Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2021

Commission File Number: 001-40618

 

 

Stevanato Group S.p.A.

(Translation of registrant’s name into English)

 

 

Via Molinella 17

35017 Piombino Dese – Padua

Italy

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

 

 

 


Table of Contents

LOGO

Stevanato Group S.p.A.

Interim condensed consolidated financial statements

For the three months and nine months ended September 30, 2021

Table of contents

 

     Page  

PART I–FINANCIAL INFORMATION

     1  

Item 1. Financial Statements

     1  

Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     36  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     52  

Item 4. Controls and Procedures

     56  

PART II–OTHER INFORMATION

     57  

Item 1. Legal Proceedings

     57  

Item 1A. Risk Factors

     57  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     57  

Item 3. Defaults Upon Senior Securities

     57  

Item 5. Other Information

     57  

Signatures

     58  

 

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Table of Contents

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 6-K contains certain forward-looking statements which include, or may include, words such as “raising”, “believe”, “potential”, “increased”, “future”, “remain”, “growing”, “expect”, “foreseeable”, “expected”, “to be”, “includes”, “estimated”, “assumes”, “would provide”, and other similar terminology. Forward-looking statements contained in this prospectus include, but are not limited to, statements about: our future financial performance, including our revenue, operating expenses and our ability to maintain profitability and operational and commercial capabilities; our expectations regarding the development of our industry and the competitive environment in which we operate; the expansion of our plants and our expectations to increase production capacity; the global supply chain and our committed orders; the global response to COVID-19 and our role in it; our geographical and industrial footprint; and our goals, strategies and investment plans. The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: (i) our product offerings are highly complex, and, if our products do not satisfy applicable quality criteria, specifications and performance standards, we could experience lost sales, delayed or reduced market acceptance of our products, increased costs and damage to our reputation; (ii) we must develop new products and enhance existing products, adapt to significant technological and innovative changes and respond to introductions of new products by competitors to remain competitive; (iii) our backlog might not accurately predict our future revenue, and we might not realize all or any part of the anticipated revenue reflected in our backlog; (iv) if we fail to maintain and enhance our brand and reputation, our business, results of operations and prospects may be materially and adversely affected; (v) we are highly dependent on our management and employees. Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees that we need to support our business and our intended future growth; (vi) our business, financial condition and results of operations depend upon maintaining our relationships with suppliers and service providers; (vii) our business, financial condition and results of operations depend upon the availability and price of high-quality materials and energy supply and our ability to contain production costs; (viii) significant interruptions in our operations could harm our business, financial condition and results of operations; (ix) our manufacturing facilities are subject to operating hazards which may lead to production curtailments or shutdowns and have an adverse effect on our business, results of operations, financial condition or cash flows; (x) our business may be harmed if our customers discontinue or spend less on research, development, production or other scientific endeavors; and (xi) we may face significant competition in implementing our strategies for revenue growth in light of actions taken by our competitors. This list is not exhaustive.

These forward-looking statements speak only as at their dates. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible to predict all of these factors. Further, the Company cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statements.

For a description of certain additional factors that could cause the Company’s future results to differ from those expressed in any such forward-looking statements, refer to the risk factors discussed under “Item 1A. Risk Factors” below and “Risk Factors” in our registration statement on Form F-1 filed with the U.S. Securities and Exchange Commission on July 16, 2021.

 


Table of Contents

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements

Stevanato Group S.p.A.

Interim consolidated income statements

for the three and the nine months ended September 30, 2021 and 2020

(Unaudited)

 

     For the three months
ended September 30,
    

For the nine months

ended September 30,

 
(EUR thousand)         2021     2020      2021      2020  
     Notes                           

Revenues

   9      214,535       157,056        611,348        455,298  

Cost of sales

   10      151,262       109,835        418,976        319,723  
     

 

 

   

 

 

    

 

 

    

 

 

 

Gross profit

        63,273       47,221        192,372        135,575  

Other operating income

   11      1,725       589        7,206        2,656  

Selling and Marketing expenses

   12      4,707       4,091        15,999        15,400  

Research and Development expenses

   12      7,393       4,731        20,110        12,519  

General and Administrative expenses

   12      24,665       16,299        44,702        45,103  
     

 

 

   

 

 

    

 

 

    

 

 

 

Operating profit

        28,233       22,689        118,767        65,209  

Finance income

   13      2,066       2,414        6,381        11,910  

Finance expense

   14      8,032       3,551        13,681        17,188  

Share of profit of an associate

        150       157        547        371  
     

 

 

   

 

 

    

 

 

    

 

 

 

Profit before tax

        22,417       21,710        112,014        60,303  

Income taxes

   15      3,781       5,087        22,347        15,733  
     

 

 

   

 

 

    

 

 

    

 

 

 

Net Profit

        18,636       16,623        89,667        44,570  
     

 

 

   

 

 

    

 

 

    

 

 

 

Net Profit attributable to:

             

Equity holders of the parent

        18,655       16,620        89,647        44,712  

Non-controlling interests

        (19     3        20        (142
     

 

 

   

 

 

    

 

 

    

 

 

 
        18,636       16,623        89,667        44,570  
     

 

 

   

 

 

    

 

 

    

 

 

 

Earnings per share

             

Basic earnings per common share (in EUR)

   16      0.07       0.07        0.36        0.19  

Diluted earnings per common share (in EUR)

   16      0.07       0.07        0.36        0.19  

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim consolidated statements of comprehensive income

for the three and the nine months ended September 30, 2021 and 2020

(Unaudited)

 

          For the three months
ended September 30,
   

For the nine months

ended September 30,

 
(EUR thousand)         2021     2020     2021     2020  
     Notes                         

Net Profit

        18,636       16,623       89,667       44,570  

Gains/(losses) from remeasurement of employee defined benefit plans

        13       (68     200       (71

Tax effect relating to those components of OCI

        (1     16       (46     17  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income that will not be classified subsequently to profit or loss

        12       (52     154       (54
     

 

 

   

 

 

   

 

 

   

 

 

 

Exchange difference on translation of foreign operations

   25      (350     (4,612     7,537       (26,038

Changes in the fair value of cash flow hedging instruments

        290       (247     1,602       (1,067

Tax effect relating to those components of OCI

        (70     59       (384     256  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) that will be classified subsequently to profit or loss

        (129     (4,800     8,754       (26,849
     

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

        (117     (4,851     8,908       (26,903
     

 

 

   

 

 

   

 

 

   

 

 

 

Total Comprehensive Income (Loss)

        18,519       11,772       98,576       17,667  
  

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to:

           

Equity holders of the parent

        18,542       11,762       98,546       17,799  

Non-controlling interests

        (24     10       30       (133
     

 

 

   

 

 

   

 

 

   

 

 

 
        18,519       11,772       98,576       17,667  
     

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim consolidated statements of financial position

as at September 30, 2021 and at December 31, 2020

(Unaudited)

 

(EUR thousand)      At September 30,
2021
    At December 31,
2020
 
     Notes               

Assets

       

Non-current assets

       

Goodwill

        47,243       47,243  

Other intangible assets

     17        31,978       33,901  

Right of Use assets

     19        23,338       25,380  

Property, plant and equipment

     18        353,484       313,658  

Investments in an associate

        2,556       2,009  

Financial assets - investments FVTPL

        1,145       760  

Other non-current financial assets

     20        2,639       6,701  

Deferred tax assets

        52,193       45,552  
     

 

 

   

 

 

 
        514,576       475,204  

Current assets

       

Inventories

     21        148,329       139,373  

Contract assets

     22        64,474       39,430  

Trade receivables

     22        154,749       127,818  

Other current financial assets

     20        27,446       41,543  

Tax receivables

     23        20,379       14,188  

Other receivables

        28,933       14,825  

Cash and cash equivalents

     24        427,974       115,599  
     

 

 

   

 

 

 
        872,284       492,775  
     

 

 

   

 

 

 

Total assets

        1,386,860       967,979  
     

 

 

   

 

 

 

Equity and liabilities

       

Equity

       

Share capital

     25        21,698       20,002  

Reserves and Retained Earnings

     25        680,472       211,979  

Net profit attributable to equity holders of the parent

        89,647       78,513  
     

 

 

   

 

 

 

Equity attributable to equity holders of the parent

        791,817       310,495  

Non-controlling interests

        (325     (355
     

 

 

   

 

 

 

Total equity

        791,492       310,140  
     

 

 

   

 

 

 

Non-current liabilities

       

Non-current financial liabilities

     26        237,110       294,124  

Employees benefits

     28        10,996       29,725  

Provisions

     29        3,983       4,384  

Deferred tax liabilities

        13,876       11,623  

Other non-current liabilities

     30        1,808       1,808  
     

 

 

   

 

 

 
        267,773       341,664  

Current liabilities

       

Current financial liabilities

     26        65,740       81,234  

Trade payables

     31        130,419       118,740  

Contract liabilities

     32        13,938       5,031  

Advances from customers

     32        30,217       48,361  

Tax payables

     23        22,017       18,543  

Other liabilities

     31        65,264       44,266  
     

 

 

   

 

 

 
        327,595       316,175  
     

 

 

   

 

 

 

Total liabilities

        595,368       657,839  
     

 

 

   

 

 

 

Total equity and liabilities

        1,386,860       967,979  
     

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim consolidated statements of changes in equity

for the nine months ended September 30, 2021 and 2020

(Unaudited)

 

(EUR thousand)    Notes      Share
capital
     Share
Premium
Reserve
    Treasury
shares
    Cash flow
hedge
reserve
    Reserve for
actuarial
gains /
(losses)
    Foreign
currency
translation
reserve
    Retained
earnings

and
other
reserve
    Equity
attributable
to equity
holders of
the parent
    Non-controlling
interests
    Total
equity
 

At January 1, 2021

        20,002        —         (26,189     (3,345     (675     (34,911     355,614       310,495       (355     310,140  

Other comprehensive income

     25               1,217       154       7,527         8,898       10       8,908  

Net profit

                     89,647       89,647       20       89,667  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

        —          —         —         1,217       154       7,527       89,647       98,546       30       98,576  

Dividends

     25                     (11,200     (11,200     —         (11,200

Capital increase

     25        1,696        410,563                 412,259       —         412,259  

Accessory costs to the capital increase

     25           (27,849               (27,849     —         (27,849

Taxes relating to capital increase costs

     25           6,684                 6,684       —         6,684  

Other

             (1,551           4,434       2,883       —         2,883  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total effects

        1,696        389,397       (1,551     —         —         —         (6,766     382,777       —         382,777  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2021

 

     21,698        389,397       (27,740     (2,128     (521     (27,384     438,496       791,817       (325     791,492  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(EUR thousand)    Notes   

Share
capital

  

Share
Premium
Reserve

  

Treasury
shares

  

Cash
flow
hedge
reserve

  

Reserve for
actuarial
gains /
(losses)

  

Foreign
currency
translation
reserve

   Retained
earnings
and
other
reserve
     Equity
attributable
to equity
holders of
the parent
     Non-controlling
interests
     Total
equity
 

At January 1, 2020

   20,002    —      (26,189)    (2,796)    (523)    (12,331)      287,327        265,490        (50      265,439  

Other comprehensive income

   25             (811)    (54)    (26,048)         (26,913      10        (26,903

Net profit

                          44,712        44,712        (142      44,570  
     

 

  

 

  

 

  

 

  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

      —      —      —      (811)    (54)    (26,048)      44,712        17,799        (133      17,667  

Dividends

   25                        (8,900      (8,900      —          (8,900

Other

                          23        23        —          23  
     

 

  

 

  

 

  

 

  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

Total effects

                          (8,877      (8,877      —          (8,877
     

 

  

 

  

 

  

 

  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

At September 30, 2020

   20,002    —      (26,189)    (3,608)    (577)    (38,378)      323,163        274,412        (183      274,230  
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Interim consolidated statements of cash flows

for the nine months ended September 30, 2021 and 2020

(Unaudited)

 

    

For the nine months

ended September 30,

 
(EUR thousand)    2021     2020  

Operating activities

    

Profit before tax

     112,014       60,303  

Adjustments:

    

Depreciation and impairment of property, plant and equipment

     31,011       29,779  

Amortization of intangible assets and Right of Use

     10,277       9,098  

Allowance for doubtful accounts

     332       1,372  

Net finance expense

     8,633       3,390  

Share of profit or loss of associated companies

     (547     (371

Change in other provisions and in employee benefits

     (8,791     (1,067

Other non-cash expenses, net

     (785     1,209  

Working capital changes:

    

- inventories and contract assets

     (33,794     (23,091

- trade receivables and other assets

     (44,826     (22,479

- trade payables, contract liabilities, advances and other liabilities

     27,664       52,588  

Interest paid

     (3,135     (4,185

Interest received

     465       497  

Income tax paid

     (20,617     (12,287
  

 

 

   

 

 

 

Cash Flow from operating activities

     77,901       94,755  
  

 

 

   

 

 

 

Cash Flow from investing activities

    

Purchase of property, plant and equipment

     (71,371     (60,779

Proceeds from sale of property, plant and equipment

     34       —    

Purchase of intangible assets

     (3,405     (3,499

Investment in financial assets

     (589     (26
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (75,332     (64,304
  

 

 

   

 

 

 

Cash Flow from financing activities

    

Net proceeds from and fees for IPO

     380,202       —    

Acquisition of non-controlling interests

     (1,103     —    

Dividends paid

     (11,200     (8,900

Payment of principal portion of lease liabilities

     (4,902     (4,433

Proceed from loans

     8,050       51,911  

Repayments of loans

     (77,805     (40,211

Other current financial activities

     14,032       1,403  
  

 

 

   

 

 

 

Net cash flows from/ (used in) financing activities

     307,275       (230
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     309,844       30,221  

Net foreign exchange difference

     2,531       (3,568

Cash and cash equivalents at January 1

     115,599       85,386  
  

 

 

   

 

 

 

Cash and cash equivalents at September 30

     427,974       112,039  
  

 

 

   

 

 

 

The accompanying notes are an integral part of the Interim Condensed Consolidated Financial Statements

 

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Stevanato Group S.p.A.

Notes to the interim condensed consolidated financial statements

1. Corporate information

Stevanato Group S.p.A. (herein referred to as the “Company” and together with its subsidiaries the “Group”) is headquartered in Italy and its registered office is located in via Molinella 17, Piombino Dese (Padova, Italy). The Group is active in the design, production and distribution of products and systems to provide integrated solutions for bio-pharma and healthcare, leveraging on constant investment and the selected acquisition of skills and new technologies to become a global player in the bio-pharma industry. Principal products are containment solutions, drug delivery systems, medical devices, diagnostic, analytical services, visual inspection machines, assembling and packaging machines, glass forming machines.

The Group has nine production plants for manufacturing and assembly of bio-pharma and healthcare products (in Italy, Germany, Slovakia, Brazil, Mexico, China, United States), five plants for the production of machinery and equipment (in Italy and Denmark), two sites for analytical services (in Italy and United States) and two commercial offices (in Japan and the United States). Further, on October 4, 2021, the Group announced the start of construction of a new facility in Fishers, Indiana, United States. The Group is also continuing investment to expand production facilities in Piombino Dese, Italy, where construction on a new building is underway. The global footprint allows to sell products and provide services in more than 70 countries worldwide.

As at September 30, 2021 Stevanato Group S.p.A. is controlled by Stevanato Holding S.r.l. which holds 78.03% of its share capital.

On July 16, 2021 Stevanato Group began trading on the New York Stock Exchange under the symbol STVN.

2. Authorization of interim condensed consolidated financial statements and compliance with international financial reporting standards

These Interim Condensed Consolidated Financial Statements of Stevanato Group S.p.A. were authorized for issuance on November 08, 2021 and have been prepared in accordance with IAS 34 - Interim Financial Reporting. The Interim Condensed Consolidated Financial Statements should be read in conjunction with the Group’s consolidated financial statements at and for the year ended December 31, 2020 (the “Consolidated Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

3. Basis of preparation for interim condensed consolidated financial statements

The preparation of the Interim Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities as well as disclosures of contingent liabilities. If in the future such estimates and assumptions, which are based on management’s best judgment at the date of these Interim Condensed Consolidated Financial Statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. Reference should be made to the section “Use of estimates” in the Consolidated Financial Statements for a detailed description of the more significant valuation procedures used by the Group.

Moreover, in accordance with IAS 34, certain valuation procedures, in particular those of a more complex nature regarding matters such as any impairment of non-current assets, are only carried out in full during the preparation of the annual consolidated financial statements, when all the related information necessary is available, other than in the event that there are indications of impairment, in which case an immediate assessment is required. Similarly, the actuarial valuations that are required for the determination of employee benefit provisions are also usually carried out during the preparation of the annual consolidated financial statements, except in the event of significant market fluctuations or significant plan amendments, curtailments or settlements. IAS 34 also requires to disclose the nature and amount of items affecting net income that are unusual due to their nature, size or significance.

 

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These interim condensed consolidated financial statements consider that the Group publishes quarterly interim financial statements. As the Group is not including the full set of disclosures, as required in a complete set of financial statements, the interim financial statements of the Group are regarded as ‘condensed’, as per IAS 34.

New standards, amendments and interpretations

The following amendments and interpretations were adopted for the first time in 2021 and did not have an impact on the interim condensed consolidated financial statements:

 

   

Amendments to IFRS 9 - Financial Instruments,

 

   

Amendments to IAS 39 - Financial Instruments: Recognition and Measurement,

 

   

Amendments to IFRS 7 - Financial Instruments: Disclosures,

 

   

Amendments to IFRS 4 - Insurance Contracts,

 

   

Amendments to IFRS 16 - Leases - Interest Rate Benchmark Reform - Phase 2 (issued on August 27, 2020 and effective from periods beginning on January 1, 2021).

New standards, amendments and interpretations not yet effective

Amendments to IAS 1 - Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

 

   

What is meant by a right to defer settlement.

 

   

That a right to defer must exist at the end of the reporting period.

 

   

That classification is unaffected by the likelihood that an entity will exercise its deferral right.

 

   

That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.

The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and must be applied retrospectively. The Group is currently assessing the impact the amendments will have on current practice, monitoring the IFRS Interpretations Committee’s discussions, and whether existing loan agreements may require renegotiation.

Amendments to IFRS 3 - Reference to the Conceptual Framework

In May 2020, the IASB issued Amendments to IFRS 3 - Business Combinations - Reference to the Conceptual Framework. The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements. The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 - Levies, if incurred separately. At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2022 and apply prospectively. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use

In May 2020, the IASB issued IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The amendments are not expected to have a material impact on the Group.

 

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Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract

In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and Administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 8 - Accounting Policies, Changes to Accounting Estimates and Errors

On 12 February 2021, the IASB issued amendments to IAS 8 Accounting Policies, Changes to Accounting Estimates and Errors, in which it introduces a new definition of “accounting estimates”. The amendments are designed to clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. The amendments become effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 1 - Presentation of Financial Statements

In February 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The IASB also issued amendments to IFRS Practice Statement 2 Making Materiality Judgements (the PS) to support the amendments in IAS 1 by explaining and demonstrating the application of the ‘four-step materiality process’ to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023. The amendments are not expected to have a material impact on the Group.

Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

In May 2021, the IASB issued amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction, that clarify the accounting of deferred tax on transactions such as leases and decommissioning obligations. The main change in Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) is an exemption from the initial recognition exemption provided in IAS 12.15(b) and IAS 12.24. Accordingly, the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition (this is also explained in the newly inserted paragraph IAS 12.22A). The amendments to IAS 12 are applicable for annual periods beginning on or after 1 January 2023. The amendments are not expected to have a material impact on the Group.

4. Scope of consolidation

Stevanato Group S.p.A. is the parent company of the Group and it holds, directly and indirectly, interests in the Group’s main operating companies. There are no changes in the scope of consolidation for the periods presented in this Interim Report and the Group’s scope of consolidation is as follows:

Subsidiaries and associate

The interim condensed consolidated financial statements of the Group include the following list of company directly or indirectly controlled:

 

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Table of Contents

Name

  

Segment

   Description    Country of
incorporation
   Type of
control
   % equity interest  
   Sep. 30,
2021
    Dec. 31,
2020
 

Nuova Ompi S.r.l.

   Biopharmaceutical    Production of container
closure systems and
development of integrated
solutions for the
pharmaceutical industry
   Italy    Direct      100     100

Spami S.r.l.

   Engineering    Production plant and
machinery
   Italy    Direct      100     100

Stevanato Group International a.s.

   Holding    Service/Subholding
company
   Slovakia    Direct      100     100

Medical Glass a.s.

   Biopharmaceutical    Production of container
closure systems
   Slovakia    Indirect      99.74     99.74

Stevanato Group N.A. S. de RL de CV

   Biopharmaceutical    Service company    Mexico    Indirect      100     100

Ompi N.A. S. de RL de CV

   Biopharmaceutical    Production of container
closure systems
   Mexico    Direct

Indirect

    

30.76

69.24


   

30.76

69.24


Ompi of America inc.

   Biopharmaceutical    Sale of container closure
systems
   USA    Indirect      100     100

Ompi do Brasil I. e C. de Em. Far. Ltda

   Biopharmaceutical    Production of container
closure systems
   Brazil    Direct

Indirect

    

79

21


   

79

21


Ompi Pharm. Packing Techn. Co. Ltd

   Biopharmaceutical    Production of container
closure systems
   China    Indirect      100     100

InnoScan A/S

   Engineering    Production plant and
machinery
   Denmark    Indirect      100     100

SVM Automatik A/S

   Engineering    Production plant and
machinery
   Denmark    Indirect      65 % *      65 % * 

Medirio SA

   Biopharmaceutical    Research and
development
   Switzerland    Indirect      100     100

Balda Medical Gmbh

   Biopharmaceutical    Production of in-vitro
diagnostic solutions
   Germany    Direct      100     100

Balda C. Brewer Inc.

   Biopharmaceutical    Production of in-vitro
diagnostic solutions
   USA    Indirect      100     100

Balda Precision Inc.

   Biopharmaceutical    Production metal
components
   USA    Indirect      100     100

Ompi of Japan Co., Ltd.

   Biopharmaceutical    Sale of container closure
systems
   Japan    Direct      51     51

 

*

Not included in minority interests as there is a put and call option for full acquisition (the minority interests would have amounted to 35%).

 

Name

   Segment    Description    Country of
incorporation
   Type of
control
   % equity interest  
   Sep. 30,
2021
    Dec. 31,
2020
 

Swissfillon AG

   Biopharmaceutical    Sterile filling services
company
   Switzerland    Associate      26.94     26.94

Non-controlling interests

The non-controlling interests as of September 30, 2021 and the net profit attributable to non-controlling interests during the nine months ended September 30, 2021 relate to Ompi of Japan Co., Ltd. and Medical Glass a.s..

5. Financial Risk Factors

The Group is exposed to the following financial risks connected with its operations:

 

   

financial market risk, mainly relating to foreign currency exchange rates and to interest rates;

 

   

liquidity risk, with particular reference to the availability of funds and access to the credit market, should the Group require it, and to financial instruments in general;

 

   

credit risk, arising both from its normal commercial relations with customers, and its financing activities.

 

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These risks could significantly affect the Group’s financial position, results of operations and cash flows, and for this reason the Group identifies and monitors these risks, in order to detect potential negative effects in advance and take the necessary action to mitigate them, primarily through its operating and financing activities and if required, through the use of derivative financial instruments.

The Interim Condensed Consolidated Financial Statements do not include all the information and notes on financial risk management required in the annual consolidated financial statements. For a detailed description of the financial risk factors and financial risk management of the Group, reference should be made to Note 40 of the Consolidated Financial Statements at and for the year ended December 31, 2020.

Although there are no significant negative impacts from the coronavirus SARS-CoV-2 coronavirus (“COVID-19”) pandemic on the Group’s exposure to financial risks or risk management procedures in the periods presented by these Interim Condensed Consolidated Financial Statements, management is continuously monitoring the evolution of COVID-19 as information becomes available and the related effects on the financial position and results of operations of the Group.

6. Foreign currency exchange

The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:

 

COUNTRY

   ISO
CODE
     Average for nine
months ended
September 30, 2021
     At September 30,
2021
     Average for nine
months ended
September 30, 2020
     At September 30,
2020
     At December 31,
2020
     At December 31,
2019
 

CHINA

     CNY        7.7376        7.4847        7.8659        7.9720        8.0225        7.8205  

UNITED STATES

     USD        1.1962        1.1579        1.1250        1.1708        1.2271        1.1234  

MEXICO

     MXN        24.0772        23.7439        24.5232        26.1848        24.4160        21.2202  

DENMARK

     DKK        7.4368        7.4360        7.4580        7.4462        7.4409        7.4715  

BRAZIL

     BRL        6.3764        6.2631        5.7100        6.6308        6.3735        4.5157  

SWITZERLAND

     CHF        1.0904        1.0830        1.0680        1.0804        1.0802        1.0854  

JAPAN

     JPY        129.8320        129.6700        120.9108        123.7600        126.4900        121.9400  

7. Seasonality of operations

It should be noted that historically the Group’s business operations are not characterized by seasonality.

8. Segment Information

Stevanato Group business operations are organized into two reportable segments, based on their specific products and services:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes containment solutions, drug delivery systems, medical devices and diagnostic & analytical services;

 

   

Engineering, which covers visual inspection, assembly packaging and glass forming machines.

For the nine months ended September 30, 2021, Stevanato Group generated approximately 83% of total sales from the Biopharmaceutical and Diagnostic Solutions Segment (87% for the nine months ended September 30, 2020), and approximately 17% from the Engineering Segment (13% for the nine months ended September 30, 2020).

The criteria applied to identify the operating segments are consistent with the information reviewed by the Chief Executive Officer (the Group’s “Chief Operating Decision Maker”) in making decisions regarding the allocation of resources and to assess performance.

 

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Table of Contents
     As at and for the three months ended September 30, 2021  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations
and unallocated
items
    Consolidated  

External Customers

     172,757        41,778        214,535        —         214,535  

Inter-Segment

     330        17,678        18,009        (18,009     —    

Total Revenues

     173,087        59,456        232,544        (18,009     214,535  

Cost of Sales

     119,159        50,304        169,463        (18,200     151,262  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     53,928        9,152        63,081        192       63,273  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     1,725        —          1,725        —         1,725  

Selling and Marketing expenses

     1,860        500        2,360        2,347       4,707  

Research and Development expenses

     5,790        988        6,778        615       7,393  

General and Administrative expenses

     16,683        3,440        20,123        4,542       24,665  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     31,320        4,224        35,544        (7,312     28,233  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     839,863        215,667        1,055,530        331,330       1,386,860  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     327,091        132,908        459,999        135,368       595,368  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     As at and for the three months ended September 30, 2020  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations
and unallocated
items
    Consolidated  

External Customers

     132,076        24,980        157,056        —         157,056  

Inter-Segment

     136        10,298        10,434        (10,434     —    

Total Revenues

     132,212        35,278        167,490        (10,434     157,056  

Cost of Sales

     88,473        31,088        119,561        (9,725     109,835  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     43,739        4,191        47,930        (709     47,221  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     673        —          673        (84     589  

Selling and Marketing expenses

     1,971        706        2,677        1,414       4,091  

Research and Development expenses

     3,611        661        4,272        459       4,731  

General and Administrative expenses

     13,537        2,600        16,137        162       16,299  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     25,293        224        25,517        (2,828     22,689  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     766,710        168,885        935,594        21,466       957,060  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     353,519        98,848        452,368        230,463       682,831  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     As at and for the nine months ended September 30, 2021  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations
and unallocated
items
    Consolidated  

External Customers

     508,175        103,172        611,348        —         611,348  

Inter-Segment

     789        39,278        40,067        (40,067     —    

Total Revenues

     508,964        142,450        651,414        (40,067     611,348  

Cost of Sales

     340,196        116,809        457,005        (38,028     418,976  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     168,768        25,641        194,409        (2,038     192,372  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     7,206        —          7,206        —         7,206  

Selling and Marketing expenses

     7,107        2,251        9,357        6,642       15,999  

Research and Development expenses

     15,889        2,985        18,874        1,236       20,110  

General and Administrative expenses

     41,786        8,383        50,169        (5,467     44,702  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     111,192        12,023        123,215        (4,449     118,767  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     839,863        215,667        1,055,530        331,330       1,386,860  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     327,091        132,908        459,999        135,368       595,368  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     As at and for the nine months ended September 30, 2020  
(EUR thousand)    Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total
segments
     Adjustments,
eliminations and
unallocated
items
    Consolidated  

External Customers

     394,903        60,395        455,298        —           455,298  

Inter-Segment

     534        38,120        38,653        (38,653     —      

Total Revenues

     395,437        98,515        493,952        (38,653     455,298  

Cost of Sales

     271,856        83,658        355,514        (35,791     319,723  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross Profit

     123,581        14,857        138,438        (2,862     135,575  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Other operating income

     2,862        —          2,862        (206     2,656  

Selling and Marketing expenses

     8,002        2,310        10,312        5,088       15,400  

Research and Development expenses

     8,993        2,005        10,999        1,521       12,519  

General and Administrative expenses

     37,839        7,159        44,997        106       45,103  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating Profit

     71,609        3,382        74,991        (9,782     65,209  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     766,710        168,885        935,594        21,466       957,060  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     353,519        98,848        452,368        230,463       682,831  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

Inter-segment revenues and costs are eliminated upon consolidation and reflected in the “adjustments, elimination and unallocated items” column. The most relevant adjustment in revenues relates to the sales of the Engineering’s equipment to the Biopharmaceutical and Diagnostic Solutions.

As of September 30, 2021 Biopharmaceutical and Diagnostic Solutions Segment and the Engineering Segment have respectively two and three customers that individually represent more than 10% of segment’s revenues.

As of September 30, 2020 the Biopharmaceutical and Diagnostic Solutions Segment and Engineering Segment have respectively one and two of customers that represent more than 10% of segment’s revenues.

Revenues generated by the Biopharmaceutical and Diagnostic Solutions Segment increase by EUR 113,527 thousand, or 28.7%, from EUR 395,437 thousand in the nine months ended September 30, 2020 to EUR 508,964 thousand for the nine months ended September 30, 2021. Revenue increase is due to organic growth, also due to COVID-19 which increased the demand for the products and solutions provided by the Group.

Gross profit of this segment increases from 31.3% for the nine months ended September 30, 2020 to 33.2% for the nine months ended September 30, 2021 due to the favorable mix of products sold and increased production efficiencies.

Revenues generated by the Engineering Segment increase by EUR 43,935 thousand, or 44.6%, from EUR 98,515 thousand for the nine months ended September 30, 2020 to EUR 142,450 thousand for the nine months ended September 30, 2021. For the nine months ended September 30, 2021 the Engineering Segment benefited from the high order intake represented by contracts with external customers, differently from the same period 2020 characterized by lower backlog achieved in the previous year.

Engineering gross profit increases from 15.1% for the nine months ended September 30, 2020 to 18.0% for the nine months ended September 30, 2021 mainly due to the increased marginality in glass converting machines and visual inspection.

9. Revenues from contract with customers

Disaggregated revenue information

The table below shows the disaggregation of the Group’s revenue from contracts with external customers:

 

13


Table of Contents
(EUR thousand)    For the three months ended September 30, 2021  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     48,382        —          48,382  

Revenues from other containment and delivery solutions

     124,375        —          124,375  

Revenues from engineering

     —          41,778        41,778  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     172,757        41,778        214,535  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     105,157        22,008        127,165  

APAC

     20,010        13,184        33,194  

North America

     40,998        5,856        46,854  

South America

     6,592        730        7,322  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     172,757        41,778        214,535  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     167,814        7,688        175,502  

Goods and services transferred over time

     4,943        34,090        39,033  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     172,757        41,778        214,535  
  

 

 

    

 

 

    

 

 

 
(EUR thousand)    For the three months ended September 30, 2020  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     37,612        —          37,612  

Revenues from other containment and delivery solutions

     94,464        —          94,464  

Revenues from engineering

     —          24,980        24,980  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     132,076        24,980        157,056  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     74,607        10,297        84,904  

APAC

     12,747        2,981        15,728  

North America

     39,914        11,694        51,608  

South America

     4,808        9        4,816  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     132,076        24,980        157,056  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     132,076        11,598        143,674  

Goods and services transferred over time

     —          13,382        13,382  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     132,076        24,980        157,056  
  

 

 

    

 

 

    

 

 

 

 

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(EUR thousand)    For the nine months ended September 30, 2021  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     141,426        —          141,426  

Revenues from other containment and delivery solutions

     366,749        —          366,749  

Revenues from engineering

     —          103,172        103,172  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     508,175        103,172        611,348  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     308,167        54,942        363,109  

APAC

     52,771        24,526        77,297  

North America

     129,608        22,732        152,340  

South America

     17,629        972        18,601  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     508,175        103,172        611,348  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     491,383        31,718        523,102  

Goods and services transferred over time

     16,792        71,454        88,246  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     508,175        103,172        611,348  
  

 

 

    

 

 

    

 

 

 
(EUR thousand)    For the nine months ended September 30, 2020  
   Biopharmaceutical
and Diagnostic
Solutions
     Engineering      Total  

Type of goods or service

        

Revenues from high-value solutions

     105,570        —          105,570  

Revenues from other containment and delivery solutions

     289,334        —          289,334  

Revenues from engineering

     —          60,395        60,395  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     394,903        60,395        455,298  
  

 

 

    

 

 

    

 

 

 

Geographical markets

        

EMEA

     236,076        36,127        272,203  

APAC

     34,034        6,364        40,398  

North America

     110,162        17,837        127,998  

South America

     14,631        67        14,699  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     394,903        60,395        455,298  
  

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

        

Goods and services transferred at a point in time

     394,903        21,198        416,101  

Goods and services transferred over time

     —          39,197        39,197  
  

 

 

    

 

 

    

 

 

 

Total revenue from contracts with customers

     394,903        60,395        455,298  
  

 

 

    

 

 

    

 

 

 

 

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The Group revenues are divided into two main segments:

 

   

Biopharmaceutical and Diagnostic Solutions: this segment includes all the products and services developed and provided for containment and delivery of bio-pharmaceutical drugs and diagnostic reagents. This segment is further divided into two sub-categories:

 

   

High-value solutions: wholly owned, internally developed products, processes and services for which the Group holds intellectual property rights or has strong proprietary know-how and are characterized by particular complexity or high performance;

 

   

Other containment and delivery solutions.

 

   

Engineering: this segment includes all the equipment and technologies developed and provided to support the end-to-end bio-pharmaceutical and diagnostic manufacturing processes.

Consolidated revenues at current exchange rates increase by EUR 156,049 thousand, or 34.27%, to EUR 611,348 thousand for the nine months ended September 30, 2021, compared to EUR 455,298 thousand for the nine months ended September 30, 2020. Currency movements in USD and BRL had a negative impact in 2021. Excluding this effect, the increase was 36.03%.

With reference to Biopharmaceutical and Diagnostic Solution Segment, revenues in high-value solutions increase by EUR 35,857 thousand, or 33.96%, from EUR 105,570 thousand for the nine months ended September 30, 2020 to EUR 141,426 thousand for the nine months ended September 30, 2021, while revenues in other containment and delivery solution increase by EUR 77,415 thousand, or 26.76%, from EUR 289,334 thousand for the nine months ended September 30, 2020 to EUR 366,749 thousand for the nine months ended September 30, 2021. Revenues in Biopharmaceutical and Diagnostic Solutions show a significant growth in all geographic markets: +17.65% in North America, +55.05% in APAC, +30.54% in EMEA and +20.49% in South America.

With reference to the Engineering Segment, revenues from contracts with external customers increase by EUR 42,777 thousand, or 70.83%, from EUR 60,395 thousand for the nine months ended September 30, 2020 to EUR 103,172 thousand for the nine months ended September 30, 2021.

Contract balances

The following table provides information on contractual asset from contracts with customer:

 

(EUR thousand)    At September 30,
2021
     At December 31,
2020
 

Trade Receivables

     154,749        127,818  

Contract Assets

     64,474        39,430  

Contract Liabilities

     (13,938      (5,031

Advances From Customers

     (30,217      (48,361
  

 

 

    

 

 

 

Total

     175,068        113,856  
  

 

 

    

 

 

 

The contract assets mainly relate to the Group’s right to consideration for productions from construction contract not yet invoiced as of the balance sheet date. The amount recognized as contract assets are reclassified to trade receivable as soon as the Group has an unconditional right to consideration.

 

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10. Cost of sales

Cost of sales are detailed as follows:

 

    

For the three months

ended September 30,

    

For the nine months

ended September 30,

 
(EUR thousand)    2021      2020      2021      2020  

Purchases

     79,918        61,700        199,309        162,352  

Change in inventories

     4,528        (9,358      15,726        (13,916

Direct industrial labour

     28,030        26,715        85,446        78,770  

Indirect industrial labour

     12,454        10,035        36,982        31,949  

Industrial depreciation

     12,330        11,370        33,889        32,539  

Other costs of sales

     14,002        9,373        47,625        28,029  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Cost of sales

     151,262        109,835        418,976        319,723  
  

 

 

    

 

 

    

 

 

    

 

 

 

All Cost of sales items increase in the first nine months of 2021 compared to the same period of the previous year as a result of the significant growth in sale volumes. In particular, the increase in other costs of sales, is mainly due to an increase in subcontracting work aimed to cope the increasing workload with external resources, as a consequence of the growing revenues in the Engineering Segment, as well as a reduction in industrial capitalized costs for the machinery built within the Group.

Nevertheless, the overall Cost of sales increase less than proportionally to revenues mainly due to the efficiency maximization in production processes.

11. Other operating income

Other operating income for the three months ended September 30, 2021, and 2020 amounts to EUR 1,725 thousand and EUR 589 thousand, respectively, and for the nine months ended September 30, 2021 amount to EUR 7,206 thousand and EUR 2,656 thousand, respectively relating mainly to feasibility study, design, development and industrialization of new products, contract cancellation fees and other recharges.

For the nine months ended September 30, 2020, other operating income included EUR 244 thousand related to grants received by Nuova Ompi from the so-called Sustainable Growth Fund promoted by the Italian Ministry for Productive Activities, in relation to an innovative research project for the development of a series of prototype solutions of innovative glass containers (called Alba) for the primary packaging of parental drugs characterized by the presence of an internal coating.

12. Expenses

Expenses are detailed as follows:

 

    

For the three months

ended September 30,

    

For the nine months

ended September 30,

 
(EUR thousand)    2021      2020      2021      2020  

Selling and Marketing expenses

     4,707        4,091        15,999        15,400  

Research and Development expenses

     7,393        4,731        20,110        12,519  

General and Administrative expenses

     24,665        16,299        44,702        45,103  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Expenses

     36,765        25,121        80,811        73,022  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the nine months ending September 30, 2021, Selling and Marketing expenses amount to EUR 15,999 thousand (EUR 15,400 thousand in 2020). These expenses are mainly related to personnel expenses for sales organizations. They include provision for bad and doubtful debts for EUR 720 thousand (EUR 1,790 thousand in 2020) and depreciation for EUR 586 thousand (EUR 628 thousand in 2020). Selling and Marketing expenses slight increase is mainly due to the higher personnel costs to support the ongoing growth in our business which has been partially offset by the reduction in bad and doubtful debt accrual following the improvement of some positions with external customers.

 

 

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Research and Development expenses for the nine months ending September 30, 2021 amounting to EUR 20,110 thousand (EUR 12,519 thousand in 2020) include costs for research and development activities to support the innovation of product range and components and include amortization of capitalized development costs for EUR 2,462 thousand (EUR 1,705 thousand in 2020). The increase in R&D expenses is primarily due to the structuring of the Drug Delivery Systems Department and the US Technology Excellence Center set up, as well as an increase in personnel expenses due to new hires.

General and Administrative expenses amount to EUR 44,702 thousand (EUR 45,103 thousand in 2020) for the nine months ending September 30, 2021 and mainly comprise personnel expenses for administrative functions, consultancies, directors’ compensation, rentals as well as, depreciation and amortization for EUR 3,573 thousand (EUR 3,226 thousand in 2020), of which amortization of fair value adjustments from purchase price allocations amount to EUR 779 thousand (the same amount in 2020). General and Administrative expenses for the nine months ending September 30, 2021 include non-recurring accrual reversal amounting to EUR 9,884 thousand related to cash settled awards under incentive plans 2012-2021 and 2018-2022 (early terminated in favor of the new stock grant plan 2021-2027) partially off-set by the non-recurring out-of-cycle bonus to personnel amounting to EUR 6,696 thousand and by costs relating to the listing of Stevanato Group shares on NYSE amounting to EUR 723 thousand. Please refer to Note 28 for further details on incentive plans.

13. Finance income

Finance income are as follows:

 

    

For the three months

ended September 30,

    

For the nine months

ended September 30,

 
(EUR thousand)    2021      2020      2021      2020  

Interest income from banks deposits

     138        110        410        198  

Income from financial discounts

     3        —          15        14  

Interest income on loans to associates

     —          —          10        10  

Other financial income

     1        13        31        274  

Foreign currency exchange rate gains

     1,811        1,321        4,830        10,362  

Derivatives write-ups

     (223      928        749        1,061  

Other fair value adjustments

     336        41        337        (10
  

 

 

    

 

 

    

 

 

    

 

 

 

Total finance income

     2,066        2,414        6,381        11,910  
  

 

 

    

 

 

    

 

 

    

 

 

 

The finance income reduction of EUR 5,529 thousand is mainly driven by foreign currency exchange gains which fluctuated significantly in 2020 following COVID-19 global spread.

 

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14. Finance expense

Finance expenses are as follows:

 

    

For the three months

ended September 30,

    

For the nine months

ended September 30,

 
(EUR thousand)    2021      2020      2021      2020  

Interest on debts and borrowings

     849        1,733        3,092        4,159  

Financial discounts and other expenses

     35        10        43        25  

Interest on lease liabilities

     144        157        441        471  

Financial component IAS 19

     5        108        25        42  

Foreign currency exchange losses

     5,241        2,531        7,754        9,214  

Derivatives write-downs

     1,463        (988      1,901        3,276  

Other fair value adjustments

     294        —          424        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total finance expense

     8,032        3,551        13,681        17,188  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance expenses include bank interest on the Group’s financial debt (recalculated using the amortized cost method) and interest on leases about the portion of financial expenses payable matured in the reporting period on the liabilities, recognized in accordance with IFRS 16 - Leases.

Foreign exchange differences are realized and unrealized gains and losses incurred on transactions in currencies other than the functional currency of the Group; the net foreign currency exchange impact, given by the sum of gains and losses, amounts to EUR 2,924 thousand for the nine months ended September 30, 2021 and EUR (1,148) thousand for the nine months ended September 30, 2020.

Foreign currency exchange losses are affected by non-recurring loss amounting to EUR 4,280 thousand related to a derivative financial instrument entered into to reduce the risk of fluctuations in the EUR/USD exchange rate in relation to the IPO proceeds.

15. Income tax

Income tax expenses amount to EUR 22,347 thousand for the nine months ended September 30, 2021 compared to EUR 15,733 thousand for the nine months ended September 30, 2020.

Effective tax rate for the nine months ended September 30, 2021 decreased by 6.14%, from 26.09% to 19.95%. As of September 30, 2021 taxes and the effective tax rate are affected by the following non-recurring items:

- a non-recurring release of deferred tax assets for EUR 4.8 million due to the early termination of the incentive plans aimed at a limited number of executives;

- in March 2021, the group reached an agreement with Italian Tax Agency regarding the so called “Patent box regime”, resulting in a retroactive EUR 7.1 million tax saving for the financial years 2016-2020. The tax benefit was estimated at €5.5 million for the three months ended March 31, 2021. An additional accrual of €1.6 million was accounted for the three months ended September 30, 2021 due to the timing of the ruling by the Italian Tax Agency;

- taxes related to non-recurring costs as restructuring and related charges, out-of-cycle bonus award, start-up costs for US plant, foreign exchange loss for derivatives on IPO proceeds, listing expenses totally amounting to EUR 3.5 million.

The normalized effective tax rate without these one-off effects is 24.38%.

Deferred tax assets and liabilities of the individual consolidated companies are offset within the interim consolidated statement of financial position when a legally enforceable right to offset exists.

 

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16. Earnings per Share

Basic earnings per share (EPS) is calculated by dividing into the profit attributable to equity holders of the parent by the weighted average number of common shares issued net of the treasury shares held by the Group and the vested awards under the 2012-2021 incentive plan (for the three and the nine months ended September 30, 2020).

For the three and nine months ended September 30, 2021 the weighted average number of shares for diluted earnings per share was increased to take into consideration the theoretical effect of potential ordinary shares that would be assigned to the beneficiaries based on the Group’s equity incentive plans (see Note 28 for further details on the equity incentive plans). There is no dilution impact for the three and nine months ended September 30, 2020, resulting in basic and diluted earnings per share being the same.

The Shareholder’s meetings held on March 4, 2021 and on July 1, 2021 approved respectively, two different share splits, as explained also in Note 25. The number of ordinary shares outstanding has been retrospectively adjusted as if such events had occurred at the beginning of the earliest period presented.

The following table reflects the income and share data used in the basic and diluted EPS calculation:

 

    

For the three months ended

September 30,

    

For the nine months ended

September 30,

 
(EUR thousand)    2021      2020      2021      2020  

Profit attributable to ordinary equity holders of the parent

     18,655        16,620        89,647        44,712  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of ordinary shares for basic EPS

     264,461,882        240,501,960        248,661,336        240,501,960  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of ordinary shares adjusted

for the effect of dilution

     264,488,975        240,501,960        248,676,387        240,501,960  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2021      2020      2021      2020  

Basic earnings per common share (in EUR)

     0.07        0.07        0.36        0.19  

Diluted earnings per common share (in EUR)

     0.07        0.07        0.36        0.19  

 

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17. Intangible assets

Changes in intangible assets as of September 30, 2021 are as follows:

 

(EUR thousand)    Total  

Cost

  

At January 1, 2021

     69,882  

Additions

     3,405  

Disposals

     (14

Exchange differences

     444  
  

 

 

 

At September 30, 2021

     73,717  

Amortization

  

At January 1, 2021

     35,982  

Amortization

     5,624  

Exchange differences

     133  
  

 

 

 

At September 30, 2021

     41,739  

Net book value

  

At September 30, 2021

     31,978  
  

 

 

 

At December 31, 2020

     33,901  
  

 

 

 

Additions of EUR 3,405 thousand for the nine months ended September 30, 2021 related to the capitalization of costs associated with the upgrading of the ERP software and software licenses for R&D, quality and production departments. No impairment indicators were identified during the nine months period ended September 30, 2021.

 

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Table of Contents

18. Property, plant and equipment

Changes in items of property, plant and equipment as of September 30, 2021 are as follows:

 

(EUR thousand)    Total  

Cost

  

At January 1, 2021

     638,033  

Additions

     67,500  

Disposals

     (2,898

Exchange differences

     5,836  
  

 

 

 

At September 30, 2021

     708,471  
  

 

 

 

Depreciation

  

At January 1, 2021

     324,375  

Depreciation charge for the year

     30,460  

Impairment

     551  

Disposals

     (2,762

Exchange differences

     2,363  
  

 

 

 

At September 30, 2021

     354,987  
  

 

 

 

Net book value

  

At September 30, 2021

     353,484  
  

 

 

 

At December 31, 2020

     313,658  
  

 

 

 

Additions of EUR 67,500 thousand for the nine months ended September 30, 2021 are mainly comprised of additions to advances and assets under construction, as well as plant, machinery and equipment, primarily related to building suitable to house new production facilities, purchase of new production equipment, investments in machines for syringes, vials and cartridges production, both bulk and EZ-Fill®.

19. Right of Use

The Group has lease contracts for various items of plant, machinery, vehicles and other equipment used in its operations. Leases of plant and machinery generally have lease terms between 3 and 15 years, while vehicles and other equipment generally have lease terms between 3 and 5 years. There are several lease contracts that include extension and termination options.

The Group also has certain leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.

Movements in the leased Right of Use assets in for the first nine months of 2021 are shown below:

 

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Table of Contents
(EUR thousand)    Total  

Cost

  

At January 1, 2021

     35,992  

Additions

     2,317  

Disposals

     (266

Exchange differences

     714  
  

 

 

 

At September 30, 2021

     38,757  
  

 

 

 

Depreciation

  

At January 1, 2021

     10,612  

Depreciation charge for the year

     4,653  

Disposals

     (47

Exchange differences

     201  
  

 

 

 

At September 30, 2021

     15,419  
  

 

 

 

Net book value

  

At September 30, 2021

     23,338  
  

 

 

 

At December 31, 2020

     25,380  
  

 

 

 

20. Financial assets

The following table details the composition of financial assets:

 

(EUR thousand)    At September 30,
2021
     At December 31,
2020
 

Receivables from financing activities

     1,784        5,956  

Other non-current financial assets

     855        745  
  

 

 

    

 

 

 

Other non-current financial assets

     2,639        6,701  
  

 

 

    

 

 

 

Fair value of derivatives financial instruments

     278        19  

Other securities

     27,168        41,523  
  

 

 

    

 

 

 

Other current financial assets

     27,446        41,543  
  

 

 

    

 

 

 

Financial Assets

     30,085        48,244  
  

 

 

    

 

 

 

Receivables from financing activities assets include financial loan for EUR 1,339 thousand as of September 30, 2021 (EUR 1,342 as of December 31, 2020) granted to the associate Swissfillon AG to fund the development projects. The decrease in receivables from financing activities follows the early termination of the incentive plans 2012-2021 and 2018-2022 aimed at a limited number of key managers, as reported in Note 28.

Other securities include guaranteed investment funds managed by Société Générale SA, which are measured at fair value. The decrease in other securities is due to the redemption of part of the insurance policies.

 

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Table of Contents

21. Inventories

Inventories, shown net of an allowance for obsolete and slow-moving goods, can be analyzed as follows:

 

(EUR thousand)    At September 30,
2021
     At December 31,
2020
 

Raw materials

     54,386        41,889  

Semifinished products

     31,014        46,479  

Finished products

     67,136        55,394  

Advances to suppliers

     9,153        7,920  

Provision from slow moving and obsolescence

     (13,360      (12,309
  

 

 

    

 

 

 

Total inventories

     148,329        139,373  
  

 

 

    

 

 

 

The provision for slow moving and obsolete inventories recognized within cost of sales during for the nine months ended September 30, 2021 and December 31, 2020 is EUR 13,360 thousand and EUR 12,309 thousand respectively, with an accrual of EUR 2,066 thousand and utilizations for EUR 1,014 thousand for the nine months ended September 30, 2021.

22. Trade receivables and contract assets

Trade receivables and contract assets are analyzed as follows:

 

(EUR thousand)    At September 30,
2021
    At December 31,
2020
 

Trade receivables

     162,898       135,514  

Allowance for expected credit losses

     (8,150     (7,696
  

 

 

   

 

 

 

Total trade receivables

     154,749       127,818  
  

 

 

   

 

 

 

Expected credit losses rate

     5.0     5.7

Trade receivables are non-interest bearing and are generally on term of 60 to 90 days. The Group is not exposed to significant concentration of third-party credit risk.

Trade receivables are stated net of an allowance for expected credit losses which has been determined in accordance with IFRS 9 amounting to EUR 8,150 thousand and EUR 7,696 thousand the nine months ended September 30, 2021 and December 31, 2020 respectively.

Contract assets

Contract assets relate to revenue earned from ongoing customer-specific construction contracts of the Engineering Segment and from the In-vitro diagnostic business. As such, the balances of this account vary and depend on the number of ongoing construction contracts at the end of the period. The Group has contract assets of EUR 64,474 thousand as of September 30, 2021 (EUR 39,430 thousand as of December 31, 2020). Contract assets gross amounts to EUR 128,469 thousand (EUR 86,905 thousand as of December 31, 2020), net of invoices issued of EUR 63,995 thousand (EUR 47,476 thousand as of December 31, 2020).

23. Tax receivables and tax payables

As of September 30, 2021 tax receivables amount to EUR 20,379 thousand (EUR 14,188 thousand as of December 31, 2020) and Tax liabilities amount to EUR 22,017 thousand (EUR 18,543 thousand as of December 31, 2020). Total net balance as of September 30, 2021 is a payable amounting to EUR 1,638 thousand, while the net balance as of December 31, 2020 was a payable amounting to EUR 4,355. The change in net balance is mainly due to the sum of various facts, mainly tax grant accruals, payments of the first instalment of step-up taxes, credits for foreign withholding taxes.

 

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Table of Contents

As of September 30, 2021 the Group re-assessed the classification of VAT receivables and payables in its consolidated statement of financial position. These items were previously reported as tax receivables and payables and are now being reported as other receivables and payables in accordance with IAS 12. The Group applied such reclassification retrospectively that resulted in the decrease of tax receivable and payables of EUR 10,845 thousand and EUR 583 thousand at December 31, 2020 with a corresponding increase in other receivables and payables. The reclassification has no impact on the profit/(loss) and basic and diluted earnings per share of the Group for the years ended December 31, 2020.

24. Cash and cash equivalents

As of September 30, 2021 cash and cash equivalents amount to EUR 427,974 thousand (EUR 115,599 thousand as of December 31, 2020).

On July 20, 2021, the Group completed its initial public offering, at completion of which it received aggregate net proceeds of approximately EUR 367,922 thousand, after deducting underwriting discounts and commissions, offering expenses and considering the hedging instrument entered into to reduce the risk of fluctuations in the EUR/USD exchange rate in relation to the IPO proceeds. On August 18, the underwriters further purchased 712,796 additional newly issued shares from the Company to cover over-allotments driving the total primary net proceeds of the offering, including the overallotment, to approximately EUR 380,202 thousand.

25. Equity

The main objective of the Group’s capital management is to maintain a solid credit rating and adequate financial ratios with a view to supporting business activity and maximizing value for the shareholders.

Movements in the equity accounts are reported in the Interim Consolidated Statements of Changes in Equity; comments on the main components and their changes are provided below.

Share capital

As of September 30, 2021 the company paid-in share capital amounts to EUR 21,698 thousand and is divided into 295,540,036 shares without any nominal value.

In particular, on March 4, 2021, the extraordinary Shareholders’ meeting approved the elimination of the indication of the EUR 1,000 nominal value of the 20,002 existing issued shares and the issuance of additional 99,989,998 ordinary shares with no par value to be allocated free of charge to shareholders in proportion to the shares held by each of them without giving rise to changes in the amount of the share capital.

On July 1, 2021 the Shareholder’s meeting approved a further share split following which all the existing 100,010,000 shares have been split into a total of 272,427,240 shares in the ratio of 2,724 new shares post-split for each share outstanding prior to the share split.

Lastly, the Shareholder’s meeting resolved to increase the share capital by issuing a maximum of 40,000,000 ordinary shares with the exclusion of the option right as a service of the trading of ordinary shares on the New York Stock Exchange (NYSE). The Shareholder’s meeting further resolved to adopt the new Company bylaws which contain the partition of the share capital into two categories of shares, ordinary shares and A shares, the latter not being listed.

On completion of the listing process, the subscription collected involved 23,112,796 ordinary shares with an increase of the share capital amounting to EUR 1,696 thousand.

Share Premium Reserve

The share premium reserve includes the additional paid-in capital raised during the Initial Public Offering net of the listing costs pertaining to the public subscription offer. As of September 30, 2021 the share premium reserve amounts to EUR 389,397 thousand.

 

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Treasury Reserve

Following the resolution of the Board of Directors to early terminate the incentive plan 2012-2021 and to revoke incentive plan 2018-2022, on March 4, 2021 and on June 3, 2021 the Company repurchased a total of n. 29 ordinary shares (corresponding to 394,980 ordinary shares after the second share split) and a total of n. 850,000 ordinary shares (corresponding to 2,315,400 ordinary shares after second share split), respectively, from the beneficiaries of the cash settled awards for EUR 1,791 thousand.

On June 3, 2021 the Company transferred a total of 133,210 ordinary shares (corresponding to 362,865 ordinary shares after the second share split) to the beneficiaries of the so called “Restricted Stock Grant Plan 2021-2027” and to certain members of the Board of Directors for a total value of EUR 240 thousand.

As of September 30, 2021 a total of 30,840,555 of Company’s A shares were held in treasury for a total cost of EUR 27,740 thousand. The amount of ordinary shares (prior to the conversion in A shares) held in treasury as of December 31, 2020 has been retroactively adjusted to reflect the share split occurred later on July 1, 2021 resulting in a total of 28,493,040 Company’s share for a total cost of EUR 26,189 thousand.

Currency translation reserve

The currency translation reserve includes the cumulative foreign currency translation differences arisen from the translation of financial statements denominated in currencies other than Euro; as of September 30, 2021 it amounts to EUR 27,384 thousand compared to EUR 34,911 thousand as of December 31, 2020. As of September 30, 2020 it amounted to EUR 38,378 thousand compared to EUR 12,331 thousand as of December 31, 2019. The high increase was mainly due to the depreciation against Euro of the Mexican Peso and the Brazilian Real occurred in 2020 after COVID-19 outbreak.

Other Reserves

On January 20, 2021 Stevanato Group shareholder’s meeting approved the distribution of EUR 11,200 thousand dividends from “other reserves”.

26. Financial liabilities

Total financial liabilities are EUR 302,850 thousand and EUR 375,358 thousand as of September 30, 2021 and as of December 31, 2020 respectively; the balances in financial debt are as follows:

 

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(EUR thousand)    At September 30,
2021
     At December 31,
2020
 

Lease liabilities - Right of Use

     5,487        5,435  

Bank overdrafts

     5,561        581  

Bank loans

     39,752        61,905  

Financial liabilities with related parties

     945        968  

Fair value of derivatives

     4,353        4,417  

Financial payables for shares acquisition

     7,118        7,927  

Financial liabilities with other lenders

     2,525        —    
  

 

 

    

 

 

 

Total current financial liabilities

     65,740        81,234  
  

 

 

    

 

 

 

Lease liabilities - Right of Use

     18,278        20,186  

Bank loans

     169,215        224,365  

Notes

     49,618        49,573  
  

 

 

    

 

 

 

Total non-current financial liabilities

     237,110        294,124  
  

 

 

    

 

 

 

Financial liabilities

     302,850        375,358  
  

 

 

    

 

 

 

Other current financial liabilities include EUR 118 thousand as of September 30, 2021 (EUR 1,221 thousand as of December 31, 2020) which refer to the unpaid amount of the purchase of the residual shares of Medirio SA due in 2021 and EUR 7,000 thousand (EUR 6,706 thousand as of December 31, 2020) recognized in relation to the put option granted to non-controlling shareholders of SVM Automatik A/S.

Other current financial assets and other financial liabilities relates to foreign exchange derivatives. The following table sets further the analysis of derivative assets and liabilities of September 30, 2021 and December 31, 2020.

 

     At September 30,
2021
     At December 31,
2020
 
(EUR thousand)    Carrying
amount
     Fair
value
     Carrying
amount
     Fair
value
 

Financial assets

           

Foreign exchange forward contracts

     259        259        19        19  

Financial liabilities

           

Foreign exchange forward contracts

     1,553        1,553        16        16  

Interest Rate Swap in cash flow hedges

     2,800        2,800        4,386        4,386  

Derivatives on currency risk have not been designated as hedging instruments and reflect the change in the fair value of those foreign exchange forward contracts that are not designated in hedge relationships, but are, nevertheless, intended to reduce the level of foreign currency risk for expected sales.

Derivatives designated as hedging instruments reflect the change in fair value of the interest rate swap contract, designated as cash flow hedges to hedge fluctuations in variable interest rate on loans. The amount recorded in the cash flow hedge reserve will be recognized in the consolidated income statement according to the timing of the cash flows of the underlying transaction.

 

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27. Fair Value Measurement

IFRS 13 establishes a hierarchy that categorizes into three levels the inputs to the valuation techniques used to measure fair value by giving the highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs). In some cases, the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy at the lowest level input that is significant to the entire measurement.

Levels used in the hierarchy are as follows:

 

   

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in level 1.

 

   

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

 

   

Level 3: If one or more of the significant inputs is not based on observable market data, the instruments are included in level 3. This is the case for unlisted equity securities.

Assets and liabilities that are measured at fair value on a recurring basis

The following table shows the fair value hierarchy for financial assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and at December 31, 2020:

As at September 30, 2021:

 

(EUR thousand)    Fair value measurement using  
     Total      Level 1      Level 2      Level 3  

Cash and cash equivalents

     427,974        427,974        —          —    

Equity Investments others

     1,145        —          —          1,145  

Derivatives financial assets

     278        —          278        —    

Financial current assets

     27,168        —          27,168        —    

Other non-current financial assets

     611        —          611        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

     457,176        427,974        28,057        1,145  
  

 

 

    

 

 

    

 

 

    

 

 

 

Put & Call related to financial liabilities

     7,000        —          —          7,000  

Derivatives financial liabilities

     4,353        —          4,353        —    

Payables for subsidiary acquisition

     118        —          —          118  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     11,470        —          4,353        7,118  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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As at December 31, 2020:

 

(EUR thousand)    Fair value measurement using  
     Total      Level 1      Level 2      Level 3  

Cash and cash equivalents

     115,599        115,599        —          —    

Equity Investments others

     760        —          —          760  

Derivatives financial assets

     19        —          19        —    

Financial current assets

     41,523        —          41,523        —    

Other non-current financial assets

     610        —          610        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

     158,512        115,599        42,153        760  
  

 

 

    

 

 

    

 

 

    

 

 

 

Put & Call related to financial liabilities

     6,706        —          —          6,706  

Derivatives financial liabilities

     4,417        —          4,417        —    

Payables for subsidiary acquisition

     1,221        —          —          1,221  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     12,344        —          4,417        7,927  
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair value of current financial assets and other financial liabilities is measured by taking into consideration market parameters at the balance sheet date, using valuation techniques widely accepted in the financial business environment.

The fair value of foreign currency derivatives (forward contracts, currency swaps and options) and interest rate swaps is determined by considering the prevailing foreign currency exchange rate and interest rates, as applicable, at the balance sheet date.

The value of cash and cash equivalents usually approximates fair value due to the short maturity of these instruments, which consist of bank current accounts. The fair value of other financial assets is measured through other unobservable input in accordance with IFRS 13, detailed in Note 20.

No borrowings of the Group are listed debt. There are no transfers between Level 1, Level 2 and Level 3 during the nine months ended September 30, 2021 and the year ended December 31, 2020.

The fair value of the loans accounted for at amortized cost approximates their carrying amounts as of September 30, 2021 and December 31, 2020.

28. Employee benefits

Employee benefits are analyzed as follows:

 

(EUR thousand)    At September 30,
2021
     At December 31,
2020
 

Employee Severance Pay

     5,530        5,791  

Jubilee benefits

     239        239  

Other post-employment plans

     657        582  

Long term incentive plan

     3,215        1,780  

Cash settled awards

     —          21,333  

Stock grant plan

     1,353        —    
  

 

 

    

 

 

 

Total employee benefits

     10,996        29,725  
  

 

 

    

 

 

 

Long-term Incentive plan

In order to align the interests of management with those of the Shareholders over the medium/long-term by establishing a strong link between remuneration and performance, the CEO approved a medium/long-term plan called the “Long-term Incentive plan” for the 2020-2023 four-year period involving a select number of Senior Management (Top Management and/or Key People) of the Companies of the Group and based on the meeting of the long-term industrial plan objectives.

 

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Table of Contents

Cash settled awards

Cash settled awards are incentive plans aimed at a limited number of executives and key resources of the Group. The 2012-2021 incentive plan and the 2018-2022 incentive plan were approved by the Board of Directors on February 9, 2012 and on September 12, 2018 respectively.

In order to concentrate in a single new plan, the incentive mechanism that could more concretely and effectively contribute to the achievement of the redefined Company’s growth objectives, Stevanato Group proceeded with the early conclusion of the 2012-2021 incentive plan and with the revocation of 2018-2022 incentive plan.

On March 4, 2021 and on June 3, 2021, the Company exercised a call option to buy back n. 995,000 shares from the beneficiaries of the 2012-2021 incentive plan and irrevocably and unconditionally waived its rights to exercise the call option on n. 215,000 shares (number of shares as before the second share split). The parties also mutually agreed to close the 2018-2022 incentive plan; the net impact of such transactions led to a reduction in cash settled award liabilities.

Restricted Stock Grant Plan 2021-2027

The Shareholders’ Meeting of Stevanato Group S.p.A. on March 4, 2021 resolved to approve a share-based incentive plan, named “Restricted Stock Grant Plan 2021-2027” with the aim to involve people playing a strategic role in the Group in the economic and strategic development of Group, aligning their interests to those of the shareholders and other stakeholders of the Company, during the period between January 1, 2021 and December 31, 2026.

The Stock Grant Plan provides for three two-years periods included, respectively, between January 1, 2021 and December 31, 2022 (First Vesting Period), January 1, 2023 and December 31, 2024 (Second Vesting Period), January 1, 2025 and December 2026 (Third Vesting Period), at the beginning of which a certain number of Stevanato Group ordinary shares – linked with the achievement within the end of each Vesting Period of specific targets in terms of consolidated revenues and EBITDA – will be assigned free of charge to the beneficiaries. For the EBITDA definition, please refer to section “Key Indicators of Performance and Financial Condition” of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below. The assigned shares shall be registered to a Trustee company and shall be subject to the prohibition to sell and to the selling commitment in accordance to a one-year lock-up period.

The transfer of ownership of the shares will be finalized after signing with each beneficiary of an agreement which binds the beneficiaries to re-sell to Stevanato Group, fully or partially, the Shares assigned to them in case the targets provided for the vesting period in relation to which the shares were assigned should not be totally or partially achieved. A similar obligation is provided if, within the end of each vesting period, the employment relationship terminates.

In the event that certain over-performances with respect to the financial targets have been met, beneficiaries will be granted, free of charge, an additional number of Stevanato Group shares related to the Vesting Period in which the target were exceeded and such shares additional assigned will be subject to the time-limited prohibition to sell.

On June 3, 2021 a total of n. 236,988 ordinary shares, which were previously held in treasury, were assigned to the participants of the plan.

 

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29. Provisions

The balances as of September 30, 2021 are detailed below:

 

(EUR thousand)    Provision for
Warranty
     Decommissioning      Provision for
legal and
sundry risks
    Provision for
agents and
directors
severance
indemnity
     Total  

At January 1, 2021

     1,061        523        1,664       1,136        4,384  

Arising during the period

     155        17        4,280       39        4,491  

Utilized

     —          —          (547     —          (547

Unused amounts reversed

     —          —          (4,421     —          (4,421

Exchange rate difference

     —          32        44       —          76  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

At September 30, 2021

     1,216        572        1,019       1,175        3,983  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Current

     —          —          —         —          —    

Non-current

     1,216        572        1,019       1,175        3,983  

The warranty provision represents the best estimate of commitments given by the Group for contractual, legal, or constructive obligations arising from product warranties given for a specified period of time. Such provisions are recognized on shipment of the goods to the customers. The warranty provision is estimated on the basis of the Group’s past experience and contractual terms. Related costs are recognized within cost of sales.

The provision for legal proceeding and sundry risks represents management’s best estimate of the expenditures expected to be required to settle on otherwise resolve legal proceeding and disputes. As of March 31, 2021 a potential claim with a customer was identified which led to an accrual of about EUR 4 million. As of September 30, 2021 the situation has evolved positively thus leading to the release of the provisioned amount.

30. Other non-current liabilities

Other non-current liabilities as of September 30, 2021 and December 31, 2020 amount to EUR 1,808 thousand respectively EUR 1,808 thousand and are mainly related to holiday pay of Danish companies’ employees following the transition to the new Danish Holiday Act started in 2019.

31. Trade payables and other current liabilities

Trade payables amount to EUR 130,419 thousand at September 30, 2021 (EUR 118,740 thousand at December 31, 2020) and other current liabilities amount to EUR 65,264 thousand at September 30, 2021 (EUR 44,266 thousand at December 31, 2020), both are entirely due within one year. The carrying amount of trade payables is considered to be equivalent to their fair value.

32. Contract liabilities and advances from customers

Contract liabilities and advances from customers are as follows:

 

(EUR thousand)    At September 30,
2021
     At December 31,
2020
 

Contract Liabilities

     13,938        5,031  

Advances from customers

     30,217        48,361  
  

 

 

    

 

 

 

Total contract liabilities and advances from customers

     44,155        53,392  
  

 

 

    

 

 

 

Current

     44,155        53,392  

Non-current

     —          —    

 

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Contract liabilities relate to revenue earned from ongoing customer-specific construction contracts of the Engineering Segment and of the In-vitro diagnostic business. The Group has contract net liabilities of EUR 13,938 thousand and EUR 5,031 thousand as of September 30, 2021 and as of December 31, 2020 respectively. Contract liabilities gross amounts to EUR 27,032 thousand (EUR 10,828 thousand as of December 31, 2020), net of invoices issued of EUR 40,970 thousand (EUR 15,859 thousand as of December 31, 2020).

Advances from customers relate to sales whose revenues are recognized at point in time.

33. Related party disclosures

According to IAS 24, the related parties of the Group are entities and individuals capable of exercising control, joint control or significant influence over the Group and its subsidiaries, companies belonging to the Stevanato Group S.p.A. the controlling company Stevanato Holding S.r.l., unconsolidated subsidiaries of the Group and associates. In addition, members of Stevanato Group’s Board of Directors and executives with strategic responsibilities and their families are also considered related parties. The Group carries out transactions with related parties on commercial terms that are normal in the respective markets, considering the characteristics of the goods or services involved.

Note 4 provide information about the Group’s structure, including details of the subsidiaries and the holding company.

Transaction with related parties refer to:

 

   

revenues for closure containment solutions from the associate Swissfillon AG;

 

   

service fees and rentals paid to Winckler & Co Ltd, the company whose owner holds minority interests in the subsidiary Ompi of Japan;

 

   

the purchase of products and rentals paid to Società Agricola Stella S.r.l., controlled by SFEM Italia S.r.l.;

 

   

rentals paid to SFEM Italia S.r.l., controlled by Stevanato family;

 

   

consulting services provided by Federici William and by MJB Consultants LLC, Progenitor Capital Partners LLC, and Studio Legale Spinazzi Azzarita Troi, whose beneficial owners are Board members in Stevanato Group;

 

   

industrial rentals paid to E & FKH Ejendomme ApS, whose beneficial owners are family members of the minority shareholders of the subsidiary SVM;

 

   

rentals paid to members of Stevanato family;

 

   

in 2017 the Company disbursed a loan of EUR 1,069 thousand to Mr. Fabrizio Bonanni to facilitate the acquisition of shares under the cash settled award. Mr. Fabrizio Bonanni is a member of the board of Stevanato Group. Such loan has been fully reimbursed and terminated on March 10, 2021;

 

   

in 2017 the Company disbursed a loan of EUR 2,239 thousand to Mr. Mauro Stocchi to facilitate the acquisition of shares under the cash settled award. Mr. Mauro Stocchi is Chief Business Officer of Stevanato Group. Such loan has been fully reimbursed and terminated on June 3, 2021;

 

   

donations to the Stevanato Foundation, owned by Stevanato family. The foundation exclusively pursues the aims of social solidarity, philanthropy and charity, operating in the fields of social and socio-medical assistance, education and training as well as cultural and educational activities and scientific research. The Foundation intervenes in support of children and young people in situations of serious difficulty due to their illnesses, the distress of their families or other situations that may affect their health or growth;

 

   

recharge of the costs pertaining to the public offer for sale to Stevanato Holding S.r.l.

Transactions with related parties also include compensation to directors and managers with strategic responsibilities.

The amounts of transactions with related parties recognized in the Interim Consolidated Income Statement and the related assets and liabilities are as follows:

 

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Table of Contents
     For the three months ended September 30,  
     2021      2020  
(EUR thousand)    Revenues      Costs*      Net
financial
expense
     Revenues      Costs*      Net
financial
expense
 

Associate companies:

                 

Swissfillon AG

     192        —          —          173        —          —    

Parent company:

                 

Stevanato Holding Srl

     4,426        —          —          —          —          —    

Other related parties

     —          1,745        —          —          1,872        (12
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total transactions with related parties

     4,619        1,745        —          173        1,872        (12
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Costs include cost of sales, selling, general administrative costs and other expenses net.

 

     For the nine months ended September 30,  
     2021     2020  
(EUR thousand)    Revenues      Costs*     Net
financial
expense
    Revenues      Costs*      Net
financial
expense
 

Associate companies:

               

Swissfillon AG

     565        —         (10     622        —          (10

Parent company:

               

Stevanato Holding Srl

     4,426        —         —         —          —          —    

Other related parties

     —          (2,942     (17     —          5,638        (36
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total transactions with related parties

     4,991        (2,942     (27     622        5,638        (46
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

*

Costs include cost of sales, selling, general administrative costs and other expenses net.

 

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Table of Contents
    

As at September 30,

2021

   

As at December 31,

2020

 
(EUR thousand)    Trade
receivables
     Trade
payables
     Other
assets
     Financial
assets or
liabilities
    Trade
receivables
     Trade
payables
     Other
assets
     Financial
assets or
liabilities
 

Associate companies:

                      

Swissfillon AG

     113        —          —          1,339       88        —          —          1,342  

Parent company:

                      

Stevanato Holding Srl

     —          —          4,426        —         —          —          —          —    

Other related parties

     —          88        —          (505     —          55        24        3,646  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total transactions with related parties

     113        88        4,426        834       88        55        24        4,988  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

As of September 30, 2021 costs for other related parties include the accrual reversal from the early termination of 2012-2021 and 2018-2022 incentive plans.

34. COVID-19 Pandemic

At the beginning of 2020, the World Health Organization declared the existence of an international emergency following the spread of SARS-CoV-2. Since the early stages of the spread of the epidemic, Stevanato Group has been strongly committed to safeguarding the health and safety of its employees, ensuring at the same time business continuity in all its premises. The company has implemented strict precautionary measures provided by national and regional regulations on personal and workplace hygiene, as well as on the organization of working life (such as reorganization of shifts) at its plants. It has adopted measures to avoid crowding, maximizing the use of remote working, allowing access to external personnel only if in compliance with current legislation. Sensitization activities about the importance of prevention, both at work and home, have been made throughout the period, and screening activities among staff have been performed when needed to increase prevention further.

Initial short-term impacts of COVID-19 on our production and operational capabilities affected us principally in 2020 and included: (i) labor absenteeism; (ii) disruptions to production lines; (iii) delays in, and increased costs of, logistics; (iv) short-term drop in sales of certain non-COVID-19 related orders, which were cancelled and or postponed; and (v) increased labor costs in the form of employee bonuses to recognize and reward general efforts during the pandemic.

Despite the initial short-term operational disruption, and the impact that the measures established to respond to the COVID-19 pandemic had on our ability to carry out business development activities (which we believe may have had an impact on our ability to broaden our customer portfolio in the short-term), sales of syringes and vials to and for vaccination programs globally, increased resulting in a revenue growth acceleration in 2020 and in the first nine months of 2021. As of September 30, 2021, we supplied: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on publicly available information and (ii) plastic diagnostic consumables for the detection and diagnosis of COVID-19. Although recent news of an orally administered pill to treat COVID-19 is a compelling development, going forward we anticipate that demand for syringes, vials and related products and services will remain elevated as the COVID-19 vaccine and treatment roll-out continues globally and, more generally, as epidemic preparedness, including through new vaccination programs and booster shots, becomes a greater priority. Further, we believe that the COVID-19 vaccine and orally administered treatments will play complementary roles in managing the pandemic since, according to experts, an orally administered pill is expected to supplement, not replace, the current COVID-19 vaccination efforts. However, there remains uncertainty around the magnitude of the long-term impact of COVID-19 on demand for our solutions.

 

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35. Events after the reporting period

The Group has evaluated subsequent events through November 08, 2021, which is the date the Interim Condensed Consolidated Financial Statements were authorized for issuance.

On October 04, 2021 Stevanato Group announced it would begin the construction on its new U.S. facility in Fishers, Indiana, that month. The site, expected to be operational in 2023, will to enable Stevanato Group to be in closer proximity to its North America pharmaceutical customers and to provide an additional supply source for its mission critical products to serve customers better.

Stevanato Group expects to invest approximatively USD 145 million to build and equip the manufacturing facility. The plant, which is expected to be up to 370,000 square feet in size, will support the expansion and production of Stevanato Group’s EZ-Fill® solutions, pre-sterilized drug containment systems for bio-pharmaceutical use. The facility is expected to house state-of-the-art production lines equipped with advanced process technologies to produce EZ-Fill® syringes and vials. Stevanato Group’s EZ-Fill® solutions offer significant benefits to bio-pharmaceutical companies by reducing time to market, lowering the overall total cost of ownership and reducing supply chain risk.

In addition, Stevanato Group plans to use the new facility as a center for after-sales support dedicated to serving its North America engineering customers, offering technical support as well as maintenance for visual inspection, assembly and packaging equipment.

On October 07, 2021, the sub holding Stevanato Group International purchased the remaining 35% of the share capital in SVM at a price that equals to the fair value recorded in the financial statements as of September 30, 2021.

On October 22, 2021, the sub holding Stevanato Group International signed the SPA for the sale and the transfer of all the owned shares in the associated company Swissfillon AG for approximately CHF 15.8 million.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties and are made in light of information currently available to us. Many important factors may adversely affect our results as indicated in forward-looking statement

For additional information, refer to the risk factors discussed under “Item 1A. Risk Factors” below and in our other filings with the U.S. Securities and Exchange Commission. You should read this discussion and analysis completely and with the understanding that our actual future results may be materially different and worse from what we expect.

Overview

We are a leading global provider of drug containment, drug delivery and diagnostic solutions to the pharmaceutical, biotechnology and life sciences industries. We deliver an integrated, end-to-end portfolio of products, processes and services that address customer needs across the entire drug life cycle at each of the development, clinical and commercial stages. Our core capabilities in scientific research and development, our commitment to technical innovation and our engineering excellence are central to our ability to offer value added solutions to our clients.

Our priority is to provide flexible solutions that preserve the integrity of bio-pharmaceutical products and enable our customers to deliver safe and effective treatments to patients while reducing time to market, total cost of ownership (i.e., logistics, drug product waste, storage and personnel costs) and supply chain risk. We achieve this by developing our products in close collaboration with our customers, leveraging our scientific research capabilities, technical expertise and engineering and manufacturing excellence to meet their quality requirements.

Our solutions are highly integrated with the development, production and commercialization processes of our customers. In addition to manufacturing drug containment and delivery solutions, we provide a full set of services across all stages of drug development, from pre-clinical to clinical and commercialization. We also engineer machinery and equipment for the production of drug containment and delivery systems that can be integrated into both our customers’ and our own manufacturing processes. Our involvement at each stage of a drug’s life cycle, together with the breadth of our offering, enables us to serve as a one-stop-shop for our customers, which we believe represents a significant competitive advantage.

We operate across the healthcare industry and serve some of its fastest growing segments, including biologics, biosimilars, vaccines and molecular diagnostics. As a result of how closely integrated we are in the drug production and delivery supply chain, we are well-positioned to benefit from secular trends within our target industries, such as increases in demand resulting from bio-pharmaceutical innovation, acceleration and expansion of vaccination programs, growth in biologics/biosimilars, self-administration of medicines, aging demographics and increasing quality standards and regulation.

We operate our business in two segments:

 

   

Biopharmaceutical and Diagnostic Solutions, which includes all the products, processes and services developed and provided for the containment and delivery of bio-pharmaceutical and biotechnology drugs and reagents, as well as the production of diagnostic consumables; and

 

   

Engineering, which includes all the equipment and technologies developed and provided to support the end-to-end pharmaceutical, biotechnology and diagnostic manufacturing processes (assembly, visual inspection, packaging and serialization and glass converting).

We refer to our premium products in the Biopharmaceutical and Diagnostic Solutions Segment as our “high-value” solutions. “High-value” solutions are wholly owned, internally developed products, processes and services for which we hold intellectual property rights or have strong proprietary know-how, and that are characterized by particular complexity and high performance. Our “high-value” solutions deliver significant benefits to customers in terms of time-to-market and reduced total cost of ownership. Among our key “high-value” solutions is our EZ-Fill® line of ready-to-fill injectable products, which can be customized to clients’ needs.

 

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We have nine production plants for manufacturing and assembling pharmaceutical and healthcare products across Europe (Italy, Germany and Slovakia) and the rest of the world (Brazil, China, Mexico and the United States), five plants for the production of machinery and equipment (Italy and Denmark), two sites for analytical services (Italy and the United States) and two commercial offices (Japan and the United States). Our manufacturing facilities in Mexico (serving the U.S. market), China and Brazil are greenfield operations established by us. Our manufacturing facilities in Slovakia, Denmark, Germany and the United States were acquired in strategic transactions over the past 15 years. Further, on October 4, 2021, we announced the start of construction of a new facility in Fishers, Indiana, United States. We are also continuing investment to expand our production facilities in Piombino Dese, Italy, where construction on a new building is underway. Our global footprint, together with our proprietary, highly standardized manufacturing systems and processes, allow us to provide quality consistent products and services to our customers in more than 70 countries.

Highlights

Consolidated Income Statement Data

 

     (Amounts in € millions, except as indicated otherwise)  
    

For the three months

ended September 30,

     Change    

For the nine months

ended September 30,

    Change  
     2021     2020      %     2021      2020     %  

Net Revenues

     214.5       157.1        36.5     611.3        455.3       34.3

Gross Profit

     63.3       47.2        34.1     192.4        135.6       41.9

Operating Profit

     28.2       22.7        24.2     118.8        65.2       82.2

Profit Before Tax

     22.4       21.7        3.2     112.0        60.3       85.7

Net Profit attributable to:

              

Equity holders of the parent

     18.7       16.6        12.2     89.6        44.7       100.5

Non-controlling interest

     (0.0     0.0        0     0.0        (0.1     (114.1 %) 

Basic earnings per common share (in €)

     0.07       0.07        0     0.36        0.19       93.9

Diluted earnings per common share (in €)

     0.07       0.07        0     0.36        0.19       93.9

Consolidated Statement of Financial Position Data

 

     (Amounts in € millions)  
     As of
September 30,
     As of
December 31,
     Change  
     2021      2020       

Assets

        

Total current assets

     872.3        492.8        379.5  

Total non-current assets

     514.6        475.2        39.4  

Total assets

     1,386.9        968.0        418.9  

Liabilities and equity

        

Total current liabilities

     327.6        316.2        11.4  

Total non-current liabilities

     267.8        341.7        (73.9

Total liabilities

     595.4        657.8        (62.5

Equity

     791.5        310.1        481.4  

Total liabilities and equity

     1,386.9        968.0        418.9  

COVID-19 Pandemic update

Initial short-term impacts of COVID-19 on our production and operational capabilities affected us principally in 2020 and included: (i) labor absenteeism; (ii) disruptions to production lines; (iii) delays in, and increased costs of, logistics; (iv) short-term drop in sales of certain non-COVID-19 related orders, which were cancelled and or postponed; and (v) increased labor costs in the form of employee bonuses to recognize and reward general efforts during the pandemic.

 

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Despite the initial short-term operational disruption, and the impact that the measures established to respond to the COVID-19 pandemic had on our ability to carry out business development activities (which we believe may have had an impact on our ability to broaden our customer portfolio in the short-term), sales of syringes and vials to and for vaccination programs globally increased resulting in a revenue growth acceleration in 2020 and in the first nine months of 2021. As of September 30, 2021, we supplied: (i) glass vials and syringes to approximately 90% of currently marketed vaccine programs, according to our estimates based on publicly available information and (ii) plastic diagnostic consumables for the detection and diagnosis of COVID-19.

Although recent news of an orally administered pill to treat COVID-19 is a compelling development, going forward we anticipate that demand for syringes, vials and related products and services will remain elevated as the COVID-19 vaccine and treatment roll-out continues globally and, more generally, as epidemic preparedness, including through new vaccination programs and booster shots, becomes a greater priority. Further, we believe that the COVID-19 vaccine and orally administered treatments will play complementary roles in managing the pandemic since, according to experts, an orally administered pill is expected to supplement, not replace, the current Covid vaccination efforts. However, there remains uncertainty around the magnitude of the long-term impact of COVID-19 on demand for our solutions.

Key Indicators of Performance and Financial Condition

Non-GAAP Financial Measures

We monitor and evaluate our operating and financial performance using several non-GAAP financial measures, including: Constant Currency Revenue, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit, Adjusted Operating Profit Margin, CAPEX and Free Cash Flow. We believe that these non-GAAP financial measures provide useful and relevant information regarding our performance and improve our ability to assess our financial condition. While similar measures are widely used in the industry in which we operate, the financial measures we use may not be comparable to other similarly titled measures used by other companies, nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.

Constant Currency Revenue

Constant Currency Revenue is defined as revenue excluding the impact of fluctuations in currency exchange rates. Constant Currency Revenue is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with the prior periods and that of our competitors. We believe providing constant currency information provides valuable supplemental information regarding our results of operations. We calculate constant currency amounts by converting our current period local currency revenue using the prior period foreign currency average exchange rates and comparing these adjusted amounts to our prior period reported results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to substitute recorded amounts presented in conformity with IFRS as issued by the IASB, nor should such amounts be considered in isolation. The following table sets forth the calculation of Constant Currency Revenue for the three months and nine months ended September 30, 2021 and 2020 and provides a reconciliation to the most comparable IFRS measure, Revenue.

 

     (Amounts in € millions)  
     Biopharmaceutical and Diagnostic Solutions      Engineering  
For the three months ended September 30, 2021    High-Value
Solutions
     Other containment and
delivery solutions
    

Total Biopharmaceutical
and

Diagnostic Solutions

     Total
Engineering
 

Reported Revenue

     48.4        124.4        172.8        41. 8  

Effect of changes in currency translation rates

     (0.3      (1.4      (1.7      (0.1

Constant Currency Revenue

     48.1        123.0        171.1        41.7  

 

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     Biopharmaceutical and Diagnostic Solutions      Engineering  
For the nine months ended September 30, 2021    High-Value
Solutions
     Other containment and
delivery solutions
    

Total Biopharmaceutical
and

Diagnostic Solutions

     Total
Engineering
 

Reported Revenue

     141.4        366.7        508.2        103.2  

Effect of changes in currency translation rates

     3.9        4.3        8.1        (0.2

Constant Currency Revenue

     145.3        371.0        516.3        103.0  

EBITDA

EBITDA is defined as net profit before income tax expenses, net financial expenses, including share of profit of associates, amortization and depreciation. EBITDA is presented to aid management in their analysis of the performance of the Group and to assist in the comparison of our performance with that of our competitors.

The following table sets forth the calculation of EBITDA for the three months and nine months ended September 30, 2021 and 2020, and provides a reconciliation of this non-GAAP measure to the most comparable IFRS measure, Net Profit.

 

     (Amounts in € millions, except as indicated otherwise)  
     For the three months
ended September, 30
    Change     For the nine months
ended September, 30
    Change  
     2021     2020     %     2021     2020     %  

Net Profit

     18.6       16.6       12.1     89.7       44.6       101.2

Income Taxes

     3.8       5.1       (25.7 %)      22.3       15.7       42.0

Finance Income

     (2.1     (2.4     (14.4 %)      (6.4     (11.9     (46.4 %) 

Finance Expenses

     8.0       3.6       126.2     13.7       17.2       (20.4 %) 

Share of Profit of an Associate

     (0.2     (0.2     (4.5 %)      (0.5     (0.4     47.4

Operating Profit

     28.2       22.7       24.4     118.8       65.2       82.1

Depreciation and Amortization

     14.9       13.2       13.1     41.3       38.9       6.2

EBITDA

     43.2       35.9       20.3     160.1       104.1       53.8

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Profit and Adjusted Operating profit Margin

Adjusted EBITDA, Adjusted Operating Profit, Adjusted Income Taxes, Adjusted Net Profit and Adjusted Diluted Earnings per Share (net of treasury shares) represent EBITDA, Operating Profit, Income Taxes, Net Profit and Diluted Earnings per Share (net of treasury shares), respectively, in each case as adjusted for certain income and costs expected to occur infrequently, and that management considers not reflective of ongoing operational activities. Adjusted EBITDA, Adjusted Operating Profit, Adjusted Income Taxes, Adjusted Net Profit and Adjusted Diluted Earnings per Share (net of treasury shares) are provided in order to present how the underlying business has performed excluding the impact of the adjusted items, which may alter the underlying performance and impair comparability of results between the periods.

The following table sets forth the calculation of Adjusted EBITDA, Adjusted Operating Profit, Adjusted Income Taxes, Adjusted Net Profit, Adjusted Diluted Earnings per Share (net of treasury shares), Adjusted EBITDA Margin and Adjusted Operating Profit margin for the three months and nine months ended September 30, 2021 and 2020. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by total revenue for the same period. Adjusted Operating Profit margin is calculated by dividing Adjusted Operating Profit for a period by total revenue for the same period.

 

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For further information on Non-recurring items see “Cost of Sales” and “General and Administrative Expenses” below.

 

     (Amounts in € millions)  
For the three months ended September 30, 2021    EBITDA     Operating
Profit
    Income
Taxes
     Net Profit     Diluted
EPS
 

Reported

     43.2       28.2       3.8        18.6       0.07  

Adjusting items:

           

Restructuring and related charges (1)

     0.2       0.2       0.1        0.1       0.00  

Incentive Plans Settlement (2)

     —         —         —          —         —    

IPO costs (3)

     0.7       0.7       0.2        0.5       0.00  

Out-of-cycle bonus to personnel (4)

     6.7       6.7       1.8        4.9       0.02  

Foreign exchange loss for derivates on IPO proceeds (5)

     0       0       1.0        3.3       0.01  

Start-up costs U.S. plant (6)

     0.6       0.6       0.2        0.5       0.00  

Patent Box (7)

     —         —         1.6        (1.6     (0.01
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted

     51.4       36.5       8.6        26.4       0.10  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted Margin

     24.0     17.0     —          —         —    

 

                                                                
     (Amounts in € millions)  
For the nine months ended September 30, 2021    EBITDA     Operating
Profit
    Income
Taxes
    Net Profit     Diluted
EPS
 

Reported

     160.1       118.8       22.3       89.7       0.36  

Adjusting items:

          

Restructuring and related charges (1)

     1.2       1.2       0.3       0.9       0.00  

Incentive Plans Settlement (2)

     (9.9     (9.9     (4.8     (5.1     (0.02

IPO costs (3)

     0.7       0.7       0.2       0.5       0.00  

Out-of-cycle bonus to personnel (4)

     6.7       6.7       1.8       4.9       0.02  

Foreign exchange loss for derivates on IPO proceeds (5)

     —         —         1.0       3.3       0.01  

Start-up costs U.S. plant (6)

     0.6       0.6       0.2       0.5       0.00  

Patent Box (7)

     —               7.1       (7.1     (0.03
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted

     159.4       118.1       28.2       87.5       0.35  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Margin

     26.1     19.3     —         —         —    

 

     (Amounts in € millions)  
For the three months ended September 30, 2020    EBITDA     Operating
Profit
    Income
Taxes
     Net Profit      Diluted
EPS
 

Reported

     35.9       22.7       5.1        16.6        0.07  

Adjusting items:

            

Litigation Costs (8)

     2.7       2.7       0.8        2.4        0.01  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted

     38.6       25.4       5.9        19.0        0.08  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted Margin

     24.6     16.2     —          —          —    

 

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     (Amounts in € millions)  
For the nine months ended September 30, 2020    EBITDA     Operating
Profit
    Income
Taxes
     Net Profit      Diluted
EPS
 

Reported

     104.1       65.2       15.7        44.6        0.19  

Adjusting items:

            

Litigation Costs (8)

     2.7       2.7       0.8        2.4        0.01  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted

     106.8       67.9       16.5        46.9        0.20  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted Margin

     23.5     14.9     —          —          —    

 

(1)

During the three and the nine months ended September 30, 2021, the Group recorded €0.2 million and €1.2 million respectively in restructuring and related charges for the consolidation of Balda plants in the U.S.

(2)

During the nine months ended September 30, 2021, the Group recorded €9.9 million, within general and administrative expenses, as accrual reversal related to the early termination of incentive plans aimed at a limited number of key managers. The three months ended September 30, 2021 are not affected by this non-recurring item.

(3)

During the three and the nine months ended September 30, 2021, the Group recorded €0.7 million, within general and administrative expenses, relating to the listing of Stevanato Group S.p.a. ordinary shares on the NYSE.

(4)

During the three and the nine months ended September 30, 2021, the Group granted a €6.7 million discretionary, out-of-cycle bonus to employees.

(5)

During the three and the nine months ended September 30, 2021, the Group recorded €4.3 million, as foreign exchange loss for derivates on IPO proceeds.

(6)

During the first three quarters of 2021, the Group recorded €0.6 million start-up costs to further the construction of the new plant in Fisher, Indiana, United States.

(7)

During the first three quarters of 2021, the Group reached an agreement with the Italian Tax Agency regarding the so-called “Patent box regime”, resulting in a retroactive €7.1 million tax saving for the financial years 2016-2020. The tax benefit was accounted for as €5.5 million for the three months ended March 31, 2021 based on our estimates. We accounted for an additional accrual of €1.6 million for the three months ended September 30, 2021 due to the timing of the ruling by the Italian Tax Agency.

(8)

During the three and the nine months ended September 30, 2020, the Group recorded €2.7 million related to litigation costs arising from a lawsuit brought by Clere BSD GmbH in connection with the payment of certain transfer fees for the acquisition of a patent by Balda AG, one of the Group’s subsidiaries.

Capital Expenditure (CAPEX)

Capital Expenditure, or CAPEX, is the sum of investment amounts in tangible fixed assets and intangible assets during the period (excluding right-of-use assets recognized during the period in accordance with IFRS 16 Leases). These investment activities consist of acquisitions of property, plant and equipment and intangible assets.

The following table sets forth the CAPEX for the nine months ended September 30, 2021 and 2020.

 

     (Amounts in € millions)  
     As of
September 30,
     As of
September 30,
     Change  
     2021      2020       

Addition to Property, plants and equipment

     67.5        58.0        9.5  

Addition to Intangible Assets

     3.4        3.5        (0.1
  

 

 

    

 

 

    

 

 

 

CAPEX

     70.9        61.5        9.4  
  

 

 

    

 

 

    

 

 

 

For further information on Capital Expenditure on a paid-out cash basis see “Liquidity and Capital Resources Capital Expenditure” below.

Free Cash Flow

Free Cash Flow is defined as cash flows from operating activities excluding interests paid and received, less investments in property, plant and equipment and intangible assets on a cash basis.

 

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The following table sets forth the calculation of Free Cash Flow for the three months and nine months ended September 30, 2021 and 2020.

 

     (Amounts in € millions)  
     For the three months
ended September 30,
     Change  
     2021      2020       

Cash Flow from Operating Activities

     17.9        50.1        (32.2

Interest paid

     0.9        1.7        (0.9

Interest received

     (0.1      (0.1      (0.0

Purchase of property, plant and equipment

     (27.3      (19.4      (7.9

Purchase of intangible assets

     (1.3      (1.4      0.1  
  

 

 

    

 

 

    

 

 

 

Free Cash Flow

     (9.9      30.9        (40.9
  

 

 

    

 

 

    

 

 

 

 

     (Amounts in € millions)  
     For the nine months
ended September 30,
     Change  
     2021      2020       

Cash Flow from Operating Activities

     77.9        94.8        (16.9

Interest paid

     3.1        4.2        (1.0

Interest received

     (0.5      (0.5      0.0  

Purchase of property, plant and equipment

     (71.4      (60.8      (10.6

Purchase of intangible assets

     (3.4      (3.5      0.1  
  

 

 

    

 

 

    

 

 

 

Free Cash Flow

     5.8        34.2        (28.4
  

 

 

    

 

 

    

 

 

 

For further information on cash flow see “Liquidity and Capital Resources Operating and Investing Activities” below.

Backlog

Our backlog represents, as of a point in time, estimated future revenue for work not yet completed under (i) specific purchase orders, with regards to our Biopharmaceutical and Diagnostic Solutions Segment; and (ii) certain one-off agreements, with regards to our Engineering Segment. We recognize direct revenue over the life of the contract based on our performance of services under the contract. Contracts may be terminated or delayed by our customers or regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of our revenue could be affected. In the event a customer terminates a contract, we are generally entitled to be paid for services rendered through the termination date and for services provided in winding down the project. However, we are generally not entitled to receive the full amount of direct revenue reflected in our backlog in the event of a contract termination. The duration of the projects in our backlog, and the related revenue recognition, ranges from several months to a couple of years. For orders that are placed inside a contractual firm period, we generally have a contractual right to payment in the event of cancellation. Fluctuations in our reported backlog levels also result from the timing and order pattern of our customers who often seek to manage their level of inventory on hand. Because of customer ordering patterns, our backlog reported for certain periods may fluctuate and may not be indicative of future results. A number of factors may affect backlog and the direct revenue generated from our backlog, including: (a) the size, complexity and duration of projects; and (b) the cancellation or delay of projects.

Our backlog as of September 30, 2021 was €834.3 million, compared to a total backlog of €606.7 million as of December 31, 2020 and of €553.1 million as of September 30, 2020. During the third quarter of 2021, we had new order intake of €309.9 million.

Although an increase in backlog will generally result in an increase in future direct revenue to be recognized over time (depending on future contract modifications, contract cancellations and other adjustments), an increase in backlog at a particular point in time does not necessarily correspond to an increase in direct revenues during a particular period. The timing and extent to which backlog will result in direct revenue depends on many factors, including the timing of commencement of work, the rate at which we perform services, scope changes, cancellations, delays, receipt of

 

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regulatory approvals and the nature, duration, size, complexity and phase of the studies. In addition, delayed projects remain in backlog until they are canceled. As a result of these factors, our backlog is not necessarily a reliable indicator of future direct revenue and we might not realize all or any part of the direct revenue from the authorizations in backlog as of any point in time.

Results of Operations

Three months and nine months ended September 30, 2021 versus three months and nine months ended September 30, 2020

The following table sets forth our results of operations for the three months ended September 30, 2021 and 2020.

 

     (Amounts in € millions)  
     For the three months ended September 30,     Change  
     2021      % of
revenue
    2020      % of
revenue
     

Revenue

     214.5        100.0     157.1        100.0     57.5  

Cost of sales

     151.3        70.5     109.8        69.9     41.4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Gross Profit

     63.3        29.5     47.2        30.1     16.1  

Other operating Income

     1.7        0.8     0.6        0.4     1.1  

Selling and Marketing Expenses

     4.7        2.2     4.1        2.6     0.6  

Research and Development Expenses

     7.4        3.4     4.7        3.0     2.7  

General and Administrative Expenses

     24.7        11.5     16.3        10.4     8.4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Operating Profit

     28.2        13.2     22.7        14.4     5.5  

Finance Income

     2.1        1.0     2.4        1.5     (0.3

Finance Expense

     8.0        3.7     3.6        2.3     4.5  

Share of Profit of an Associate

     0.2        0.1     0.2        0.1     (0.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Profit Before Tax

     22.4        10.4     21.7        13.8     0.7  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Income Taxes

     3.8        1.8     5.1        3.2     (1.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net Profit

     18.6        8.7     16.6        10.6     2.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020.

 

     (Amounts in € millions)  
     For the nine months ended September 30,     Change  
     2021      % of
revenue
    2020      % of
revenue
     

Revenue

     611.3        100.0     455.3        100.0     156.0  

Cost of sales

     419.0        68.5     319.7        70.2     99.3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Gross Profit

     192.4        31.5     135.6        29.8     56.8  

Other operating Income

     7.2        1.2     2.7        0.6     4.6  

Selling and Marketing Expenses

     16.0        2.6     15.4        3.4     0.6  

Research and Development Expenses

     20.1        3.3     12.5        2.7     7.6  

General and Administrative Expenses

     44.7        7.3     45.1        9.9     (0.4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Operating Profit

     118.8        19.4     65.2        14.3     53.6  

Finance Income

     6.4        1.0     11.9        2.6     (5.5

Finance Expense

     13.7        2.2     17.2        3.8     (3.5

Share of Profit of an Associate

     0.5        0.1     0.4        0.1     0.2  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Profit Before Tax

     112.0        18.3     60.3        13.2     51.7  

Income Taxes

     22.3        3.7     15.7        3.5     6.6  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net Profit

     89.7        14.7     44.6        9.8     45.1  

 

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Revenue

Revenue at current exchange rates increased by €57.5 million, or 36.5%, to €214.5 million for the three months ended September 30, 2021, compared to €157.1 million for the three months ended September 30, 2020 driven by growth in both segments, and, in particular, due to strong sales from our Engineering Segment as well as increased demand caused by the continuing impact of COVID-19 on our industry. While in 2020 COVID-19 contributed marginally to our increase in revenue, in 2021 COVID-19 related revenue grew significantly as COVID-19 vaccination programs were deployed in several countries worldwide. For the three months ended September 30, 2021, we estimate that COVID-19 related revenue equated to 15.5% of our total revenue. Currency movements in U.S. Dollars had a negative impact in the third quarter of 2021, but were more than offset by the positive impact of the movements in the other reporting currencies of our subsidiaries located outside the Eurozone. Excluding this effect, the increase in revenue on a constant currency basis was 35.5%.

Revenue at current exchange rates increased by €156.0 million, or 34.3%, to €611.3 million for the nine months ended September 30, 2021, compared to €455.3 million for the nine months ended September 30, 2020 driven by growth in both segments as a result of increased demand due to the increasing impact of COVID-19 on our industry and delivery of previously placed orders, which was partially offset by unfavorable currency translations in U.S. Dollars and Brazilian Real. While in 2020 COVID-19 contributed marginally to our increase in revenue, in 2021 COVID-19 related revenue grew significantly as COVID-19 vaccination programs were deployed in several countries worldwide. For the nine months ended September 30, 2021, we estimate that COVID-19 related revenue equated to 14.8% of our total revenue. Currency movements in U.S. Dollars and Brazilian Real had a negative impact in 2021. Excluding this effect, the increase in revenue on a constant currency basis was 36.0%.

Biopharmaceutical and Diagnostic Solutions Segment

Revenue generated by the Biopharmaceutical and Diagnostic Solutions Segment increased by €40.7 million, or 30.8%, to €172.8 million for the three months ended September 30, 2021, compared to €132.1 million in the three months ended September 30, 2020. For the three months ended September 30, 2021, high-value solutions accounted for approximately 28.0% of the segment’s revenue, compared to 28.5% for the three months ended September 30, 2020. Revenue growth for this segment was due primarily to a general increase in our high-value solutions sales by €10.8 million, or 28.6%, to €48.4 million for the three months ended September 30, 2021, compared to €37.6 million for the three months ended September 30, 2020. In addition, other containment and delivery solutions sales grew by €29.9 million, or 31.7%, to €124.4 million for the three months ended September 30, 2021, compared to €94.5 million for the three months ended September 30, 2020.

On a constant currency basis, revenue generated by high-value solutions increased by €10.5 million, or 28.0%, for the three months ended September 30, 2021, while revenue generated by other containment and delivery solutions increased by €28.5 million, or 30.2%.

Revenue generated by the Biopharmaceutical and Diagnostic Solutions Segment increased by €113.3 million, or 28.7%, to €508.2 million for the nine months ended September 30, 2021, from €394.9 million for the nine months ended September 30, 2020. Revenue growth for this segment was due to : (i) the increase in sales volumes of our premium priced “high-value” solutions, which grew by €35.9 million, or 34.0%, to €141.4 million for the nine months ended September 30, 2021, compared to €105.6 million for the nine months ended September 30, 2020, reflecting our continuing efforts to strategically shift towards a product mix that includes a higher proportion of “high-value” solutions, such as EZ-Fill® products and molecular diagnostic plastic parts; and (ii) a general increase in demand for our other containment and delivery solutions due to the increasing impact of COVID-19 on our industry which caused sales to increase by €77.4 million, or 26.8%, to €366.7 million for the nine months ended September 30, 2021, from €289.3 million for the nine months ended September 30, 2020. COVID-19 contributed to a higher demand for our products, causing a revenue increase which more than offset any decrease in sales of our products to businesses impacted by COVID-19 such as anesthetic, diagnostic, plastic and minor surgeries related businesses.

 

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On a constant currency basis, revenue generated by high-value solutions increased by €39.7 million, or 37.6%, for the nine months ended September 30, 2021, while revenue generated by other containment and delivery solutions increased by €81.7 million, or 28.2%.

Engineering Segment

Revenue generated by the Engineering Segment increased by €16.8 million, or 67.2%, to €41.8 million for the three months ended September 30, 2021, compared to €25.0 million for the three months ended September 30, 2020. Revenue increase in this segment was driven by higher demand of glass converting and visual inspection machines.

Revenue generated by the Engineering Segment, increased by €42.8 million, or 70.8%, to €103.2 for the nine months ended September 30, 2021, compared to €60.4 million for the nine months ended September 30, 2020. Growth in this segment was mainly driven by higher sales of visual inspection systems as well as glass forming machines for a total of €36.7 million. Revenue further grew by €6.1 million as a result of our attempts to better serve our customers and to increase our share in after sales area.

We do not consider any of the revenue in our Engineering Segment to be attributable to COVID-19 since: (i) we cannot accurately determine the end uses of our products; and (ii) most of our products have life cycles of 10 years or more and, therefore, bear a reasonably likely chance of being used for purposes other than COVID-19 related.

Revenue Breakdown by Region

Our ongoing geographic expansion resulted in an increase in sales in almost all geographic regions where we operate. For the three months ended September 30, 2021, we experienced the fastest growth in the APAC region. For the three months ended September 30, 2021, in the APAC region, we reported a €17.5 million, or 111.1% increase. For the same period, in North America, we reported a €4.8 million, or 9.2% decrease, mainly due to a revenue decrease of €5.8 million associated with certain Engineering projects realized in 2020 and not repeated in 2021, while the Biopharmaceutical and Diagnostic Solutions Systems reported a €1.1 million, or 2.7%, increase. In Europe and the South American region, we reported a €42.3 million, or 49.8%, and a €2.5 million, or 52.0%, increase respectively.

For the nine months ended September 30, 2021, our revenue grew: (i) by €24.3 million, or 19.0%, in North America (which accounted for approximately 24.9% of our total revenue for the nine months ended September 30, 2021); (ii) by €36.9 million, or 91.3%, in the APAC region (which accounted for approximately 12.6% of our total revenue for the nine months ended September 30, 2021); (iii) by €90.9 million, or 33.4%, in EMEA (which accounted for approximately 59.4% of our total revenue for the nine months ended September 30, 2021); and (iv) by €3.9 million, or 26.6%, in South America (which accounted for approximately 3.0% of our total revenue for the nine months ended September 30, 2021).

Revenue increase in the North America and the APAC region resulted from our recent international expansion efforts through more focused sales and business development activities as well as our increase in COVID-19 related sales of products and services. We continue to experience the highest demand in these regions and have focused our efforts accordingly.

Cost of Sales

Cost of sales increased by €41.4 million, or 37.7%, to €151.3 million for the three months ended September 30, 2021, compared to €109.8 million for three months ended September 30, 2020. The increase in cost of sales was mainly due to the significant growth in sales volumes. In the third quarter of 2021, the cost of sales increased more than proportionally compared to our revenue mainly due to a product mix effect, caused by the increased amount of sales of our Engineering Segment, which has a higher incidence of cost of sales compared to our Biopharmaceutical and Diagnostic Solutions Segment.

 

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Cost of sales increased by €99.3 million, or 31.1%, to €419.0 million for the nine months ended September 30, 2021, compared to €319.7 million for the nine months ended September 30, 2020, mainly due to the cost of materials, components and labor expenses related to the production and distribution of goods and services. Cost of sales increased less than proportionally compared to our revenue, mainly due to our ongoing efforts to maximize efficiency and to maximize our installed capacity.

For the nine months ended September 30, 2021, cost of sales includes €0.5 million non-recurring restructuring costs related to the consolidation of our Balda plants in the U.S. as well as €0.3 million non-recurring start-up costs related to the new U.S. facility in Indiana.

Gross Profit

Gross profit increased by €16.1 million, or 34.1%, to €63.3 million for the three months ended September 30, 2021, compared to €47.2 million for the three months ended September 30, 2020. The increase in gross profit was mainly driven by the higher sales volumes.

Gross profit margin decreased to 29.5% for the three months ended September 30, 2021 compared to 30.1% for the three months ended September 30, 2020 reflecting a change in the product mix as well as the strong increase in sales from our Engineering Segment which has a lower margin than our Biopharmaceutical and Diagnostic Solutions Segment.

Gross profit increased by €56.8 million, or 41.9%, to €192.4 million for the nine months ended September 30, 2021, compared to €135.6 million for the nine months ended September 30, 2020. This increase was mainly driven by: (i) higher mix of “high-value” solutions and COVID-19 related products and services in our Biopharmaceutical and Diagnostic Solutions Segment; and (ii) improved efficiencies through our business optimization and operational excellence program. The increase in the Engineering Segment’s gross profit was mainly driven by: (i) higher sales volumes; and (ii) an increase in after sales and standardization initiatives that improved efficiencies across the Engineering plants. The enhanced profitability has been mainly reported in glass forming and in pharma vision business.

Other Operating Income

Other operating income increased by €1.1 million, or 183.3% to €1.7 million for the three months ended September 30, 2021, compared to €0.6 million for the three months ended September 30, 2020. Other operating income represents a minor part of our income and its amount varies yearly depending of the specific business agreements in place.

Other operating income, which mainly includes revenue from feasibility studies, design, development and industrialization of new products not derived from the sale of our products, services and solutions, increased by €4.6 million, or 166.7%, to €7.2 million for the nine months ended September 30, 2021, compared to €2.7 million for the nine months ended September 30, 2020. Other operating income represents a minor part of our income and its amount varies yearly depending of the specific business agreements in place.

Selling and Marketing Expenses

Selling and marketing expenses increased by €0.6 million, or 14.6%, to €4.7 million for the three months ended September 30, 2021, compared to €4.1 million for the three months ended September 30, 2020. The increase, mainly driven by an increase in personnel expenses to support the ongoing growth in our business, was partially offset by the decrease in bad and doubtful debts provision.

Selling and marketing expenses increased by €0.6 million, or 3.9%, to €16.0 million for the nine months ended September 30, 2021, compared to €15.4 million for the nine months ended September 30, 2020. These expenses are mainly related to personnel expenses for our sales organization. They also include depreciation and provisions for bad and doubtful debts of €1.3 million for the nine months ended September 30, 2021 (€2.4 million for the nine months ended September 30, 2020). The slight increase in selling and marketing expenses was mainly due to the increase in personnel expenses to support the ongoing growth in our business, which was partially offset by the reduction in bad and doubtful debt provision.

 

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Research and Development Expenses

Research and development expenses increased by €2.7 million, or 57.4%, to €7.4 million for the three months ended September 30, 2021, compared to €4.7 million for the three months ended September 30, 2020, mainly in connection with investing in our drug delivery systems business and the efforts to sustain and accelerate the Company’s Container Closure Systems “high-value” solution pipeline. The increase was also driven by an increase in personnel expenses as a result of new hirings.

Research and development expenses increased by €7.6 million, or 60.8%, to €20.1 million for the nine months ended September 30, 2021, compared to €12.5 million for the nine months ended September 30, 2020. Such expenses include costs for research and development activities to support the innovation of our products and components as well as amortization of capitalized development costs. The increase in research and development expenses reflects our strategy to accelerate the growth of our “high-value” solutions pipeline and advance our market leadership position.

General and Administrative Expenses

General and administrative expenses increased by €8.4 million, or 51.5%, to €24.7 million for the three months ended September 30, 2021, compared to €16.3 million in the three months ended September 30, 2020. The increase was mainly due to a €6.7 million discretionary, out-of-cycle bonus to employees, €0.7 million IPO costs, €0.3 million non-recurring start-up costs related to the new U.S. facility in Indiana as well as €0.1 million restructuring costs for the consolidation of our Balda plants in the United States. General and administrative expenses less the discretionary, out-of-cycle bonus to employees, the IPO costs, the start-up costs related to the new U.S. facility in Indiana and the restructuring costs for the three months ended September 30, 2021 would have been €16.8 million. Excluding €2.7 million non-recurring litigation costs for the three months ended September 30, 2020, general and administrative expenses would have increased by €3.2 million to €16.8 million for the three months ended September 30, 2021 from €13.6 million for the three months ended September 30, 2020.

General and administrative expenses decreased by €0.4 million, or 0.9%, to €44.7 million for the nine months ended September 30, 2021, compared to €45.1 million for the nine months ended September 30, 2020. These expenses mainly comprise personnel expenses for management of the Company as well as depreciation and amortization of €4.4 million (compared to €4.0 million in 2020), of which amortization of fair value adjustments from purchase price allocations amounted to €0.8 million (as in 2020). The decrease in general and administrative expenses is mainly due to a non-recurring accrual reversal of €9.9 million related to the early termination of incentive plans aimed at a limited number of key managers which has been partially offset by €6.7 million discretionary, out-of-cycle bonus to personnel, by €0.7 million IPO costs, by €0.7 million restructuring costs for the consolidation of our Balda plants in the U.S. and by €0.3 million start-up costs related to the new U.S. facility in Indiana. General and administrative expenses less the above-mentioned non-recurring items would have increased by €3.8 million for the nine months ended September 30, 2021 compared to the same period in the prior year.

Operating Profit

As a result of the foregoing, operating profit increased by €5.5 million, or 24.2%, to €28.2 million for the three months ended September 30, 2021, compared to €22.7 million for the three months ended September 30, 2020. This included a one-time cost of €8.3 million gross profit, which is €7.7 million of net profit (including Patent Box tax effect), or €0.03 of diluted earnings per share (net of treasury shares). The majority of this related to the discretionary, out-of-cycle bonus to personnel. As a result, in the third quarter, diluted earnings per share were €0.07 and adjusted diluted earnings per share were €0.10 (calculated assuming weighted issued shares of approximately 264.5 million and net of treasury shares). Adjusted operating profit increased by €11.1 million, to €36.5 million for the three months ended September 30, 2021, compared to €25.4 million for the three months ended September 30, 2020.

As a result of the foregoing, operating profit increased by €53.6 million, or 82.2%, to €118.8 million for the nine months ended September 30, 2021, compared to €65.2 million for the nine months ended September 30, 2020.

Adjusted operating profit increased by €50.2 million, to €118.1 million for the nine months ended September 30, 2021, compared to €67.9 million for the nine months ended September 30, 2020.

 

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Net Finance Expenses

Finance expenses, net of finance income, increased by €4.9 million, to €6.0 million net expenses for the three months ended September 30, 2021, from €1.1 million net expenses for the three months ended September 30, 2020. The increase in net finance expense was due to a non-recurring loss of €4.3 million relating to a derivative financial instrument entered into to reduce the risk of fluctuations in the EUR/USD exchange rate in relation to the IPO proceeds. Net financial expenses less this derivative financial instrument and €0.5 million non-recurring interest expenses in 2020 would have increased by €1.0 million for the three months ended September 30, 2021.

Finance expenses, net of finance income, increased by €2.0 million, or 37.7%, to €7.3 million for the nine months ended September 30, 2021, from €5.3 million for the nine months ended September 30, 2020. The increase in net finance expenses was due to a non-recurring loss of €4.3 million relating to a derivative financial instrument entered into to reduce the risk of fluctuations in the EUR/USD exchange rate in relation to the IPO proceeds. Net financial expenses less this derivative financial instrument and €0.5 million non-recurring interest expenses in 2020 would have increased by €1.8 million for the nine months ended September 30, 2021.

Profit Before Tax

Profit before taxes increased by €0.7 million, or 3.2%, to €22.4 million for the three months ended September 30, 2021, compared to €21.7 million for the three months ended September 30, 2020.

Profit before taxes increased by €51.7 million, or 85.7%, to €112.0 million for the nine months ended September 30, 2021, compared to €60.3 million for the nine months ended September 30, 2020.

Income Taxes

Income taxes decreased to €3.8 million for the three months ended September 30, 2021, compared to €5.1 million for the three months ended September 30, 2020. Our effective tax rate decreased by 6.56%, from 23.43% to 16.87% in the third quarter of 2021. Income taxes included €1.6 million tax saving relating to a tax bonus granting tax benefits to taxpayers carrying out research and development activities and exploit the resulting intangibles and taxes relating to non-recurring costs of restructuring and related charges, discretionary, out-of-cycle bonus award to personnel, start-up costs related to the new U.S. facility in Indiana, foreign exchange loss for derivatives on IPO proceeds, listing expenses totaling €3.2 million. The effective tax rate without the above-mentioned items was 24.59%.

Income taxes increased by €6.6 million, or 42.0%, to €22.3 million for the nine months ended September 30, 2021, compared to €15.7 million for the nine months ended September 30, 2020. Average tax rate decreased by 6.14% from 26.09% to 19.95% for the nine months ended September 30, 2021.

In March 2021, the group reached an agreement with the Italian Tax Authority regarding the applicability of the so called “Patent box regime”, resulting in a retroactive €7.1 million tax saving for the financial years 2016-2020. The tax benefit was accounted for as €5.5 million for the three months ended March 31, 2021 based on our estimates. We accounted for an additional accrual of €1.6 million for the three months ended September 30, 2021 due to the timing of the ruling by the Italian Tax Agency. Income taxes included a non-recurring reversal of deferred tax assets amounting to €4.8 million following the early termination of certain legacy incentive plans that were replaced by a new stock grant plan as well as the taxes related to non-recurring costs of restructuring and related charges, discretionary, out-of-cycle bonus award to personnel, start-up costs related to the new U.S. facility in Indiana, foreign exchange loss for derivatives on IPO proceeds and listing expenses, totally amounting to €3.5 million. The effective tax rate without these one-off items is 24.38%.

Income Taxes for the three months ended September 30, 2021 and 2020

 

     (Amounts in € millions)  
    

For the three months

ended September 30,

     Change  
     2021      2020       

Income Tax Expenses reported in the statement of profit or loss

     3.8        5.1        (1.3

 

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Income Taxes for the nine months ended September 30, 2021 and 2020

 

     (Amounts in € millions)  
    

For the nine months

ended September 30,

     Change  
     2021      2020      <