Wallenius Wilhelmsen: Change in accounting treatment
Wallenius Wilhelmsen has decided to change the accounting treatment relating to
the options over the 20% non-controlling interest in EUKOR, following a review
and recommendation by the group's new auditor. As part of the required
restatements, equity in 2023 and Q1-24 will be reduced by USD 977m and USD 929m,
respectively. The group is financially solid, and this accounting change does
not affect the group's strong performance or ability to deliver on dividend
policy and planned payout.
The accounting change involves recognizing a liability for the put option and
removing the non-current asset currently recognized. The combined effect of
these two adjustments will be recognized in equity. The required restatements of
the financial statements are non-cash adjustments.
The restatements will not affect the group's strong performance, the ability to
deliver on dividend policy and planned payout, the ability to meet financial
obligations, nor have any adverse effect on covenants in outstanding debt
facilities. While the equity ratio will be reduced, the group continues to
deliver on all financial targets.
Background and historical accounting treatment
Since 2018 Wallenius Wilhelmsen has in its financial statements recognized the
put and call options relating to Hyundai Motor Group's (HMG) 20% non-controlling
interest (NCI) in EUKOR, in which group owns the remaining 80%. The options
have been exercisable since 2018 as a result of the group's share of HMG's
transported volumes falling below 50% (currently we transport 40%).
The options have since 2018 been accounted for as a one integrated derivative
financial instrument, recognized as a non-current asset when the fair value of
the NCI exceeds the exercise price of the put and call option. Since then, any
non-cash changes in fair value of the net derivative have been recognized in the
income statement as Other gain/(loss).
The current accounting treatment of the options was decided by the group with
the involvement and audit by the previous auditor, PwC. They also reconfirmed
the treatment following a request by the group in 2022. PwC now recognizes that
a change in accounting treatment is warranted.
New accounting treatment
From the financial year 2024, the group changed its auditor to EY. As part of
their reviews, the accounting treatment for the put and call options was found
not to be in accordance with IFRS accounting standards. It has been concluded
that the put option liability must be recognized in full and the non-current
asset currently recognized must be removed. The combined effect will be
recognized in equity. Consequently, the group will restate its 2023 and Q1-24
financial statements. The restatements do not entail reissuance of the annual
report for 2023, nor the report for Q1-24. The final restatement effects will be
outlined in the Q2-24 financial report, which will be issued on 13 August 2024.
Going forward, there will be no further gains or losses linked to change in
value of the option agreement recognised in the income statement. Under the
revised accounting treatment, any future changes in value of the put liability
will be recognised directly in equity.
As long as the option is not exercised, the associated liability is non-cash and
will not be included in our net interest-bearing debt calculations.
Impact of the preliminary restatement
The restatement of the 2023 and Q1-24 financial statements will increase current
liabilities with USD 878m and USD 847m, respectively. The original shareholders
agreement stipulates that an option notice must be settled after 30 days, and
the obligation will be classified as a current liability.
In addition, non-current assets will be reduced by USD 98m and USD 82m,
respectively, which is the value of the integrated derivative financial
instrument recognized at year-end 2023 and in Q1-24 under the current accounting
treatment. Consequently, equity will be reduced by USD 977m and USD 929m,
respectively.
In the income statement for 2023 and Q1-24, Other gain/(loss) of -USD 6m and
-USD 17m, respectively, would be removed and improve EBIT, Profit before tax and
Net profit by the same amounts.
Note that the above amounts are preliminary effects subject to verification in
the Q2-24 report. See restated amount for 2023 and Q1-24 below.
2023 preliminary restated amounts (prior values in brackets)
Balance Sheet:
Other non-current assets: USD 125m (USD 224m)
Equity: USD 3,080m (USD 4,056m)
Other current liabilities: USD 1,443m (USD 564m)
Income Statement:
EBIT: USD 1,224m (USD 1,218m)
Profit before tax: USD 1,041m (USD 1,035m)
Profit after tax: USD 974m (USD 967m)
Financial targets:
ROCE: 18.2% (16.2%)
Equity ratio: 36.0% (46.9%)
Leverage ratio: 1.1x (not affected)
Q1-24 preliminary restated amounts (prior values in brackets)
Balance Sheet:
Other non-current assets: USD 133m (USD215m)
Equity: USD 3,211m (USD 4,140m)
Other current liabilities: USD 1,496m (USD 649m)
Income Statement:
EBIT: USD 290m (USD 273m)
Profit before tax: USD 234m (USD 217m)
Profit after tax: USD 201m (USD 185m)
Financial targets:
ROCE: 18.9% (16.6%%)
Equity ratio: 36.5% (46.6%)
Leverage ratio: 1.0x (not affected)
In connection with the restatement of our accounts we will host a conference
call for interested parties at 18:00 hrs CET on Friday, 7 June 2024.
Dial-in details as follows:
Norway: +47 21 95 63 42
Sweden: +46 8 1241 0952
Denmark: +45 7876 8490
UK: +44 203 769 6819
US: +1 646 787 0157
Conference code: 922654
For those missing the first call, we will host a second call Sunday, 9 June 2024
at 15:00 CET. Dial-in details and conference code for the Sunday call are the
same as for the Friday call.
For further information, please contact:
Anders Redigh Karlsen, VP Global IR & Market Insight
Tel: +47 994 20 293 Email: anders.karlsen@walwil.com
Torbjørn Wist, CFO
Tel: +47 906 62 222 Email: torbjorn.wist@walwil.com
About Wallenius Wilhelmsen
The Wallenius Wilhelmsen group is a market leader in roll-on/roll-off (RoRo)
shipping and vehicle logistics, managing the distribution of cars, trucks,
rolling equipment and breakbulk to customers all over the world. The group
operates around 125 vessels servicing 15 trade routes to six continents, a
global inland distribution network, 66 processing centers and eight marine
terminals. With a head office in Oslo, Norway, the Wallenius Wilhelmsen group
has 9,500 employees working across 28 countries worldwide.
This information is considered to be inside information pursuant to the EU
Market Abuse Regulation and is subject to the disclosure requirements pursuant
to Section 5-12 the Norwegian Securities Trading Act. This stock exchange
announcement was published by Anders Redigh Karlsen, VP Global IR and Market
Insight on the date and time provided.