CONDENSED CONSOLIDATED INTERIM FINANCIAL Wilson Sons Holdings Brasil S.A. 30 September 2021 ENGAGE WITH US: wilsonsons.com.br/ir Instagram.com/WilsonSons Twitter.com/WilsonSonsBR YouTube.com/WilsonSonsIR IR CONTACTS: [email protected]+55 21 3504-4122
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Wilson Sons Holdings Brasil S.A. FINANCIAL 30 September ...
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Wilson Sons Holdings Brasil S.A.“(Free translation of the original issued in Portuguese)”
30 September 2021with Independent Auditor’s Review Report
Wilson Sons Holdings Brasil S.A.
Interim financial information
30 September 2021
Contents
Independent auditor’s review report on quarterly information ............................................................... 1
Interim financial information
Balance sheets .................................................................................................................................... 3Income statement ................................................................................................................................ 4Statements of comprehensive income ................................................................................................. 5Statements of changes in equity .......................................................................................................... 6Statements of cash flows ..................................................................................................................... 7Value added statements ...................................................................................................................... 8Notes to the parent company and consolidated interim financial information ........................................ 9
Centro Empresarial PB 370Praia de Botafogo, 370 6º ao 10º andar - Botafogo22250-040 - Rio de Janeiro - RJ - BrasilTel: +55 21 3263-7000ey.com.br
Uma empresa-membro da Ernst & Young Global Limited
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A free translation from Portuguese into English of Independent Auditor’s Review Report on interim financialinformation prepared in Brazilian currency in accordance with NBC TG 21 and IAS 34 applicable to the preparationof Quarterly Information (ITR) and the rules issued by the Brazilian Securities and Exchange Commission (CVM)
Independent auditor’s review report on quarterly information
To the Board of Directors and Shareholders’ ofWilson Sons Holdings Brasil S.A.Rio de Janeiro, Brazil
Introduction
We have reviewed the accompanying individual and consolidated interim financial information,contained in the Quarterly Information Form (ITR) of Wilson Sons Holdings Brasil S.A. (“theCompany”) for the quarter ended September 30, 2021, comprising the statement of financial positionas of September 30, 2021 and the related statements of profit or loss and of comprehensive incomefor the three and nine-month periods then ended, and of changes in equity and of cash flows for thenine-month period then ended, including the explanatory notes.
Management is responsible for preparation of the individual and consolidated interim financialinformation in accordance with Accounting Pronouncement NBC TG 21 - Interim Financial Reporting,and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board(IASB), as well as for the fair presentation of this information in conformity with the rules issued by theBrazilian Securities and Exchange Commission (CVM) applicable to the preparation of the QuarterlyInformation Form (ITR). Our responsibility is to express a conclusion on this interim financialinformation based on our review.
Scope of review
We conducted our review in accordance with Brazilian and international standards on reviewengagements (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information performed bythe Independent Auditor of the Entity, respectively). A review of interim financial information consistsof making inquiries, primarily of persons responsible for financial and accounting matters, and applyinganalytical and other review procedures. A review is substantially less in scope than an audit conductedin accordance with auditing standards and consequently does not enable us to obtain assurance thatwe would become aware of all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion.
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Conclusion on the individual and consolidated interim financial information
Based on our review, nothing has come to our attention that causes us to believe that theaccompanying individual and consolidated interim financial information are not prepared, in all materialrespects, in accordance with NBC TG 21 and IAS 34 applicable to the preparation of QuarterlyInformation Form (ITR) and presented consistently with the rules issued by the Brazilian Securitiesand Exchange Commission (CVM).
Other matters
Statements of value added
The abovementioned quarterly information include the individual and consolidated statement of valueadded (SVA) for the nine-month period ended September 30, 2021, prepared under Company’sManagement responsibility and presented as supplementary information by IAS 34. These statementshave been subject to review procedures performed together with the review of the quarterlyinformation with the objective to conclude whether they are reconciled to the interim financialinformation and the accounting records, as applicable, and if its format and content are in accordancewith the criteria set forth by NBC TG 09 - Statement of Value Added. Based on our review, nothinghas come to our attention that causes us to believe that they were not prepared, in all materialrespects, consistently with the overall individual and consolidated interim financial information.
Rio de Janeiro, November 10, 2021.
ERNST & YOUNGAuditores Independentes S.S.CRC-2SP015199/O-6
Diogo Afonso da SilvaAccountant CRC-1RJ114783/O-8
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A free translation from Portuguese into English of Independent Auditor’s Review Report on interim financialinformation prepared in Brazilian currency in accordance with NBC TG 21 and IAS 34 applicable to the preparationof Quarterly Information (ITR) and the rules issued by the Brazilian Securities and Exchange Commission (CVM)
Wilson Sons Holdings Brasil S.A.Balance sheets30 September 2021 and 31 December 2020(All amounts in thousands of reais, unless otherwise stated)
Parent Company ConsolidatedNota 30/09/2021 31/12/2020 30/09/2021 31/12/2020
The accompanying notes are an integral part of the condensed consolidated interim financial information.
5
Wilson Sons Holdings Brasil S.A.
Statements of Comprehensive IncomeThree and nine-month periods ended 30 September 2021 and 2020(All amounts in thousands of reais, unless otherwise stated)
Parent Company ConsolidatedThree-Month Period Nine-Month Period Three-Month Period Nine-Month Period
Net cash generated by (used in) operating activities (16,513) (10,633) 421,907 512,454
Financial income and interest received 1,209 611 6,760 28,656Interest received from related companies 313 828 1,305 1,271Accounts payable and receivable with related companies (810) 49,513 357 4,221Dividends received 161,420 168,663 - -Capital increase 3,374 - 3,528 10,465Sale of property, plant and equipment, and Intangible assets - 272 670 (2,093)Additions to property, plant, and equipment and intangible assets (255) (381) (153,972) (238,630)Disposal of investments - - 267 -Advances for future capital increases - Joint ventures (78,021) - (78,021) -
Net cash generated by (used in) investing activities 87,230 219,506 (219,106) (196,110)
Funding - third parties - - 18,641 249,715Amortisation of financing - third parties - - (245,570) (104,339)Repayments of leases obligations (52) (69) (34,480) (23,857)Dividends paid 7 (31,673) (149,504) (38,468) (84,467)
Net cash used in financing activities (31,725) (149,573) (299,877) 37,052
Net increase (decrease) in cash and cash equivalents balance 38,992 59,300 (97,076) 353,396
Cash and cash equivalents at the start of the fiscal year 71,480 3,765 303,123 215,929Effect of foreign exchange rate changes (22,462) (6,870) 2,153 (156,397)Cash and cash equivalents at year-end 88,010 56,195 208,200 412,928
Net increase in cash and cash equivalents balance 38,992 59,300 (97,076) 353,396
The accompanying notes are an integral part of the condensed consolidated interim financial information.
8
Wilson Sons Holdings Brasil S.A.
Value Added StatementsNine-month period ended 30 September 2021 and 2020(All amounts in thousands of reais, unless otherwise stated)
Parent Company Consolidated30/09/2021 30/09/2020 30/09/2021 30/09/2020
Generation of value added
Revenues (1,160) 2,100 1,570,437 1,334,241Revenue from products and services - - 1,563,564 1,329,297Other revenues (1,160) 2,100 6,075 5,362Expected credit losses - - 798 (418)Inputs from third parties 14,179 5,713 (330,117) (269,618)Costs of products and services (2,993) (3,404) (159,691) (131,297)Maintenance (263) (38) (51,854) (34,252)Energy, fuels, and outsourced services 19,000 10,296 (109,681) (84,553)Other costs (1,565) (1,141) (10,526) (23,674)Recovery of asset Values - - 1,635 4,158
Gross value added 13,019 7,813 1,240,320 1,064,623
Amortisation of right-of-use of the assets (65) (81) (48,424) (40,273)Depreciation and amortisation (135) (120) (199,440) (192,919)
Net added value 12,819 7,612 992,456 831,431
Received from third parties 191,271 73,773 (1,783) (17,903)Equity results 187,729 71,716 (23,759) (32,135)Finance income 3,542 2,057 18,085 10,397Others - - 3,891 3,835
Total value added value to be distributed 204,090 81,385 990,673 813,528
Distributed value added 204,090 81,385 990,673 813,528
The accompanying notes are an integral part of the condensed consolidated interim financial information.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
9
1. Operational contextWilson Sons is a publicly-held corporation headquartered at Rua da Quitanda, 86, 5º andar, Centro, Riode Janeiro, Brazil, and its securities will have its titles traded on the São Paulo stock exchange – BR S.A.(PORT3) from 25 October 2021. The Company is one of the largest integrated operators of port andmaritime logistics and supply chain solutions in Brazil. With over 180 years of history, the Company offersa complete line of services, nationwide, to participants in the domestic and foreign trade sectors, as wellas to the oil and gas industry. The Company's main activities are divided into the following segments:tugboats and maritime agency, container terminals and offshore support bases, offshore support vessels,logistics and shipyards.
2. Basis of preparation and presentation and main accounting policiesThe unaudited interim financial information was prepared following CPC 21 (R1)/IAS 34 - Interim FinancialStatements.
The relevant accounting policies adopted by the Group in this unaudited interim financial information areconsistent with those adopted in the accounting statements for the year ended 31 December 2020,disclosed on 21 September 2021.
Additionally, the Group considered the guidelines issued by Technical Guideline CPC 07, issued by theCPC in November 2014, in preparing its financial statements. Thus, the relevant information specific tothe financial statements is being highlighted and corresponds to that used by the administration in itsmanagement.
The result for the nine-month period ended 30 September 2021 is not necessarily indicative of the resultsthat can be expected for the entire fiscal year ending 31 December 2021. The interim financial informationand notes do not include all information and disclosures required for annual accounting statements.Therefore, these statements should be read with the annual audited financial statements for 31 December2020.
Critical accounting practices, policies, estimates, and judgments adopted by the Company in this interimfinancial information are consistent with those adopted in the accounting statements for the fiscal yearended 31 December 2020.
Authorization to finish preparing the Company's management granted this interim financial information on9 November 2021.
New or revised pronouncements applied for the first time in 2021Standards were revised and became applicable as of 1 January 2021 and, therefore, are being adoptedin this individual and consolidated interim financial information, however, the adoption of theseamendments did not result in a material impact on the disclosures or amounts disclosed.
New standards and interpretations not yet in forceA number of new standards and interpretations will come into effect as of 1 January 2022 and their earlierapplication is permitted. The Company has not early adopted any of these standards or futureinterpretations in preparing this interim financial information, and does not expect that they will have asignificant impact in future periods.
2.1. Functional and presentation currency of individual and consolidated interim financialinformationWe present below the concepts and practices related to the functional currency used due to its impact onthe individual and consolidated interim financial information.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
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a) Functional currency of the Parent CompanyA company's functional currency is the currency of the main economic environment in which itoperates and should be the currency that best reflects its business and operations. Based on thisanalysis, Management concluded that the United States Dollar (“US$” or “Dollar”) is the ParentCompany's functional currency and this conclusion is based on the analysis of the followingindicators:
Currency that most influences the prices of goods and services. It is the currency in which theselling price of your goods and services is expressed and settled;
Currency of the country whose competitive forces and regulations most influence the businessof the parent company;
Currency that most influences costs for the supply of products or services, that is, the currencyin which the Parent Company's costs are normally expressed and settled;
Currency in which the Parent Company normally raises funds from financial activities, and inwhich it normally receives for its sales and accumulates cash.
b) Presentation currency of the Parent CompanyThe presentation currency is the currency in which the interim financial information is presentedand is normally defined based on the Company's legal obligations. In compliance with Brazilianlaw, this individual and consolidated financial information is presented in Reais, converting theindividual and consolidated interim financial information prepared in the Parent Company'sfunctional currency into Reais, using the following criteria:
Assets and liabilities at the exchange rate in effect on the balance sheet date;
Income and comprehensive income accounts, statement of cash flows and value added at theaverage monthly rate; and
Equity at the historical value of formation.
The corresponding adjustments resulting from the above translation are recognized in equity asaccumulated translation.
c) Conversion of Interim Financial Information of SubsidiariesFor subsidiaries whose functional currency is different from the US dollar, the asset and liabilityaccounts are translated into the Parent Company's functional currency, using the exchange ratesin effect on the balance sheet date, and the income and expense items are translated using theaverage rate monthly. The resulting translation adjustments are recognized in equity asaccumulated translation adjustments.
Goodwill and fair value adjustments arising from the acquisition of a foreign entity (entities with afunctional currency other than the Parent) are treated as assets and liabilities of the foreign entityand translated at the closing rate, and the adjustments resulting from the conversion are alsorecognized in equity as cumulative translation adjustments.
The consolidated balance sheets, consolidated statements of income and cash flows in thefunctional currency (Dollar), converted to the presentation currency (Real) are as follows:
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
Equity attributable to the parent company 388,185 2,111,474 359,050 1,865,845Non-controlling interests 271 1,473 330 1,715
Total equity 388,456 2,112,947 359,380 1,867,560
Total liabilities and equity 976,493 5,311,532 975,341 5,068,504
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
Income before financial result 78,883 421,312 58,993 302,752
Financial result (20,354) (108,922) (23,801) (119,530)
Income before tax 58,529 312,390 35,192 183,222
Income tax expense (24,368) (130,485) (23,139) (114,517)
Net income for the period 34,161 181,905 12,053 68,705
Net income attributable to:Controlling shareholders 32,961 175,506 11,267 64,660Non-controlling interests 1,200 6,399 786 4,045
34,161 181,905 12,053 68,705
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
13
Statements of Cash Flows
30/09/2021 30/09/2020US$ R$ US$ R$
Cash flow from operating activitiesProfit before income tax and social contribution 58,529 312,390 35,192 183,222
Adjustments by:Equity result 4,474 23,759 6,631 32,135Depreciation and amortisation 37,371 199,440 38,175 192,918Amortisation of right-of-use 10,056 48,424 9,408 40,274Gain on sale of property, plant, and equipment (53) (286) (133) (507)Loss (gain) on sale of investment - SUAPE (59) (312) - -Expected credit losses 249 1,335 56 258Provision for tax, labor, civil and environmental risks (966) (5,024) 296 1,613Financial result 20,354 108,922 23,801 119,530Employee benefit 48 255 102 514Operational trade receivables (9,689) (51,659) 9,179 46,622Inventories (2,013) (10,733) 234 1,189Recoverable taxes (538) (2,869) 15,400 78,220Escrow deposits 405 2,159 4,632 23,527Other operating assets (6,036) (32,182) 2,383 12,104Trade payables 1,418 7,560 (804) (4,084)Salaries, provisions, and social charges 1,550 8,264 (1,101) (5,592)Recoverable taxes 588 3,135 (1,456) (7,395)Income tax expense paid (21,485) (114,835) (20,425) (106,443)Interest paid on lease (11,216) (59,648) (10,961) (55,855)Interest paid on financing (7,158) (38,339) (6,495) (32,370)Other operating liabilities 4,193 22,151 (1,461) (7,426)
Net cash generated by operating activities 80,022 421,907 102,653 512,454
Financial income and interest 1,272 6,760 6,023 28,656Interest received from related companies 245 1,305 251 1,271Accounts payable and receivable with related companies 67 357 831 4,221Dividends received - - - -Capital increase 646 3,528 2,498 10,465Sale of property, plant and equipment, and Intangible assets 121 670 (360) (2,093)Additions to property, plant, and equipment and intangible
assets (28,921) (153,972) (47,005) (238,630)Sale of investments 65 267 - -Advances for future capital increases - Joint ventures (15,033) (78,021) - -
Net cash used in investing activities (41,538) (219,106) (37,762) (196,110)
Funding - third parties 3,489 18,641 47,355 249,715Amortisation of financing - third parties (44,856) (245,570) (21,713) (104,339)Repayments of leases obligations (6,470) (34,480) (4,676) (23,857)Dividends paid (6,870) (38,468) (15,605) (84,467)
Net cash generated by (used in) financing activities (54,707) (299,877) 5,361 37,052
Net increase (decrease) in cash and cash equivalents balance (16,223) (97,076) 70,252 353,396
Cash and cash equivalents at the start of the fiscal year 58,330 303,123 53,571 215,929Effect of foreign exchange rate changes (3,831) 2,153 (50,618) (156,397)Cash and cash equivalents at year-end 38,276 208,200 73,205 412,928
Net increase (decrease) in cash and cash equivalents balance (16,223) (97,076) 70,252 353,396
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
14
3. Cash and cash equivalents
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Denominated in US dollar:Exchange funds 53,998 - 53,998 -Cash and banks - - 21,952 23,651
Total 53,998 - 75,950 23,651
Denominated in Brazilian Real:Fixed income investments 34,012 61,945 129,326 244,542Cash and banks - 4 2,663 4,072Deposit certificates - 9,531 261 30,858
Total 34,012 71,480 132,250 279,472
Total cash and cash equivalents 88,010 71,480 208,200 303,123
The average income from cash and cash equivalents is shown below:
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Denominated in US Dollar:Fixed income investments - - (3.06%) -
Denominated in Brazilian Real:Fixed income investments 3.46% 2.55% 3.46% 2.55%Deposit certificates - 2.25% 3,45% 2.16%
Cash and cash equivalents comprise cash on hand, bank accounts and short-term investments that arehighly liquid and readily convertible to known amounts of cash and subject to an immaterial risk of changesin value.
US dollar-denominated cash and cash equivalents refer principally to investments in time deposits placedwith major financial institutions. Real-denominated cash and cash equivalents refer principally toinvestments in deposit certificates and Brazilian treasury bonds.
Exclusive investment fundThe Group has investments in an exclusive investment fund managed by Itaú BBA S.A., which isconsolidated in this interim financial information. These highly liquid investments are readily convertibleinto known amounts of cash and are marked at fair value daily in profit or loss. The financial obligations ofthis fund are limited to Itaú BBA SA service fees, audit fees and other minor administrative expenses.
The exclusive investment fund has its portfolio breakdown as set out below:
30/09/2021 31/12/2020Fixed income investments:Treasury financial bill 53,144 143,773Finance bill 38,111 36,768CDB after early settlement - 16,010Eligible financial bill - Level II 5,349 4,745LTN Over 32,722 -LTF Over - 43,246
Total 129,326 244,542
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
15
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Fund’s Interest % 26% 25% 100% 100%Amount invested in the Fund 34,012 61,945 129,326 244,542
4. Operational trade receivables
30/09/2021 31/12/2020
Receivable for services rendered 265,116 204,340Expected credit losses (1,543) (2,879)
Total 263,573 201,461
Trade receivables disclosed are classified as financial assets measured at amortized costs.
The aging list of receivables for services rendered is as follows:
30/09/2021 31/12/2020
Current 218,431 170,092
Overdue: 01 to 30 days 31,111 24,942 31 to 90 days 9,944 4,426 91 to 180 days 3,561 1,026 More than 180 days 2,069 3,854
Total 265,116 204,340
Generally, the interest of one percent per month plus a two percent penalty is charged on overduebalances. Allowances for expected credit losses are recognized as a reduction of receivables whenever aloss is expected. The Group has recognizes an allowance considering an expected credit loss model thatinvolves historical evaluation of effective loss over billing cycles. The period over review is 3.5 years, beingrenewed every 180 days. The measurement of default rate shall consider the recoverability of receivablesand apply according to the debtors' payment profile. The Group reviews, when appropriate, the matrix toadjust the historical credit loss experience with forward-looking information. The provision matrix isdisclosed in Note 24. Due to the COVID-19 pandemic, the Company has reviewed the variables that makeup the methodology of measuring estimated losses and has not observed an increase in customer defaultdue to the coronavirus outbreak.
The changes in the provision for expected credit losses are shown below:
Consolidated
At 31 December 2019 3,374Decrease in allowance (495)At 31 December 2020 2,879
Decrease in allowance (1,336)
At 30 September 2021 (1,543)
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
16
5. Inventories
Consolidated30/09/2021 31/12/2020
Operating materials 58,373 48,870Raw materials for construction contracts (external customers) 16,553 12,264
Total 74,926 61,134
Inventories are presented net of losses to adjust to their net realizable value, and these adjustments aremainly due to obsolescence and, when constituted, are recognized in income for the year. On 30September 2021, the provisioned balance was R$1.7 million (2020: R$1.8 million).
6. Recoverable taxes
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
PIS and COFINS recoverable 20 55 91,454 66,000
Income tax and social contribution recoverable 6,894
Total recoverable taxes current 7,266 6,934 151,405 116,815
PIS and COFINS recoverable - - 16,538 42,748FUNDAF recoverable - - 290 -Judiciary bond recoverable 2,171 1,265 13,776 11,394INSS recoverable - - 3,053 3,053
Total recoverable taxes non-current 2,171 1,265 33,657 57,195
Total 9,437 8,199 185,062 174,010
The Group reviews taxes and levies impacting its business to ensure that payments are accurately made.If tax credits arise, the Group intends to use them in future years within their legal term. If the Companydoes not utilize the tax credit within their legal term, reimbursement of such amounts will be requestedfrom the Brazilian Internal Revenue Service (“Receita Federal do Brasil”).
7. Dividends receivable and payable
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Amounts to be received:Saveiros Camuyrano Serviços Marítimos S.A. - 226.672 - -Wilson Sons Serviços Marítimos Ltda. 158.671 - - -Wilport Operadores Portuários Ltda. - 100.000 - -Wilson Sons Terminais e Logística Ltda. 19.000 - - -Wilson, Sons Agência Marítima Ltda. - 9.000 - -Wilson, Sons Shipping Services Ltda. 3.000 - - -
Total 180,671 335,672 - -
Amounts to be paid:Wilson Sons Limited - 31,673 - 31,673
Total - 31,673 - 31,673
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
17
Movement of dividends in the period:
Parent Company Consolidated
At 31 December 2019 66,602 66,727Declarations 245,832 252,232Payments (278,650) (285,175)Others (2,111) (2,111)At 31 December 2020 31,673 31,673
Declarations - 6,795Payments (31,673) (38,468)
Balance at 30 September 2021 - -
8. Investments
8.1. InvestedDetails of the Company’s subsidiaries, and other entities and operations under its control, on the basedate of this financial information, are shown below:
Percentage of participationPlace of 30/09/2021 31/12/2020
constitution Direct Indirect Direct IndirectSubsidiariesTowageSaveiros, Camuyrano Serviços Marítimos S.A (1) Rio de Janeiro - - 100.00% -
ShipyardWilson Sons Shipping Services Ltda. Rio de Janeiro 100.00% - 100.00% -Wilson Sons Estaleiros Ltda. Rio de Janeiro 100.00% - 100.00% -
Ship agencyWilson Sons Agência Marítima Ltda. (2) Rio de Janeiro - - 100.00% -Dock Market Soluções Ltda. Rio de Janeiro 90.00% - 90.00% -
LogisticsWilson Sons Terminais e Logística Ltda.(3) (7) Rio de Janeiro 100% - - 100.00%EADI Santo André Terminais de Cargas Ltda. (4) São Paulo - - - 100.00%Allink Transportes Internacionais Ltda. (5) São Paulo 50.00% - 50.00% -
Container terminalWilport Operadores Portuários Ltda. (3)) Rio de Janeiro - - 100.00% -Tecon Rio Grande S.A. Rio Grande do Sul - 100.00% - 100.00%Tecon Salvador S.A. Bahia - 100.00% - 100.00%
Offshore support basesWilson Sons Serviços Marítimos Ltda. Rio de Janeiro 100.00% - 100.00% -
Joint venturesOffshoreWilson Sons Ultratug Participações Ltda. (6) Rio de Janeiro 50.00% - 49.13% -
LogisticsPorto Campinas, Logística e Intermodal Ltda. São Paulo 50.00% - 50.00% -
(1) In January 2021 the subsidiary Saveiros, Camuyrano Serviços Marítimos S.A. was merged into Wilson Sons Serviços Marítimos Ltda.(2) In January 2021 the subsidiary Wilson, Sons Agência Marítima Ltda was incorporated by Wilson Sons Shipping Services Ltda.(3) In January 2021 the subsidiary Wilport Operadores Portuários Ltda was merged into Wilson Sons Logística Ltda, and then the name of this subsidiarywas change to Wilson, Sons Terminais e Logística Ltda.(4) In January 2021 the subsidiary Eadi Santo André Terminais de Carga Ltda was merged into Wilson Sons Terminais e Logística Ltda.(5) In January 2021 the subsidiary Allink Services e Gerenciamento de Cargas Ltda was merged into Allink Transportes Internacionais Ltda.(6) In February 2021 Wilson Sons Limited paid in the Company's capital by transferring 891,482 shares, totalling R$3,243,644.00 corresponding to theentire equity interest held in Wilson, Sons Ultratug Participações S/A.(7) During the third quarter of 2021 Wilson Sons Holdings Brasil S.A carried out the spin-off and subsequent sale of the assets of Wilson Sons Terminaise Logísticas Ltda. linked to assets related to Suape Logistics Center.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
18
The investments presented in the parent company’s financial information evaluated under the equity method are shown as follows:
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
19
The movement of investments in subsidiaries in the parent company financial information is as follows:
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
20
The investments presented in the consolidated financial information evaluated under the equity methodare shown as follows:
30/09/2021Investee’s’ Eliminationadjusted of profit on Result Book value
Number of Percentage of Share shareholders’ construction of Equity ofshares participation capital equity contracts invested result investment
Wilson Sons UltratugParticipações Ltda. 50,346,250 50.00% 154,989 389,571 (136,369) (47,314) (23,657) 126,595
31/12/2020Investee’s’ Eliminationadjusted of profit on Result
Number of Percentage of Share shareholders’ construction of Equity Book value ofshares participation capital equity contracts invested result investment
Wilson Sons UltratugParticipações Ltda. 50,346,250 49.13% 102,469 373,353 (144,936) (58,331) (28,645) 111,903
The movement of investments in joint ventures, presented in the consolidated financial information, is asfollows:
30/09/2021Eliminationof profit on
Opening Translation construction Equity Capital Finalbalance reserve contracts result increase balance
Wilson Sons Ultratug Participações Ltda. 110,667 13,226 99 (23,657) 26,260 126,595Porto Campinas, Logística e Intermodal Ltda 1,128 - - (102) - 1,026
111,795 13,226 99 (23,759) 26,260 127,621
31/12/2020Eliminationof profit on
Opening Translation construction Equity Capital Finalbalance reserve contracts result increase balance
Wilson Sons Ultratug Participações Ltda. 110,667 29,651 230 (28,645) - 111,903Porto Campinas, Logística e Intermodal Ltda 1,129 - - (122) 121 1,128
111,796 29,651 230 (28,767) 121 113,031
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
21
8.2. Joint operations and joint ventures
Interest % - Parent CompanyPlace of 30/09/2021 31/12/2020
constitution Direct Indirect Direct Indirect
Joint venturesOffshoreWilson Sons Ultratug Participações Ltda. Rio de Janeiro 50.00% - 49.13% -
LogisticsPorto Campinas, Logística intermodal Ltda. Rio de Janeiro 50.00% - 50.00% -
Joint operationsTowageConsórcio de Rebocadores da Baia de São Marcos Maranhão - 50.00% - 50.00%
8.3. Joint operationsThe following amounts are included in the financial statements because of the proportionalconsolidation of joint ventures and consortia:
30/09/2021 31/12/2020
Intangible assets - 10Vehicles, plant, and equipment 13,857 9,571Inventories 629 967Trade and other trade receivables 3,713 5,145Cash and cash equivalents 968 7,319
Total assets 19,167 23,012
Trade and other trade payables (18,283) (22,020)Deferred tax liabilities (884) (992)
Total liabilities (19,167) (23,012)
Three-Month Period Nine-Month Period30/09/2021 30/09/2020 30/09/2021 30/09/2020
8.4. Joint venturesThe following balances are not consolidated in the Company's financial statements, considered jointventures. The Company’s interests in joint ventures are equity accounted.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
22
30/09/2021 31/12/2020
Cash and cash equivalents 53,920 71,302Long-term investment 11,738 11,085Trade and other trade receivables 200,790 149,509Other assets 58,442 53,757Vehicles, plant, and equipment 2,658,746 2,627,031Right of use 161,904 50,845
Total assets 3,145,540 2,963,529
Trade and other trade payables 414,616 280,174Bank loans 1,948,817 2,090,902Lease liabilities 163,639 52,388Other non-current liabilities 226,845 164,455Equity 391,623 375,610
Total liabilities and equity 3,145,540 2,963,529
Three-Month Period Nine-Month Period30/09/2021 30/09/2020 30/09/2021 30/09/2020
Selling expenses (32) (106) (121) (331)General and administrative expenses (11,424) (15,149) (46,533) (45,969)Other operating expenses, net (318) (189) (625) (446)
Income before financial result (11,212) 12,735 (28,181) 24,244
Financial result (52,106) (34,685) (70,807) (177,049)Loss before tax (63,318) (21,950) (98,988) (152,805)
Income tax expense 31,914 16,770 51,469 87,397
Loss for the period (31,404) (5,180) (47,519) (65,408)
We have not separately disclosed all material Joint Ventures because they belong to the same economicgroup and are managed unified.
GuaranteesLoan agreements of Wilson, Sons Ultratug Participações S.A., and subsidiaries with the BNDES areguaranteed by a lien on the financed vessels and in most of the contracts a corporate guarantee from bothWilson Sons Holdings Brasil e da Remolcadores Ultratug Ltda., each guaranteeing 50% of its subsidiary’sdebt balance with the BNDES. Financing, equivalent to 50%, totals R$900.8 million (2020: R$887.2million).
Wilson, Sons Ultratug Participações S.A. subsidiary’s loan agreement with Banco do Brasil is guaranteedby a pledge on the financed offshore support vessels. The security package also includes a standby letterof credit issued by Banco de Crédito e Inversiones - Chile for part of the debt balance, assignment ofPetrobras' long-term contracts and a corporate guarantee issued by Inversiones Magallanes Ltda. - Chile.A cash reserve account of R$11.7 million, classified as a long-term investment, must be maintained untilfull repayment of the loan agreement. Financing, equivalent to 50%, totals R$133.7 million (2020: R$133.7million).
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
23
Restrictive clausesAs of 30 September 2021, Wilson, Sons Ultratug Participações S.A.’s subsidiary was not complying withone of the covenant ratios. In the event of non-compliance, the subsidiary of the jointly-owned subsidiarymust be capitalized, within a period of one year, in the amount necessary to reach the index (R$30.0million). In September 2021, there was a capital increase in the subsidiary in the amount of R$30.0 million.
Provision for tax, labor, civil and environmental risksIn its ordinary course of business in Brazil, Wilson, Sons Ultratug Offshore S.A. (WSUT) remains exposedto numerous local legal claims. The WSUT policy is to vigorously contest such claims, many of whichappear to have little substance in merit and to manage such claims through its legal counsel.
WSUT booked provisions related to labor claims amounting to R$0.8 million (2020: R$0.4 million), whoseprobability of loss was estimated as probable.
In addition to the cases for which WSUT booked the provision, there are other tax, civil, labor andenvironmental disputes amounting to R$31.9 million (2020: R$31.8 million) whose probability of loss wasestimated by the legal counsel as possible.
The breakdown of possible claims is described as follows:
ImpairmentThe Company annually tests its assets for impairment or when there is an indication that the book valuemay not be recoverable.
The recoverable amount of a Cash Generating Unit (CGU) is determined based on value-in-usecalculations. These calculations use cash flow projections, based on financial budgets approved bymanagement for a period of ten years, for the offshore support bases and until the end of the leaseagreements for the container terminals.
Discount rates represent the assessment of risks in the current market, specific to each cash-generatingunit, taking into account the time value of money and the individual risks of the underlying assets that werenot incorporated in the cash flow estimates. The calculation of the discount rate is based on specificcircumstances of the Company, and is derived from the weighted average cost of capital (WACC). TheWACC considers both the cost of debt and equity. The cost of equity is derived from the expected returnon investment by investors. The cost of debt is based on interest-bearing financing that the Company isrequired to honor. The specific risk of the logistics and port segments (in the case of the UGCs of TeconRio Grande and Tecon Salvador), as well as of the oil and gas segment, are incorporated by applyingindividual beta factors. Beta factors are evaluated annually based on publicly available market data.
No apparent impairment of tangible and intangible assets was identified for the nine-month period ended30 September 2021 and the fiscal year ended 31 December 2020.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
24
10. Property, plant, and equipmentChanges in the parent company's property, plant, and equipment in the period:
Lands andVehicles,
machines andTotalbuildings equipment
Cost or valuationAt 31 December 2019 428 864 1,292Additions 51 35 86Disposals (337) - (337)Foreign currency loss in respect of translation into Brazilian Reais 38 248 286At 31 December 2020 180 1,147 1,327
Additions - 255 255Foreign currency loss in respect of translation into Brazilian Reais 9 62 71At 30 September 2021 189 1,464 1,653
Accumulated depreciationAt 31 December 2019 145 589 734Charge for the year - 162 162Disposals (45) - (45)Foreign currency loss in respect of translation into Brazilian Reais 30 172 202At 31 December 2020 130 923 1,053
Charge for the year - 135 135Foreign currency loss in respect of translation into Brazilian Reais 6 46 52At 30 September 2021 136 1,104 1,240
Carrying amountAt 30 September 2021 53 360 413
At 31 December 2020 50 224 274
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
25
Changes in consolidated property, plant, and equipment in the period:
Land andbuildings Vessels
Vehicles,machines and
equipmentAssets underconstruction Total
Cost or valuation
At 31 December 2019 1,263,353 2,081,297 931,999 1,177 4,277,826Additions 128,547 52,762 134,249 - 315,558Transfers 794 (614) (180) - -Transfer to right-of-use - - (2,434) - (2,434)Transfers from intangible assets - - (604) - (604)Disposals (21,269) (5,151) (25,004) - (51,424)
Foreign currency loss in respect oftranslation into Brazilian Reais 80,081 602,490 48,253 341 731,165
At 31 December 2020 1,451,506 2,730,784 1,086,279 1,518 5,270,087
Additions 32,251 76,289 22,999 18,194 149,733Transfers (128) - 128 - -Transfer between Vehicles, plant, andequipment and intangible assets (2) - - - (2)Investment´s writte-off - Suape (8,386) - (7,042) - (15,428)Disposals (1,922) (887) (6,898) - (9,707)Foreign currency loss in respect of
translation into Brazilian Reais 27,517 128,818 10,525 591 167,451At 30 September 2021 1,500,836 2,935,004 1,105,991 20,303 5,562,134
Accumulated depreciationAt 31 December 2019 370,607 876,143 503,630 - 1,750,380Additions 34,659 149,451 61,342 - 245,452Elimination on construction contracts - 67 - - 67Transfer to right-of-use - - (2,328) - (2,328)Disposals (13,968) (4,386) (24,407) - (42,761)Foreign currency loss in respect of
translation into Brazilian Reais 22,506 254,933 32,232 - 309,671
At 31 December 2020 413,804 1,276,208 570,469 - 2,260,481
Additions 32,017 104,662 51,750 - 188,429Elimination on construction contracts - 134 - - 134Investment´s write-off - Suape (3,985) - (5,146) - (9,131)Disposals (2,147) (828) (6,349) - (9,324)Foreign currency loss in respect of
translation into Brazilian Reais 6,656 61,582 6,947 - 75,185At 30 September 2021 446,345 1,441,758 617,671 - 2,505,774
Carrying amountAt 30 September 2021 1,054,491 1,493,246 488,320 20,303 3,056,360At 31 December 2020 1,037,702 1,454,576 515,810 1,518 3,009,606
Land and buildings with a net carrying amount of R$1.2 million (2020: R$1.1 million) and plant andequipment with a net carrying amount of R$0.6 million (2020: R$0.5 million) have been pledged ascollateral for various tax lawsuits.
The Group has pledged assets with a carrying amount of approximately R$1,369 million (2020: R$1,318million) to secure loans granted to the Group.
Borrowing costs capitalized in 2020 totalled R$15.6 million at an average interest rate of 2.49%. In 2021,there are no capitalized borrowing costs.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
26
On 30 September 2021, the Group had contractual commitments to suppliers for the acquisition andconstruction of Vehicles, plants, and equipment amounting to R$88.9 million (2020: R$8.3 million). Theamount mainly refers to investments in the Salvador container terminal with smaller amounts related tothe Rio Grande container terminal and Offshore support bases.
On 31 December 2020 and 30 September 2021, the Company did not identify any impairment on theseassets.
11. Lease operations
11.1 Right-of-use
Parent Company
Right-of-use by class of asset BuildingsVehicles, plant,and equipment Total
Cost or valuationAt 31 December 2019 82 180 262Contractual amendments 1 6 7Foreign currency loss in respect of translation into Brazilian Reais 24 52 76At 31 December 2020 107 238 345
Foreign currency loss in respect of translation into Brazilian Reais 5 11 16At 30 September 2021 112 249 361
Accumulated amortisationsAt 31 December 2019 14 66 80Charge for the year 19 101 120Foreign currency loss in respect of translation into Brazilian Reais 4 20 24At 31 December 2020 37 187 224
Additions 13 52 65Foreign currency loss in respect of translation into Brazilian Reais 3 10 13At 30 September 2021 53 249 302
Carrying amountAt 30 September 2021 59 - 59At 31 December 2020 70 51 121
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
27
Consolidated
Right-of-use by class of assetOperational
assets Vessels BuildingsVehicles, plant,and equipment Finance Leases Total
Cost or valuationAt 31 December 2019 749,815 18,063 25,893 14,674 36,526 844,971Contractual amendments 41,612 280 1,039 454 - 43,385Additions 8,280 18,949 106 654 - 27,989Transfer from property, plant,
and equipment - - - - 2,434 2,434Finished contracts - - (820) (336) (5,307) (6,463)Foreign currency loss in respect
of translation into BrazilianReais 4,277 529 2,551 1,550 2 8,909
At 31 December 2020 803,984 37,821 28,769 16,996 33,655 921,225
Carrying amountAt 30 September 2021 831,531 30,700 14,255 8,634 1,843 886,963At 31 December 2020 732,589 13,137 17,023 8,940 4,064 775,753
On 31 December 2020 and 30 September 2021, the Company did not identify any impairment on theseassets.
Operational assetsThe main lease commitments for operational assets are described below:
Rio Grande container terminalThe Rio Grande container terminal lease was signed on 3 February 1997 for 25 years renewable for afurther 25. Given the compliance with the contractual requirements and advanced investments in theexpansion works of the terminal, construction of the third berth of docking and the annual volume handledtogether with other considerations. The Rio Grande container terminal was granted the right to renew thelease as outlined in the first amendment signed on 7 March 2006.
Among the commitments outlined in the Lease Agreement and its Addendum, the following arehighlighted:
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
28
Monthly payment for facilities and leased areas; Payment by container moved, with a commitment for minimum contractual movement (MMC); Pay per tone in general cargo handling and unloading.
Salvador container terminalTecon Salvador S.A. has the right to lease and operate the Container and Heavy and Unitized CargoTerminal (Liaison Quay) in the Port of Salvador for 25 years early renewed in 2016 for a further 25 years,to March 2050.
The total lease term of 50 years, until March 2050, is provided in the Second Addendum to the RentalAgreement. This addendum provides for the expansion of the lease area through completing minimuminvestments.
As a result of the lease agreement with CODEBA, the Company has the following commitments:
Payment of monthly instalments readjusted for the minimum periodicity established in the contract; Payment for the lease of the existing area and the area added under the terms of the second contractual
addendum; Payment of minimum contractual movement - MMC.
Tecon Salvador is pleading in court for the change in the index that updates the lease agreement, fromthe IGP-M to the IPCA, for the year 2020, and obtained an injunction in favor of the deposit/guarantee incourt of the difference in values. In relation to 2021, the procedure for formalising a contractual amendmentis in progress to definitively change the readjustment index of the contractual amendment.
Wilson Sons shipyardsWilson Sons shipyards lease commitments mainly refer to a 60-year lease right of its operational assetfrom June 2008 (30 years, renewable for a further period of 30 years, under Group’s sole option).Management intends to exercise its renewal option.
Offshore support basesOffshore support base lease commitments mainly refer to a 30-year lease right to operate in a shelteredarea at Guanabara Bay, Rio de Janeiro, Brazil, with a privileged position to service the Campos and Santosoil-producing basins.
LogisticsLogistics lease commitments mainly refer to the bonded terminals and distribution centers located in SantoAndré and Suape with terms between eighteen and twenty-four years.
VesselsChartering of vessels for maritime transport between container terminals and towage operations.
The payments related to the quantity of vessel trips were not included in the measurement of leaseliabilities because they relate to variable payments.
BuildingsThe Group has lease commitments for its headquarters, branches, and commercial offices in severalBrazilian cities.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
29
Vehicles, plant, and equipmentRental contracts mainly refer to forklifts, other operating equipment, and vehicles for operational,commercial, and administrative activities.
Finance LeasesLease contracts previously classified under CPC 06 (R1) and substantially represented by Machines andEquipment.
11.2. Lease liabilities
Parent CompanyLease liabilities by class of asset Discount Rate 30/09/2021 31/12/2020
Buildings 8.75% 48 57Vehicles, plant, and equipment - - 42
Total 48 99
Total current 16 58Total noncurrent 32 41
ConsolidatedLease liabilities by class of asset Discount Rate 30/09/2021 31/12/2020
In the one year 17 61 115,574 99,533In the second year 17 17 107,886 90,239In the third to fifth years (including) 21 34 287,329 256,471After five years - - 1,762,420 1,521,418
Total undiscounted lease liabilities 55 112 2,273,209 1,967,661
Adjustment to present value (7) (13) (1,331,682) (1,147,134)
Total lease liabilities 48 99 941,527 820,527
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
30
Inflation adjustment of the lease liabilitiesThe table below presents the lease liabilities balance considering the projected future inflation in thediscounted payment flows. For this calculation, all other assumptions were maintained.
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Parent CompanyThree-Month Period Nine-Month Period
30/09/2021 30/09/2020 30/09/2021 30/09/2020
Amortisation of right-of-use (8) (38) (66) (91)Amortisation of PIS and COFINS 1 10 1 10Interest on lease liabilities (1) (3) (5) (13)Expenses relating to short-term leases (16) (1) (16) (1)Expenses relating to low-value assets (1) (1) (1) (1)
Total (25) (33) (87) (96)
ConsolidatedThree-Month Period Nine-Month Period
30/09/2021 30/09/2020 30/09/2021 30/09/2020
Amortisation of right-of-use (18,031) (15,712) (53,532) (48,133)Amortisation of PIS and COFINS 1,740 1,453 5,108 7,859Interest on lease liabilities (20,806) (16,978) (59,648) (55,791)Interest on PIS and COFINS 1,201 816 3,601 5,964Variable lease payments not included in the measurement
of lease liabilities (1) (3,250) (3,439) (9,262) (8,234)Expenses relating to short-term leases (42,236) (36,540) (113,858) (80,954)Expenses relating to low-value assets (1,416) (1,322) (3,112) (4,069)
Total (82,798) (71,722) (230,703) (183,358) (1) The amount refers to payments that exceeded the minimum forecast volumes of the Rio Grande container terminal, and Salvador containerterminals and payments related to the quantity of vessel trips were not included in the measurement of lease liabilities.
The Group cannot estimate the future cash outflows to variable lease payments due to operational,economics and exchange rate variabilities.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
31
11.4. Amounts recognized in the statement of cash flows
Parent CompanyThree-Month Period Nine-Month Period
Carrying amountAt 30 September 2021 - - 60,634 4 60,638At 31 December 2020 416 - 57,929 4 58,349
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
32
ConsolidatedSystems
apps Right of Goodwill on Brands andsoftware Exploration investments patents Total
Cost or valuationBalance at 31 December 2019 170,984 82,476 56,792 244 310,496Additions 5,509 - - - 5,509Disposals (107) - - - (107)Transfer to property, plant, andequipment 604 - - - 604Exchange effect 36,629 189 12,994 2 49,814Balance at 31 December 2020 213,619 82,665 69,786 246 366,316
At 30 September 2021 30,746 52,886 72,494 249 156,375At 31 December 2020 35,121 52,805 69,786 246 157,958
The Company annually tests its assets for impairment or when there is an indication that the book valuemay not be recoverable. There is no indication of impairment of intangible assets to date.
13. Taxes payable
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
33
14. Bank and loans
Secured borrowings Interest rate% p.a. Business 30/09/2021 31/12/2020
BNDES - FMM linked to US Dollar¹ 2.30% - 3.71% Tugs 618,790 612,070BNDES - FMM linked to US Dollar¹ 2.07% - 4.08% Shipyards 141,862 140,625BNDES - FMM linked to US Dollar¹ 5.00% Tugs 3,006 8,339BNDES – Real 14.85% Container Terminals 249,401 247,528BNDES – Real 13.59% Offshore support bases 35,909 39,211BNDES - FMM Real¹ 5.50% Tugs 3,716 4,181
Total BNDES 1,052,684 1,051,954
Banco do Brasil - FMM linked to US Dollar¹ 2.00% - 4.00% Tugs 398,822 393,885Bradesco - NCE – Real 7.08% - 7.45% Container Terminals 178,866 200,907China Construction Bank – Real 5.65% Container Terminals - 71,020Santander – Real 6.44% Container Terminals - 31,977Itaú - NCE – Real 3.38% Container Terminals - 21,076Santander – Real 6.44% Tugs - 9,888
Total others 577,688 728,753
Total 1,630,372 1,780,707
(1) As agents of the Merchant Marine Fund (Fundo da Marinha Mercante - FMM), Banco Nacional de Desenvolvimento Econômico e Social(“BNDES”) and Banco do Brasil (“BB”) finance the construction of tugboats and shipyard facilities.
The breakdown of bank overdrafts and loans by maturity is as follows:
30/09/2021 31/12/2020
In the one year 237,183 304,901In the second year 198,341 232,329In the third to fifth years (including) 497,708 500,182After five years 697,140 743,295
Total 1,630,372 1,780,707
Total current 237,183 304,901Total noncurrent 1,393,189 1,475,806
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
34
Changes in bank loans are as follows:
R$
On 1 January 2020 1,350,196Additions 271,022Principal amortisation (125,350)Interest amortisation (43,554)Accrued interest (¹) 71,261Foreign currency loss in respect of translation into Brazilian Reais 257,132On 31 December 2020 1,780,707
Additions 18,641Principal amortisation (245,570)Interest amortisation (38,339)Other provisions 145Foreign currency loss in respect of translation into Brazilian Reais 114,788
On 30 September 2021 1,630,372 (¹) It includes capitalised interest.
The analysis of borrowings by currency is as follows:
30/09/2021 31/12/2020R$ R$
Bank loansReal 79,817 175,023Real linked to US Dollars 157,366 129,878
Total current 237,183 304,901
Bank loansReal 388,075 450,764Real linked to US Dollars 1,005,114 1,025,042
Total non-current 1,393,189 1,475,806
Total 1,630,372 1,780,707
GuaranteesLoans from BNDES and Banco do Brasil have a corporate guarantee from the Company or Wilson SonsTerminais e Logística Ltda. For some contracts, the corporate guarantee is additional to the pledge of therespective tugboat or lien on the logistics equipment.
The loan agreement for the Salvador and Rio Grande container terminals from Bradesco for equipmentacquisition relies on a corporate guarantee from Wilson Sons Terminais e Logística Ltda.
The loan agreement with Itaú for the acquisition of equipment was settled in January 2021.
Undrawn credit facilitiesOn 30 September 2021, the Group had R$64.8 million available (2020: R$99.3 million) of undrawnborrowing facilities available concerning (i) the Salvador Terminal expansion; and (ii) the docking,maintenance, and repair of tugs. Additionally, the Group has R$36.9 million in contracted financing for thefuture construction of tugboats which is pending amendment to the contract related to vessel specificationchanges.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
35
Fair valueManagement estimates the fair value of the Group’s borrowings as follows:
30/09/2021 31/12/2020Bank loansBNDES 1,052,684 1,051,954Banco do Brasil 398,822 393,885Bradesco - NCE 178,408 210,867China Construction Bank - 70,970Santander - 41,806Itaú - 21,100
Total 1,629,914 1,790,582
CovenantsSome of the Company's long-term financial instruments including obligations related to financial indicators,including Net Debt / EBITDA; PL / Total Debt; Current Liquidity Ratio; Debt Service Coverage Ratio.
Wilson Sons Holdings Brasil S.A. and Wilson Sons Terminais e Logística Ltda., as corporate guarantor,must comply with the covenants the financing agreements of Wilson Sons Estaleiros, da Wilson SonsServiços Maritimos Ltda. and Tecon Salvador S.A., signed with BNDES and Bradesco.
Wilson Sons Holdings Brasil S.A. must comply with the following financial covenants with BNDES: EBITDA / Net operating revenue >= 0.165 EBITDA / Debt service >= 1.7 Equity / Total assets >= 0.3 Net Debt / EBITDA =< 3.0
Wilson Sons Terminais e Logística Ltda. must comply with the following financial covenants with BNDESand Bradesco: Debt service coverage ratio >= 1.3 Net Debt / EBITDA =< 3.0 Equity / Total assets >= 0.3
Wilson Sons Terminais e Logística Ltda. as corporate guarantor, it must comply with the covenants thefinancing agreements of Tecon Salvador S.A. and Tecon Rio Grande S.A., signed with Bradesco.
The subsidiary Tecon Salvador S.A. must comply with covenants in financing contracts, such as a DebtCoverage Ratio greater than or equal to 1.3 in contracts with BNDES to fund the terminal's expansion.
In the normal course of its operations, the Company has complied with all applicable covenants and claimscompliance with all obligations in financial contracts.
On 30 September 2021, the Company followed all covenants for the above-mentioned loan contracts.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
36
15. Income tax expense
15.1. Income tax recognized in profit or loss:
Parent Company ConsolidatedThree-Month Period Nine-Month Period Three-Month Period Nine-Month Period
Total income tax expense (33) 439 (1,142) (5,249) (52,039) (35,412) (130,485) (114,517)
Brazilian income tax is calculated at 25% of the taxable profit for the period. Brazilian socialcontribution taxes are calculated at 9% of the taxable profit for the period.
The income tax expense for the period can be reconciled with the accounting profit as follows:
Parent Company ConsolidatedThree-Month Period Nine-Month Period Three-Month Period Nine-Month Period
Income before tax 32,406 52,462 176,648 69,909 86,675 89,993 312,390 183,222Tax at the standard Brazilian tax rate(34%) (11,018) (17,837) (60,060) (23,769) (29,470) (30,598) (106,213) (62,296)
Exchange variation on loans - - - - 23,600 8,628 5,167 102,271Tax effect of share of results of jointventures 19,149 19,328 63,828 24,383 (5,339) (870) (8,078) (10,926)
Tax effect of foreign exchange gainor loss on monetary items (6,437) (113) (3,519) 853 (6,200) (1,351) (1,391) (21,131)
Effect of exchange differences on thetranslation process of non-currentassets (5) 2 12 (20) (31,809) (1,869) 2,338 (100,205)
Stock Option (746) (17) (860) (50) (764) (42) (919) (127)Non-deductible expenses (285) (97) (696) (708) (281) (2,351) (6,200) (7,755)Unrecognized tax loss for the period - - - - (1,543) (1,982) (2,324) (8,304)Leasing - - - - 234 110 764 419Termination of tax litigation - - - - - 1,130 - 1,130Impact of the result converted by thehistorical rate versus the averagerate (translation from dollar to real) (1,577) (582) (842) (5,691) (7,819) (8,556) (25,019) (22,201)
Government Grant – Adene - - - 86 2,137 251 8,089Others 886 (245) 995 (247) 7,266 202 11,139 6,519
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
37
15.2. Deferred taxesThe table below corresponds to the analysis of deferred tax assets (liabilities) presented in thebalance sheets:
Parent CompanyUnrealized Other Non-
foreign timing monetaryexchange differences items Total
At 31 December 2019 (9,216) 6,260 (27) (2,983)Charge (credit) to income (3,944) 1,229 10 (2,705)Other adjustments - (104) - (104)Translation adjustment to Brazilian real - - (14) (14)At 31 December 2020 (13,160) 7,385 (31) (5,806)
Charge (credit) to income (858) (933) 12 (1,779)Other adjustments - 876 - 876Translation adjustment to Brazilian real - - (1) (1)
At 30 September 2021 (14,018) 7,328 (20) (6,710)
ConsolidatedUnrealised Profit Other Non-
Tax foreign Tax under timing monetarydepreciation exchange losses construction differences items Total
At 31 December 2019 (150,249) 118,420 60,189 67,989 28,835 (206,831) (81,647)Charge (credit) to income (2,970) 71,038 16,549 (7,414) 2,212 (60,747) 18,668Other adjustments - - (326) - 629 - 303Translation adjustment to Brazilian
real - - - 19,663 467 (68,423) (48,293)At 31 December 2020 (153,219) 189,458 76,412 80,238 32,143 (336,001) (110,969)
Charge (credit) to income (10,100) 5,606 (18,019) (2,973) 3,205 2,338 (19,943)Other adjustments - - - - (9,603) - (9,603)Translation adjustment to Brazilian
real - - - 3,667 532 (14,657) (10,458)
At 30 September 2021 (163,319) 195,064 58,393 80,932 26,277 (348,320) (150,973)
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
38
15.3. Tax losses
Deferred taxes over net operating lossesAt the end of the reporting period, the Group has a balance of R$219.0 million (2020: R$334.8million) balance of tax losses carry forward available to be utilized against future taxable profits.
Brazil has no tax consolidation rules, and it applies ring-fencing on a legal entity basis in determiningthe utilization of net operating losses (NOL) to carry forward.
Out of R$73.4 million (2020: R$112.5 million) total deferred tax assets from net operating losses,only R$58.4 million (2020: R$76.4 million) was recognized for accounting purposes at the end ofthe reporting period and is expected to be utilized against the cash-generating entities future taxableprofits. The Company expects to recover the deferred tax assets between three and five years.
Deferred taxes over non-monetary itemsAs disclosed in Note 2 (“Basis of Preparation”), under CPC 02, the US dollar is the functionalcurrency for the Company, and non-monetary items are re-measured using historical exchangerates. Changes in exchange rates and indexing for tax purposes will create differences between theBrazilian Reais cost of those items (tax basis) and the equivalent US dollar amount.
The deferred tax liability or asset for those differences is recognized to neutralize the effect ofchanges in exchange rates on non-monetary items measured at historical BRL/USD versus theexchange rates at the period close.
16. Provision for tax, labor, civil and environmental risks
Parent CompanyTax cases
At 31 December 2019 2,049Increase in provision in the year 26At 31 December 2020 2,075
Increase in provision in the year 27
At 30 September 2021 2,102
Consolidated
Labor claims Tax cases
Civil andenvironmental
cases Total
At 31 December 2019 43,145 8,506 11,133 62,784Increase in provision in the year 4,532 428 384 5,344Unused amounts reversed (3,448) (2,538) (5,259) (11,245)Utilization of provisions (2,735) (152) (211) (3,098)At 31 December 2020 41,494 6,244 6,047 53,785
Increase in provision in the period 1,282 1,362 1,656 4,300Unused amounts reversed (3,049) (273) - (3,322)Utilization of provisions (1,511) - (53) (1,564)
At 30 September 2021 38,216 7,333 7,650 53,199
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
39
In the ordinary course of business in Brazil, the Company is exposed to numerous local legal claims. TheCompany’s policy is to vigorously contest such claims, many of which appear to have little substance ormerit, and manage such claims through its lawyers.
In addition to the cases for which the Company booked provisions, there are other tax, civil, labor andenvironmental disputes amounting to R$539.9 million (2020: R$402.2 million).
The breakdown of possible claims is described as follows:
Parent Company Consolidated30/09/2021 31/12/2020 30/09/2021 31/12/2020
The main probable and possible claims against the Group are described below:
Tax cases - The Company defends against government tax assessments considered inappropriate, orthe Company considers it has a chance of successfully defending its position.
Labor claims - Most claims involve payment of health risks, additional overtime, and other allowances.
Civil and environmental cases - Indemnification claims involving material damages, environmental andshipping claims, and other contractual disputes.
Procedure for classification of legal liabilities identifies claims as probable, possible, or remote, asassessed with the assistance of external lawyers:
• Upon receiving notices of new judicial lawsuits, external lawyers generally classify the claim aspossible, disclosing the total amount involved. The Company uses the criteria of the estimated valueat risk and not the total order value involved in each process.
• Exceptionally, if there is sufficient knowledge from the beginning that there is a very high or very lowrisk of loss, the lawyer may classify the claim as a probable loss or remote loss.
• During the lawsuit and considering, for instance, its first judicial decision, legal precedents, argumentsof the claimant, thesis under discussion, applicable laws, documentation for the defense and othervariables, the lawyer may re-classify the claim as a probable loss or remote loss.
• When classifying the claim as a probable and possible loss, the lawyer estimates the amount at riskfor such a claim.
Management cannot indicate when the provisions are likely to be utilized as most provisions involvelitigations, the resolution of which is highly uncertain as to timing.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
40
17. Equity
Share capitalIn February 2021, there was a capital increase totaling R$3,374.
On 5 March 2021, the partners approved the conversion of the Company's quotas into shares. The129,441,321 quotas were herein converted into common shares at a ratio of 1 quota for 1 share, thusconverted into 129,441,321 shares, transforming the Limited Liability Company into a Publicly HeldCorporation changing the name to Wilson Sons Holdings Brasil S.A. The Company's transformation,regardless of dissolution and liquidation, into a privately held corporation was approved, and it is nowgoverned by the provisions of Law 6404/76 and other applicable legal provisions. Throughout 2021, theCompany will comply with requirements outlined in Law 6404/76 regarding the allocation of reserves.
On 30 September 2021, the fully paid-in capital is R$129.6 million (2020: R$126.2 million):
Number of shares30/09/2021 31/12/2020
Wilson Sons Limited 129,606,513 126,197,677
Total 129,606,513 126,197,677
The share capital is fully subscribed and paid up. The capital stock may be increased regardless ofamendment to the bylaws, by resolution of the Board of Directors, up to the global limit of 150,000,000.00(one hundred and fifty million) common shares. The conditions for issuing the new common shares will bedeliberated and approved at a meeting of the Board of Directors.
Legal reserveThe legal reserve is calculated based on amounts in US dollars, the Company's functional currency, andtranslated into Brazilian Real at the closing rate. The amount equivalent to 5% of annual net profit in USdollars is allocated and classified in a specific account called “legal reserve”, limited to 20% of the sharecapital in US dollars.
Mandatory dividendsAccording to the Company's Bylaws, after recognizing the legal reserve, the net income will be allocatedas proposed by the Company. Of the balance, if any, 25% will be allocated to the payment of the minimummandatory dividend.
The Company may also draw up interim balance sheets and declare dividends, as resolved by theShareholders’ Meeting. Interim dividends will be considered as an advanced mandatory dividend.
Translation reserveExchange rate differences related to the translation of assets, liabilities, results and equity of subsidiariesthat have the same functional currency as the Company (US dollar) and the translation of this financialinformation to the Company's presentation currency (Brazilian Real) are recognized directly in othercomprehensive income and accumulated in a specific account in equity.
Earnings per shareThe basic and diluted net earnings (loss) per share is calculated by dividing the Company's net income(loss) attributable to the controlling shareholders by the average amount in the period, as shown below:
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
41
Three-Month Period Nine-Month Period30/09/2021 30/09/2020 30/09/2021 30/09/2020
Net income attributed to controlling shareholders 32,373 52,901 175,506 64,660Weighted average number of shares in the period 129,038,374 126,197,677 129,038,374 126,197,677
Earnings per share - basic and diluted (expressed in reais) 0.2509 0.4192 1.3601 0.5124
In February 2021, 3,243,644 shares were issued. The weighted average calculation of the number ofshares during the period is prepared considering the number of total common shares held by shareholdersat the beginning of the period, adjusted by the number of common shares issued during the periodmultiplied by a time weighting factor.
The Company did not have diluting income instruments for the periods ended 30 September 2020 and2021.
18. Net operating revenueThe table below shows the analysis of the Company's income from continuing operations for the period(excluding financial income - Note 23):
18.1. Disaggregated revenue informationSet out below is the disaggregation of the Group’s revenue from contracts with customers:
Three-Month Period Nine-Month Period30/09/2021 30/09/2020 30/09/2021 30/09/2020
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
42
Three-Month Period Nine-Month Period30/09/2021 30/09/2020 30/09/2021 30/09/2020
Timing of revenue recognitionAt a point in time 539,414 472,005 1,539,003 1,319,879Over time 4,512 2,096 22,007 7,946
Total 543,926 474,101 1,561,010 1,327,825
18.2. Contract balanceTrade receivables are generally received within 30 days. At the end of the reporting period, thecarrying amount of operational trade receivables was R$263.6 million (2020: R$201.5 million).These amounts include R$58.3 million (2020: R$54.0 million) of contract assets (unbilled accountsreceivables). Details are disclosed in Note 4.
There are no other contract assets and liabilities recognized for the period presented.
18.3. Performance obligationsInformation about the Group’s performance obligation is summarized below:
When the performance obligationPerformance obligation is typically met
Towage and shipping agency servicesHarbour Manoeuvres At a point in timeSpecial Operations At a point in timeShip Agency At a point in time
Container terminals offshore support basesContainer handling At a point in timeWarehousing At a point in timeAncillary services At a point in timeOffshore support base At a point in timeOther services At a point in time
LogisticsLogistics At a point in time
ShipyardShip construction contracts OvertimeTechnical assistance / dry-docking Overtime
Most of the Group’s performance obligations are satisfied at a point in time upon delivery of theservice, and payment is generally due within 30 days upon completion of services.
The performance obligation of ship construction contracts is satisfied over time, and the revenuerelated to services and construction contracts is recognized when the work in proportion to the stageof completion of transactions contracted has been performed. On 30 September 2021, there are nowarranties or refunds obligations applied to ship construction contracts.
There are no significant judgements on both scenarios of performance obligations.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
43
19. Service costs
Three-Month Period Nine-Month Period30/09/2021 30/09/2020 30/09/2021 30/09/2020
Salaries and charges (77,065) (77,949) (230,519) (231,280)Material and operating costs (68,198) (47,983) (186,251) (134,453)Depreciation and amortisation (59,779) (59,795) (188,487) (174,285)Property rents (44,384) (38,386) (122,154) (88,310)Labor and third-party services (17,436) (15,939) (49,689) (49,656)Amortisation of right-of-use (13,587) (11,203) (39,476) (31,053)Service maintenance (8,216) (5,699) (21,714) (15,030)Other costs (511) (923) (2,326) (2,475)
Total (289,176) (257,877) (840,616) (726,542)
20. General and administrative expenses
Parent Company ConsolidatedThree-Month Period Nine-Month Period Three-Month Period Nine-Month Period
Total (9,700) (6,618) (27,672) (21,478) (98,949) (85,187) (276,501) (256,807)
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
44
21. Other operating revenue (expenses)
Parent Company ConsolidatedThree-Month Period Nine-Month Period Three-Month Period Nine-Month Period
30/09/2021 30/09/2020 30/09/2021 30/09/2020 30/09/2021 30/09/2020 30/09/2021 30/09/2020RevenuesExpense Recovery 6,036 2,208 26,097 14,282 638 504 3,976 5,124Result on sale of property, plant,
Exchange gain (loss) on translation (18,932) (334) (10,350) 2,508 (18,236) (3,974) (4,093) (62,150)
Total (17,587) (4) (7,806) 3,776 (52,843) (31,935) (108,922) (119,530)
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
45
23. Compensation of key management personnelThe compensation of the Group's key management personnel is presented below, aggregated bycategories:
Parent Company ConsolidatedThree-month period Nine-month period Three-month period Nine-month period
Total (4,711) (3,051) (12,457) (9,733) (4,711) (4,318) (14,989) (13,574)
24. Financial instruments and risk assessment
a) Capital risk managementThe Group manages its capital to ensure that its entities will continue as a going concern whilemaximizing the return to stakeholders through the optimization of the debt and equity balance. TheGroup’s capital structure consists of debt (which includes the borrowings disclosed in Note 14, cashand cash equivalents and short-term investments disclosed in Note 3, and equity attributable to ownersof the parent company comprising issued capital, reserves and retained earnings as disclosed in Note17.
b) Categories of financial instruments
Parent CompanyFair value Carrying amount
30/09/2021 31/12/2020 30/09/2021 31/12/2020Financial assets classified as amortized costCash and cash equivalents - 4 - 4Deposit certificates - 9,531 - 9,531Trade receivables from related parties 138,763 54,645 138,763 54,645Total financial assets - amortized cost 138,763 64,180 138,763 64,180
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
c) Financial risk management objectivesThe Group monitors and manages financial risks related to the operations. A financial risk committeemeets regularly to assess financial risks and decide mitigation based on the Group’s financial risk policyguidelines.
These risks include market risk, credit risk and liquidity risk. The primary objective is to minimizeexposure to those risks by using financial instruments and assessing and controlling the credit andliquidity risks. The Group may use derivatives and other financial instruments for hedging purposesonly.
d) Foreign currency risk managementThe operating cash flows are exposed to currency fluctuations because they are denominated partiallyin Brazilian Real. These proportions vary according to the characteristics of each business.
Cash flows from investments in fixed assets are denominated partly in Brazilian Real. Theseinvestments are subject to currency fluctuations when those goods or services are acquired and theactual payment date. The resources and their application are monitored to match the currency cashflows and payment dates.
The Group seeks to neutralize the currency risk of operating cash flows by matching revenues andexpenses in general terms. Furthermore, the Group seeks to generate an operating cash surplus in thesame currency in which the debt service of each business is denominated.
The Group has part of its debt and part of its cash and cash equivalents denominated in Brazilian Real.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetaryliabilities at the reporting dates are as follows:
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
47
Assets Liabilities30/09/2021 31/12/2020 30/09/2021 31/12/2020Transactions in Brazilian Real
Parent Company 370,004 417,908 61,868 94,278Consolidated 764,811 811,218 1,945,400 1,977,375
Foreign currency sensitivity analysisThe sensitivity analysis presented in the following sections estimates the impacts of the Brazilian Realdevaluation against the US Dollar based on the position on 30 September 2021. Three exchange ratescenarios are contemplated: the likely scenario (Probable) and two scenarios of deterioration of 25%(Possible) and 50% (Remote) in the exchange rate. The Group uses the Brazilian Central Bank’s“Focus” report to determine the probable scenario.
(1) Information source: BACEN Focus Report of 15 October 2021.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
(1) Information source: Focus BACEN, a report from 8 January 2021.
Derivative financial instrumentsThe Group may enter derivative contracts to manage risks arising from exchange rate fluctuations. Allsuch transactions are carried out within the guidelines set by the Financial Risk Committee.
The Group may use exchange rate hedges to limit its exposure that may result from the variation of theU.S. Dollar against the Brazilian Real or other exchange rates, and there are no current outstandingcontracts.
e) Interest rate risk managementThe Company holds most of its debts linked to fixed rates, most of which are with the FMM (MerchantMarine Fund).
Other loans exposed to floating rates are as follows:
TJLP (Brazilian Long Term Interest Rate) for Brazilian Real-denominated funding through Finamecredit line to port operations and Logistics operations;
DI (Brazilian Interbank Interest Rate) for Brazilian Real-denominated funding in logistics operations;
IPCA (Brazilian National Consumer Prices) for Brazilian Real-denominated funding in portoperations and offshore support bases.
The Company’s Brazilian Real-denominated investments yield interest rates corresponding to the DIdaily fluctuation for privately issued securities and/or “Selic-Over” government-issued bonds. The USDollar-denominated investments are short-term time deposits.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
49
Interest rate sensitivity analysisThe Company does not currently fair value account for financial assets or liabilities through profit orloss. Therefore, a change in interest rates at the reporting date would not change the profit or lossresult. The Company uses the Brazilian Central Bank’s “Focus” BM&F (Bolsa de Mercadorias eFuturos), Bloomberg and Brazilian Economic and Social Development Bank (BNDES) data to estimatethe probable scenarios.
The following analysis concerns a possible fluctuation of revenue or expenses linked to the transactionsand scenarios shown without considering their fair value.
30/09/2021CDI(1), TJLP(2), IPCA(3) and DI - BM&F(4)
Investments CDI 183,585 Result 16,697 22,942 29,186
Net income 12,977 10,731 8,653
(1) Information source: B3 (Brasília Bolsa Balcão), report of 5 October 2021.(2) Information source: BNDES (Banco Nacional de Desenvolvimento Econômico e Social), report from 6 October 2021.(3) Information source: IPCA (Índice de Preços ao Consumidor Amplo), report from 6 October 2021.(4) Information source: BM&F (Bolsa de Mercadorias e Futuros), report from 6 October 2021.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
50
31/12/2020CDI(1), TJLP(2), IPCA(3) and DI - BM&F(4)
(1) Information source: B3 (Brasilia Bolsa Balcão), report from 8 January 2021.(2) Information source: BNDES (Banco Nacional de Desenvolvimento Econômico e Social), report from 8 January 2021.(3) Information source: IPCA (Índice de Preços ao Consumidor Amplo), report from 8 January 2021.(4) Information source: BM&F (Bolsa de Mercadorias e Futuros), report from 8 January 2021.
The net effect was obtained by assuming a 12-month period starting 30 September 2021 in whichinterest rates vary, and all other variables are held constant. The scenarios express the differencebetween the weighted scenario rate and the actual rate.
Derivative financial instrumentsThe Company may enter derivative contracts to manage risks arising from interest rate fluctuations. Allsuch transactions must be carried out within the guidelines set by the Financial Risk Committee.Generally, the Company seeks to apply hedge accounting to manage volatility in profit or loss.
f) Liquidity risk managementThe Company manages liquidity risk by maintaining adequate cash reserves, banking facilities andreserve borrowing facilities, continuously monitoring the forecast and actual cash flows and matchingthe maturity profiles of financial assets and liabilities.
Liquidity risk is the risk that the Company will encounter difficulty fulfilling obligations associated withits financial liabilities that are settled with cash payments or other financial assets. The Company’sapproach in managing liquidity is to ensure that the Group always has sufficient liquidity to fulfil theobligations that expire, under normal and stress conditions, without causing unacceptable losses orrisk damage to the reputation of the Group.
The Company ensures sufficient cash reserves to meet the expected operational expenses, includingfinancial obligations. This practice excludes the potential impact of extreme circumstances that cannotbe reasonably foreseen, such as natural disasters.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
51
For these cases, the Company’s practice is to create a multidisciplinary crisis committee to addressthe most appropriate actions. The tables have been drawn up based on the undiscounted cash flowsof financial liabilities based on the earliest date on which the Company can be required to pay. Thetable includes both interest and principal cash flows.
Averageweighted Less than Less than
interest rates 12 months 1-5 years 5 years Total30 September 2021 %
g) Credit riskThe Group’s credit risk can be attributed mainly to balances such as cash and cash equivalents, short-term investments, debt securities, loans, trade receivables and other trade receivables. The disclosurein the balance sheet is shown net of the allowance for bad debts.
According to regulations approved by Management, the Group invests temporary cash surpluses ingovernment and private bonds, which follow the Group policy on credit risk concentration. Credit riskon investments in non-government-backed bonds is mitigated by investing only in assets issued byleading financial institutions. The Group stipulates a cash allocation limit per bank and investment rulesaccording to rating classification. The Company invests in banks with rating classification BBB (limitedto a maximum of 15%), from A to AA (limited to a maximum of 40%) or AAA (limited to a minimum of40% and a maximum of 100%).
The Group’s sales policy follows the criteria for credit sales set by management, which seeks to mitigateany loss due to customer default.
Parent Company ConsolidatedNote 30/09/2021 31/12/2020 30/09/2021 31/12/2020
Cash and cash equivalents 3 88,010 71,480 208,200 303,123Operational trade receivables 4 - - 263,573 201,461Trade receivables from related parties 25 138,763 54,645 136,594 53,939
Exposed to credit risk 226,773 126,125 608,367 558,523
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
52
Operational trade receivablesAn impairment analysis is performed at each reporting date using a provision matrix to measureexpected credit losses. The provision matrix is initially based on the Company’s historical observeddefault rates. The Company evaluates the concentration of risk concerning trade receivables andcontract assets as low, as historically trade receivables are generally received in 30 days.
30 September 2021 To be due01 to 30
days31 to 90
days91 to 180
daysHigher than
180 days Total
Expected credit loss rate 0.03% 0.03% 1.50% 4.47% 52.30%Receivables for services rendered 218,431 31,111 9,944 3,561 2,069 265,116Accumulated credit loss (143) (10) (149) (159) (1,082) (1,543)
31 December 2020 To be due01 to 30
days31 to 90
days91 to 180
daysHigher than
180 days Total
Expected credit loss rate 0.09% 0.09% 3.30% 12.77% 62.48%Receivables for services rendered 170,092 24,942 4,426 1,026 3,854 204,340Accumulated credit loss (171) (23) (146) (131) (2,408) (2,879)
h) Fair value of financial instrumentsThe Group’s financial instruments are managed through operating strategies to obtain liquidity,profitability, and security. The control policy consists of ongoing monitoring of rates agreed versus thosein force in the market and whether its short-term financial investments are being properly marked tomarket by the institutions dealing with its funds.
Determining estimated realizable values of the Group’s financial assets and liabilities relies oninformation available in the market and relevant assessment methodologies. Nevertheless,considerable judgment is required when interpreting market data to derive the most adequate estimatedrealizable value.
All the Group’s financial instruments (as disclosed in note 24 b) are considered as level 2 under theCPC 40 (IFRS 7) hierarchy as fair values are observable for the asset or liability, either directly (i.e., asprices) or indirectly (i.e., derived from prices).
i) Criteria, assumptions, and limitations used when computing fair values
Cash and cash equivalentsThe market values of the bank's current account balances are consistent with book balances.
InvestmentsThe fair values of the short-term investments are consistent with book balances.
Trade and other trade receivables/payablesAccording to management estimates, the fair values of the trade receivables and trade payables areconsistent with book balances.
Bank loansThe fair value of loan arrangements was calculated at their present value determined by future cashflows and at interest rates applicable to instruments of similar nature, terms, and risks or marketquotations of these securities. Fair value measurements recognized in the consolidated financialstatements are grouped into levels based on the degree to which the fair value is observable.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
53
The fair values of BNDES, BB and Bradesco financing arrangements are considered their carryingamounts as the Group has not identified comparable instruments to date.
25. Related-party transactionsThe balances and transactions, as well as the details regarding the transactions between the Companyand its subsidiaries and other related parties, are presented below:
Parent Company 30/09/2021 31/12/2020 30/09/2021 31/12/2020 30/09/2021 30/09/2020
1. Wilson Sons Ultratug Participações Ltda. 135,335 53,486 - - 1,305 1,2712. Wilson Sons Estaleiro Ltda. 1,227 - - - 1,226 -3. Tecon Rio Grande S.A. 1,754 800 - - 15,822 9,0934. Tecon Salvador S.A. 83 - - - 2,908 2,0085. Wilson. Sons Shipping Services Ltda. 19 - 44,765 43,774 (372) -6. Wilson Sons Limited 8 18 - - 1,669 1,5697. Wilson Sons Terminais & Logística Ltda. 12 - - - 1,732 (444)8. Wilson Sons Serviços Marítimos Ltda. 223 - - - - 69. Porto Campinas Ltda. 102 - - - - -10. Others - 341 - - - -
Total 138,763 54,645 44,765 43,774 24,290 13,503
1 - Loan with Wilson, Sons Ultratug (interest rate - 0.3% p.m. without maturity) and AFAC of Wilson Sons Holdings Brasil S.A. at Wilson, Sons Ultratug.;2, 3, 4, 7, 8 and 10 - Current account receivable referring to expenses paid by the Company or by the subsidiary/corporate apportionment;5 – Loan payable (interest of 3% per year, with a term of 60 months, renewable for an equal period);6 - Transfer of corporate expenses; and9 – AFAC receivable.
1. Loan with Wilson, Sons Ultratug (interest rate - 0.3% p.m. without maturity) (R$57.3 million) and AFAC of Wilson Sons Holdings Brasil S.A. at Wilson,Sons Ultratug (R$78.0 million);
2. The transactions with the joint operations are disclosed because of proportionate amounts not eliminated on consolidation; Transfer of corporateexpenses;
3. Transfer of corporate expenses;4. AFAC receivable; and5. Mr. Mr. J.F. Gouvêa Vieira is a partner with the law firm Gouvêa Vieira. Fees were paid to Gouvêa Vieira Advogados for legal services.
Allink Transportes Internacionais Ltda. it is 50% controlled by the Group and rents a warehouse from theGroup's terminal. Mr Augusto Cezar Baião is a minority shareholder of Allink Transportes InternacionaisLtda. The Company also presented outstanding amounts payable with Allink on 30 September 2021 ofR$87 and as of 31 December 2020 there was no outstanding amount. The Company had a negative neteffect on the result of transactions with Allink on 30 September 2021 in the amount of (R$976) (30September 2020: (R$843)).
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
54
26. Non-cash transactionsDuring the current period, the Company entered the following non-cash investing and financing activitieswhich are not reflected in the consolidated statement of cash flows:
30/09/2021 30/09/2020
Additions to fixed assetsCapitalized interest - 13,273Disposal of investments - SUAPE (2,843) -
27. Stock options plan and post-employment benefits
27.1. Stock option planThe shareholders in a special general meeting of Wilson Sons Limited approved granting optionsto eligible participants to be selected by the board of Wilson Sons Limited on 8 January 2014,including an increase in the authorized capital of Wilson Sons Limited through the creation of up to4,410,927 new shares. The options provide participants with the right to acquire shares via BrazilianDepositary Receipts (“BDR”) in Wilson Sons Limited at a predetermined fixed price not less thanthe three-day average mid-price for the days preceding the date of option issuance. The optionsplan is detailed below:
Options series Grant dateOriginal
vesting date Expiry dateExercise
price Number Expired Exercised VestedOutstandingnot vested
Total 3,886,100 (644,500) (1,715,960) 950,540 575,100 1,525,640
The options terminate on their expiry date or immediately on the resignation of the director or senioremployee, whichever is earlier. Options lapse if not exercised within six months of the date that theparticipant ceases to be employed or hold office because of, amongst others, injury, disability,retirement, or dismissal without cause.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
55
Movements during the yearThe following table illustrates the number and weighted average exercise prices (WAEP) of, andmovements in, share options during the year:
Number WAEP (R$)
At 1 January 2020 2,702,540 31.85Exercised during the year (475,050) 31.23Expired during the year (14,000) 33.98At 31 December 2020 2,213,490 31.96
Options 450,000 51.95Exercised during the year (1,123,850) 31.65Expired during the year (14,000) 38.00
At 30 September 2021 1,525,640 38.03
(¹) At the date of exercise, the weighted average share price of these options was R$33.50 (2020: R$45.76).
The fair value expense of the grant to be recorded as a liability in the respective accounting periodswas determined using a binomial model based on the assumptions detailed below:
Period commencing Projected IFRS2 fair value expense R$
Closing share price (in Real) R$30.05 R$33.50 R$32.15 R$38.00 R$38.01 R$50.85Expected volatility 28.00% 29.75% 31.56% 31.82% 31.82% 38.18%-40.30%Expected life 10 years 10 years 10 years 10 years 10 years 10 yearsRisk free rate 10.80% 12.74% 12.03% 10.17% 10.17% 7.68%-8.44%Expected dividend yield 1.70% 4.80% 4.80% 4.80% 4.80% 5.66%
Expected volatility was determined by calculating the historical volatility of the Company’s shareprice. The expected life used in the model has been adjusted based on management’s best estimatefor exercise restrictions and behavioral considerations.
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
56
27.2. Post-employment benefitsThe Group operates a private medical insurance scheme for its employees, requiring eligibleemployees to pay fixed monthly contributions. Under the regulation of the Brazilian law, eligibleemployees with greater than ten years’ service acquire the right to remain in the plan followingretirement or termination of employment, generating a post-employment commitment for the Group.Ex-employees remaining in the plan will be liable for paying the full cost of their continued schememembership. The present value of actuarial obligations on 30 September 2021 is R$8.8 million(2020: R$8.5 million). The future actuarial liability for the Group relates to the potential increase inplan costs resulting from additional claims because of the expanded membership of the scheme.
Actuarial assumptionsThe calculation of the liability generated by the post-employment commitment involves actuarialassumptions. The following are the principal actuarial assumptions at the reporting date:
Economic and financial assumptions31/12/2020
Annual interest rate 7.90%Estimated inflation rate in the long-term 3.50%Aging factor Based on the experience of Wilson Sons (1)
Health care cost trend rate 6.09% p.a.(¹) The amount of current contributions of both retirees and medical costs used in the actuarial valuation, in monthly amounts per health careprovider, may vary between R$117,06 and R$12,036,51 (absolute value).
Biometric and demographic assumptions31/12/2020
Employee turnover 21.27%Mortality table AT-2000Disability table Álvaro VindasRetirement age 100% at 62Employees who opt to keep the health plan after retirement and termination 23%Family composition before retirement:
Probability of marriage 80% of the participantsAge difference for active participants Man 3 years older than the woman
Family composition before retirement Composition of the family group
Sensitivity analysisThe present value of future liabilities may change depending on market conditions and actuarialassumptions. Changes on a relevant actuarial assumption, keeping the other assumptions constant,would have affected the defined benefit obligation as shown below:
31/12/2020
CiPBO(*) - discount rate + 0.5% (1,167)CiPBO(*) - discount rate - 0.5% 1,353CiPBO(*) - Health Care Cost Trend Rate + 0.5% 1,371CiPBO(*) - Health Care Cost Trend Rate - 0.5% (1,191)CiPBO(*) - Aging factor + 0.5% 786CiPBO(*) - Aging factor - 0.5% (786) (*) CiPBO means Change in Projected Benefit Obligation.
There were no significant changes in the biometric and demographic assumptions between 31December 2020 and 30 September 2021. The plan's actuarial obligations will be updated on thebase date 31 December 2021 and disclosed in the annual financial statements referring to this basedate .
Wilson Sons Holdings Brasil S.A.
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
57
28. Information by Segment
Reportable segmentsFor management purposes, the Group is currently organized into five reportable segments: towage andagency services, port terminals, offshore vessels, logistics and shipyards. These divisions are reported forresource allocation and assessment of segment performance.
Finance costs relating to liabilities were allocated to reporting segments based on the loans taken tofinance the acquisition or the construction of fixed assets in that segment. Finance income arising frombank balances held by Brazilian operating segments, including foreign exchange differences on suchbalances, were also allocated to the reporting segments.
Administrative and financial expenses are presented as non-segmented activities.
Segment information relating to these businesses is presented below:
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
Notes to the parent company and consolidated interim financial information30 September 2021(All amounts in thousands of reais, unless otherwise stated)
29. Directors’ declaration on the interim financial informationAs Directors of Wilson Sons Holdings Brasil S.A., we state, under Article 25, Paragraph 1, Item VI, of CVMInstruction 480, of 7 December 2009, as amended, that we have reviewed, discussed, and agreed withthe Company's Interim Financial Information for the period ended 30 September 2021.
30. Directors’ declaration on the Independent Auditors' Review ReportAs Directors of Wilson Sons Holdings Brasil S.A., we state, under Article 25, Paragraph 1, Item V, of CVMInstruction 480, of 7 December 2009, as amended, that we have reviewed, discussed and agreed with theconclusion in the independent auditor’s review report on the Company's Interim Financial Information forthe period ended 30 September 2021.
31. Subsequent EventsMerger of Wilson Sons LimitedOn 22 October 2021, the Companies' shareholders approved, at the respective Extraordinary GeneralMeetings of the Companies, the merger of Wilson Sons Limited by WS SA, pursuant to Law No. 6.404, of15 December 1976, as amended, and other applicable legal and regulatory provisions ("Incorporation").
Company joins the “Novo Mercado” and starts trading shares on B3On 25 October 2021, the Company began trading its shares on B3, starting to trade its shares directly onthe Brazilian stock exchange under the ticker PORT3.