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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2021

Commission File Number: 001-40618

 

 

Stevanato Group S.p.A.

(Translation of registrant’s name into English)

 

 

Via Molinella 17

35017 Piombino Dese – Padua

Italy

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

 

 

 


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LOGO

Stevanato Group S.p.A.

Interim condensed consolidated financial statements

For the three months and six months ended June 30, 2021

Table of contents

 

     Page  
PART I – FINANCIAL INFORMATION   

Item 1. Financial Statements

     1  

Interim condensed statement of operations

     1  

Interim condensed statement of comprehensive loss

     2  

Interim condensed statement of financial position

     3  

Interim condensed statement of changes in equity

     4  

Interim condensed statement of cash flows

     5  

Notes to the interim condensed consolidated financial statements

     6  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     33  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     47  

Item 4. Controls and Procedures

     52  
PART II – OTHER INFORMATION   

Item 1. Legal Proceedings

     53  

Item 1A. Risk Factors

     53  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     53  

Item 3. Defaults Upon Senior Securities

     53  

Item 5. Other Information

     53  

Signatures

     54  

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 6-K contains certain forward-looking statements which include, or may include, words such as “raising”, “believe”, “potential”, “increased”, “future”, “remain”, “growing”, “expect”, “foreseeable”, “expected”, “to be”, “includes”, “estimated”, “assumes”, “would provide”, and other similar terminology. Forward-looking statements contained in this prospectus include, but are not limited to, statements about: our future financial performance, including our revenue, operating expenses and our ability to maintain profitability and operational and commercial capabilities; our expectations regarding the development of our industry and the competitive environment in which we operate; and our goals and strategies. The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: (i) our product offerings are highly complex, and, if our products do not satisfy applicable quality criteria, specifications and performance standards, we could experience lost sales, delayed or reduced market acceptance of our products, increased costs and damage to our reputation; (ii) we must develop new products and enhance existing products, adapt to significant technological and innovative changes and respond to introductions of new products by competitors to remain competitive; (iii) our backlog might not accurately predict our future revenue, and we might not realize all or any part of the anticipated revenue reflected in our backlog; (iv) if we fail to maintain and enhance our brand and reputation, our business, results of operations and prospects may be materially and adversely affected; (v) we are highly dependent on our management and employees. Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees that we need to support our business and our intended future growth; (vi) our business, financial condition and results of operations depend upon maintaining our relationships with suppliers and service providers; (vii) our business, financial condition and results of operations depend upon the availability and price of high-quality materials and energy supply and our ability to contain production costs; (viii) significant interruptions in our operations could harm our business, financial condition and results of operations; (ix) our manufacturing facilities are subject to operating hazards which may lead to production curtailments


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or shutdowns and have an adverse effect on our business, results of operations, financial condition or cash flows; and (x) our business may be harmed if our customers discontinue or spend less on research, development, production or other scientific endeavors; (xi) we may face significant competition in implementing our strategies for revenue growth in light of actions taken by our competitors. This list is not exhaustive.

These forward-looking statements speak only as at their dates. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible to predict all of these factors. Further, the Company cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statements.

For a description of certain additional factors that could cause the Company’s future results to differ from those expressed in any such forward-looking statements, refer to the risk factors discussed under “Item 1A. Risk Factors” below and “Risk Factors” in our registration statement on Form F-1 filed with the U.S. Securities and Exchange Commission on July 16, 2021.


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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Stevanato Group S.p.A.

Interim condensed consolidated income statements

for the three and the six months ended June 30, 2021 and 2020

(Unaudited)

 

     For the three months
ended June 30,
   

For the six months

ended June 30,

 
(EUR thousand)         2021      2020     2021      2020  
     Notes                           

Revenues

   9      203,964        161,811       396,813        298,242  

Cost of sales

   10      140,274        112,961       267,714        209,888  
     

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

        63,690        48,850       129,099        88,354  

Other operating income

   11      2,256        1,812       5,481        2,067  

Selling and Marketing expenses

   12      5,424        5,080       11,292        11,309  

Research and Development expenses

   12      6,897        3,840       12,717        7,788  

General and Administrative expenses

   12      6,030        14,606       20,037        28,804  
     

 

 

    

 

 

   

 

 

    

 

 

 

Operating profit

        47,595        27,136       90,534        42,520  

Finance income

   13      2,310        3,806       4,315        9,496  

Finance expense

   14      2,411        3,383       5,650        13,637  

Share of profit of an associate

        397        214       397        214  
     

 

 

    

 

 

   

 

 

    

 

 

 

Profit before tax

        47,891        27,773       89,598        38,593  

Income taxes

   15      13,426        7,070       18,566        10,646  
     

 

 

    

 

 

   

 

 

    

 

 

 

Net Profit

        34,465        20,703       71,031        27,947  
     

 

 

    

 

 

   

 

 

    

 

 

 

Net Profit attributable to:

             

Equity holders of the parent

        34,442        20,767       70,993        28,092  

Non-controlling interests

        25        (63     39        (145
     

 

 

    

 

 

   

 

 

    

 

 

 
        34,467        20,704       71,031        27,947  
     

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per share

             

Basic earnings per common share (in EUR)

   16      0.14        0.09       0.29        0.12  

Diluted earnings per common share (in EUR)

   16      0.14        0.09       0.29        0.12  

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim condensed consolidated statements of comprehensive income

for the three and the six months ended June 30, 2021 and 2020

(Unaudited)

 

          For the three months
ended June 30,
    For the six months
ended June 30,
 
(EUR thousand)         2021     2020     2021     2020  
     Notes                         

Net Profit

        34,466       20,704       71,031       27,947  

Gains/(losses) from remeasurement of employee defined benefit plans

        47       (364     187       (3

Gains/(losses) from remeasurement of the agent termination plan

        —         —         —         —    

Tax effect relating to those components of OCI

        (11     87       (45     1  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income that will not be classified subsequently to profit or loss

        36       (276     142       (2
     

 

 

   

 

 

   

 

 

   

 

 

 

Exchange difference on translation of foreign operations

   24      5,302       (3,563     7,887       (21,426

Changes in the fair value of cash flow hedging instruments

        842       (64     1,311       (821

Tax effect relating to those components of OCI

        (202     15       (315     197  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) that will be classified subsequently to profit or loss

        5,942       (3,612     8,884       (22,050
     

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

        5,978       (3,888     9,026       (22,052
     

 

 

   

 

 

   

 

 

   

 

 

 

Total Comprehensive Income (Loss)

        40,444       16,816       80,057       5,895  
  

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to:

           

Equity holders of the parent

        40,415       16,874       80,003       6,038  

Non-controlling interests

        29       (58     54       (143
     

 

 

   

 

 

   

 

 

   

 

 

 
        40,444       16,816       80,057       5,895  
     

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim condensed consolidated statements of financial position

as at June 30, 2021 and at December 31, 2020

(Unaudited)

 

(EUR thousand)      At June 30,
2021
    At December 31,
2020
 
     Notes               

Assets

       

Non-current assets

       

Goodwill

        47,243       47,243  

Other intangible assets

     17        32,504       33,901  

Right of Use assets

     19        24,107       25,380  

Property, plant and equipment

     18        341,672       313,658  

Investments in an associate

        2,406       2,009  

Financial assets - investments FVTPL

        810       760  

Other non-current financial assets

     20        2,616       6,701  

Deferred tax assets

        45,144       45,552  
     

 

 

   

 

 

 
        496,502       475,204  

Current assets

       

Inventories

     21        149,717       139,373  

Contract assets

     22        48,505       39,430  

Trade receivables

     22        135,800       127,818  

Other current financial assets

     20        27,925       41,543  

Tax receivables

     23        41,532       25,033  

Other receivables

        6,628       3,979  

Cash and cash equivalents

        100,786       115,599  
     

 

 

   

 

 

 
        510,893       492,775  
     

 

 

   

 

 

 

Total assets

        1,007,395       967,979  
     

 

 

   

 

 

 

Equity and liabilities

       

Equity

       

Share capital

     24        20,002       20,002  

Reserves and Retained Earnings

     24        290,757       211,979  

Net profit attributable to equity holders of the parent

        70,993       78,513  
     

 

 

   

 

 

 

Equity attributable to equity holders of the parent

        381,752       310,495  

Non-controlling interests

        (301     (355
     

 

 

   

 

 

 

Total equity

        381,451       310,140  
     

 

 

   

 

 

 

Non-current liabilities

       

Non-current financial liabilities

     25        264,552       294,124  

Employees Benefits

     27        10,539       29,725  

Provisions

     28        4,149       4,384  

Deferred tax liabilities

        13,796       11,623  

Other non-current liabilities

     29        1,831       1,808  
     

 

 

   

 

 

 
        294,867       341,664  

Current liabilities

       

Current financial liabilities

     25        80,676       81,234  

Trade payables

     30        100,582       118,740  

Contract liabilities

     31        6,451       5,031  

Advances from customers

     31        46,675       48,361  

Tax payables

     23        48,466       19,126  

Other liabilities

     30        48,227       43,683  
     

 

 

   

 

 

 
        331,077       316,175  
     

 

 

   

 

 

 

Total liabilities

        625,944       657,839  
     

 

 

   

 

 

 

Total equity and liabilities

        1,007,395       967,979  
     

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim condensed consolidated statements of changes in equity

for the six months ended June 30, 2021 and 2020

(Unaudited)

 

(EUR thousand)   Notes     Share
capital
    Treasury
shares
    Cash flow
hedge
reserve
    Reserve for
actuarial
gains /
(losses) on
employee
benefits
    Foreign
currency
translation
reserve
    Retained
earnings and
other reserve
    Equity
attributable to
equity holders
of the parent
    Non-controlling
interests
    Total
equity
 

At January 1, 2021

      20,002       (26,189     (3,345     (675     (34,911     355,614       310,495       (355     310,140  

Other comprehensive income

    24       —         —         997       142       7,872       —         9,011       15       9,026  

Net profit

      —         —         —         —         —         70,993       70,993       39       71,032  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      —         —         997       142       7,872       70,993       80,004       54       80,058  

Dividends

    24       —         —         —         —         —         (11,200     (11,200     —         (11,200

Other

      —         (1,551     —         —         —         4,005       2,454       —         2,454  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total effects

      —         (1,551     —         —         —         (7,195     (8,746     —         (8,746
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At June 30, 2021

      20,002       (27,740     (2,349     (533     (27,039     419,412       381,752       (301     381,451  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(EUR thousand)   Notes     Share
capital
    Treasury
shares
    Cash flow
hedge
reserve
    Reserve for
actuarial
gains /
(losses) on
employee
benefits
    Foreign
currency
translation
reserve
    Retained
earnings and
other reserve
    Equity
attributable to
equity holders
of the parent
    Non-controlling
interests
    Total
equity
 

At January 1, 2020

      20,002       (26,189     (2,796     (523     (12,331     287,327       265,490       (50     265,439  

Other comprehensive income

    24       —         —         (624     (2     (21,428     —         (22,054     2       (22,052

Net profit

      —         —         —         —         —         28,092       28,092       (145     27,947  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      —         —         (624     (2     (21,428     28,092       6,038       (143     5,895  

Dividends

    24       —         —         —         —         —         (8,900     (8,900     —         (8,900

Other

      —         —         —         —         —         (96     (96     —         (96
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total effects

      —         —         —         —         —         (8,996     (8,996     —         (8,996
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At June 30, 2020

      20,002       (26,189     (3,420     (525     (33,759     306,423       262,532       (193     262,338  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim condensed consolidated statements of cash flows

for the six months ended June 30, 2021 and 2020

(Unaudited)

 

    

For the six months

ended June 30,

 
(EUR thousand)    2021     2020  

Operating activities

    

Profit before tax

     89,598       38,593  

Adjustments:

    

Depreciation of property, plant and equipment

     19,567       19,624  

Amortization of intangible assets and Right of Use

     6,797       6,061  

Allowance for doubtful accounts

     699       1,773  

Net finance expense

     3,241       1,693  

Share of profit or loss of associated companies

     (397     (214

Change in other provisions and in employee benefits

     (8,722     (368

Other non-cash expenses, net

     (113     154  

Working capital changes:

    

- inventories and contract assets

     (19,560     (9,771

- trade receivables and other assets

     (25,694     (22,066

- trade payables, contract liabilities, advances and other liabilities

     3,390       14,019  

Interest paid

     (2,251     (2,442

Interest received

     323       373  

Income tax paid

     (6,907     (2,789
  

 

 

   

 

 

 

Cash Flow from operating activities

     59,972       44,640  
  

 

 

   

 

 

 

Cash Flow from investing activities

    

Purchase of property, plant and equipment

     (44,064     (41,370

Proceeds from sale of property plant and equipment

     34       —    

Purchase of intangible assets

     (2,099     (2,086

Investment in financial assets

     (562     (29
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (46,690     (43,485
  

 

 

   

 

 

 

Cash Flow from financing activities

    

Acquisition of non-controlling interests

     (986     —    

Dividends paid

     (11,200     —    

Payment of principal portion of lease liabilities

     (3,335     (2,991

Proceed from loans

     6,577       51,911  

Repayments of loans

     (33,424     (31,676

Other current financial activities

     12,519       3,181  
  

 

 

   

 

 

 

Net cash flows from/ (used in) financing activities

     (29,849     20,425  
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (16,567     21,580  

Net foreign exchange difference

     1,754       (2,563

Cash and cash equivalents at January 1

     115,599       85,386  
  

 

 

   

 

 

 

Cash and cash equivalents at June 30

     100,786       104,403  
  

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Notes to the interim condensed consolidated financial statements

1. Corporate information

Stevanato Group S.p.A. (herein referred to as the “Company” and together with its subsidiaries the “Group”) is headquartered in Italy and its registered office is located in via Molinella 17, Piombino Dese (Padova, Italy). The Group is active in the design, production and distribution of products and systems to provide integrated solutions for pharma and healthcare, leveraging on constant investment and the selected acquisition of skills and new technologies to become a global player in the pharma industry. Principal products are containment solutions, drug delivery systems, medical devices, diagnostic, analytical services, visual inspection machines, assembling and packaging machines, glass forming machines.

The Group has nine production plants for manufacturing and assembly of pharma and healthcare products (in Italy, Germany, Slovakia, United States, Mexico, China), five plants for the production of machinery and equipment (in Italy and Denmark), two sites for analytical services (in Italy and United States) and two commercial offices (in Japan and the United States). The global footprint allows to sell products and provide services in more than 70 countries worldwide.

As at June 30, 2021 Stevanato Group S.p.A. is controlled by Stevanato Holding S.r.l. which holds 88.28% of its share capital.

On July 16, 2021 Stevanato Group began trading on the New York Stock Exchange under the symbol STVN.

2. Authorization of interim condensed consolidated financial statements and compliance with international financial reporting standards

These Interim Condensed Consolidated Financial Statements of Stevanato Group S.p.A. were authorized for issuance on August 19, 2021 and have been prepared in accordance with IAS 34 - Interim Financial Reporting. The Interim Condensed Consolidated Financial Statements should be read in conjunction with the Group’s consolidated financial statements at and for the year ended December 31, 2020 (the “Consolidated Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

3. Basis of preparation for interim condensed consolidated financial statements

The preparation of the Interim Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities as well as disclosures of contingent liabilities. If in the future such estimates and assumptions, which are based on management’s best judgment at the date of these Interim Condensed Consolidated Financial Statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. Reference should be made to the section “Use of estimates” in the Consolidated Financial Statements for a detailed description of the more significant valuation procedures used by the Group.

Moreover, in accordance with IAS 34, certain valuation procedures, in particular those of a more complex nature regarding matters such as any impairment of non-current assets, are only carried out in full during the preparation of the annual consolidated financial statements, when all the related information necessary is available, other than in the event that there are indications of impairment, in which case an immediate assessment is required. Similarly, the actuarial valuations that are required for the determination of employee benefit provisions are also usually carried out during the preparation of the annual consolidated financial statements, except in the event of significant market fluctuations or significant plan amendments, curtailments or settlements. IAS 34 also requires to disclose the nature and amount of items affecting net income that are unusual due to their nature, size or significance.

 

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These interim condensed consolidated financial statements consider that the Group publishes quarterly interim financial statements. As the Group is not including the full set of disclosures, as required in a complete set of financial statements, the interim financial statements of the Group are regarded as ‘condensed’, as per IAS 34.

New standards, amendments and interpretations:

The following amendments and interpretations were adopted for the first time in 2021 and did not have an impact on the interim condensed consolidated financial statements:

 

   

Amendments to IFRS 9 - Financial Instruments,

 

   

Amendments to IAS 39 - Financial Instruments: Recognition and Measurement,

 

   

Amendments to IFRS 7 - Financial Instruments: Disclosures,

 

   

Amendments to IFRS 4 - Insurance Contracts

 

   

Amendments to IFRS 16 - Leases - Interest Rate Benchmark Reform - Phase 2 (issued on August 27, 2020 and effective from periods beginning on January 1, 2021).

New standards, amendments and interpretations not yet effective

Amendments to IAS 1 - Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

 

   

What is meant by a right to defer settlement.

 

   

That a right to defer must exist at the end of the reporting period.

 

   

That classification is unaffected by the likelihood that an entity will exercise its deferral right.

 

   

That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.

The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and must be applied retrospectively. The Group is currently assessing the impact the amendments will have on current practice, monitoring the IFRS Interpretations Committee’s discussions, and whether existing loan agreements may require renegotiation.

Amendments to IFRS 3 - Reference to the Conceptual Framework

In May 2020, the IASB issued Amendments to IFRS 3 - Business Combinations - Reference to the Conceptual Framework. The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements. The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 - Levies, if incurred separately. At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2022 and apply prospectively. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use

In May 2020, the IASB issued IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The amendments are not expected to have a material impact on the Group.

 

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Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract

In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and Administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 8 - Accounting Policies, Changes to Accounting Estimates and Errors

On 12 February 2021, the IASB issued amendments to IAS 8 Accounting Policies, Changes to Accounting Estimates and Errors, in which it introduces a new definition of “accounting estimates”. The amendments are designed to clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. The amendments become effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 1 - Presentation of Financial Statements

In February 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The IASB also issued amendments to IFRS Practice Statement 2 Making Materiality Judgements (the PS) to support the amendments in IAS 1 by explaining and demonstrating the application of the ‘four-step materiality process’ to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction

In May 2021, the IASB issued amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction, that clarify the accounting of deferred tax on transactions such as leases and decommissioning obligations. The main change in Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) is an exemption from the initial recognition exemption provided in IAS 12.15(b) and IAS 12.24. Accordingly, the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition (this is also explained in the newly inserted paragraph IAS 12.22A). The amendments to IAS 12 are applicable for annual periods beginning on or after 1 January 2023. The amendments are not expected to have a material impact on the Group.

4. Scope of consolidation

Stevanato Group S.p.A. is the parent company of the Group and it holds, directly and indirectly, interests in the Group’s main operating companies. There are no changes in the scope of consolidation for the periods presented in this Interim Report and the Group’s scope of consolidation is as follows:

 

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Subsidiaries and associate

The interim condensed consolidated financial statements of the Group include the following list of company directly or indirectly controlled:

 

Name

  

Segment

   Description    Country of
incorporation
   Type of
control
   % equity interest  
   June 30,
2021
    Dec. 31,
2020
 

Nuova Ompi S.r.l.

   Biopharmaceutical    Production of container

closure systems and
development of integrated
solutions for the
pharmaceutical industry

   Italy    Direct      100     100

Spami S.r.l.

   Engineering    Production plant and
machinery
   Italy    Direct      100     100

Stevanato Group International a.s.

   Holding    Service/Subholding
company
   Slovakia    Direct      100     100

Medical Glass a.s.

   Biopharmaceutical    Production of container
closure systems
   Slovakia    Indirect      99.74     99.74

Stevanato Group N.A. S. de RL de CV

   Biopharmaceutical    Service company    Mexico    Indirect      100     100

Ompi N.A. S. de RL de CV

   Biopharmaceutical    Production of container
closure systems
   Mexico    Direct
Indirect
    

30.76

69.24


   

30.76

69.24


Ompi of America inc.

   Biopharmaceutical    Sale of container closure
systems
   USA    Indirect      100     100

Ompi do Brasil I. e C. de Emb. Far. Ltda

   Biopharmaceutical    Production of container
closure systems
   Brazil    Direct
Indirect
    

79

21


   

79

21


Ompi Pharm. Packing Techn. Co. Ltd

   Biopharmaceutical    Production of container
closure systems
   China    Indirect      100     100

InnoScan A/S

   Engineering    Production plant and
machinery
   Denmark    Indirect      100     100

SVM Automatik A/S

   Engineering    Production plant and
machinery
   Denmark    Indirect      65 % *      65 % * 

Medirio SA

   Biopharmaceutical    Research and
development
   Switzerland    Indirect      100     100

Balda Medical Gmbh

   Biopharmaceutical    Production of in-vitro
diagnostic solutions
   Germany    Direct      100     100

Balda C. Brewer Inc.

   Biopharmaceutical    Production of in-vitro
diagnostic solutions
   USA    Indirect      100     100

Balda Precision Inc.

   Biopharmaceutical    Production metal
components
   USA    Indirect      100     100

Ompi of Japan Co., Ltd.

   Biopharmaceutical    Sale of container closure
systems
   Japan    Direct      51     51

SG Technology Excellence Center Inc.

   Biopharmaceutical    Provision of analysis and
laboratory testing
services
   USA    Direct      0 % **      100 % ** 

 

*

Not included in minority interests as there is a put and call option for full acquisition (the minority interests would have amounted to 35%).

**

Following subsequent evaluations, the business of Technology Center will be carried out by Ompi of America, therefore the newly established company SG Technology Excellence Center Inc. was liquidated on October 16, 2020, after repayment of share capital (USD 100 thousand).

 

Name

   Division    Description    Country of
incorporation
   Type of
control
   % equity interest  
   June 30,
2021
    Dec. 31,
2020
 

Swissfillon AG

   Biopharmaceutical    Sterile filling services
company
   Switzerland    Associate      26.94     26.94

Non-controlling interests

The non-controlling interests as of June 30, 2021 and the net profit attributable to non-controlling interests during the six months ended June 30, 2021 relate to Ompi of Japan Co., Ltd. and Medical Glass a.s..

5. Financial Risk Factors

The Group is exposed to the following financial risks connected with its operations:

 

   

financial market risk, mainly relating to foreign currency exchange rates and to interest rates;

 

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liquidity risk, with particular reference to the availability of funds and access to the credit market, should the Group require it, and to financial instruments in general;

 

   

credit risk, arising both from its normal commercial relations with customers, and its financing activities.

These risks could significantly affect the Group’s financial position, results of operations and cash flows, and for this reason the Group identifies and monitors these risks, in order to detect potential negative effects in advance and take the necessary action to mitigate them, primarily through its operating and financing activities and if required, through the use of derivative financial instruments.

The Interim Condensed Consolidated Financial Statements do not include all the information and notes on financial risk management required in the annual consolidated financial statements. For a detailed description of the financial risk factors and financial risk management of the Group, reference should be made to Note 40 of the Consolidated Financial Statements at and for the year ended December 31, 2020.

Although there are no significant negative impacts from the coronavirus Covid-19 (“Covid-19”) pandemic on the Group’s exposure to financial risks or risk management procedures in the periods presented by these Interim Condensed Consolidated Financial Statements, management is continuously monitoring the evolution of Covid-19 as information becomes available and the related effects on the financial position and results of operations of the Group.

6. Foreign currency exchange

The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:

 

COUNTRY

   ISO
CODE
     Average for six
months ended
June 30, 2021
     At June 30,
2021
     Average for six
months ended
June 30, 2020
     At June 30,
2020
     At December 31,
2020
     At December 31,
2019
 

CHINA

     CNY        7.7960        7.6742        7.7509        7.9219        8.0225        7.8205  

UNITED STATES

     USD        1.2053        1.1884        1.1020        1.1198        1.2271        1.1234  

MEXICO

     MXN        24.3270        23.5784        23.8430        25.9470        24.4160        21.2202  

DENMARK

     DKK        7.4368        7.4362        7.4648        7.4526        7.4409        7.4715  

BRAZIL

     BRL        6.4902        5.9050        5.4104        6.1118        6.3735        4.5157  

SWITZERLAND

     CHF        1.0946        1.0980        1.0642        1.0651        1.0802        1.0854  

JAPAN

     JPY        129.8681        131.4300        119.2668        120.6600        126.4900        121.9400  

7. Seasonality of operations

It should be noted that historically the Group’s business operations are not characterized by seasonality.

8. Segment Information

Stevanato Group business operations are organized into two reportable segments, based on their specific products and services:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes containment solutions, drug delivery systems, medical devices and diagnostic & analytical services;

 

   

Engineering, which covers visual inspection, assembly packaging and glass forming machines.

For the six months ended June 30, 2021, Stevanato Group generated approximately 85% of total sales from the Biopharmaceutical and Diagnostic Solutions segment (88% for the six months ended June 30, 2020), and approximately 15% from the Engineering segment (12% for the six months ended June 30, 2020).

 

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The criteria applied to identify the operating segments are consistent with the information reviewed by the Chief Executive Officer (the Group’s “Chief Operating Decision Maker”) in making decisions regarding the allocation of resources and to assess performance.

 

     As at and for the three months ended June 30, 2021  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations
and unallocated

items
    Consolidated  

External Customers

     174,842        29,121        203,964        —         203,964  

Inter-Segment

     279        13,854        14,133        (14,133     —    

Total Revenues

     175,121        42,975        218,096        (14,133     203,964  

Cost of Sales

     117,571        35,233        152,804        (12,530     140,274  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     57,550        7,742        65,292        (1,603     63,690  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     2,256        —          2,256        —         2,256  

Selling and Marketing expenses

     2,105        929        3,034        2,390       5,424  

Research and Development expenses

     5,549        939        6,488        409       6,897  

General and Administrative expenses

     12,632        2,460        15,093        (9,062     6,030  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     39,521        3,414        42,935        4,660       47,595  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     852,754        197,107        1,049,861        (42,466     1,007,395  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     365,033        117,067        482,100        143,844       625,944  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     As at and for the three months ended June 30, 2020  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations and

unallocated
items
    Consolidated  

External Customers

     142,444        19,367        161,811        —         161,811  

Inter-Segment

     202        12,095        12,297        (12,297     —    

Total Revenues

     142,646        31,462        174,108        (12,297     161,811  

Cost of Sales

     98,242        26,831        125,073        (12,113     112,961  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     44,403        4,631        49,034        (184     48,850  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     1,876        —          1,876        (64     1,812  

Selling and Marketing expenses

     2,489        814        3,303        1,777       5,080  

Research and Development expenses

     3,193        227        3,420        420       3,840  

General and Administrative expenses

     11,689        2,709        14,398        209       14,606  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     28,909        881        29,790        (2,654     27,136  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     745,181        164,684        909,865        19,279       929,144  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     347,294        94,251        441,545        225,262       666,807  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     As at and for the six months ended June 30, 2021  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations

and unallocated
items
    Consolidated  

External Customers

     335,418        61,394        396,813        —         396,813  

Inter-Segment

     458        21,600        22,058        (22,058     —    

Total Revenues

     335,877        82,994        418,870        (22,058     396,813  

Cost of Sales

     221,037        66,505        287,542        (19,828     267,714  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     114,840        16,489        131,329        (2,230     129,099  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     5,481        —          5,481        —         5,481  

Selling and Marketing expenses

     5,247        1,750        6,997        4,295       11,292  

Research and Development expenses

     10,099        1,997        12,096        621       12,717  

General and Administrative expenses

     25,103        4,943        30,046        (10,009     20,037  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     79,873        7,798        87,671        2,863       90,534  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     852,754        197,107        1,049,861        (42,466     1,007,395  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     365,033        117,067        482,100        143,844       625,944  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     As at and for the six months ended June 30, 2020  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations and

unallocated
items
    Consolidated  

External Customers

     262,827        35,415        298,242        —         298,242  

Inter-Segment

     397        27,822        28,219        (28,219     —    

Total Revenues

     263,224        63,236        326,461        (28,219     298,242  

Cost of Sales

     183,383        52,570        235,953        (26,066     209,888  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     79,841        10,666        90,507        (2,153     88,354  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     2,189        —          2,189        (122     2,067  

Selling and Marketing expenses

     6,031        1,604        7,635        3,674       11,309  

Research and Development expenses

     5,382        1,345        6,726        1,062       7,788  

General and Administrative expenses

     24,302        4,559        28,861        (56     28,804  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     46,316        3,159        49,475        (6,955     42,520  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     745,181        164,684        909,865        19,279       929,144  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     347,294        94,251        441,545        225,262       666,807  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Inter-segment revenues and costs are eliminated upon consolidation and reflected in the “adjustments, elimination and unallocated items” column. The most relevant adjustment in revenues relates to the sales of the Engineering’s equipment to the Biopharmaceutical and Diagnostic Solutions.

The Biopharmaceutical and Diagnostic segment has only one customer with more than 10% of group’s revenues as of June 30, 2020. As of June 30, 2021, no external customer exceeds 10% of group’s revenue neither in Biopharmaceutical and Diagnostic segment nor in the Engineering segment.

Revenues generated by the Biopharmaceutical and Diagnostic Solutions segment increase by EUR 72,653 thousand, or 27.6%, from EUR 263,224 thousand in the six months ended June 30, 2020 to EUR 335,877 thousand for the six months ended June 30, 2021. Revenue increase is due to organic growth, also due to Covid-19 which increased the demand for the products and solutions provided by the Group.

Gross profit of this segment increases from 30.3% for the six months ended June 30, 2020 to 34.2% for the six months ended June 30, 2021 due to the favorable mix of products sold and the increased production efficiencies.

Revenues generated by the Engineering segment increase by EUR 19,758 thousand, or 31.2%, from EUR 63,236 thousand for the six months ended June 30, 2020 to EUR 82,994 thousand for the six months ended June 30, 2021. For the six months ended June 30, 2021 Engineering segment benefited from the high order intake represented by contracts with external customers, differently from the first half 2020 characterized by lower backlog achieved in the previous year.

Engineering gross profit increases from 16.9% for the six months ended June 30, 2020 to 19.9% for the six months ended June 30, 2021 mainly due to the increased marginality in visual inspection and glass converting machines.

9. Revenues from contract with customers

Disaggregated revenue information

The table below shows the disaggregation of the Group’s revenue from contracts with external customers:

 

(EUR thousand)    For the three months ended June 30, 2021  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     48,098        —          48,098  

Revenues from other containment and delivery solutions

     126,745        —          126,744  

Revenues from engineering

     —          29,121        29,121  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     174,843        29,121        203,964  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     103,266        15,355        118,620  

APAC

     19,906        8,094        28,000  

North America

     45,947        5,519        51,466  

South America

     5,724        153        5,878  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     174,843        29,121        203,964  
  

 

 

    

 

 

    

 

 

 

 

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Timing of revenue recognition

        

Goods and services transferred at a point in time

     166,972        11,532        178,503  

Goods and services transferred over time

     7,871        17,589        25,460  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     174,843        29,121        203,964  
  

 

 

    

 

 

    

 

 

 
(EUR thousand)    For the three months ended June 30, 2020  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     37,744        —          37,744  

Revenues from other containment and delivery solutions

     104,700        —          104,700  

Revenues from engineering

     —          19,367        19,367  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     142,444        19,367        161,811  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     84,843        11,877        96,721  

APAC

     11,903        1,880        13,784  

North America

     40,007        5,558        45,565  

South America

     5,690        51        5,741  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     142,444        19,367        161,811  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     142,444        3,478        145,921  

Goods and services transferred over time

     —          15,889        15,889  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     142,444        19,367        161,811  
  

 

 

    

 

 

    

 

 

 
(EUR thousand)    For the six months ended June 30, 2021  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     93,044        —          93,044  

Revenues from other containment and delivery solutions

     242,374        —          242,374  

Revenues from engineering

     —          61,394        61,394  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     335,418        61,394        396,813  
  

 

 

    

 

 

    

 

 

 

 

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Geographical markets

        

EMEA

     203,010        32,934        235,944  

APAC

     32,761        11,342        44,103  

North America

     88,610        16,876        105,486  

South America

     11,037        242        11,279  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     335,418        61,394        396,813  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     323,569        24,031        347,600  

Goods and services transferred over time

     11,849        37,364        49,213  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     335,418        61,394        396,813  
  

 

 

    

 

 

    

 

 

 
(EUR thousand)    For the six months ended June 30, 2020  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     67,958        —          67,958  

Revenues from other containment and delivery solutions

     194,869        —          194,869  

Revenues from engineering

     —          35,415        35,415  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     262,827        35,415        298,242  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     161,469        25,830        187,299  

APAC

     21,288        3,383        24,671  

North America

     70,247        6,143        76,390  

South America

     9,824        59        9,882  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     262,827        35,415        298,242  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     262,827        9,600        272,427  

Goods and services transferred over time

     —          25,815        25,815  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     262,827        35,415        298,242  
  

 

 

    

 

 

    

 

 

 

The Group revenues are divided into two main segments:

 

   

Biopharmaceutical and Diagnostic Solutions: this segment includes all the products and services developed and provided for containment and delivery of pharmaceutical drugs and diagnostic reagents. This segment is further divided into two sub-categories:

 

   

High-value solutions: wholly owned, internally developed products, processes and services for which the Group hold intellectual property rights or have strong proprietary know-how and are characterized by particular complexity or high performance;

 

   

Other containment and delivery solutions.

 

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Engineering: this segment includes all the equipment and technologies developed and provided to support the end-to-end pharmaceutical and diagnostic manufacturing processes.

Consolidated revenues at current exchange rates increase by EUR 98,571 thousand, or 33.05%, to EUR 396,813 thousand for the six months ended June 30, 2021, compared to EUR 298,242 thousand for the six months ended June 30, 2020. Currency movements in USD and BRL had a negative impact in 2021. Excluding this effect, the increase was 36.30%.

With reference to Biopharmaceutical and Diagnostic Solution segment, revenues in high-value solutions increase by EUR 25,086 thousand, or 36.91%, from EUR 67,958 thousand for the six months ended June 30, 2020 to EUR 93,044 thousand for the six months ended June 30, 2021, while revenues in other containment and delivery solution increase by EUR 47,505 thousand, or 24.38%, from EUR 194,869 thousand for the six months ended June 30, 2020 to EUR 242,374 thousand for the six months ended June 30, 2021. Revenues in Biopharmaceutical and Diagnostic Solutions show a significant growth in all the geographic markets: +26.14% in North America, +53.90% in APAC, +25.73% in EMEA and +12.35% in South America.

With reference to Engineering segment, revenues from contracts with external customers increase by EUR 25.979 thousand, or 73.36%, from EUR 35,415 thousand for the six months ended June 30, 2020 to EUR 61,394 thousand for the six months ended June 30, 2021.

Contract balances

The following table provides information on contractual asset from contracts with customer:

 

(EUR thousand)    At June 30,
2021
     At December 31,
2020
 

Trade Receivables

     135,800        127,818  

Contract Assets

     48,505        39,430  

Contract Liabilities

     (6,451      (5,031

Advances From Customers

     (46,675      (48,361
  

 

 

    

 

 

 

Total

     131,179        113,856  
  

 

 

    

 

 

 

The contract assets mainly relate to the Group’s right to consideration for productions from construction contract not yet invoiced as of the balance sheet date. The amount recognized as contract assets are reclassified to trade receivable as soon as the Groups has an unconditional right to consideration.

10. Cost of sales

Cost of sales are detailed as follows:

 

    

For the three months

ended June 30,

    

For the six months

ended June 30,

 
(EUR thousand)    2021      2020      2021      2020  

Purchases

     62,372        51,227        119,391        100,652  

Change in inventories

     15,670        2,426        11,198        (4,558

Direct industrial labour

     29,427        26,462        57,416        52,055  

Indirect industrial labour

     12,793        11,366        24,528        21,914  

Industrial depreciation

     11,002        10,615        21,559        21,169  

Other costs of sales

     9,010        10,865        33,622        18,656  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Cost of sales

     140,274        112,961        267,714        209,888  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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All Cost of sales items increase in the first half of 2021 compared to the same period of the previous year as a result of the significant growth in sale volumes. In particular, the increase in other costs of sales, is mainly due to an increase in subcontracting work aimed to cope the increasing workload with external resources, as a consequence of the growing revenues in Engineering segment, as well as a reduction in industrial capitalized costs for the machinery built within the Group.

Nevertheless, the overall Cost of sales increase less than proportionally to revenues mainly due to the efficiency maximization in production processes.

11. Other operating income

Other operating income for the three months ended June 30, 2021 and 2020 amount to EUR 2,256 thousand and EUR 1,812 thousand, respectively, and for the six months ended June 30, 2021 amount to EUR 5,481 thousand and EUR 2,067 thousand, respectively relating mainly to feasibility study, design, development and industrialization of new products and contract cancellation fees.

For the six months ended June 30, 2021, other operating income also include EUR 470 thousand related to grants received by Ompi Pharma. Packaging Tech. Co. Ltd for machinery technical renovation to support implementation of intelligent manufacturing projects.

For the six months ended June 30, 2020 other operating income included also EUR 244 thousand related to grants received by Nuova Ompi from the so-called Sustainable Growth Fund promoted by the Ministry for Productive Activities, in relation to an innovative research project for the development of a series of prototype solutions of innovative glass containers (called Alba) for the primary packaging of parental drugs characterized by the presence of an internal coating.

12. Expenses

Expenses are detailed as follows:

 

     For the three months
ended June 30,
    

For the six months

ended June 30,

 
(EUR thousand)    2021      2020      2021      2020  

Selling and Marketing expenses

     5,424        5,080        11,292        11,309  

Research and Development expenses

     6,897        3,840        12,717        7,788  

General and Administrative expenses

     6,030        14,606        20,037        28,804  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Expenses

     18,351        23,526        44,406        47,901  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the six months ending June 30, 2021 Selling and Marketing expenses amount to EUR 11,292 thousand (EUR 11,309 thousand in 2020). These expenses are mainly related to personnel expenses for sales organizations. They include provision for bad and doubtful debts for EUR 1,098 thousand (EUR 1,773 thousand in 2020) and depreciation for EUR 393 thousand (EUR 417 thousand in 2020). Selling and Marketing expenses slight decrease is mainly due to the reduction in bad and doubtful debt accrual following the improvement of some positions with external customers, to the postponement of all the exhibitions and business events as well as the reduction in business travels as a consequence of the Covid-19 pandemic persistency. This decrease has been partially offset by higher personal costs to support the ongoing growth in our business.

Research and Development expenses for the six months ending June 30, 2021 amounting to EUR 12,717 thousand (EUR 7,788 thousand in 2020) include costs for research and development activities to support the innovation of product range and components and include amortization of capitalized development costs for EUR 1,535 thousand (EUR 1,095 thousand in 2020). The increase in R&D expenses is primarily due to the structuring of the Drug Delivery Systems Department and the US Technology Excellence Center set up as well as an increase in personnel expenses due to new hires.

 

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General and Administrative expenses amount to EUR 20,037 thousand (EUR 28,804 thousand in 2020) for the six months ending June 30, 2021 and mainly comprise personnel expenses for administrative functions, consultancies, directors compensation, rentals as well as, depreciation and amortization for EUR 2,878 thousand (EUR 3,004 thousand in 2020), of which amortization of fair value adjustments from purchase price allocations amount to EUR 519 thousand (same amount in 2020). General and Administrative expenses for the six months ending June 30, 2021 include non-recurring accrual reversal amounting to EUR 9,884 thousand related to cash settled awards under incentive plans 2012-2021 and 2018-2022 which were early terminated in favor of the new stock grant plan 2021-2027. Please refer to Note 27 for further details.

13. Finance income

Finance income are as follows:

 

    

For the three months

ended June 30,

    

For the six months

ended June 30,

 
(EUR thousand)    2021      2020      2021      2020  

Interest income from banks deposits

     128        52        271        88  

Income from financial discounts

     15        (34      12        14  

Interest income on loans to associates

     10        5        10        10  

Other financial income

     9        68        29        261  

Foreign currency exchange rate gains

     1,148        3,401        3,019        9,040  

Derivatives write-ups

     894        133        973        133  

Other fair value adjustments

     107        179        1        (50
  

 

 

    

 

 

    

 

 

    

 

 

 

Total finance income

     2,310        3,806        4,315        9,496  
  

 

 

    

 

 

    

 

 

    

 

 

 

The finance income reduction of EUR 5,181 thousand is mainly driven by foreign currency exchange gains which fluctuated significantly in 2020 following Covid-19 global spread.

14. Finance expense

Finance expenses are as follows:

 

    

For the three months

ended June 30,

    

For the six months

ended June 30,

 
(EUR thousand)    2021      2020      2021      2020  

Interest on debts and borrowings

     1,101        1,262        2,243        2,426  

Financial discounts and other expenses

     3        20        8        16  

Interest on lease liabilities

     147        155        297        314  

Financial component IAS 19

     20        (88      20        (66

Foreign currency exchange losses

     1,561        4,077        2,514        6,683  

Derivatives write-downs

     (552      (2,044      437        4,264  

Other fair value adjustments

     130        —          130        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total finance expense

     2,411        3,383        5,650        13,637  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Finance expenses include bank interest on the Group’s financial debt (recalculated using the amortized cost method) and interest on leases about the portion of financial expenses payable matured in the reporting period on the liabilities, recognized in accordance with IFRS 16 - Leases.

Foreign exchange differences are realized and unrealized gains and losses incurred on transactions in currencies other than the functional currency of the Group; the net foreign currency exchange impact, given by the sum of gains and losses, amounts to EUR (505) thousand for the six months ended June 30, 2021 and EUR (2,357) thousand for the six months ended June 30, 2020.

The exchange rate fluctuations following Covid-19 spread in 2020 affected derivatives evaluation; in particular, derivative financial instruments on Mexican Pesos underwent a significant decrease in fair value during the first half 2020.

15. Income tax

Income tax expense amount to EUR 18,566 thousand for the six months ended June 30, 2021 compared to EUR 10,646 thousand for the six months ended June 30, 2020. Income tax expense includes a non-recurring release of deferred tax assets for EUR 4,795 thousand due to the early termination of the incentive plans aimed at a limited number of executives.

Effective tax rate for the six months ended June 30, 2021 decreased by 6.86%, from 27.59% to 20.72%. In March 2021, the group reached an agreement with Italian Tax Agency regarding the so called “Patent box regime”, resulting in a retroactive EUR 5.5 million tax saving for the financial years 2016-2020. The normalized effective tax rate without this one-off effect and without EUR 2.0 million of deferred tax assets reversal associated with the incentive plans early termination items not affecting the income statement is 24.59%.

Deferred tax assets and liabilities of the individual consolidated companies are offset within the interim consolidated statement of financial position when a legally enforceable right to offset exists.

16. Earnings per Share

Basic earnings per share (EPS) is calculated by dividing into the profit attributable to equity holders of the parent by the weighted average number of common shares issued net of the treasury shares held by the Group and the vested awards under the 2012-2021 incentive plan (for the three and the six months ended June 30, 2020).

For the three and six months ended June 30, 2021 the weighted average number of shares for diluted earnings per share was increased to take into consideration the theoretical effect of potential ordinary shares that would be assigned to the beneficiaries based on the Group’s equity incentive plans (see Note 27 for further details on the equity incentive plans). There are no dilution impact for the three and six months ended June 30, 2020, resulting in basic and diluted earnings per share being the same.

The Shareholder’s meetings held on March 4, 2021 and on July 1, 2021 approved respectively, two different share splits, as explained also in Note 24. The number of ordinary shares outstanding has been retrospectively adjusted as if such events had occurred at the beginning of the earliest period presented.

 

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The following table reflects the income and share data used in the basic and diluted EPS calculation:

 

     For the three months ended
June 30,
     For the six months ended
June 30,
 
(EUR thousand)    2021      2020      2021      2020  

Profit attributable to ordinary equity holders of the parent

     34,442        20,767        70,993        28,092  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of ordinary shares for basic EPS

     240,997,465        240,501,960        240,761,063        240,501,960  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of ordinary shares adjusted for the effect of dilution

     241,015,527        240,501,960        240,770,093        240,501,960  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2021      2020      2021      2020  

Basics earnings per common share (in EUR)

     0.14        0.09        0.29        0.12  

Diluted earnings per common share (in EUR)

     0.14        0.09        0.29        0.12  

17. Intangible assets

Changes in intangible assets as of June 30, 2021 are as follows:

 

(EUR thousand)    Total  

Cost

  

At January 1, 2021

     69,882  

Additions

     2,107  

Disposals

     (8

Exchange differences

     310  
  

 

 

 

At June 30, 2021

     72,291  

Amortization

  

At January 1, 2021

     35,982  

Amortization

     3,706  

Exchange differences

     97  
  

 

 

 

At June 30, 2021

     39,786  

Net book value

  

At June 30, 2021

     32,504  
  

 

 

 

At December 31, 2020

     33,901  
  

 

 

 

Additions of EUR 2,107 thousand for the six months ended June 30, 2021 related to the capitalization of costs associated with the upgrading of the ERP software and software licenses for R&D, quality and production departments. No impairment indicators were identified during the six months period ended June 30, 2021.

 

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18. Property, plant and equipment

Changes in items of property, plant and equipment as of June 30, 2021 are as follows:

 

(EUR thousand)    Total  

Cost

  

At January 1, 2021

     638,033  

Additions

     43,329  

Disposals

     (106

Exchange differences

     6,648  
  

 

 

 

At June 30, 2021

     687,904  
  

 

 

 

Depreciation

  

At January 1, 2021

     324,375  

Depreciation charge for the year

     19,567  

Disposals

     (85

Exchange differences

     2,376  
  

 

 

 

At June 30, 2021

     346,233  
  

 

 

 

Net book value

  

At June 30, 2021

     341,672  
  

 

 

 

At December 31, 2020

     313,658  
  

 

 

 

Additions of EUR 43,329 thousand for the six months ended June 30, 2021 are mainly comprised of additions to advances and assets under construction, as well as plant, machinery and equipment, primarily related to building suitable to house new production facilities, purchase of new production equipment (part of the capital expenditure in machinery is also related to the increasing production capacity due to the Covid-19 pandemic), investments in machines for syringes, vials and cartridges production.

19. Right of Use

The Group has lease contracts for various items of plant, machinery, vehicles and other equipment used in its operations. Leases of plant and machinery generally have lease terms between 3 and 15 years, while vehicles and other equipment generally have lease terms between 3 and 5 years. There are several lease contracts that include extension and termination options.

The Group also has certain leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.

 

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Movements in the leased Right of Use assets in for the first six months of 2021 are shown below:

 

(EUR thousand)    Total  

Cost

  

At January 1, 2021

     35,992  

Additions

     1,714  

Disposals

     (214

Exchange differences

     394  
  

 

 

 

At June 30, 2021

     37,885  

Depreciation

  

At January 1, 2021

     10,612  

Depreciation charge for the year

     3,091  

Disposals

     (35

Exchange differences

     109  
  

 

 

 

At June 30, 2021

     13,778  
  

 

 

 

Net book value

  

At June 30, 2021

     24,107  
  

 

 

 

At December 31, 2020

     25,380  
  

 

 

 

20. Financial assets

The following table details the composition of financial assets:

 

(EUR thousand)    At June 30,
2021
     At December 31,
2020
 

Receivables from financing activities

     1,766        5,956  

Other non-current financial assets

     850        745  
  

 

 

    

 

 

 

Other non-current financial assets

     2,616        6,701  
  

 

 

    

 

 

 

Fair value of derivatives financial instruments

     757        19  

Other securities

     27,168        41,523  
  

 

 

    

 

 

 

Other current financial assets

     27,925        41,543  
  

 

 

    

 

 

 

Financial Assets

     30,541        48,244  
  

 

 

    

 

 

 

Receivables from financing activities assets include financial loan for EUR 1,323 thousand as of June 30, 2021 (EUR 1,342 as of December 31, 2020) granted to the associate Swissfillon AG to fund the development projects. The decrease in receivables from financing activities follows the early termination of the incentive plans 2012-2021 and 2018-2022 aimed at a limited number of key managers, as reported in Note 27.

Other securities include guaranteed investment funds managed by Société Générale SA, which are measured at fair value. The decrease in other securities is due to the redemption of part of the insurance policies.

 

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21. Inventories

Inventories, shown net of an allowance for obsolete and slow-moving goods, can be analyzed as follows:

 

(EUR thousand)    At June 30,
2021
     At December 31,
2020
 

Raw materials

     48,336        41,889  

Semifinished products

     41,501        46,479  

Finished products

     62,573        55,394  

Advances to suppliers

     10,689        7,920  

Provision from slow moving and obsolescence

     (13,384      (12,309
  

 

 

    

 

 

 

Total inventories

     149,717        139,373  
  

 

 

    

 

 

 

The provision for slow moving and obsolete inventories recognized within cost of sales during for the six months ended June 30, 2021 and December 31, 2020 is EUR 13,384 thousand and EUR 12,309 thousand respectively, with an accrual of EUR 1,992 thousand and utilizations for EUR 1,860 thousand for the six months ended June 30, 2021.

22. Trade receivables and contract assets

Trade receivables and contract assets are analyzed as follows:

 

(EUR thousand)    At June 30,
2021
    At December 31,
2020
 

Trade receivables

     144,324       135,514  

Allowance for expected credit losses

     (8,524     (7,696
  

 

 

   

 

 

 

Total trade receivables

     135,800       127,818  
  

 

 

   

 

 

 

Expected credit losses rate

     5.9     5.7

Trade receivables are non-interest bearing and are generally on term of 60 to 90 days. The Group is not exposed to significant concentration of third-party credit risk.

Trade receivables are stated net of an allowance for expected credit losses which has been determined in accordance with IFRS 9 amounting to EUR 8,524 thousand and EUR 7,696 thousand the six months ended June 30, 2021 and December 31, 2020 respectively.

Contract assets

Contract assets relate to revenue earned from ongoing customer-specific construction contracts of the Engineering segment and from the In-vitro diagnostic business. As such, the balances of this account vary and depend on the number of ongoing construction contracts at the end of the period. The Group has contract assets of EUR 48,505 thousand as of June 30, 2021 (EUR 39,430 thousand as of December 31, 2020). Contract assets gross amounts to EUR 122,784 thousand (EUR 86,905 thousand as of December 31, 2020), net of invoices issued of EUR 74,279 thousand (EUR 47,476 thousand as of December 31, 2020).

23. Tax receivables and tax payables

As of June 30, 2021 tax receivables amount to EUR 41,532 thousand (EUR 25,033 thousand as of December 31, 2020) and Tax liabilities amount to EUR 48,466 thousand (EUR 19,126 thousand as of December 31, 2020). Total net balance as of June 30, 2021 is a payable amounting to EUR 6,934 thousand, while the net balance as of December 31, 2020 was a receivable amounting to EUR 5,907. The change in net balance is mainly due to the fact that no tax advances for fiscal year 2021 have been paid yet by the Italian legal entities.

 

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24. Equity

The main objective of the Group’s capital management is to maintain a solid credit rating and adequate financial ratios with a view to supporting business activity and maximizing value for the shareholders.

Movements in the equity accounts are reported in the Interim Consolidated Statements of Changes in Equity; comments on the main components and their changes are provided below.

Share capital

On March 4, 2021, the extraordinary Shareholders’ meeting approved:

 

 

the elimination of the indication of the nominal value of the 20,002 issued shares,

 

 

the issuance of additional 99,989,998 ordinary shares with no par value to be allocated free of charge to shareholders in proportion to the shares held by each of them, so that the share capital of EUR 20,002,000 is divided into a total of 100,010,000 ordinary shares with no par value, without giving rise to changes in the amount of the share capital.

On July 1, 2021 the Shareholder’s meeting approved a further share split following which all the existing 100,010,000 shares have been split into a total of 272,427,240 shares in the ratio of 2,724 new shares post-split for each share outstanding prior to the share split.

Treasury Reserve

Following the resolution of the Board of Directors to early terminate the incentive plan 2012-2021 and to revoke incentive plan 2018-2022, on March 4, 2021 and on June 3, 2021 the Company repurchased a total of n. 29 ordinary shares (corresponding to 145,000 ordinary shares after the first share split) and a total of n. 850,000 ordinary shares, respectively, from the beneficiaries of the cash settled awards for EUR 1,791 thousand.

On June 3, 2021 the Company transferred a total of 133,210 ordinary shares to the beneficiaries of the so called “Restricted Stock Grant Plan 2021-2027” and to certain members of the Board of Directors for a total value of EUR 240 thousand.

Prior to the second share split disclosed in this note, a total of 10,460,000 of Company’s ordinary shares were held in treasury at December 31, 2020, for a total cost of EUR 26,189 thousand, and a total of 11,321,790 of Company’s ordinary shares at June 30, 2021, for a total cost of EUR 27,740 thousand. The amounts of ordinary shares held in treasury disclosed in this note have been retroactively adjusted to reflect the share split occurred later on July 1, 2021, resulting in a total number of ordinary shares held in treasury at June 30, 2021 and at December 31, 2020 of 30,840,555 of 28,493,040 respectively.

Currency translation reserve

The currency translation reserve includes the cumulative foreign currency translation differences arisen from the translation of financial statements denominated in currencies other than Euro; as of June 30, 2021 it amounts to EUR 27,039 thousand compared to EUR 34,911 thousand as of December 31, 2020. As of June 30, 2020 it amounted to EUR 33,759 thousand compared to EUR 12,331 thousand as of December 31, 2019. The high increase was mainly due to the depreciation against Euro of the Mexican Peso and the Brazilian Real occurred in the first half 2020 after Covid-19 outbreak.

Other Reserves

On January 20, 2021 Stevanato Group shareholder’s meeting approved the distribution of EUR 11,200 thousand dividends from “other reserves”.

 

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25. Financial liabilities

Total financial liabilities are EUR 345,229 thousand and EUR 375,358 thousand as of June 30, 2021 and as of December 31, 2020 respectively; the balances in financial debt are as follows:

 

(EUR thousand)    At June 30,
2021
     At December 31,
2020
 

Lease liabilities - Right of Use

     5,527        5,435  

Bank overdrafts

     3,238        581  

Bank loans

     58,194        61,905  

Financial liabilities with related parties

     932        968  

Fair value of derivatives

     3,319        4,417  

Financial payables for shares acquisition

     6,942        7,927  

Financial liabilities with other lenders

     2,525        —    
  

 

 

    

 

 

 

Total current financial liabilities

     80,676        81,234  
  

 

 

    

 

 

 

Lease liabilities - Right of Use

     18,931        20,186  

Bank loans

     196,018        224,365  

Notes

     49,603        49,573  
  

 

 

    

 

 

 

Total non-current financial liabilities

     264,552        294,124  
  

 

 

    

 

 

 

Financial liabilities

     345,229        375,358  
  

 

 

    

 

 

 

Other current financial liabilities include EUR 236 thousand as of June 30, 2021 (EUR 1,221 thousand as of December 31, 2020) which refer to the unpaid amount of the purchase of the residual shares of Medirio SA due in 2021 and EUR 6,706 thousand (unchanged compared to December 31, 2020) recognized in relation to the put option granted to non-controlling shareholders of SVM Automatik A/S.

Other current financial assets and other financial liabilities relates to foreign exchange derivatives. The following table sets further the analysis of derivative assets and liabilities of June 30, 2021 and December 31, 2020.

 

     At June 30,
2021
     At December 31,
2020
 
(EUR thousand)    Carrying
amount
     Fair
value
     Carrying
amount
     Fair
value
 

Financial assets

           

Foreign exchange forward contracts

     757        757        19        19  

Financial liabilities

           

Foreign exchange forward contracts

     229        229        16        16  

Interest Rate Swap in cash flow hedges

     3,090        3,090        4,386        4,386  

Derivatives on currency risk have not been designated as hedging instruments and reflect the change in the fair value of those foreign exchange forward contracts that are not designated in hedge relationships, but are, nevertheless, intended to reduce the level of foreign currency risk for expected sales.

 

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Derivatives designated as hedging instruments reflect the change in fair value of the interest rate swap contract, designated as cash flow hedges to hedge fluctuations in variable interest rate on loans. The amount recorded in the cash flow hedge reserve will be recognized in the consolidated income statement according to the timing of the cash flows of the underlying transaction.

26. Fair Value Measurement

IFRS 13 establishes a hierarchy that categorizes into three levels the inputs to the valuation techniques used to measure fair value by giving the highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs). In some cases, the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy at the lowest level input that is significant to the entire measurement.

Levels used in the hierarchy are as follows:

 

   

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in level 1.

 

   

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

 

   

Level 3: If one or more of the significant inputs is not based on observable market data, the instruments are included in level 3. This is the case for unlisted equity securities.

Assets and liabilities that are measured at fair value on a recurring basis

The following table shows the fair value hierarchy for financial assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021 and at December 31, 2020:

As at June 30, 2021:

 

(EUR thousand)    Fair value measurement using  
     Total      Level 1      Level 2      Level 3  

Cash and cash equivalents

     100,786        100,786        —          —    

Equity Investments others

     810        —          —          810  

Derivatives financial assets

     757        —          757        —    

Financial current assets

     27,168        —          27,168        —    

Other non-current financial assets

     611        —          611        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     130,132        100,786        28,536        810  
  

 

 

    

 

 

    

 

 

    

 

 

 

Put & Call related to financial liabilities

     6,706        —          —          6,706  

Derivatives financial liabilities

     3,319        —          3,319        —    

Payables for subsidiary acquisition

     236        —          —          236  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     10,261        —          3,319        6,942  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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As at December 31, 2020:

 

(EUR thousand)    Fair value measurement using  
     Total      Level 1      Level 2      Level 3  

Cash and cash equivalents

     115,599        115,599        —          —    

Equity Investments others

     760        —          —          760  

Derivatives financial assets

     19        —          19        —    

Financial current assets

     41,523        —          41,523        —    

Other non-current financial assets

     610        —          610        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     158,512        115,599        42,153        760  
  

 

 

    

 

 

    

 

 

    

 

 

 

Put & Call related to financial liabilities

     6,706        —          —          6,706  

Bonds at amortized cost

     49,573        —          49,573        —    

Derivatives financial liabilities

     4,417        —          4,417        —    

Payables for subsidiary acquisition

     1,221        —          —          1,221  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     61,917        —          53,990        7,927  
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair value of current financial assets and other financial liabilities is measured by taking into consideration market parameters at the balance sheet date, using valuation techniques widely accepted in the financial business environment.

The fair value of foreign currency derivatives (forward contracts, currency swaps and options) and interest rate swaps is determined by considering the prevailing foreign currency exchange rate and interest rates, as applicable, at the balance sheet date.

The value of cash and cash equivalents usually approximates fair value due to the short maturity of these instruments, which consist of bank current accounts. The fair value of other financial assets is measured through other unobservable input in accordance with IFRS 13, detailed in Note 20.

No borrowings of the Group are listed debt. There are no transfers between Level 1, Level 2 and Level 3 during the six months ended June 30, 2021 and the year ended December 31, 2020.

The fair value of the loans accounted for at amortized cost approximates their carrying amounts as of June 30, 2021 and December 31, 2020.

27. Employee benefits

Employee benefits are analysed as follows:

 

(EUR thousand)    At June 30,
2021
     At December 31,
2020
 

Employee Severance Pay

     5,610        5,791  

Jubilee benefits

     239        239  

Other post-employment plans

     660        582  

Long term incentive plan

     2,676        1,780  

Cash settled awards

     —          21,333  

Stock grant plan

     1,353        —    
  

 

 

    

 

 

 

Total employee benefits

     10,539        29,725  
  

 

 

    

 

 

 

 

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Long-term Incentive plan

In order to align the interests of management with those of the Shareholders over the medium/long-term by establishing a strong link between remuneration and performance, the CEO approved a medium/long-term plan called the “Long-term Incentive plan” for the 2020-2023 four-year period involving a select number of Senior Management (Top Management and/or Key People) of the Companies of the Group and based on the meeting of the long-term industrial plan objectives.

Cash settled awards

Cash settled awards are incentive plans aimed at a limited number of executives and key resources of the Group. The 2012-2021 incentive plan and the 2018-2022 incentive plan were approved by the Board of Directors on February 9, 2012 and on September 12, 2018 respectively.

In order to concentrate in a single new plan the incentive mechanism that could more concretely and effectively contribute to the achievement of the redefined Company’s growth objectives, Stevanato Group proceeded with the early conclusion of the 2012-2021 incentive plan and with the revocation of 2018-2022 incentive plan.

On March 4, 2021 and on June 3, 2021, the Company exercised a call option to buy back n. 995,000 shares from the beneficiaries of the 2012-2021 incentive plan and irrevocably and unconditionally waived its rights to exercise the call option on n. 215,000 shares (number of shares as before the second share split). The parties also mutually agreed to close the 2018-2022 incentive plan; the net impact of such transactions led to a reduction in cash settled award liabilities.

Restricted Stock Grant Plan 2021-2027

The Shareholders’ Meeting of Stevanato Group S.p.A. on March 4, 2021 resolved to approve a share-based incentive plan, named “Restricted Stock Grant Plan 2021-2027” with the aim to involve people playing a strategic role in the Group in the economic and strategic development of Group, aligning their interests to those of the shareholders and other stakeholders of the Company, during the period between January 1, 2021 and December 31, 2026.

The Stock Grant Plan provides for three two-years periods included, respectively, between January 1, 2021 and December 31, 2022 (First Vesting Period), January 1, 2023 and December 31, 2024 (Second Vesting Period), January 1, 2025 and December 2026 (Third Vesting Period), at the beginning of which a certain number of Stevanato Group ordinary shares – linked with the achievement within the end of each Vesting Period of specific targets in terms of consolidated revenues and EBITDA – will be assigned free of charge to the beneficiaries. For the EBITDA definition, please refer to section “Key Indicators of Performance and Financial Condition” of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below. The assigned shares shall be registered to a Trustee company and shall be subject to the prohibition to sell and to the selling commitment in accordance to a one-year lock-up period.

The transfer of ownership of the shares will be finalized after signing with each beneficiary of an agreement which binds the beneficiaries to re-sell to Stevanato Group, fully or partially, the Shares assigned to them in case the targets provided for the vesting period in relation to which the shares were assigned should not be totally or partially achieved. A similar obligation is provided if, within the end of each vesting period, the employment relationship terminates.

In the event that certain over-performances with respect to the financial targets have been met, beneficiaries will be granted, free of charge, an additional number of Stevanato Group shares related to the Vesting Period in which the target were exceeded and such shares additional assigned will be subject to the time-limited prohibition to sell.

On July 3, 2021 a total of n. 87,000 ordinary shares, which were previously held in treasury, were assigned to the participants of the plan.

 

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28. Provisions

The balances as of June 30, 2021 are detailed below:

 

(EUR thousand)    Provision for
Warranty
     Decommissioning      Provision for
legal and
sundry risks
    Provision for
agents and
directors
severance
indemnity
     Total  

At January 1, 2021

     1,061        523        1,664       1,136        4,384  

Arising during the period

     57        11        4,238       26        4,332  

Utilized

     —          —          (112     —          (112

Unused amounts reversed

     —          —          (4,505     —          (4,505

Exchange rate difference

     0        17        33       —          50  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

At June 30, 2021

     1,117        552        1,317       1,162        4,149  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Current

     —          —          —         —          —    

Non-current

     1,117        552        1,317       1,162        4,149  

The warranty provision represents the best estimate of commitments given by the Group for contractual, legal, or constructive obligations arising from product warranties given for a specified period of time. Such provisions are recognized on shipment of the goods to the customers. The warranty provision is estimated on the basis of the Group’s past experience and contractual terms. Related costs are recognized within cost of sales.

The provision for legal proceeding and sundry risks represents management’s best estimate of the expenditures expected to be required to settle on otherwise resolve legal proceeding and disputes. As of March 31, 2021 a potential claim with a customer was identified which led to an accrual of about EUR 4 million. As of June 30, 2021 the situation has evolved positively thus leading to the release of the provisioned amount.

29. Other non-current liabilities

Other non-current liabilities as of June 30, 2021 and December 31, 2020 amount to EUR 1,831 thousand respectively EUR 1,808 thousand and are mainly related to holiday pay of Danish companies’ employees following the transition to the new Danish Holiday Act started in 2019.

30. Trade payables and other current liabilities

Trade payables amount to EUR 100,582 thousand at June 30, 2021 (EUR 118,740 thousand at December 31, 2020) and other current liabilities amount to EUR 48,227 thousand at June 30, 2021 (EUR 43,683 thousand at December 31, 2020), both are entirely due within one year. The carrying amount of trade payables is considered to be equivalent to their fair value.

 

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31. Contract liabilities and advances from customers

Contract liabilities and advances from customers are as follows:

 

(EUR thousand)    At
June 30,

2021
     At
December 31,
2020
 

Contract Liabilities

     6,451        5,031  

Advances from customers

     46,675        48,361  
  

 

 

    

 

 

 

Total contract liabilities and advances from customers

     53,126        53,392  
  

 

 

    

 

 

 

Current

     53,126        53,392  

Non-current

     —          —    

Contract liabilities relate to revenue earned from ongoing customer-specific construction contracts of the Engineering System Division and of the In-vitro diagnostic business. The Group has contract net liabilities of EUR 6,451 thousand and EUR 5,031 thousand as of June 30, 2021 and as of December 31, 2020 respectively. Contract assets gross amounts to EUR 15,554 thousand (EUR 10,828 thousand as of December 31, 2020), net of invoices issues of EUR 22,006 thousand (EUR 15,859 thousand as of December 31, 2020).

Advances from customers relate to sales whose revenues are recognized at point in time.

32. Related party disclosures

According to IAS 24, the related parties of the Group are entities and individuals capable of exercising control, joint control or significant influence over the Group and its subsidiaries, companies belonging to the Stevanato Group S.p.A. the controlling company Stevanato Holding S.r.l., unconsolidated subsidiaries of the Group and associates. In addition, members of Stevanato Group’s Board of Directors and executives with strategic responsibilities and their families are also considered related parties. The Group carries out transactions with related parties on commercial terms that are normal in the respective markets, considering the characteristics of the goods or services involved.

Note 4 provide information about the Group’s structure, including details of the subsidiaries and the holding company.

Transaction with related parties refer to:

 

   

revenues for closure containment solutions from the associate Swissfillon AG;

 

   

service fees and rentals paid to Winkler & Co Ltd, the company whose owner holds minority interests in the subsidiary Ompi of Japan;

 

   

the purchase of products and rentals paid to Società Agricola Stella S.r.l., controlled by SFEM Italia S.r.l.;

 

   

rentals paid to SFEM Italia S.r.l., controlled by Stevanato family;

 

   

consulting services provided by Federici William and by MJB Consultants LLC, Progenitor Capital Partners LLC, and Studio Legale Spinazzi Azzarita Troi, whose beneficial owners are Board members in Stevanato Group;

 

   

industrial rentals paid to E & FKH Ejendomme ApS, whose beneficial owners are family members of the minority shareholders of the subsidiary SVM;

 

   

rentals paid to members of Stevanato family;

 

   

in 2017 the Company disbursed a loan of EUR 1,069 thousand to Mr. Fabrizio Bonanni to facilitate the acquisition of shares under the cash settled award. Mr. Fabrizio Bonanni is a member of the board of Stevanato Group. Such loan has been fully reimbursed and terminated on March 10, 2021;

 

   

in 2017 the Company disbursed a loan of EUR 2,239 thousand to Mr. Mauro Stocchi to facilitate the acquisition of shares under the cash settled award. Mr. Mauro Stocchi is Chief Business Officer of Stevanato Group. Such loan has been fully reimbursed and terminated on June 3, 2021;

 

   

donations to the Stevanato Foundation, owned by Stevanato family. The foundation exclusively pursues the aims of social solidarity, philanthropy and charity, operating in the fields of social and socio-medical assistance, education and training as well as cultural and educational activities and scientific research. The Foundation intervenes in support of children and young people in situations of serious difficulty due to their illnesses, the distress of their families or other situations that may affect their health or growth.

 

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Transactions with related parties also include compensation to directors and managers with strategic responsibilities.

The amounts of transactions with related parties recognized in the Interim Consolidated Income Statement and the related assets and liabilities are as follows:

 

     For the three months ended June 30,  
     2021     2020  
(EUR thousand)    Revenues      Costs*     Net
financial
expense
    Revenues      Costs*      Net
financial
expense
 

Associate companies:

               

Swissfillon AG

     372        —         (10     426        —          (10

Other related parties

     —          (3,984     (6     —          2.040        (12
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total transactions with related parties

     372        (3,984     (16     426        2.040        (22
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

*

Costs include cost of sales, selling, general administrative costs and other expenses net.

 

     For the six months ended June 30,  
     2021     2020  
(EUR thousand)    Revenues      Costs*     Net
financial
expense
    Revenues      Costs*      Net
financial
expense
 

Associate companies:

               

Swissfillon AG

     372        —         (10     450        —          (10

Other related parties

     —          (4,687     (17     —          3,766        (24
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total transactions with related parties

     372        (4,687     (27     450        3,766        (34
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

*

Costs include cost of sales, selling, general administrative costs and other expenses net.

 

    

As at June 30,

2021

   

As at December 31,

2020

 
(EUR thousand)    Trade
receivables
     Trade
payables
     Other
assets
     Financial
assets or
liabilities
    Trade
receivables
     Trade
payables
     Other
assets
     Financial
assets or
liabilities
 

Associate companies:

                      

Swissfillon AG

     10        —          —          1,313       88        —          —          1,342  

Other related parties

     —          303        —          (491     —          55        24        3,646  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total transactions with related parties

     10        303        —          822       88        55        24        4,988  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2021 costs for other related parties include the accrual reversal from the early termination of 2012-2021 and 2018-2022 incentive plans.

 

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33. Covid-19 Pandemic

At the beginning of 2020, the World Health Organization declared the existence of an international emergency following the spread of SARS-CoV-2. Since the early stages of the spread of the epidemic, Stevanato Group has been strongly committed to safeguarding the health and safety of its employees, ensuring at the same time business continuity in all its premises. The company has implemented strict precautionary measures provided by national and regional regulations on personal and workplace hygiene, as well as on the organization of working life (such as reorganization of shifts) at its plants. It has adopted measures to avoid crowding, maximizing the use of remote working, allowing access to external personnel only if in compliance with current legislation. Sensitization activities about the importance of prevention, both at work and home, have been made throughout the period, and screening activities among staff have been performed when needed to increase prevention further.

Short-term impacts of Covid-19 on Stevanato Group production and operational capabilities included: (i) labor absenteeism; (ii) disruptions to production lines; (iii) delays in, and increased costs of, logistics; (iv) short-term drop in sales of certain non- Covid-19 related orders which were cancelled and or postponed; and (v) increased labor costs in the form of employee bonuses to recognize and reward general efforts during the pandemic.

Long-term effects of Covid-19 have included the acceleration of the Group business plan and growth strategy due to a general increase in demand for our products, processes and services. A significant part of our production has been devoted to supporting our customers in providing a rapid response to Covid-19 since the inception of the pandemic. The group has been supplying: (i) glass vials and syringes to producer of vaccines already in commercial phase as well as to more than 80% of the treatment and vaccine programs in advanced development phases (Phase I to Phase III) according to our estimates based on public information about treatments and vaccines (WHO, EMA, FDA); (ii) plastic diagnostic consumables for the detection and diagnosis of Covid-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspections systems. The governmental measures adopted to contain the outbreak of Covid-19 have also impacted the Group ability to carry out business development activities in the past few months; we believe this may have an impact on our ability to broaden our customer portfolio in the immediate future. Currently, it is not possible to predict with certainty the full scope of the impact of Covid-19 on our business and operations given much rests on future developments of the outbreak.

34. Events after the reporting period

The Group has evaluated subsequent events through August 19, 2021, which is the date the Interim Condensed Consolidated Financial Statements were authorized for issuance.

On July 1, 2021 the Shareholders’ meeting approved the request for admission to trading functional to the listing and placement of the company’s ordinary shares on the New York Stock Exchange (NYSE). In order to create the free float necessary to ensure the sufficient circulation of the company’s shares on the NYSE, as a necessary prerequisite for trading, an initial public offering of the company’s shares was made in the form of a registered offering in the United States. The placement concerned both newly issued ordinary shares, as a paid capital increase, and shares put up for sale by the majority shareholder, Stevanato Holding S.r.l.

The shareholders’ meeting therefore resolved to increase the share capital by issuing a maximum of 40,000,000 ordinary shares with the exclusion of the option right as a service of the trading of ordinary shares on the NYSE.

The Shareholders’ meeting further resolved to adopt the new Company bylaws which contain the partition of the share capital into two categories of shares, ordinary shares and A shares, the latter not being listed, as well as the splitting of the 100,010,000 existing shares into a total of 272,427,240 shares.

On July 16, 2021 Stevanato Group began trading on the New York Stock Exchange under the symbol STVN placing 32,000,000 share at USD 21 each. Stevanato Group S.p.a. offered 22,400,000 ordinary shares while the selling shareholder, Stevanato Holding S.r.l., offered an additional 9,600,000 ordinary shares. The Gross Proceeds for the IPO shares placed by the Group were USD 470,400 thousand.

 

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On July 29, 2021, the Board of Directors notified the reaching of a non-binding agreement with the minority shareholder for the acquisition of the remaining 35% of the share capital in SVM at a price that approximates to the fair value recorded in the financial statements as of June 30, 2021 and conferred on the Chairman and the Chief Executive Officer every broader power to proceed with all the acts necessary for the negotiation and the execution of the acquisition by the subsidiary Stevanato Group International.

On August 13, 2021 the underwriters partially exercised their over-allotment option and purchased additional 1,018,280 ordinary shares at the same price as the ordinary shares offered at IPO on July 16, 2021. Stevanato Group S.p.a. offered additional 712,796 ordinary shares while the selling shareholder, Stevanato Holding S.r.l., offered additional 305,484 ordinary shares. The Gross Proceeds for the Group related to the additional shares offered were USD 14,969 thousand.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions; they are subject to numerous risks and uncertainties and are made in light of information currently available to us. Many important factors may adversely affect our results as indicated in forward-looking statement

For additional information, refer to the risk factors discussed under “Item 1A. Risk Factors” below and in our other filings with the U.S. Securities and Exchange Commission. You should read this discussion and analysis completely and with the understanding that our actual future results may be materially different and worse from what we expect.

Overview

We are a leading global provider of drug containment, drug delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We deliver an integrated, end-to-end portfolio of products, processes and services that address customer needs across the entire drug life cycle at each of the development, clinical and commercial stages. Our core capabilities in scientific research and development, our commitment to technical innovation and our engineering excellence are central to our ability to offer value added solutions to our clients.

Our priority is to provide flexible solutions that preserve the integrity of pharmaceutical products and enable our customers to deliver safe and effective treatments to patients while reducing time to market, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk. We achieve this by developing our products in close collaboration with our customers, leveraging our scientific research capabilities, technical expertise and engineering and manufacturing excellence to meet their quality requirements.

Our solutions are highly integrated with the development, production and commercialization processes of our customers. In addition to manufacturing drug containment and delivery solutions, we provide a full set of services across all stages of drug development, from pre-clinical to clinical and commercialization. We also engineer machinery and equipment for the production of drug containment and delivery systems that can be integrated into both our customers’ and our own manufacturing processes. Our involvement at each stage of a drug’s life cycle, together with the breadth of our offering, enables us to serve as a one-stop-shop for our customers, which we believe represents a significant competitive advantage.

We operate across the healthcare industry and serve some of its fastest growing segments, including biologics, biosimilars, vaccines and molecular diagnostics. As a result of how closely integrated we are in the drug production and delivery supply chain, we are well-positioned to benefit from secular trends within our target industries, such as increases in demand resulting from pharmaceutical innovation, acceleration and expansion of vaccination programs, growth in biologics/biosimilars, self-administration of medicines, aging demographics and increasing quality standards and regulation.

We operate our business in two segments:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes all the products, processes and services developed and provided for the containment and delivery of pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables; and

 

   

Engineering, which includes all of the equipment and technologies developed and provided to support the end-to-end pharmaceutical, biotechnology and diagnostic manufacturing processes (assembly, visual inspection, packaging and serialization and glass converting).

 

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We refer to our premium products in the Biopharmaceutical and Diagnostic Solutions segment as our “high-value” solutions. “High-value” solutions are wholly owned, internally developed products, processes and services for which we hold intellectual property rights or have strong proprietary know-how, and that are characterized by particular complexity and high performance. Our “high-value” solutions deliver significant benefits to customers in terms of time-to-market and reduced total cost of ownership. Among our key “high-value” solutions is our EZ-Fill® line of ready-to-fill injectable products, which can be customized to clients’ needs.

We have nine production plants for manufacturing and assembling pharmaceutical and healthcare products across Europe (Italy, Germany and Slovakia) and the rest of the world (Brazil, China, Mexico and the United States), five plants for the production of machinery and equipment (Italy and Denmark), two sites for analytical services (Italy and the United States) and two commercial offices (Japan and the United States). Our manufacturing facilities in Mexico (serving the U.S. market), China and Brazil are greenfield operations established by us. Our manufacturing facilities in Slovakia, Denmark, Germany and the United States were acquired in strategic transactions over the past 15 years. Our global footprint, together with our proprietary, highly standardized manufacturing systems and processes, allow us to provide quality consistent products and services to our customers in more than 70 countries.

Highlights

Consolidated Income Statement Data

 

     (Amounts in € millions, except as indicated otherwise)  
    

For the three
months

ended June 30,

    Change    

For the six
months

ended June 30,

    Change  
     2021      2020     %     2021      2020     %  

Net Revenues

     204.0        161.8       26.1       396.8        298.2       33.1  

Gross Profit

     63.7        48.9       30.3       129.1        88.4       46.0  

Operating Profit

     47.6        27.1       75.6       90.5        42.5       112.9  

Profit Before Tax

     47.9        27.8       72.3       89.6        38.6       132.1  

Net Profit attributable to:

              

Equity holders of the parent

     34.4        20.8       65.4       71.0        28.1       152.7  

Non-controlling interest

     0.0        (0.1     (100.0     0.0        (0.1     (100.0

Basic earnings per common share (in €)

     0.14        0.09       55.6       0.29        0.12       141.7  

Diluted earnings per common share (in €)

     0.14        0.09       55.6       0.29        0.12       141.7  

Consolidated Statement of Financial Position Data

 

     (Amounts in € millions)  
     As of
June 30,
     As of
December 31,
     Change  
     2021      2020       

Assets

        

Total current assets

     510.9        492.8        18.1  

Total non-current assets

     496.5        475.2        21.3  

Total assets

     1,007.4        968.0        39.4  

Liabilities and equity

        

Total current liabilities

     331.1        316.2        14.9  

Total non-current liabilities

     294.9        341.7        (46.8

Total liabilities

     625.9        657.8        (31.9

Total liabilities and equity

     1,007.4        968.0        39.4  

 

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Covid-19 Pandemic update

Initial short-term impacts of Covid-19 on our production and operational capabilities affected us principally in 2020 and included: (i) labor absenteeism; (ii) disruptions to production lines; (iii) delays in, and increased costs of, logistics; (iv) short-term drop in sales of certain non-Covid-19 related orders, which were cancelled and or postponed; and (v) increased labor costs in the form of employee bonuses to recognize and reward general efforts during the pandemic.

Despite the initial short-term operational disruption, and the impact that the measures established to respond to the COVID- 19 pandemic had on our ability to carry out business development activities (which we believe may have had an impact on our ability to broaden our customer portfolio in the short-term), sales of syringes and vials to and for vaccination programs globally and visual inspection systems, increased resulting in a revenue growth acceleration in 2020, and a further acceleration in the first six months of 2021. As of June 30, 2021, we supplied: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on public information (WHO, EMA, FDA); (ii) plastic diagnostic consumables for the detection and diagnosis of Covid-19; (iii) glass forming lines, which are being installed worldwide, to facilitate the distribution of glass bulks and sterile vials and syringes; and (iv) visual inspection systems. Going forward, we anticipate that demand for syringes, vials and related products and services will remain elevated as the Covid-19 vaccine and treatment roll-out continues globally and, more generally, as epidemic preparedness, including through new vaccination programs and booster shots, becomes a greater priority going forward. However, there remains uncertainty around the magnitude of the long-term impact of Covid-19 on demand for our solutions.

Key Indicators of Performance and Financial Condition

Non-GAAP Financial Measures

We monitor and evaluate our operating and financial performance using several non-GAAP financial measures, including: Constant Currency Revenue, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow. We believe that these non-GAAP financial measures provide useful and relevant information regarding our performance and improve our ability to assess our financial condition. While similar measures are widely used in the industry in which we operate, the financial measures we use may not be comparable to other similarly titled measures used by other companies, nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.

Constant Currency Revenue

Constant Currency Revenue is defined as revenue excluding the impact of fluctuations in currency exchange rates. Constant Currency Revenue is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with the prior periods and that of our competitors. We believe providing constant currency information provides valuable supplemental information regarding our results of operations. We calculate constant currency amounts by converting our current period local currency revenue using the prior period foreign currency average exchange rates and comparing these adjusted amounts to our prior period reported results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to substitute recorded amounts presented in conformity with IFRS as issued by the IASB, nor should such amounts be considered in isolation. The following table sets forth the calculation of Constant Currency Revenue for the three months and six months ended June 30, 2021 and 2020 and provides a reconciliation to the most comparable IFRS measure, Revenue.

 

     Biopharmaceutical and Diagnostic Solutions      Engineering  
For the three months ended June 30, 2021    High-Value
Solutions
     Other containment
and delivery
solutions
     Total
Biopharmaceutical
and Diagnostic
Solutions
     Total
Engineering
 

Reported Revenue

     48.1        126.7        174.8        29.1  

Effect of changes in currency translation rates

     2.1        1.9        4.0        —    

Constant Currency Revenue

     50.2        128.7        178.8        29.1  

 

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Table of Contents
     Biopharmaceutical and Diagnostic Solutions      Engineering  
For the six months ended June 30, 2021    High-Value
Solutions
     Other containment
and delivery
solutions
     Total
Biopharmaceutical
and Diagnostic
Solutions
     Total
Engineering
 

Reported Revenue

     93.0        242.4        335.4        61.4  

Effect of changes in currency translation rates

     4.1        5.7        9.8        (0.1

Constant Currency Revenue

     97.2        248.0        345.2        61.3  

EBITDA

EBITDA is defined as net profit before income tax expenses, net financial expenses, including share of profit of associates, amortization and depreciation. EBITDA is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with that of our competitors.

The following table sets forth the calculation of EBITDA for the three months and six months ended June 30, 2021 and 2020, and provides a reconciliation of this non-GAAP measure to the most comparable IFRS measure, Net Profit.

 

     (Amounts in € millions, except as indicated otherwise)  
     For the three months
ended June, 30
    Change    

For the six months

ended June, 30

    Change  
     2021     2020     %     2021     2020     %  

Net Profit

     34.5       20.7       66.7       71.0       27.9       154.5  

Income Taxes

     13.4       7.1       88.7       18.6       10.6       75.5  

Finance Income

     (2.3     (3.8     (39.5     (4.3     (9.5     (54.7

Finance Expenses

     2.4       3.4       (29.4     5.6       13.6       (58.8

Share of Profit of an Associate

     (0.4     (0.2     100.0       (0.4     (0.2     100.0  

Operating Profit

     47.6       27.1       75.6       90.5       42.5       112.9  

Depreciation and Amortization

     13.4       13.1       2.3       26.4       25.7       2.7  

EBITDA

     61.0       40.2       51.7       116.9       68.2       71.4  

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit and Adjusted Operating profit Margin

Adjusted EBITDA, Adjusted Operating Profit, Adjusted Income Taxes, Adjusted Net Profit and Adjusted Diluted Earnings per Share (net of treasury shares) represent EBITDA, Operating Profit, Income Taxes, Net Profit and Diluted Earnings per Share (net of treasury shares), respectively, in each case as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities. Adjusted EBITDA, Adjusted Operating Profit, Adjusted Income Taxes, Adjusted Net Profit and Adjusted Diluted Earnings per Share (net of treasury shares) are provided in order to present how the underlying business has performed excluding the impact of the adjusted items, which may alter the underlying performance and impair comparability of results between the periods.

The following table sets forth the calculation of Adjusted EBITDA, Adjusted Operating Profit, Adjusted Income Taxes, Adjusted Net Profit, Adjusted Diluted Earnings per Share (net of treasury shares), Adjusted EBITDA Margin and Adjusted Operating Profit margin for the three months and six months ended June 30, 2021 and 2020. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by total revenue for the same period. Adjusted Operating Profit margin is calculated by dividing Adjusted Operating Profit for a period by total revenue for the same period.

For further information on Non-recurring items see “Cost of Sales” and “General and Administrative Expenses” below.

 

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For the three months ended June 30, 2021    EBITDA     Operating
Profit
    Income
Taxes
    Net
Profit
    Diluted
EPS
 

Reported

     61.0       47.6       13.4       34.5       0.14  

Adjusting items:

          

Restructuring and related charges (1)

     0.7       0.7       0.2       0.5       0.00  

Incentive Plans Settlement (2)

     (7.8     (7.8     (4.0     (3.8     (0.02

IPO costs reversed (booked as at March, 31 2021)(3)

     (1.5     (1.5     (0.4     (1.1     (0.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted

     52.4       39.0       9.2       30.1       0.12  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Margin

     25.7 %      19.1 %       

 

For the six months ended June 30, 2021    EBITDA     Operating
Profit
    Income
Taxes
    Net
Profit
    Diluted
EPS
 

Reported

     116.9       90.5       18.6       71.0       0.29  

Adjusting items:

          

Restructuring and related charges (1)

     1.0       1.0       0.3       0.7       0.00  

Incentive Plans Settlement (2)

     (9.9     (9.9     (4.8     (5.1     (0.02

Tax Incentive—Patent Box(4)

     —         —         5.5       (5.5     (0.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted

     108.0       81.6       19.6       61.1       0.25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Margin

     27.2 %      20.6 %       

 

For the three months ended June 30, 2020    EBITDA     Operating
Profit
    Income
Taxes
     Net
Profit
     Diluted
EPS
 

Reported

     40.2       27.1       7.1        20.7        0.09  

Adjusting items:

     —         —         —          —          —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted

     40.2       27.1       7.1        20.7        0.09  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted Margin

     24.8     16.7        

 

For the six months ended June 30, 2020    EBITDA     Operating
Profit
    Income
Taxes
     Net
Profit
     Diluted
EPS
 

Reported

     68.2       42.5       10.6        27.9        0.12  

Adjusting items:

     —         —         —          —          —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted

     68.2       42.5       10.6        27.9        0.12  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted Margin

     22.9 %      14.2 %         

 

(1)

During the three and the six months ended June 30, 2021, the Group recorded € 0.7 million and € 1.0 million respectively in restructuring and related charges for the consolidation of Balda plants in the U.S.

 

(2)

During the three and the six months ended June 30, 2021, the Group recorded € 7.8 million and € 9.9 million respectively, within general and administrative expenses, as accrual reversal related to the early termination of incentive plans aimed at a limited number of key managers.

 

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(3) 

During the three months ended June 30, 2021, the Group reversed the IPO project costs prudentially accrued at P&L as of March 31, 2021.

 

(4)

During the first quarter 2021, the Group reached an agreement with Italian Tax Agency regarding the so-called “Patent box regime”, resulting in a retroactive € 5.5 million tax saving for the financial years 2016-2020.

Capital Expenditure (CAPEX)

Capital Expenditure, or CAPEX, is the sum of investment amounts in tangible fixed assets and intangible assets during the period (excluding right-of-use assets recognized during the period in accordance with IFRS 16 Leases). These investment activities consist of acquisitions of property, plant and equipment and intangible assets.

The following table sets forth the CAPEX for the six months ended June 30, 2021 and 2020.

 

     (Amounts in € millions)  
     As of June 30,      As of June 30,      Change  
     2021      2020       

Addition to Property, plants and equipment

     43.3        38.2        5.1  

Addition to Intangible Assets

     2.1        2.1        0.0  
  

 

 

    

 

 

    

 

 

 

CAPEX

     45.4        40.3        5.1  
  

 

 

    

 

 

    

 

 

 

For further information on Capital Expenditure on a paid-out cash basis see “Liquidity and Capital Resources Capital Expenditure” below.

Free Cash Flow

Free Cash Flow is defined as cash flows from operating activities excluding interests paid and received, less investments in property, plant and equipment and intangible assets on a cash basis.

The following table sets forth the calculation of Free Cash Flow for the three months and six months ended June 30, 2021 and 2020.

 

     (Amounts in € millions)  
     For the three months ended June 30,      Change  
     2021      2020       

Cash Flow from Operating Activities

     54.1        53.9        0.2  

Interest paid

     1.1        1.3        (0.2

Interest received

     (0.2      (0.1      (0.1

Purchase of property, plant and equipment

     (22.3      (17.3      (5.0

Purchase of intangible assets

     (1.4      (1.5      0.1  
  

 

 

    

 

 

    

 

 

 

Free Cash Flow

     31.3        36.3        (5.0
  

 

 

    

 

 

    

 

 

 

 

     (Amounts in € millions)  
     For the six months ended June 30,      Change  
     2021      2020       

Cash Flow from Operating Activities

     60.0        44.6        15.4  

Interest paid

     2.3        2.4        (0.1

Interest received

     (0.3      (0.4      0.1  

Purchase of property, plant and equipment

     (44.1      (41.4      (2.7

Purchase of intangible assets

     (2.1      (2.1      0.0  
  

 

 

    

 

 

    

 

 

 

Free Cash Flow

     15.8        3.1        12.7  
  

 

 

    

 

 

    

 

 

 

 

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For further information on cash flow see “Liquidity and Capital Resources Operating and Investing Activities” below.

Backlog

Our backlog represents, as of a point in time, estimated future revenue for work not yet completed under (i) specific purchase orders, with regards to our Biopharmaceutical and Diagnostic Solution segment, and (ii) certain one-off agreements, with regards to our Engineering segment. We recognize direct revenue over the life of the contract based on our performance of services under the contract. Contracts may be terminated or delayed by our customers or regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of our revenue could be affected. In the event a customer terminates a contract, we are generally entitled to be paid for services rendered through the termination date and for services provided in winding down the project. However, we are generally not entitled to receive the full amount of direct revenue reflected in our backlog in the event of a contract termination. The duration of the projects in our backlog, and the related revenue recognition, ranges from several months to many years For orders that are placed inside a contractual firm period, we generally have a contractual right to payment in the event of cancellation. Fluctuations in our reported backlog levels also result from the timing and order pattern of our customers who often seek to manage their level of inventory on hand. Because of customer ordering patterns, our backlog reported for certain periods may fluctuate and may not be indicative of future results. A number of factors may affect backlog and the direct revenue generated from our backlog, including: (a) the size, complexity and duration of projects; and (b) the cancellation or delay of projects.

Our backlog as of June 30, 2021 was €739 million, compared to a total backlog of €606.7 million as of December 31, 2020 and of €395.8 as of June 30, 2020.

Although an increase in backlog will generally result in an increase in future direct revenue to be recognized over time (depending on future contract modifications, contract cancellations and other adjustments), an increase in backlog at a particular point in time does not necessarily correspond to an increase in direct revenues during a particular period. The timing and extent to which backlog will result in direct revenue depends on many factors, including the timing of commencement of work, the rate at which we perform services, scope changes, cancellations, delays, receipt of regulatory approvals and the nature, duration, size, complexity and phase of the studies. In addition, delayed projects remain in backlog until they are canceled. As a result of these factors, our backlog is not necessarily a reliable indicator of future direct revenue and we might not realize all or any part of the direct revenue from the authorizations in backlog as of any point in time.

Results of Operations

Three months and six months ended June 30, 2021 versus three months and six months ended June 30, 2020

The following table sets forth our results of operations for the three months ended June 30, 2021 and 2020.

 

     (Amounts in € millions)  
     For the three months ended June 30,     Change  
     2021      % of
revenue
    2020      % of
revenue
     

Revenue

     204.0        100.0     161.8        100.0     42.2  

Costs of sales

     140.3        68.8     113.0        69.8     27.3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Gross Profit

     63.7        31.2     48.9        30.2     14.8  

Other operating Income

     2.3        1.1     1.8        1.1     0.5  

Selling and Marketing Expenses

     5.4        2.7     5.1        3.1     0.3  

 

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Research and Development Expenses

     6.9        3.4     3.8        2.4     3.1  

General and Administrative Expenses

     6.0        3.0     14.6        9.0     (8.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Operating Profit

     47.6        23.3     27.1        16.8     20.5  

Finance Income

     2.3        1.1     3.8        2.4     (1.5

Finance Expense

     2.4        1.2     3.4        2.1     (1.0

Share of Profit of an Associate

     0.4        0.2     0.2        0.1     0.2  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Profit Before Tax

     47.9        23.5     27.8        17.2     20.1  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Income Taxes

     13.4        6.6     7.1        4.4     6.3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net Profit

     34.5        16.9     20.7        12.8     13.8  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The following table sets forth our results of operations for the six months ended June 30, 2021 and 2020.

 

     (Amounts in € millions)  
     For the six months ended June 30,     Change  
     2021      % of
revenue
    2020      % of
revenue
     

Revenue

     396.8        100.0     298.2        100.0     98.6  

Costs of sales

     267.7        67.5     209.9        70.4     57.8  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Gross Profit

     129.1        32.5     88.4        29.6     40.7  

Other operating Income

     5.5        1.4     2.1        0.7     3.4  

Selling and Marketing Expenses

     11.3        2.8     11.3        3.8     0.0  

Research and Development Expenses

     12.7        3.2     7.8        2.6     4.9  

General and Administrative Expenses

     20.0        5.0     28.8        9.7     (8.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Operating Profit

     90.5        22.8     42.5        14.3     48.0  

Finance Income

     4.3        1.1     9.5        3.2     (5.2

Finance Expense

     5.6        1.4     13.6        4.6     (8.0

Share of Profit of an Associate

     0.4        0.1     0.2        0.1     0.2  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Profit Before Tax

     89.6        22.6     38.6        12.9     51.0  

Income Taxes

     18.6        4.7     10.6        3.6     8.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net Profit

     71.0        17.9     27.9        9.4     43.1  

Revenue

Revenue at current exchange rates increased by €42.2 million, or 26.1%, to €204.0 million for the three months ended June 30, 2021, compared to €161.8 million for the three months ended June 30, 2020 driven by growth in both Segments as a result of increased demand due to the continuing impact of Covid-19 on our industry as well as revenue derived from orders placed in 2020 and early 2021 being manufactured and delivered to customers, which was partially offset by unfavorable currency translations. Covid-19 contributed marginally to our increase in revenue for 2020 as Covid-19 vaccination deployment began only around the end of the calendar year in certain western countries. However, in 2021, Covid-19 related revenue grew significantly as Covid-19 vaccination programs were deployed in several countries worldwide. For the three months ended June 30, 2021, we estimate that Covid-19 related revenue equated to 14.8% of our total revenue. Currency movements in U.S. Dollars and Brazilian Real had a negative impact in 2021. Excluding this effect, the increase in revenue on a constant currency basis was 28.5%.

Revenue at current exchange rates increased by €98.6 million, or 33.1%, to €396.8 million for the six months ended June 30, 2021, compared to €298.2 million for the six months ended June 30, 2020 driven by growth in both Segments as a result of increased demand due to the increasing impact of Covid-19 on our industry and delivery of previously placed orders, which was partially offset by unfavorable currency translations. Covid-19 contributed marginally to our increase in revenue for 2020 as Covid-19 vaccination deployment began only around the end of the calendar year in certain western countries. However, in 2021, Covid-19 related revenue grew significantly as Covid-19 vaccination programs were deployed in several countries worldwide. For the six months ended June 30, 2021, we estimate that

 

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Covid-19 related revenue equated to 14.4% of our total revenue. Currency movements in U.S. Dollars and Brazilian Real had a negative impact in 2021. Excluding this effect, the increase in revenue on a constant currency basis was 36.3%.

Biopharmaceutical and Diagnostic Solutions segment

Revenue generated by the Biopharmaceutical and Diagnostic Solutions segment increased by €32.4 million, or 22.7%, to €174.8 million for the three months ended June 30, 2021, compared to €142.4 million in the three months ended June 30, 2020. For the three months ended June 30, 2021, high-value solutions accounted for approximately 27.5% of revenue, compared to 26.5% for the three months ended June 30, 2020. Revenue growth for this segment was due in part to a general increase in our high-value solutions sales by €10.4 million, or 27.4%, to €48.1 million for the three months ended June 30, 2021, compared to €37.7 million for the three months ended June 30, 2020, driven by increased demand. In addition, other containment and delivery solutions sales grew by €22.0 million, or 21.0%, to €126.7 million for the three months ended June 30, 2021, compared to €104.7 million for the three months ended June 30, 2020.

On a constant currency basis, revenue generated by high-value solutions increased by €12.4 million, or 32.9%, for the three months ended June 30, 2021, while revenue generated by other containment and delivery solutions increased by €24.0 million, or 22.9%.

Revenue generated by the Biopharmaceutical and Diagnostic Solutions Segment increased by €72.6 million, or 27.6%, to €335.4 million for the six months ended June 30, 2021, from €262.8 million for the six months ended June 30, 2020. Revenue growth for this segment was due to in part: (i) the increase in sales volumes of our premium priced “high-value” solutions, which grew by €25.1 million, or 36.9%, to €93.0 million for the six months ended June 30, 2021, compared to €68.0 million for the six months ended June 30, 2020 driven by increased demand, and reflecting our continuing efforts to strategically shift towards a product mix that includes a higher proportion of “high-value” solutions, such as EZ-Fill® products and molecular diagnostic plastic parts; and (ii) a general increase in demand for our other containment and delivery solutions due to the increasing impact of Covid-19 on our industry and delivery of previously placed orders, which caused sales to increase by €47.5 million, or 24.4%, to €242.4 million for the six months ended June 30, 2021, from €194.9 million for the six months ended June 30, 2020. Covid-19 contributed to a higher demand for our products, causing a revenue increase which more than offset any decrease in sales of our products to businesses impacted by Covid-19 such as anesthetic, diagnostic, plastic and minor surgeries related businesses.

On a constant currency basis, revenue generated by high-value solutions increased by €29.2 million, or 43.0%, for the six months ended June 30, 2021, while revenue generated by other containment and delivery solutions increased by €53.2 million, or 27.3%.

The Company monitors its utilization rates in its Biopharmaceutical and Diagnostics Solutions Segment (BDS) in order to appropriately plan for its longer-term capacity needs. The Company works in partnership with its clients to determine their required product needs, production timing and order delivery. While utilization rates vary from product to product, the Company currently estimates that it has an average utilization rate in its BDS Segment of approximately 80% to 85%.

Engineering segment

Revenue generated by the Engineering segment increased by €9.7 million, or 50.0%, to €29.1 million for the three months ended June 30, 2021, compared to €19.4 million for the three months ended June 30, 2020. Revenue increase in this segment and in all our product lines, namely glass converting machines, visual inspection systems and assembly and packaging machines.

Revenue generated by the Engineering Segment, increased by €26.0 million, or 73.4%, to €61.4 for the six months ended June 30, 2021, compared to €35.4 million for the six months ended June 30, 2020. Growth in this segment was mainly driven by higher sales of visual inspection systems as well as glass forming machines for a total of € 22.3 million. Revenue further grew by €3.0 million as a result of our attempts to better serve our customers and to increase our share in after sales area, as well as by €0.7 million increase in packaging and assembly business.

We do not consider any of the revenue in our Engineering segment to be attributable to Covid-19 on the basis that we cannot accurately determine the end uses of our products and that most of our products have life cycles of 10 years or more, and therefore bear a reasonably likely chance of being used for purposes other than Covid-19 related.

Revenue Breakdown by Region

Our ongoing geographic expansion resulted in an increase in sales in all geographic regions where we operate. For the three months ended June 30, 2021, in APAC we experienced the fastest growth. For the three months ended June 30,

 

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2021, in APAC, we reported a €14.2 million, or 103.1% increase. For the same period, in North America, we reported a €5.9 million, or 13.0% increase while in Europe and the South American region, we reported a €21.9 million, or 22.6%, and a €0.1 million, or 2.4%, increase respectively.

For the six months ended June 30, 2021, our revenue grew: (i) by €29.1 million, or 38.1%, in North America (which accounted for approximately 26.6% of our total revenue for the six months ended June 30, 2021), (ii) by €19.4 million, or 78.8%, in the APAC region (which accounted for approximately 11.1% of our total revenue for the six months ended June 30, 2021), (iii) by €48.6 million, or 26.0%, in EMEA (which accounted for approximately 59.5% of our total revenue for the six months ended June 30, 2021), and (iv) by €1.4 million, or 14.1%, in South America (which accounted for approximately 2.8% of our total revenue for the six months ended June 30, 2021).

Revenue increase in the North America and the APAC regions resulted from our recent international expansion efforts through more focused sales and business development activities as well as our increase in Covid-19 related products and services. We continue to experience the highest demand in these regions and have focused our efforts accordingly.

Cost of Sales

Cost of sales increased by €27.3 million, or 24.2%, to €140.3 million for the three months ended June 30, 2021, compared to €113.0 million for three months ended June 30, 2020. Our overall cost of sales increased less than proportionally compared to our revenues, principally due to our continuing efforts to optimize operations through increased efficiency in our production processes and maximizing the use of our installed production capacity. The increase in cost of sales resulted from a general increase in cost of materials and components and direct and indirect personnel costs mainly due to support the significant growth of our sales volumes.

Cost of sales increased by €57.8 million, or 27.5%, to €267.7 million for the six months ended June 30, 2021, compared to €209.9 million for the six months ended June 30, 2020, mainly due to the cost of materials, components and labor expenses related to the production and distribution of goods and services. Cost of sales increased less than proportionally compared to our revenue, mainly due to our ongoing efforts to maximize efficiency and to maximize our installed capacity.

For the six months ended June 30, 2021, cost of sales includes € 0.7 million non-recurring restructuring costs related to the consolidation of our Balda plants in the U.S.

Gross Profit

Gross profit increased by €14.8 million, or 30.3%, to €63.7 million for the three months ended June 30, 2021, compared to €48.9 million for the three months ended June 30, 2020. This increase was mainly driven by our Biopharmaceutical and Diagnostic Solutions Segment for which gross profit improved due to an increase in more accretive “high-value” solutions and Covid-19 related products and services as well as an increase in efficiency by better leveraging our installed capacity and fixed expenses. The increase in the Engineering Segment gross profit was mainly driven by a substantial growth in sales of vision inspection and glass converting machinery and by the adoption of integrated project management systems in our plants which created synergies and improved utilization of resources as well as standardization of supplies and processes. Gross profit also benefitted from a greater focus on aftersales activities, which are more accretive compared to the sale of machinery.

Gross profit increased by €40.7 million, or 46.1%, to €129.1 million for the six months ended June 30, 2021, compared to €88.4 million for the six months ended June 30, 2020. This increase was mainly driven by the Biopharmaceutical and Diagnostic Solutions Segment due to a higher mix of “high-value” solutions and Covid-19 related products and services as well as improved efficiencies through our business optimization and operational excellence program. The increase in the Engineering Segment gross profit was mainly driven by the higher sales volumes in addition to an increase in after sales as well as standardization initiatives that increased efficiencies across the Engineering plants. The better profitability has been shown especially in glass forming and in pharma vision business.

 

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Other Operating Income

Other operating income increased by €0.5 million, or 27.8% to €2.3 million for the three months ended June 30, 2021, compared to €1.8 million for the three months ended June 30, 2020. Other operating income represents a minor part of our income and its amount varies yearly depending of the specific business agreements in place.

Other operating income, which includes revenue from feasibility studies, design, development and industrialization of new products not derived from the sale of our products, services and solutions, increased by €3.4 million, or 161.9%, to €5.5 million for the six months ended June 30, 2021, compared to €2.1 million for the six months ended June 30, 2020. Other operating income represents a minor part of our income and its amount varies yearly depending of the specific business agreements in place.

Selling and Marketing Expenses

Selling and marketing expenses increased by €0.3 million, or 5.9%, to €5.4 million for the three months ended June 30, 2021, compared to €5.1 million for the three months ended June 30, 2020. The increase, mainly driven by an increase in personnel expenses to support the ongoing growth in our business, was partially offset by the decrease in bad and doubtful debts provision.

Selling and marketing expenses were substantially unchanged at €11.3 million for the six months ended June 30, 2021, compared to €11.3 million for the six months ended June 30, 2020. These expenses are mainly related to personnel expenses for our sales organization. They also include depreciation and provisions for bad and doubtful debts of €1.5 million for the six months ended June 30, 2021 (€2.2 million for the six months ended June 30, 2020). The expenses are substantially in line due to the combined effect of an increase in personnel expenses to support the ongoing growth in our business, which completely offset the reduction in bad debt provision and the decrease in travel costs and trade shows canceled as a result of the Covid-19 pandemic (which instead had affected the first months of 2020).

Research and Development Expenses

Research and development expenses increased by €3.1 million, or 81.6%, to €6.9 million for the three months ended June 30, 2021, compared to €3.8 million for the three months ended June 30, 2020, mainly in connection with investing in our drug delivery systems business, establishing our new research and development lab in Boston and the efforts to sustain and accelerate the Company’s Container Closure Systems “high-value” solution pipeline. The increase was also driven by an increase in personnel expenses as a result of new hirings.

Research and development expenses increased by €4.9 million, or 62.8%, to €12.7 million for the six months ended June 30, 2021, compared to €7.8 million for the six months ended June 30, 2020. Such expenses include costs for research and development activities to support the innovation of our products and components and include amortization of capitalized development costs. The increase in research and development expenses reflects our strategy to accelerate the growth of our “high-value” solutions pipeline.

General and Administrative Expenses

General and administrative expenses decreased by €8.6 million, or 58.9%, to €6.0 million for the three months ended June 30, 2021, compared to €14.6 million in the three months ended June 30, 2020. The decrease was mainly due to a €7.8 million reduction in personnel expenses following a non-recurring accrual reversal related to cash settled awards under some early terminated incentive plans. Normalizing the costs from this non-recurring item, general and administrative expenses slightly increased by €0.7 million.

General and administrative expenses decreased by €8.8 million, or 30.6%, to €20.0 million for the six months ended June 30, 2021, compared to €28.8 million for the six months ended June 30, 2020. These expenses mainly comprise personnel expenses for management of the Company as well as depreciation and amortization of €2.9 million (compared to €3.0 million in 2020), of which amortization of fair value adjustments from purchase price allocations amounted to €0.5 million (as in 2020). The decrease in general and administrative expenses is mainly due to a non-recurring accrual reversal of €9.9 million related to the early termination of incentive plans aimed at a limited number of key managers which has been partially offset by € 0.2 million restructuring costs for the consolidation of our Balda plants in the U.S. Normalizing the costs from this non-recurring items, general and administrative expenses increased by € 0.9 million.

 

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Operating Profit

As a result of the foregoing, operating profit increased by €20.5 million, or 75.6%, to €47.6 million for the three months ended June 30, 2021, compared to €27.1 million for the three months ended June 30, 2020. This included a one-time benefit of €8.6 million gross profit, which is €4.5 million of net profit, or €0.02 of diluted earnings per share (net of treasury shares). The majority of this related to the termination of a stock incentive plan. As a result, second quarter, diluted earnings per share were €0.14 and adjusted diluted earnings per share were €0.12 (calculated assuming weighted issued shares of approximately 241.0 million and net of treasury shares).

As a result of the foregoing, operating profit increased by €48.0 million, or 112.9%, to €90.5 million for the six months ended June 30, 2021, compared to €42.5 million for the six months ended June 30, 2020.

Net Finance Expenses

Finance expenses, net of finance income, increased by €0.5 million, to €0.1 million net expenses for the three months ended June 30, 2021, from €(0.4) million net income for the three months ended June 30, 2020. The change in net finance expenses is mainly due to a decrease in net foreign exchange losses, partially offset by a revaluation of derivative financial instruments.

Finance expenses, net of finance income, decreased by €2.8 million, or 68.3%, to €1.3 million for the six months ended June 30, 2021, from €4.1 million for the six months ended June 30, 2020. For the six months ended June 30, 2020, finance expenses were affected by the significant fluctuations in the exchange rate of the main currencies we are exposed to (in particular the Mexican Pesos). The decrease in finance expenses in 2021 is mainly due to a decrease in net foreign exchange gains, partially offset by the lesser devaluation of derivative financial instruments.

Profit Before Tax

Profit before taxes increased by €20.1 million, or 72.3%, to €47.9 million for the three months ended June 30, 2021, compared to €27.8 million for the three months ended June 30, 2020.

Profit before taxes increased by €51.0 million, or 132.1%, to €89.6 million for the six months ended June 30, 2021, compared to €38.6 million for the six months ended June 30, 2020.

Income Taxes

Income taxes increased to €13.4 million for the three months ended June 30, 2021, compared to €7.1 million for the three months ended June 30, 2020. Our effective tax rate increased by 2.58%, from 25.46% to 28.03% in the second quarter of 2021. The effective tax rate was negatively affected by the reversal of a deferred tax assets amounting to €1.8 million following the early termination of certain legacy incentive plans that were replaced by a new stock grant plan. The normalized effective tax rate without this one-off item is 24.30%.

Income taxes increased by €8.0 million, or 7.5%, to €18.6 million for the six months ended June 30, 2021, compared to €10.6 million for the six months ended June 30, 2020. Average tax rate decreased by 6.86% from 27.59% to 20.72% for the six months ended June 30, 2021.

In March 2021, the group reached an agreement with the Italian Tax Authority regarding the applicability of the so called “Patent box regime”, resulting in a retroactive €5.5 million tax saving for the financial years 2016-2020. The effective tax rate was negatively affected by the reversal of a deferred tax assets amounting to €2.0 million following the early termination of certain legacy incentive plans that were replaced by a new stock grant plan. The normalized effective tax rate without these one-off items is 24.59%.

 

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Income Taxes for the three months ended June 30, 2021 and 2020

 

     (Amounts in € millions)