dividends & financial calendarbeerse, belgium. a new, more aggressive marketing policy was also...
TRANSCRIPT
Annual Report 1999
UN
ION
MIN
IERE
1999
DIVIDENDS & FINANCIAL CALENDAR
DIVIDENDS
If the appropriation of profit proposed to you on page 94 of this report is approved, a gross dividend of BEF 50.42 (EUR 1.25) per share will be paid for the financial year 1999, i.e.- a net dividend of BEF 37.82 (EUR 0.94) after deduction of the
25% withholding tax on presentation of coupon No 7- a net dividend of BEF 42.86 (EUR 1.06) after deduction of the
15% withholding tax on presentation of coupon and VVPR strip No 7
Starting 26 May 2000 Payment of dividends on presentation of coupon No 7 at the registered offices and branches of the following institutions:- Fortis Bank- Artesia Bank- Banque Bruxelles Lambert- Banque Degroof- KBC Bank- Petercam
FINANCIAL CALENDAR
14 March 2000 Press release and final figures for financial year 199910 May 2000 at 3 p.m. General Meeting of shareholders (financial year 1999)
in the Auditorium of Fortis BankRue de la Chancellerie 1B-1000 Brussels (Belgium)
13 September 2000 Press release and interim results for the first half of 2000February/March 2001 Press release and final figures for financial year 20009 May 2001 General Meeting of shareholders (financial year 2000)
ADDITIONAL INFORMATION
Stock Listed on Brussels BourseFinancial information Institutional investors and analysts who wish to obtain additional
information may apply to the Investor Relations department at the company's registered office
Contact : Isabelle MichottePhone: 32-2-227.71.47
Annual report This report is also available in French and DutchInternet This report can be downloaded from the Union Minière Website:
www.um.beRegistered office n.v. Union Minière s.a.
Rue du Marais 31B-1000 BrusselsBelgiumPhone: 32-2-227.71.11Fax: 32-2-227.79.00Internet : www.um.beE-mail : [email protected] Trade Register 85382VAT No: BE 401.574.852
E
Union Minière 1
PROFILE
Union Minière (UM) is an international metals and materials group, whichstrives to obtain leadership positions in selected markets. Its activities arecentred on 3 main business groups: Copper & Precious Metals, Zinc andAdvanced Materials. To ensure a rapid response to market openings, each business group is divided in several business units.
The UM Group has industrial operations in Europe, North America, Asia and Africa and serves a global customer base through an international sales network with offices in more than 25 countries.
The underlying principles of UM's strategy across the various business groupsare a commitment to technological innovation, operational excellence, recycling and environmental responsibility.
CONTENTSPage
Key events of the 1999 financial year 2
Message to the shareholders 4
Business review 9
Zinc 10
Copper 18
Precious metals 22
Advanced materials 26
Technology & services 34
Other 42
Environment, Health and Safety 44
People 46
UM products and their main applications 48
Annual accounts 1999 - Contents 49
Report of the statutory auditor 91
Board, auditors and day-to-day management 96
Dividends & Financial calendar Back cover
Group structure Inside back cover
Legal notes: Article 60 Supplement
ANNUAL REPORT 1999 SUBMITTED TO THE ANNUAL GENERAL MEETING OF SHAREHOLDERS ON 10 MAY 2000
2 Union Minière
ZincCost reductions, high premiums and relative growth of addedvalue products led to increased profitability at UM Zinc, despite lower sulphuric acid prices and treatment charges.
UM Building Products' sales increased by 5%.
CopperSales of transformed products increased by more than 5% - almost twice the growth rate of world consumption - and for the first time exceeded the 500,000 tonne mark.
Treatment charges for concentrates and raw copper fell to an all-time low in dollar terms.
The first in a series of major investments was carried out atthe Pirdop smelter in Bulgaria, bringing its capacity up to150,000 tonnes per year, following a 3-month shutdown.
Precious MetalsThe technical and metallurgical problems at the Hobokenplant were successfully resolved, leading to a € 64.4 million improvement in operating income.
Accumulated inventories were substantially reduced, with the result that all leased metals were returned.
The precious metals refining facilities achieved record production levels in the year under review.
KEY EVENTS OF THE 1999 FINANCIAL YEAR
Union Minière 3
Advanced MaterialsMost of the gains generated by higher sales volumes at UM Cobalt & Energy Products were eliminated due to heavy competitive pressure on margins.
Building work was started on a lithium cobaltite plant in South Korea.
Increased sales of germanium did not offset the drop indemand for substrates for solar cells.
Technology & ServicesUM Research developed special products for its traditionalmarkets and also for advanced technology sectors, such aslithium-ion batteries, solar cells and high-purity materials for use in the electronics industry.
UM ENGINEERING obtained new contracts in Asia, South Americaand South Africa.
SOGEM posted higher trade volumes, in an economic climatedominated by the strong dollar.
OtherIn 1999 Union Minière sold its shareholdings in Overpelt-Plascobeland Diamant Boart and its interest in several diamond trading companies affiliated to De Beers’ Central Selling Organisation (CSO).
Union Minière has acquired a 11% stake in AMERICA MINERAL FIELDS.
Net debt decreased to € 334.6 million at the end of 1999 (1998: € 515.6 million) due to positive operating cash flows and divestments.
4 Union Minière
MESSAGE TO THE SHAREHOLDERS
Ladies and Gentlemen,
We are no longer the company we used to be, butwe are not yet the company we want to be.
This sentence summarises the stage our company has reachedat the end of 1999. In 1995, we said in UM’s MissionStatement that our goal was acknowledged world-wide leadership in our industry. We have gone a long way towardsattaining this goal, as is illustrated by the excellent performanceachieved in1999. Comparison with the previous year is insignificant, as there has been a remarkable turnaround in the company, which is reflected not only in the numbers butalso in the quality of the results.
The industrial and financial achievements in 1999 were madepossible by the combination of three factors:
■ operational excellence
■ improved market conditions and the favourable dollar exchange rate
■ implementation of a focused divestment programme.
The Industrial Plan was initiated in 1995 with the aim of converting the UM Group into one capable of delivering competitive, innovative products and services. This Plan entailed capital expenditures of BEF 22 billion and a heavysocial programme to reduce labour costs. The Plan has been successfully completed. The Zinc business group has significantly increased its competitiveness by consistently aiming for improved productivity and margins and progressivelyswitching over to alloys offering higher added value. In theCopper & Precious Metals business group, operations havebeen modernised by building a new 330,000 tonnes per yearcopper refinery in Olen, Belgium. Its supply of anodes has been
Union Minière 5
secured through the acquisition of a primary copper smelter in Pirdop, Bulgaria, and a stake in a secondary smelter inBeerse, Belgium. A new, more aggressive marketing policy wasalso adopted for wire rod and other commercial shapes. On the precious metals front, the major project, both from a technological and economic point of view, was the introductionof a totally new recovery process in the new smelting and refining operations in Hoboken. The start-up problems of 1998have been resolved and the new smelter is performing betterthan we expected. The Advanced Materials business group was set up to foster growth in specific niches with significantbusiness potential, such as portable energy and electro-opticmaterials.
The overall goal of the Industrial Plan was to achieve a 12%return on capital employed over one business cycle. Our resultsin 1999 show that the UM Group is capable of performing inline with the overall corporate target.
During the period 1995 – 1999, non-core assets were sold offfor a total of more than BEF 23 billion including Union Mines,Cananea, Zinkgruvan, Asturienne Penamet, the zinc wire operations, Overpelt-Plascobel, Diamant Boart and the CSOtrading companies. These divestments confirm the UM Group’scommitment to focusing its available resources on the strategyof building sustainable leadership positions.
The Industrial Plan has laid the foundations for the future. We believe that successful companies get things right for theircustomers, employees, suppliers, shareholders and communities.Financial health not only depends on extracting value, but alsoon creating value for all the stakeholders. Our commitment tooperational excellence combined with the will to integrate newtechnologies into our strategies and our organisational structure are the key to ensuring sustainable growth for theUM Group. The concept of corporate sustainability is becomingmore and more attractive to investors. Sustainability drivencompanies achieve their business goals by integrating economic, environmental and social growth opportunities intotheir business strategies. We are therefore particularly proudthat we were ranked No 2 in the Dow Jones SustainabilityIndex for the mining and metals industry.
6 Union Minière
Rejuvenating the UM Group was far from easy. It would havebeen a near impossible task without the motivation, dedicationand hard work of UM’s people, world-wide. Without pausingfor breath or flagging, they have given their all for years and,in so doing, they have created a new industrial platform for further growth. They all deserve our gratitude. Their commitmentto the company's growth was evidenced once again by thesuccessful launch in 1999 of an all Employee Stock OptionPlan. In Belgium, 84% of the staff subscribed 206,000 options,and the plan is now being extended internationally.
As far as the outlook for 2000 is concerned, the beginning of the year was very encouraging in terms of operating performance. Exchange rates and most metal prices show apositive trend.
The UM Group now has a sound industrial base, a broaderrange of high added value products and an efficient management structure; it has the financial and humanresources to implement its growth programme, based on bothinternal and external development. All three business groupsare actively working on realising their growth potential.
Some specific new projects have already been launched, such as the 60,000 tonne extension of the Balen and Aubyglobal zinc smelting capacity, the extension of the copper electro-winning plant, which will boost the Olen tankhousecapacity to 350,000 tonnes, and several new initiatives in the field of battery raw materials.
The year 2000 is expected to show a significant improvementin net profit for the Group.
In view of 1999's healthy performance, coupled with the factthat the company is confident that 2000 will show a furtherimprovement in performance, the Board has proposed paying a
Union Minière 7
dividend of EUR 1.25 per share, to be approved by the AnnualGeneral Meeting of Shareholders to be held on 10 May 2000.
Our shareholders’ return has been unsatisfactory for the lastten years. We sincerely thank those who supported the company during a period when the difficulties linked to thefar-reaching internal restructuring programme were exacerbatedby negative market conditions. We have now taken up thechallenge to offer sustainable shareholder satisfaction bystrengthening our existing capabilities and building new ones.
The success of our Industrial Plan leads on to new challengesand new questions. The UM Group has learned a lot from therepositioning exercise in 1995-1999. It realises that withoutsustainable, profitable growth, it will see its stakeholder credibility diminishing. This move will be more complex. Therisks may be greater but they are not unmanageable thanksto our previous experience.
We firmly believe that the UM Group is now a winner.
Karel VINCK
Chief Executive Officer
Etienne DAVIGNON
Chairman of the Board of Directors
8 Union Minière
Changes in the board of directors
Viscount Etienne Davignon is stepping down as Chairman of the board.His role in the complete repositioning of our company cannot be valued enough. The insight of his strategic views and his personal support has been extremely important in the success of the IndustrialPlan.Paul De Keersmaeker and Hubert Detremmerie are leaving after havingbeen very active Directors during many years.To all of them our appreciation and gratitude.
Effective on the date of the next Annual General Meeting of Shareholders, and subject to its approval,
■ Karel Vinck will become Executive Chairman, succeeding Etienne Davignon
■ Thomas Leysen will become Chief Executive Officer and join the board
■ Arnoud de Pret, upon retiring as Chief Financial Officer, will also join the board as non-executive director.
The Executive Chairman will ensure that the board actively plays itsrole in supporting, stimulating and supervising the management. He will also take part in the shaping of the strategy of the Group.
In order to prepare the decisions of the board on strategic matters, a Strategy Committee has been formed. It is composed of EtienneDavignon (Chairman), Jean-Luc Dehaene, Philippe Delaunois, ChristineMorin-Postel, Karel Vinck and Thomas Leysen.
These changes are a logical consequence of the wider public ownershipof UM and are in line with the international corporate governanceprinciples.
Union Minière 9
BUSINESS REVIEW
10 Union Minière
ZINC
Key figures (amounts in million)
1996 1997 1998 1999€ € € € BEF
Operating profit (loss) 34.6 98.4 50.0 84.0 3,387Average capital employed 352.9 377.8 369.3 343.8 13,869Added value 232.5 303.5 242.6 279.2 11,262Investments in tangible and intangible assets 27.7 32.4 38.8 17.9 722R&D expenditure 4.9 3.6 3.6 3.7 148
Workforce as at 31 December 2,735 2,724 2,282 2,440
Be present in all applicationswhere zinc adds value and where
UM can make a difference.
Miscellaneous�4%
Continuous�galvanising�
30%
General�galvanising�
18%
Brass�18%
Die-casting�15%
Chemicals�8%
Zinc semis�7% Miscellaneous�
3% Continuous�galvanising�
19%
General�galvanising�
21%
Brass�0%
Die-casting�27%
Chemicals�14%
Zinc semis�16%
PRESENT IN ALL MAJOR ZINC APPLICATIONS EXCEPT BRASS
ZINC USAGE WORLDWIDE UM’S ZINC BUSINESS GROUP
Union Minière’s zinc activities are geared towards serving markets requiring specific zinc products. In order to concentrateefficiently on the needs of the different markets, developmentof these products has been organised into several businessunits: UM Zinc
UM Building ProductsUM Zinc Chemicals
Union Minière is currently present in all major zinc applicationsexcept brass, in line with its mission statement: "UM wants to be present in all applications where zinc addsvalue and where UM can make a difference".
The zinc business group model is focused on the zinc applications, markets and products, on competitive smeltingand refining as well as on recycling i.e. closing the loop withits customers.
Its strategic guidelines are:■ Environmental responsibility (recyclability, research
into zero-waste processes)■ Excellence in technology and operations■ Development of new products and new applications■ Growth in new markets (e.g. the UNIMET joint venture
in Mexico providing high value added zinc products in general galvanising and die-casting to new markets in North and South America).
Each of the three business units has developed its own strategyaround these guidelines.
Union Minière 11
12 Union Minière
UM ZINC
UM Zinc serves three major zinc markets: continuousgalvanising, general hot-dip galvanising and die-casting,offering a wide range of specially adapted products and services.
UM Zinc also supplies the Group’s downstream zinctransformation activities.
UM Zinc’s operations are located on four sites: Balenand Overpelt in Belgium, Auby and Calais in France.
Treatment charges for zinc concentrates in 1999 were aboutUSD 3 per tonne lower than the previous year. However, thestructure of the unit’s contracts, and higher zinc prices, coupled with the strong US dollar, resulted in an increase in income per tonne of close to 4%.
As far as demand in Europe was concerned, two differenttrends were apparent in 1999: the first half was depressedcompared with the same period in 1998, but demand wasboosted in the second half with a high level of orders comingfrom both the galvanising sector and the die-casting sector.
In the Far East, zamak premium levels dropped by betweenUSD 20 and USD 50 per tonne, but UM defended its marketshare in the second half of the year.
Although Chinese exports rose from 380,000 tonnes to about500,000 tonnes, there was a worldwide zinc shortage and LME warehouse stocks decreased by 38,000 tonnes, closing at 279,000 tonnes at the end of the year.
The supply situation in Europe was affected by the closure of the zinc production plant in Crotone, Italy, in February (followed by the closure of the zamak plant in July), with the result that SHG premiums climbed to record levels, inexcess of USD 100 per tonne, and UM's market share forzamak in Italy improved by 50%.
Reflecting these trends, LME prices gradually increased in thesecond half of 1999, standing at USD 1,239 per tonne by theend of the year.
Union Minière 13
In 1999, the last year of the Industrial Plan, investments werelimited to the completion of a few projects and amounted toBEF 450 million.
As was the case last year, R&D efforts focused on reducingprocess waste, carrying out further tests and the operation of a pilot plant to produce Gravelite, an inert and reusableproduct made from iron residue.
Further industrial tests were also conducted on a new generalgalvanising alloy to be launched in 2000.
For 2000, activity levels should remain good and if the pricelevels seen at the end of 1999 persist, UM Zinc should be in a position to further increase its profitability.
Miscellaneous�7%
Die-casting�44%
Continuous�galvanising�
25%
General �galvanising�
24%
European Union� 77%
Other�Europe�
4%
Middle East�7%
Far East�8%
Other�4%
ZINC & ZINC ALLOYSGEOGRAPHICAL BREAKDOWN OF SALES MARKET STRUCTURE
14 Union Minière
UM BUILDING PRODUCTS
This business unit manufactures zinc sheet, shaped zincproducts and lead sheet for use in the building industry.
Most of its production units are located in France, whichis also the main market. Other production units andsales teams are based in Belgium, Germany, Portugal,Switzerland, Hungary and Denmark.
Sheets, coils and shaped products are produced by thezinc rolling mills at Auby and Viviez and by the shapingand cutting shops at Auby, Viviez and Bray-et-Lû. Theseproducts are used for roofing, weathering and flashingand as decorative elements.
The lead rolling mill at Overpelt produces lead sheetmainly for use in the building industry.
The European construction market recovered in 1999, particularlyin France and Belgium. Combined with intense marketingefforts to promote new products and services, and to expandinto new markets, the market recovery pushed sales volumesup by almost 5% from 1998 levels. However, fierce competitionand higher zinc prices kept margins under pressure.
In France, efforts were concentrated on increasing the unit’sproximity to the distribution network, with both a tailoredproduct offer and a redefined tariff system.
Total Productive Maintenance remains one of the essentialvectors for operational excellence and is applied on all theunit’s production sites in addition to the now well-establishedISO 9001 certification.
Sales continued to increase in Spain, Denmark and Portugal,but suffered from the very competitive situation in Germanyand Switzerland. In south-east Asia the effects of the financialcrisis are still being felt, with sales proving particularly slow inJapan. However some signs of recovery are starting to appear,with positive results being achieved in certain targeted markets in the area. Other promising new markets includeNorth and South America; prospection efforts will be steppedup in this region in the coming year.
New products, including Adeka and Dexter, continued to penetrate the market, with the most spectacular results beingachieved by facade systems, which were promoted more intensively in 1999. The unit is continuing to expand its product range in this area and is also developing innovative
Union Minière 15
multi-component systems for both the roofing and facademarket.
Rolled lead volumes remained at a high level for the secondyear running.
In 2000 UM Building Products will extend its range of transformed products and services in Germany and Belgium.New products, new services, new more environmentally friendlyproducts will help consolidate the unit's position in France and expand in new markets.
SHARE OF PREWEATHERED AND BILACQUERED PRODUCTS (EVOLUTION VERSUS TOTAL SALES)
BUILDING PRODUCTS
GEOGRAPHICAL BREAKDOWN OF SALES
France�47%
Belux�15%
Germany�22%
Other�16%
01990 1991 1992 1993 1994 1995 1996 1997 1998 1999
4
8
12
16%
2
6
10
14
5%
6%
7%
8% 8%
9%
10%
12% 13
% 14%
16 Union Minière
UM ZINC CHEMICALS
The business unit produces zinc oxides and zinc dust.
The most important outlets for zinc oxides are the tyre,ceramic, chemical and animal feed industries. Zinc oxides are mainly produced from zinc-bearing secondary raw materials, such as galvanisation residues,scrap zinc from demolition sites and other intermediateindustrial products. The main sites are La Ciotat (France),Eijsden (Netherlands), Barking (United Kingdom), whichproduce oxides, and Fécamp (France) and Zolder(Belgium), which carry out the intermediate residue processing operations as part of the zinc oxide production cycle. With a capacity of 78,500 tonnes, UM is the European leader in this field.
Zinc dust, which is produced at Angleur (Belgium), isused in the paint and chemical industries. A major partof the dust produced is used in the electrolytic refiningof zinc.
Operating income in 1999 remained in line with that of 1998.Volumes increased, availability and prices for zinc secondaries,the main source of raw material in the zinc oxide segment,improved and manufacturing costs were kept under strict control.
However, prices for zinc oxide products decreased by ± 5%,despite the higher USD exchange rate, as a result of exportsfrom the Far East.
Investments were essentially focused on product and processimprovements.
Union Minière 17
The unit plays an active role as the industry representative inassessing the impact of zinc oxide on the environment at alllevels.
R & D activities were focused on product development; variousareas for innovation have been identified for the coming year.
Efforts will be pursued in 2000 towards product and servicedifferentiation in a market which is expected to remain verycompetitive.
MARKET STRUCTURE (WESTERN EUROPE)
GEOGRAPHICAL BREAKDOWN OF SALES
ZINC OXIDE ZINC DUST
Ceramics�26%
Tyres�24%Rubber�
14%
Agriculture�10%
Lubricants�4%
Other�22%
America�14.5%
Asia�4.4%
Africa�1.4%
Other Europe�45.8%
Oceania�0.4%
Belgium�33. 5%
18 Union Minière
Integration of smelting, refining, and transformation
activities for the three production sites.
COPPER
Key figures (amounts in million)
1996 1997 1998 1999(1)
€ € € € BEF
Operating profit (loss) 9.0 13.8 11.2 1.7 68Average capital employed 249.4 253.1 365.3 403.6 16,280Added value 74.6 85.3 75.8 85.6 3,454Investments in tangible and intangible assets 44.1 42.6 14.4 24.0 970R&D expenditure 0.6 0.6 0.9 0.5 21
Workforce as at 31 December 1,034 946 858 2,282
(1) Including employees and figures for UNION MINIERE PIRDOP COPPER consolidated for the first time as from
30 June 1999
COPPER
Union Minière 19
UM COPPER
Union Minière is one of the leading copper producers in Europe with a total output exceeding 500,000 tonnes.UM is the third largest producer of wire rod in the world,with a production capacity of 270,000 tonnes at Olenand 160,000 tonnes at Avellino (Italy). The Olen plantalso produces some 100,000 tonnes of billets and cakes forthe manufacture of copper tubes and sheet, respectively.The Group's main copper refinery in Olen has a nominalcapacity of 330,000 tonnes per year.
In Bulgaria, UNION MINIERE PIRDOP COPPER, operates a smelterwith an annual capacity of around 150,000 tonnes anda refinery with a capacity of 45,000 tonnes. A vast modernisation and expansion programme is currentlybeing implemented at the Pirdop site.
This smelting plant has become one of the main sourcesof feedstocks for the Olen refinery. The balance of theOlen refinery's requirements is covered by supplies ofanodes from NON FERROUS INTERNATIONAL (NFI), long-termsupply contracts, scrap, as well as blister copper fromthe Group's operations at Hoboken.
World copper consumption climbed by 3% to a total of 13.7 million tonnes, driven by the upturn in the Far East (+6%) and the strong performance of the North American economy(+3%). Although consumption in Europe remained relativelystatic, UM Copper's sales of end products grew by more than5% to exceed 500,000 tonnes for the first time. In the wire rod market, UM's "customers first" programme contributed to record sales of 400,000 tonnes. Sales of billets and cakestotalled 105,000 tonnes, up 5% on the 1998 level.
Less buoyant economic activity in the first half of 1999 keptthe price of copper down to an average of USD 1,440 pertonne. But the second half of the year saw a significant improvement in demand from all consumers, with the resultthat the average price climbed to more than USD 1,700 pertonne (copper closed the year at USD 1,846 per tonne).
LME stocks increased by more than 160,000 tonnes over thecourse of the year. The greater part of the increase was notedin the first few months of 1999 and stocks remained more
20 Union Minière
stable throughout the rest of the year, although at around775,000 tonnes they are still particularly high.
Despite the closure of some smelters, mainly in the US, the copper industry is still in a difficult situation. Treatmentand refining charges have dropped by nearly 30% from the 1998 level, weighing on the financial performance of both the smelting and refining operations of Union Minière. The strength of the dollar only partly offset this fall.
At Olen, the new leaching and electrowinning unit for unrefinedcopper from Hoboken, with a very high precious metals content, reached nominal capacity and helped cut the transittime of these metals by several weeks.
At Pirdop, the first phase of the investment plan was completed,after a 3-month shutdown. The aim of this investment was to stabilise the performance of the smelter and increase itscapacity to 150,000 tonnes per year. Due to this shutdown,anode production was limited to 95,000 tonnes for the year.The programme to clean up the site, which is financed by theBulgarian government and the World Bank, is going ahead asplanned. Additional investments are scheduled in 2000 in orderto improve the plant's environmental performance.
As regards safety at work, the concerted efforts made by all the staff at Olen have borne fruit, with the number of accidents being reduced by half over the past twelve months.
Increased anode production in Pirdop and further growth inend product sales should be the main contributors to improvedfinancial performance in 2000. The positive outlook is somewhatovershadowed by low treatment and refining charges, whichwill continue to prevail in 2000.
Union Minière 21
NON FERROUS INTERNATIONAL (NFI) (19.9%)
The sharp drop in LME prices in the financial year endingMarch 1999 had a major negative impact on the margins andcash flow generated by NFI. Other factors affecting marginswere the persistently high level of exports of copper scrap toAsia and the reduction in supplies from the former SovietUnion. The general market situation however improved significantly in the second half of 1999.
The smelting facilities in Belgium and Spain continued to operate close to budgeted targets in terms of both volume and cost. Enhanced flexibility means that the facilities can now process lower grade and more complex materials.
The copper refining unit operated at 100% capacity in Belgiumbut the capacity of the Spanish unit could not be fully utilisedowing to unreliable anode supplies.
Cooperation between NFI and the Union Minière businessgroups "Zinc" and "Copper and Precious Metals" was steppedup in 1999.
Other World�8%
Other Europe�11%
Spain�5%
Italy�36%
France�7%
Germany�18%
Benelux�15%
1998199719961995 1999
Metalrame�UM Olen
0
100
200
300
400
500(000 tonnes)�
�
237
382370371345
402
145
232
138
227
144
204
141
247
155
GEOGRAPHICAL BREAKDOWN OF SALES (ALL PRODUCTS)
COPPER
CONTIRODWIRE ROD
22 Union Minière
Offer precious metals recyclingand refining services to a
worldwide customer base.
PRECIOUS METALS
Key figures (amounts in million)
1996 1997 1998 1999€ € € € BEF
Operating profit (loss) (15.2) (21.6) (62.4) (0.3) (13)Average capital employed 225.7 270.2 274.7 195.8 7,900Added value 102.9 77.2 28.7 95.9 3,868Investments in tangible and intangible assets 16.7 58.8 27.3 10.4 420R&D expenditure 3.0 2.7 2.8 2.8 111
Workforce as at 31 December 1,730 1,297 1,245 1,215
Union Minière 23
UM PRECIOUS METALS
UM Precious Metals operates the largest precious metals recycling plant in the world at Hoboken. Thisplant specialises in the recovery of precious metals,recycling complex intermediate products from the othersmelters and refineries and end-of-life products containingprecious metals, which mainly come from the electronics,photography and catalysts sectors.
Precious metals (silver, gold, platinum, palladium, rhodium), special metals (indium, selenium, tellurium),secondary metals (antimony, tin, bismuth, arsenic) andbase metals are recovered by using a unique proprietarytechnology.
Technical and metallurgical problems which had occurred in 1998 were solved in the course of 1999, leading to a EUR 64.4 million improvement in operating income and a significant reduction in inventories. All precious metals leasedwere returned by the end of the year.
The new smelting process based on the Isasmelt technologywas successfully integrated into the flowsheet. Coupled with a smooth performance of the blast furnace, it enabled inventories to be brought down to a normal operating level.
The initial teething problems with the gold and silver refinery,which came on stream in April 1998, were resolved in the firsthalf of 1999. These facilities subsequently operated on targetand achieved record production levels.
24 Union Minière
UM Precious Metals offers its recycling and refining services toa worldwide customer base. The new flowsheet is ideally suitedto recovering precious metals from secondary raw materials,such as drosses, mattes, speiss, electrolytic slimes, slag, lead sulphates, copper cements. These products come from othersmelters and refineries and from a wide range of industrial and consumer goods, such as spent catalysts from cars andscrap from the petrochemical, photographic and computerindustries. A large part of the supply base is secured underlong-term contracts.
UM PRECIOUS METALS CLOSES THE LOOP IN PRECIOUS METALS CYCLES
Mines
Market
UM Precious Metals
Industry
Smelters & Refineries
Refinedmetal
Productionscrap
Preciousmetals
e.g.Computers
e.g.Electronic
scrap
e.g.Copper
scrap
e.g.Tankhouseslimes
Metalconcentrates
Union Minière 25
In 2000 attention will be focused on further optimising theprocess. Costs could be further reduced as knowledge of processes and smelting and refining facilities increases.
The environment and safety at work remain top priority issues,as is illustrated by the procedure initiated with a view toobtaining ISO 14001 certification.
On the basis of the improved performance of the Hobokenplant and the rise in platinum, palladium and rhodium pricessince late 1999, a significantly improved result for UM Precious Metals is forecast for 2000.
26 Union Minière
Contribute with metal-based materials
to the technology of the future.
ADVANCED MATERIALS
Key figures (amounts in million)
1996 1997 1998 1999€ € € € BEF
Operating profit (loss) 39.3 42.6 27.3 9.2 372Average capital employed 172.2 195.4 204.7 218.5 8,815Added value 94.0 104.7 82.8 88.6 3,576Investments in tangibleand intangible assets 14.9 39.3 33.8 11.4 460R&D expenditure 4.4 5.2 5.8 6.6 266
Workforce as at 31 December 887 1,179 1,105 965
Union Minière 27
Union Minière's advanced materials activities are gearedtoward products for use in advanced technological applications.They presently include two business units
UM Cobalt & Energy ProductsUM Electro-Optic Materials
and a Venture Unit.
The Advanced Materials business group’s mission is “to contributeto the technology of the future” by building up a profitable,market-oriented, metal-based materials business. In line withthe UM Group’s policy, the profitability goal is defined andbased on the creation of shareholder value. The markets in which the business group operates are batteries, optics, electronics, hard metals, diamond tools, ceramics and chemicals.The business model is based on strong core skills and is foundedon a portfolio of engineered products, recycling services tocustomers and a competitive feed basis for metals.
The business group will focus on new developments in the fastgrowing information and energy technology markets.
Rapid response to market openings will be achieved through a flexible business line organisation.
The business group’s core skills are the product of significantexpertise which has been built up over the years in the field of producing and marketing added value products based oncobalt and germanium. In recent years the product portfoliohas been substantially expanded, and this will be stepped up in the years to come.
UM COBALT & ENERGY PRODUCTS
UM Cobalt & Energy Products is a world leader in theproduction and marketing of speciality materials for anumber of applications the most important of which are batteries, diamond tools, hard metals, ceramics and industrial chemicals.
The business unit has occupied a leading position formany years in the field of cobalt-based products but hasalso developed the production of compounds of othermetals to serve its customer base.
UM Cobalt & Energy Products has operations in Olen,Belgium (cobalt and nickel), Laurinburg, USA (cobalt and advanced tungsten carbide materials), Shanghai,People's Republic of China (cobalt and zinc),Roodepoort, South Africa (cobalt), Fort Saskatchewanand Leduc, Canada (cobalt and nickel), Overpelt,Belgium (zinc) and Seneffe, Belgium (cadmium).
It also has interests in the Kasombo cobalt mine (Democratic Republic of Congo) and BATTERY MATERIALS CORPORATION (Japan).
Production and sales volumes of most of the products of UM Cobalt & Energy Products were on average 20 % higherthan the year before. However, commercial conditions wereunder severe pressure leading to lower unit prices and eliminating most of the benefits generated by higher sales volumes.
Market prices for cobalt metal hit an all-time low for thenineties at USD 6/lb in January 1999. The drop in price startedat the end of 1998 and was driven by speculative forces. It wasconsequently short-lived and metal prices rebounded quicklyto as high as USD 18/lb. Balance was restored in the secondhalf of the year, with cobalt metal trading in a range betweenUSD 12 and USD 15/lb.
The extremely low price at the beginning of the year affectedboth profitability and activity levels of cobalt refining activitiesat the Olen plant. Output fell 30% in the first 6 months, butby the second half of the year the refinery was once againoperating at full capacity.
Markets for hard metals and diamond tools were strong inmost parts of the world. The Asian market, hit by a severe economic crisis in 1998, started to recover in 1999, with theexception of the Japanese market. Sales of newly introducedpowders (submicron powders and Cobalite®) almost tripled inone year. While they still have a modest share of the market,
28 Union Minière
COBALT & ENERGY PRODUCTS
MARKET STRUCTURE GEOGRAPHICAL BREAKDOWN OF SALES (ALL PRODUCTS)
Africa�4%
America�12%
Belgium�2%
Other�Europe�
25%
Japan�37%
Other Asia�20%
Batteries�44%
Engineered �powders�
37%
Ceramics �and Chemicals�
19%
Union Minière 29
it is believed that growth will accelerate in the years to comeand UM is well placed to develop into the leading supplier ofthese powders.
Sales of cobalt powders in China were also very buoyant.SHANGHAI BLUE LOTUS METALS operated at full capacity and sold its entire output. Consequently, it was decided to increase the capacity to permit further growth in this very promisingmarket.
Technical problems with the start up of NANODYNE’s industrialplant in North Carolina slowed down the introduction ofMycrocarb® and Nanocarb® tungsten carbide powders andweighed heavy on the business unit’s operating income.
A new -even finer- cobalt powder (Half Micron Powder) is nowbeing produced in Canada. This powder has been developed forvery specific, advanced applications in the hard metals sector.
Sales of cobalt and nickel salts and oxides, for the ceramicsand chemical industries, suffered from very severe pricing pressure during the course of the year. The price of cobaltoxides, sales of which are no longer limited by capacity restrictions, was hit especially hard. The volume increasesachieved offset the drop in the unit price to some extent.
In the batteries market, materials for both the primary andsecondary battery systems registered very healthy growth, withthe exception of cadmium compounds for the nickel cadmiummarket.
The range of zinc-based products for primary batteries(zinc/carbon and alkaline battery systems) recorded an overallgrowth rate of 20%.
The plant at SHANGHAI BLUE LOTUS METALS for the manufacture ofmercury-free zinc powders was successfully started up. Marketacceptance is going as planned and buoyant growth is forecastfor 2000.
Sales of nickel compounds for rechargeable battery systemstripled, while cobalt oxide sales for lithium-ion rechargeablebatteries increased by 70 %, proving the strength of the nickelmetal hydride and lithium-ion systems.
Since the battery market is extremely competitive, prices of all systems continued to decline at a staggering rate, draggingdown raw materials suppliers with them. This market segmentwas no exception and lower sales premiums for all productswere a fact of life.
UM Cobalt & Energy Products also launched sales of lithiumcobaltite, the active cathode material for lithium-ion batteries,made by a pilot facility at its Canadian plant. Market acceptancewas very good. The facility operated at full capacity and itsentire output was sold. Meanwhile, research is continuing intoachieving further product improvements. In the course of theyear ground was broken for the construction of a full-scaleplant in South Korea, which will start up in the middle of 2000.
In order to prepare the business unit for further growth, amore focused organisational structure per business line wasintroduced in January 2000. Sales, production, marketing anddevelopment will be managed by each business line, focusingon particular market segments. The three business lines are:
■ engineered powders, primarily to serve the hard metals and diamond tools markets
■ batteries, for the primary and rechargeable battery markets■ ceramics and chemicals, focusing on the ceramics and
industrial chemicals application areas.
One of the main challenges facing UM Cobalt & Energy Productsis the growing trend on the part of the authorities to adoptlegislation aimed at limiting the use of, and/or exposure to,metal-based (cobalt, nickel, cadmium and zinc) compounds. As a responsible industry leader, the business unit is working inhouse and with industry organisations to develop safe productsand a safe working environment and to improve the knowledgeof the hazards for the environment and for the people exposedto these products.
In 2000, the business unit expects further strong volumeincreases. However, continuing pressure on prices will notmake it possible to translate growth entirely into increasedincome.
30 Union Minière
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UM ELECTRO-OPTIC MATERIALS
This unit’s Olen plant is the largest germanium productionplant in the world. Germanium compounds are used inthe manufacture of optical fibres and as catalysts forthe production of polyethylene bottles. Germaniummetal is a key component in infrared optics systems,radiation detectors and semi-conductors. It also has a few medical applications.
At Hoboken (Belgium), indium, selenium and telluriumare refined and transformed into finished industrial products.
In Boston (USA), the UM Group has a unit that specialisesin the production of polished wafers for solar cells (germanium) and specific electronic applications (silicon). At the beginning of 1998 it acquired PHASE4 INFRARED, which is based in the Boston area.PHASE4 INFRARED produces zinc selenide which is used in infrared optics and high-power lasers.
Temporary cutbacks in aerospace programmes impacted UM Electro-Optic Materials’ sales of high-tech substrates forsolar cells used by the aerospace industry, which declined by 57%. The unit was able to offset this decline thanks to arecord 35% volume increase in sales of germanium. But as faras overall earnings are concerned, it was not possible to make up for the substantial reduction in the added value generatedby the substrates business. This negative impact on earningswas compounded by the increasingly strict quality requirementsfor this product in a market characterised by severe competitivepressure. In response to this situation the unit is actively continuing its efforts to attain its strategic objectives, focusingon expanding its product range in order to reduce its dependenceon a product’s main application.
Producers flooded the market with stocks of germanium whichthey had built up with a view to manufacturing substrates forsolar cells. As a result competitive pressure for all germaniumproducts intensified and steadily pushed down the price, whichhas dropped nearly 20% from its level at the beginning of 1999.It now stands at its lowest level for five years.
The other more traditional markets for germanium were verybuoyant. The optical fibre sector not only made up for thedecline noted in 1998, it also grew steadily throughout 1999.
The development of a new grade of germanium dioxide, whichis used as a catalyst in the manufacture of PET bottles, and a more aggressive sales campaign in Japan, helped boost UM Electro-Optic Materials’ market share in this sector from18 to 30%. The US-based zinc selenide unit suffered from temporary production problems; this decline in its performancesomewhat overshadowed the increase in the demand for germanium for use in infrared optics. At VERTEX (France) thedevelopment of chalcogenide glass for night-vision applicationsis going ahead as planned. The Japanese automotive industry is also showing an interest in this low-cost optical application.
Sales of substrates for solar cells were disappointing in 1999. But significant quality improvements were achieved in thecourse of the year at each stage of the manufacturing process.The performance of solar cells produced by UM’s customers has improved to such an extent that confidence in this product has been boosted, with the result that the company’s marketposition has been consolidated. At the same time, developmentprogrammes using this type of solar cell based on germaniumsubstrates for terrestrial applications have yielded promisingresults. This type of solar cell is relatively expensive but thecost is offset by the high efficiency of these cells in convertinglight into energy.
32 Union Minière
ELECTRO-OPTIC MATERIALS
GEOGRAPHICAL BREAKDOWN OF SALES (ALL PRODUCTS)
BREAKDOWN OF SALESPER APPLICATION (ALL PRODUCTS)
France�16%
Germany�5%
Other�5%Other Europe�
5%Benelux�
3%
United Kingdom�9%
Japan�17%
North �America�
40%
Metallurgy and alloys�4%
Chemicals�and catalysts�
22%Other�
1%
Electronics �& opto-electronics�
21%Optics & optical�fibres 52%
Union Minière 33
1999 proved to be a transition year for advanced materials atHoboken. In cooperation with the research teams, developmentof alloys for electro-optic applications (solar cells, screens, etc.)was actively pursued.
Research focused on improving existing production processesand developing new materials and alloys. The unit has its ownresearch team, which works jointly with UM’s central researchdepartment, universities and independent research centres. TheEuropean Space Agency (ESA) and the Flemish Institute for thePromotion of Scientific and Technological Research in Industry(IWT) provide financial support for these activities.
In 1999 the unit finalised its strategic plan for the next fouryears. This involved identifying new openings, which could lead to new developments or new partnerships in the years to come.
The series of cutbacks in aerospace programmes seems to havetailed off in 1999, but there are still no signs as yet, in 2000,of any significant upturn in this sector. The unit will be in aposition to improve its performance in 2000 thanks to the progress made with achieving a more consistent product qualityand with consolidating the volume of germanium sold.
VENTURE UNIT
In 1998 UM decided to create a Venture Unit. The objectives of this unit are to promote the generation of business ideas, tocreate an environment to put these ideas on the market rapidlyand to stimulate the spirit of enterprise. These objectives willbe achieved through an internal programme of venture-typeinitiatives and by acquiring shares in venture capital funds. The Venture Unit provides backup for the business units bymanaging small-scale operations with a high return potentialin the medium and long term.
The initial portfolio in 1999 focused on the Advanced Materialsbusiness group. Initiatives were targeted on electronic powdersbased on a proprietary technology, the development of low-costinfrared optical materials for automotive applications andadvanced substrates for opto-electronics.
34 Union Minière
TECHNOLOGY & SERVICESTECHNOLOGY & SERVICES
Key figures (amounts in million)
1996 1997 1998 1999€ € € € BEF
Operating profit (loss) 2.2 0.6 0.4 2.4 98Average capital employed 64.1 91.2 106.5 111.7 4,508Added value 34.5 36.2 36.5 41.7 1,681Investments in tangible and intangible assets 2.0 2.1 2.5 3.7 150
Workforce as at 31 December 488 501 521 529
Implementing the Group's strategy in research, engineering
and international trade.
Union Minière 35
UM RESEARCH
UM Research’s project portfolio is fully aligned on the businessunits’ strategies. It is regularly asked to provide solutions toproblems such as minimising waste production and enhancingthe recyclability of products and to provide a response toclients’ specific (or not so specific) requests.
In this context UM Research co-operates closely with around25 universities and research institutes around the world.
UM Research’s teams have played an active part in improvingthe reliability of new processes and new technologies for processing and refining materials containing precious metals.Working methods have been developed in conjunction withthe manufacturing departments in question, with a view to stimulating a continuous learning process and on-goingimprovements.
Other teams have devoted themselves to developing specificproducts for cutting tools and applications such as paints, galvanisation, lithium-ion batteries, solar cells, and high-puritymetals for the electronics industry.
In North America the main focus of UM Research’s work wasassisting with the start-up of the specialist NANODYNE facilitiesfor the production of advanced materials based on tungstencarbide and the production on a semi-industrial scale of lithium cobaltite for use in rechargeable batteries.
UM ENGINEERING
UM ENGINEERING is the Union Minière Group's engineering arm. It has built up considerable know-howin the field of non-ferrous metals refining, includingboth hydrometallurgy and pyrometallurgy, in particularfor zinc, copper, cobalt, lead and precious metals. This know-how has been acquired through:
■ the engineering work it carries out for the UM Group when implementing investment projects for its industrial sites,
■ carrying out numerous projects to develop or upgraderefining capacities throughout the world,
■ the significant synergy generated within the UM Group between operators, R&D teams and process engineers.
For more than thirty years UM ENGINEERING has also beenbuilding up its skills and expertise in the environmentalfield and in connection with thermal processes, throughits NESA product line.
UM ENGINEERING enjoyed a successful year as regards new projects awarded. However, the retrenching of major players in the non-ferrous business caused by depressed metal prices,imbalance in supply and demand, the Asian crisis and otherfactors resulted in several major projects, for which UM ENGINEERING was a potential candidate, being reconsidered.Postponed, cancelled or re-assessed projects made 1999 a difficult year from the operating results point of view.
UM ENGINEERING successfully continued to implement its strategy, which focuses on 2 axes.
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Union Minière 37
Worldwide coverage for non-ferrous metals projects
In 1999 UM ENGINEERING focused on specific geographical areas with a high density of potential projects in copper, zincand related metallurgies. In Latin America, UM ENGINEERING’s reputation, image and project involvement were strengthenedthrough the office in Santiago (Chile). This move resulted in acontract being awarded for a new zinc cellhouse in Brazil, andvarious preparatory studies for significant copper modernisationprojects in Chile.
A second front has been developed in Southern Africa, resultingin 3 important contracts being awarded in 1999.
A third focus area is Asia where UM ENGINEERING was awarded acontract for a new zinc cellhouse.
Technological leadership in UM ENGINEERING’s specialist field
Traditionally, zinc is the main area where UM ENGINEERING hasachieved recognised technological leadership for its processknow-how. Its leadership was confirmed by the recent implementation of three major investments in zinc productionin the world.
In collaboration with strategic partners UM ENGINEERING is developing an innovative approach for zinc oxide ore treatment,which is currently being piloted in South Africa.
In addition to this zinc know-how, UM ENGINEERING has developedspecific expertise in the automation of electrode handling incopper tankhouses. One of the key areas where this expertise is currently being applied is the modernisation of an existingtankhouse. The award of several feasibility studies for leadingcopper producers has confirmed UM ENGINEERING’s position onthis market.
On the European market, UM ENGINEERING has been awardedseveral contracts for its Nesa product line for the thermal processing of waste to reduce the impact on the environment.
SOGEM
SOGEM, the Union Minière Group's international tradingarm, has more than thirty subsidiaries and representativeoffices in some twenty-five countries. It specialises inthree types of business.
First and foremost, it acts as a purchase and sales agenton behalf of UM and as the Group's representative onthe main world markets. It also acts as an agent anddistributor for non-Group companies.
Secondly, SOGEM trades for its own account in line withthe strategy and guidelines laid down by Union Minière,specialising in ores, concentrates and non-ferrous metals.
Finally, SOGEM is an important participant in the London Metal Exchange (LME) via its futures brokerage subsidiary SOGEMIN METALS. SOGEMIN is also an AssociateMember of the London Bullion Market Association andthe London Platinum and Palladium Market.
In 1999 the company benefited from a much more favourablebusiness environment than expected, through larger sales volumes and a much stronger US dollar. This translates into aconsolidated operating profit for physical operations (excludingSOGEMIN's brokerage activities of EUR 3.9 million, 156% up on 1998, reflecting a 15% increase in gross margin.
The upturn in industrial activity in Western Europe boosted theagency and distribution income of SOGEM’s European subsidiariesin the second part of the year.
38 Union Minière
Union Minière 39
A similar improvement was noted in Asia, which was mainlydriven by the Korean, Thai and Japanese markets. In Japan, in particular, a strong increase was noted in the demand foradvanced materials for the electronics industry.
SOGEM USA continued to enjoy a high level of economic activity throughout the year.
Sale premiums achieved over the base price of metals, whichto a large extent constitute the basis of SOGEM’s income, remained on the low side, however, in most of these markets,due to continuing severe competition between producers.
Expert teams in steel, batteries and electronics, made up of specialist sales personnel from various offices, continued to make progress with sharing commercial and technical information, with a view to further improving services to customers as well as to promoting new business. With the same aim in mind, additional staff with a strongertechnical background were taken on in various countries.
Trading activities, which are now centralised at company headquarters in Brussels, also benefited from the improvementin economic activity. Increased demand for raw materials,especially in the field of lead and special metals, gave a significant boost to financial income.
Efforts to attract new business partners in the agency and trading sectors were actively pursued during the year with anumber of notable successes: an agreement was signed withNormandy, Australia, for the sale of their KCCL cobalt on theworld market, excluding Japan. Other examples include agencycontracts concluded with Bundy, Belgium, and Inodor,Germany, for the sale of components for primary and/or secondary batteries on the Asian market. The company also
continued to support the commercial ramp up of the Cawsenickel and cobalt project developed by Centaur Mining. Today this project is the most successful lateritic project inAustralia.
As a result of these efforts, the share of gross income fromthird parties, compared with income received from UM, hascontinued to increase and now stands well above 50%.
In 1999 the company implemented a substantial informationtechnology investment programme involving several operatingsites in Europe, North America and Asia. When complete thisinvestment is expected to substantially improve the efficiencyof both front and back-office operations.
SOGEM expects the economic recovery to continue in Europeand Asia in 2000, with a major question mark over the impactof a potential downturn in the US. Raw materials trading activities may suffer from an increasing shortage of supplies.
40 Union Minière
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As far as the futures brokerage subsidiary, SOGEMIN METALS, is concerned, the first half of 1999 saw a continuation of the low prices and difficult trading conditions of 1998 on the London Metal Exchange. From mid summer, prices, volumesand volatilities all improved, however sentiment proved fickleand trading conditions remained problematic. Changes to trading strategy produced a 4.5% improvement in revenue.Unfortunately, a bad debt charge of 8% of revenue relating tothe prior year's business inevitably led to unsatisfactory resultsalthough SOGEMIN's overall return on equity and subordinateddebt (net of exceptional costs) remained positive during thecourse of the year.
Significant changes are expected in the metal markets in 2000.SOGEMIN will continue to focus on refining its trading and marketing strategies and controlling its cost base in order tobe well positioned to take advantage of these changes and achieve its targeted returns.
42 Union Minière
SIBEKA (80.4%)
The SIBEKA group operates in the natural diamond andsynthetic abrasives sector, working in two distinct areas:exploration and mining of natural diamonds, and manufacturing, processing and marketing of syntheticdiamonds and other synthetic abrasives.
SIBEKA sold its entire holding in Diamant Boart last July under a management buy-out, which was mainly financed by the UKequity investors, Candover PLC. For more than 60 years,Diamant Boart was one of SIBEKA’s core assets. Diamant Boart,which is one of the world’s leading producers of diamond toolsfor the stone and construction sectors, suffered heavy losses in1990, 1991, 1996 and 1997. Diamant Boart’s position improvedas a result of the strategic plan to refocus operations, whichwas implemented in 1997.
Key figures (1) (amounts in million)
1996 1997 1998 1999€ € € € BEF
Operating profit (loss) (23.6) (10.1) (43.0)(2) (8.6) (346)Average capital employed 479.1 460.7 386.9 304.3 12,276Added value 110.8 120.2 100.8 3.2 128Investments in tangible and intangible assets 34.9 25.9 22.3 9.0 362R&D expenditure 2.1 2.3 2.4 2.9 118
Workforce as at 31 December 3,314 3,134 2,603 634
(1) Includes: - SIBEKA
- Group share in profit (loss) of MEGAPODE (50%) included by the equity method- the financial subsidiaries- the Corporate Departments- HURON VALLEY EUROPE (20%)- Overpelt-Plascobel until 30 June 1999
(2) Includes a non-recurrent write-down of EUR 34.5 million on inventories
OTHER
Union Minière 43
In the second half of the year, the De Beers group announcedthat it wished to acquire the minority interests held by SIBEKA
and its subsidiaries in certain natural diamond marketing companies. SIBEKA concluded the sale of these participatinginterests in exchange for a cash payment, coupled with a block of De Beers shares. As a result, SIBEKA now holds 3 million De Beers shares (representing about 0.9% of the company'scapital). A consolidated net capital gain of BEF 2,564 millionwas realised on this sale.
SIBEKA has a 20% stake in the Congolese mining company MIBA,which mines natural diamonds, mainly for use in industry.Despite the continuing civil war and on-going serious economicproblems, production in 1999 stood at 4,730,861 carats, a dropof 26.6% on the 1998 level. But owing to an improvement inthe average grade of the stones produced and very strongdemand for MIBA’s top-grade stones sales revenues climbed to USD 97.2 million, compared with USD 93.6 million in 1998.
SIBEKA holds a 50% interest in the MEGAPODE group, the world’sleading producer of synthetic diamonds, which are marketedby De Beers Industrial Diamonds. As a result of the economicrecovery in the Far East and the continuing growth enjoyed bythe industrialised economies, sales of most of MEGAPODE ’s products increased in 1999, in terms of both volume and value. The downward trend in the average price per carat for synthetic diamonds eased off, and prices stabilised at theirnormal long-term level. The combination of these factors helpedboost MEGAPODE ’s profits for the 1999 financial year by morethan 10% compared with 1998. On the business frontMEGAPODE continued to implement its product line rationalisationprogramme and launched several new products which are moreclosely targeted on customers’ requirements, with a view toestablishing a stronger position in the face of increasinglysevere competition. Certain market segments for polycrystallineproducts have shown very encouraging developments. Demandtrends in 2000 will be closely linked to economic growth levelsin the industrialised world. MEGAPODE’s prospects for the nextfew years could be impacted by increasing competitive pressures in the sector and the risk of a slowdown in demandgrowth.
44 Union Minière
ENVIRONMENT, HEALTH AND SAFETY
As part of the systematic development of the UM Group’s own environmental management system, an internal reporting programme has been set up based on environmentalperformance indicators (EPI). These indicators will provide thetechnical foundation for the UM Group’s environment report,which will be published for the first time in 2000.
This initiative reflects the importance Union Minière attachesto informing the public about its approach to environmentalissues, in line with its policy of transparency. Initially, this environment report will concentrate on the performance of the industrial plants in the European Union, but it willeventually cover all UM’s activities on a worldwide basis. From the outset this report will be certified by an approvedindependent auditor.
The main consideration underlying Union Minière’s policy onenvironmental management is continuous improvement, aprinciple set out in UM’s charter. The graph on the oppositepage charts emissions into the atmosphere and water of allUM sites in Flanders. It shows that emissions have been fallingsteadily with the result that in 2000 emission levels were onlyone tenth of the levels noted in 1980.
In 1999 there was clear evidence of a marked trend towardsthe internationalisation and globalisation of environmentalissues. New concepts are on the agenda, at European andinternational level. For example, the policy on the environmentalimpact of products and the concept of sustainable development.
Union Minière 45
The Union Minière Group is monitoring developments inthis field very closely, in co-operation with the relevanttrade organisations. It intends not only to take account of such developments in its environment policy, but also in its overall strategy.
The Union Minière Group has been actively implementing its policy of sustainable development for many years now.Among other things, this involves making maximum use of recyclable products as raw materials. The lack of supportfor recycling on the part of the authorities at the international, European and local level is a constant causefor concern. The fact that recycled materials and waste products are placed on the same footing has created numerous legal barriers to optimum recycling and, byextension, to making sustainable development a morewidely accepted principle.
The Union Minière Group paid particular attention to welfare in the workplace in 1999. In this connection, oneof the most positive developments has been the reductionin the number of accidents at work. This achievement isthe result of a series of measures which were adopted. A new Group-wide target was set to cut the number ofaccidents at work by half in the course of the next threeyears.
1995199019851980 1999
Water
0
700
600
500
400
300
200
100
94
100
158
369
627
6
138
20
343
26
435
192
44
11
Air
55
EMISSIONS TO AIR AND WATER(ALL UM SITES IN FLANDERS)
1995= INDEX 100
46 Union Minière
PEOPLE
INDUSTRIAL RELATIONS
In France 1999 was marked by negotiations aimed at reorganising and cutting down working hours following the implementation of the Aubry law on the 35-hour week.These negotiations required partners on both sides to makea significant effort to rethink organisational procedures totake account of both staff expectations and essential businessrequirements. A collective company agreement was signedin November 1999, followed by local agreements for eachindividual site. Under these agreements working hours willbe significantly reduced for all members of staff. In practice,this means that in most cases staff will be given additionaldays or half days of leave and will continue to receive thesame salary. In exchange, under these agreements, a strictwage restraint policy will be introduced in 2000 and working hours will be calculated on an annual basis for allthe staff, with the result that flexibility will be enhancedand working practices more closely aligned on businessrequirements and customers’ demands. Thanks to the constructive social dialogue it was possible to come upwith a solution for each unit which was in the best interests of both the company and its employees.
During the financial year under review sector agreementsfor the period 1999-2000 were concluded in Belgium forboth blue-collar and white-collar staff. The key issues atthe centre of these agreements were strict control overwage costs and measures to promote training and jobs.Since these agreements were concluded, the first steps havebeen taken at local level to deal with issues affecting
Union Minière 47
individual sites, within the limits of the overall budgets.
Against the background of an uncertain economic situation,the cyclical nature of the non-ferrous market and increasinglysevere international competition in the sector, the companyinitiated joint discussions with the Belgian trade unions on thequestion of flexible management of the volume of work, within the framework of the various legal options open tothem. As a result of this initiative a collective labour agreementwas concluded on this subject with blue-collar staff.
Another key event, which marked the financial year, was thecreation of a pension fund for blue-collar staff. The introductionof this non-statutory pension scheme for blue-collar staff,under the last two collective labour agreements, marks a decisive stage in drawing up a forward looking staff charterfor blue-collar employees.
WORKFORCE
At the end of the 1999 financial year the UM Group’s workforcetotalled 8,065. The 2,624 decrease compared with the previousyear is due to various changes in staffing levels in the companiesbelonging to the Group. This decrease reflects the furtherimplementation of the Industrial Plan in Belgium and France,the expiry of temporary contracts and staff cuts in Bulgaria.
The disposal of Overpelt-Plascobel and SIBEKA’s Diamant Boartoperation also resulted in a reduction in the workforce of2,017 persons.
Total workforce 31.12.1998 31.12.1999
Belgium 5,178 4,338France 1,515 1,387Bulgaria 2,075 1,441Rest of Europe 1,051 460Rest of World 870 439
TOTAL UNION MINIERE GROUP 10,689 8,065
48 Union Minière
UM PRODUCTS AND THEIR MAIN APPLICATIONS
ANTIMONY Glassware, flame retardants, catalystsARSENIC Photo-electrical devices, lasers, laser printers, glassware, high-speed copiers,
wood treatmentBISMUTH Pharmaceutical products, low melting point alloys, metallurgical additives
CADMIUM Rechargeable batteries, pigments, enamels, ceramics, anticorrosion coatings, electric contacts, soldering, glassware
COBALT Hard metals, diamond tools, batteries, catalysts, ceramics, paints, magnetic tapes, permanent magnets, tyres, trace elements
COPPER Electric wires and cables, pipes, sheets, shapes, brass, bronze, alloysGERMANIUM Infrared optics, radiation detectors, semiconductors, catalysts, optical fibres,
solar cells, alloysGOLD Investment, jewelry, coins, electronics, dentistry
INDIUM Low melting point alloys, bearings, electronics, sodium lamps, batteries, soldering, dentistry, control rods for nuclear reactors
LEAD Batteries, sheathing for electric cables, soldering, ceramics, radiation protection, paints, crystal glassware, sheets and extruded products for the building industry
MERCURY BatteriesNICKEL Rechargeable batteries, catalysts, electroplating, phosphatation
PALLADIUM Catalysts, electric contacts, electronics, dentistry, jewelry, surgical instrumentsPLATINUM Catalysts, electric contacts, laboratory equipment, jewelry, surgical instrumentsRHODIUM Catalysts, electric contacts, jewelrySELENIUM Reprography, glassware, semiconductors, infrared optics, pigments, animal feed
SILVER Photography, catalysts, electric contacts, electronics, jewelry, coinsTELLURIUM Radiation detectors, thermo-electric components, reprography, vulcanisation,
metallurgical applications, catalysts, chemical and pharmaceutical products THALLIUM Glassware, supraconductors
ZINC Steel galvanising and electrogalvanising, pressure and gravity die-casting,cathodic protection, pigments, anticorrosion paints, plastics, powder metallurgy,dry and alkaline batteries, rubber, tyres, paints, enamels, ceramics, agriculture,chemical products, roofing, weathering, flashing, architectural decoration
Sulphuric acid Fertilisers, chemical products, pickling, coke production
Union Minière 49
Page
Data per share 50
Consolidated key figures
and ratios and their breakdown 52
Comments on consolidated results 55
Statement of consolidated cash flows 71
Consolidated balance sheet 72
Consolidated income statement 74
Notes to the consolidated accounts 76
Statutory auditor's report 91
Summarised annual accounts 93
CONTENTSANNUAL ACCOUNTS 1999
50 Union Minière
DATA PER SHARE
1995 1996 1997 1998 1999 (1)
€ € € € € BEF
Data per ordinary share:Group equity 34.46 35.20 39.91 36.19 39.00 1,573Group share in net consolidated profit (loss) (EPS) (0.97) 0.40 3.57 (2.01) 2.73 110PER (2) at 31.12 n.s. 136 18 n.s. 14 14Added value (3) 25.80 25.08 27.46 20.87 22.34 901Cash flow (3) 10.91 4.86 11.21 4.79 8.04 325Gross dividend (4) - - 1.09 1.09 1.25 50.42Net dividend ordinary share - - 0.82 0.82 0.94 37.82Net dividend VVPR share - - 0.93 0.93 1.06 42.86Forward price ordinary shares on Brussels Bourse:
ceiling 61.60 60.49 94.08 70.65 46.50 1,876 floor 44.37 49.45 52.06 29.00 26.30 1,061closing 48.71 53.30 63.71 32.42 38.60 1,557weighted average 49.21 56.10 70.28 53.35 35.97 1,451
Market capitalisation (5): (amounts in million)
1,205 1,319 1,632 831 980 39,514
Price of the Union Minière share
(1) Taking into account the number of own shares held by UM at 31.12.1999 (241,488)(2) Closing price / Group share of profit (loss)(3) See definitions p. 52(4) Previous dividend paid in 1990(5) Closing price x number of shares issued at 31.12 (25,617,515)
JJ F M A M J A S O N DJ F M A M J
1998 1999
J S O N DA
Forward price on Brussels Bourse (weekly average))Bel-20 index (weekly average)
77
64 67
49 51
42
35
43 51
38
85
64
57
47
45 50 48
20
30
40
50
60
70EUR
2200
2600
3000
3400
3800
Bel-20
47
62
7880
68
47
46
Daily transaction volumes (monthly average), expressed in thousands
Union Minière 51
1995 1996 1997 1998 1999
Capital at 31.12 (BEF thousand)
Issued capital 15,000,000 15,000,000 15,000,000 15,526,451 15,529,240
Stock option plan - - 13,094 2,789 -
Exchange offer for SIBEKA - - 513,357 - -
Total 15,000,000 15,000,000 15,526,451 15,529,240 15,529,240
Number of shares at 31.12
Categories of shares
Ordinary shares 22,559,302 22,559,302 23,427,752 23,432,352 25,617,515
VVPR shares 2,185,163 2,185,163 2,185,163 2,185,163 - (1)
Total 24,744,465 24,744,465 25,612,915 25,617,515 25,617,515
Type of shares
Registered shares 11,862,021 11,860,889 4,861,369 4,995,368 4,995,319
Bearer shares 12,882,444 12,883,576 20,751,546 20,622,147 20,622,196
Total 24,744,465 24,744,465 25,612,915 25,617,515 25,617,515
Shareholder base at 31.12 (%)
SGB group 50.19 50.19 25.26 25.25 25.25
Templeton Worldwide Inc. - 7.66 7.40 7.40 4.51
Other shareholders 49.81 42.15 67.34 67.35 70.24
Total 100.00 100.00 100.00 100.00 100.00
(1) The VVPR shares were stripped on 26 March 1999, with coupon No 5 from VVPR shares entitling holders to a sheet of stripsand coupon No 5 from ordinary shares being cancelled
52 Union Minière
CONSOLIDATED KEY FIGURES AND RATIOS
1995 1996 1997 1998 1999€ € € € € BEF
Working capital (amounts in million):
Current assets minus short-term debts 633.22 668.99 655.33 498.17 519.51 20,957
Liquid position:
Current assets
Short-term debts 1.92 2.03 1.66 1.57 1.59
Financial autonomy:
[Financial debts (LT+ST) – current investments, cash & banks] (1)
Total equity (1) 25% 25% 32% 45% 43%
Cover ratio net debt charges/operating profit:
Operating profit
Net debt charges (2) 2.80 3.40 50.14 (1.17) 6.26
Return on equity (Group share):
Total profit (loss) for the year
Total equity (1) (3%) 1% 9% (6%) 7%
Cash flow (3) (amounts in million): 269.88 120.22 284.83 122.58 204.14 8,235
Added value (4) (amounts in million): 638.48 620.49 703.25 534.77 566.81 22,865
Investments in tangible assets (amounts in million): 84.33 131.85 195.91 135.99 73.30 2,957
(1) Annual average(2) Debt charges minus income from current assets(3) Profit (loss) of consolidated companies + dividends paid by companies included by the equity method + depreciation/amortisation
(current + extraordinary – R&D) + write-downs (write-backs) + changes in provisions + residual book value of fixed assets sold –
investment grants charged to profit and loss account(4) Operating result + remunerations, social security charges and pensions + current depreciation/amortisation charges + write-downs
Union Minière 53
AND THEIR BREAKDOWN
BALANCE SHEET AT 31.12 (amounts in million)
1995 1996 1997 1998 1999€ € € € € BEF
ASSETS 2,144.79 2,220.92 2,687.56 2,406.29 2,425.45 97,843
Intangible assets 27.62 33.34 32.26 28.88 14.49 584Consolidation differences 100.30 96.60 118.71 110.79 88.45 3,568Tangible assets 493.18 539.49 637.18 642.25 677.12 27,315Financial assets 202.03 227.76 239.42 240.29 245.61 9,908Amounts receivable after one year 3.84 5.21 9.36 6.70 2.43 98
Fixed assets (expanded) 826.97 902.40 1,036.93 1,028.91 1,028.10 41,473Inventories and contracts in progress 662.94 656.65 784.17 729.38 645.43 26,037Amounts receivable within one year 479.50 450.47 626.99 505.32 496.36 20,023Invested cash 92.71 105.97 129.99 48.75 71.30 2,876Cash at bank and in hand 61.18 90.51 76.68 54.31 64.14 2,588Deferred charges and accrued income 21.49 14.92 32.80 39.62 120.12 4,846
Current assets 1,317.82 1,318.52 1,650.63 1,377.38 1,397.35 56,370
LIABILITIES AND SHAREHOLDERS' EQUITY 2,144.79 2,220.92 2,687.56 2,406.29 2,425.45 97,843
Group equity 852.48 871.32 1,022.08 927.09 989.74 39,926Minority interests 106.79 106.50 89.83 35.02 47.29 1,908
Total equity 959.27 977.82 1,111.91 962.11 1,037.03 41,834Provisions and deferred taxes 324.35 317.05 285.35 255.28 262.75 10,600Financial debts payable after one year 158.08 263.88 287.07 303.32 240.87 9,717Other amounts payable after one year 18.49 12.64 7.97 6.53 6.92 279
Long-term liabilities 176.57 276.52 295.04 309.85 247.79 9,996Financial debts payable within one year(including current portion of long-term financial debts) 228.21 177.89 343.73 315.64 229.23 9,247Other amounts payable within one year 418.44 417.30 548.19 465.93 530.11 21,384Accrued charges and deferred income 37.95 54.34 103.34 97.48 118.54 4,782
Current liabilities 684.60 649.53 995.26 879.05 877.88 35,413
INCOME STATEMENT
1995 1996 1997 1998 1999€ € € € € BEF
Sales and services 3,156.95 3,248.07 3,889.75 3,449.00 3,180.18 128,288Remunerations, social security charges and pensions 476.85 480.62 472.26 434.54 374.97 15,126Depreciation and amortisation charges of the year 98.29 94.97 109.40 116.42 118.99 4,800Operating profit (loss) 54.34 42.69 113.11 (21.53) 72.60 2,929Financial charges 59.22 53.69 85.57 117.00 99.19 4,001Net debt charges (1) 19.43 12.54 2.26 18.38 11.62 468
Pre-tax current profit (loss) 34.85 35.62 102.85 (27.28) 53.55 2,161
Profit (loss) for the year (16.41) 8.18 105.73 (47.66) 87.94 3,548
Group share of profit (loss) (23.65) 9.69 91.22 (51.15) 69.28 2,796
(1) Debt charges minus income from current assets
54 Union Minière
1998199719961995 1999
%
FINANCIAL AUTONOMY
0
10
20
30
40
50
25 25
32
4543
1998199719961995 1999
EUR
CASH FLOW�(amounts in million)
0
50
100
150
200
250
300269.88
284.83
120.22 122.58
204.14
1998199719961995 1999
EUR
INVESTMENTS IN TANGIBLE ASSETS�(amounts in million)
0
50
100
150
200
84.33
195.91
131.85 135.99
73.30
(6)
(4)
(2)
0
2
4
6
8
10
1998199719961995 1999
%
RETURN ON EQUITY �(Group share)
(3)1
9
(6)
7
1998199719961995 1999
EUR
ADDED VALUE�(amounts in million)
0
100
200
300
400
500
600
700
800
638.4 620.5
703.3
534.8566.8
Write-downs)Current depreciation/amortisation)Remunerations)Operating profit (loss)
1998199719961995 1999
EUR
EMPLOYEE COST(1)�
(thousand / employee)
0
10
20
30
40
50
43.1 42.644.7 45.4
43.4
N.B. Footnotes on page 52 also apply to the above graphs(1) Labour costs excluding pensions and similar obligations
Union Minière 55
INTRODUCTION
The consolidated accounts are published in accordance with the provisions of the Royal Decree of 25 November 1991, whichgoverns holding companies’ accounts. The accounts are stated in millions of Belgian francs (BEF). In view of the industrialnature of the Group, the income statement is analysed according to the type of results, in line with the plan set out in theRoyal Decree of 6 March 1990 on companies’ consolidated accounts.
As was the case in previous years, the consolidated accounts of Union Minière have been drawn up using accountingstandards - described in section VI.a. of the Notes to the Consolidated Accounts - which are based to a large extent onEuropean and international rules and which are common to the whole Group.
It should be noted that the accounts of companies included in the scope of consolidation have been restated to make themuniform and consistent with the principles mentioned above.
COMMENTS ON THE CONSOLIDATED RESULTS, BALANCE SHEET ANDSTATEMENT OF CASH FLOWS FOR THE 1999 FINANCIAL YEAR
RESULTS
The fully consolidated companies posted a profit for the year of BEF 2,910 million against a loss of BEF 2,121 millionin 1998, i.e. an improvement of BEF 5,031 million.
The profit shown by companies included by the equity method, which stands at BEF 638 million against BEF 199 millionin 1998, i.e. an improvement of BEF 439 million, should be added to the above profit.
The SIBEKA group’s synthetic diamond operations account for the greater part of the profit shown by the companiesincluded by the equity method.
The Group closed the year with a consolidated profit of BEF 3,548 million, which includes an amount of BEF 2,928 million,i.e. the profit realised on the disposal of assets such as:
■ the Diamant Boart operations sold to Candover■ the sale of the participating interest held in Overpelt-Plascobel to TrustCapital Partners■ the sale of the participating interests held in natural diamond marketing concerns to the
De Beers Central Selling Organisation (CSO)
and an amount of BEF 891 million, i.e. the negative balance comprising:■ the balance of the loss before consolidation (1997-1998) posted by UNION MINIERE PIRDOP COPPER
■ exceptional write-downs booked on miscellaneous participating interests■ the impact of the repayment of Maribel subsidies■ the amount booked to settle and close the Codelco dispute.
The analysis of the consolidated profit (loss) is as follows:
BEF million
1999 1998
■ Group share- total Group share 2,796 -2,063- of which exceptional profit -2,928 -715- of which exceptional loss 891 636
i.e. Group share excluding extraordinary transactions 759 -2,142i.e. an improvement of BEF 2,901 million
■ minority share- total minority share 752 141- of which exceptional profit 596 -
i.e. minority share excluding extraordinary transactions 156 141i.e. an improvement of BEF 611 million
UNION MINIERE GROUPCONSOLIDATED ACCOUNTS AT 31 DECEMBER 1999
)
56 Union Minière
OPERATING RESULTS
The operating profit stands at BEF 2,929 million, i.e. an improvement of BEF 3,798 million.
The analysis of the contribution made by the various operations to the Group’s profit (loss) is as follows:
BEF million
Operations 1999 1998 Change
Zinc 3,387 2,014 1,373Copper 69 451 (382)Precious metals (13) (2,516) 2,503Advanced materials 372 1,101 (729)Technology & services 98 17 81Diamonds 346 522 (176)Write-downs on inventories (46) (1,392) 1,346Corporate and other activities (646) (867) 221
3,567 (670) 4,237of which profit shown by companies included by the equity method 638 199 439
2,929 (869) 3,798
Zinc Profit BEF 3,387 million (+ 1,373)
The zinc operations significantly enhanced their competitive position by paying constant attention to improving boththeir productivity and their profit margin by cutting costs and developing new high added value products.
The operational targets for this sector set out in the Industrial Plan have therefore been achieved.
Copper Profit BEF 69 million (-382)
The profit shown by the copper operations was negatively impacted by the extremely low level of treatment and refiningcharges, which affected both the Olen refinery and the Pirdop smelter, and also by the three-month shutdown at Pirdopto carry out maintenance work and increase the capacity of the smelter at Pirdop.
These negative factors, coupled with the drop in the price of sulphuric acid, cancelled out the positive impact of the newOlen refinery's excellent technical performance.
Precious metals Loss BEF 13 million (+ 2,503)
The performance of the precious metals operations improved significantly in 1999.
There were no more major technical problems with the ISA smelter in Hoboken. As a result, stocks of raw materials andintermediate products were reduced; this had a positive impact on the capital employed and on leasing charges. Leasingtransactions ceased at the end of 1999.
In addition, the smelter was shut down as scheduled at the end of August in order to replace the refractory lining.
As most of the technical problems had been solved, the smelter was able to operate at full capacity and its performanceimproved in the second half of the year.
Advanced materials Profit BEF 372 million (-729)
Despite increased sales volumes the cobalt and energy products operations were not able to compensate for the negativeimpact of heavy competitive pressure on prices nor the problems caused by the extremely volatile cobalt market.
However, Union Minière succeeded in defending the leading market shares it holds for its key products.
The electro-optic materials operations were obliged to cut back production of substrates for solar cells owing to majorcommunications and satellite launching programmes being postponed once again.
Although the Group stepped up its presence in the market for germanium and germanium-bearing compounds used inthe infrared, optical fibres and catalyst sectors it was not possible to fully offset the reduction in income from substratesfor solar cells.
Union Minière 57
Technology & services Profit BEF 98 million (+ 81)
UM ENGINEERING had a difficult year from the point of view of operating income owing to delays, changes or problems inconnection with the development of projects scheduled by various players in the non-ferrous metals field. This situationwas mainly brought about by the Asian crisis and the low levels of metals prices.
Owing to the market situation proving better than forecast (sales and US dollar) the SOGEM group's physical tradingoperations generated a significantly higher operating profit than in 1998.
Diamonds Profit BEF 346 million (-176)
Following the sale of the Diamant Boart group and its participating interest in the natural diamond sector, this sector ofactivity now mainly comprises a 50% interest in the MEGAPODE group, which is the world's leading producer of syntheticdiamonds, which are marketed by De Beers Industrial Diamonds.
Owing to the general improvement in the world economic situation the MEGAPODE group increased its sales both in termsof volume and value in 1999, and as a result improved its profit by more than 10% compared with 1998.
FINANCIAL RESULTS
The year closed with a net financial charge of BEF 768 million, against BEF 232 million in 1998. This BEF 536 milliondecline reflects a BEF 1,255 million reduction in financial income, which was partly offset by a BEF 719 million reductionin financial charges.
The Group's consolidated financial income decreased by BEF 1,255 million.
This is mainly due to the reduction in «Other financial income» (BEF -870 million), which mainly reflects the combinedimpact of exchange differences and translation adjustments (BEF -861 million).
The Group's consolidated financial charges decreased by BEF 719 million.
This is due to:■ the reduction in «Debt charges» on the Group's debts (BEF -595 million)■ the reduction in «Write-downs on current assets» (BEF -96 million)
and also to :■ the reduction in «Other financial charges» (BEF -28 million).
«Other financial charges» mainly consist of:■ exchange differences and translation adjustments (BEF 186 million)■ miscellaneous financial charges, which decreased by BEF 214 million, this reduction being due to no further metal
borrowing transactions being carried out by the Precious Metals unit (these transactions stood at only BEF 89 millionagainst BEF 299 million in 1998, i.e. a decrease of BEF 210 million).
EXTRAORDINARY RESULTS
The year closed with an extraordinary profit of BEF 947 million, compared with a loss of BEF 574 million in 1998, i.e. animprovement of BEF 1,521 million.
This improvement reflects the BEF 2,336 million increase in extraordinary income, less the BEF 815 million increase inextraordinary charges.
The Group's extraordinary income stands at BEF 3,473 million and comprises the following main items :BEF million
■ capital gains realised on fixed assets ( BEF 3,407 million) of which :
- sale of tangible fixed assets 60- sale of participating interests (before deducting charges) 3,339
The Group's extraordinary charges stand at BEF 2,526 million and comprise the following main items :
■ extraordinary depreciation and write-downs (BEF 90 million) of which:
- on tangible fixed assets 90
58 Union Minière
BEF million
■ amounts written down on financial fixed assets (BEF 111 million) of which:
- HURON VALLEY EUROPE 24- ANTWERPSE HANDELSMAATSCHAPPIJ 45- subsidiaries of UNION MINIERE INC. 21- subsidiaries of SIBEKA 15- subsidiaries of SOGEM 6
■ provisions for extraordinary liabilities and charges, net of amounts applied (BEF 731 million) of which:
- net provision for pensions and early retirement benefits -271- provision for staff plans -58- provision for liabilities on participating interest
- HURON VALLEY EUROPE -24- provision for miscellaneous disputes and risks -35- environmental provision 894- staff provision for seniority bonus (France) 225
■ capital losses realised on fixed assets (BEF 27 million)
■ other extraordinary charges (BEF 1,567 million) of which:
- charges for pensions and early retirement benefits covered by provisions 521- cost of staff plans 21- charges for disposals of participating interests 59- cost of repaying Maribel 281- impact of consolidating UNION MINIERE PIRDOP COPPER for the first time
(balance of loss realised in 1997-1998) 300- charges for on-going SOGEM group disputes
(covered by provisions of which BEF 274 million has been applied) 315- other extraordinary charges 70
INCOME TAXES
Taxes for the financial year amount to BEF 198 million, against BEF 446 million in 1998, i.e. a reduction ofBEF 248 million. The main items making up this total are as follows:
BEF million
■ French companies 138
■ SOGEM group 57
■ Bulgaria -59
■ United States -11
■ Italy 69
■ Union Minière (parent company) -1
■ other subsidiaries 5
The Group's overall tax burden at 31 December 1999 remains high owing to the taxable profits achieved by theGroup companies, which contrast with the significant tax deductible losses brought forward by n.v. Union Minière s.a.
SHARE IN THE PROFIT OF COMPANIES INCLUDED BY THE EQUITY METHOD
The SIBEKA group accounts for the greater part of the profit generated by companies included by the equity method.
The profit booked in 1999 stands at BEF 638 million, significantly higher than the BEF 199 million posted in 1998. This isdue to the healthy performance of the MEGAPODE group (synthetic diamonds for industry and polycrystalline products)which achieved a profit of BEF 647 million, i.e. an increase of BEF 223 million compared with 1998 (BEF 424 million).
The interest acquired in UNION MINIERE PIRDOP COPPER at the end of 1997 was included in the consolidated accounts for theyear ending 31 December 1999 on a full consolidation basis (interest held 97.725%), as this company's accounts, drawnup according to Group rules and restated in USD, were available by the deadline for publishing the accounts in 1999.
Union Minière 59
INCOME STATEMENT (BEF million)
Impact of de-consolidations1998 1998 2nd half 1998 1999 Differences
Diamant 1998 restated 1998/1999Boart Overpelt-
Plascobel
Operating income 142,790 (9,566) (630) 132,594 128,074 (4,520)
Operating charges 143,659 (9,130) (656) 133,873 125,145 (8,728)
Operating profit (loss) (869) (436) 26 (1,279) 2,929 4,208
Financial income 4,488 (247) (14) 4,227 3,233 (994)
Financial charges 4,720 (467) (6) 4,247 4,001 (246)
Net financial income (charge) (232) 220 (8) (20) (768) (748)
Current profit (loss) (1,101) (216) 18 (1,299) 2,161 3,460
Extraordinary income 1,137 (66) (6) 1,065 3,473 2,408
Extraordinary charges 1,711 (230) - 1,481 2,526 1,045
Extraordinary profit (loss) (574) 164 (6) (416) 947 1,363
Taxes 446 (41) - 405 198 (207)
Profit (loss) of fully consolidated companies (2,121) (11) 12 (2,120) 2,910 5,030
Profit (loss) of companies
included by the equity method 199 3 - 202 638 436
CONSOLIDATED PROFIT (LOSS) FOR THE YEAR (1,922) (8) 12 (1,918) 3,548 5,466
60 Union Minière
BALANCE SHEET
ASSETS
INTANGIBLE FIXED ASSETS (-581)
of which impact of asset disposals (-445)
Intangible fixed assets decreased due to the amortisation booked for the year (BEF 294 million) exceeding the acquisitionsand own production (BEF 127 million).
Investments for the year included:BEF million
■ booking to assets the additional charges incurred on installing new SAP software modules (Belgium) +37
■ acquisition of new software +69
The charges booked on the SAP projects are amortised over three years. The amortisation booked on these projects forthe 1999 financial year is as follows:
■ in Belgium BEF 152 million■ in France BEF 84 million.
CONSOLIDATION DIFFERENCES (-901)
of which impact of asset disposals (-510)
The decrease in consolidation differences carried under assets can be broken down as follows :BEF million
■ change in the scope of consolidation
- Diamant Boart (sale) -361- subsidiaries of Diamant Boart (sale) -149- natural diamonds (sale) -99- translation adjustments +49
-560
■ amortisation booked for the financial year
- operating charges -341- extraordinary charges -
-341
TANGIBLE FIXED ASSETS (+1,406)
of which impact of asset disposals (-2,064)
Tangible fixed assets increased owing to further investments being realised and to UNION MINIERE PIRDOP COPPER, Bulgaria(BEF 4,285 million) being included in the scope of consolidation.
Investments, including own production, totalled BEF 2,957 million, including BEF 1,100 million at n.v. Union Minière s.a.,Belgium, BEF 273 million at UNION MINIERE FRANCE, BEF 820 million at UNION MINIERE PIRDOP COPPER, Bulgaria, BEF 107 millionat Overpelt-Plascobel and BEF 146 million at GALVA 45.
An amount of BEF 4,170 million was booked to cover ordinary depreciation and BEF 90 million extraordinary depreciation.
Changes in the scope of consolidation, disposals due to sales and retirals account for BEF 2,222 million.
Union Minière 61
FINANCIAL FIXED ASSETS (-215)
The changes in financial fixed assets reflect the following factors:BEF million
- changes in participating interests included by the equity method totalling BEF -3,562 million comprising:■ change in consolidation scope and consolidation method
- change in methodUNION MINIERE PIRDOP COPPER -3,575NANODYNE -65
- included in, and excluded from, consolidation scopeHURON VALLEY EUROPE -24Diamant Boart subsidiaries -80UNIMET +9UMCORE +57
■ sale to third parties -586■ (net) result realised +638■ dividend distribution -484■ translation adjustments +548
-3,562
- change in non-consolidated participating interests totalling BEF 2,586 millioncomprising:■ acquisitions from third parties
- DE BEERS CONSOLIDATED/DE BEERS CENTENARY +2,735- METALLO CHIMIQUE INTERNATIONAL (MCI) +4- AMERICA MINERAL FIELDS INC. (AMFI) +246- PERFORMANCE MATERIALS INC. +39- LASER POWER +52- SOGEM MALAYSIA +4- ACEC (USA) +1
+3,081■ sales to third parties
- SIBEKA’s Firban & Exmin subsidiaries -385- SIBEKA subsidiaries (natural diamonds) -71- Emcore -132- Indaver -35- others -1
-624■ amounts written down
- HURON VALLEY EUROPE -24- ANTWERPSE HANDELSMAATSCHAPPIJ -45- SOGEM subsidiaries -7
-76■ reversals of amounts written down following disposals +4■ transfers and changes in scope of consolidation
- Diamant Boart -5- HURON VALLEY EUROPE +24- CMEA -35- UMCORE -22- UNION MINIERE BULGARIA -2- UNIMET -9
-49
62 Union Minière
BEF million■ translation adjustments +250
TOTAL +2,586
- BEF 1,191 million increase in amounts receivable, comprising:
■ repayments -8
■ new receivables(1) +1,309
■ change in scope of consolidation -31
■ transfers -68
■ amounts written down -35
■ translation adjustments +24+1,191
INVENTORIES AND CONTRACTS IN PROGRESS (-3,386)
of which impact of asset disposals (-2,396)
In addition to the reduction in inventories as a result of asset disposals, i.e. Diamant Boart for BEF 2,092 million andOverpelt-Plascobel for BEF 304 million, the reduction in the level of the Group's inventories mainly reflects changesat n.v. Union Minière s.a. (BEF 4,105 million) and more particularly the Precious Metals operations (BEF 4,168 million).
The problems encountered in 1998 with modernising the industrial process were solved and as a result the level ofinventories decreased as smelting operations were able to process and sell the inventories which had built up over thecourse of the previous financial year.
For this reason in 1999 Union Minière was able to discontinue the metal borrowing transactions which it had beenobliged to contract to cover its physical delivery commitments.
The drop in the level of inventories was partly offset by the inclusion in the scope of consolidation ofUNION MINIERE PIRDOP COPPER, Bulgaria, for an amount as at 31.12.1999 of BEF 1,772 million and by the increase ininventories at SOGEM (BEF +686 million).
As a metals broker and trader SOGEM's inventories can fluctuate sharply from one year end to another depending on thelevel of transactions outstanding.
It should be remembered that since 1992 the Group has valued its metal inventories on an annual LIFO basis in view ofthe nature of its activities and the problems entailed by stock-taking.
The Group's metal inventories are valued at BEF 13,496 million on a LIFO basis and have a market value of BEF 26,143 million.
AMOUNTS RECEIVABLE WITHIN ONE YEAR (-362)
The BEF 62 million decrease in trade receivables is primarily due to the reduction following the disposal of Diamant Boart(BEF -2,672 million) and Overpelt-Plascobel (BEF -342 million), which was offset by an increase following the inclusion inthe scope of consolidation of UNION MINIERE PIRDOP COPPER, Bulgaria, (BEF +344 million) coupled with the increase inshort-term receivables at GALVA 45 (BEF +341 million), METALRAME (BEF +385 million), the SOGEM group (BEF +1,300 million),UNION MINIERE FRANCE (BEF +183 million).
Other receivables decreased by BEF 300 million.
This decrease is mainly due to the disposal of Diamant Boart (BEF -295 million at 31.12.1999) and Overpelt-Plascobel(BEF -52 million at 31.12.1999), offset by the increase due to the inclusion in the scope of consolidation ofUNION MINIERE PIRDOP COPPER, Bulgaria (BEF +218 million at 31.12.1999).
(1) New receivables comprise a «Promissory Note» for BEF 1,200 million issued in connection with the sale ofthe Diamant Boart group to Candover
Union Minière 63
INVESTED CASH (+909)
The increase in invested cash reflects the combined impact of the following items:BEF million
■ own shares(1) +309
■ decrease in the cash invested by the SIBEKA group -844
■ increase at UNION MINIERE SERVICES & FINANCE
in investments with banks +1,403
■ cancellation following the sale of Diamant Boart -105
■ increase following the inclusion in the scope of
consolidation of UNION MINIERE PIRDOP COPPER, Bulgaria +146
CASH AT BANK AND IN HAND (+397)
At the end of the financial year cash at bank and in hand stood at BEF 2,588 million,comprising the following items:
BEF million
■ Union Minière, Belgium +353
■ UNION MINIERE SERVICES & FINANCE +85
■ UNION MINIERE FRANCE +79
■ METALRAME, Italy +95
■ SIBEKA +12
■ SOGEM group +1,459
■ other subsidiaries +505+2,588
DEFERRED CHARGES AND ACCRUED INCOME (+3,248)
The main items carried under this heading are the result of revaluing exchange positions at n.v. Union Minière s.a.(BEF 1,348 million) which are booked to accrued income and the result of marking to market forward exchange contractsat UNION MINIERE SERVICES & FINANCE (BEF 1,369 million).
(1) In 1999, Union Minière decided to buy back these shares in accordance with the statutory limits and conditions.At 31.12.1999, 241,488 shares had been acquired for an amount of BEF 309 million. An unavailable reserve for the same amount wasset aside. These shares are not included in the dividend distribution and the corresponding coupon has been destroyed
64 Union Minière
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY (+2,527)
Changes in Group shareholders' equity are analysed in section XI of the Notes to the Consolidated Accounts.The main items were as follows:
BEF million
■ profit for the year (Group share) +2,796
■ translation adjustments +1,036
■ consolidation differences -25
■ proposed dividend distribution -1,280+2,527
The capital and share premium account of n.v. Union Minière s.a., Belgium did not show any change in 1999.
The increase in translation adjustments (BEF 1,036 million) made when consolidating foreign companies is mainly dueto the appreciation of the US dollar against the Belgian franc, (consolidation currency), in particular at SIBEKA
(BEF 274 million), and also to the appreciation of the Canadian dollar at 755490 ALBERTA (BEF 200 million), followingthe deconsolidation of Diamant Boart (BEF 68 million) and the inclusion of UNION MINIERE PIRDOP COPPER, Bulgaria(BEF 344 million) in the scope of consolidation.
The reduction in consolidation differences carried under liabilities is due to the amortisation and write-downs for theperiod (BEF 5 million) and to the deconsolidation of Overpelt-Plascobel (BEF 20 million).
Union Minière has decided to propose to the Annual General Meeting of Shareholders that dividends totallingBEF 1,280 million be distributed as follows:
■ ordinary shares: EUR 1.25 before tax (25%) i.e. BEF 1,170 million
■ VVPR shares: EUR 1.25 before tax (15%) i.e. BEF 110 million.
With effect from 26 March 1999, all the VVPR shares were converted into ordinary shares, with a coupon strip attached.Coupon No. 5 from the VVPR shares entitled holders to a strip of coupons (a total of 2,185,163 strips were issued) andcoupon No. 5 from the ordinary shares was cancelled.
MINORITY INTERESTS (+495)
The increase in the minority shareholders' share of the Group's equity reflect the following main changes:BEF million
■ minority shareholders' share in the profit for the year +752
■ dividends paid to minority shareholders (1998) -48
■ proposed dividend payment for 1999 to minority shareholders (SIBEKA) -399
■ impact of deconsolidation of Diamant Boart (BEF 12 million)and inclusion of UNION MINIERE PIRDOP COPPER, Bulgaria (BEF 91 million) in the scope of consolidation and other acquisitions (BEF -3 million) +100
■ capital increase by SHANGHAI BLUE LOTUS METALS +11
■ translation adjustments +79+495
Union Minière 65
PROVISIONS FOR LIABILITIES AND CHARGES AND DEFERRED TAXES (+301)
The movements in the various types of provisions are analysed in section XVIII of the Notes to the Consolidated Accounts.They can be summarised as follows:
BEF million
■ amounts charged in the financial year +3,079
of which BEF 1,499 million as operating charges
of which BEF 1,580 million as extraordinary charges
■ amounts applied in the financial year -2,685
of which BEF -1,836 million as operating charges
of which BEF -849 million as extraordinary charges
■ amounts released in the financial year -319
of which BEF -272 million as operating charges
of which BEF -47 million as extraordinary charges
■ change in the scope of consolidation +145
■ translation adjustments +81+301
The various categories of provisions registered the following changes in the course of the financial year:
■ pensions and similar obligations -811
■ taxes -14
■ major repairs and maintenance +241
■ other liabilities and charges +263
■ deferred taxes +622+301
The decrease in provisions for pensions and similar obligations (BEF -811 million) reflects the net results of the amountscharged, applied and released in the course of the financial year and the impact of the changes in the scope ofconsolidation, i.e.:
BEF million
■ sale of Diamant Boart -909
■ sale of Overpelt-Plascobel -43
■ inclusion of UNION MINIERE PIRDOP COPPER, Bulgaria
in the scope of consolidation +1,097
Provisions for major repairs and maintenance increased by BEF 241 million. These provisions, which mainly cover the costof carrying out regular maintenance work on the furnaces and cell houses, fluctuate according to changes inmaintenance cycles and in line with investments and disposals carried out.
Provisions for other liabilities and charges increased by BEF 263 million, reflecting the amounts charged, applied andreleased in 1999 and the impact of the changes in the scope of consolidation (BEF -270 million).
On the environmental front, n.v. Union Minière s.a. in Belgium concluded an agreement with the Flemish RegionalAuthorities in 1997 on the rehabilitation of industrial sites, spread over a period of 10 years. A joint working party was setup to compile a detailed inventory of the work to be carried out and to determine priorities, and also to find optimumsolutions for long-standing pollution problems.
Although a final agreement has not yet been signed with OVAM (the Flemish regional waste body) on the conditions forimplementing the soil rehabilitation programme, Union Minière has been able to estimate the cost of the work to becarried out and for this purpose has set aside a provision of BEF 411 million.
Following the finalisation of the Industrial Plan and the completion of several major investments, Union Minièreimplemented a plan to rehabilitate its industrial sites, with the agreement of the regional authorities.
66 Union Minière
Union Minière set aside the following provisions to cover the cost of demolishing old facilitiesBEF million
■ demolition of unused facilities at Hoboken (precious metals) 164
■ demolition of the old copper tankhouse at Olen 223
The increase in the provision for deferred taxes (BEF 622 million) mainly reflects the inclusion of UNION MINIERE PIRDOP COPPER,Bulgaria in the scope of consolidation (BEF +738 million) and the reduction in deferred taxes at UNION MINIERE FRANCE
(BEF -114 million).
The provision for deferred taxes set aside by UNION MINIERE PIRDOP COPPER in accordance with Group rules, was estimated onthe basis of the company's special tax position at the time of acquisition. However, the tax position ofUNION MINIERE PIRDOP COPPER is still not clear and may change in future, depending on the Bulgarian tax system.
AMOUNTS PAYABLE AFTER ONE YEAR (-2,503)
The increase in amounts payable after one year can be analysed as follows:BEF million
■ transfer of the current portion -1,051
■ repayment effected in 1999 -1,343
■ new loans contracted +1,919
■ amounts written down -49
■ change in scope of consolidation -2,058
■ translation adjustments +11
■ others +68-2,503
The change in the scope of consolidation can be analysed as follows:
■ sale of Diamant Boart -2,027
■ sale of Overpelt-Plascobel -108
■ change of method (NANODYNE) +64
■ inclusion of UNION MINIERE PIRDOP COPPER, Bulgaria, in the scope of consolidation +13
-2,058
AMOUNTS PAYABLE WITHIN ONE YEAR (-897)
Amounts payable within one year mainly comprise financial debts, trade debts and amounts due in respect of taxes,wages and social security.
The current portion of amounts payable after one year decreased by BEF 701 million owing to the following:BEF million
■ repayment of loans -1,491
■ transfer from amounts payable after one year (current portion) +1,051
■ change in scope of consolidation -495
■ new loan +195
■ miscellaneous +39-701
Financial debts decreased significantly (BEF 2,785 million) and trade debts increased by BEF 1,493 million.
Union Minière 67
ACCRUED CHARGES AND DEFERRED INCOME (+850)
At Union Minière these items mainly comprise treatment charges to be incurred on material to be toll treated. Thesecharges have already been invoiced to customers but have not been booked as income as the treatment has not yet beencarried out. They decreased from BEF 1,109 million at the end of 1998 to BEF 739 million at the end of 1999, owing tothe reduction in inventories.
The value of metals, which had been invoiced but not delivered, declined from BEF 709 million to BEF 91 million, areduction of BEF 618 million.
«Accrued charges and deferred income» also include the potential loss resulting from the revaluation of exchangepositions at n.v Union Minière s.a. (BEF 1,315 million) and the result of marking to market metal positions(BEF 130 million) and forward exchange contracts at UNION MINIERE SERVICES & FINANCE (BEF 1,611 million).
68 Union Minière
BALANCE SHEET MOVEMENTS (BEF million)
1998 Impact of de-consolidations Impact Other 1999on opening position on 1999 financial year of first move-
Diamant Overpelt- Diamant Overpelt- consoli- mentsBoart Plascobel Boart Plascobel dation
Pirdop
Intangible assets 1,165 (445) (136) 584
Consolidation differences 4,469 (149) (361) (391) 3,568
Tangible assets 25,909 (1,652) (412) 4,285 (815) 27,315
Financial assets 9,693 (119) (1) 1,185 (3,575) 2,725 9,908
Amounts receivable after one year 270 (48) (11) (113) 98
Inventories and contracts in progress 29,423 (2,092) (304) 961 (1,951) 26,037
Amounts receivable within one year 20,385 (2,672) (342) 465 2,187 20,023
Invested cash 1,967 66 141 702 2,876
Cash at bank and in hand 2,191 (172) 138 1,421 615 26 (1,631) 2,588
Deferred charges and accrued income 1,598 (89) (8) 9 3,336 4,846
TOTAL ASSETS 97,070 (7,372) (799) 2,245 615 2,171 3,913 97,843
Group capital and reserves 38,156 (1,665) (272) 1,665 272 (1,280) 36,876
Group share in consolidated profit (loss) (50) 363 (300) 2,783 2,796
Consolidation differences 73 (20) (5) 48
Translation adjustments (830) 68 175 793 206
Minority interests 1,413 (392) 480 91 316 1,908
Provisions and deferred taxes 10,299 (909) (43) 150 1,097 6 10,600
Amounts payable after one year 12,499 (2,027) (108) 13 (381) 9,996
Current portion of amountspayable after one year 1,776 (494) (18) (189) 1,075
Financial debts payablewithin one year 10,957 (470) 37 841 (3,193) 8,172
Amounts payable within one year 18,795 (1,343) (386) 254 4,064 21,384
Accrued charges and deferred income 3,932 (140) (9) 999 4,782
TOTAL LIABILITIES 97,070 (7,372) (799) 2,245 615 2,171 3,913 97,843
Union Minière 69
STATEMENT OF CONSOLIDATED CASH FLOWS
DEFINITIONS
The Union Minière Group's statement of cash flows shows the difference between actual amounts received and amountsdisbursed in the course of the financial year and provides an analysis of these amounts on the basis of operating,investing and financing activities.
Operating activities should be understood in the broadest sense of the word, i.e. also including cash flows linked to debtservicing and to financial products (financial income), extraordinary items which are not linked to investmenttransactions and also income taxes. The cash flow from operating activities is calculated on the basis of the net profit(indirect method):
■ by eliminating from this profit the charges and income:
- which do not have an impact on cash flows, such as depreciation, provisions, write-downs, etc.
- which are linked to investment transactions (such as the proceeds from the sale of fixed assets)
■ by taking account of the difference in operational working capital requirements.
The difference in operational working capital requirements represents the difference between current assets and currentliabilities, excluding cash at bank and in hand and financing, where necessary re-stated to allow for the impact ofchanges in the scope of consolidation and exchange rates, plus items more specifically linked to investing activities.
Financing activities comprise the various changes in loans and debts at more than one year (repayments of loans and newloans) and other cash movements pertaining to permanent funds, such as capital increases or decreases and dividendspaid either to minority shareholders by fully consolidated subsidiaries, or to the company's shareholders.
The change in the net cash position includes changes in liquid financial assets, i.e. short-term cash investments, availableassets and short-term financial debts.
COMMENTS
Increase in the cash flow from operating activities
The cash flow from operating activities given in the table on page 71 stands at BEF 5,463 million for the Group, i.e. animprovement of BEF 3,818 million compared with 1998.
The positive change in operational working capital requirements (BEF 4,015 million), the impact of the changes in thescope of consolidation (BEF -2,514 million) and other changes (BEF 45 million) resulted in an increase in the cash flowof BEF 1,546 million, i.e. a positive difference in the cash flow from operating activities for the 1999 financial year ofBEF 7,009 million (against BEF 4,080 million in 1998 and BEF -1,853 million in 1997).
Investing activities
Investing activities for 1999 stand at BEF 3,705 million against BEF 9,707 million in 1998. This figure was offset in part bydisposals of intangible, tangible and financial investments totalling BEF 3,764 million against BEF 2,490 million in 1998,i.e. a positive net position of BEF 59 million.
70 Union Minière
This mainly reflects the following transactions :
BEF million
■ continuation of major investments in tangible assets in Belgium and abroad 3,118
■ acquisition of additional interests in Group companies 337
■ sale of consolidated participating interests -2,655
including the sale of:
- Overpelt-Plascobel to TrustCapital Partners N.V.
- Diamant Boart to Candover
- various interests held in trading companies marketing natural diamonds sold toDe Beers Central Selling Organisation (CSO)
Financing activities
The new loans at more than one year contracted with financial institutions in 1999, i.e. BEF 2,199 million, less repaymentsof existing loans, i.e. BEF 2,783 million, and other changes (capital increase of n.v. Union Minière s.a. for an amount ofBEF 11 million under the stock option plan and dividend payments to shareholders of BEF -1,120 million) give a netnegative balance of BEF 2,141 million.
Change in net cash flow
The net positive change (BEF 4,927 million) in the Group's cash flow in 1999 is mainly due to the significant improvement inthe cash flow from operating activities (BEF 5,463 million in 1999 against BEF 1,645 million in 1998).
The position can be summarised as followsBEF million
■ increase in cash flow from operating activities 7,009
■ decrease in cash flow from financing activities -2,141
■ net investments realised in 1999 59
Net positive change in cash flow 4,927
Union Minière 71
STATEMENT OF CONSOLIDATED CASH FLOWS
(amounts in million)
1999 1999 1998 1997BEF € € €
Operating activities
Consolidated profit (loss) (Group share) 2,796 69.31 (51.14) 91.22Minority share in consolidated profit (loss) 753 18.66 3.50 14.50Profit (loss) of companies included by the equity method,net of dividends received (154) (3.82) 6.99 1.26Depreciation of tangible fixed assets 4,260 105.60 106.84 95.22Amortisation of intangible assets and consolidation differences 630 15.61 24.44 17.33Amortisation of investment grants (49) (1.21) (1.71) (1.74)Write-downs (write-backs) on amounts receivable - - (0.10) 0.25Write-downs (write-backs) on financial fixed assets 107 2.65 1.56 (0.96)Increase (decrease) in provisions for liabilities and charges 376 9.32 (28.06) (32.67)(Gain) loss on disposal of fixed assets (3,256) (80.70) (21.54) (38.72)Cash flow 5,463 135.42 40.78 145.69(Increase) decrease in working capital requirements for operations 4,015 99.53 86.04 (193.36)Impact of changes in scope of consolidation and translation adjustmentson working capital requirements and on net cash and equivalents (2,514) (62.32) (27.49) 4.81Transfers of current assets and current liabilities and other movements 45 1.12 1.81 (3.07)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 7,009 173.75 101.14 (45.93)
Investing activities
Acquisitions and own production of tangible fixed assets (3,118) (77.29) (140.58) (185.30)Acquisitions and own production of intangible fixed assets (127) (3.15) (3.32) (5.23)Acquisitions of financial fixed assets (consolidated) (337) (8.35) (11.95) (81.26)Acquisitions of financial assets - - (4.09) (0.37)Acquisitions of additional participations in Group companies (4) (0.10) (74.19) (1.84)New loans extended (119) (2.96) (6.49) (2.70)Sub-total acquisitions (3,705) (91.85) (240.62) (276.70)Disposals and retirals of tangible fixed assets 129 3.20 5.43 9.15Disposals and retirals of intangible fixed assets - - - 1.07Disposals of consolidated financial investments 2,655 65.81 40.43 5.35Disposals of financial fixed assets 968 24.00 11.16 117.65Repayment of former loans 12 0.30 4.71 12.72Sub-total disposals 3,764 93.31 61.73 145.94
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 59 1.46 (178.89) (130.76)
Financing activities
New loans 2,199 54.51 125.68 115.82Repayment of loans (2,783) (68.98) (90.53) (129.75)Capital increases 11 0.27 0.92 1.26Dividends paid to minority shareholders by fully consolidated subsidiaries (448) (11.11) (1.59) (0.17)Dividends paid to UM shareholders (1,120) (27.76) (27.94) -
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,141) (53.07) 6.54 (12.84)
INCREASE (DECREASE) IN NET CASH AND EQUIVALENTS 4,927 122.14 (71.21) (189.53)
Net cash and equivalents : opening position (6,799) (168.53) (102.01) 87.52Change in scope of consolidation and transfers on opening position (836) (20.73) 4.69 -Net cash and equivalents : closing position (2,708) (67.12) (168.53) (102.01)
72 Union Minière
ASSETS (amounts in million)
1999 1999 1998 1997BEF € € €
FIXED ASSETS 41,375 1,025.67 1,022.21 1,027.57
II. Intangible assets 584 14.49 28.88 32.26
III. Consolidation differences 3,568 88.45 110.79 118.71
IV. Tangible assets 27,315 677.12 642.25 637.18
A. Land and buildings 8,187 202.94 195.74 174.61B. Plants, machinery and equipment 16,560 410.51 364.07 285.43C. Furniture and vehicles 909 22.54 25.01 24.32D. Leasing and similar rights 68 1.68 1.94 5.54E. Other tangible assets 167 4.15 5.23 7.17F. Construction in progress and advance payments 1,424 35.30 50.26 140.11
V. Financial assets 9,908 245.61 240.29 239.42Investments included by the equity method 4,072 100.93 189.25 108.68Unconsolidated investments 3,764 93.32 29.20 109.34Amounts receivable 2,072 51.36 21.84 21.40
CURRENT ASSETS 56,468 1,399.78 1,384.08 1,659.99
VI. Amounts receivable after one year 98 2.43 6.70 9.36A. Trade receivables - - 3.15 3.34B. Other amounts receivable 98 2.43 3.55 6.02
VII. Inventories and contracts in progress 26,037 645.43 729.38 784.17A. Inventories 24,438 605.79 696.51 754.81B. Contracts in progress 1,599 39.64 32.87 29.36
VIII. Amounts receivable within one year 20,023 496.36 505.32 626.99A. Trade receivables 18,725 464.18 465.72 575.92B. Other amounts receivable 1,298 32.18 39.60 51.07
IX. Invested cash 2,876 71.30 48.75 129.99A. Own shares 309 7.65 - -B. Other investments and deposits 2,567 63.65 48.75 129.99
X. Cash at bank and in hand 2,588 64.14 54.31 76.68
XI. Deferred charges and accrued income 4,846 120.12 39.62 32.80
TOTAL ASSETS 97,843 2,425.45 2,406.29 2,687.56
CONSOLIDATED BALANCE SHEET AFTER APPROPRIATION AT 31 DECEMBER
Union Minière 73
LIABILITIES AND SHAREHOLDERS' EQUITY (amounts in million)
1999 1999 1998 1997BEF € € €
TOTAL SHAREHOLDERS' EQUITY 41,834 1,037.03 962.11 1,111.91
GROUP SHAREHOLDERS' EQUITY 39,926 989.74 927.09 1,022.08
I. Capital 15,529 384.96 384.96 384.89
II. Share premiums 5,090 126.18 126.18 126.00
IV. Reserves 19,053 472.30 434.71 513.61
V. Consolidation differences 48 1.20 1.82 1.98
VI. Translation adjustments 206 5.10 (20.58) (4.40)
MINORITY INTERESTS
VIII. Minority interests 1,908 47.29 35.02 89.83
PROVISIONS AND DEFERRED TAXES 10,600 262.75 255.28 285.35
IX. A. Provisions for liabilities and charges 9,708 240.65 248.60 281.171. Pensions and similar obligations 5,550 137.58 157.67 145.902. Taxes 10 0.24 0.60 0.603. Major repairs and maintenance 736 18.24 12.27 9.854. Other liabilities and charges 3,412 84.59 78.06 124.82
B. Deferred taxes 892 22.10 6.68 4.18
CREDITORS 45,409 1,125.67 1,188.90 1,290.30
X. Amounts payable after one year 9,996 247.79 309.85 295.04A. Financial debts 9,717 240.87 303.32 287.07B. Trade debts 16 0.39 0.42 -D. Other amounts payable 263 6.53 6.11 7.97
XI. Amounts payable within one year 30,631 759.34 781.57 891.92A. Current portion of amounts payable after one year 1,075 26.65 44.04 35.04B. Financial debts 8,172 202.58 271.60 308.69C. Trade debts 13,541 335.67 298.67 350.32D. Advances received on contracts 2,074 51.42 36.49 32.84E. Taxes, remunerations and social security 4,184 103.72 86.54 103.46F. Other amounts payable 1,585 39.30 44.23 61.57
XII. Accrued charges and deferred income 4,782 118.54 97.48 103.34
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 97,843 2,425.45 2,406.29 2,687.56
74 Union Minière
CONSOLIDATED INCOME STATEMENT
(amounts in million)
1999 1999 1998 1997BEF € € €
I. Operating income 128,074 3,174.87 3,539.68 3,988.76
A. Sales and services 128,288 3,180.18 3,449.00 3,889.74
B. Increase (decrease) in inventories of work in process,finished goods, and contracts in progress (1,580) (39.17) 39.17 41.21
C. Fixed assets - own construction 157 3.88 7.89 6.83D. Other operating income 1,209 29.98 43.62 50.98
II. Operating charges 125,145 3,102.27 3,561.21 3,875.64
A. Raw materials and consumables 94,810 2,350.28 2,698.08 2,987.971. Purchases 94,305 2,337.77 2,647.29 3,075.352. (Increase) decrease in inventories 505 12.51 50.79 (87.38)
B. Services and other goods 9,296 230.43 274.37 273.64C. Remunerations, social security charges, and pensions 15,126 374.97 434.54 472.28D. Depreciation and amortisation of: 4,800 118.99 116.42 109.39
■ formation expenses and intangible and tangible assets 4,464 110.66 106.43 100.43■ consolidation differences 336 8.33 9.99 8.96
E. Increase (decrease) in write-downs on inventories,contracts in progress and trade receivables 10 0.25 5.34 8.48
F. Provisions for liabilities and charges: charges (utilisations, reversals) (435) (10.78) (5.24) (14.88)
G. Other operating charges 1,538 38.13 37.70 38.76
III. Operating profit 2,929 72.60 (21.53) 113.12
IV. Financial income 3,233 80.14 111.25 75.31
A. Income from financial fixed assets 332 8.24 9.81 9.97B. Income from current assets 271 6.71 14.68 24.19C. Other financial income 2,630 65.19 86.76 41.15
V. Financial charges 4,001 99.19 117.00 85.58
A. Interest and other debt charges 739 18.33 33.06 26.46B. Write-downs on current assets (78) (1.94) 0.44 0.40C. Other financial charges 3,340 82.80 83.50 58.72
Net financial income (charge) (768) (19.05) (5.75) (10.27)
VI. Current profit (loss) 2,161 53.55 (27.28) 102.85
Union Minière 75
(amounts in million)
1999 1999 1998 1997BEF € € €
VII. Extraordinary income 3,473 86.08 28.17 49.78A. Write-backs on intangible and tangible fixed assets and
consolidation differences - - 0.89 -B. Write-backs on financial fixed assets 4 0.09 0.55 1.08C. Write-backs on provisions for extraordinary liabilities and charges 47 1.16 5.08 5.35D. Gain on disposal of fixed assets 3,407 84.46 9.74 40.04E. Other extraordinary income 15 0.37 11.91 3.31
VIII. Extraordinary charges 2,526 62.61 42.41 48.24A. Extraordinary depreciation and amortisation of: 90 2.23 15.75 3.16
■ intangible and tangible assets 90 2.23 9.45 1.69■ consolidation differences - - 6.30 1.47
B. Write-downs on financial fixed assets 111 2.76 2.11 0.12C. Provisions for extraordinary liabilities and charges :
amounts charged (amounts utilised) 731 18.11 (19.04) (7.60)D. Loss on disposal of fixed assets 27 0.66 0.17 0.82E. Other extraordinary charges 1,567 38.85 43.42 51.74
Extraordinary profit (loss) 947 23.47 (14.24) 1.54
IX. Profit (loss) for the year before taxes 3,108 77.02 (41.52) 104.39
X. Income taxes (198) (4.90) (11.06) (9.15)
XI. Profit (loss) of consolidated companies 2,910 72.12 (52.58) 95.24
XII. Group share in profit (loss) of companiesincluded by the equity method 638 15.82 4.92 10.49Profit 654 16.21 10.60 11.75Loss (16) (0.39) (5.68) (1.26)
XIII. Consolidated profit (loss) 3,548 87.94 (47.66) 105.73
XIV. Minority share in consolidated profit (loss) 752 18.66 3.49 14.52
XV. Group share in consolidated profit (loss) 2,796 69.28 (51.15) 91.21
APPROPRIATION ACCOUNT
Appropriation of Group share
Transfer from (to) reserves (1,516) (37.58) 78.90 (63.28)Remuneration of shareholders (1) (1,280) (31.70) (27.75) (27.93)
Appropriation of minority share
Transfer from (to) reserves (704) (17.46) (2.29) (13.18)Remuneration of minority shareholders (48) (1.20) (1.20) (1.34)
(1) See comment p. 94
76 Union Minière
NOTES TO THE 1999 CONSOLIDATED ACCOUNTS(1)
I. CRITERIA FOR DETERMINING THE CONSOLIDATION METHODS
Full consolidation is used for subsidiaries in which the consolidating company holds a de jure or de facto interest.
Proportional consolidation is applied to subsidiaries held and managed jointly by a limited number of shareholders.
The equity method is used for associated companies over which one or more of the companies included in the scope ofconsolidation exert a significant influence.
I.bis. CHANGES IN THE SCOPE OF CONSOLIDATION
In 1999, the main changes in the scope of consolidation were the full consolidation (100%) of UNION MINIERE PIRDOP COPPER,Bulgaria, which had previously been included by the equity method, and the sale of the participating interests held inOverpelt-Plascobel and Diamant Boart.
As the transactions in question were significant, a table summarising the impact of the various changes on the balancesheet and the income statement is included in the comments on the consolidated accounts.
The following changes occurred with regard to the consolidated companies:
1. Acquisitions and additions to the scope of consolidation
1.1. Full consolidation
■ UNION MINIERE PIRDOP COPPER (Bulgaria)
As part of the Bulgarian privatisation programme, the Union Minière Group acquired a controlling interest of 56% inan important copper smelter, MDK, in September 1997.
In 1998 Union Minière gradually increased the interest held in this company, which has since been renamedUNION MINIERE PIRDOP COPPER, bringing it up to 97.725% by 31 December 1998. The acquisition price of the interest heldamounts to a total of BEF 3,729 million.
Since this company’s accounts, prepared in accordance with Group accounting rules and restated in USD, wereavailable by the publishing deadline for the Group’s consolidated annual accounts this participating interest has beenincluded in the consolidated accounts for the year ending 31 December 1999 on a full consolidation basis.
This participating interest was previously included under the equity method.
■ UNION MINIERE KOREA (Korea)
On 2 September 1999, Union Minière set up a new wholly owned subsidiary - UNION MINIERE KOREA – at an investmentcost of BEF 54.5 million.
This company has started building work on a plant in South Korea, which will produce lithium cobaltite, an advancedproduct used for manufacturing lithium-ion batteries, the most recent generation of rechargeable batteries.
The plant will start production around the middle of 2000.
1.2. Capital increase and change in the percentage interest held
■ SOGEM
In December 1998, Union Minière carried out a “squeeze out” operation on its subsidiary’s shares still held by thegeneral public.
At 31 December 1998, Union Minière held a 99.69% interest in SOGEM, although the operation was still running onthat date.
At 31 December 1999, Union Minière had acquired the remaining shares for an amount of BEF 6 million, i.e. it helda 100% interest in SOGEM.
(1) The numbering of these notes reflects the provisions of the Royal Decree of 25 November 1991 pertaining to the accounts ofholding companies
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■ UNION MINIERE INC. (USA)
In 1999, the Union Minière Group participated in the recapitalisation of its American subsidiary and in the repayment ofpart of its equity for a net amount of BEF 968 million (USD 25 million).
■ SHANGHAI BLUE LOTUS METALS (China)
In 1999, Union Minière participated in the recapitalisation of its Asian subsidiary for an amount ofBEF 29 million (USD 0.75 million).
1.3. Companies included by the equity method
■ UNION MINIERE PIRDOP COPPER (Bulgaria)
This participating interest, which was previously included under this heading, is now included on a full consolidationbasis (see notes under point 1.1.)
■ NANODYNE (USA)
Through its American subsidiary, UNION MINIERE INC., USA, the Union Minière Group increased the 27.9% interest whichit had held in NANODYNE since November 1997 to 98.84% in December 1998.
This company was included in the Union Minière Group’s consolidated accounts on a full consolidation basis in 1999.
2. Sales and exclusions from the scope of consolidation
2.1. Sales to third parties
■ Overpelt-Plascobel
UM had previously announced that its holdings in injection moulded plastics manufacturing operations no longerformed part of its core business and consequently on 23 June 1999 it sold its holding in Overpelt-Plascobel N.V. tothe Plastic Investment Company N.V., which is part of the TrustCapital Partners N.V. group, a company which islisted on the Brussels Stock Exchange.
The first half-year’s results have been included in the Union Minière Group’s consolidated profit.
■ Diamant Boart
On 2 July 1999, SIBEKA, a subsidiary of the Union Minière Group, finalised the sale of its participating interest inDiamant Boart to the British finance group Candover.
Sale negotiations were initiated in November 1998 and in view of the fact that Union Minière’s freedom to manageits participating interest was contractually limited as a result, the Group decided to exclude this interest from thescope of consolidation with effect from 1 January 1999.
2.2. Exclusion from the scope of consolidation
■ HURON VALLEY EUROPE
In 1999, Union Minière decided to deconsolidate the participating interest it held in HURON VALLEY EUROPE, which hadpreviously been included under the equity method.
78 Union Minière
II.a. MAIN FULLY CONSOLIDATED SUBSIDIARIES AND SUB-GROUPS
The list of the main subsidiaries and sub-groups found below relates to fully consolidated companies, excepted whereotherwise stated.
The estimated aggregate value of the non-consolidated subsidiaries and sub-groups is of the order of 1 per cent of theestimated aggregate value of the holdings in the subsidiaries and sub-groups.
A full list of the companies referred to in Article 69, II to V, of the Royal Decree of 6 March 1990 pertaining to theconsolidated accounts of companies will be deposited at “Centrale des Bilans”, a department of the National Bank ofBelgium. A copy may be obtained free of charge from Union Minière’s head office on request.
NAME HEAD OFFICE/COUNTRY VAT or % capital National No. held in1999
Altenberg Zink GmbH Essen (Germany) DE119.658.667 99.68Fininco Luxembourg (GD of Luxembourg) NA 100Metall Dinslaken Dinslaken (Germany) DE119.066.058 100Metalrame Milan (Italy) IT10.022.420.151 100Produits Chimiques Wiaux Seneffe (Belgium) BE441.937.740 100Shanghai Blue Lotus Metals Shanghai (China) NA 75Sibeka (pre-consolidated) and its main subsidiaries : Brussels (Belgium) BE403.202.373 80.44■ Syndiaco Luxembourg (GD of Luxembourg) 80.44■ Syndianed Amsterdam (Netherlands) NA 80.44■ Syndiabel Brussels (Belgium) NA 80.44■ Syndian Willemstad (Curaçao) 80.44Sogem and its main subsidiaries : Brussels (Belgium) BE402.964.625 100■ Sogem Far East Hong Kong 100■ Sogemin Holdings London (UK) GB245.273.759 100■ Sogemin Metals London (UK) GB245.273.759 100■ Sogem Deutschland Essen (Germany) DE119.427.736 100UM Engineering Louvain-la-Neuve (Belgium) BE422.631.473 100UM International B.V. and its main subsidiaries : Amsterdam (Netherlands) NA 100■ Maastrichtsche Zinkwit Maatschappij (MZM) Eygelshoven (Netherlands) NL007.269.183B01 100■ Union Minière Oxyde (Nederland) (sub-group) Eijsden (Netherlands) NL007.269.183B01 100■ Laura B.V. Eygelshoven (Netherlands) NL008.863.301B01 100Union Minière South Africa Rynfield (South Africa) 100UMCZ Liège (Belgium) BE402.343.924 100Umex Inc. Toronto (Canada) 100Union Minière Inc. and its subsidiaries Delaware (USA) 99.94Union Minière Finance Luxembourg (GD of Luxembourg) 100Union Minière Franceand its main subsidiaries (sub-groups): Bagnolet (France) FR10.342.965.001 100■ Mapral Fécamp (France) FR57.346.550.072 100■ Union Minière Invest France (former SPCV) Bagnolet (France) FR23.775.673.049 100■ Union Minière Oxyde (France)
(merged with BZM as at 31 December1998) La Ciotat (France) FR92.056.801.707 99.99■ Asturiana das Minas Porto (Portugal) PT502.367.059 100Union Minière Services & Finance Brussels (Belgium) BE428.179.081 99.40Union Minière Korea Chung Nam (South Korea) 100Union Minière Pirdop Copper Pirdop (Bulgaria) 97.73Union Minière Bulgaria Sofia (Bulgaria) 100Union Minière Commercial & Services Fribourg (Switzerland) 100
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VI.a. ACCOUNTING PRINCIPLES AND VALUATION RULES
1. Restatements and eliminationsApplication of consistent accounting rules and valuation methods within the Group allows the accounts of consolidatedcompanies to be presented on the same economic basis and requires individual company accounts to be restated inaccordance with the accounting principles set out below.After summing the balance sheet and profit and loss accounts, restated as necessary, the inter-company balances and lossesor gains resulting from inter-company operations within the Group are eliminated.
2. Gains or losses of interestA gain or a loss is recorded when there is a reduction of the effective level of holding in a consolidated company followingan increase in capital. When, in the same circumstances, the Group increases its holding a consolidation difference is recorded.
3. Translation of assets and liabilities expressed in foreign currenciesAssets and liabilities expressed in foreign currencies are translated at the official exchange rates at the end of the financialyear. For Belgian companies the rule applies to items which are not expressed in Belgian francs; in the case of foreigncompanies, it applies to items expressed in a currency other than that used in their financial statements.Losses or gains resulting from these translations as well as exchange differences realised on operations of the financial yearare recorded in the income statement.
4. Translation of financial statements of foreign companies and branchesBalance sheets and income statements of foreign companies and branches are translated into Belgian francs using theofficial exchange rates at the end of the financial year and the average rates for that year, respectively. Differences resultingfrom these translations are debited or credited to shareholders' equity; the Group share in these differences is shown in the"Translation adjustments" component of consolidated shareholders' equity.
5. Closing dateThe consolidated accounts are prepared as at 31 December, the closing date of the parent company and of most of theconsolidated companies. For companies with closing dates between 30 September and 31 December, the annual accountsare used without adjustment; when the closing date is before 30 September, intermediate financial statements asat 31 December are drawn up for consolidation.
6. Intangible and tangible fixed assetsFixed assets are shown at their historical cost less accumulated depreciation and amortisation, calculated over the estimatedeconomic life of the assets concerned, using the straight-line or declining balance method.The economic lives used are as follows:■ Land non-depreciable■ Buildings:
- Industrial buildings 20except industrial complexes 15
- Other buildings (offices, laboratories, etc.) 40- Infrastructure works, such as roads and railways 15- Fixtures, fittings and improvements to buildings 10
■ Plant, machinery and equipment 10except furnaces 7except small equipment 5
■ Furniture and vehicles :- Computer equipment 3 to 5- Furniture and office equipment 5 to 10- Vehicles 5- Mobile handling equipment 7
■ Other tangible fixed assets :- Houses and residential buildings 40
Acquisitions are recorded at cost price, together with capitalised interest expenses. Repairs and maintenance are charged tothe income statement. Assets acquired under leasing contracts are recorded as fixed assets at their purchase price; the leasepayments made are recorded in the income statement as depreciation and financial charges.
7. Consolidation goodwillWhen a company is consolidated for the first time, a difference arises between the cost of the shares and the related sharein the company's equity. This difference is usually attributable to unrealised gains or losses on the assets and liabilities ofthe acquired company, or to the expected future profitability of the investment.
80 Union Minière
With effect from 1 January 1988, the main differences resulting from the related assets and liabilities are imputed to therelevant items of the balance sheet, and amortised, written down or written back in the income statement according to therules applying to these items. Any residual intangible difference is recorded in the consolidated balance sheet as«Consolidation differences» and is amortised by the straight-line method over a period not exceeding 20 years.This period is determined on the basis of a prudent assessment of the economic life of this intangible asset taking intoaccount the time required to recover the additional price which was paid and not applied.Additional or exceptional amortisation may be booked in cases where it is no longer economically justified to continue tocarry the consolidation goodwill as an asset.
8. Financial fixed assetsIn the consolidated balance sheet, investments consolidated by the equity method are recorded at the value of the share in theequity determined according to the consolidation rules, rather than at the book value in the holding company's books.Holdings in non-consolidated companies comprise long-term investments which give a decisive or significant influence on, orenable business relations to be established with the companies concerned, but do not meet the consolidation criteria. They arerecorded at acquisition cost, excluding any balance of capital uncalled. When the assessment shows a durable loss in value, thevalue of the investment is written down accordingly.
9. InventoriesInventories are recorded at the historical cost obtained by applying the valuation method which is most appropriate to eachbusiness line within the Group.Consumables and supplies are carried at cost, withdrawals being booked on the basis of a weighted average. An appropriatewrite-down is booked where turnover is slow or there is an impairment of value.Metals - primary materials, production in progress and finished products - which are covered, in particular on the internationalmetal exchanges, continue to be carried at their purchase price. In particular this applies to precious metals and copper.Other metals which are not covered by this system, together with zinc, are valued according to the annual LIFO method,allowing for the specific nature of the activities in question and the problems posed by stock-taking.At the end of the financial year the value of these inventories is written down to bring their book value into line with theirmarket price. Amounts written down in this way are not subsequently written back.Inventories in other sectors of activity are valued on the FIFO (first in, first out) basis or, where this is not applicable, accordingto the average weighted cost method, calculated over a period which does not exceed the average stocking period.Withdrawals are booked according to either method.The cost price of purchased goods includes the net acquisition price plus related expenses. For finished goods and work inprocess, cost price includes the direct and a share of the indirect production costs.
10. Contracts in progressThe cost price of long-term contracts is determined in the same way as work in process; interest expenses incurred directly tofinance such contracts may be included.Long-term contracts are valued using the percentage-of-completion method.
11. Amounts receivable and amounts payableAmounts receivable and amounts payable are recorded at nominal value. When they are expressed in a foreign currency,they are recorded at the Belgian franc equivalent based on the exchange rate on the day of acquisition. At the end of thefinancial year, they are valued using the closing exchange rate of that year. With respect to amounts receivable, the rulesfor recording impairment of value are similar to those applicable to securities.
12. Invested cashThis heading comprises term deposits with credit institutions and securities acquired as market opportunities arise, or astemporary re-investment of excess cash.They are recorded at acquisition cost, or at stock exchange value for listed securities and estimated value for unlistedsecurities if these values are lower than the acquisition price.
13. Provisions for pensionsResponsibility for pensions due under the various mandatory retirement schemes to which employers and employeescontribute is generally assumed by specialised institutions independent of the company. The contributions due for thefinancial year are charged to the income statement for that year. Supplementary retirement plans which generate obligations for the companies concerned are covered by provisionsdetermined according to actuarial calculations based on end-of-career salary forecasts (the «projected benefit obligation»method).
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14. Company taxationIn the consolidated accounts, deferred taxes are recorded on all temporary differences resulting from charges and incomewhich are included in, or excluded from, the book profit or loss of a given financial year but which should be deducted from,or added to, the tax basis of the financial year during which the differences are reversed. The liability method is applied. Thismeans that deferred taxes are calculated on the basis of the latest enacted tax rate on the last day of the financial year. Onthis date, for each tax entity in the scope of consolidation, the tax assets and liabilities on all temporary differences areoffset. The individual balances are then offset, and only the net balance of deferred tax liabilities is recorded in the balancesheet.
VI.b. EXCHANGE RATES USED TO DRAW UP THE CONSOLIDATED ACCOUNTS
Closing rates Average rates
1999 1999 1998 1999 1999 1998€ BEF BEF € BEF BEF
FRENCH FRANC FRF 0.15245 6.15 6.15 0.15245 6.15 6.15
SWISS FRANC CHF 0.62301 25.13 25.09 0.62488 25.21 25.04
DUTCH GUILDER NLG 0.45378 18.31 18.31 0.45378 18.31 18.30
DEUTSCHE MARK DEM 0.51129 20.63 20.63 0.51129 20.63 20.63
POUND STERLING GBP 1.60849 64.89 57.18 1.51837 61.25 60.12
US DOLLAR USD 0.99542 40.16 34.58 0.93833 37.85 36.28
CANADIAN DOLLAR CAD 0.68456 27.61 22.34 0.63133 25.47 24.51
LIRE (100) ITL 0.00052 2.08 2.08 0.00052 2.08 2.09
PESETA (100) ESP 0.60101 24.24 24.24 0.60101 24.24 24.30
ESCUDO (100) PTE 0.49880 20.12 20.12 0.49880 20.12 20.14
DANISH CROWN DKK 0.13435 5.42 5.42 0.13449 5.43 5.42
MEXICAN PESO (100) MXP 0.10524 4.25 3.49 0.09813 3.96 4.00
BULGARIAN LEVA BGL 0.00051 0.02 0.02 0.00051 0.02 0.02
YEN (100) JPY 0.97343 39.27 30.38 0.82484 33.27 27.83
RAND ZAR 0.16202 6.54 5.90 0.15347 6.19 6.62
HONG KONG DOLLAR HKD 0.12834 5.18 4.46 0.12093 4.88 4.68
ZLOTY PLZ 0.24046 9.70 9.79 0.23657 9.54 10.40
WON (100) KRW 0.08807 3.55 2.87 0.07892 3.18 2.61
HUNGARIAN FORINT HUF 0.00393 0.16 0.16 0.00396 0.16 0.17
YUAN RENMINBI CNY 0.12050 4.86 4.18 0.11335 4.57 4.38
82 Union Minière
VIII. STATEMENT OF INTANGIBLE FIXED ASSETS (amounts in million)
Concessions, patents, Software Other Totallicences, goodwill tangible assets
a) Acquisition value
At the end ofthe preceding financial year 1,303 1,026 - 2,329
Movements■ change in scope
of consolidation (656) (69) - (725)■ acquisitions 2 66 2 70■ own construction - 40 17 57■ retirals - (5) - (5)■ transfers 2 12 - 14■ translation adjustments - 1 - 1■ sub-total movements (652) 45 19 (588)
At the end of the financial year BEF 651 1,071 19 1,741€ 16.15 26.56 0.47 43.18
b) Amortisation
At the end ofthe preceding financial year 573 591 - 1,164
Movements■ change in scope
of consolidation (233) (64) - (297)■ amounts charged 33 255 6 294■ cancellations - (5) - (5)■ transfers - 1 - 1■ sub-total movements (200) 187 6 (7)
At the end of the financial year BEF 373 778 6 1,157€ 9.25 19.29 0.15 28.69
c) Net book value
At the end ofthe preceding financial year 730 435 - 1,165At the end of the financial year BEF 278 293 13 584
€ 6.90 7.27 0.32 14.49
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IX. STATEMENT OF TANGIBLE FIXED ASSETS (amounts in million)
Land and Plants, Furniture Leasing Other Constructionbuildings machinery and and tangible in progress
and vehicles similar assets and advanceequipment rights payments
a) Acquisition value
At the end ofthe preceding financial year 16,733 46,889 3,785 151 7,023 2,028
Movements■ change in scope
of consolidation (477) (17) (31) (7) (50) 51■ acquisitions 71 380 215 20 38 2,196■ own construction 2 32 3 - - -■ disposals (120) (18) (101) (1) (29) (8)■ retirals (534) (596) (294) (36) (26) (1)■ transfers 441 1,697 68 - 665 (2,896)■ translation adjustments 156 455 40 10 24 54■ sub-total movements (461) 1,933 (100) (14) 622 (604)
At the end ofthe financial year BEF 16,272 48,822 3,685 137 7,645 1,424
€ 403.36 1,210.26 91.36 3.40 189.52 35.30
b) Depreciation and write-downs
At the end ofthe preceding financial year 8,837 32,203 2,776 73 6,812 -
Movements■ change in scope
of consolidation (844) (2,034) (55) 3 (34) -■ amounts charged 740 2,953 399 25 143 -■ disposals (39) (21) (77) - (14) -■ cancellations (514) (537) (290) (36) (26) -■ transfers (132) (454) (6) - 580 -■ translation adjustments 37 152 29 4 17 -■ sub-total movements (752) 59 - (4) 666 -
At the end ofthe financial year BEF 8,085 32,262 2,776 69 7,478 -
€ 200.42 799.75 68.82 1.72 185.37 -
c) Net book value
At the end ofthe preceding financial year 7,896 14,686 1,009 78 211 2,028At the endof the financial year BEF 8,187 16,560 909 68 167 1,424of which :land and buildings 42plants, machinery and equipment 26
€ 202.94 410.51 22.54 1.68 4.15 35.30
84 Union Minière
X. STATEMENT OF FINANCIAL FIXED ASSETS (amounts in million)
a) Investments included by the equity method
At the end of the preceding financial year 7,634
Movements■ change in scope of consolidation (3,678)■ disposals (586)■ dividends paid (484)■ profit (loss) of the financial year 638■ translation adjustments 548■ sub-total movements (3,562)
At the end of the financial year BEF 4,072€ 100.93
Acquisition Write-value downs
b) Unconsolidated investments
At the end of the preceding financial year 4,108 (2,930)
Movements■ change in scope of consolidation (216) 178■ acquisitions 3,081 -■ disposals (636) 12■ write-downs - (76)■ write-backs - 4■ transfers 139 (150)■ translation adjustments 275 (25)■ sub-total movements 2,643 (57)
At the end of the financial year BEF 6,751 (2,987)€ 167.35 (74.03)
Net book valueAt the end of the preceding financial year - 1,178At the end of the financial year BEF - 3,764
€ - 93.32
Acquisition Write-value downs
c) Amounts receivable
At the end of the preceding financial year 1,462 (581)
Movements■ change in scope of consolidation (36) 5■ additions and acquisitions 1,309 -■ write-downs and write-backs - (35)■ repayments and disposals (8) -■ transfers (68) -■ translation adjustments 25 (1)■ sub-total movements 1,222 (31)
At the end of the financial year BEF 2,684 (612)€ 66.53 (15.17)
Net book valueAt the end of the preceding financial year 881At the end of the financial year BEF 2,072
€ 51.36
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XI. STATEMENT OF SHAREHOLDERS' EQUITY (amounts in million)
Capital Share Reserves Consolidation Translation Totalpremiums differences adjustments
At the end ofthe preceding financial year 15,529 5,090 17,537 73 (830) 37,399
Movements■ remuneration of shareholders - - (1,280) - - (1,280)■ change in
translation adjustments - - - - 1,036 1,036■ change in
consolidation differences - - - (25) - (25)■ profit (loss) of the financial year - - 2,796 - - 2,796
At the end of the financial year BEF 15,529 5,090 19,053 48 206 39,926€ 384.96 126.18 472.30 1.20 5.10 989.74
XII. STATEMENT OF CONSOLIDATION DIFFERENCES (amounts in million)
Positive NegativeNet book value differences differences
At the end of the preceding financial year 4,469 73
Movements■ change in scope of consolidation (148) (20)■ disposals (460) -■ ordinary amortisation charges (341) (5)■ other movements 48 -■ sub-total movements (901) (25)
At the end of the financial year BEF 3,568 48€ 88.45 1.20
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XIII. STATEMENT OF AMOUNTS PAYABLE AFTER ONE YEAR (excluding investment grants) (amounts in million)
n+6 n+11A. Breakdown by maturity dates n+2 n+3 n+4 n+5 to 10 to 15 Total
Unsubordinated debentures - - - 1 6 - 7Leasing and similar obligations 11 1 - - - - 12Credit institutions 1,786 1,176 1,619 1,013 4,027 - 9,621Other financial debts 59 18 - - - - 77sub-total financial debts 1,856 1,195 1,619 1,014 4,033 - 9,717Other amounts payable 5 5 6 - - - 16(excl. BEF 263 million of investment grants) - - - - - - -
Total 1,861 1,200 1,625 1,014 4,033 - 9,733
B. Breakdown of financial debts by currencies(1) BEF FRF DEM USD NLG Other Total
Unsubordinated debentures 7 - - - - - 7Leasing and similar obligations 1 - - - - 11 12Credit institutions 1,036 1,494 - - 8,125 16 10,671Other financial debts 4 53 - 38 - - 95
Total financial debts 1,048 1,547 - 38 8,125 27 10,785(1) Including current portion of financial debts (BEF 1,069 million)
XIV. INCOME STATEMENT (amounts in million)
1999 1998A. Breakdown of sales and services (€) (BEF) (€) (BEF)
By activities :
■ Zinc 706.22 28,489 692.39 27,931■ Copper 704.96 28,438 672.09 27,112■ Precious Metals 766.07 30,903 613.83 24,762■ Advanced Materials 221.59 8,939 230.05 9,280■ Diamonds 0.15 6 225.41 9,093■ Technology and Services 753.72 30,405 980.99 39,573■ Other 27.47 1,108 34.23 1,381
Total 3,180.18 128,288 3,448.99 139,132
By geographical areas of production :
■ Belgium 1,996.93 80,556 2,010.89 81,119■ France 315.82 12,740 385.80 15,563■ Germany 322.11 12,994 340.23 13,725■ Other European countries 322.39 13,005 353.99 14,280■ America 113.91 4,595 233.57 9,422■ Africa-Oceania - - 2.40 97■ Asia 109.02 4,398 122.11 4,926
Total 3,180.18 128,288 3,448.99 139,132
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B. Average number of persons employed
1. Breakdown by categories Consolidated companies1999 1998
■ Hourly-paid employees 5,172 5,187■ Monthly-paid employees 2,131 2,670■ Managerial staff 801 909■ Executives 66 85Total 8,170 8,851
2. Breakdown by geographical areas Consolidated companiesHourly-paid Monthly-paid Managerial staff Executives Total
Belgium 2,758 1,112 436 17 4,323France 815 439 130 2 1,386Other European countries 1,386 476 182 23 2,067America 96 59 22 17 194Africa 65 9 6 - 80Asia 52 36 25 7 120Total 5,172 2,131 801 66 8,170
3. Breakdown of remunerations, social security charges and pensions (BEF million)1999 1998
Personnel charges 14,313 16,193Pensions and similar obligations 813 1,336Total 15,126 17,529
C. Other extraordinary charges (€ million) (BEF million)
Reorganisation costs (covered by provisions) 12.37 499Other charges covered by provisions 6.52 263Charges related to sales of assets 0.37 15Maribel 6.97 2811997-1998 Pirdop results before consolidation 7.44 300Miscellaneous 5.18 209Total 38.85 1,567
D. Reconciliation of theoretical and effective tax charges (€ million) (BEF million)
Theoretical tax charge : 30.93 1,248
■ Dividends of non-consolidated companies (income already taxed) (0.47) (19)■ Untaxed fraction of capital gains (10.41) (420)■ Use of deferred tax assets of previous financial years
and recoverable tax losses (8.13) (328)■ Impact of the financial year's loss 13.34 538■ Tax rate differences due to foreign tax rates (3.02) (122)■ Items taxed on other bases (28.17) (1,136)■ Sundry deductions and reinstatements 10.83 437
Effective tax charge per income statement 4.90 198
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XV. RIGHTS AND COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET (amounts in million)
1999 1998BEF € €
Guarantees constituted by third parties on behalf of the Group 2,812 69.70 111.50Guarantees constituted by the Group on behalf of third parties 2,895 71.77 65.32Guarantees constituted by the Group on own assets andfor own account 204 5.05 5.48Guarantees received 704 17.44 22.56Property and securities held by third parties in their own names but at the Group's risk 233 5.77 0.10Commitments to acquire and sell fixed assets 15 0.37 12.84Forward contracts :
■ Commodities purchased (to be received) 11,964 296.57 340.26■ Commodities sold (to be delivered) 15,473 383.57 463.49■ Currencies purchased (to be received) 25,991 644.29 476.75■ Currencies sold (to be delivered) 25,992 644.33 471.79■ Options - change : purchases - - 12.39■ Swaps - - 12.39
Property and securities of third parties held by the Group 7,962 197.39 173.58Miscellaneous rights and commitments 1,047 25.95 105.80of which metal borrowings - - 91.05
XVII. FINANCIAL RELATIONS WITH DIRECTORS
(BEF million)
Aggregate amount of remunerations attributed in the financial year to the directors or executive officers of the consolidating company by reason of their offices in said company, its subsidiaries and its affiliated companies, including the retirement allowances attributed, for the same reason,in the financial year to former directors or executive officers 34
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XVIII. STATEMENT OF PROVISIONS AND DEFERRED TAXES (amounts in million)
Pensions and Tax Major Other Deferredsimilar charges repairs liabilities taxes
obligations and andmaintenance charges
Net book value
At the end ofthe preceding financial year 6,361 24 495 3,149 270
Movements■ change in scope of consolidation (513) (4) 178 (270) 754■ charges 678 2 903 1,488 8■ utilisations (1,006) (12) (837) (830) -■ write-backs (91) - (4) (41) (183)■ transfers 119 - - (119) -■ translation adjustments 2 - 1 35 43■ sub-total movements (811) (14) 241 263 622
At the end of the financial year BEF 5,550 10 736 3,412 892€ 137.58 0.24 18.24 84.59 22.10
LITIGATION AND MAJOR EVENTS
■ 1996-1998 Industrial Plan
Union Minière has now completed the Industrial Plan which was scheduled to cover the period 1996-1998.
The positive effects of this Plan will start to make themselves felt from 2000 onwards.
■ Valuation of inventories
In line with the Union Minière Group's valuation rules, metal inventories which are not covered are valued according tothe LIFO method once a year owing to the fact that physical stock-taking is necessary in order to determine their value interms of the metal contained.
The value of the company's metal inventories on a LIFO basis was BEF 13,496 million and their market value wasBEF 26,143 million.
■ Environment-related risks
In 1997 Union Minière signed an agreement with the Flemish Regional Authorities with a view to dealing with theproblem of long-standing pollution at the industrial sites which were still in operation in Flanders. Under this agreement,Union Minière will first carry out a study on a voluntary basis in order to identify the risks. Once this phase has beencompleted, the Flemish Regional Authorities and Union Minière should agree on a rehabilitation plan, including themethod of treating the identified risks and the time schedule for carrying out this treatment. In 1999 Union Minière setaside an extraordinary provision of BEF 411 million to cover the non-recurrent expenditure estimated to date.
In France a risk inventory for all the Group's industrial sites has to be completed by the end of 1999 as required by a newministerial decree. This inventory was started in 1998 but had not been completed by 31 December 1999.
Union Minière charges an environment-related provision where there is a formal requirement to carry out rehabilitationwork and where the charges entailed can be estimated with a reasonable degree of accuracy.
90 Union Minière
■ Precious metals borrowing
Owing to changes in the production flowsheet, coupled with substantial investments and the fact that delivery cycles areshorter than production cycles, it had been necessary to borrow significant quantities of metals since 1996 in order to fulfilUnion Minière's commitments to deliver precious metals.
The metals borrowed are returned to the lenders when the metals have been refined from the raw materials and intermediatematerials at the plant.
As the necessary production volumes were achieved in 1999 Union Minière discontinued precious metal borrowings.
■ Strategic cover
In 1999 the board of directors decided to use forward sales to fix the currency translation rates for its income expressedin USD, for an amount of USD 240 million, i.e. equivalent to half the annual position.
Cover was obtained at an average rate of BEF 36.5 to USD 1, the balance of the position having been sold as and whentransactions were carried out.
Further to a decision taken by the board of directors on 28 October 1999, additional cover was taken out for the2000 financial year for an amount of USD 240 million at an average rate of BEF 37.66 to USD 1, i.e. once againequivalent to half the annual position.
In addition, the company concluded forward sales of metals, whereby the contracts started to run after the end of thefinancial year.
At 31 December 1999 these transactions related to 15,250 tonnes of zinc at an average price of USD 1,193/tonneand 600 kg of palladium at an average price of USD 12,323/kg; they had no impact on the results posted forthe 1999 financial year.
■ Application of VAT on deliveries «ex works»
In some cases Union Minière sells precious metals on an "ex works" basis.
Following the amendment of Community VAT legislation, customs documents in support of VAT exemption onintra-Community deliveries to other Member States of the European Union have to be made out by Union Minière'scustomers or agents acting on behalf of the said customers. It is the seller's responsibility to prove, by any legal means,including the production of transport documents, that an intra-Community delivery has actually taken place.
In connection with "ex works" sales, it is Union Minière's customer or a subsequent customer, acting on behalf of UM'scustomer, who is responsible for the freight arrangements. As a result, Union Minière does not automatically have in itspossession the transport documents proving that goods have been exported from Belgium. Where these documents arenot available, the VAT authorities consider that Belgian VAT should be levied on these sales in the same manner asdeliveries effected in Belgium.
The Belgian tax authorities carried out an inspection on the VAT applied by Union Minière from 1995 to 1998 on sales ofrefined silver which was transported by the purchasers from Union Minière (Hoboken) to Italy. The VAT on these salesamounts to BEF 983 million.
As the Belgian tax authorities no longer seem to be querying the fact that the silver left Belgium and arrived in Italy,where, according to information received by Union Minière, it was subject to Italian VAT, Union Minière is of the opinionthat Belgian VAT is not due on these sales of silver. Union Minière is making every effort to provide the tax authoritieswith such proof as will bring them round to its point of view.
Union Minière 91
To the shareholders of n.v. Union Minière s.a.
In accordance with legal and regulatory requirements, we are pleased to report to you on the completion of the auditmandate, which you have entrusted to us.
We have audited the consolidated financial statements as of and for the year ended 31 December 1999, which have beenprepared under the responsibility of the board of directors of n.v. Union Minière s.a. and which show a balance-sheet totalof BEF 97,843 million and a consolidated profit, Group share, for the year of BEF 2,796 million.
Unqualified opinion on the financial statements
We conducted our audit in accordance with Belgian auditing standards, as issued by the "Institut des Reviseursd'Entreprises/Instituut der Bedrijfsrevisoren". Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, taking into accountthe legal and regulatory requirements applicable to financial statements in Belgium.
In accordance with those standards, we considered the Group’s administrative and accounting organisation, as well as itsinternal control procedures. We obtained the explanations and information required for the purposes of our audit and weexamined, on a test basis, evidence supporting the amounts in the consolidated financial statements. We assessed theaccounting principles used and significant estimates made by the Group, as well as the overall presentation of theconsolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements as at 31 December 1999 present fairly the net worth, the financialposition and the consolidated results of the Group in compliance with the applicable legal and regulatory requirements,and the information given in the notes to the financial statements is properly presented.
REPORT OF THE STATUTORY AUDITORON THE CONSOLIDATED ACCOUNTS AT 31 DECEMBER 1999
92 Union Minière
Additional certifications and information
We have also reviewed the consolidated directors’ report and verified that it contains the information required by law andis consistent with the financial statements.
In the context of our audit of the statutory financial statements of n.v. Union Minière s.a., we ascertained that the boardof directors of the company had complied with the Belgian legal provisions applicable to cases of conflicting interest of afinancial nature. In conformity with the Belgian co-ordinated laws on business enterprises, these transactions have beencovered explicitly in our report on the statutory financial statements of n.v. Union Minière s.a.
Brussels, 15 March 2000
The statutory Auditor
PricewaterhouseCoopers
Reviseurs d’Entreprises
represented by
Robert Peirce
Union Minière 93
SUMMARISED ANNUAL ACCOUNTS OF n.v. UNION MINIERE s.a.
The annual accounts of n.v. Union Minière s.a. are given below in summarised form.In accordance with the law on commercial companies, the annual accounts of n.v. Union Minière s.a., together with themanagement report and the statutory auditor’s report have been deposited with the National Bank of Belgium.These documents may also be obtained on demand from:
n.v. Union Minière s.a.rue du Marais 31B-1000 Brussels (Belgium)
The statutory auditor did not express any reservations in respect of the annual accounts of n.v. Union Minière s.a.
SUMMARISED BALANCE SHEET AT 31 DECEMBER (amounts in thousand)
ASSETS 1999 1999 1998 1997BEF € € €
FIXED ASSETS 42,858,941 1,062,446 1,072,597 1,091,047
II. Intangible assets 781,003 19,361 17,108 18,589
III. Tangible assets 15,245,230 377,919 412,857 386,870
IV. Financial assets 26,832,708 665,166 642,632 685,588
CURRENT ASSETS 28,789,072 713,662 762,511 878,835
V. Amounts receivable after one year 9,716 241 316 582
VI. Inventories and contracts in progress 15,414,856 382,124 478,582 481,949
VII. Amounts receivable within one year 10,079,537 249,865 230,780 269,357
VIII. Invested cash 626,412 15,528 7,656 63,605
IX. Cash at bank and in hand 353,130 8,754 5,394 19,582
X. Deferred charges and accrued income 2,305,421 57,150 39,783 43,760
TOTAL ASSETS 71,648,013 1,776,108 1,835,108 1,969,882
LIABILITIES AND SHAREHOLDERS’ EQUITY
SHAREHOLDERS’ EQUITY 33,414,975 828,336 797,973 863,205
I. Capital 15,529,240 384,960 384,960 384,891
II. Share premiums 5,090,044 126,179 126,179 126,004
III. Revaluation surplus 54,951 1,362 1,362 1,362
IV. Reserves 7,037,083 174,445 163,662 233,814
V. Profit (loss) carried forward 5,658,061 140,260 120,130 114,881
VI. Investment grants 45,596 1,130 1,680 2,253
PROVISIONS AND DEFERRED TAXES 7,195,042 178,360 167,840 186,094
VII. A. Provisions for liabilities and charges 7,195,042 178,360 167,840 186,094
CREDITORS 31,037,996 769,412 869,295 920,583
VIII. Amounts payable after one year 7,792,411 193,169 181,845 94,381
IX. Amounts payable within one year 20,688,640 512,858 615,691 749,633
X. Accrued charges and deferred income 2,556,945 63,385 71,759 76,569
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 71,648,013 1,776,108 1,835,108 1,969,882
94 Union Minière
SUMMARISED INCOME STATEMENT (amounts in thousand)
1999 1999 1998 1997BEF € € €
I. Operating income 101,876,212 2,525,445 2,428,631 2,791,305
II. Operating charges 99,994,419 2,478,797 2,470,086 2,692,340
III. Operating profit (loss) 1,881,793 46,648 (41,455) 98,965
IV. Financial income 2,922,702 81,286 97,336 49,322
V. Financial charges 1,469,923 45,272 53,177 44,290
VI. Current profit (loss) 3,334,572 82,662 2,704 103,997
VII. Extraordinary income 605,922 15,020 13,324 6,625
VIII. Extraordinary charges 1,414,668 35,069 53,751 22,594
IX. Profit (loss) for the year before taxes 2,525,826 62,613 (37,723) 88,028
X. Income taxes 756 19 571 (91)
XI. Profit (loss) for the year 2,526,582 62,632 (37,152) 87,937
XII. Transfer from untaxed reserves - - 71,889 -
XIII. Profit (loss) for the year available for
appropriation 2,526,582 62,632 34,737 87,937
APPROPRIATION ACCOUNT
A. Profit (loss) to be appropriated 7,372,622 182,762 149,618 147,215
1. Profit (loss) for the financial year 2,526,582 62,632 34,737 87,9372. Profit (loss) carried forward 4,846,040 120,130 114,881 59,278
C. Appropriation to equity (434,978) (10,782) (1,737) (4,397)
2. To the legal reserve (126,329) (3,131) (1,737) (4,397)3. To the reserve for own shares (308,649) (7,651) - -
D. Profit (loss) to be carried forward (1) (5,658,061) (140,260) (120,130) (114,881)
2. Profit (loss) to be carried forward (5,658,061) (140,260) (120,130) (114,881)
F. Profit to be distributed (1) (1,279,583) (31,720) (27,751) (27,937)
1. Dividends- ordinary shares BEF 50.42 - € 1.25 (1,279,583) (31,720) (27,751) (27,937)
(1) The total of these two items will be amended to allow for the amount of the company's own shares held by Union Minière on the dateof the Annual General Meeting of shareholders on 10 May 2000; the gross dividend of BEF 50.42 per share will not change
Union Minière 95
STATEMENT OF CAPITAL
BEF thousand Number of shares
A. Share capital
1. Issued capital
At the end of the preceding financial year 15,529,240 25,617,515At the end of the financial year 15,529,240 25,617,515
2. Structure of the capital
2.1. Categories of shares (1)
Ordinary shares 15,529,240 25,617,515
2.2. Registered shares or bearer sharesRegistered 4,995,319Bearer 20,622,196
E. Authorised unissued capital 14,471,730
% capital Number of shares
G. Shareholder base (2)
SOCIETE GENERALE DE BELGIQUE S.A., rue Royale 30, 1000 Brussels 25.21 6,458,570CONTASSUR S.A., Place du Trône 1, 1000 Brussels 0.04 10,416
SGB group 25.25 6,468,986
Other shareholders
- Templeton Worldwide Inc. (3) 4.51 1,156,689500 East Broward Boulevard, Suite 2100Fort Lauderdale, Florida 33394 (USA)
- Others 70.24 17,991,840100.00 25,617,515
(1) The VVPR shares were stripped on 26 March 1999, with coupon No 5 from VVPR shares entitling holders to a sheet of stripsand coupon No 5 from ordinary shares being cancelled
(2) According to the statements of 19 August 1997 and 20 May 1999, disregarding the existence of warrants for a maximumof 126,400 shares attached to five bond issues reserved for the company’s senior management that were floated in 1994,1995, 1996, 1997 and 1998, and for a maximum of 267,250 shares attached to part of the stock option plan launchedfor all UM personnel in 1999. Maximum potential dilution if all the warrants were exercised would be 1.50%
(3) Templeton Worldwide Inc. holds voting rights by order and on behalf of the funds which it manages
VALUATION RULES
The valuation rules of n.v. Union Minière s.a. are the basis and provide the essential guidelines for the valuation rules usedby the Union Minière Group as described in point VI.a. of the notes to the consolidated accounts.
Brussels, 14 March 2000The Board of Directors
96 Union Minière
BOARD OF DIRECTORS
WORKING PROCEDURES
In accordance with the articles of association, the board of directors is authorised to perform whatever acts are necessary to achieve the company’sobjects. In this context such acts include approving strategic plans, expansionplans and budgets and ensuring that such plans are duly implemented. It shalltake the necessary steps to ensure that the organisational structure put in placemeets the company’s requirements and that a system of reporting and efficientinternal controls exists to ensure that information is reliable. In addition, it shalltake steps to ensure that the policies adopted by the company are properly co-ordinated, particularly with regard to issues such as finance, humanresources, the environment and safety, and also the information made availableto company shareholders and the general public.
The board of directors, whose members are appointed by the Annual GeneralMeeting, must comprise at least six members. Their period of office may notexceed six years. At present they are elected for a period of two or three years.
The age limit for directors is set at 67; however, the board may make an exception to this rule in the interests of the company.
Decisions are taken in accordance with article 10, § 3 of the articles of association, i.e. :
"The board may only conduct business if the majority of its members are present or represented at the meeting. Decisions are taken by majority vote. Inthe event of votes being equally divided, the person chairing the meeting shallhave the casting vote."
BOARD, AUDITORS AND DAY-TO-DAY MANAGEMENT
Union Minière 97
CURRENT COMPOSITION OF THE BOARD OF DIRECTORS
Executive director
Karel Vinck, Director and Chief Executive Officer since October 1994Born in 1938. His present period of office expires at the 2000 Annual GeneralMeeting.
Non-executive directors representing shareholders
Etienne Davignon, Director since December 1989 and Chairman since June 1992Born in 1932. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Chairman of Société Générale deBelgique.
Christine Morin-Postel, Director since December 1997Born in 1946. Her present period of office expires at the 2000 Annual GeneralMeeting. Her main function outside UM is Chief Executive Officer of SociétéGénérale de Belgique.
Jean-Pierre Standaert, Director since July 1989Born in 1947. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Corporate Secretary and GeneralCounsel of Société Générale de Belgique.
Klaus Wendel, Director since July 1989Born in 1943. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Member of the Executive Committeeof Société Générale de Belgique.
98 Union Minière
Independent non-executive directors
Marc Blanpain, Director since March 1997Born in 1941. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Chairman of the Board of BanqueBelgolaise.
Jean-Luc Dehaene, Director since October 1999Born in 1940. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is member of the Board of Directors ofTelinfo N.V.
Erik E. Dejonghe, Director since September 1997Born in 1947. His present period of office expires at the 2001 Annual GeneralMeeting. His main function outside UM is Senior Vice-President and ChiefOperating Officer of BARCO N.V.
Paul De Keersmaeker, Director since April 1992Born in 1929. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Chairman of the Board of Directorsof Interbrew.
Philippe Delaunois, Director since May 1999Born in 1941. His present period of office expires at the 2002 Annual GeneralMeeting. His main function outside UM is Chairman of the press groupMedi@bel.
Hubert Detremmerie, Director since May 1995Born in 1930. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Honorary President of the BACOBbank.
Pierre Klees, Director since July 1989Born in 1933. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is Chief Executive Officer of BIAC.
Robert F.W. van Oordt, Director since May 1997Born in 1936. His present period of office expires at the 2000 Annual GeneralMeeting. His main function outside UM is member of the Board of Directors ofNokia Corporation.
Union Minière 99
PERIOD OF OFFICE WHICH EXPIRED DURING THE YEAR AND WHICH WAS NOT RENEWED
Independent non-executive Director
Jean Van Marcke,Born in 1937. Director from September 1991 until May 1999
RESIGNATIONS DURING THE FINANCIAL YEAR
Non-executive Director representing shareholders
Alain Chaigneau,Born in 1951. Director from September 1995 until July 1999
Independent non-executive Director
Roger Dillemans,Born in 1932. Director from May 1995 until May 1999
BOARD REMUNERATION
In accordance with article 9, last paragraph, of the articles of association, the Annual General Meeting of shareholders of 12 May 1999 approved a totalboard remuneration of BEF 6,176,986 for the year 1999. The allocation of thesaid amount among the board members was decided by the board.
NUMBER OF MEETINGS DURING THE FINANCIAL YEAR
The board of directors met seven times in 1999.
PROFIT APPROPRIATION POLICY
Union Minière resumed dividend payments in 1998. Union Minière’s policy is to continue to pay an annual dividend whenever this is compatible with steady growth.
RELATIONS WITH SHAREHOLDERS
Société Générale de Belgique holds a participating interest of 25.25%. To the company’s knowledge there are no shareholders’ committees or agreements between shareholders.
100 Union Minière
COMMITTEES
For the purpose of assisting the board with its above-mentioned duties, anAudit Committee and a Nomination and Remuneration Committee were set up in March 1996; a Strategy Committee was set up in December 1999.
I. Audit Committee
The Audit Committee consists of three members, who are all non-executivedirectors, two of them being independent directors.
The mission of the Audit Committee is:
- to recommend to the board the external auditors to be appointed or dismissed, the remuneration of the external auditors;
- to establish the annual audit programme;- to carry out an in-depth examination of the company and
consolidated accounts for the year and half year before transmitting them to the board;
- to review with the external auditors, the nature, extent and results of their auditing of the company and consolidated accounts for the year and half year and more particularly to review with them any remarks or qualifications they have in respect of their auditing of, and their report on, the said accounts;
- to review the appropriateness, the changes and amendments of the accounting principles and valuation rules used by the company to draw up, prior to their approval by the board, the above-mentioned accounts;
- to review with the chief financial officer and the financial controller the company’s control methods and the results thereof;
- to make to the board any recommendation to further the performance of its mission.
The chairman of the Audit Committee reports to the board on the results of its work and examinations and, if necessary, makes recommendations.
MEMBERS Hubert Detremmerie ChairmanRobert F.W. van Oordt Member
Klaus Wendel Member
The Audit Committee’s fee is BEF 350,000 per meeting.
Union Minière 101
II. Nomination and Remuneration Committee
The Nomination and Remuneration Committee consists of three members who are all non-executive directors, one of them being an independent director.
The members should neither be employed by the company, nor have been employed by the company in the two preceding years.
The mission of the Nomination and Remuneration Committee is:
- to recommend new directors to the board;- to recommend to the board the members of the UM Executive Committee
and the key managers of the UM Group to be appointed or dismissed;- to recommend to the board the most appropriate remuneration policy;- to review the personnel policy;- to make to the board any recommendation to further the performance of
its mission.
MEMBERS Etienne Davignon ChairmanRoger Dillemans Member (until May 1999)
Philippe Delaunois Member (from May until September 1999)
Christine Morin-Postel MemberPaul De Keersmaeker Member (since September 1999)
The Nomination and Remuneration Committee’s fee is BEF 350,000 per meeting.
The chairman of the Nomination and Remuneration Committee reports to the board on the results of its work and examinations and makes recommendations.
III. Strategy Committee
The Strategy Committee consists of at least six members, appointed by theboard, one of whom should be an independent director.
The members should not be employed by the company.
Its mission will be to examine the strategic business plans of the UM Group and submit a report to the board of directors for discussion and approval.
The Chairman, or the member he designates, reports to the board - in the form which the Strategy Committee deems appropriate - on the results of its workand examinations and makes recommendations.
102 Union Minière
MEMBERSEtienne Davignon Chairman
Jean-Luc Dehaene MemberPhilippe Delaunois Member
Thomas Leysen MemberChristine Morin-Postel Member
Karel Vinck Member
The Strategy Committee's fee is BEF 650,000 per meeting.
AUDITORS
PRICEWATERHOUSECOOPERS, Reviseurs d’Entreprises SCCRLrepresented by Robert Peirce and Marcel Bellen.
The auditors’ mandate expires at the 2002 Annual General Meeting.
DAY-TO-DAY MANAGEMENT
In accordance with the provisions of the articles of association, the board ofdirectors has delegated responsibility for the day-to-day management of thecompany to Mr Karel Vinck, in his capacity as Chief Executive Officer. In connection with this delegation of responsibility for day-to-day management,the board of directors has decided to set up an Executive Committee, chaired by Mr Karel Vinck. In order to enhance industrial coherence and expedite decision taking at operational level, three business groups were also set up:
- the business group Zinc comprising the Zinc, Building Products and Zinc Chemicals business units;
- the business group Copper/Precious Metals comprising the Copper and Precious Metals business units;
- the business group Advanced Materials comprising the Electro-Optic Materials and Cobalt & Energy Products business units.
Each of these groups reports to a business group Executive Committee, which ischaired by an Executive Vice-President. These Executive Vice-Presidents are alsoin charge of certain subsidiaries or functional departments.
Union Minière 103
UM EXECUTIVE COMMITEE
The Executive Committee consists of the most senior managers of UM and is in charge of the overall management of the Group.
MEMBERS
Karel Vinck Chief Executive OfficerChairman
Thomas Leysen Executive Vice-PresidentDeputy ChairmanChairman business group Copper/Precious MetalsCorporate Developments.a. SOGEM n.v./SOGEMIN METALS
Jean-Luc Deleersnyder Executive Vice-PresidentChairman business group ZincHuman Resources (until September 1999)Purchasing & TransportationUM ENGINEERING s.a.
Marc Van Sande Executive Vice-PresidentChairman business group Advanced MaterialsResearch & Development
Arnoud de Pret Chief Financial OfficerJos Bosmans Senior Vice-President
Human Resources (from September 1999)Alain Godefroid Senior Vice-President
Legal and Environmental AffairsEtienne Denis Chief Executive Officer SIBEKA s.a.
104 Union Minière
BUSINESS GROUP EXECUTIVE COMMITTEESThe powers of the various business group Executive Committees are as follows:
- all proposals to be submitted to UM’s Executive Committee and in particular proposals concerning the business group’s strategy;
- implementation of decisions taken by UM’s Executive Committee;
- any operational decision which concerns the business units belonging to the business group but which does not affect the Group as a whole;
- any investment involving an amount in excess of BEF 20 million and less than BEF 50 million.
All other matters are the responsibility of the various business units.
Executive Committee Business Group Copper/Precious Metals
Thomas Leysen ChairmanThierry Caeymaex Senior Vice-President Copper
Deputy ChairmanHugo Morel Vice-President Precious Metals
Union Minière 105
Executive Committee Business Group Zinc
Jean-Luc Deleersnyder ChairmanAndré van der Heyden Senior Vice-President Zinc
Deputy ChairmanFrançois Blanc Senior Vice-President Building Products
(until September 1999)Ernst Pleyer Vice-President Building Products
(since September 1999)Julien Deraedt Vice-President Zinc Chemicals
Phillip Vandervoort Chief Executive Officer UM ENGINEERING
Executive Committee Business Group Advanced Materials
Marc Van Sande ChairmanLuc Gellens Vice-President Cobalt & Energy Products
Michel Cauwe Vice-President Electro-Optic MaterialsGuido Vermeylen Vice-President Research
106 Union Minière
OPERATIONAL COMMITTEE UM
The Operational Committee is an information and discussion panel and consistsof all the members of the UM Executive Committees listed and shown above,plus all other Vice-Presidents who are on the photograph below.
Edwin D'Hondt Vice-PresidentInformation Systems
Antoon Franckaerts Vice-PresidentEnvironment, Health & Safety
Marcel Goetstouwers Vice-PresidentPurchasing & Transportation
Marc Grynberg Vice-PresidentAccounting & Control
Michel Moser Vice-PresidentCorporate Development
Philippe Rombaut Chief Executive OfficerUNION MINIERE PIRDOP COPPER
Freddy Van Grimbergen Chief Operating OfficerSOGEM
Publisher responsible at law n.v. Union Minière s.a.Corporate Communication DepartmentContact: Moniek Delvou
Phone: 32-2-227.70.63Realisation Image Plus
Printing Snoeck Ducaju & Zoon
Photographs By courtesy of: Fotografie Claude Smekens, De Visu DDD,Kéops Graphs & Photographs, Mahaux Photography, Image Plus
GROUP STRUCTURE AS AT 31 DECEMBER 1999
Mapral (FR)
VM Zinc (HU)
Gilhac (FR)
Galva 45 (FR)
100
100
100
40
100
100
24
45.8
100
60
100
35
75
100
100
100
100
100
100
50
42.5
20
100
58.8
100
100
11.04
100
100
20
56.6
68
100
100
100
11. 074.2923.54
100
234.49.76.2
UM Engineering (BE)
UM Engineering (CL)
UMCZ (BE)
755490 Alberta (CA)
Union Minière Services & Finance (BE)
Huron Valley Europe (BE)
Antwerpse Handelsmaatschappij (BE)
Nocafex (ZR)
Union Minière Bulgaria (BG)
America Mineral Fields (CA)
Fininco (LU)
UM Finance (LU)
Union Minière Pirdop Copper (BG)
Metalrame (IT)
Non Ferrous International (BE)
Electrolyse du Palais (FR)
Unimet (MX)
Metall Dinslaken (DE)
VM Zinc Polska (PL)
VM Zinc Denmark (DK)
Produits Chimiques Wiaux (BE)
Umex (CA)
Union Minière South Africa (ZA)
Shanghai Blue Lotus Metals (CN)
Battery Materials (JP)
Union Minière Korea (KR)
32
100
100
24.3
100
100
100
100
Phase4 Infrared (US)
Nanodyne (US)
UMCore (US)
Laser Power (US)
Emcore (US)
100
99
50
13.9
3.93
100
100
50
50
Sogem Italia (IT)
Sogem Mexico (MX)
Sogem Peru (PE)
Sogem Bolivia (BO)
Sogem Far East (CN)
Sogem Korea (KR)
Sogem Japan (JP)
Sogem Taiwan (TW)
Sogem Thailand (TH)
Sogem Malaysia (MY)
Sogem Shanghai (CN)
Sogem Africa (ZA)
Sogemetais (BR)
Sogemet (FR)
Sogem Iberica (ES)
Sogem Lusitana (PT)
Sogem Deutschland (DE)
Sogem Handel Austria (AT)
Altenberg Zink (DE)
Sogemin Holdings (GB)
Sogem UK (GB)
Sogemin Metals (GB)
Sogemin WarrantFinancing (GB)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
17.5
Megapode (VG)
Miba (ZR)
Entrinvest (BE)
De Beers (ZA-CH)
50
20
97.7
0.9
10082.510010080.44
UM Commercial & Services (CH)
RCMA (NL)
VM Zinc Suisse (CH)
Union Minière Invest France (FR)
Asturiana das Minas (PT)
Ateliers d'Art Français (FR)
Union Minière Oxyde (FR)
Vertex (FR)
12
Sogem USA (US)
Sogemin Metals (US)
African Metals (US)
7.17 Performance Materials (US)
Zinc
Subsidiaries managed by
Precious Metals
Technology & Services
Copper
Advanced Materials
UMCI (BE)
n.v. UNION MINIERE s.a.
UM International (NL) Union Minière USA (US)Sibeka (BE) Union Minière France (FR) Sogem (BE)
Maastrichtsche ZinkwitMaatschappij (NL)
Union Minière Oxyde (NL)
Union Minière Oxyde (BE)
Union Minière Oxyde (GB)
Annual Report 1999
UN
ION
MIN
IERE
1999
DIVIDENDS & FINANCIAL CALENDAR
DIVIDENDS
If the appropriation of profit proposed to you on page 94 of this report is approved, a gross dividend of BEF 50.42 (EUR 1.25) per share will be paid for the financial year 1999, i.e.- a net dividend of BEF 37.82 (EUR 0.94) after deduction of the
25% withholding tax on presentation of coupon No 7- a net dividend of BEF 42.86 (EUR 1.06) after deduction of the
15% withholding tax on presentation of coupon and VVPR strip No 7
Starting 26 May 2000 Payment of dividends on presentation of coupon No 7 at the registered offices and branches of the following institutions:- Fortis Bank- Artesia Bank- Banque Bruxelles Lambert- Banque Degroof- KBC Bank- Petercam
FINANCIAL CALENDAR
14 March 2000 Press release and final figures for financial year 199910 May 2000 at 3 p.m. General Meeting of shareholders (financial year 1999)
in the Auditorium of Fortis BankRue de la Chancellerie 1B-1000 Brussels (Belgium)
13 September 2000 Press release and interim results for the first half of 2000February/March 2001 Press release and final figures for financial year 20009 May 2001 General Meeting of shareholders (financial year 2000)
ADDITIONAL INFORMATION
Stock Listed on Brussels BourseFinancial information Institutional investors and analysts who wish to obtain additional
information may apply to the Investor Relations department at the company's registered office
Contact : Isabelle MichottePhone: 32-2-227.71.47
Annual report This report is also available in French and DutchInternet This report can be downloaded from the Union Minière Website:
www.um.beRegistered office n.v. Union Minière s.a.
Rue du Marais 31B-1000 BrusselsBelgiumPhone: 32-2-227.71.11Fax: 32-2-227.79.00Internet : www.um.beE-mail : [email protected] Trade Register 85382VAT No: BE 401.574.852
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