| Financial Instruments | (30) Financial Instruments (a) Below is a breakdown of the financial instruments by nature, category and fair value. The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term. Thousands of Euros 31/12/2023 Carrying amount Fair Value Financial assets Financial Financial Other at amortised Financial assets assets at FV liabilities at financial costs at FVTPL through OCI Hedges amortised costs liabilities Total Level 1 Level 2 Level 3 Total Non-current financial assets — 7 11,131 — — — 11,138 7 — 11,131 11,138 Derivative instruments — — — 24,688 — — 24,688 — 24,688 — 24,688 Trade receivables — — 193,356 — — — 193,356 — 193,356 — 193,356 Financial assets measured at fair value — 7 204,487 24,688 — — 229,182 Non-current financial assets 164,494 — — — — — 164,494 Other current financial assets 116,075 — — — — — 116,075 Trade and other receivables 526,689 — — — — — 526,689 Cash and cash equivalents 529,577 — — — — — 529,577 Financial assets measured at amortized cost 1,336,835 — — — — — 1,336,835 Derivatives instruments — (10,144) — — — (10,144) — (10,144) — — Financial liabilities measured at fair value — (10,144) — — — — (10,144) Senior Unsecured & Secured Notes — — — — (4,568,130) — (4,568,130) (4,364,798) — — (4,364,798) Promissory Notes — — — — (114,188) — (114,188) Senior secured debt — — — — (3,179,333) — (3,179,333) — (3,332,560) — (3,332,560) Other bank loans — — — — (1,144,459) — (1,144,459) Lease liabilities — — — — (1,111,329) — (1,111,329) Other financial liabilities — — — — (929,636) — (929,636) Trade and other payables — — — — (946,295) — (946,295) Other current liabilities — — — — — (283,366) (283,366) Financial liabilities measured at amortized cost — — — — (11,993,370) (283,366) (12,276,736) 1,336,835 (10,137) 204,487 24,688 (11,993,370) (283,366) (10,720,863) Thousands of Euros 31/12/2022 Carrying amount Fair Value Financial assets Financial Financial Financial Other at amortised assests at assets at FV liabilities at financial costs FVTPL through OCI Hedges amortised costs liabilities Total Level 1 Level 2 Level 3 Total Non-current financial assets — 7 11,533 — — — 11,540 7 — 11,533 11,540 Derivative instruments — — — 39,659 — — 39,659 — 39,659 — 39,659 Trade receivables — — 236,076 — — — 236,076 — 236,076 — 236,076 Financial assets measured at fair value — 7 247,609 39,659 — — 287,275 — Non-current financial assets 582,175 — — — — — 582,175 Other current financial assets 31,034 — — — — — 31,034 Trade and other receivables 445,793 — — — — — 445,793 Cash and cash equivalents 547,979 — — — — — 547,979 Financial assets measured at amortized cost 1,606,981 — — — — — 1,606,981 Derivatives instruments — (4,736) — — — (4,736) — (4,736) — (4,736) Financial liabilities measured at fair value — (4,736) — — — — (4,736) Senior Unsecured & Secured Notes — — — — (4,572,720) — (4,572,720) (4,122,656) — — (4,122,656) Promissory Notes — — — — (118,940) — (118,940) Senior secured debt — — — — (3,227,926) — (3,227,926) — (3,286,662) — (3,286,662) Other bank loans — — — — (813,595) — (813,595) Lease liabilities — — — — (1,016,944) — (1,016,944) Other financial liabilities — — — — (1,001,387) — (1,001,387) Other non-current debts — — — — — (15) (15) Trade and other payables — — — — (846,648) — (846,648) Other current liabilities — — — — — (241,487) (241,487) Financial liabilities measured at amortized cost — — — — (11,598,160) (241,502) (11,839,662) 1,606,981 (4,729) 247,609 39,659 (11,598,160) (241,502) (9,950,142) (b) Measurement of fair value In order to determine the fair value of financial assets or liabilities, the Group uses the following hierarchy based on the relevance of the variables used: ● Level 1: estimations based on quoted prices of the instrument. ● Level 2: estimations based on significant observable variables coming directly from the market. ● Level 3: estimations based on valuation techniques other than observable variables in the market, mainly discounted cash flows. (c) Financial risk management This item provides information on the Group’s exposure to risk associated with the use of financial instruments, the Group’s objectives and procedures to measure and mitigate this risk, and the Group’s capital management strategy. The Group is exposed to the following risks: ● Credit risk ● Liquidity risk ● Market risk: includes interest rate risk, currency risk and other price risks. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, define appropriate risk limits and controls and to control risks and comply with limits. Risk management policies and procedures are reviewed regularly so that they reflect changes in market conditions and the Group’s activities. The Group’s management procedures and rules are designed to create a strict and constructive control environment in which all employees understand their duties and obligations. The Group’s Audit Committee supervises how management controls compliance with the Group’s risk management procedures and policies and reviews whether the risk management policy is suitable considering the risks to which the Group is exposed. This committee is assisted by Internal Audit which acts as supervisor. Internal Audit performs regular and ad hoc reviews of the risk management controls and procedures and reports its findings to the Audit Committee. (i) Credit risk Credit risk is the risk to which the Group is exposed in the event that a customer or counterparty to a financial instrument fails to discharge a contractual obligation, and mainly results from trade receivables and the Group’s investments in financial assets. Trade receivables The main risk is that of late payments, which is mitigated through the possibility of claiming interest as foreseen by prevailing legislation. No significant bad debt or late payment issues have been detected for sales to private entities. The Group recognizes impairment based on its best estimate of the expected losses on trade and other receivables. The main impairment losses recognized are due to specific losses relating to individually identified risks. At year end, these impairment losses are immaterial. Concentration of credit risk For trade receivables the Group uses the simplified approach, estimating lifetime expected credit losses, while for all other financial assets the Group uses the general approach for calculating expected credit losses. In both cases, due to the customers’ credit rating, as well as the internal classification systems currently in place for new customers and considering that collection periods are mostly under 30 days, there is no significant impact for the Group. Exposure to credit risk The carrying amount of financial assets represents the maximum exposure to credit risk. At 31 December 2023 and 2022 the maximum level of exposure to credit risk is as follows: Thousands of Euros Carrying amount Reference 31/12/2023 31/12/2022 Non-current financial assets Note 11 176,676 620,745 Other current financial assets Note 11 140,232 43,663 Contractual assets Note 14 47,751 35,154 Trade receivables Note 15 645,113 608,688 Other receivables Note 15 31,594 29,083 Cash and cash equivalents Note 16 529,577 547,979 1,570,943 1,885,312 The maximum level of exposure to risk associated with receivables and contractual assets at 31 December 2023 and 2022, by geographical area, is as follows. Thousands of Euros Carrying amount 31/12/2023 31/12/2022 Spain 67,786 53,145 EU countries 90,168 69,003 United States of America 91,360 139,721 Other European countries 14,399 16,030 Other regions 460,745 395,026 724,458 672,925 Impairment losses A breakdown of the trade and other receivables and contractual assets net of the impairment losses by ageing at 31 December 2023 is as follows: Thousands of Euros Total net third Total gross carrying party trade ECL Rate amount Provision receivables Not matured 0.19 % 524,696 (560) 524,136 Past due 0-30 days 0.19 % 106,323 (246) 106,077 Past due 31-60 days 0.62 % 19,428 (119) 19,309 Past due 61-90 days 2.03 % 6,398 (120) 6,278 Past due 91-180 days 3.01 % 9,283 (279) 9,004 Past due 181-365 days 8.52 % 6,749 (573) 6,176 More than one year 100.00 % 25,985 (4,101) 21,884 Customers with objective evidence of impairment 25,578 (25,578) — 724,440 (31,576) 692,864 An impairment matrix based on the length of time overdue was used to monitor receivables portfolios that do not show any specific indications of impairment in individual cases. For trade receivables related to customers from the Middle East which are overdue by more than one year, the flat-rate percentages from the impairment matrix were adjusted due to special default patterns. A breakdown of the trade and other receivables and contractual assets net of the impairment losses by ageing as of 31 December 2022 is as follows: Thousands of Euros Total net third Total gross carrying party trade ECL Rate amount Provision receivables Not matured 0.19 % 550,131 (48) 550,083 Past due 0-30 days 0.19 % 44,779 (425) 44,354 Past due 31-60 days 0.62 % 16,000 (163) 15,837 Past due 61-90 days 2.03 % 6,029 (133) 5,896 Past due 91-180 days 3.01 % 17,407 (295) 17,112 Past due 181-365 days 8.52 % 10,747 (187) 10,560 More than one year 100.00 % 9,994 (9,994) — Customers with objective evidence of impairment 21,046 (21,046) — 676,133 (32,291) 643,842 Movement in the bad debt provision was as follows: Thousands of Euros 31/12/2023 31/12/2022 31/12/2021 Opening balance 32,291 24,009 22,985 Net charges for the year 7,322 14,074 6,471 Net cancellations for the year (7,237) (6,949) (6,269) Transfers 47 53 — Translation differences (847) 1,104 822 Closing balance 31,576 32,291 24,009 The Group does not have significant credit risk, with both treasury placements and the contracting of derivatives being carried out with highly solvent financial institutions. (ii) Liquidity risk Liquidity risk is the risk that the Group cannot meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure where possible, that it always has sufficient liquidity to settle its obligations at the maturity date, both in normal conditions and in times of tension, to avoid incurring unacceptable losses or tarnishing the Group’s reputation. The Group manages liquidity risk on a prudent basis, based on availability of cash and sufficient committed unused long-term credit facilities, enabling the Group to implement its business plans and carry out operations using stable and secure sources of financing. At 31 December 2023 the Group has total cash and cash equivalents of Euros 529,577 thousand (Euros 547,979 thousand at 31 December 2022). The Group also has approximately Euros 615,328 thousand in unused credit facilities (Euros 987,340 thousand at 31 December 2022), including Euros 544,729 thousand on the revolving credit facility (Euros 937,559 thousand at 31 December 2022). The Credit Agreement establishes a limitation on the disposition of the “revolving line” that has not been exceeded as of December 31, 2022 and 2023. The Group is able to provide sufficient liquidity to fund its current obligations based on cash flows from operations combined with cash balances and availability of unused credit lines, and it is committed to maintaining elevated and adequate levels of liquidity through internally generated cash flows, and a decrease in dividend payments in the medium term. Additionally, currently the Group does not generate significant cash in any country that might have restrictions on the repatriation of funds. As in previous years, the Group continues with its quarterly program for optimization of working capital, which is mainly based on contracts to sell receivables without recourse. The main contractual obligations existing at the end of the fiscal year comprise mainly long-term financial debt obligations with capital repayments and interest payments (see note 21). The Group’s treasury budget plans to pay all its commitments in the next 12 months. Additionally, the cash received from the divestment in Shanghai RAAS (see Notes 10 and 12) and the improvement in operating cash flow will be used to continue reducing the level of indebtedness initiated in previous years. On the other hand, the Group has various additional financing alternatives such as negotiating with debt holders, accessing the debt market or possible divestments in non-strategic assets, to optimize the debt structure and its financial cost. Details of the contractual maturity dates of financial liabilities including committed interest calculated using interest rate forward curves are as follows: Thousands of Euros Carrying amount at Contractual 6 months 6 - 12 1-2 2 - 5 More than Carrying amount Reference 31/12/23 flows or less months years years 5 years Financial liabilities Bank loans Note 21 4,323,792 5,329,182 611,387 327,923 650,970 3,738,902 — Other financial liabilities Note 21 929,635 1,518,616 181,800 1,855 116,398 455,467 763,096 Bonds and other marketable securities Note 21 4,682,319 5,304,861 187,543 73,571 1,978,190 3,065,557 — Lease liabilities Note 21 1,111,328 1,111,328 53,828 53,273 82,564 293,159 628,504 Payable to suppliers Note 22 813,114 813,114 811,943 1,171 — — — Other current liabilities Note 23 16,651 16,651 16,496 155 — — — Financial derivatives Note 30 (d) 10,144 10,144 10,133 — 11 — — Other commitments Note 10 — 378,920 124,393 124,392 73,853 56,282 — Total 11,886,983 14,482,817 1,997,523 582,341 2,901,986 7,609,367 1,391,600 Thousands of Euros Carrying amount at Contractual 6 months 6 - 12 1-2 2 - 5 More than Carrying amount Reference 31/12/22 flows or less months years years 5 years Financial liabilities Bank loans Note 21 4,041,522 5,193,051 527,770 148,914 488,105 4,028,262 — Other financial liabilities Note 21 1,001,387 1,685,824 169,278 18,656 124,822 441,933 931,135 Bonds and other marketable securities Note 21 4,691,659 5,468,068 190,453 75,951 147,903 5,053,761 — Lease liabilities Note 21 1,016,944 1,016,944 51,088 51,268 57,695 218,384 638,509 Payable to suppliers Note 22 731,918 731,918 731,675 243 — — — Other current liabilities Note 23 14,261 14,262 11,364 2,898 — — — Financial derivatives Note 30 (d) 4,736 4,736 733 — 12 3,991 — Total 11,502,427 14,114,803 1,682,361 297,930 818,537 9,746,331 1,569,644 In addition, on 31 December 2023 and 2022, the Group has a call option that grants it the irrevocable and exclusive right (not an obligation) to acquire the companies Haema AG and BPC Plasma Inc. (see note 29). (iii) Currency risk The Group operates internationally and is therefore exposed to currency risk when operating with foreign currencies, especially with regard to the US Dollar. Currency risk is associated with future commercial transactions, recognized assets and liabilities, and net investments in foreign operations. The Group holds significant investments in foreign operations, the net assets of which are exposed to currency risk. The conversion risk affecting net assets of the Group’s foreign operations in US Dollars is mitigated primarily through borrowings in this foreign currency. The Group’s main exposure to currency risk is with regard to the US Dollar, which is used in a significant percentage of transactions in foreign functional currencies. The financing obtained in Euros represents 62% of the total debt of the Group and amounts to Euros 6,032 million at 31 December 2023 (60% and Euros 5,563 million at 31 December 2022). As mentioned in note 21, part of the US Dollar debt of the Group is covered by a currency swap to hedge the exposure to the associated currency risk. The Group applies the cost of hedging method. This method enables the Group to exclude the currency basis spread from the designated hedging instrument and, subject to certain requirements, changes in their fair value attributable to this component are recognized in other comprehensive income. Details of the Group’s exposure to currency risk is as follows: Thousands of Euros 31/12/2023 Euros (*) US Dollars (**) Trade receivables 2,278 47,772 Receivables from Group companies 121,173 10,908 Loans to Group companies 4,818,407 41 Cash and cash equivalents 7,296 2,026 Trade payables (38,610) (43,682) Payables to Group companies (119,801) (30,643) Loans from Group companies (4,650,080) — Bank loans (336,250) — Balance sheet exposure (195,587) (13,578) (*) Balances in Euros in subsidiaries with US Dollars functional currency (**) Balances in US Dollars in subsidiaries with Euros functional currency Thousands of Euros 31/12/2022 Euros (*) US Dollars (**) Trade receivables 2,116 58,331 Receivables from Group companies 132,645 11,542 Loans to Group companies 4,548,142 33 Cash and cash equivalents 11,154 1,989 Trade payables (17,297) (20,870) Payables to Group companies (77,367) (29,277) Loans from Group companies (4,414,879) — Bank loans (31,875) — Balance sheet exposure 152,639 21,748 (*) Balances in Euros in subsidiaries with US Dollar functional currency (**) Balances in US Dollar in subsidiaries with Euros functional currency The most significant exchange rates applied at 2023 and 2022 year ends are as follows: Closing exchange rate Euros 31/12/2023 31/12/2022 US Dollars 1.1050 1.0666 A sensitivity analysis for foreign exchange fluctuations is as follows: Had the US Dollar strengthened by 10% against the Euro at 31 December 2023, equity would have increased by Euros 820,616 thousand (Euros 892,806 thousand at 31 December 2022) and profit due to foreign exchange differences would have decreased by Euros 20,638 thousand (increased of Euros 17,439 thousand at 31 December 2022). This analysis assumes that all other variables are held constant, especially that interest rates remain constant. A 10% weakening of the US Dollar against the Euro at 31 December 2023 and 2022 would have had the opposite effect for the amounts shown above, all other variables being held constant. The Group uses hedge accounting to partially hedge the currency risk exposure (See note 30 (d)). (iv) Interest rate risk The Group’s interest rate risks arise from current and non-current borrowings. Borrowings at variable interest rates expose the Group to cash flow interest rate risks. Fixed-rate borrowings expose the Group to fair value interest rate risk. The objective of the management of interest rate risk is to achieve a balance in the structure of the debt, keeping part of the external resources issued at a fixed rate and covering part of the variable rate debt through hedges. A significant part of the financing obtained accrues interest at fixed rates, representing 59% of the total debt of the Group at 31 December 2023 (61% at 31 December 2022). It mainly includes corporate senior notes, European Investment Bank loans, as well as the agreement with GIC (Sovereign Fund of Singapore) (see note 21). Variable-rate debt represents 41% of the total debt at 31 December 2023 (39% at 31 December 2022) and includes mainly the senior secured debt (see note 21 (b)). To date, the profile of interest on interest-bearing financial instruments is as follows: Thousands of Euros 31/12/2023 31/12/2022 Fixed-interest financial instruments Financial liabilities (5,696,851) (5,835,492) (5,696,851) (5,835,492) Variable-interest financial instruments Financial liabilities (3,956,154) (3,705,088) (3,956,154) (3,705,088) (9,653,005) (9,540,580) Had the interest rate been 100 basis points higher at 31 December 2023, the interest expense would have increased by Euros 34,114 thousand (Euros 34,688 thousand at 31 December 2022). As the Group does not have any hedging derivatives in place, the net effect on cash interest payments would have increased by the same amount. (v) Market price risk Price risk affecting raw materials is mitigated by the vertical integration of the hemoderivatives business in a highly concentrated sector. (d) Financial derivatives At 31 December 2023 and 2022 the Group has recognized the following derivatives: Thousands of Euros Notional Notional amount at amount at Value at Value at Financial derivatives Currency 31/12/2023 31/12/2022 31/12/23 31/12/22 Maturity Cross currency interest rate swap US Dollar 500,000,000 500,000,000 20,538 35,296 15/10/2024 Cross currency interest rate swap US Dollar 205,000,000 205,000,000 (140) 3,216 15/10/2024 Foreign exchange rate forward Swiss Franc 10,000,000 5,500,000 378 71 05/02/2024 Foreign exchange rate forward Canadian dollar 32,666,667 4,416,667 450 165 07/02/2024 Foreign exchange rate forward Pound Sterling — 27,100,000 — 805 29/11/2023 Foreign exchange rate forward Czech crown 160,000,000 — 191 — 12/02/2024 Foreign exchange rate forward Mexican Peso 90,000,000 — 193 — 12/02/2024 Foreign exchange rate forward Turkish lira 87,834,511 — 44 — 31/01/2024 Foreign exchange rate forward US Dollar 7,700,000 23,720,000 92 104 29/02/2024 Foreign exchange rate forward Euro 40,000,000 160,000,000 1,412 2 22/01/2024 Energy PPA Euro / KwH — — 1,529 — 31/12/2032 Total assets (note 11) 24,687 39,659 Cross currency interest rate swap US Dollar 205,000,000 205,000,000 (7,712) (3,990) 15/10/2024 Foreign exchange rate forward Canadian dollar 42,560,102 8,000,001 (2,081) (146) 05/01/2024 Foreign exchange rate forward US Dollar 2,000,000 60,000,000 (2) (600) 30/01/2023 Foreign exchange rate forward Czech crown 160,000,000 — (13) — 12/02/2024 Foreign exchange rate forward Pound Sterling 8,500,000 — (122) — 12/02/2024 Foreign exchange rate forward Japanese Yen 700,000,000 — (214) — 07/02/2024 Total liabilities (note 20) (10,144) (4,736) (i) Hedging derivative financial instruments On 5 October 2021, the Group subscribed three cross currency interest-rate swaps with an aggregate value of US Dollars 500 million to hedge part of the Euro equivalent value of the US Dollar unsecured notes issued in October 2021. It is a fixed-to-fixed USD/EUR cross currency swap with the following characteristics: - The Group receives a loan of Euros 431.6 million at a nominal interest rate of 3.78%. - The Group grants a US Dollars 500 million loan at a nominal interest rate of 4.75%. On 28 June 2022, the Group subscribed one cross currency interest-rate swap of US Dollars 205 million to hedge the remaining part of the Euro equivalent value of the US Dollar unsecured notes issued in October 2021. It is a fixed-to-fixed USD/EUR cross currency swap with the following characteristics: - The Group receives a Euros 194 million loan at a nominal interest rate of 3.1046%. - The Group grants a US Dollars 205 million loan at a nominal interest rate of 4.75%. The derivative complies with the criteria required for hedge accounting. See further details in notes 4 (i). (ii) Derivative financial instruments at fair value through profit and loss The Group has subscribed various foreign exchange forwards to partially hedge the foreign currency value of intercompany loan. Since the Group chooses not to apply hedge accounting criteria, gains or losses resulting from changes in the fair value of derivatives are taken directly to “Change in fair value of financial instruments” in the consolidated statement of profit and loss. At 31 December 2023, the Group has recognized a net finance cost of Euros 876 thousand (Euros 4,586 thousand of net finance cost at 31 December 2022). (iii) Electricity derivative At the beginning of 2023, the Company contracted a hedge on the variation of the price of electricity. This contract has served in its entirety to cover the purchase price of electricity against potential market price increases. The energy price hedging derivatives meet the requirements to apply hedge accounting, so the variations in the value of this financial instrument are recorded (by the net amount of taxes) in equity. The movement in derivative financial instruments is as follows: Thousands of Euros 31/12/2023 31/12/2022 Opening balance 34,923 4,431 Business combination — (1,255) Changes in fair value recognized in equity 1,914 (4,757) Transfer to profit or loss 5,775 12,552 Transfer to profit or loss - translation differences (23,037) 32,954 Tax effect (84) 6,170 Collections / Payments (4,948) (15,172) Closing balance 14,543 34,923 (e) Capital management The directors’ policy is to maintain a solid capital base in order to ensure investor, creditor and market confidence and sustain future business development. The board of directors defines and proposes the level of dividends paid to shareholders. The capital structure is periodically reviewed through the preparation of strategic plans focused mainly on a sequential improvement of EBITDA (Earnings before interest, tax, amortization and depreciation), generation of operating cash and discipline in the allocation of capital; with the objective and commitment to reduce the leverage ratio. In accordance with the senior secured debt contract, the Group is subject to compliance with some covenants. At 31 December 2023 and 2022, the Group complies with the covenants in the contract. The credit rating of the Group is as follows: January 2024 September 2023 March 2023 September 2022 Moody's Investors Corporate rating B2 B1 Senior secured debt Ba3 Ba3 Senior Unsecured debt Caa1 B3 Perspective Negative Negative Standard & Poor's Corporate rating B+ B+ Senior secured debt BB- BB- Senior Unsecured debt B- B- Perspective Stable Stable Fitch Ratings Corporate rating BB- BB- Senior secured debt BB+ BB+ Senior Unsecured debt B+ B+ Perspective Stable Stable The Parent held Class A and B treasury stock equivalent to 1.23% of its capital at 31 December 2023 (1.33% at 31 December 2022). |
