIATED COMPANIES: (cont.) |
|
b. |
Investments
in associated companies |
|
The
Company has a number of investments in associated companies, which are held either
directly or through investee companies on December 31, 2008. The financial statements of
significant associated companies Mondi Hadera Paper Ltd. (formerly Neusiedler Hadera
Paper Ltd, NHP) and Hogla-Kimberly Ltd are attached to these financial statements. )The
data for December 31, 2007 including also Carmel Containers System Ltd. and Frenkel C.D.
Ltd. Since September 1 2008, the company consolidate Carmel Containers System Ltd. and
Frenkel C.D. Ltd data, see note 15 below) |
|
|
December 31
|
|
|
2008
|
2007
|
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
Investment in Shares: |
|
|
| |
|
| |
|
|
Cost | | |
| 1,875 |
|
| 7,325 |
|
|
Gain on issuance of shares of an associated | | |
|
company to a third party | | |
| 40,241 |
|
| 40,241 |
|
|
Adjustments from translation of foreign currency | | |
|
financial statements | | |
| (22,186 |
) |
| 3,810 |
|
|
Share in cash flow hedging capital | | |
| (2,426 |
) |
| (635 |
) |
|
Share in Actuarial losses | | |
| (307 |
) |
| - |
|
|
Share in profits since acquisition, net | | |
| 247,935 |
|
| 241,008 |
|
|
|
| |
| |
|
| | |
| 265,132 |
|
| 291,749 |
|
|
Long-term loans and capital notes * | | |
| 52,969 |
|
| 54,654 |
|
|
|
| |
| |
|
| | |
| 318,101 |
|
| 346,403 |
|
|
|
| |
| |
|
* |
Classified
by linkage terms and rate of interest, the total amounts of the loans and capital notes
are as follows: |
|
|
Weighted average
interest rate
at December 31,
2008
|
December 31
|
|
|
2008
|
2007
|
|
|
%
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Capital notes in dollars |
|
|
| |
|
| - |
|
| 2,698 |
|
|
Unlinked loans and capital notes | | |
| 5.3 |
% |
| 52,969 |
|
| 51,956 |
|
|
|
| |
| |
| |
|
| | |
| |
|
| 52,969 |
|
| 54,654 |
|
|
|
| |
| |
| |
|
As
of December 31, 2008, the repayment dates of the balance of the loans and capital
notes have not yet been determined. |
F - 35
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 4 |
|
INVESTMENTS IN ASSOCIATED COMPANIES: (cont.) |
|
2. |
The
changes in the investments during 2008 are as follows: |
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year |
|
|
| 346,403 |
|
|
|
| |
|
Changes during the year: | | |
|
Share in profits of associated companies - net | | |
| 51,315 |
|
|
increase in the share of holding from associated companies to subsidiaries | | |
| (49,839 |
) |
|
Differences from translation of foreign currency financial statements | | |
| (25,996 |
) |
|
Share in capital surplus of hedging cash flows at associated companies | | |
| (1,790 |
) |
|
Share in capital surplus from recording actuarial gains to reserves | | |
| (307 |
) |
|
Decrease in balance of long-term loans and capital notes - net | | |
| (1,685 |
) |
|
|
| |
|
Balance at end of year | | |
| 318,101 |
|
|
|
| |
|
3. |
Mondi
Hadera Paper Ltd. (hereafter - Mondi Hadera; formerly Neusiedler
Hadera Paper Ltd. NHP):
Mondi Hadera is held to the extent of 49.9%
by the Company and also by Mondi Business Paper LTD (hereafter MBP),
As part of an agreement dated November 21, 1999 with Mondi Business Paper
(hereafter MBP, formerly Neusiedler AG), Mondi Hadera purchased the
operations of the Group in the area of writing and typing paper and issued
50.1% of its shares to MBP. |
|
As
part of this agreement, MBP was granted an option to sell its holdings in Mondi Hadera to
the company, at a price 20% lower than its value (as defined in the agreement) or $ 20
million less 20%, whichever is higher. According to oral understandings between persons
in the company and persons in MBP, which were formulated in proximity to signing the
agreement, MBP will exercise the option only in extremely extraordinary circumstances,
such as those which obstruct manufacturing activities in Israel over a long period. |
|
In
view of the extended period which has passed since the date of such understandings and
due to changes in the management of MBP, the company has chosen to take a conservative
approach, and, accordingly, to reflect the economic value of the option in the context of
the transition to reporting according to international standards. The total value of the
option as of December 31, 2008, is NIS 13.9 million and as of December 31, 2007 is 3.9
million. |
|
4. |
Hogla-Kimberly
Ltd. (hereafter Hogla-Kimberly) |
|
Hogla-Kimberly
is held to the extent of 49.9% by the Company and to the extent of 50.1% by Kimberly
Clark Corporation (hereafter- KC). |
F - 36
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
a. |
Composition
of assets and the accumulated depreciation thereon, grouped by major
classifications, and changes therein during 2008, are as follows: |
|
Cost
|
Accumulated depreciation
|
|
|
Balance at
beginning of
year
|
Additions
during the
year
|
Disposals
during the year
|
Initial
Consolidation
|
Balance
at end
of year
|
Balance at
beginning of
year
|
Additions
during the
year
|
Disposals
during the
year
|
Initial
Consolidation
|
Balance
at end
of year
|
Depreciated balance
|
|
December 31
|
|
2008
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings thereon |
|
|
| 207,001 |
|
| 2,393 |
|
| 25 |
|
| 19,888 |
|
| 229,257 |
|
| 114,653 |
|
| 2,478 |
|
| - |
|
| 13,925 |
|
| 131,056 |
|
| 98,201 |
|
Machinery and equipment | | |
| 762,771 |
|
| 31,147 |
|
| 1,997 |
|
| 488,341 |
|
| 1,280,262 |
|
| 529,195 |
|
| 44,187 |
|
| 1,496 |
|
| 344,147 |
|
| 916,033 |
|
| 364,229 |
|
Vehicles | | |
| 35,245 |
|
| 6,617 |
|
| 903 |
|
| 6,902 |
|
| 47,861 |
|
| 21,311 |
|
| 4,248 |
|
| 872 |
|
| 6,073 |
|
| 30,760 |
|
| 17,101 |
|
Office furniture and | | |
equipment (including | | |
computers) | | |
| 72,417 |
|
| 2,779 |
|
| 8 |
|
| 23,183 |
|
| 98,371 |
|
| 51,310 |
|
| 2,478 |
|
| 8 |
|
| 21,720 |
|
| 75,500 |
|
| 22,871 |
|
Payments on account of | | |
machinery and equipment, net | | |
| 21,782 |
|
| 216,921 |
|
| - |
|
| 142 |
|
| 238,845 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 238,845 |
|
Spare parts - not current, net | | |
| 22,484 |
|
| 3,811 |
|
| - |
|
| - |
|
| 26,295 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 26,295 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |
| 1,121,700 |
|
| 263,668 |
|
| 2,933 |
|
| 538,456 |
|
| 1,920,891 |
|
| 716,469 |
|
| 53,391 |
|
| 2,376 |
|
| 385,865 |
|
| 1,153,349 |
|
| 767,542 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
F - 37
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 5 |
|
FIXED
ASSETS: (cont.) |
|
a. |
Composition
of assets and the accumulated depreciation thereon, grouped by major
classifications, and changes therein during 2007, are as follows: |
|
Cost
|
Accumulated depreciation
|
|
|
Balance at
beginning of
year
|
Additions
during the
year
|
Disposals
during the
year
|
Balance
at end
of year
|
Balance at
beginning
of year
|
Additions
during the year
|
Disposals
during the
year
|
Balance
at end
of year
|
Depreciated balance
|
|
December 31
|
|
2007
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings thereon |
|
|
| 191,237 |
|
| 15,863 |
|
| 99 |
|
| 207,001 |
|
| 111,248 |
|
| 3,557 |
|
| 154 |
|
| 114,651 |
|
| 92,350 |
|
Machinery and equipment | | |
| 702,206 |
|
| 80,592 |
|
| 20,027 |
|
| 762,771 |
|
| 512,044 |
|
| 25,658 |
|
| 8,505 |
|
| 529,197 |
|
| 233,574 |
|
Vehicles | | |
| 35,339 |
|
| 5,228 |
|
| 5,322 |
|
| 35,245 |
|
| 23,049 |
|
| 3,409 |
|
| 5,147 |
|
| 21,311 |
|
| 13,934 |
|
Office furniture and equipment | | |
(including computers) | | |
| 70,847 |
|
| 2,377 |
|
| 807 |
|
| 72,417 |
|
| 59,379 |
|
| 2,125 |
|
| 10,194 |
|
| 51,310 |
|
| 21,107 |
|
Payments on account of machinery | | |
and equipment, net | | |
| 49,329 |
|
| (27,547 |
) |
| - |
|
| 21,782 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 21,782 |
|
Spare parts - not current, net | | |
| 22,705 |
|
| - |
|
| 221 |
|
| 22,484 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 22,484 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |
| 1,071,663 |
|
| 76,513 |
|
| 26,476 |
|
| 1,121,700 |
|
| 705,720 |
|
| 34,749 |
|
| 24,000 |
|
| 716,469 |
|
| 405,231 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
F - 38
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 5 |
|
FIXED
ASSETS: (cont.) |
|
b. |
The
item is net of investment grants in respect of investments in approved
enterprises. |
|
c. |
Depreciation expenses amounted to NIS 53,391 thousands and NIS 34,749
thousands NIS for the years ended December 31, 2008 and 2007 respectively. |
|
d. |
As
of December 31, 2008 and 2007, the cost of fixed assets includes borrowing
costs of NIS 27,071 thousands and NIS 1,007 thousands
capitalized to the cost of machinery and equipment for the years ended
December 31, 2008 and 2007, respectively. |
|
e. |
As
of December 31, 2008 and 2007, the cost of fixed assets includes payroll
costs of NIS 1,987 thousands and NIS 2,168 thousands capitalized to
the cost of machinery and equipment for the years ended December 31, 2008
and 2007, respectively. |
|
f. |
For
details of rights in lands see note 6 as follows. |
|
The
Companys real estate is partly owned and partly leased and some lease fees have
been capitalized. The leasehold rights are for 49-57 year periods ending in the years
2008 to 2059, with options to extend for an additional 49 years. |
|
Details
as of December 31, 2008: |
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land owned |
|
|
| 50,226 |
|
|
Property under capitalized lease (lease rights for the period ending on 2059). | | |
| 24,438 |
|
|
Property under non-capitalized lease (lease rights for different periods ending in 2049). | | |
| 11,906 |
|
|
|
| |
|
| | |
| 86,570 |
|
|
|
| |
|
Presented
in the balance sheets as follows: |
|
|
December 31
|
|
|
2008
|
2007
|
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
Fixed assets |
|
|
| 50,226 |
|
| 45,172 |
|
|
Expenditure for lease | | |
| 36,344 |
|
| 34,900 |
|
|
|
| |
| |
|
| | |
| 86,570 |
|
| 80,072 |
|
|
|
| |
| |
F - 39
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 7 |
|
OTHER INTANGIBLE ASSETS: |
|
a. |
Composition
and changes are as follows: |
|
Software
|
Order backlog
|
Goodwill
|
Portfolio of
Customers
|
Total
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Balance at January 1, 2008 | | |
| - |
|
| - |
|
| - |
|
| 4,147 |
|
| 4,147 |
|
Purchase of intangible assets | | |
| 178 |
|
| - |
|
| - |
|
| 1,750 |
|
| 1,928 |
|
Initial Consolidation | | |
| 1,199 |
|
| 3,082 |
|
| 599 |
|
| 29,095 |
|
| 33,975 |
|
|
| |
| |
| |
| |
| |
Balance at December 31, 2008 | | |
| 1,377 |
|
| 3,082 |
|
| 599 |
|
| 34,992 |
|
| 40,050 |
|
|
| |
| |
| |
| |
| |
| | |
Cost | | |
Balance at January 1, 2007 | | |
| - |
|
| - |
|
| - |
|
| 4,147 |
|
| 4,147 |
|
|
| |
| |
| |
| |
| |
Balance at December 31, 2007 | | |
| - |
|
| - |
|
| - |
|
| 4,147 |
|
| 4,147 |
|
|
| |
| |
| |
| |
| |
| | |
Accumulation amortization and impairment: | | |
Balance at January 1, 2008 | | |
| - |
|
| - |
|
| - |
|
| 2,569 |
|
| 2,569 |
|
Deduction | | |
| 334 |
|
| 3,082 |
|
| |
|
| 1,799 |
|
| 5,215 |
|
Initial Consolidation | | |
| 747 |
|
| - |
|
| - |
|
| - |
|
| 747 |
|
|
| |
| |
| |
| |
| |
Balance at December 31, 2008 | | |
| 1,081 |
|
| 3,082 |
|
| - |
|
| 4,368 |
|
| 8,531 |
|
|
| |
| |
| |
| |
| |
| | |
Accumulation amortization and impairment: | | |
Balance at January 1, 2007 | | |
| - |
|
| - |
|
| - |
|
| 1,864 |
|
| 1,864 |
|
Deduction | | |
| - |
|
| - |
|
| - |
|
| 705 |
|
| 705 |
|
|
| |
| |
| |
| |
| |
Balance at December 31, 2007 | | |
| - |
|
| - |
|
| - |
|
| 2,569 |
|
| 2,569 |
|
|
| |
| |
| |
| |
| |
| | |
Amortized cost: | | |
December 31, 2008 | | |
| 296 |
|
| - |
|
| 599 |
|
| 30,624 |
|
| 31,519 |
|
|
| |
| |
| |
| |
| |
December 31, 2007 | | |
| - |
|
| - |
|
| - |
|
| 1,578 |
|
| 1,578 |
|
|
| |
| |
| |
| |
| |
|
b. |
Amortization
of intangible assets is presented in the statement of income under the
following items: |
|
|
Year ended December 31
|
|
|
2008
|
2007
|
|
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
| 970 |
|
| - |
|
|
Cost of sales | | |
| 3,082 |
|
| - |
|
|
General and administrative expenses | | |
| 1,163 |
|
| 705 |
|
|
c. |
Additional
information: |
|
The
Group has a list of customers that was created internally. This list is a significant
asset for the group, but at the same time is not recognized as an asset in the groups
financial statements, since the list, which was created internally, does not meet the
criteria for asset recognition. |
|
As
for testing the impairment of other intangible assets see note 2L above. |
F - 40
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 8 |
|
FIINANCIAL
LIABILITIES: |
|
|
December 31
|
|
|
2008
|
2007
|
|
|
NIS in thousands
|
|
|
Series IV
|
Series III
|
Series II
|
Series I
|
Series II
|
Series I
|
|
|
|
|
|
|
|
|
|
Balance * |
|
|
| 235,557 |
|
| 190,541 |
|
| 158,559 |
|
| 7,422 |
|
| 182,052 |
|
| 14,098 |
|
|
Less - current maturities | | |
| - |
|
| - |
|
| 31,712 |
|
| 7,422 |
|
| 30,342 |
|
| 7,049 |
|
|
|
| |
| |
| |
| |
| |
| |
|
| | |
| 235,557 |
|
| 190,541 |
|
| 126,847 |
|
| - |
|
| 151,710 |
|
| 7,049 |
|
|
|
| |
| |
| |
| |
| |
| |
|
Distribution according to repayment dates as of December 31, 2008: |
|
|
Nis in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st year - Current maturity |
|
|
| 39,134 |
|
|
2nd year | | |
| 92,142 |
|
|
3rd year | | |
| 92,142 |
|
|
4th year | | |
| 92,142 |
|
|
5th year | | |
| 92,144 |
|
|
6th year and forward | | |
| 184,375 |
|
|
|
| |
|
| | |
| 592,079 * |
|
|
|
| |
|
* |
The
aforementioned detailed balance does not include deferred issuance expenses in the amount
of NIS 1,179 thousands (as of December 31, 2007 NIS 625 thousand) which were
deducted from the bonds balance. |
|
The
balance of the notes as of December 31, 2008 is redeemable in one installment, due
in June 2009. The installment amounting to 6.66% of the original par value of the notes,
which is NIS 105,055 thousands, in December 2008 terms; the unpaid balance of the
notes bears annual interest of 3.8%, payable annually each June. The notes principal
and interest are linked to the Israeli known CPI (base CPI of February 1992). |
|
2) |
Series
II December 2003 |
|
The
balance of the notes as of December 31, 2008 is redeemable in 5 equal, annual
installments due in December of each of the years 2009-2013; the unpaid balance of the
notes bears annual interest of 5.65%, payable annually each December. The notes principal
and interest are linked to the Israeli known CPI (based CPI of November 2003). |
|
3) |
Series
III and IV July August 2008 |
|
On
July 14, 2008 the Company contemplated a public offering pursuant to the shelf prospectus
published by the Company in Israel on May 26, 2008 of two new series of debentures. The
Company has offered an aggregate principal amount of NIS 187,500 thousands of debentures
(Series 3 CPI linked) issued in return for approximately NIS 187,500 thousands
bearing an interest rate of 4.65% and payable annualy each on July 10th of the
years 2010-2018. In addition the company has offered an aggregate principal amount of NIS
120,560 thousands of (Series 4) debentures issued in return for approximately NIS 120,560
thousands bearing an interest rate of 7.45% and payable annualy each on July 10th of
the years 2010-2015. |
F - 41
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 8 |
|
NOTES AND
OTHER LONG-TERM LIABILITIES: (cont.) |
|
3) |
Series
III and IV July August 2008 (cont.) |
|
The
net proceeds of the offering net of issue expenses are NIS 306,000 thousands. |
|
On
August 14, 2008 the Company raised of (Series 4) debentures according to the shelf
prospectus published by the Company in Israel on May 26, 2008. The company issued NIS
114,997 thousands of Series 4 debentures issued in return for approximately NIS 119,800
thousands bearing an interest rate of 7.45%. The net proceeds of the offering net of
issue expenses are NIS 119,167 thousands. |
|
4) |
As
of December 31, 2008 the balance of the notes amounts to NIS 554,124
thousands, is after deduction of issuance costs. |
|
b. |
Credit
from bank and others |
|
1) |
Composition
of financial liabilities measuring at depreciated balance: |
|
Yearly
Interest Rate
|
Current Liabilities
As of December 31
|
Non-Current Liabilities
As of December 31
|
Total
|
|
As of December 31
|
|
31/12/08
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
|
%
|
NIS in thousands
|
NIS in thousands
|
NIS in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks: |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Credit from banks | | |
| 3.8%-4.5 |
% |
| 77,655 |
|
| 143,015 |
|
| - |
|
| - |
|
| 77,655 |
|
| 143,015 |
|
| | |
Loans: | | |
linked to the CPI | | |
| 3.8%-5.65 |
% |
| 11,060 |
|
| - |
|
| 24,212 |
|
| - |
|
| 35,272 |
|
| - |
|
| | |
Unlinked | | |
| 3.8%-7.45 |
% |
| 26,275 |
|
| 5,384 |
|
| 97,698 |
|
| 28,127 |
|
| 123,973 |
|
| 33,511 |
|
|
| |
| |
| |
| |
| |
| |
| |
Total financial liabilities measured at amortized cost | | |
| |
|
| 114,990 |
|
| 148,399 |
|
| 121,910 |
|
| 28,127 |
|
| 236,900 |
|
| 176,526 |
|
|
| |
| |
| |
| |
| |
| |
| |
|
2) |
Distribution
according to repayment dates as of December 31, 2008: |
|
|
NIS in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st year - Current maturities of long-term loans |
|
|
| 37,335 |
|
|
|
| |
|
2nd year | | |
| 36,096 |
|
|
3rd year | | |
| 36,028 |
|
|
4th year | | |
| 31,123 |
|
|
5th year | | |
| 15,122 |
|
|
6th year and forward | | |
| 3,541 |
|
|
|
| |
|
| | |
| 159,245 |
|
|
|
| |
|
c. |
Financial
Parameters and Covenants |
|
The
Company has no financial covenants vis-à-vis the banks. However, in relation to
long-term loans to the bank, from a company that was associated until August 31, 2008,
and that was consolidated for the first time on September 1, 2008, whose balance as at
December 31, 2008, amounts to a total sum of NIS 19,316 thousands, the consolidated
subsidiary undertook toward the bank, inter alia, that the ratio of tangible shareholders equity
of the company to the balance sheet total will not fall below 19%. |
|
The
said consolidated subsidiary fails to meet the aforesaid financial covenants, yet the
bank nevertheless agreed, true to the balance sheet date, to delay the exercise of its
rights pursuant to the letter of undertaking, provided that the company will forward the
bank signed financial statements for the year 2008, by May 31, 2009, and will make
available to the bank by that date, collateral and security at a sum that will not fall
below the sum necessary in order to supplement the tangible shareholders equity,
until such time that the financial covenants are met. The Company believes that the
consolidated subsidiary will meet these covenants. |
|
d. |
Other
financial liabilities |
|
Other financial liabilities include capital note from an associated company. The
capital note is unlinked and interest free. The associated company intend to demand the
repayment of the capital note till March 31, 2009, and due to the abovementioned
intention, as of December 31, 2008, the capital note was classified to current
liabilities . |
F - 42
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 9 |
|
EMPLOYEE
BENEFITS |
|
|
As of December 31
|
|
|
2 0 0 8
|
2 0 0 7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Employment Benefits at defined benefit plan: |
|
|
| |
|
| |
|
|
Benefits to retirees | | |
| 7,632 |
|
| 8,117 |
|
|
Severance pay and retirement liability (asset) | | |
| 3,560 |
|
| (861 |
) |
|
|
| |
| |
|
| | |
| 11,192 |
|
| 7,256 |
|
|
|
| |
| |
|
Other long term employee benefits: | | |
|
Benefits for unused vacation | | |
| 16,360 |
|
| 11,603 |
|
|
|
| |
| |
|
| | |
|
Severance pay benefits | | |
| 3,734 |
|
| 2,645 |
|
|
|
| |
| |
|
| | |
| 31,286 |
|
| 21,504 |
|
|
|
| |
| |
|
Short term employee benefits: | | |
|
Salaries and wages, payroll and social benefits | | |
| 27,711 |
|
| 17,722 |
|
|
Profit-sharing and bonus plans | | |
| 15,766 |
|
| 10,522 |
|
|
|
| |
| |
|
| | |
| 43,477 |
|
| 28,244 |
|
|
|
| |
| |
|
Stated in the balance sheet as follows: | | |
|
Employee benefit assets: | | |
|
Current assets | | |
| - |
|
| - |
|
|
Non-current assets | | |
| 624 |
|
| 861 |
|
|
|
| |
| |
|
| | |
| 624 |
|
| 861 |
|
|
|
| |
| |
|
Employee benefit liabilities: | | |
|
Current liabilities - part of other payables and | | |
|
accrued expenses -see note 13 d (2) | | |
| 43,477 |
|
| 28,244 |
|
|
Non-current liabilities | | |
| 31,910 |
|
| 22,365 |
|
|
|
| |
| |
|
| | |
| 75,387 |
|
| 50,609 |
|
|
|
| |
| |
|
b. |
Post
Employment Benefits |
|
Plans for Severance pay obligations |
|
Labor
laws and the severance pay law in Israel and abroad require companies in the Group to pay
severance benefits to employees who are dismissed, resign or retire from their employment
under different specific circumstances. Liabilities for employee severance benefits are
calculated pursuant to the employment agreement in effect at the time of their employment
and based on the employees wages which, in managements opinion, creates
entitlement to the severance benefits, taking into consideration the number of years of
employment. |
|
The
Company and its subsidiaries have an approval from the Ministry of Labor and Welfare in
accordance with Section 14 of the Severance Pay Law, 1963, pursuant to which its regular
deposits with pension funds and/or insurance policies, exempt it from any further
obligation to employees, in respect of whom the aforementioned deposits were made. The
Group deposits 8.33%-11.33% of the monthly wages of its employees in different benefit
plans. The Groups has no legal or implied obligation to make additional payments if the
plan will not have sufficient assets to pay the entire employee benefits relating to the
employees service during current and past periods. The total amount of the expenses
recognized in the statement of income in respect of defined benefit plans in the year
that ended on December 31, 2008 is NIS 15,889 thousands (2007 NIS 15,249
thousands). |
F - 43
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 9 |
|
EMPLOYEE
BENEFITS: (cont.) |
|
b. |
Post
Employment Benefits (cont.) |
|
(2) |
Plans
for defined deposit |
|
Labor
laws and the severance pay law in Israel and abroad require companies in the Group to pay
severance benefits to employees who are dismissed, resign or retire from their employment
under different specific circumstances. Liabilities for employee severance benefits are
calculated pursuant to the employment agreement in effect at the time of their employment
and based on the employees wages which, in managements opinion, creates
entitlement to the severance benefits, taking into consideration the number of years of
employment. |
|
The
defined benefit liability was measured using actuarial assessments. The present value of
the defined benefit liability and the related costs of current service and past service
were measured using the projected unit credit method. |
|
Assumptions
regarding future mortality rates are based on statistic data and mortality tables
published by the Commissioner of the Capital Market in the Ministry of Finance in Pension
Circular 2007-3-6, which are adjusted as of December 31, 2001. The average life
expectancy for men that retired at the age of 67 is 17.4 while the average life
expectancy for women that retired at the age of 62-64 is 22.5-24.3. |
|
The
projected rate of return on plan assets is based on a nominal rate of return that varies
according to the type of fund. |
|
(2) |
Changes
in the current value of the liability in respect of a defined benefit plan |
|
|
For the year ended December 31
|
|
|
2008
|
2007
|
|
|
NIS in thousand
|
|
|
|
|
|
|
|
|
|
Open Balance |
|
|
| 2,440 |
|
| 1,982 |
|
|
Current service cost | | |
| 505 |
|
| 224 |
|
|
Interest rate cost | | |
| 318 |
|
| 80 |
|
|
Actuarial losses | | |
| 260 |
|
| 336 |
|
|
Paid-up benefits | | |
| (1,148 |
) |
| (182 |
) |
|
Liabilities assumed in business combinations | | |
| 19,646 |
|
| - |
|
|
Other | | |
| (28 |
) |
| - |
|
|
|
| |
| |
|
Closing balance | | |
| 21,993 |
|
| 2,440 |
|
|
|
| |
| |
|
(3) |
Changes
in the fair value of plan assets |
|
|
2008
|
2007
|
|
|
NIS in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
| 2,440 |
|
| 1,473 |
|
|
Projected return on plan assets | | |
| 231 |
|
| 60 |
|
|
Actuarial profits (losses) | | |
| (1,478 |
) |
| 604 |
|
|
Deposits by the employer | | |
| 799 |
|
| 429 |
|
|
Paid-up benefits | | |
| (851 |
) |
| (126 |
) |
|
Assets acquired in business combinations | | |
| 16,950 |
|
| - |
|
|
Other | | |
| (282 |
) |
| - |
|
|
|
| |
| |
|
Closing balance | | |
| 17,809 |
|
| 2,440 |
|
|
|
| |
| |
F - 44
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 9 |
|
EMPLOYEE
BENEFITS: (cont.) |
|
c. |
Other
long-term employee benefits |
|
Other
long-term employee benefits are benefits which are expected to be utilized or which are
payable during a period greater than 12 months from the end of the period in which the
entitling service was provided. |
|
Other
employee benefits in the Company include liabilities in respect of vacation pay. These
benefits are included in the statement of income in accordance with the Projected Unit
Credit Method, while using actuarial assessments at each balance sheet date. The current
value of the Companys liability for vacation pay is determined by discounting the
projected future cash flows from the plan based on market yields of government bonds,
which are stated in the currency in which vacation pay benefits will be paid, whose terms
to maturity are identical to the projected vacation payment dates. |
|
Profits
and losses are carried to the income statement as incurred. Past service cost is
immediately recognized in the Companys financial statements. |
|
(2) |
Changes
in the current value of the liability in respect of other long-term employee
benefits |
|
|
2008
|
2007
|
|
|
NIS in thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
| 19,720 |
|
| 18,913 |
|
|
Current service cost | | |
| (183 |
) |
| 1,038 |
|
|
Interest rate cost | | |
| 1,159 |
|
| 1,034 |
|
|
Actuarial profits | | |
| (613 |
) |
| - |
|
|
Paid-up benefits | | |
| (1,484 |
) |
| (1,265 |
) |
|
Liabilities assumed in business combinations | | |
| 5,393 |
|
| - |
|
|
|
| |
| |
|
Closing balance | | |
| 23,992 |
|
| 19,720 |
|
|
|
| |
| |
|
d. |
Main
actuarial assumptions as of the balance sheet date of post employment benefits
and other long term benefits |
|
|
As of December 31
|
|
|
2008
|
2007
|
|
|
%
|
%
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
| 6.07 |
% |
| 3.6 |
% |
|
Projected rates of return regarding asset plan | | |
| 4.1%-6.2 |
% |
| 3.9%-5.95 |
% |
|
Projected rates of salary increases | | |
| 4.25 |
% |
| 4.25 |
% |
|
Churn and departure rates | | |
| 2%-36 |
% |
| 4.5%-25 |
% |
|
e. |
Severance
pay benefits |
|
The
benefits include liability in respect of retirement grant to the companys CEO (see
note 12c) and include early retirement liability. |
F - 45
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 9 |
|
EMPLOYEE
BENEFITS: (cont.) |
|
f. |
Amounts
recognized in the statement of income in respect of employee benefit plans (in
respect of post employment benefits and other long term benefits) |
|
|
For the year ended December 31
|
|
|
2008
|
2007
|
|
|
NIS in thousand
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
| 406 |
|
| 1,089 |
|
|
Interest rate cost | | |
| 1,494 |
|
| 1,114 |
|
|
Projected yield on the plan's assets | | |
| (232 |
) |
| (63 |
) |
|
Effect of any reduction or settlement | | |
| (1,935 |
) |
| (1,289 |
) |
|
|
| |
| |
|
| | |
| (267 |
) |
| 851 |
|
|
|
| |
| |
|
| | |
|
The expense was included in the following items: | | |
|
| | |
|
Cost of sales | | |
| (1,425 |
) |
| 187 |
|
|
Selling expenses | | |
| 97 |
|
| (79 |
) |
|
Administrative and general expenses | | |
| (299 |
) |
| (196 |
) |
|
Financing expenses | | |
| 1,263 |
|
| 1,051 |
|
|
Capitalized amounts | | |
| 97 |
|
| (112 |
) |
|
|
| |
| |
|
| | |
| (267 |
) |
| 851 |
|
|
|
| |
| |
NOTE 10 |
|
SHAREHOLDERS EQUITY: |
|
Composed
of ordinary registered shares of NIS 0.01 par value, as follows: |
|
|
|
December 31
|
|
|
|
2008
|
2007
|
|
|
Authorized
|
Issued and paid
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares of NIS 0.01 |
|
|
| 20,000,000 |
|
| 5,060,774 |
|
| 5,060,774 |
|
|
|
| |
| |
| |
|
Amount in NIS | | |
| 200,000 |
|
| 50,608 |
|
| 50,608 |
|
|
|
| |
| |
| |
|
The
shares are traded on stock exchanges in Tel-Aviv and in the U.S. (AMEX). The
quoted prices per share, as of December 31, 2008 are NIS 109.1 and $ 28.5 (NIS 108.4),
respectively. |
|
As
part of the Companys arrangement for the financing of the acquisition of the new
machine for the manufacture of packaging paper in November 2007, the Company performed a
private allotment of 1,012,585 ordinary shares of NIS 0.01 par value of the Company,
which, as of the date of allotment, accounted for 20% of the issued share capital of the
Company against an investment in the total sum of NIS 213 million (hereinafter in this
section: the raised amount). About 60% of the shares (607,551 shares) were
allotted to the shareholders in the Company, Clal Industries and Investments and Discount
Investments (hereinafter: the special offerees), in accordance with the
pro-rata holdings in the Company, and 40% of the shares (405,034 shares) were offered by
way of a tender to institutional entities and private entities. The price per share for
institutional entities and private entities as determined in the tender was NIS 210.
Accordingly, the price per share for Clal Industries and Investments and Discount
Investments considering the amount of shares offered to Clal Industries and Investments
and Discount Investments, was set at NIS 211.05 (the price per share in the tender plus a
rate of 0.5%). |
F - 46
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 10 |
|
SHAREHOLDERS EQUITY: (cont.) |
|
The
company paid the distributors a rate of 1.2% of the total consideration received from
institutional entities and private entities, that is, a sum of NIS 1,021 thousands. |
|
The
share capital was increased as a result from this issuance in amounts of NIS 10 thousands
and the capital surplus that divided from the issuance in deduction of cost issuance as
mentioned above amounts of NIS 211,635 thousands. |
|
b. |
Employee
stock option plans: |
|
1) |
The
2001 plan for senior officers in the Group |
|
On
April 2, 2001, the Companys board of directors approved a stock option plan
for senior officers in the Group (hereafter the 2001 plan for senior officers).
Under this plan, 194,300 options were allotted on July 5, 2001 without consideration.
Each option can be exercised to purchase one ordinary share of NIS 0.01 par value of the
Company. The options are exercisable in four equal annual batches. The blocking period of
the first batch is two years, commencing on the date of grant; the blocking period of the
second batch is three years from the date of grant, and so forth. Each batch is
exercisable within two years from the end of the blocking period. |
|
The
exercise price of the options granted as above was set at NIS 217.00, linked to the
CPI, on the basis of the known CPI on April 2, 2001. The exercise price for each
batch is determined as the lesser of the aforementioned exercise price or the average
price of the Companys shares as quoted on the Tel-Aviv Stock Exchange (hereafter -
the Stock Exchange) during the thirty trading days preceding to the effective date of
each batch, less 10%. The 2001 plan for senior officers expired during July 2007. |
|
In
2007, 35,425 options, were exercised under the 2001 plan for senior officers, and 15,466
shares of NIS 0.01, were issued following the exercise of the options, as above. |
|
This
plan is designed to be governed by the terms stipulated by Section 102 of the Israeli
Income Tax Ordinance. Inter alia, these terms provide that the Company is allowed to
claim, as an expense for tax purposes, the amounts credited to the employees as a benefit
in respect of shares or options granted under the plan. |
|
The
amount allowed as an expense for tax purposes, at the time the employee utilizes such
benefit, is limited to the amount of the benefit that is liable to tax as labor income,
in the hands of the employee; all being subject to the restrictions specified in Section
102 of the Income Tax Ordinance. |
|
Since
the Company did not recognize the expense in its books (as part of selecting the relief
allowed by IFRS 1, under which the provisions of IFRS 2, regarding options which were
granted before November 7, 2002 and which vested prior to the transition date, shall not
be implemented retroactively see note 2a(2)), the Company credited the tax saving
derived from the exercise of benefits by employees in the 2007 to capital surplus. |
|
2) |
The
2008 plan for senior officers in the Group |
|
In
January 2008, the Board of Directors of the Company approved a program for the allotment,
for no consideration, of non marketable options to the CEO of the company, to employees
and officers of the company and investees. In the context of the program, an allotment of
285,750 options was approved, of which 40,250 options were to the CEO of the company,
135,500 to management of the subsidiaries and 74,750 to management of the affiliates. |
F - 47
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 10 |
|
SHAREHOLDERS EQUITY: (cont.) |
|
b. |
Employee
stock option plans: (cont.) |
|
2) |
The
2008 plan for senior officers in the Group (cont.) |
|
The granting date of the options was determined to January-March 2008, pursuant
to the restrictions of Section 102 (equity track) of the Income Tax Ordinance.
|
|
On
May 11, 2008, the board of directors of the company approved the allotment to a
trustee of the balance of the options that had not been allotted through that date, in
the amount of 35,250 options as a pool for the future grant to officers and employees of
associated companies, subject to the approval of the board of directors. |
|
On January 9, 2009, 34,000 options have been allotted from the allotted options
of the trustee to associated company's officers. On December, 31, 2008, there are
1,250 options existing at the trustee. |
|
Each
option is exercisable into one ordinary share of the company with NIS 0.01 par value
against the payment of an exercise increment in the amount of NIS 223.965. The options
will vest in installments as follows: 25% of the total options will be exercisable from
January 14, 2009; 25% of the total options will be exercisable from January 14, 2010; 25%
of the total options will be exercisable from January 14, 2011; and 25% of the total
options will be exercisable from January 14, 2012. The vested options are exercisable
through January 14, 2012, 2013, 2014 for the first and second, third and fourth portions,
respectively. |
|
The
cost of the benefit embedded in the allotted options as above, on the basis of the fair
value as of the date they are granted, was approximated to be the amount of approximately
NIS 13.5 million. This amount was charged to the statement of operations over the vesting
period. The debt for the grant to officers of the affiliates will be paid in cash.
The
fair value of the options granted as aforementioned was estimated by applying the Black
and Scholes model. In this context, the effect of the terms of vesting will not taken
into account by the company, other than the market condition of fair value of the capital
instruments granted. |
|
The
parameters which were used for implementation of the model are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share price (NIS) |
|
|
| 245.20-217.10 |
|
|
Exercise price (NIS) | | |
| 223.965 |
|
|
Anticipated volatility (*) | | |
| 27.04 |
% |
|
Length of life of the options (years) | | |
| 3-5 |
|
|
Non risk interest rate | | |
| 5.25 |
% |
|
(*) |
The
anticipated volatility is determined on the basis of historical fluctuations of
the share price of the company. The average length of life of the option was
determined in accordance with managements forecast as to the holding
period by the employees of options granted to them, in consideration of their
functions in the company and past experience of the company with employees
leaving. |
|
3) |
Additional
details of options granted to employees |
|
|
2008
|
2007
|
|
|
No. Of options
|
Weighted average
the of exercise price
|
No. Of options
|
Weighted average
of the exercise price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted to employees which: |
|
|
| |
|
| |
|
| |
|
| |
|
|
Outstanding at the start of the period | | |
| - |
|
| |
|
| 35,425 |
|
| 127.35 |
|
|
Granted | | |
| 250,500 |
|
| 223.96 |
|
| - |
|
| |
|
|
Forfeited | | |
| (4,250 |
) |
| 223.96 |
|
| - |
|
| |
|
|
Exercised | | |
| - |
|
| |
|
| (35,425 |
) |
| 119.76 |
|
|
Expired | | |
| - |
|
| |
|
| - |
|
| |
|
|
|
| |
| |
| |
| |
|
Outstanding at the end of the period | | |
| 246,250 |
|
| 223.96 |
|
| - |
|
| |
|
|
|
| |
| |
| |
| |
F - 48
HADERA PAPER LTD
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 10 |
|
SHAREHOLDERS EQUITY: (cont.) |
<