Financials

KME Group Financial Results

The income statement data provided above (stated on a comparable basis in both years) provide a fair presentation of the results from operations. The table below shows the consolidated income statement data computed valuing the structural inventory of raw materials as required by the IFRS accounting principles, instead of valuing it at cost by the LIFO method (see Annex 1 to this press release for more information). The structural inventory is the inventory that has not been set aside to feel customer orders and so represents a strategic reserve, substantially fixed in the time, which guaranties the industrial activity. In the current environment this type of valuation produced a positive difference. Consequently, some of the operating and financial data provided in the table are based on accounting principles that differ in some respects from the IFRS principles, mainly in terms of measurement and presentation. Specifically:

• Revenues are shown net of the value of raw materials to eliminate the impact of fluctuations in raw material prices.
• When valuing the ending metal inventory, the portion representing the structural inventory (i.e., the portion of the inventory that was not set aside to fill customer orders) was valued by the LIFO method. The portion of  inventory set aside for customer orders was valued based on the value of the corresponding orders, which is deemed to be the realizable value. Under the IFRS method, the inventory is valued at the lower of average weighted cost or net realizable value, which is the sales price for inventory earmarked to fill customer orders and the average of the closing prices on the London Metal Exchange (LME) in the month of December. The IFRS principles also require that inventory buy and sell commitments and the corresponding hedges executed on the LME be disclosed separately and shown in the financial statements as financial instruments measured at fair value.
• Extraordinary items are shown below the EBITDA line.