The movement during the year in consolidated fixed assets and corresponding amortisation, depreciation and provision accounts is as follows:
Euros
ITEMS
Intangible assets:
Start-up costs 52,587,787 16,828,233 225,188 1,456,246 70,647,078
Research and development costs 3,694,536 1,302,324 714,192 7,619,045 11,901,713
Patents and other similar costs 7,147,583 19,769 3,383 - 590,979 6,572,990
b) Projects in progress 1,601,757 1,109,353 442,683 - 1,721,996 546,431
d) Goodwill arising on consolidation 260,944,664 - 260,944,664
325,976,327 19,259,679 1,385,446 - 254,182,348 89,668,212 Tangible assets:
Land 49,898,721 2,383,178 2,711,883 19,164,472 68,734,488
Buildings 366,121,009 4,013,042 16,031,271 76,457,880 430,560,660
Plant and machinery 1,369,142,974 14,019,802 32,569,840 230,508,897 1,581,101,833
Vehicles 20,652,193 1,069,283 1,271,589 7,673,749 28,123,636
Tools 3,834,715 259,908 158,152 693,343 4,629,814
Fixtures and fittings 44,404,707 3,589,223 907,136 6,890,487 53,977,281
Containers 120 14,797 14,917
Others 12,411,191 1,138,737 31,124 13,171,485 26,690,289
b) In construction 217,185,247 373,029,435 1,274,155 - 146,348,732 442,591,795
c) Advances 64,825,440 13,287,435 99,343 - 61,073,092 16,940,440
2,148,476,316 412,790,043 55,054,493 147,153,286 2,653,365,153 Investments:
Shares in related (including associated) undertakings 45,997,437 574,101 116,988 18,959,873 65,414,423 Loans to related (including associated) undertakings 30,769,954 956,231 4,576,527 - 5,982,896 21,166,762
Shares in other undertakings 118,055 - 13,422 104,633
Other investments other than loans 401,019 24,930 - 148 375,941
Other loans 352,825 4,545,212 30 6,493 4,904,500
Advances 577,463 516,870 - 4,479 1,089,854
78,216,753 6,592,414 4,718,475 12,965,421 93,056,113 Gross Assets At 1 January Increases Decreases Transfers and At 31 December
2001 Write-offs (a) 2001
ITEMS
Intangible assets:
Start-up costs 10,542,905 3,373,757 45,146 291,951 14,163,467
Research and development costs 740,688 261,093 143,183 1,527,481 2,386,079
Patents and other similar costs 1,432,962 3,963 678 - 118,481 1,317,766
b) Projects in progress 321,124 222,405 88,750 - 345,229 109,550
d) Goodwill arising on consolidation 52,314,708 - 52,314,708
65,352,387 3,861,218 277,757 - 50,958,986 17,976,862 Tangible assets:
Land 10,003,795 477,785 543,684 3,842,132 13,780,028
Buildings 73,400,672 804,542 3,213,981 15,328,429 86,319,662
Plant and machinery 274,488,522 2,810,718 6,529,667 46,212,885 316,982,458
Vehicles 4,140,393 214,372 254,931 1,538,449 5,638,283
Tools 768,791 52,107 31,707 139,003 928,194
Fixtures and fittings 8,902,344 719,575 181,864 1,381,419 10,821,473
Containers 24 2,967 2,991
Others 2,488,220 228,297 6,240 2,640,646 5,350,923
In construction 43,541,733 74,785,686 255,445 - 29,340,286 88,731,688
Advances 12,996,334 2,663,891 19,916 - 12,244,056 3,396,253
430,730,828 82,756,973 11,037,435 29,501,588 531,951,953 Investments:
Shares in related (including associated) undertakings 9,221,658 115,097 23,454 3,801,113 13,114,414 Loans to related (including associated) undertakings 6,168,822 191,707 917,511 - 1,199,463 4,243,555
Shares in other undertakings 23,668 - 2,691 20,977
Other investments other than loans 80,397 4,998 - 30 75,369
Other Loans 70,735 911,233 6 1,302 983,264
Advances 115,771 103,623 - 898 218,496
15,681,051 1,321,660 945,969 2,599,333 18,656,075 Gross Assets At 1 January Increases Decreases Transfers and At 31 December
2001 Write-offs (a) 2001
a) Includes exchange adjustments of the opening balance of foreign subsidiaries totalling -42,145,750 Euros (-8,449,464 thousand Escudos);
b) The main items included in fixed assets in construction correspond to the following projects:
Thousands of Escudos
Installation of a new MDF line in Le Creusot - France 35,781,448 7,173,536
Construction of a new factory in Lure (France) 100,862,722 20,221,160
Construction of a new factory in Nettgau (Germany) 168,406,458 33,762,464
Construction of a new factory in Linares (Spain) 91,565,574 18,357,249
Installation of a new melamine line in Oliveira do Hospital (Portugal) 3,898,300 781,539
400,514,502 80,295,948
Euros Thousands
of Escudos
Note: The column "Transfers and write-offs" includes the effect of the changes in consolidation methods and the exclusion of the companies referred to in Note 1.
Installation of new production lines in Piên (Brazil) 14,184,199 2,843,677
Construction of a new factory in Linares (Spain) 2,492,369 499,675
16,676,568 3,343,352
Euros Thousands
of Escudos
ITEMS
Intangible assets:
Start-up costs 16,876,859 9,560,015 - 49,622 26,387,252
Research and development costs 2,192,246 1,353,481 4,578,343 8,124,070
Patents and other similar costs 5,115,116 943,910 - 1,040,827 5,018,199
b) Goodwill arising on consolidation 31,156,145 - 31,156,145
55,340,366 11,857,406 - 27,668,251 39,529,521 Tangible assets:
Land 1,963,934 535,840 - 301,589 2,198,185
Buildings 102,957,675 15,250,718 8,629,860 126,838,253
Plant and machinery 661,432,975 94,036,458 21,965,710 777,435,143
Vehicles 15,497,399 2,849,759 5,356,712 23,703,870
Tools 1,992,407 732,936 502,406 3,227,749
Fixtures and fittings 28,758,647 3,870,164 4,756,141 37,384,952
Containers 120 2,877 5,119 8,116
Others 7,783,641 3,875,677 9,594,090 21,253,408
820,386,798 121,154,429 50,508,449 992,049,676 Investments:
Shares in related (including associated) undertakings 7,745,838 570,126 36,969,913 45,285,877 Loans to related (including associated) undertakings 3,909,711 128,316 10,931,204 14,969,231
Other investments other than loans 55,222 8,941 64,163
11,710,771 707,383 47,901,117 60,319,271 Accumulated amortisation, At 1 January Increase Transfers and At 31 December
depreciation and provisions 2001 (a’) Adjustments (a) 2001
Euros c) The main items included in advances for tangible fixed assets correspond to the following projects:
d ) Includes the effect of the change in the accounting policy relating to goodwill arising on consolidation (Note 14).
ITEMS
Intangible assets:
Start-up costs 3,383,506 1,916,611 - 9,948 5,290,169
Research and development costs 439,506 271,349 917,875 1,628,730
Patents and other similar costs 1,025,489 189,237 - 208,667 1,006,059
b) Goodwill arising on consolidation 6,246,246 - 6,246,246
11,094,747 2,377,197 - 5,546,986 7,924,958 Tangible assets:
Land 393,733 107,427 - 60,463 440,697
Buildings 20,641,161 3,057,494 1,730,132 25,428,787
Plant and machinery 132,605,406 18,852,617 4,403,729 155,861,752
Vehicles 3,106,949 571,326 1,073,924 4,752,199
Tools 399,442 146,941 100,723 647,106
Fixtures and fittings 5,765,591 775,898 953,521 7,495,010
Containers 24 577 1,026 1,627
Others 1,560,480 777,004 1,923,442 4,260,926
164,472,786 24,289,284 10,126,034 198,888,104 Investments:
Shares in related (including associated) undertakings 1,552,901 114,300 7,411,802 9,079,003 Loans to related (including associated) undertakings 783,827 25,725 2,191,510 3,001,062
Other investments other than loans 11,071 1,792 12,863
2,347,799 141,817 9,603,312 12,092,928 Accumulated amortisation, At 1 January Increase Transfers and At 31 December
depreciation and provisions 2001 (a’) Adjustments (a) 2001
a) Includes exchange adjustments to the opening balances of foreign subsidiaries totalling – 1,814,663 Euros (-363,807 thousand Escudos);
a’) Includes 11,750,906 Euros (2,355,845 thousand Escudos) relating to depreciation recorded under the extraordinary items caption "Exceptional depreciation and provisions".
b) Includes the effect of the accounting policy change related with the goodwill arising on consolidation (note 14).
Note: The column "Transfers and adjustments" includes the effect of the changes in the consolidation method used and the exclusion of the companies referred to in Note 1.
Note 28. Interest expense capitalised during the year
Interest totalling 12,294,606 Euros (2,464,847 thousand Escudos), incurred on loans to finance fixed assets in construction, was capitalised during the year.
Note 33. Liabilities due after more than five years
The consolidated balance sheet includes liabilities of 120,798,530 Euros (24,217,931 thousand Escudos) due after more than five years.
Note 34. Liabilities covered by real guarantees
At 31 December 2001 the liabilities included in the consolidated balance sheet, covered by real guarantees given by the com-panies included in the consolidation, were as follows:
Euros Thousands
of Escudos
Mortgages 71,890,456 14,412,742
Pledged assets 2,992,788 600,000
Note 36. Turnover by geographic market
Consolidated turnover by geographic market was as follows:
By market Euros Thousands
of Escudos
Domestic market 185,313,309 37,151,983
Foreign market 1,316,751,098 263,984,894
Total 1,502,064,407 301,136,877
Note 38. Deferred Taxes
In 2001 deferred tax liabilities of 8,401,987 Euros (1,684,447 thousand Escudos) were recorded in the consolidated profit and loss account caption income tax and in the consolidated balance sheet caption accrued expenses.
Deferred taxes assets amounting to 4,930,356 Euros (988,448 thousand Escudos) reversed during the year and were reflected in the consolidated profit and loss account caption income tax and consolidated balance sheet account accrued income.
During the year 2001 deferred tax assets of 39,425,322 Euros (7,904,067 thousand Escudos), relating to tax losses incurred by the associated undertakings in Germany, France and the United Kingdom, were recorded.
The Company and its subsidiaries have commitments under tax legislation to reinvest amounts resulting from the sale of investments in prior years. As in previous years, it is the intention of the Board of Directors that the Company and its subsidiaries comply with these commitments through the acquisition of other investments and so the profit generated in previous years from the sale of investments (including profit on the sale of investments to Group companies, recorded in the non consolidated accounts of the subsidiaries, and eliminated on consolidation) has not been included in taxable income for 2000 and 2001.
Note 41. Legislation under which tangible fixed assets were revalued
Tangible fixed assets of several companies included in the consolidation, with head offices in Portugal, were revalued in previous years in accordance with Decree Laws 430/78, of 27 December, 219/82, of 2 June, 278/85, of 17 July, 118/86, of 27 May, 111/88, of 2 April, 49/91, of 25 January and 264/92, of 24 November. Assets acquired recently at market prices have not been revalued.
Tangible assets:
Land 59,639,851 6,896,452 66,536,303
Buildings 290,464,803 13,257,604 303,722,407
Plant and machinery 793,574,699 10,091,991 803,666,690
Vehicles 4,085,098 334,668 4,419,766
Tools 1,394,718 7,347 1,402,065
Fixtures and fittings 16,602,774 - 10,445 16,592,329
Containers 6,801 6,801
Others 5,177,275 259,606 5,436,881
1,170,946,019 30,837,223 1,201,783,242
Tangible assets:
Land 11,956,717 1,382,614 13,339,331
Buildings 58,232,965 2,657,910 60,890,875
Plant and machinery 159,097,443 2,023,263 161,120,706
Vehicles 818,989 67,095 886,084
Tools 279,616 1,472 281,088
Fixtures and fittings 3,328,557 - 2,094 3,326,463
Containers 1,363 1,363
Others 1,037,950 52,047 1,089,997
234,753,600 6,182,307 240,935,907
Historical Revaluations Revalued
Items Cost (a) (b) book value
(a) (a)
Historical Revaluations Revalued
Items Cost (a) (b) book value
(a) (a)
Euros
Thousands of Escudos
(a) Net of depreciation;
(b) Includes all revaluations to date
In previous years other revaluations totalling 2,179,443 Euros (436,939 thousand Escudos) were recorded by a subsidiary.
Most of the revalued assets have since been sold and the related reserves have been maintained. Consequently, the opening consolidation difference was adjusted by the same amount.
Note 42. Revaluations
The overall effect of the revaluations of tangible fixed assets is as follows
(a) Includes the caption “Variation in production”.
Note 43. Comparability of financial statements: Impact of changes to the consolidation perimeter
Note 14 shows the changes in the companies included in the consolidation perimeter that affect the comparability of consolidated financial statements. Of the changes referred to, the change in the consolidation method of the subsidiaries of Gescartão SGPS, SA, is especially significant.
The following table shows the total amounts of the consolidated accounts as of 31 December 2001, together with the effect of consolidation of the subsidiaries of Gescartão SGPS SA by the full consolidation method:
Note: the change in the consolidation method referred to above does not affect the amounts of the proportion absorbed of the results and shareholders’ funds of the subsidiaries of Gescartão SGPS, SA.
Intangible assets 50,138,691 834,688
Tangible assets 1,661,315,477 145,211,164
Investments 32,736,842 77,475
Stocks 244,702,409 25,973,344
Debts receivable 419,350,281 59,716,605
Other assets 176,229,618 48,971,681
Equity 354,201,570 16,626,773
Minority interests 178,153,083 60,663,638
Debts payable 1,810,598,422 165,671,563
Other liabilities 241,520,243 37,822,983
Turnover 1,502,064,407 197,082,942
Operational income (a) 55,351,007 -2,256,406
Financial income 23,867,901 2,494,533
Extraordinary income 55,778,494 9,268,874
Cost of goods sold and consumed 735,612,755 76,357,803
Operating costs 797,412,012 84,788,740
Financial expenses 100,067,698 6,132,680
Extraordinary costs 90,825,171 11,760,591
Other costs 656,339
Income taxes -26,220,009 7,002,235
Net incomode – minority 9,361,778 13,884,174
Net incomode – group -70,653,935 6,663,720
Euros
Consolidated Gescartão
Account Effect
Note 44. Net financial charges
Interest expense
Depreciation of real state investments Provision for marketable securities Exchange losses
Financial discounts allowed
Loss on the sale of short term investments Other financial charges
Gain on disposal of short term investments Other financial income
Euros
Charges 01.12.31 00.12.31
70,743,205
Depreciation of real estate investments Provision for marketable securities Exchange losses
Financial discounts allowed
Loss on the sale of short term investments Other financial charges
Gain on disposal of short term investments Other financial income
Thousands of Escudos
Charges 01.12.31 00.12.31
14,182,739
Note 45. Net extraordinary items
Donations
Doubtful debts written off Stock losses
Loss on the sale of fixed assets Fines and penalties
a) Increase in depreciation and provisions Charges relating to prior years b) Other extraordinary charges
Net extraordinary items
Income 01.12.31 00.12.31
Taxes refunded
Collection of doubtful debts written off Stock gains
Gain on the sale of fixed assets Contractual penalties
c) Decrease in provisions and depreciation Gains relating to prior years
d) Other extraordinary income
Euros
Charges 01.12.31 00.12.31
167,497 319,947 2,111,093 1,350,249 71,464 50,136,885 2,319,539 34,348,497 -35,046,677 55,778,494
4 31,296 1,892,399 7,920,830 16,920 21,742,106 1,004,507 23,170,432 55,778,494
74,929 344,235 242,002 6,145,225 99,610 32,917,229 1,434,797 28,713,865 4,708,616 74,680,509
384,828 111,616 126,066 23,969,888 40,782 24,524,082 1,384,793 24,138,455 74,680,509
Donations
Doubtful debts written off Stock losses
Loss on the sale of fixed assets Fines and penalties
Increase in depreciation and provisions Charges relating to prior years Other extraordinary charges Net extraordinary items
Income 01.12.31 00.12.31
Taxes refunded
Collection of doubtful debts written off Stock gains
Gain on the sale of fixed assets Contractual penalties
Decrease in provisions and depreciation Gains relating to prior years
Other extraordinary income
Thousands of Escudos
Charges 01.12.31 00.12.31
33,580
a) Includes 5,295,430 Euros (1,061,638 thousand Escudos) relating to provisions for losses on loans to Group companies excluded from the consolidation;
Also includes 36,739,681 Euros (7,365,645 thousand Escudos) relating to provisions for costs to be incurred on the closure of several production, administration and logistics segments.
b) Includes costs of deactivating Portucel Recicla (see item d) below): 5,199,094 Euros (1,042,325 thousand Escudos);
Exchange differences of the Brazilian subsidiaries: 7,759,940 Euros (1,555,728 thousand Escudos)
Also includes 7,360,085 Euros (1,475,565 thousand Escudos) relating to costs incurred on the closure of several production, administration and logistics segments.
c) Includes 12,820,193 Euros (2,570,218 thousand Escudos) due to utilisation and reversal of the excess provision for closure of production and logistics segments.
d) Recognition of the income relating to indemnity received by Portucel Recicla from Empresa de Desenvolvimento de Infraestruturas do Alqueva (see item b) above): 5,199,094 Euros (1,042,325 thousand Escudos);
Recognition of investment subsidies: 5,049,770 Euros (1,012,388 thousand Escudos).
Euros Thousands of Escudos
Land 3,085,243 618,536
Buildings 14,925,401 2,992,274
Plant and machinery 20,402,234 4,090,281
Vehicles 322,680 64,692
Fixtures and fittings 2,209,108 442,886
Other 796,546 159,693
41,741,212 8,368,362
Note 46. Provisions as of 31 December 2001 and movement for the year then ended
The accumulated provisions at 31 December 2001 and movement during the year then ended are as follows:
Provisions At 1 January Increases Decreases At 31 December
2001 2001
Provisions for short term investments Provisions for doubtful debts Provisions for other risks and charges Provisions for stock losses Provisions for investments
Provisions At 1 January Increases Decreases At 31 December
2001 2001
Provisions for short term investments Provisions for doubtful debts Provisions for other risks and charges Provisions for stock losses Provisions for investments Thousands of Escudos
Note: The increase of 48,608,500 Euros (9,745,129 thousand Escudos) in the provision for investments corresponds, essentially, to the exclusion from consolidation of the company Tarnaise des Panneaux, the investment in which was already fully provided for (36,969,914 Euros (7,411,802 thousand Escudos)), and transfer of the provision for a loan to Tarnaise, which at 31.12.2000 was recorded in the caption provisions for other risks and charges (5,999,859 Euros (1,202,864 thousand Escudos)).
Note 47. Leased assets and their consolidated book values
Note 50. Other information
1) Accruals and Deferrals a) Accrued income Includes:
Euros Thousands
of Escudos
Deferred taxation 62,298,702 12,489,768
Other revenues 8,350,152 1,674,055
70,648,854 14,163,823
b) Accrued expenses Includes:
Euros Thousands
of Escudos
Holiday pay and bonuses 19,656,875 3,940,850
Volume discounts 10,243,606 2,053,659
Accrued interest 3,580,617 717,849
Deferred taxation 32,747,685 6,565,321
Other 24,606,833 4,933,227
90,835,616 18,210,906
c) Deferred income Includes:
Euros Thousands
of Escudos
Investment grants and subsidies 69,872,358 14,008,150
Indemnity from Empresa Desenvolv. Infraestruturas Alqueva (EDIA) 4,924,613 987,296
Other 340,212 68,206
75,137,183 15,063,652
2) Loans from associated companies – medium and long term Includes:
Euros Thousands
of Escudos
Sonae S. G. P. S., S. A. 225,185,723 45,145,684
Sonae Investments, B. V. 121,628,405 24,384,306
Papeles y Cartones Europe, S. A. 17,267,460 3,461,815
364,081,588 72,991,805
3) Other debtors – amounts falling due within one year Includes:
Euros Thousands
of Escudos
Investment grants and subsidies 31,878,348 6,391,035
EDIA 15,813,599 3,170,342
47,691,947 9,561,377
4) Other creditors – short term
Includes:
Euros Thousands
of Escudos
Factoring current accounts 55,719,772 11,170,811
5) Other creditors – medium and long term
Includes:
Euros Thousands
of Escudos
Aserraderos de Cuellar 50,051,855 10,034,496
6) Bonds
Bonds are as follows:
a) SONAE INDUSTRIA / 95 bonds amounting to 24,939,895 Euros (5,000,000 thousand Escudos), redeemable in four equal instalments, with the 9th, 10th, 11th and 12th coupons, bearing interest at an annual rate equal to the Lisbor rate plus 0.45% rounded up to the 1/16 of a percentage point. In March 2001, the 7th and last coupon was paid, and the remaining bonds were redeemed.
b) SONAE INDUSTRIA / 98 bonds amounting to 39,903,832 Euros (8,000,000 thousand Escudos), redeemable in full in March 2003. The bonds bear interest at a rate equal to the Lisbor rate less 5 percentage points for the first 6 coupons, and the Lisbor rate plus 0.45 percentage points for the remaining coupons, the interest rate not being less than 0%. Each 1000 escudos bond include a stock purchase warrant for 4 Sonae Indústria shares, at 9.6 Euro (1,924 Escudos) per share, exercisable in the months of May and November of each year following the maturity of the first coupon and up to the maturity of the sixth coupon.
During the year 2001, the 6th and 7th coupons matured. Additionally, the early redemption option was exercised for 3,784,113 bonds.
c) TAFISA / 98 bonds amounting to 30,052,573 Euros (6,025,000 thousand Escudos), redeemable in full in 2004, bearing interest at an annual interest rate equal to the Mibor rate plus 0.75%.
d) SIAF / 95 bonds amounting to 24,939,895 Euros (5,000,000 thousand Escudos), redeemable in full with the 14th coupon, bearing interest at an annual rate equal to the Lisbor rate plus 1.5%.
In April 2000, upon maturity of the 9th coupon, the early redemption option, exercisable as from the 6th coupon, was exercised for bonds totalling 12,469,948 Euros. In June 2001, upon maturity of the 12th coupon, the remaining bonds totalling 12,469,947 Euros were redeemed.
Although bonds totalling 51,081,744 Euros (10,240,970 thousand Escudos), included in the financial statements as medium and long term liabilities, have call options, they have been considered to mature at their latest maturity date on the basis that, in the event of early redemption, they can be refinanced, the long term borrowing structure being maintained.
7) Retirement pensions
In accordance with the remuneration policies of some subsidiaries of Sonae Indústria SGPS, SA, retirement benefit plans were introduced in prior years under the following conditions:
a) Glunz AG: has a defined benefits pension plan, no fund having been constituted. The liability under the plan, calculated based on actuarial studies made by an independent entity in accordance with International Accounting Standard 19, in the amount of 22,504,927 Euros (4,511,833 thousand Escudos) at 31 December 2001, is fully covered by a provision for pensions;
b) Subsidiaries of Gescartão SGPS, SA have a defined benefits pension plan, having constituted a fund, managed by a third party entity, based on the amount calculated by an independent entity in accordance with International Accounting Standard 19. At 31 December 2001, the cost for the year, in the amount of 738,267 Euros (148,009 thousand Escudos), was recorded in the consolidated balance caption accrued expenses;
c) Subsidiaries of Sonae Indústria SGPS, SA have a defined benefits pension plan, having constituted a fund, managed by a third party entity, based on the amount calculated by an independent entity in accordance with International Accounting Standard 19. The employees of four subsidiaries hired up to 31 December 1994 are covered by the plan, and are entitled to receive 24 months of their current salary at the time of their retirement. At 31 December 2001, the cost for the year, in the amount of 197,531 Euros (39,601 thousand Escudos), was recorded in the consolidated balance caption accrued expenses.
8) Bank loans – amounts falling due after more than one year
In 1999, a group of subsidiaries of Sonae Indústria contracted a syndicated revolving credit facility for up to 400,000,000 Euros.
The credit facility will be reduced to 300,000,000 Euros on 20/12/2002, to 100,000, 000 Euros on 20/12/2004 and expires on 20/12/2006. Early repayment of the loan can be demanded following a sale option held by the participating banks, after a remedy period of 15 days as from the date of publication of the yearly and half yearly accounts, in the event of non compliance by the Sonae Indústria Group with the following ratios: net interest bearing debt over shareholders’ funds of a maximum of 1.5 and net interest bearing debt over operating cash flow (EBITDA) of a maximum of 4.5 at December 1999 and a maximum of 4 thereafter.
The facility bears interest at a rate equal to the Euribor 3 or 6 month rate, at the subsidiaries’ option, plus a variable spread of between 0.6% and 1.375%, in accordance with the financial performance of the Sonae Indústria Group, measured by the ratios of net interest bearing debt over shareholders’ funds and net interest bearing debt over operating cash flow (EBITDA).
9) Conversion of capital to euros and capital increase
During the 2001 the Sonae Indústria, SGPS, SA’s share capital was converted to Euros and increased by 674,626 Euros (135,250 thousand Escudos) by incorporation of reserves.
Additionally, Sonae Indústria SGPS, SA had a capital increase from 280,602,460 Euros to 500,000,000 Euros, through the issuance of 43,879,508 shares. This capital increase was taken up by a consortium of financial institutions, Sonae SGPS, SA having subsequently subscribed for shares in proportion to its participation and, through distribution of the shares, subscribed for those not taken up by the other shareholders.
Note 51. Explanation added for translation
These financial statements are a translation of financial statements originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the format and disclosures required by the Portuguese Official Chart of Accounts ("Plano Oficial de Contabilidade") some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.
(Translation of a report originally issued in Portuguese) (Amounts expressed in Euros – € )
Introduction
1. We have examined the accompanying consolidated financial statements of Sonae Indústria, S.G.P.S., S.A., which comprise the consolidated Balance Sheet as of 31 December 2001 that reflects a total of € 2,584,473,318 and shareholder’s equity of € 353,172,006, including a net loss of € (70,653,935) and the consolidated Statements of Profit and Loss by nature and by function for the year then ended and the related notes.
Responsibilities
2. The preparation of consolidated financial statements that present a true and fair view of the financial position of the companies included in the consolidation and the consolidated results of their operations, as well the adoption of adequate accounting principles and criteria and the maintenance of appropriate systems of internal control are the responsibility of the Company’s Board of Directors. Our responsibility is to express a professional and independent opinion on these financial statements, based on our examination.
Scope
3. Our examination was performed in accordance with the Technical Standards issued by the Portuguese Institute of Statutory Auditors, which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the consolidated financial statements are free of material misstatement.
Such an examination includes verifying, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on judgements and criteria defined by the Board of Directors, used in their preparation. Such an examination also includes: verification of the consolidation procedures used and application of the equity method, as well as verifying that the financial statements of the companies included in the consolidation have been appropriately examined;
assessing the adequacy of the accounting principles used and their uniform application and disclosure, taking into consideration the circumstances; verifying the applicability of the going concern concept; and assessing the adequacy of the overall presentation of the consolidated financial statements. We believe that our examination provides a reasonable basis for expressing our opinion.
4. The accompanying consolidated financial statements were prepared for approval by the Shareholders’ General Meeting in accordance with the provisions of article 376º of the Commercial Companies Code, and do not include a consolidated Statement of Cash Flows and related notes.
These will be prepared and presented for the purposes of article 245º of the Securities Market Code.
Qualification
5. Up to 31 December 2000 the Group recorded goodwill arising on the acquisition of investments in group and associated companies under the caption Intangible Assets, and amortised it over the period estimated to recover the investments. In the beginning of 2001 the Group decided to change this accounting policy and write off goodwill against
5. Up to 31 December 2000 the Group recorded goodwill arising on the acquisition of investments in group and associated companies under the caption Intangible Assets, and amortised it over the period estimated to recover the investments. In the beginning of 2001 the Group decided to change this accounting policy and write off goodwill against