Geographical Net Sales
Net sales split in 2018
In May 2019, Glaston published its reviewed strategy and updated its financial targets for the strategy period 2018–2021 as a result of its acquisition of Bystronic glass.
Our overall strategic goal remains unchanged: our ambition is to be the industry’s innovative technology leader, realizing its customers’ highest ambitions in glass.
The updated financial targets are:
- Annual growth of net sales exceeding market growth* (CAGR)
- Comparable operating margin (EBITA)** above 8% at the end of the strategy period. EBITA excludes amortizations of purchase price allocations.
- Comparable return on capital employed (ROCE)** of more than 14% at the end of the period
*Flatglassmarket growth over the cycle.
**Calculation of key ratios:
Comparable EBITA excluding amortizations of purchase price allocations: Result before amortization of purchase price allocations +/- items affecting comparability
Comparable return on capital employed, % (Comparable ROCE): (Profit / loss before taxes + amortization of purchase price allocations +/- items affecting comparability + financial expenses x 100) / (Equity + interest-bearing liabilities, average of 1 January and end of the reporting period)
GLASTON’S OUTLOOK FOR 2019 UNCHANGED (published in Glaston’s Q3/2019 interim report on 28 October 2019)
Glaston Corporation expects that 2019 comparable pro forma EBITA will be at the 2018 level or will improve slightly on it (2018 comparable pro forma EBITA EUR 11.5 million).
At the end of 2018, Bystronic glass had a significant number of orders that were recognized as revenue in the second and third quarters of 2019, thereby improving Bystronic glass’ actual net sales and profitability. Bystronic glass’ fourth quarter net sales and profitability will be significantly lower than in the early part of the year. The Glaston segment’s result is skewed towards the second half of the year.
Outlook for 2019 as in Glaston’s Q1/2019 Interim Report, published on 29 April 2019:
Bystronic glass will be consolidated as part of Glaston Corporation from 1 April 2019 and consequently, Glaston will have two reporting segments: Glaston and Bystronic glass. The Company estimates the acquisition to be earnings enhancing, also in terms of comparable earnings per share when compared to the situation excluding the acquisition. As stated in the stock exchange release, published on 12 February 2019, the Company will disclose information regarding its 2019 full-year outlook at a later stage. In addition, Glaston plans to publish Glaston’s and Bystronic glass’ unaudited combined financial information for 2018 and the first quarter of 2019 at the latest in connection with the planned rights issue, which is expected to begin during the second quarter of 2019.
Some of Glaston’s (excluding Bystronic glass) orders received in the latter part of 2018 will be delivered in the second half of the year, which will shift net sales and operating result to later than normal.
Glaston’s Outlook 2019, as published in Glaston’s 2018 Financial Statement Bulletin on 12 February 2019:
The company’s business is seasonal and, historically, the first quarter of the year is generally the weakest and the fourth quarter the strongest. Net sales and comparable operating profit are expected to be low for the first quarter of 2019, due to the low number of new orders received in the third quarter and the beginning of the fourth quarter of last year.
Deviating from Glaston’s disclosure policy and due to the timetable of the Bystronic glass acquisition, Glaston will disclose information on its outlook for the whole of 2019 at a later stage.
Outlook as in Glaston’s January-September 2018 Interim Report, published on 31 October 2018:
Glaston’s outlook is unchanged. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.0 million according to the new revenue recognition standard IFRS 15).
Outlook as in Glaston’s January-June 2018 Half-year report on 9 August 2018:
The order intake in the early part of the year and the positive market development create good conditions for profitable growth in 2018. Due to the weighting of the order intake forecast towards the second half of the year, the operating profit for the final quarter of the year is expected to be significantly better than the other quarters.
We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.0 million according to the new revenue recognition standard IFRS 15).
Outlook as in Glaston’s January-March 2018 Interim Report, published on 23 April 2018:
Activity in the glass processing market was good from the beginning of 2018. The development of Glaston’s order intake took a turn for the better as the end of the quarter approached, and the positive market development is expected to continue. The strong growth expectations for the world economy support this view. Customers continue to take time over their investment decisions, which may cause delays in orders and fluctuations in quarterly order intake.
The steady order intake of the previous six months and positive market development create good conditions for profitable growth in 2018. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.0 million according to the new revenue recognition standard IFRS 15).
As in Glaston’s Financial Statements Bulletin, published on 8 February 2018:
The development of the glass processing market gradually improved during 2017, and Glaston expects the positive development to continue in the current year. The strong growth expectations for the world economy support this view. Customers continue to take time over their investment decisions, which may cause delays in orders and fluctuations in quarterly order intake.
Although the order book at the end of 2017 was lower than the previous year, the good order intake of the second half of the year and positive market development create good conditions for profitable growth in 2018. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.4 million.)
As in Glaston’s January-September 2017 Interim Report, published on 30 October 2017:
In the third quarter, the development of the glass processing market continued to be mainly positive. The prolonged uncertainty in the global economy and increasing political tensions in some regions are impacting customers’ willingness to invest, and decision-making times have lengthened. There are no visible signs of a permanent change in the market, however. We expect the positive market development to continue.
Glaston’s January–September comparable operating result was EUR 2.8 million, i.e. at the same level as the whole of 2016. Previously, the full-year 2017 comparable operating result was expected to improve from 2016.
Glaston revises its outlook and now expects the full-year 2017 comparable operating result to be EUR 4.0–5.5 million. (Previous outlook: We expect the full-year comparable operating result to improve from 2016. In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Half Year Financial Report published on 10 August 2017:
After a quiet first quarter, the glass processing market became more active to some extent in the second quarter. The prolonged uncertainty in the global economy and increasing political tensions in some regions are impacting customers’ willingness to invest, and decision-making times have lengthened. There are no visible signs of a permanent change in the market, however. We expect the positive market development to continue.
Good order book at start of the year, positive market development and the cost-saving measures undertaken create good conditions for the development of operations in 2017. We expect the full-year comparable operating result to improve from 2016. (In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Interim Report published on 26 April 2017:
In the first quarter of 2017, the glass processing market was quiet, as anticipated. The prolonged uncertainty in the global economy and increasing political tensions in some regions will impact customers’ willingness to invest, and decision-making times have lengthened. There are no visible signs of a permanent change in the market, however. We expect that positive market development will still continue.
A higher order book than the previous year, positive market development and the cost-saving measures undertaken create good conditions for the development of operations in 2017. We expect the full-year comparable operating result to improve from 2016. (In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Financial Statements Bulletin, published on 10 February 2017:
The development of the glass processing market was positive at the end of 2016. There are currently no signs of a weakening of the market, and positive development is expected to continue. Despite good demand, customers are often taking longer to make their investment decisions due to the uncertain global economy and political developments.
A higher order book than the previous year, positive market development and the cost-saving measures undertaken create good conditions for the development of operations in 2017. For the first quarter, a relatively small number of deliveries are scheduled, as a result of which the comparable operating result for the period is expected to be lower than the corresponding period a year earlier.
Glaston expects the full-year comparable operating result to improve from 2016. (In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Financial Statement Bulletin 2015, published on 11 February 2016:
In the final quarter of 2015, signs of caution appeared in Glaston markets. Looking at 2016, we expect the overall market to develop positively but cautiously.
We expect the North American market to continue to develop well also in 2016. We expect the EMEA area to develop positively. In Asia, we expect the Chinese market to remain stable at its current level, and we expect growth in the Pacific area.
The heat treatment machines market will continue to be reasonably subdued. We expect that demand for new heat treatment machines will be weaker than the previous year during the early part of the year. Despite a challenging market outlook, Glaston’s position in the market is good. Our wide product range corresponds excellently with customers’ needs. As the technology leader, we will continue our goal-oriented development work, in which digitalisation and new technologies will present new business opportunities.
The outlook for the services market is cautiously positive. Our growth objectives are supported by Glaston’s strong market position, comprehensive service network and up-to-date product range.
Due to the subdued market situation and reduced order book, we expect 2016 net sales to be slightly below the 2015 level. We expect the operating profit, excluding non-recurring items, to be at the 2015 level. (In 2015 net sales were EUR 123.4 million and operating profit, excluding non-recurring items, was EUR 6.1 million).
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*) return of capital
According to Glaston’s dividend policy Glaston’s objective is to distribute annually a dividend or return of capital amounting to 30-50% of the company’s comparable earnings per share.
When determining the amounts and dates of payment of any future dividends or returns of capital the Board of Directors always takes the company’s financial position and future outlook into consideration. In addition, the dividend policy takes into account growth targets in line with strategy as well as financing requirements for growth.
Glaston Corporation is a public limited liability company organized under the laws of the Republic of Finland and domiciled in Helsinki, Finland. Glaston’s shares are publicly traded in the NASDAQ Helsinki Ltd. Small Cap in Helsinki, Finland. Glaston Corporation is the parent of Glaston Group and its registered office is at Lönnrotinkatu 11, 00120 Helsinki, Finland.
Glaston Group is an international glass technology company. Glaston is a one of the leading manufacturers of glass processing machines globally. Its product range and service network are the most extensive in the industry. The operations of the Glaston Group are organized in two reportable segments, which are Machines and Services. Supporting activities include head office operations.
The Board of Directors of Glaston Corporation has in its meeting on 8 February, 2018, approved these financial statements to be published. According to the Finnish Companies’ Act, the shareholders have a possibility to approve or reject or make a decision on altering the financial statements in a General Meeting to be held after the publication of the financial statements.
The consolidated financial statements of Glaston Group are prepared in accordance with International Financial Reporting Standards (IFRS), including International Accounting Standards (IAS) and Interpretations issued by the International Financial Reporting Interpretations Committee (SIC and IFRIC). International Financial Reporting Standards are standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the European Parliament and of the Council. The Notes to the Financial Statements are also in accordance with the Finnish Accounting Act and Ordinance and the Finnish Companies’ Act.
The consolidated financial statements include the financial statements of Glaston Corporation and its subsidiaries. The functional and reporting currency of the parent is euro, which is also the reporting currency of the consolidated financial statements. Functional currencies of subsidiaries are determined by the primary economic environment in which they operate.
The financial year of Glaston Group as well as of the parent and subsidiaries is the calendar year ending 31 December.
The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.
The figures in Glaston’s consolidated financial statements are mainly presented in EUR thousands. Due to rounding differences the figures presented in tables do not necessarily add up to the totals of the tables.
In addition to the standards and interpretations presented in the financial statements for 2017, the Group will adopt the following published standards, interpretations and changes to existing standards and interpretations in its 2018 financial statements or later.
IFRS 15 Revenue from Contracts with Customers (to be applied for the reporting periods beginning on 1 January 2018 or later)
IFRS 15 establishes a five-step model for the recognition of sales revenue arising from contracts with customers. Revenue is recognised in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods delivered or services rendered. The disclosure requirements are extended from the present.
In accordance with the principles of the new standard, Glaston will recognise the revenue from tailor-made glass processing deliveries over time. As a recognition practice, Glaston will apply the cost-to-cost method, i.e. the share of accumulated project costs compared to total estimated costs will be used as the degree of completion (progress towards the performance obligation under IFRS 15.39). Revenue recognition will take place over time as costs accumulate and are recognised for the project. Revenue recognition according to degree of completion will bring forward the timing of revenue recognition, and revenue recognition will be distributed over the entire period of a project more evenly than at present. In the balance sheet, the change will reduce the amount of works in progress in inventories.
Glaston will apply the network standard in full retrospectively from 1 January 2018, and will prepare a restated income statement and balance sheet for 2017.
IFRS 9 Financial Instruments (to be applied for the reporting periods beginning on 1 January 2018 or later)
IFRS 9 includes new guidance on the classification and measurement of financial assets, including a new expected credit loss model for calculating impairment on financial assets as well as new general hedge accounting requirements.
Under IFRS 9, financial assets are classified into three measurement categories: amortised cost, fair value through other comprehensive income items and fair value through profit and loss. The category is determined at original recognition. Glaston will apply the new standard on 1 January 2018.
The amendment of the standard does not affect the classification of the Group’s financial assets. The standard changes the calculation of impairment on the Group’s current receivables and the amount of credit loss provision, but the change has no significant impact on the consolidated financial statements.
IFRS 16 Leases (to be applied for the reporting periods beginning on 1 January 2019 or later)
IFRS 16 replaces the existing guidance IAS 17 Leases. Under IFRS 16, all lease contracts over 12 months in length are recognised in the lessee’s balance sheet. The lessee recognises in the balance sheet a right-of-use asset item, based on its right to use the said asset, and a lease liability item corresponding to the present value of the asset, based on the obligation to make the lease payments. From the lessor’s perspective, reporting will remain the same as at present under the existing standard, i.e. leases are still divided into finance leases and other leases.
The new lease standard will have an impact on the Company’s income statement, balance sheet and key figures. Under the new standard, Glaston will recognise in the balance sheet assets and liabilities covered by current premises and vehicle leases. In the income statement, the present rental expense will be removed and replaced by a depreciation of a right-of-use asset and an interest expense reported in financial expenses. Glaston will calculate the effects of the new standard during the next 12 months and will apply the new standard on the required application date.
Management estimates that the other published new IFRSs, IFRIC interpretations and changes to existing standards and interpretation will have no material affect on Glaston consolidated financial statements or the disclosure thereof.
The consolidated financial statements include the parent and its subsidiaries. Subsidiaries are companies in which the parent has, based on its holding, more than half of the voting rights directly or via its subsidiaries or over which it otherwise has control. Divested subsidiaries are included in the consolidated financial statements until the control is lost, and companies acquired during the reporting period are included from the date when the control has been transferred to Glaston. Acquisitions of subsidiaries are accounted for under the purchase method.
Associates, where the Group has a significant influence (holding normally 20 – 50 per cent), are accounted for using the equity method. The Group’s share of the associates’ net results for the financial year is recognized as a separate item in profit or loss. The Group’s interest in an associate is carried in the statement of financial position at an amount that reflects its share of the net assets of the associate together with goodwill on acquisition, if such goodwill exists. When the Group’s share of losses exceeds the carrying amount of associate, the carrying amount is reduced to nil and recognition of further losses ceases unless the Group is committed to satisfy obligations of the associate by guarantees or otherwise.
Other shares, i.e. shares in companies in which Glaston owns less than 20 percept of voting rights, are classified as available-for-sale financial assets and presented in the statement of financial position at fair value, or if the fair value cannot be measured reliably, at acquisition cost, and dividends received from them are recognized in profit or loss.
All inter-company transactions are eliminated as part of the consolidation process. Unrealized gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealized losses are eliminated in the similar way as unrealized gains, but only to the extent that there is no evidence of impairment.
Non-controlling interests are presented separately in arriving at the net profit or loss attributable to owners of the parent. They are also shown separately within equity. If the Group has a contractual obligation to redeem the share of the non-controlling interest with cash or cash equivalents, non-controlling interest is classified as a financial liability. The effects of the transactions made with non-controlling interests are recognized in equity, if there is no change in control. These transactions do not result in goodwill or gains or losses. If the control is lost, the possible remaining ownership share is measured at fair value and the resulting gain or loss is recognized in profit or loss. Total comprehensive income is attributed also to non-controlling interest even if this will result in the non-controlling interest having a deficit balance.
In the consolidated financial statements, the income statements, statements of comprehensive income and statements of cash flows of foreign subsidiaries have been translated into euros using the average exchange rates of the reporting period and the statements of financial positions have been translated using the closing exchange rates at the end of the reporting period.
The exchange difference arising from translating the income statements, statements of comprehensive income and statements of financial position using the different exchange rates is recognized as other comprehensive income and included in equity as cumulative exchange difference. Exchange differences arising from the translation of the net investments in foreign subsidiaries and associates in non-euro-area are also recognized in other comprehensive income and included in equity as cumulative exchange difference.
On the disposal of all or part of a foreign subsidiary or an associate, the cumulative amount or proportionate share of the exchange difference is reclassified from equity to profit or loss as a reclassification item in the same period in which the gain or loss on disposal is recognized.
In their own day-to-day accounting the Group companies translate transactions in foreign currencies into their own reporting or functional currency at the exchange rates prevailing on the dates of the transactions. At the end of the reporting period, the unsettled balances of foreign currency transactions are measured at the exchange rates prevailing at the end of the reporting period. Foreign exchange gains and losses arising from trade receivables are entered as adjustments of net sales and foreign exchange gains and losses related to trade payables are recorded as adjustments of purchases. Foreign exchange gains and losses arising from financial items are recorded as financial income and expenses.
Financial assets and liabilities of Glaston have been classified as financial assets and liabilities at fair value through profit or loss, loans and receivables, available-for-sale financial assets and financial liabilities measured at amortized cost.
A financial asset is derecognized from the statement of financial position when Glaston’s contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to an external party and the transfer fulfils the asset derecognition criteria of IAS 39.
A financial liability or a part of a financial liability is removed from the statement of financial position when the liability is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired.
Derivative Financial Instruments at Fair Value through Profit or Loss and Hedge Accounting
Derivative contracts are entered in the balance sheet at the time of acquisition at fair value and remeasured at fair value in the financial statements using the market prices at the end of the reporting period. Entries of the changes of derivatives are influenced by whether a derivative contract falls within the scope of hedge accounting.
Derivatives that do not meet the hedge accounting criteria are financial assets and liabilities acquired for trading and entered at fair value through profit and loss, and whose changes of value are recognised immediately through profit and loss. At the end of reporting period 2017, Glaston had open foreign exchange forward contracts. At the end of reporting period 2016, Glaston had electricity forward contracts.
When a hedging arrangement is entered into, the relationship between the item being hedged and the hedging instrument, as well as the objectives of the Group’s risk management are documented. The effectiveness of the hedging relationship is tested regularly and the effective portion is recognised, against the change in the fair value of the hedged item, in translation differences in equity, or in the revaluation reserve. The ineffective portion is recognised either in financial items or in other operating income and expenses, depending on its nature.
If the hedging accounting criteria are met, cash flow hedge accounting under IAS 39 is applied with respect to foreign exchange derivatives. During the reporting period 2017, hedge accounting was used to hedge accounts receivable from projects. In 2016, hedge accounting was not used. If the hedge accounting criteria are not met, the result of hedging instruments when hedging a commercial foreign exchange risk are recognised in profit and loss within other operating income or expenses.
Derivative instruments are included in the balance sheet in current assets and liabilities. Trade date accounting is used in recognising sales and purchases of derivatives.
Other Assets and Liabilities at Fair Value through Profit or Loss
Other assets and liabilities at fair value through profit or loss can include mainly Glaston’s current investments, which are classified as held for trading, i.e. which have been acquired or incurred principally for the purpose of selling them in the near future. Other assets and liabilities at fair value through profit or loss are included in current assets or liabilities in the statement of financial position.
Fair values of other financial assets and liabilities at fair value through profit or loss are estimated to approximate their carrying amounts because of their short maturities. Trade date accounting is used in recognizing purchases and sales of other assets and liabilities at fair value through profit or loss.
Loans and Receivables
Loans and receivables are assets which are not included in derivative assets. Loans and receivables arise when money, goods or services are delivered to a debtor. They are not quoted in an active market and payments related to them are either fixed or determinable. Loans and receivables granted by the Group are measured at amortized cost.
Loans and receivables include loan receivables, trade receivables, other receivables and cash. They are included in current or non-current financial assets in accordance with their maturity. Loan and trade receivables falling due after 12 months are discounted, if no interest is charged separately, and the increase in the receivable which reflects the passage of time is recognized as interest income in financial income and expenses.
Trade receivables are carried at the original invoice amount less the share of the discounted interest and an estimate made for doubtful receivables. Estimate made for doubtful receivables is based on a periodic review of all outstanding amounts. For example payment defaults or late payments are considered as indications of impairment of the receivable. Impairment losses of trade receivables are recorded in a separate allowance account within trade receivables, and the impairment losses are recognized in profit or loss as other operating expenses. If the impairment loss is final, the trade receivable is derecognized from the allowance account. If a payment is later received from the impaired receivable, the received amount is recognized in profit or loss as a deduction of other operating expenses. If no impairment loss has been recognized in allowance account and the impairment loss of the trade receivable is found to be final, impairment loss is recognized directly as deduction of trade receivables.
Loan receivables are carried at the original amount less an estimate made for doubtful receivables. Estimate made for doubtful receivables is based on a review of all outstanding amounts at the end of the reporting period. For example payment defaults or late payments are considered as indications of impairment of the receivable. Impairment losses of loan receivables are recognized in profit or loss as financial expenses. If a payment is later received from the impaired receivable, the received amount is recognized in profit or loss in financial items.
Available-for-sale Financial Assets
Available-for-sale financial assets are assets not classified as derivative assets, assets at fair value through profit or loss or loans and receivables.
Glaston has classified other shares than shares in associates as available-for-sale financial assets.
Glaston records changes in fair value of available-for-sale assets as other comprehensive income net of tax, and they are included in the fair value reserve in equity until the assets are disposed of, at which time changes in fair value are reclassified from equity into profit or loss items.
Listed investments are measured at the market price at the end of the reporting period. Investments, for which fair values cannot be measured reliably, such as unlisted equities, are reported at cost or at cost less impairment. If the available-for-sale asset is impaired, impairment loss is recognized immediately in profit or loss.
Trade date accounting is used in recognizing purchases and sales of available-for-sale financial assets.
Available-for-sale assets are included in non-current assets in the statement of financial position.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash and other financial assets. Other financial assets are highly liquid investments with remaining maturities at the date of acquisition of three months or less. Bank overdrafts are included in current interest-bearing liabilities.
Financial Liabilities Measured at Amortized Cost
On initial recognition financial liabilities are measured at their fair values that are based on the consideration received. Subsequently, financial liabilities are measured at amortized cost using the effective interest method. Transaction costs are included in the acquisition cost.
Financial liabilities measured at amortized cost include convertible bond, pension loans, loans from financial institutions, finance lease liabilities, debenture bond, trade payables and advances received. They are included in current or non-current liabilities in accordance with their maturity.
Interest expenses are accrued for and mainly recognized in profit or loss for each period. If an asset is a qualifying asset as defined in IAS 23 Borrowing Costs, the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized to the acquisition cost of the asset. The capitalization applies mainly to property, plant and equipment and intangible assets.
At the end of 2017 and 2016 Glaston had no convertible bond.
Net sales include the total invoicing value of products sold and services provided less discounted interest and sales tax, cash discounts and rebates. Foreign exchange differences arising from trade receivables are recognized as sales adjustments.
Revenue is recognized after the risks and rewards of ownership of the goods have been transferred to the buyer. Normally, revenue recognition takes place at the date of the delivery in accordance with the delivery terms. Revenue from services rendered and reparation work made is recognized in profit or loss when the service has been rendered or the work has been finished.
Revenue from tailor-made glass processing machine deliveries is recognized based on a milestone method with two milestones. Revenue from a glass processing machine is recognized when the machine delivery leaves the manufacturing plant and the revenue from the installation is recognized when the machine has been installed and is taken into use by the customer. The portion of the total estimated costs of the project, allocated to the revenue recognized, is recognized in profit or loss simultaneously with the revenue recognition. Costs which are attributable to a project, for which revenue is not yet recognized, are included in inventories as unfinished construction contracts.
The Group has various pension plans in accordance with the local conditions and practices in the countries where it operates. The pension plans are classified as defined contribution plans or defined benefit plans. The payments to the schemes are determined by actuarial calculations.
The contributions to defined contribution plans are charged to profit or loss in the period to which the contributions relate.
In addition to defined benefit pensions, Glaston has other long-term employee benefits, such as termination benefits. These benefits are accounted for as post-employment benefits, and they are presented separately from defined benefit pensions.
The obligations for defined benefit plans have been calculated separately for each plan. Defined benefit liabilities or assets, which have arisen from the difference between the present value of the obligations and the fair value of plan assets, have been entered in the statement of financial position.
The defined benefit obligation is measured as the present value of the estimated future cash flows using interest rates of government securities that have maturity terms approximating the terms of related liabilities or similar long-term interests.
For the defined benefit plans, costs are assessed using the projected unit credit method. Under this method the cost is charged to profit or loss so as to spread over the service lives of employees.
According to the standard Glaston records actuarial gains and losses in other comprehensive income. Only current and past service costs as well as net interest on net defined benefit liability can be recorded in profit or loss. Other changes in net defined benefit liability are recognized in other comprehensive income with no subsequent recycling to profit or loss.
Glaston Corporation has share-based incentive plans for the Group’s key personnel. Depending on the plan, the reward is settled in shares, cash, or a combination thereof, provided that the key employee’s employment or service with the Group is in force and the criteria for the performance is fulfilled. If a key employee’s employment or service with the Group ends before the payment of a reward, the main principle is that no reward will be paid.
The granted amount of the incentive plans settled in shares is measured at fair value at the grant date, and the cash-settled part of the plans is measured at fair value at the reporting or payment date.
The expenses arising from the incentive plans are recognized in profit or loss during the vesting periods. The cash-settled portion of the incentive plans is recorded as a liability in the statement of financial position, if it has not been paid, and the portion settled in shares is recorded in retained earnings in equity net of tax. Glaston records the personnel costs arising from the share-based incentive plans to the extent it is liable to pay them. The share-based incentive plans are described in Note 29 to the consolidated financial statements.
The consolidated financial statements include current taxes, which are based on the taxable results of the group companies for the reporting period together with tax adjustments for previous reporting periods, calculated in accordance with the local tax rules, and the change in the deferred tax liabilities and assets.
Income taxes which relate to items recognized in other comprehensive income are also recognized in other comprehensive income.
The Group’s deferred tax liabilities and assets have been calculated for temporary differences, which have been obtained by comparing the carrying amount of each asset or liability item with their tax bases. Deferred tax assets are recognized for deductible temporary differences and tax losses to the extent that it is probable that taxable profit will be available, against which tax credits and deductible temporary differences can be utilized. In calculating deferred tax liabilities and assets, the tax rate used is the tax rate in force at the time of preparing the financial statements or which has been enacted by end of the reporting period.
Principal temporary differences arise from depreciation and amortization of property, plant and equipment and intangible assets, defined benefit plans, recognition of net assets of acquired companies at fair value, measuring available-for-sale assets and derivative instruments at fair value, inter-company inventory profits, share-based payments and confirmed tax losses.
Glaston includes in items affecting comparability mainly items arising from restructuring and structural changes. They can include expenses arising from personnel reduction, product portfolio rationalization, changes in production structure and from reduction of offices. Impairment loss of goodwill is also included in items affecting comparability. Items affecting comparability are recognized in profit or loss in the income or expense category where they belong by their nature and they are included in operating result. In its key ratios Glaston presents also comparable operating result.
If a non-comparable expense is reversed for example due to changes in circumstances, the reversal is also included in in items affecting comparability.
In addition, exceptionally large gains or losses from disposals of property, plant and equipment and intangible assets as well as capital gains or losses arising from group restructuring are included in items affecting comparability.
Goodwill represents the excess of the acquisition cost over fair value of the assets less liabilities of the acquired entity. Goodwill arising from the acquisition of foreign entities of acquisitions made after 1 January 2004, is treated as an asset of the foreign entity and translated at the closing exchange rates at the end of the reporting period. Goodwill arising from the acquisitions of foreign entities made before 1 January 2004, has been translated into euros at the foreign exchange rate prevailing on the acquisition date.
Acquisitions made after 1 January 2004, have been recognized in accordance with IFRS 3. Purchase consideration has been allocated to intangible assets, if they have met the recognition criteria stated in IAS 38 (Intangible Assets). Acquisitions made before 1 January 2004, have not been restated to be in accordance with IFRS-standards. The revised IFRS 3 standard has been applied for business combinations made after 1 January 2010.
In accordance with IFRS 3 Business Combinations, goodwill is not amortized. The carrying amount of goodwill is tested annually for impairment. The testing is made more frequently if there are indications of impairment of the goodwill. Any possible impairment loss is recognized immediately in profit or loss.
Glaston’s goodwill has been allocated to the cash generating units of the group.
Intangible asset is recognized in the balance sheet if its cost can be measured reliably and it is probable that the expected future economic benefits attributable to the asset will flow to the Group. Intangible assets are stated at cost and amortized on a straight line basis over their estimated useful lives. Intangible assets with indefinite useful life are not amortized, but tested annually for impairment.
Acquired intangible assets recognized as assets separately from goodwill are recorded at fair value at the time of the acquisition of the subsidiary.
The estimated useful lives for intangible assets are as follows:
Computer software, patents,
licenses, trademarks, product rights 3-10 years
Capitalized development expenditure 5-7 years
Other intangible assets 5-10 years
Research costs are expensed as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products, is capitalized if the product is technically and commercially feasible and the Group has sufficient resources to complete development and to use or sell the intangible asset. Amortization of the capitalized expenditure starts when the asset is available for use. The intangible assets not yet available for use are tested annually for impairment. Research expenditure and development expenditure recognized in profit or loss are recognized in operating expenses.
Borrowing costs are capitalized as part of the acquisition cost of intangible assets if the intangible assets are qualifying assets as defined in IAS 23 Borrowing Costs. In 2017 or 2016 Glaston did not have any qualifying assets.
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads. When an asset consists of major components with different useful lives, they are accounted for as separate items. Assets from acquisition of a subsidiary are stated at their fair values at the date of the acquisition.
Depreciation is recorded on a straight-line basis over expected useful lives. Land is not depreciated since it is deemed to have indefinite useful life.
The most common estimated useful lives are as follows:
Buildings and structures 25-40 years
Heavy machinery 10-15 years
Other machinery and equipment 3-5 years
IT equipment 3-10 years
Other tangible assets 5-10 years
Gain on the sale of property, plant and equipment is included in other operating income and loss in operating expenses.
The costs of major inspections or the overhaul of property, plant and equipment items, that occur at regular intervals and are identified as separate components, are capitalized and depreciated over their useful lives. Ordinary maintenance and repair charges are expensed as incurred.
Borrowing costs are capitalized as part of the acquisition cost of tangible assets if the tangible assets are qualifying assets as defined in IAS 23 Borrowing Costs. In 2017 or 2016 Glaston did not have any qualifying assets.
A discontinued operation is a segment or a unit representing a significant geographical area, which has been disposed of or is classified as held for sale. The profit for the period attributable to the discontinued operation is presented separately in the consolidated income statement. Also post-tax gains and losses recognized on the measurement to fair value less costs to sell or on the disposal of the asset or disposal group are presented in the income statement as result of discontinued operations. Comparative information has been restated.
Non-current assets or disposal groups are classified as held for sale and presented separately in the statement of financial position if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. In order to be classified as held for sale the asset or disposal group must be available for immediate sale in its present condition and the sale must be highly probable. In addition, the sale should qualify for recognition of a complete sale within one year from the date of the classification.
An asset classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell and it is not depreciated or amortized.
Also liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations is not applied retrospectively if the valuations and other information required by the standard were not obtainable at the time the classification criteria were met.
Annual impairment tests for goodwill are performed during the fourth quarter of the year. If there is, however, an indication of impairment of goodwill, the impairment tests for goodwill are performed earlier during the financial year. Other assets of the Group are evaluated at the end of each reporting period or at any other time, if events or circumstances indicate that the value of an asset has been impaired. If there are indications of impairment, the asset’s recoverable amount is estimated, based on the higher of an asset’s fair value less costs to sell and value in use. An impairment loss is recognized in profit or loss whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. If subsequently recording the impairment loss a positive change has occurred in the estimates of the recoverable amount, the impairment loss made in prior years is reversed no more than up to the value which would have been determined for the asset, net of amortization or depreciation, had not impairment loss been recognized in prior years. For goodwill, a recognized impairment loss is not reversed.
Cash flow projections have been calculated on the basis of reasonable and supportable assumptions. They are based on the most recent financial plans and forecasts that have been approved by management. Estimated cash flows are used for a maximum of five years. Cash flow projections beyond the period covered by the most recent plans and forecasts are estimated by extrapolating the projections. The discount rate is the weighted average cost of capital. It is a pre-tax rate and reflects current market assessments of the time value of money at the time of review and the risks related to the assets. Impairment of assets has been described in more detail in Note 12 to the consolidated financial statements.
Inventories are reported at the lower of cost and net realisable value. Cost is determined on a first in first out (FIFO) basis, or alternatively, weighted average cost. Net realisable value is the amount which can be realized from the sale of the asset in the normal course of business, after allowing for the estimated costs of completion and the costs necessary to make the sale.
The cost of finished goods and work in process includes materials, direct labour, other direct costs and a systematically allocated appropriate share of variable and fixed production overheads. As Glaston’s machine projects are usually not considered to be qualifying assets as defined in IAS 23, borrowing costs are not included in the cost of inventory in normal machine projects.
Used machines included in the inventory are measured individually so that the carrying amount of a used machine does not exceed the amount that is expected to be received from the sale of the machine. In this measurement the costs arising from converting the used machine back to saleable condition are taken into account.
Prototypes of new machines included in inventory are measured at the lower of cost and net realisable value.
Government or other grants are recognised in profit or loss in the same periods in which the corresponding expenses are incurred. Government grants received to acquire property, plant and equipment are reduced from the acquisition cost of the assets in question.
Glaston Group has entered into various operating leases, the payments under which are treated as rentals and charged to profit or loss over the lease term.
Leases of property, plant and equipment where Glaston has substantially all the rewards and risks of the ownership, are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments. Lease payments are allocated between liability and finance charges. The lease liabilities net of finance charges are included in interest-bearing liabilities, with the interest element charged to profit or loss over the lease period.
Property, plant and equipment acquired under finance lease contracts are depreciated over the shorter of the useful life of the asset or the lease period.
A provision is recognized when as a consequence of some previous event there has arisen a legal or constructive obligation, and it is probable that this will cause future expenses and the amount of the obligation can be evaluated reliably.
A restructuring provision is booked only when a detailed and fully compliant plan has been prepared for it and implementation of the plan has been started or notification of it has been made known to those whom the arrangement concerns. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the time value of money is material, provisions are discounted.
A provision for warranties is recognized when the underlying products are sold. The provision is estimated on the basis of historical warranty expense data. Warranty provision is presented as non-current or current provision depending on the length of the warranty period.
The amount and probability of provision requires management to make estimates and assumptions. Actual results may differ from these estimates.
In June 2015, Glaston Corporation completed the sale of the pre-processing machines business and reorganized its business and reporting structure. As a result of the sale, Glaston has re-evaluated its reporting segments and, as of 1 July 2015, has combined the operating segments, Machines and Services, into a single reporting segment. The remaining business consists of the manufacture and sale of heat treatment glass machines as well as the service operations for these machines.
The reportable segment applies Glaston Group’s accounting and measurement principles. The reportable segments consist of operating segments, which have been aggregated in accordance with the criteria of IFRS 8.12. Operating segments have been aggregated, when the nature of the products and services is similar, the nature of the production process is similar, as well as the type or class of customers. Also the methods to distribute products or to provide services are similar. Glaston follows the same commercial terms in transactions between segment as with third parties.
The reportable segment is disclosed in more detail in the Note 5 to the consolidated financial statements.
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the end of the reporting period and the recognized amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.
In addition, management uses judgment in applying the accounting principles and in choosing the applicable accounting policies, if IFRS allow alternative methods.
The following items include critical accounting estimates: impairment testing of assets; estimated fair values of property, plant and equipment and intangible assets acquired in an acquisition and their estimated useful lives; useful lives of other intangible assets and property, plant and equipment; future economic benefits arising from capitalized development cost; measurement of inventories and trade and loan receivables; recognition and measurement of deferred taxes; estimates of the amount and probability of provisions and actuarial assumptions used in defined benefit plans.
The critical accounting estimates and judgments are described in more detail in Note 2 to the consolidated financial statements.
Dividends and/or return of capital proposed by the Board of Directors are not recorded in the financial statements until they have been approved by the shareholders at the Annual General Meeting.
Treasury shares acquired by the company and the related costs are presented as a deduction of equity. Gain or loss on surrender of treasury shares are recorded in reserve for invested unrestricted equity net of tax.
Basic earnings per share are calculated by dividing the net result attributable to owners of the parent by the weighted share-issue adjusted average number of shares outstanding during the year, excluding shares acquired by the Group and held as treasury shares.
Glaston’s order book includes the binding undelivered orders of the Group at the end of the reporting period. Orders for new machines and machinery upgrades are recognized in the order book only after receiving a binding agreement and either a down payment or a letter of credit.
Glaston’s orders received include the binding orders received and recognized in the order book during the reporting period as well as net sales of the service business, including net sales of spare parts and tools. Machine upgrades, which belong to the service business, are included in orders received based on the binding orders received and recognized in the order book during the reporting period.