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 on the basis of 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.

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Carrying amounts of joint ventures and associates

SEKm

2018

2017

2016

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 7m (5; 2) for joint ventures and SEK 79m (171; 147) for associates.

Joint ventures

Value, January 1

144

130

114

Net increase in joint ventures¹⁾

Reclassification between joint ventures and associates

–

Translation differences

Value, December 31

171

144

130

Associates

Value, January 1

918

966

927

Company acquisitions

–

Company divestments

–3

–

–40

Net increase in associates¹⁾

–21

–28

Impairment of associates

–278

–

Reclassification between associates and subsidiaries

–6

–8

–

Translation differences

–4

–15

Value, December 31

606

918

966

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

777

1,062

1,096

Joint ventures and associates

Asaleo Care Ltd

Asaleo Care Ltd 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.

In 2015, 2016 and 2017, the company implemented a program to repurchase shares from the market, in which Essity did not participate. This has caused Essity’s participation in Asaleo Care to increase to 36.2%. In 2018, the company recognized an impairment loss of AUD 148.5m relating to assets in the Tissue business in Australia and the Personal Care business in New Zealand. Essity has recognized this as an item affecting comparability, see Note B3.

Bunzl & Biach

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

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TF3:1 Material joint ventures and associates, 100% of operations
	Joint ventures			Associates
	Bunzl & Biach			Asaleo Care Ltd			Total
SEKm	2018	2017	2016	2018	2017	2016	2018	2017	2016
Condensed income statement
Net sales	1,471	1,123	955	3,623	3,829	3,851	5,094	4,952	4,806
Depreciation/amortization	–13	–11	–11	–169	–188	–185	–182	–199	–196
Operating profit/loss	47	28	22	–803	604	597	–756	632	619
Interest income	–	–	–	3	–	2	3	–	2
Interest expenses	–	–	–	–98	–76	–67	–98	–76	–67
Other financial items	1	1	1	–3	–	–2	–2	1	–1
Tax expense	–14	–7	–	219	–154	–155	205	–161	–155
Profit/loss for the period	34	22	23	–682	374	375	–648	396	398
Other comprehensive income for the period	–	–	–	62	–61	31	62	–61	31
Comprehensive income for the period	34	22	23	–620	313	406	–586	335	429

Condensed balance sheet
Non-current assets	147	120	118	2,482	3,402	3,600	2,629	3,522	3,718
Cash and cash equivalents	12	19	15	426	194	199	438	213	214
Other current assets	238	174	120	1,140	1,250	1,269	1,378	1,424	1,389
Total assets	397	313	253	4,048	4,846	5,068	4,445	5,159	5,321

Non-current financial liabilities	118	92	60	2,061	1,975	2,121	2,179	2,067	2,181
Other non-current liabilities	67	47	46	72	257	252	139	304	298
Current financial liabilities	–	–	–	1	8	28	1	8	28
Other current liabilities	34	30	25	850	703	652	884	733	677
Total liabilities	219	169	131	2,984	2,943	3,053	3,203	3,112	3,184
Net assets	178	144	122	1,064	1,903	2,015	1,242	2,047	2,137
Group share of net assets	87	71	60	385	688	725	472	759	785
Fair value adjustment	71	62	58	178	182	178	249	244	236
Carrying amount of the companies	158	133	118	563	870	903	721	1,003	1,021
Carrying amount of other joint ventures	13	11	12	–	–	–	13	11	12
Carrying amount of other associates	–	–	–	43	48	63	43	48	63
BS TF3:2 Carrying amount of joint ventures and associates	171	144	130	606	918	966	777	1,062	1,096
Market value, December 31				3,144	5,232	5,296

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TF3:2 Carrying amounts of joint ventures and associates
Company name	Corp. Reg. No.	Domicile	Share of equity at December 31, 2018 %	Share of equity at December 31, 2017 %	Share of equity at December 31, 2016 %	Carrying amount December 31, 2018 SEKm	Carrying amount December 31, 2017 SEKm	Carrying amount December 31, 2016 SEKm
Joint ventures
Bunzl & Biach GmbH	FN79555v	Vienna, Austria	49	49	49	158	133	118
Other						13	11	12

Associates
Asaleo Care Ltd	61 154 461 300	Melbourne, Australia	36	36	36	563	870	903
Other						43	48	63
BS TF3:1 Carrying amount, December 31						777	1,062	1,096