Biological assets comprise standing trees of a plantation in Minas Gerais, Brazil, which are used as a raw material for pulp production. In accordance with IAS 41 (Agriculture), biological assets are presented at fair value in the consolidated statement of financial position. The plantation is recognized at level 3 of the fair value less estimated costs to sell at the harvest. It is assumed that fair values can be measured. The measurement of biological assets is monitored and reviewed by the Lenzing Group. The necessary market data are validated on the basis of the dual control principle.
The measurement is based on a discounted cash flow model on the basis of sustainable forest management plans, industry benchmarks for wood prices and delivery costs and taking into account the growth potential. The annual harvest from the projected tree growth is multiplied by wood prices, and the forestry and harvesting costs are deducted. The fair value of the plantation is measured as the present value of the harvest from one growth cycle on the basis of the productive forest area, taking into account environmental restrictions and other reservations. In particular, the calculated fair value would increase (decrease) if both the timber price and the timber volume were to increase (decrease). The calculated fair value would decrease (increase) if the discount rate were to increase (decrease).
Young standing timber less than one year old is considered an immature asset and is recognized at cost. When harvested, biological assets are transferred to the item inventories of the consolidated statement of financial position. Changes in the fair value of hedging instruments in relation to the foreign exchange risk are recognized in the income statement under cost of sales.
As at December 31, 2021, the plantation comprised approximately 40,115 hectares of eucalypt wood (December 31, 2020: 39,892 hectares) and 975 hectares of pine wood (December 31, 2020: 1,001 hectares). The wood is up to 13 years (December 31, 2020: 12 years) old. Wood amounting to EUR 2,163 thousand (December 31, 2020: EUR 2,486 thousand) is less than one year old and therefore considered an immature asset.
Biological assets developed as follows:
|
2021 |
2020 |
|---|---|---|
As at 01/01 |
84,254 |
0 |
Addition |
0 |
103,109 |
Acquisition |
1,469 |
105 |
Sales |
(6,923) |
(6,620) |
Capitalized production costs |
12,037 |
9,864 |
Change in the fair value |
(2,001) |
(12,943) |
Currency translation adjustment |
7,071 |
(9,226) |
Other changes |
(138) |
(36) |
As at 31/12 |
95,767 |
84,254 |
Gains and losses from the change in the fair value of biological assets of EUR 2,258 thousand (December 31, 2020 EUR minus 10,334 thousand) consisted of the regular remeasurement of EUR minus 2,001 thousand (December 31, 2020: EUR minus 12,943 thousand) and changes in the value of hedges related to the exchange rate risk of EUR 4,259 thousand (December 31, 2020: EUR 2,608 thousand). These are included in the cost of sales.
In October 2020, a fire occurred on the plantation. The fire resulted in a reduction of the selling price for the damaged wood. The devaluation taking into account insurance cover amounts to EUR 3,192 thousand and is included in the change in fair value.
The following assumptions were made:
|
31/12/2021 |
31/12/2020 |
|---|---|---|
Market price EUR/m3 |
8.16 |
7.70 |
Discount rate |
5.48 % |
6.93 % |
Wood volume |
11,725,725 m3 |
11,322,673 m3 |
A change in key input factors which cannot be observed on the market would have the following effects on the measurement of biological assets:
|
Increase |
Decrease |
|---|---|---|
Change in the market price (+/- 1 %) |
952 |
(952) |
Discount rate (+/- 1 %) |
(787) |
837 |
Wood volume (+/- 5 %) |
4,967 |
(4,967) |