NOTES TO THE FINANCIAL STATEMENTS AS OF
(In thousands
of Reais)
1. Operations
Elekeiroz (the “Company”), an open capital company
controlled by Itausa – Investimentos Itaú S.A., has two industrial units, one
in Camaçari, in the state of Bahia, and one in Várzea Paulista, in the state of
São Paulo, where it is headquartered.
The Company’s activities comprise the production, trading, import and
export of chemicals and petrochemicals, including chemicals and petrochemicals
produced by third parties, and participation in other companies.
The chemicals production capacity of its industrial
units exceeds 700 thousand tons per year, mostly intended for use in industrial
activities, especially in the civil construction, clothing, automotive and food
industries.
2. Presentation
of the financial statements
The individual and consolidated financial statements
of Elekeiroz S.A., approved by the Administrative Council on February 24, 2010,
were prepared in conformity with accounting practices adopted in Brazil, based
on the corporate law, the “CPC” – Accounting Pronouncements Committee´s
pronouncements, guidance and interpretations, the “CVM – Comissão de Valores
Mobiliários” (Brazilian Securities Commission) standards, as well as amendments
introduced by Law 11.638/07 and Law 11.941/09.
With the enactment of Law 11.638/07, which updated the Brazilian
corporate legislation to enable harmonization of Brazilian accounting practices
with the “IRFS” – International Financial Reporting Standards), new accounting
standards and pronouncements have been issued by the “CPC”. In 2009, 26 new technical pronouncements
(“CPC”) and 12 technical interpretations (“ICP”) approved by “CVM” for
mandatory use as from 2009, were issued for comparability purposes. The Management evaluated the new “CPCs” and
“ICPs” taking into consideration the Company´s operations and selected the
following standards as applicable to its current business activities:
The Company is
currently analyzing the possible effects of new pronouncements on its financial
statements and income for the next years.
3. Summary
of the Main Accounting Practices
a) Income
determination - Income is
determined on the accrual basis. The
revenue from products sold is recognized as income upon transfer to the
purchaser of all risks and benefits inherent in the products. A revenue is not recognized if its
realization is uncertain. As from
b) Accounting
Estimates – The individual
and consolidated financial statements are prepared in accordance with
accounting practices adopted in
c) Current and non current assets
·
Cash and Cash Equivalents – These comprise movement account balances and investments in the money market
redeemable in up to 90 days, which are stated at cost plus the related earnings
up to the balance sheet date, not exceeding market value. The investments in the money market are
stated at the amortized cost plus the contracted earnings ratably recognized up
to the financial statements base dates, at market value (Note 5).
·
Financial Instruments - The financial, non-derivative instruments include
short-term investments in the money market; debt and equity instruments;
accounts and other receivables; cash and cash equivalents; loans and financing,
as well as accounts and other payables.
The financial, non-derivative instruments are initially recognized at
their fair value plus, in the case of instruments not recognized at fair value
through income, any transaction costs directly attributable thereto. Subsequently, the financial, non-derivative
instruments are valued in accordance with their classification, as follows:
Instruments held to maturity – If the Company intends to, and
can, keep its debt instruments up to the maturity date, they are classified as
such, and valued at the amortized cost on the effective-interest-rate method,
net of any reductions in their recoverable value;
Instruments available for sale – The Company´s investments in equity
instruments and certain assets relating to debt instruments are classified as
available for sale. After the initial
recognition they are valued at fair value, with any fluctuations other than
reductions in their recoverable value and differences in foreign currency being
recognized as shareholders´ equity, net of tax effects. If an instrument fails to be recognized, the
gains or losses accumulated under the shareholders´ equity are reclassified as
income.
Financial instruments at fair value
through the income – An instrument is classified based on its fair
value, through the income, if held for trading, i.e., designated as such upon
the initial recognition. The financial instruments are stated at fair value
through the income, if the Company manages these investments and decides to
sell or purchase them based on their fair value, in accordance with its
investment strategy and risk management strategy. After the initial recognition, the
attributable transaction costs are recognized as income, as incurred. The financial instruments at fair value
through the income are stated at their fair value and the related fluctuations
are recognized as income.
Other – The other financial, non
derivative instruments are stated at the amortized cost on the actual-interest-rate
method, net of any reductions in their recoverable value.
·
Trade bills receivable – These refer to receivables from
clients, which are reduced to their probable realizable values by means of an allowance
for doubtful accounts, set up in an amount deemed sufficient to cover possible
losses on any such receivables (Note 6).
·
Inventories - Inventories are stated at the
average acquisition or production cost, which does not exceed market value.
Where applicable, provisions are set up for obsolete inventories and
adjustments to inventories which exceed their realizable value (Note 7).
·
Investments – The investments in subsidiary and
affiliate are valued on the equity method, with counter-entries recognized in a
specific “Shareholders´ Equity” account, upon sale or write off of the
investment in question. The other
investments are stated at the acquisition cost plus monetary restatement
(recognition of the effects of inflation) up to December 31, 1995 and adjusted
to market value, where applicable (Note 11).
·
Property, Plant and Equipment and
Depreciation – The property, plant and equipment items are stated at acquisition or
construction cost plus monetary restatement up to
·
Intangibles – These refer to goodwill on acquisition of
subsidiaries, amortization of which was interrupted on January 2009, with the
balance subject to an impairment analysis (Note 13).
·
Reduction to the recoverable value of assets – The Company periodically checks for evidences that the book value of
assets may not be recovered. The
recoverable value of an asset is: a) its fair value less costs that would be incurred
to sell it, and b) its value of use, whichever is higher. The use value is the equivalent to the
(pretax) discounted cash flow arising from continuing use of an asset up to the
end of its useful life. Regardless of
whether or not any such evidences exist, the recoverability of goodwill on
business combination is tested at least once a year. If the residual value of an asset exceeds
its recoverable value, the Company recognizes a reduction of the book value of
the asset (impairment). The recoverability is analyzed by business
unit, which is the smallest possible cash-generating unit for cash flow
identification purposes. No unrecorded
losses were found as of
·
Other current and non current assets
– These are shown
at the realizable value including, where
applicable, the earnings, monetary and exchange gains, or in the case of
prepaid expenses, at cost.
d) Current and non current liabilities
·
Current and non current liabilities
– These are
recognized in the balance sheet, whenever the Company has a legal obligation or
one resulting from past events, the settlement of which may require expenditure
of economic resources. Some liabilities
involve uncertainties in terms of time and amount, being estimated as incurred
and recorded through a provision. The
provisions are recorded based on the best estimate of risks involved.
The Management is required to use
judgment to estimate fiscal, civil and labor
obligations, and does so based on their internal and external lawyers. Because in the course of its activities the
Company is subject to several processes involving fiscal, civil and labor
matters, it sets up provisions for probable losses on these processes, where
their outcome can be estimated with reasonable accuracy. These amounts are
adjusted in such way that any changes in the circumstances surrounding these
processes can be reflected. The actual
results may differ from the estimates.
Where applicable, the liabilities
are updated based on the exchange rates and financial charges contracted, so
that they can reflect the amounts incurred up to the balance sheet date. The long-term items are adjusted to present
value, if so required (Note 15).
·
Taxation – The sales revenues are subject to taxes and contributions
at the following rates:
|
|
Tax Rates |
|
ICMS (State of |
18% |
|
ICMS (State
of Bahia) |
17% |
|
ICMS (other
states) |
7% or 12% |
|
IPI |
0 or 5% |
|
PIS |
1.65% |
|
COFINS |
7.6% |
These
charges are shown as sales deductions in the statement of income. The credits arising from non cumulative
taxes are shown as a reduction of the cost of products sold, also in the
statement of income. Income tax is calculated at 15% on taxable income plus
a 10% surtax. Currently, tax loss
carryforwards are under way. The Social Contribution on Net Income rate is 9%
on the income book value, duly adjusted.
Also, the offsetting of negative basis is considered. The Company benefits from a partial reduction
in Income Tax due on the operating income of its Camaçari – BA production unit,
at the rate of 75% until December 31, 2015 (Note
·
Escrow deposits, provision for taxes and contributions and provision for
contingencies
- As required by CVM Deliberation 489/05, escrow deposits are
reclassified to liabilities, thus reducing the correspondent provisions for
Taxes and contributions and provisions for Contingencies (Note 18).
·
Loans and financing – Loans and financing
are updated based on monetary and exchange
variations, as applicable, plus interest incurred up to the balance sheet
date (Note 16).
·
Earnings or losses per share – Earnings or losses per share are calculated based on the number of
shares outstanding at the balance sheet date.
4. Consolidated
Financial Statements
The consolidated financial statements were prepared
under the basic consolidation principles and in accordance with CVM – Brazilian
Securities Commission´s standards.
Consolidation includes the elimination of the following:
a) intercompany assets and liabilities;
b) investments, ratably to participation in
subsidiaries´ shareholding;
c) revenues and expenses arising from intercompany
businesses;
d) unrealized earnings arising from intercompany
businesses, if relevant.
The fiscal year of consolidated companies coincides
with the parent company´s.
Summary information on the financial statements of the
subsidiary:
|
CASTLETOWN
TRADING |
Dec/2009 |
Dec/2008 |
|
ASSETS |
|
|
|
Current
Assets |
1,180 |
1,587 |
|
Total Assets |
1,180 |
1,587 |
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
Current
Liabilities |
55 |
70 |
|
Shareholders’ Equity |
1,125 |
1,517 |
|
Total Liabilities and
Shareholders’ Equity |
1,180 |
1,587 |
|
STATEMENT OF INCOME |
|
|
|
Net
Operating Expenses |
(5) |
(7) |
|
Loss for the Period |
(5) |
(7) |
5. Cash
and Cash Equivalents
|
|
Parent
Company |
Consolidated |
||
|
|
Dec/2009 |
Dec/2008 |
Dec/2009 |
Dec/2008 |
|
Cash |
21 |
34 |
21 |
34 |
|
Bank Accounts |
803 |
4,584 |
803 |
4,587 |
|
Readily Realizable Investments |
- |
- |
- |
- |
|
Held to maturity |
856 |
2,638 |
856 |
2,638 |
|
Available
for sale |
39,895 |
69,102 |
39,895 |
69,102 |
|
Investments in shares – available for sale |
1,886 |
1,438 |
1,886 |
1,438 |
|
Total |
43,461 |
77,796 |
43,461 |
77,799 |
|
Current |
43,461 |
77,796 |
43,461 |
77,799 |
|
Non current |
- |
- |
- |
- |
The investments held to maturity comprise investments
in BNB – Banco do Nordeste do Brasil, as a counter-entry to fiscal incentives
relating to income tax (deposit for reinvestment).
The investments classified as available for sale
basically include post-fixed Bank Deposit Certificates – CDB with CDI-linked
earnings. Given the nature of these
investments, their book values reflect the redeemable value at the balance
sheet date.
Investments in shares comprise Eletrobrás´s shares,
valued at their fair value, with fluctuations recognized under the
“Shareholders´ Equity”.
6. Clients
– Trade Receivables
|
|
Company |
Consolidated |
||
|
|
Dec/2009 |
Dec/2008 |
Dec/2009 |
Dec/2008 |
|
Local clients |
69,092 |
54,312 |
69,092 |
54,312 |
|
Foreign clients |
24,212 |
18,220 |
24,213 |
18,221 |
|
Advance on ACE – Export contracts |
(10,127) |
- |
(10,127) |
- |
|
Allowance for doubtful accounts |
(3,197) |
(2,194) |
(3,197) |
(2,194) |
|
Total |
79,980 |
70,338 |
79,981 |
70,339 |
7. Inventories
|
|
Parent
Company and Consolidated |
|
|
|
Dec/2009 |
Dec/2008 |
|
Finished products |
49,935 |
44,693 |
|
Raw, auxiliary and packaging materials |
25,815 |
71,232 |
|
Miscellaneous materials |
11,069 |
12,737 |
|
Provisions for losses on inventories |
(794) |
(2,711) |
|
Total |
86,025 |
125,951 |
8. Tax
Credits and Taxes Recoverable
|
|
|
Parent Company and Consolidated |
||
|
|
|
Dec/2009 |
|
Dec/2008 |
|
Taxes
Recoverable/To be Offset |
|
|
|
|
|
Social
Contribution on Profits |
|
121 |
|
1,156 |
|
Income Tax |
|
1,257 |
|
2,935 |
|
|
|
|
|
|
|
ICMS to be
Offset on Acquisition of Assets |
|
2,341 |
|
3,042 |
|
(-)
Adjustment to present value |
|
(272) |
|
(363) |
|
|
|
|
|
|
|
Accumulated ICMS Credits - SP |
|
675 |
|
2,503 |
|
|
|
|
|
|
|
Accumulated
ICMS Credits - BA |
|
38,575 |
|
42,083 |
|
Accumulated
ICMS Export Credits - BA |
|
25,527 |
|
40,903 |
|
(-)
Provision for Losses on i ICMS Credits
- BA |
|
(9,640) |
|
(12,480) |
|
(-)
Adjustment to present value |
|
|
|
|
|
|
|
|
|
|
|
Accumulated
PIS and COFINS Credits |
|
5,213 |
|
908 |
|
Accumulated
PIS and COFINS Credits on Acquisition of Assets |
|
1,149 |
|
1,358 |
|
|
|
|
|
|
|
Other |
|
3,192 |
|
1,120 |
|
Total |
|
68,138 |
|
83,165 |
|
Stated as: |
|
|
|
|
|
Current
assets |
|
34,916 |
|
33,555 |
|
Non current
assets |
|
33,222 |
|
49,610 |
The
Company’s production unit in
In
May 2008, the government of the state of
In
December 2008, the Company signed a term of agreement with the State
Secretariat of Finance of the State of
9. Income
Tax (IRPJ) and Social Contribution on Net Income (CSLL)
(a)
Reconciliation of IRPJ and CSLL Expenses
|
|
Parent Company and Consolidated |
||
|
IRPJ and CSLL Expense Composition |
Dec/2009 |
|
Dec/2008 |
|
Pretax Income |
(21,944) |
|
91,922 |
|
( - ) Tax loss and negative basis carryforwards |
- |
|
(27,577) |
|
Income Tax
and Social Contribution at 34% |
- |
|
(21,877) |
|
Permanent
add-backs and deductions |
- |
|
(1,995) |
|
Temporary
add-backs and deductions |
750 |
|
980 |
|
Interest on
own capital |
- |
|
4,758 |
|
Deferred tax
on tax loss and negative basis |
25,024 |
|
- |
|
Fiscal
incentives |
|
|
7,458 |
|
Income Tax
and Social Contribution |
25,774 |
|
(10,676) |
|
Current
income tax |
- |
|
(4,151) |
|
Current social contribution |
- |
|
(4,132) |
|
Deferred
income tax |
21,230 |
|
(1,806) |
|
Deferred
social contribution |
4,544 |
|
(587) |
(b) Deferred
Income Tax and Social Contribution Composition
As required under CVM Deliberation No. 273 and CVM
Instruction No. 371, the Company has recorded as Long-Term Assets R$ 40,381 of
deferred tax assets arising from temporary differences, tax losses and negative
bases. The consolidated deferred tax
credits and liabilities (Income Tax and Social Contribution) as of
|
|
|
Consolidated
balance Dec/2009 |
|
Temporary
differences comprised by: |
|
|
|
Tax losses
and negative bases |
|
25,024 |
|
Allowance for doubtful accounts |
|
1,087 |
|
Provision
for labor contingencies |
|
2,813 |
|
Provision
for tax contingencies |
|
2,031 |
|
Adjustment to present value – Non
current assets |
|
3,723 |
|
Amortized
goodwill |
|
425 |
|
Other
provisions |
|
5,278 |
|
Total |
|
40,381 |
Expected
Tax Credit Realization
|
|
|
|
|
|
2010 |
4,626 |
|
2011 |
4,260 |
|
2012 |
2,813 |
|
2013 |
204 |
|
2014 onwards |
3,454 |
|
Total |
15,357 |
Based on the Company´s profitability
records and projected income for the next years, R$ 20,703 and R$ 4,321 of tax
credits arising from tax losses on determination of Income Tax and negative
CSLL basis, respectively, were recorded as assets.
|
Expected realization of tax credits arising from tax
losses and negative bases |
|
|
2010 |
5,172 |
|
2011 |
7,410 |
|
2012 |
8,359 |
|
2013 |
4,083 |
|
Total |
25,024 |
Under
the Company´s “Non Current Liabilities” are deferred tax obligations amounting to
R$ 2,064, which derive from capital gains made on the credit sale of the
Taubaté unit. This capital gain is
being taxed as the credit sale installments are paid.
10. Receivables
|
|
Parent
Company and Consolidated |
|
|
|
Dec/2009 |
Dec/2008 |
|
Bills
receivable – Asset Sales |
11,013 |
15,560 |
|
Bills receivable – Assignment of rights |
4,438 |
8,415 |
|
Other receivables |
2,555 |
907 |
|
(-)
Adjustment to present value |
(1,036) |
(1,442) |
|
Total |
16,970 |
23,440 |
|
Current |
9,232 |
11,302 |
|
Non current |
7,738 |
12,138 |
11. Investments
Below, the main information on investments valued on
the “MEP” – the equity method - and at cost as of December 31:
|
12. Property, Plant
and Equipment
a) Composition of
property, plant and equipment
|
|
|
|
Parent
Company and Consolidated |
||||
|
|
|
|
Dec/2009 |
|
Dec/2008 |
||
|
|
Annual |
|
Restated |
Accumulated |
Residual |
|
Residual |
|
Property, Plant and Equipment |
Depreciation |
|
|
|
|
|
|
|
|
Rates |
|
Cost |
Depreciation |
Value |
|
Value |
|
Land |
- |
|
11,088 |
- |
11,088 |
|
11,088 |
|
Buildings |
4% |
|
56,036 |
(32,477) |
23,559 |
|
24,623 |
|
Equipment and
Facilities (i) |
8% a 10% |
|
372,764 |
(208,468) |
164,296 |
|
152,881 |
|
Computer
Hardware |
20% |
|
3,207 |
(2,425) |
782 |
|
779 |
|
Furniture
and Fixtures |
10% |
|
6,340 |
(5,034) |
1,306 |
|
1,438 |
|
Vehicles |
20% |
|
2,247 |
(1,206) |
1,041 |
|
957 |
|
Other assets |
10% e 20% |
|
17 |
(13) |
4 |
|
9 |
|
Construction
Work in Progress |
- |
|
20,332 |
- |
20,332 |
|
38,652 |
|
Total |
|
|
472,031 |
(249,623) |
222,408 |
|
230,427 |
The depreciation of equipment and industrial facilities
varies with the volume of production, between 8% and 10% p.a. on average.
b) Changes in property, plant and equipment - Cost
|
|
13. Intangibles
|
|||||||||||||||||||||||||||
The Company´s goodwill derives from the difference between the
acquisition cost and the Shareholders´ Equity held in subsidiaries as of the
acquisition date, based on the investee´s expected future profitability and
projected income for a 10-year period. After the merger of the subsidiary into the
parent company, the goodwill was transferred from the investment account to
deferred assets, as required by changes introduced by Law 11.638/07 in the
intangibles account.
14. Related-party transactions
The
transactions with companies owned by the parent company Itaúsa consist of
purchase and sale of products and services, at the usual terms and conditions
prevailing in the market.
|
|
a)
Itaú
Seguros – insurance policy contracts.
b) Itaú
Banco – cash and cash equivalents.
c) Itaú
Corretora – provision of share custody services.
d) Itaúsa
Empreendimentos – provision of economic and financial analysis and dividend
payment services.
e) Itautec
– acquisition of hardware, software and services
f) Duratex
– real estate rental and purchase of finished products.
g)
Elekpart
– dividend payment.
h)
Itaúsa
– dividend payment
- Taxes , rates and
contributions; other provisions and other
|
|
Parent Company |
Consolidated |
||
|
|
Dec/2009 |
Dec/2008 |
Dec/2009 |
Dec/2008 |
|
Taxes
payable |
1,248 |
2,523 |
1,248 |
2,523 |
|
Charges on
payroll |
1,422 |
1,476 |
1,422 |
1,476 |
|
Commissions |
1,082 |
1,181 |
321 |
159 |
|
Miscellaneous
provisions |
3,211 |
4,448 |
3,211 |
4,448 |
|
Other
accounts payable |
1,788 |
5,843 |
1,843 |
5,913 |
|
Total |
8,751 |
15,471 |
8,045 |
14,519 |
- Financial Institutions
Loans taken for funding investments in expansion and
modernization of facilities and meeting working capital requirements can be
thus described:
The long-term portion of these loans matures as
follows:
|
|
Parent
Company and Consolidated |
|
|
|
|
Dec/2009 |
|
|
|
|
|
2011 |
|
2,999 |
|
2012 onwards |
|
7,622 |
|
Total |
|
10,621 |
In order
to finance the continuity of modernization, rationalization and automation
programs intended to enable productivity increases and cost reductions, the
Company obtained from “BNDES” (Brazilian National Economic Development Bank) a
long term credit line of R$ 116,681, whereby R$ 14,619 had already been
released until December 31, 2009.
- Dividends and Profit-Sharing
|
|
Company and
Consolidated |
|
|
|
Dec/2009 |
Dec/2008 |
|
Interest on own capital |
1,541 |
7,789 |
|
Management’s sharing |
284 |
3,048 |
|
Employees´ sharing |
- |
2,274 |
|
Total |
1,825 |
13,111 |
The Management´s sharing is limited to 10% of the net
income after income tax and the amount of their fees, as stipulated in the
Company´s by-laws. The employees´ participation
is linked to results, as agreed with the employees represented by a commission
elected for this purpose.
- Non current taxes payable and provision for contingencies
Under the Company’s Long-Term Liabilities are Taxes
Payable referring to 100% of tax payments pending legal decisions, all
monetarily restated; and provisions in sufficient amounts to cover losses,
initially deemed probable, on tax-related, labor-related and civil suits. Based on their legal counsellors´ opinion,
the Management believes that the provisions are sufficient to cover possible
losses on unfavorable outcome of these suits, and that the final decisions will
not significantly affect the Company´s financial and economic position as of
(a) Non
current taxes payable
|
|
Parent
Company and Consolidated |
|
|
|
Dec/2009 |
Dec/2008 |
|
PIS and COFINS |
21,322 |
37,630 |
|
COFINS and Education Allowance |
16,097 |
16,097 |
|
(-) Escrow Deposit |
(16,097) |
(16,097) |
|
IRPJ and CSLL |
- |
4,881 |
|
Other |
105 |
5,620 |
|
(-) Escrow Deposit |
(105) |
(2,395) |
|
Total non current taxes payable |
37,524 |
64,228 |
|
Total escrow deposits |
(16,202) |
(18,492) |
|
Total net |
21,322 |
45,736 |
As
a result of the favorable outcome of a legal action questioning the
constitutionality of the Decree-Laws 2445 and 2449 of 1988, which modified the PIS
determination method, the Company offset tax credits and maintained under “Non
Current Liabilities” the respective R$ 21,322 provision, duly updated. Part of the PIS and COFINS offsetting, for
which a provision had been recorded, was settled in November 2009 through the
“REFIS” (Fiscal Recovery Program) under Law 11.941/09, without refinancing.
As
a result of legal actions questioning the lawfulness of collecting a 1%
difference in COFINS and the Education Allowance rates, the Company made escrow
deposits in the amount of R$ 16,097, the equivalent to these taxes until the
year ended
The
Company offset 100% of tax losses and negative basis concerning the payment of
IRPJ and CSLL. These offsetting were
settled in November 2009 through the “REFIS”, under Law 11.941/09, without refinancing.
(b) Provision
for Contingencies
|
|
Parent Company and Consolidated |
|
|
|
Dec/2009 |
Dec/2008 |
|
Labor-Related and Civil |
40,059 |
34,730 |
|
Probable |
12,469 |
10,568 |
|
Possible |
27,590 |
24,162 |
|
Tax-Related |
74,938 |
70,909 |
|
Probable |
19,227 |
17,193 |
|
Possible |
55,711 |
53,716 |
|
Total - Probable |
31,696 |
27,761 |
|
(-) Escrow Deposits |
(3,257) |
(2,194) |
|
Total – Net |
28,439 |
25,567 |
|
Total Possible |
83,301 |
77,878 |
The labor- and tax-related and civil actions deemed to
involve probable loss are fully provided for under the Company´s “Non Current
Liabilities”.
- Capital
a) Capital subscribed and paid up
Capital
in the amount of R$ 220,000, subscribed and paid as of
b) Characteristics
of the Shares
Below,
the rights inherent in preferred, non-voting shares
a) priority over common shares in statutory dividend
distribution;
b) right to dividends not lower than those attributed to
common shares;
c) participation in capital increase through reserve and
profit capitalization;
d) priority over common shares in capital reimbursement
without premium, in case of liquidation.
e) in the event of disposal of majority shareholding,
inclusion in public offer that ensures unit price of 80% of amount paid per
voting share included in the majority group;
f) minimum priority dividend of R$ 2,00 per
thousand-share lot on an annual, non-cumulative basis, subject to adjustment in
case of split or unification.
- Dividends
and interest on own capital
All shareholders are entitled to statutory, minimum
dividends in the equivalent to twenty five percent (25%) of the income for the
year, adjusted in accordance with Law 6.404/76 art. 202, I “a” and “b” , with due regard for II
and III of the same provision.
The dividends were calculated as follows:
|
|
Dec/2009 |
|
|
|
|
Net income for the year |
3,830 |
|
(-) Legal reserve (5%) |
(191) |
|
(=) Basis of calculation |
3,639 |
|
Minimum statutory dividend (25%) |
910 |
|
|
|
|
Interest on own capital declared for the year |
1,600 |
|
(-) IRRF (withholding income tax) |
(240) |
|
(=) Net yield for the year |
1,360 |
As permitted by pertinent legislation and
provided under the Company´s by-laws, the amount of interest on own capital, net
of income tax, is being included in the statutory dividend payment.
- Financial
income
The financial income is thus composed:
|
|
Parent
Company |
Consolidated |
||
|
|
Dec/2009 |
Dec/2008 |
Dec/2009 |
Dec/2008 |
|
Financial revenues |
9,910 |
11,738 |
9,910 |
11,738 |
|
Monetary and exchange variation – assets |
7,374 |
27,191 |
7,374 |
27,191 |
|
Reversal of adjustment to present value |
3,245 |
736 |
3,245 |
736 |
|
Total financial revenues |
20,529 |
39,665 |
20,529 |
39,665 |
|
|
|
|
|
|
|
Financial expenses |
(9,605) |
(10,019) |
(9,605) |
(10,019) |
|
Monetary and exchange variation – liabilities |
(7,580) |
(25,860) |
(7,580) |
(25,860) |
|
Total financial expenses |
(17,185) |
(35,879) |
(17,185) |
(35,879) |
|
Net financial income |
3,344 |
3,786 |
3,344 |
3,786 |
22. Financial
Instruments
The realizable value of the Company´s and its
subsidiary´s financial assets and liabilities is estimated based on information
available in the market and appropriate valuation methodology. Also, judgment was required in interpreting
market data capable of producing more adequate estimates of realizable
values. As a consequence, the estimates
provided do not necessarily reflect amounts actually realizable in current
market. The use of various market
methodologies may materially affect the estimates.
These instruments are administered according to
operating strategies aimed at ensuring liquidity, profitability and
security. The control policy consists
in continuingly monitoring contracted rates against those ruling in the
market. The Company and its subsidiary
do not make speculative investments in derivative instruments or any other risk
assets.
a) Market value – In compliance with the “CPC” Technical Pronouncement
14 – Financial Instruments: Recognition, Measurement and Disclosure, the market
value of the main financial instruments presented as of
Cash and cash equivalents and short-term investments –
The available cash, shown at its book value, includes cash on hand and in
current accounts.
The
investments in post-fixed CDB, DI Investment Funds and shares are classified as
held for trading. The other investments,
which refer to deposits for reinvestment (income tax incentive) are classified
as held to maturity. The investment in
shares comprises Eletrobrás shares and is classified as available for
sale. The book value of the financial
instruments reflect their market value.
|
|
Consolidated |
|
|
|
Book Value |
Market Value |
|
|
|
|
|
Cash
and cash equivalents |
824 |
824 |
|
Post-fixed
CDBs – held for trading |
39,402 |
39,402 |
|
Investment
Funds – held for trading |
493 |
493 |
|
Other
Investments |
856 |
856 |
|
Shares
– available for sale |
1,886 |
1,886 |
|
Total |
43,461 |
43,461 |
Current
and non current financing – The book value of these items was determined at
interest rates contracted with the financial institutions, which reflect the market
value, taking into consideration the nature of these operations and the
Company´s size, among other things.
b) Below, a summary of the main risks surrounding the
Company´s businesses:
Credit Risk – the Company’s sales are not highly
concentrated, there being no clients accounting for over 5% of net sales. Under the Company’s credit policy, limits
and terms are established according to liquidity levels, which in turn are
determined by rating instruments.
Besides the diversification in the domestic market, a substantial
portion of products is intended for foreign markets, for which the same risk
evaluation assessment method applies.
Exchange Risk – Because exports represent a
substantial part of its revenues, the Company’s working capital requirements
are met by export-linked credit lines, with more attractive rates and
conditions than those prevailing in the domestic money market.
Price Risk – The Brazilian chemical sector is highly
influenced by the globalized market, with prices heavily affected by
international demand and supply conditions. As a consequence, the peaks of both
selling prices and raw material purchase prices in this sector occur almost
simultaneously, which in turn enables maintenance of an average margin capable
of sustaining the business;
Interest Rate Risk – Funding is at fixed interest
rates under regular market conditions, with restatement and recording in the
amount of settlement at the balance sheet date.
c) Derivative Operations – USD x CDI SWAP Contracts – In
the year 2009, the Company settled a US$
8,000 contract of this kind with Banco Santander, dated October 31, 2008 and
maturing on August 26, 2009, with a long position in US dollars + interest at
2.55% p.a. and a short position in CDI.
This operation was intended solely as a safeguard against the risk of
exchange variation involving the Company´s operations, for no speculative
purposes whatsoever. The contract in
question is detailed below:
|
Description |
Position |
Reference Values |
|
|
|
|
|
|
Foreign currency |
Local currency |
Fair value |
Accumulated effect |
|
|
|
|
|
|
Amount
receivable/received– payable/paid |
|
Swap Contract |
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
Long |
USD + 2,55% p.a. |
USD 8,000 |
16,921 |
18,777 |
1,498 |
|
Short |
CDI |
|
|
17,279 |
|
|
|
|
|
|
1,498 |
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
Long |
USD + 2,55% p.a. |
USD 8,000 |
16,921 |
15,047 |
(3,408) |
|
Short |
CDI |
|
|
18,455 |
|
|
|
|
|
|
(3,408) |
|
d) Sensitivity Analysis
Exchange risk – Based on assets and liabilities
balances exposed to exchange risks as of December 31, the Company prepared two
simulations with exchange rates (R$/US$) increased by 25% and 50%, with the
following results:
23. Stock
Options Plan and Pension Plan, Management´s Fees and Statutory Management´s
Participation
a) Stock option
plan
With a view to integrating
managers and employees into the Company’s growth process in the middle- and the
long-run, at the Extraordinary General Shareholders’ Meeting of July 31, 2003
it was deliberated to institute a stock options plan to enable these managers
and employees to enjoy any benefits from share appreciation that may result
from their work and dedication. To the date of these financial statements the
stock options plan had not had any effects on the Company´s results.
b) Private pension
plan
All the Company’s employees are entitled to
participate in a defined-contribution plan (“PAI-CD Plan) administered by
Fundação Itausa Industrial, a private pension, not-for-profit entity, which is
sponsored by Elekeiroz S.A., among others.
Given the nature of the plan, there are no actuarial risks, any existing
investment risks lying with the participants.
Under current regulations, the sponsor is responsible for 100% of the
amount contributed by the participants, or R$ 1,563 in fiscal 2009 (R$ 2,020 in
2008).
c) Management´s
fees
The Management´s fees until
Also, until December 31, 2009 R$ 2,652 was paid,
referring to the balance of statutory profit sharing for the year 2008, (in
2008 – R$ 2,958 relating to the balance of profit sharing referring to fiscal
2007 and R$ 2,575 as an advance on profit sharing on retained earnings for the
year 2008).
Under the Management´s Supplementary Pension Plan
deposits in the amount of R$ 711 were made in fiscal 2009 (R$ 1,016 in 2008).
24. Insurance
Coverage
Based on the nature of the Company’s assets and the
risks inherent therein, management finds that the insurance coverage is deemed
sufficient to cover possible casualties.
The insurance coverage of fixed assets and inventories against
miscellaneous risks amounts to R$ 261,869 at
25. Non
recurring losses on inventories
The Company maintains finished-products and raw
materials- inventories in quantities deemed sufficient for its regular
operations. Early in 2009, the prices of
some products and the volumes of sales fell significantly, thus causing the
finished-products and raw materials-
inventories to exceed their expected realizable value. In view of this, after revaluing these
items, the Company set up a provision for adjustment of inventories to their
realizable value.
In the first quarter 2009, the Company bore losses of
R$ 23,739 on sales of these items, having recorded a provision for losses on
inventories, corresponding to the balances existing as of March 31, taking into
account the expected realizable value – R$ 19,615. The losses add up to R$ 43,354, which are shown on a specific
line, for clearer presentation.
26. Statement of EBITDA Calculation
|
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