Annual Report 2014

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Financial report Consolidated financial statements In order to mitigate this risk and working together with the Trustees, the Irish sponsors have closed the Plans to future accrual and reduced the investment risk of the Plans. The distribution of the defined benefit liability per country, at the end of the year is as follows: IN THOUSANDS OF EUR 2013 2014 United Kingdom 954,839 1,137,173 Germany 122,400 150,001 Ireland 83,747 94,255 Belgium 39,768 41,225 France 22,767 22,638 Others 46,848 37,321 Defined benefit obligation 1,270,369 1,482,613 The changes in the present value of the defined benefit obligations are as follows: IN THOUSANDS OF EUR 2013 2014 Defined benefit obligation at the beginning of the year 1,329,370 1,270,369 Service cost 6,062 13,611 Past service cost (gain)/loss -800 -637 Settlements -1,768 -6,497 Total service cost 3,494 6,477 Interest cost 50,174 54,104 Actuarial (gains) and losses -22,191 169,347 Benefits paid -67,080 -88,769 Plan participants contribution 453 219 Changes in the scope of consolidation -418 -191 Translation differences -23,433 71,057 Defined benefit obligation at the end of year 1,270,369 1,482,613 In 2013, settlement gains of € 1,061 thousand were recognized, relating to the Eternit UK Pension Fun pension exchange. Furthermore, early retirement settlements resulted in a gain of € 707 thousand relating to the Marley Scheme. Past service cost gains of € 484 thousand related to benefit reduction in the Tegral Pension Fund (Ireland). The remaining € 316 thousand correspond to past service gains in The Netherlands due to a curtailment in benefits. In 2014, Settlement gains of € 6,497 thousand relate to the termination of our defined benefits plans in the Netherlands, which have been replaced by defined contribution plans. Past service gains of € 637 thousand includes € 675 thousand related to benefit reduction in the Tegral Pension Fund (Ireland). The changes in the fair value of the plan assets are as follows: IN THOUSANDS OF EUR 2013 2014 Fair value of plan assets at the beginning of the year 1,004,597 1,026,975 Interest income 39,757 46,216 Actuarial gains and (losses) 40,306 96,648 Employer contribution 9,748 9,807 Plan participants contribution 452 219 Administration cost (excluding management of assets) -1,437 -1,573 Benefits paid -48,669 -73,317 Translation differences -17,779 64,561 Fair value of plan assets at the end of the year 1,026,975 1,169,536 126
Etex Annual Report 2014 Financial report Consolidated financial statements The expense recognised in the income statement is detailed as follows: IN THOUSANDS OF EUR 2013 2014 Total service cost -3,495 -6,477 Interest cost -50,174 -54,104 Interest Income 39,757 46,216 Administration cost (excluding management of assets) -1,437 -1,573 Total employee benefit expense -15,349 -15,938 The employee benefit expense is included in the following line items of the income statement : Operating income -4,932 -8,046 Financial result -10,417 -7,892 The main weighted assumptions used in measuring the employee benefit liabilities are the following: 2013 2014 Discount rate 4.45% 3.53% Future salary increases 2.21% 2.08% Pension increase 3.16% 2.96% Medical cost trend 5.50% 5.50% The distribution of the plan assets is the following: 2013 2014 Equity instruments 62% 35% Debt instruments 20% 50% Real estate 8% 7% Cash and fixed deposits 6% 4% Insurance 4% 4% Total 100% 100% The expected employer contributions to be paid in 2015 to defined benefit plans amount to € 10,862 thousand. Sensitivity analysis UK The measurement of the defined benefit obligation for the Plans in UK is particularly sensitive to changes in key assumptions, as described below: The discount rate has been selected following actuarial advice and taking into account the duration of the liabilities. A decrease in the discount rate of 1.0% would result in a £ 165 million increase in the present value of the defined benefit obligations of the Plans (which is likely to be mitigated in part by an increase in asset values). The inflation assumption adopted is consistent with the discount rate used. It is used to set the assumptions for pension increases and deferred revaluations used for preserved members benefits. An increase in the inflation rate of 1.0% would result in a £ 101 million increase in the present value of the defined benefit obligation of the Plans (which is likely to be mitigated in part by an increase in asset values). The increase in the present value of the defined benefit obligation due to a member living one year longer would be approximately £ 25 million. There is also a risk of asset volatility leading to lower funding levels in the Plans. Ireland The measurement of the defined benefit obligation for the Plans in Ireland is particularly sensitive to changes in key assumptions, as described below: The discount rate has been selected following actuarial advice and taking into account the duration of the liabilities. A decrease in the discount rate of 1.0% would result in a € 20 million increase in the present value of the defined benefit obligations of the Plans (which is likely to be mitigated in part by an increase in asset values). The inflation assumption adopted is consistent with the discount rate used. It is used to set the assumptions for pension increases and deferred revaluations used for preserved members’ benefits. An increase in the inflation rate of 1.0% would result in a € 20 million increase in the present value of the defined benefit obligation of the Plans (which is likely to be mitigated in part by an increase in asset values). The increase in the present value of the defined benefit obligation due to a member living one year longer would be approximately € 3 million. 127
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ABOUT ETEX 1 Our company & strategy
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