Plastic Omnium - 2018 Registration Document

4 2018 CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements at December 31, 2018 PLASTIC OMNIUM 2018 REGISTRATION DOCUMENT 151 First application of IFRS 15 “revenue from contracts 2.1.1 with customers” and impacts on accounts The Group has been applying IFRS 15 “Revenue from contract with customers” since January 1, 2018. See Note 1.1.7 “Revenue” in the “Accounting policies, accounting rules and methods” . In this context, the accounting treatment selected through December 31, 2017 for costs and products related to activities carried out during the project phase of automotive contracts has been amended (see Notes 1.1.7 and 1.1.11). The Group decided to apply the modified retrospective method; the 2017 consolidated financial statements are not restated and the new accounting treatment is applied to projects not completed on January 1, 2018, i.e. automotive contracts whose series had not been launched at December 31, 2017. The impact of this change in accounting treatment on the opening balance sheet at January 1, 2018 is essentially related to the restatement of the revenue recognized for the current projects through December 31, 2017. As previously indicated, the new accounting treatment provides for the recognition of products relating to performance obligations at the start of the series life. Hence, invoices to be recorded on these unfinished projects as at December 31, 2017 have been cancelled, in the amount of €125 million, and invoices until that date for contracts whose series’ life has not begun have been recorded as deferred income, in the amount of €170.4 million. In return, the related costs that were no longer in the balance sheet at December 31, 2017 have been restated, i.e. recorded in inventories, in the amount of €274 million, or property, plant and equipment/intangible assets, in the amount of €19.4 million, according to their nature. These restatements have a non-significant impact on the equity, since no profit or loss has been booked on these projects at December 31, 2017 in accordance with the accounting principles applicable at that date. The impact on shareholders’ equity of the change in method corresponds to the provisions for losses on the completion of the performance obligations or the tooling sales, and to a lesser extent to the restatement of the acquisition costs of capitalized contracts at December 31, 2017 and the related deferred taxes. 2018: As indicated in the 2017 financial statements, the impact of the application of this new standard has no significant impact on the Group’s revenues and results for 2018. The impact on non-current assets is also insignificant (approximately +€20 million). On the other hand, current assets are significantly impacted as a result of the discontinuation of the recognition of turnover at completion (approximately +€310 million on inventories, -€200 million on receivables, +€130 million on operating debts). First time application of IFRS 9 “Financial 2.1.2 Instruments” and impacts on accounts The impacts related to the provisions of IFRS 9 “Financial Instruments”, which are mandatory from January 1, 2018 onwards, are not material for the Plastic Omnium Group. See Notes 1.1.8 “Receivables”, 1.1.23 “Other non-current financial assets” and 1.1.24 “Derivatives and hedge accounting” in the “Accounting policies, accounting rules and methods”. Creation of a New Energies business dedicated 2.2 to new energy sources During the first half of 2018, the Group created a new New Energies business within the Plastic Omnium Clean Energy Systems Division of the Industries segment. It is devoted to business related to future energy sources in the fields of combustion cells and hydrogen propulsion. Acquisitions and acquisitions of shares in 2018 2.3 Acquisition by the Group of Mahle-Behr’s 33.33% 2.3.1 interest in HBPO ACQUISITION INFORMATION 2.3.1.1 On March 1, 2018, the Plastic Omnium Group signed an agreement with the German group Mahle-Behr to acquire its 33.33% equity stake in the joint venture HBPO until then held equally by Plastic Omnium, Hella and Mahle-Behr. After it was authorized by the competition authorities, the Plastic Omnium Group finalized the acquisition on June 26, 2018, for a price of €370 million corresponding to the 33.33% Mahle-Behr stake, financed with the Group’s own resources. The Plastic Omnium Group now holds 66.67% of the HBPO Group. The balance is held by Hella. The global leader in automotive block-front-end module development, assembly and logistics with a global market share of nearly 17%, HBPO employs 2,200 people. This acquisition enables the Plastic Omnium Group to acquire additional industrial resources to implement its development strategy in the smart and modular body segment. ACCOUNTING TREATMENT OF HBPO TAKEOVER 2.3.1.2 The acquisition of this additional 33.33% stake and integration procedures described below enabled Plastic Omnium Group to gain control of HBPO. In fact, exchanges with the partner in the weeks following the acquisition and the integration arrangements make it possible to conclude that the rights granted to the partner in the shareholders pact are protective rights. The integration procedures include the appointment of the CEO of HBPO to the Plastic Omnium Group Management Board, HBPO’s access to Group Guaranteed Financing to replace the former HBPO financings, the application by HBPO of all the Group’s financial processes (reporting, financing, budget), the ongoing alignment of processes (industrial, logistic and technological) and the search for initial synergies. Given the effective July 2018 takeover, the full consolidation method has been applied since July 1, 2018.