15 Deconsolidation of medmix Poland
On May 16, 2022, the group announced a suspension of operations at its manufacturing site in Wroclaw, Poland, as a result of sanctions levied by the Polish government. The sanctions apply to medmix’ minority shareholder, Viktor Vekselberg, but have been extended to medmix Poland Sp. z o.o. (medmix Poland), even though Viktor Vekselberg has no control or ownership of any medmix entities and is deprived of all his economic rights in medmix.
On May 23, 2022, the Polish Ministry of the Interior and Administration denied the group's urgent request for removal from the Polish sanctions list. Therefore, the group started to relocate production to other countries. Appeals to the Polish administration are continuing and medmix is pushing for a speedy outcome, with the full support of the Swiss government administration.
As of June 30, 2022, the group assessed whether it still controls medmix Poland and concluded that there is a temporary loss of control. However, it was more likely than not that the group would regain control before the end of the year and therefore the group's management decided to include the financial statements of medmix Poland in the consolidated financial statements as of June 30, 2022. As another consequence, the group reviewed the balance sheet of medmix Poland and assessed if indications for impairments of assets existed. No impairments were recognized as of June 30, 2022.
As of December 31, 2022, the group assessed whether it still controls medmix Poland and concluded that the group lost control at the end of April 2022, the date the sanctions were levied by the Polish government. As a result, the group stopped consolidating medmix Poland by derecognizing the assets and liabilities of the subsidiary including any components of other comprehensive income (OCI) attributable to the entity. Total net assets at the time of deconsolidation amounted to CHF 12.5 million and currency translation differences accumulated in OCI amounted to CHF 3.0 million, which resulted in a total loss from deconsolidation of CHF 15.4 million as stated below.
Net assets derecognized
|
millions of CHF |
|
April 30, 2022 |
|
Other intangible assets |
|
0.0 |
|
Property, plant and equipment |
|
15.0 |
|
Lease assets |
|
4.8 |
|
Deferred income tax assets |
|
0.2 |
|
Other non-current assets |
|
–0.0 |
|
Cash and cash equivalents |
|
2.0 |
|
Inventory |
|
7.8 |
|
Trade accounts receivable |
|
2.5 |
|
Other current assets |
|
–0.0 |
|
Borrowings |
|
–11.5 |
|
Lease liabilities |
|
–4.5 |
|
Provisions |
|
–0.1 |
|
Other liabilities |
|
–3.9 |
|
Net assets derecognized |
|
12.5 |
Loss on net assets derecognized and retained investment
|
millions of CHF |
|
April 30, 2022 |
|
Net assets derecognized |
|
–12.5 |
|
Currency translation differences recycled into the income statement |
|
–3.0 |
|
Fair value on retained investment |
|
– |
|
Loss on net assets derecognized and retained investment |
|
–15.4 |
The group also remeasured the investment in medmix Poland to its fair value, which was assessed to be zero at initial recognition and as of December 31, 2022.
Amounts owed to and from medmix Poland before losing control have been reclassified from intercompany receivables, loans and payables to third party receivables, loans and payables in the total net assets amount of CHF 11.8 million. The related assets have been tested for impairment based on the expected credit loss model. As a result of the impairment test and to reflect the existing credit risk, the group recognized a fifty percent loss allowance of CHF 5.9 million, calculated based on the net amount owed by medmix Poland.
Impairments
|
|
|
2022 |
||||
|
millions of CHF |
|
Gross amount |
|
Impairments |
|
Net book value |
|
Non-current financial assets |
|
11.2 |
|
–4.7 |
|
6.5 |
|
Trade accounts receivable |
|
2.3 |
|
–1.1 |
|
1.2 |
|
Other current receivables and prepaid expenses |
|
0.3 |
|
–0.1 |
|
0.2 |
|
Trade accounts payable |
|
–2.0 |
|
– |
|
–2.0 |
|
Total exposure against medmix Poland |
|
11.8 |
|
–5.9 |
|
5.9 |
On January 11, 2023, the group announced negotiations for the sale of its Polish entity, following its decision to stop production in Wroclaw, Poland. Since sanctions on its Polish subsidiary were first imposed in April 2022, the group has unequivocally stated that the sanctions are erroneous. While the group continues to appeal these local administrative decisions that are based on a misunderstanding of its governance and shareholding structure, medmix has entered into negotiations to dispose of its Polish legal entity and to exit operations in Poland, subject to regulatory approvals.