14 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 on the medmix local affiliate. The Polish government wrongly assumed that medmix’ minority shareholder, Viktor Vekselberg, would have control of medmix Poland, which is false. 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 build production capacity in other countries. Appeals against the decision by the Polish administration are continuing. medmix has received the full support of the Swiss government.

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 then 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 interim 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 consolidation of medmix Poland retrospectively as of April 30, 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. 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 June 30, 2022.

On January 11, 2023, the group announced that it was seeking to sell its Polish entity, following its decision not to resume operations in Wroclaw, Poland.

On May 31, 2023, the group received an amount of CHF 2.0 million in the sale process of medmix Poland to a third party, resulting in a profit recognized in other operating income (note 5) and a cash flow in the amount of CHF 2.0 million. The transaction is subject to regulatory approvals.

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

Amounts owed to and from medmix Poland before loss of 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.

Impact of deconsolidation medmix Poland on net income

January 1 – June 30

millions of CHF		2022
Loss on net assets derecognized and retained investment		–15.4
Adjustment of medmix Poland for the period May - June		0.9
Total impact of deconsolidation medmix Poland		–14.6

Due to the retrospective deconsolidation as of April 30, 2022, the group adjusted its financial statements as of June 30, 2022.

Adjusted consolidated income statement

January 1 – June 30

millions of CHF	As reported in 2022	Adjustment	Adjusted 2022
Revenue	250.6	–	250.6
Cost of goods sold	–152.7	1.3	–151.4
Gross profit	97.9	1.3	99.2
Selling and administrative expenses	–52.7	0.2	–52.5
Research and development expenses	–12.3	–	–12.3
Other operating income / (expenses), net	–1.7	–15.9	–17.6
Operating income (EBIT)	31.3	–14.4	16.9
Interest income	0.0	–	0.0
Interest expenses	–3.0	–	–3.0
Other financial income / (expenses), net	–0.3	0.1	–0.2
Income before income tax expenses	28.0	–14.3	13.7
Income tax expenses	–4.2	–0.2	–4.5
Net income	23.8	–14.6	9.2

Earnings per share (in CHF)
Basic earnings per share	0.58	–0.36	0.23
Diluted earnings per share	0.58	–0.35	0.22

Adjusted consolidated statement of comprehensive income

January 1 – June 30

millions of CHF	As reported in 2022	Adjustment	Adjusted 2022
Net income	23.8	–14.6	9.2
		–
Items that may be reclassified subsequently to the income statement		–
Cash flow hedges, net of tax	–0.5	–	–0.5
Currency translation differences	–8.0	–	–8.0
Total items that may be reclassified subsequently to the income statement	–8.5	–	–8.5
		–
Items that will not be reclassified to the income statement		–
Remeasurements of defined benefit plans, net of tax	–5.4	–	–5.4
Total items that will not be reclassified to the income statement	–5.4	–	–5.4
		–
Total other comprehensive income	–13.9	–	–13.9
		–
Total comprehensive income for the period	9.9	–14.6	–4.7

Adjusted consolidated balance sheet

June 30, 2022

millions of CHF	As reported in 2022	Adjustment	Adjusted 2022
Non-current assets
Goodwill	252.1	–	252.1
Other intangible assets	123.3	–0.0	123.3
Property, plant and equipment	160.9	–15.4	145.5
Lease assets	79.0	–4.7	74.3
Non-current financial assets	–	12.0	12.0
Non-current receivables	0.0	–	0.0
Deferred income tax assets	3.7	–0.4	3.3
Total non-current assets	619.0	–8.5	610.5

Current assets
Inventory	90.2	–7.9	82.2
Current income tax receivables	0.0	–	0.0
Advance payments to suppliers	8.4	–	8.4
Contract assets	0.4	–	0.4
Trade accounts receivable	51.7	–2.5	49.2
Other current receivables and prepaid expenses	17.4	–0.7	16.7
Current financial assets	–	–	–
Cash and cash equivalents	190.9	–2.0	188.9
Total current assets	358.9	–13.2	345.8
		–
Total assets	977.9	–21.7	956.2

Equity
Share capital	0.4	–	0.4
Reserves	517.2	–14.6	502.6
Equity attributable to shareholders of medmix Ltd	517.6	–14.6	503.1
Total equity	517.6	–14.6	503.1

Non-current liabilities
Non-current borrowings	226.7	–	226.7
Non-current lease liabilities	68.5	–3.3	65.2
Deferred income tax liabilities	18.2	–	18.2
Non-current income tax liabilities	0.8	–	0.8
Defined benefit obligations	1.5	–	1.5
Non-current provisions	3.8	–	3.8
Other non-current liabilities	0.1	–	0.1
Total non-current liabilities	319.4	–3.3	316.2

Current liabilities
Current borrowings	21.7	–	21.7
Current lease liabilities	9.8	–0.8	9.0
Current income tax liabilities	8.4	–0.6	7.8
Current provisions	5.5	–0.1	5.4
Contract liabilities	3.2	–	3.2
Trade accounts payable	44.7	–1.7	43.0
Other current and accrued liabilities	47.5	–0.6	46.9
Total current liabilities	140.9	–3.9	137.0
Total liabilities	460.3	–7.2	453.2

Total equity and liabilities	977.9	–21.7	956.2

Adjusted consolidated statement of cash flows

January 1 – June 30

millions of CHF	As reported in 2022	Adjustment	Adjusted 2022
Cash and cash equivalents as of January 1	209.8	–	209.8
		–
Net income	23.8	–14.6	9.2
Loss on net assets derecognized and retained investment	–	15.4	15.4
Interest income	–0.0	–0.0	–0.0
Interest expenses	3.0	–0.0	3.0
Income tax expenses	4.2	0.2	4.5
Depreciation, amortization and impairments	25.2	–0.5	24.7
(Gains) / losses from disposals of tangible and intangible assets	0.0	–	0.0
Changes in inventory	–12.2	0.1	–12.1
Changes in advance payments to suppliers	–3.2	–	–3.2
Changes in contract assets	–0.4	–	–0.4
Changes in trade accounts receivable	–24.2	–0.0	–24.3
Changes in contract liabilities	–1.1	–	–1.1
Changes in trade accounts payable	4.6	–1.4	3.1
Changes in employee benefit plans	–6.3	–	–6.3
Changes in provisions	–1.1	–0.1	–1.2
Changes in other net current assets	18.1	0.5	18.7
Other non-cash items	4.2	0.0	4.2
Interest received	0.0	0.0	0.0
Interest paid	–2.6	0.0	–2.6
Income tax paid	–5.6	–0.0	–5.6
Total cash flow from operating activities	26.4	–0.3	26.1
		–
Purchase of intangible assets	–0.7	–	–0.7
Purchase of property, plant and equipment	–12.2	0.3	–12.0
Sale of property, plant and equipment	0.8	–	0.8
Cash consideration for acquisitions, net of cash acquired	0.0	–	0.0
Deconsolidation of medmix Poland, cash derecognized	0.0	–2.0	–2.0
Sale of other non-current financial assets	0.1	–	0.1
Purchase of current financial assets	0.0	–	0.0
Sale of current financial assets	0.2	–	0.2
Total cash flow from investing activities	–11.8	–1.7	–13.6
		–
Dividends paid to shareholders	–15.0	–	–15.0
Purchase of treasury shares	–6.1	–	–6.1
Payments of lease liabilities	–4.4	–0.1	–4.5
Repayments of non-current borrowings	–2.6	0.0	–2.6
Proceeds from current borrowings	153.8	–	153.8
Repayments of current borrowings	–158.5	–	–158.5
Total cash flow from financing activities	–32.8	–0.1	–32.8
		–
Exchange gains / (losses) on cash and cash equivalents	–0.8	0.1	–0.7
		–
Net change in cash and cash equivalents	–18.9	–2.0	–21.0
		–
Cash and cash equivalents as of June 30	190.9	–2.0	188.9

Adjusted segment information

January 1 – June 30

millions of CHF	As reported in 2022	Adjustment	Adjusted 2022
Revenue	250.6	–	250.6
Business area cost of goods sold	–130.7	0.1	–130.6
Business area gross profit	119.9	0.1	120.0
Business area gross profit margin	47.8%	0.1%	47.9%
Other cost of goods sold	–22.0	1.2	–20.8
Gross profit	97.9	1.3	99.2
Operating expenses	–66.6	–15.6	–82.3
Operating income (EBIT)	31.3	–14.4	16.9
Depreciation	15.1	–0.5	14.6
Amortization	10.2	–0.0	10.2
EBITDA	56.5	–14.8	41.7
Restructuring expenses	0.5	–	0.5
Non-operational items	3.1	14.8	17.9
Adjusted EBITDA	60.1	–	60.1
Adjusted EBITDA margin	24.0%	–	24.0%