F3. Joint ventures and associates

AP Accounting principles

Joint arrangements

Essity classifies its joint arrangements as joint ventures or joint operations, which are presented in Note F4 Joint operations.

Joint ventures

Joint ventures are defined as companies in which Essity together with other parties has shared control over operations. A joint venture entitles the joint owners to the net assets of the investment. Joint ventures are recognized in accordance with the equity method, meaning that a net item including the goodwill will be recognized for each joint venture in the balance sheet. A share in profits is recognized in the income statement as a component of “Share of profits of associates and joint ventures.” Share of profits is calculated based on Essity’s share of equity in the respective joint venture. Joint arrangements recognized in accordance with the equity method are initially measured at cost. Measurement of acquired assets and liabilities is carried out in the same way as for subsidiaries. Essity’s single largest joint venture is Bunzl & Biach G.m.b.H., Vienna, which supplies the business with raw materials.

Associates

Associates are companies in which the Group exercises a significant influence without the partly owned company being a subsidiary or a joint arrangement. Normally, this means that the Group owns between 20% and 50% of the votes. Accounting for associates is carried out according to the equity method and they are initially measured at cost. Valuation of acquired assets and liabilities is performed in the same manner as for subsidiaries and the carrying amount for associates includes any goodwill and other Group adjustments.

The Group’s share of profit after tax arising in the associate after the acquisition is recognized in the consolidated income statement in the line “Share of profits of associates and joint ventures.” Share of profits is calculated on the basis of Essity’s share of equity in the respective associate.

Carrying amounts of joint ventures and associates

SEKm

2017

2016

2015

1)

Net increase for the period includes the Group’s share of the profit after tax of joint ventures and associates, as well as items recognized directly in equity (both after deductions for any non-controlling interests), in addition to an adjustment for dividends received during the period, which amounted to SEK 5m (2; 11) for joint ventures and SEK 171m (147; 125) for associates.

Joint ventures

 

 

 

Value, January 1

130

114

122

Net increase in joint ventures1)

9

10

4

Reclassification between joint ventures and associates

–8

Translation differences

5

6

–4

Value, December 31

144

130

114

 

 

 

 

Associates

 

 

 

Value, January 1

966

927

925

Investments

66

Company acquisitions

3

Company divestments

–40

Net increase in associates1)

–28

11

40

Impairment of associates

–62

Reclassification between associates and subsidiaries

–8

Reclassification between joint ventures and associates

8

Translation differences

–15

68

–50

Value, December 31

918

966

927

BS TF3:1 Value, December 31, joint ventures and associates

1,062

1,096

1,041

Joint ventures and associates

Asaleo Care Ltd

As of 2014, Asaleo Care Ltd in Australia is recognized as an associate in accordance with the equity method, following the flotation of the company on the Australian Securities Exchange (ASX). In connection with the flotation, Essity’s participation decreased to 32.5% from the previous figure of 50%. In 2015, the company implemented a program to repurchase shares from the market, in which Essity did not participate. This caused Essity’s participation in Asaleo Care to increase to 34.7% during the fourth quarter of 2015. This program continued in 2016, resulting in Essity’s share in the company increasing to 35.9%. Asaleo Care manufactures and markets Consumer Tissue, Professional Hygiene and Personal Care products. Essity has licensed its Tork and TENA brands to Asaleo Care for sale in Australia, New Zealand and Fiji.

Bunzl & Biach

Bunzl & Biach is a joint venture that operates in the recovered paper market and supplies raw materials to Essity’s business.

TF3:1 Material joint ventures and associates, 100% of operations

 

Joint ventures

 

Associates

 

 

 

 

 

Bunzl & Biach

 

Asaleo Care Ltd

 

Total

SEKm

2017

2016

2015

 

2017

2016

2015

 

2017

2016

2015

Condensed income statement

 

 

 

 

 

 

 

 

 

 

 

Net sales

1,123

955

852

 

3,829

3,851

3,946

 

4,952

4,806

4,798

Depreciation/amortization

–11

–11

–11

 

–188

–185

–169

 

–199

–196

–180

Operating profit

28

22

31

 

604

597

736

 

632

619

767

Interest income

 

2

3

 

2

3

Interest expenses

 

–76

–67

–64

 

–76

–67

–64

Other financial items

1

1

3

 

–2

–3

 

1

–1

Tax expense

–7

–8

 

–154

–155

–193

 

–161

–155

–201

Profit for the period

22

23

26

 

374

375

479

 

396

398

505

Other comprehensive income/loss for the period

–1

 

–61

31

–49

 

–61

31

–50

Comprehensive income for the period

22

23

25

 

313

406

430

 

335

429

455

 

 

 

 

 

 

 

 

 

 

 

 

Condensed balance sheet

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

120

118

106

 

3,402

3,600

3,343

 

3,522

3,718

3,449

Cash and cash equivalents

19

15

10

 

194

199

214

 

213

214

224

Other current assets

174

120

93

 

1,250

1,269

1,159

 

1,424

1,389

1,252

Total assets

313

253

209

 

4,846

5,068

4,716

 

5,159

5,321

4,925

 

 

 

 

 

 

 

 

 

 

 

 

Non-current financial liabilities

92

60

50

 

1,975

2,121

1,792

 

2,067

2,181

1,842

Other non-current liabilities

47

46

47

 

257

252

181

 

304

298

228

Current financial liabilities

 

8

28

24

 

8

28

24

Other current liabilities

30

25

16

 

703

652

668

 

733

677

684

Total liabilities

169

131

113

 

2,943

3,053

2,665

 

3,112

3,184

2,778

Net assets

144

122

96

 

1,903

2,015

2,051

 

2,047

2,137

2,147

Group share of net assets

71

60

47

 

688

725

711

 

759

785

758

Fair value adjustment

62

58

56

 

182

178

119

 

244

236

175

Carrying amount of the companies

133

118

103

 

870

903

830

 

1,003

1,021

933

Carrying amount of other joint ventures

11

12

11

 

 

11

12

11

Carrying amount of other associates

 

48

63

97

 

48

63

97

BS TF3:2 Carrying amount of joint ventures and associates

144

130

114

 

918

966

927

 

1,062

1,096

1,041

Market value, December 31

 

 

 

 

5,232

5,296

5,495

 

 

 

 

TF3:2 Carrying amounts of joint ventures and associates

Company name

Corp. Reg. No.

Domicile

Share of equity at December 31, 2017 %

Share of equity at December 31, 2016 %

Share of equity at December 31, 2015 %

Carrying amount
December 31, 2017 SEKm

Carrying amount
December 31, 2016 SEKm

Carrying amount
December 31, 2015 SEKm

Joint ventures

 

 

 

 

 

 

 

 

Bunzl & Biach GmbH

FN79555v

Vienna, Austria

49

49

49

133

118

103

Other

 

 

 

 

 

11

12

11

 

 

 

 

 

 

 

 

 

Associates

 

 

 

 

 

 

 

 

Asaleo Care Ltd

61.154.461.300

Melbourne, Australia

36

36

35

870

903

830

Other

 

 

 

 

 

48

63

97

BS TF3:1 Carrying amount, December 31

 

 

 

1,062

1,096

1,041