Annual Report 2019

ANNUAL RE PORT 201 9
PFNonwovens a.s.
Introduction 4
Year 2019 in Brief 8
Statement of the CEO 12
Investor Information 16
Corporate Governance Report 22

A separate part of the Annual Report pursuant to 41
Section 118 (4) of the Capital Market Undertakings Act
Management Report 48
Report on Relations 64
Consolidated Financial Statements 72
Non-consolidated Financial Statements 112
Independent Auditor’s Report 136
THE ANNUAL REPORT 2019

IS EXECUTED IN CZECH
LANGUAGE. THIS ENGLISH Glossary 146
TRANSLATION IS FOR
INFORMATION PURPOSES
ONLY. IN THE CASE OF A
DISCREPANCY, THE CZECH Statements of Responsible Persons 152
VERSION WILL PREVAIL.
1
Introduction
01 | Introduction 7
Introduction
PFNonwovens a.s. (hereafter “the Company”) and its subsidiar-

ies (together jointly referred to as “the Group”) is one of the leading
producers of nonwoven textiles in the EMEA region (Europe, the
Middle East and Africa) for use primarily in the personal hygiene
products market. The Group supplies its customers with spunmelt
polypropylene- and polypropylene/polyethylene-based (“PP” and
“PP/PE”) textiles principally for use in disposable hygiene products
(such as baby diapers, adult incontinence and feminine hygiene
products) and, to a lesser extent, in construction, agricultural and
medical applications.
Founded in 1990, the Group has of international expansion, a new

grown over the past almost three company PFNonwovens Interna-
decades and based on 2019 annual tional s.r.o. was established in 2010
production capacity, it has become and subsequently PFNonwovens
one of the leading producers of Egypt LLC was established in June
spunmelt nonwovens in the EMEA 2011, which invests in the Egyptian
region. The Group currently oper- production facility. In July 2016, a
ates ten production lines in the subsidiary PFNonwovens RSA (PTY)
Czech Republic, one production line LTD was established for the purpose
in Egypt, which commenced com- of realization of the investment proj-
mercial production in 2013 and one ect in the Republic of South Africa.
production line in the Republic of At the end of 2019, the Group
South Africa, which commenced employed more than 680 people.
commercial production at the end
of the first half of 2019. The total Shares in the Company are listed
production capacity of the Group is on the Prague Stock Exchange fol-
currently up to 110 thousand tonnes lowing an Initial Public Offering
of nonwoven fabric per annum in in December 2006. In 2017, R2G
the Czech Republic, up to 20 thou- Rohan Czech s.r.o. (now PFNonwo-
sand tonnes in Egypt and up to 10 vens Holding s.r.o.) became the new
thousand tonnes in the Republic of majority shareholder. PFNonwovens
South Africa. a.s. and its affiliated companies are
members of PFNonwovens hold-
The Group consists of a parent ing (concern) subject to single man-
holding company in the Czech agement by PFNonwovens Hold-
Republic and four operating com- ing s.r.o.
panies, PFNonwovens Czech s.r.o.,
PFN – NW a.s., PFN – NS a.s. and The Company is a member of the
PFN – GIC a.s., all located in the European Disposables and Nonwov-
Czech Republic. For the purpose ens Association (EDANA).
2
Year 2019 in Brief
10 PFNonwovens a.s. | Annual Report 2019
Total production output (in tonnes net of scrap)
2017 109,157
2018 109,845
2019 110,966
0 20,000 40,000 60,000 80,000 100,000 120,000
Revenues (CZK thousands)
2017 6,115,941
2018 6,484,793
2019 6,541,444
0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000
Number of employees – EOP

2017 590
2018 605
2019 684
0 100 200 300 400 500 600 700

02 | Year 2019 in Brief 11
Financials (CZK thousands) 2019 2018
Revenues 6,541,444 6,484,793
EBITDA 1,217,498 1,347,054
Profit from Operations 687,995 879,531
Net Profit for the Period Attributable to Shareholders 473 198 815,157
No. of Shares - End of Period (“EOP”) 8,763,859 8,763,859
Total Assets 11,585,281 10,861,924
Total Equity 5,486,101 4,970,752
Total Borrowings 4,987,874 5,076,635
Net Debt 4,785,340 4,676,501
CAPEX 1,166,589 748,345
Ratios 2019 2018
EBITDA Margin 18.6% 20.8%
Operating Profit Margin 10.5% 13.6%
Margin of Net Profit Attributable to Shareholders 7.2% 12.6%
CAPEX as % of Revenues 17.8% 11.5%
Operations 2019 2018
Total Production Output (in tonnes net of scrap) 110,966 109,845
Number of Employees – EOP 684 605
Exchange Rates 2019 2018
USD/CZK average 22.934 21.735
USD/CZK EOP 22.621 22.466
ZAR/CZK average 1.588 1.647
ZAR/CZK EOP 1.611 1.562

3
Statement of the CEO
03 | Statement of the CEO 15
Dear shareholders, business partners, colleagues, tion and testing phase. I see substantial potential in this
new special line and believe that it will greatly contribute
I would like to take this opportunity to share my per- towards our efforts in research, testing and subsequent
spective on the most important events of last year and commercialization of new high-value innovative prod-
to shed some light on our expectations and plans for ucts with application potential in both current as well as
2020. future end products.
As usual, I will start by evaluating last year from the In addition to the progress that we’ve made in our
financial-operational perspective. Our production vol- expansion projects in 2019, we also concluded new
umes last year hit record levels and we produced nearly supply agreements with our key customers, thus ensur-
111 thousand metric tons of nonwoven textiles, which ing demand for both our current as well as new capaci-
we supplied to our customers throughout the world. ties for a couple of years into the future.
Despite this record production figure, we did not man-
age to meet our ambitious EBITDA target that was in the So far, 2020 has proven to be quite demanding and we
range CZK 1.30 – 1.45 billion. see this situation continuing for some time. The break-
out of the corona virus pandemic has presented us
The entire year 2019 was characterized by very low fin- with many new challenges, quite unlike any that we’ve
ished products inventory levels, a situation that per- ever faced in the past. Nevertheless, we have quickly
sisted from the end of 2018. Our inventory levels bot- adapted to these new conditions, taking proactive steps
tomed out in mid 2019 when we had merely fourteen to maintain close real-time communications with all our
days of inventory in our warehouses, less than half of production sites and key business partners as the situa-
our standard level. We were unable to restore our fin- tion continues to evolve. As a result, our production has
ished product inventory to normal throughout 2019. This not been impacted by the pandemic and we are pres-
resulted in frequent production changeovers and signifi- ently operating at full capacity. Our company has man-
cantly worse production efficiency compared to 2018. aged to overcome the unpleasant obstacles brought by
In 2019, we also started to feel the competitive pricing these unprecentented market conditions and we stand
pressures and overall overcapacity in the nonwovens firm with respect to the commitments we have made to
market, which were reflected in our results. And finally, our stakeholders.
the fact that our new investments went into commercial
operation later than expected in 2019 meant that they On the basis of our outlook for 2020 and in line with
did not contribute as much to the full-year results as the present market conditions coupled with an increas-
had been planned. ing staff and energy cost base, we have set our 2020
EBITDA guidance in the range from CZK 1.25 to 1.4 bil-
Despite certain unavoidable delays, we are very happy lion. Also, in accordance with the announced strategy
that we have managed to successfully complete the of the company, the Board of Directors shall propose
project in South Africa, which is now running at full to the General Meeting not to pay out dividends for the
speed with production efficiency now achieving stan- year 2019.
dard benchmark levels. Our other major project last
year was the installation of a new semi-commercial line Finally and most importantly, I would like sincerely thank
in Znojmo, which has been producing standard com- all our customers, business partners and sharehold-
mercial product since September. The special part of ers for their support and, of course, our employees that
this production line is now successfully in the finaliza- keep everything running despite the present challenges.
Carl Allen Bodford
Chairman of the Board of Directors of PFNonwovens a.s.

CEO of PFNonwovens Group
4
Investor Information
Ì to ask the Supervisory Board to review the per-

4.1 Shares and formance of the Board of Directors’ responsibili-
ties in the matters specified in the request,
Share Capital
Ì to claim damages against a member of the
Board of Directors or the Supervisory Board
The total Share Capital of the Company as at

31 December 2019 was EUR 10,867,185.16. The Share
Capital of the Company consisted of 8,763,859 shares
with a nominal value of EUR 1.24 each. Structure of
shareholders as at
31 December 2019
Identifiers
of which PFNonwovens Holding s.r.o. 89.99%
ISIN LU0275164910
of which institutional and retail inves-
10.01%
tors (free float)
of which owns shares 0.00%
Rights and obligations of which shares held by the Board of

Directors
0.00%
associated with
the shares
Changes in ownership structure in 2019
Rights and obligations of shareholders are governed by During 2019 there were no changes in the ownership
Articles 23 – 26 of the Company’s Articles of Association structure of the Company. The Company did not receive
and include: any notifications regarding ownership interests in the
Company.
Ì right to a share of profits, dividends if and when dis-
tributed
Ì right to a share of the surplus upon liquidation

Public tradeability
Ì right to a participate in the General Meeting, vote,
request, and obtain explanations of shares
Ì the shareholders with shares with a nominal value of
at least 3% of the Company’s registred capital may: The shares of the Company are publicly traded on the
Prague Stock Exchange as of 18 December 2006. As
Ì to ask the Board of Directors to convene a Gen- of 19 March 2007, they are part of the PX Index, which
eral Meeting to discuss the matters proposed by consists of all major issues on the PSE.
them,
The Company´s shares were delisted from trading on
Ì to ask the Board of Directors to include on the the Warsaw Stock Exchange with effect from 19 Sep-
agenda of the General Meeting the matter deter- tember 2017.
mined by them in accordance with the proce-
dures set forth in the Articles of Association and The list of shareholders is replaced by the evidence
the Act on Commercial Corporations, of registered securities kept at the central securities
04 | Investor Information 19
depository (Centrální depozitář cenných papírů, a.s.) pursuant to special legal

regulations.
Share Price Development and

Trading Activity in 2019
During 2019, the Company´s shares were traded for a total value of
CZK 302.6 million on the Prague Stock Exchange. The lowest trading price during
the year was CZK 666 and the highest trading price was CZK 846.
The closing price on 30 December 2019 was CZK 700 on the Prague Stock
Exchange and the market capitalisation of the Company reached CZK 6.1 billion.
SHARE PRICE DEVELOPMENT 1 JANUARY 2019 – 31 DECEMBER 2019
850
830
810
790
770
750
730
710
690
670
650
I II III IV V VI VII VIII IX X XI XII
Source: PSE
5. Approval of consolidated financial statements of the

Annual General Meeting Company prepared as at 31 December 2018.
held on 14 June 2019 6. Approval of separate financial statements of the

Company prepared as at 31 December 2018.
The Annual General Meeting of the Company held on 7. Decision on the settlement of the Company’s 2018
14 June 2019 in Znojmo, Czech Republic, approved all loss.
proposals.
8. Appointment of an auditor to carry out a mandatory
The agenda of the Meeting was the following: audit of the Company in 2019.
1. Election of the chair of the General Meeting, the min-

ute taker, minute verifiers, and scrutinisers.
2. Approval of the Rules of Procedure of the General Dividend Policy

Meeting.
3. Report of the Board of Directors on the Company’s Taking into account the level of Net Debt and with the
business activities and assets in 2018; a summary objective of strengthening the financial stability of the
explanatory report pursuant to Section 118 (9) of Act Company and the accummulation of resources for long-
No. 256/2004 Coll., on Capital Market Undertakings, term growth, the Company does not pay out dividends.
as amended; conclusions of the Company’s 2018
report on relations.
4. Report of the Supervisory Board on the results of

its activities in 2018; a statement of the Supervisory
Board concerning the regular consolidated finan- 4.2 Bonds
cial statements for 2018, the regular unconsolidated
financial statements for 2018, the proposal for the
settlement of 2018 loss, and the Company’s 2018
report on relations. The Group is the issuer of the following bonds.
ISIN Issuer Type Nominal Offer Interest Date Maturity

price rate p.a. of issue date
CZ0000000658 PFNonwovens a.s. Private 1,080,000,000 CZK 101.954% 2.646% 14/07/2015 14/07/2022
PFNonwovens 6M PRIBOR
CZ0003512808 Private 678,000,000 CZK 100% 14/07/2015 14/07/2025
Czech s.r.o. + 2%
PFNonwovens
CZ0003512816 Private 35,000,000 EUR 100% 3.39% 14/07/2015 14/07/2025
Czech s.r.o.
PFNonwovens
CZ0003515835 Private 50,000,000 EUR 99.637% 1.875.% 20/01/2017 20/01/2024
Czech s.r.o.
04 | Investor Information 21
4.3 Rating
As at 31 December 2019, the Group was not assigned a

corporate rating.
Financial Results
Calendar for 2020
30 September 2020
Ì Half Year Report for the 1st Half of 2020.
Ì 1st Half 2020 Unaudited Consolidated Financial

Results of PFNonwovens a.s. in accordance with
IFRS
IR Contact Details
INVESTOR RELATIONS
Address Přímětická 3623/86

669 02 Znojmo
Czech Republic
Phone number +420 515 262 408
E-mail iro@pfnonwovens.cz
Website www.pfnonwovens.cz
5
Corporate Governance
Report
The company was incorporated in Luxembourg as a

5.1 Basic public limited liability company (société anonyme) for
an unlimited duration on 18 November 2005 under
Information on the name Pamplona PE Holdco 2 SA and was regis-
tered with the Luxembourg trade and companies reg-
the Company ister under number B 112.044. In 2006, the Company
changed its name to PEGAS NONWOVENS SA.
On 18 December 2017, the Extraordinary General Meet-

ing of the Company resolved to transfer the head office
NAME to the Czech Republic and to change the nationality
(status) of the Company from Luxembourg nationality to
Ì PFNonwovens a.s., joint-stock company existing Czech nationality. Concurrently, the Extraordinary Gen-
under the laws of the Czech Republic eral Meeting resolved to accept a new wording of the
Articles of Association and to change the name of the
Company to PEGAS NONWOVENS a.s.
ADDRESS AND CONTACT
The Luxembourg company PEGAS NONWOVENS SA did
Ì Hradčanské náměstí 67/8 not cease to exist as a result of the transfer of the head
Hradčany, 118 00 Praha 1 office of the Company nor did a new legal entity come
Czech Republic into existence, but rather its legal form was changed to
a joint stock company according to Czech law. PEGAS
Ì Phone number: +420 515 262 411 NONWOVENS a.s. was registered in the Czech com-
mercial register with effect from 1 January 2018. The
head office of the Company is Hradčanské náměstí 67/8,
REGISTRY AND REGISTRATION NUMBER Hradčany, 118 00 Prague 1, Czech Republic.
Ì LEI: 3157009RURHKNJBPX873 On 15 June 2018, the Ordinary General Meeting of the

Company resolved to accept a new wording of the
Ì ID: 06711537 Articles of Association and to change the name of the
Company to PFNonwovens a.s. The change was regis-
Ì Company is registered with the commercial register tered in the Czech commercial register with effect from
in the Czech Republic maintained by the Municipal 19 June 2018.
Court in Prague under file No. B 23154
JURISDICTION
Line of business and
Ì Czech Republic
business activity
(according to Article 3
of the Articles of
Association)
The Company’s business activity is:
Ì Production, trade, and services not listed in Annexes

1 to 3 of the Trade Licensing Act
The Company’s other activity is:
Ì Management of its own property

05 | Corporate Governance Report 25
5.2 Organisational Structure
The diagram below represents the structure of the Group PFNonwovens a.s.
and its position in the concern PFNonwovens Holding s.r.o. as at 31 Decem-
ber 2019:
PFNonwovens Holding s.r.o.
88.78% 100%
PFNonwovens a.s. PFNonwovens US Inc.
100% 100% 100% 100%
PFNonwovens PFNonwovens
PFNonwovens LLC FQN Asia Pte. Ltd.
Czech s.r.o. International s.r.o.
0.3%
100% PFN – NW a.s. 99.7% 100%
Egypt LLC (Wuxi) Co., Ltd.
PFNonwovens
100% PFN – NS a.s. 100%
RSA (PTY) LTD
100% PFN – GIC a.s.
PFNonwovens a.s. and its affiliated companies are sation of the investment project in the Republic of South
members of PFNonwovens holding (concern) subject to Africa.
single management by PFNonwovens Holding s.r.o.
Relationships with suppliers and customers of the
All of the operating assets in the Czech Republic are Group are managed by PFNonwovens Czech s.r.o. with
owned by PFNonwovens Czech s.r.o. and its subsidiar- the exception of relationships with suppliers and cus-
ies: PFN – GIC a.s., PFN – NW a.s. and PFN – NS a.s. tomers of PFNonwovens Egypt LLC and PFNonwovens
RSA (PTY) LTD, which are managed by these compa-
In 2010, PFNonwovens International s.r.o. was estab- nies independently.
lished as a special purpose vehicle for the realisation of
potential investment opportunities. In 2011, PFNonwov- Subsidiaries in which PFNonwovens a.s. has a direct
ens Egypt LLC was established in order to carry out the or an indirect interest amounting to at least 10% of the
Group’s investment in Egypt. In July 2016, PFNonwov- consolidated equity or 10% of the consolidated net
ens RSA (PTY) LTD was established to pursue the reali- profit:
Name Registered office Identification number Activity
Znojmo, Přímětická 3623/86,

PFNonwovens Czech s.r.o. 25478478 Production of textiles
PSČ 66902, Czech Republic

PFN – NW a.s. 26961377 Production of textiles

PFN – NS a.s. 27757951 Production of textiles

PFN – GIC a.s. 06423078 Production of textiles
PFNonwovens Znojmo, Přímětická 3623/86, Special purpose vehicle for

29249708
International s.r.o. PSČ 66902, Czech Republic investments
Plot No. O6,O8 in Zone No. 3

Commercial registry
PFNonwovens EGYPT LLC – Northern Expansions Area, Production of textiles
No. 52 190
6th of October City, Egypt
6 Charles Matthews Street,

Registration No.
PFNonwovens RSA (PTY) LTD Atlantis, Western Cape, Production of textiles
2016/278699/07
Republic of South Africa, 7349
The General Meeting is the company’s supreme body.

5.3 Statutory Its scope of authority includes the following:
bodies of a) decisions on changes to the Articles of Association,

except for a change due to an increase in registered
PFNonwovens a.s. capital authorized by the Board of Directors or a
change that occurred based on other legal circum-
stances;
b) decisions on a change in the amount of registered

capital and on authorizing the Board of Directors to
increase registered capital;
5.3.1 General Meeting
c) decisions on the ability to set-off a monetary receiv-
of Shareholders able owed to the company against an outstanding
payment for an issue price;
The General Meeting is the Company’s supreme body. d) decisions to issue debentures or priority bonds;
The decisive date for participation in a General Meeting
is always the 7th (seventh) day prior to the date of the e) election and dismissal of members of the Supervi-
General Meeting. The Company shall obtain a statement sory Board and members of the Audit Committee;
of share issues from book-entry securities records as at
the decisive date no later than by the date of the general f) approval of a regular, special, or consolidated finan-
meeting. A General Meeting has quorum if sharehold- cial statement, and in cases where one is stipulated
ers are present (either in person or through a proxy) that by other legislation, also an interim financial state-
possess shares with a total nominal value in excess of ment;
30% (thirty percent) of the company’s registered capital.
If a General Meeting does not have a quorum, the Board g) decisions to distribute profits or other equity or to
of Directors shall call a Substitute General Meeting with cover a loss;
the same agenda in the manner stipulated by law and
by the Articles of Association. Matters that were not h) decisions to submit a request to accept the compa-
included on the proposed agenda of the original Gen- ny’s securities for trading on the regulated European
eral Meeting can be decided on at a Substitute General market or to exclude these securities from trading on
Meeting only if all shareholders agree. the regulated European market;
The General Meeting decides with a majority vote of i) decisions to dissolute the company in liquidation,
shareholders present, unless a different majority is naming and dismissing the liquidator, approval of
required by law or the Articles of Association. Voting contracts with the liquidator and performance pur-
takes place by raising the voting list with the number of suant to § 61 of the Business Corporations Act,
votes of the given shareholder. Shareholders first vote and approval of a motion to allocate the liquidation
on a motion by the Board of Directors or Supervisory remainder;
Board, and if this motion is not approved, they vote on
further motions regarding the point at hand, in the order j) decisions to acquire the company’s own shares pur-
they were submitted. As soon a submitted motion is suant to § 301 of the Business Corporations Act;
approved, further motions regarding this point are not
voted on. k) decisions to change the appearance, kind, or form of
shares, decisions to split shares or to merge shares,
Each share has one vote. Voting rights connected to to limit transferability of registered shares;
company shares can only be restricted in the manner
specified in applicable law. A shareholder may not exer- l) approval of contracts with members of company
cise their voting right in the cases specified under provi- bodies for the performance of their office and other
sion § 426 of the Business Corporations Act. performance pursuant to § 61 of the Business Cor-
porations Act (except for approval of contracts with
members of the Board of Directors for the perfor-
mance of their office and other performance paid out
to members of the Board of Directors pursuant to the Supervisory Board is further defined by article 17 of
§ 61 of the Business Corporations Act); the Company’s Articles of Association.
m) approval of the transfer, mortgage, or lease of the

company’s plant or such a part thereof that would Composition of the Supervisory Board
mean a substantial change to the plant’s existing
structure or substantial change to the company’s The Supervisory Board comprises three members,
line of business or business activity; elected by the general meeting. The term of individ-
ual members of the Supervisory Board is three years.
n) decisions regarding transformation; A member of the Supervisory Board may be re-elected.
o) decisions to stipulate an auditor;

Decision-making of the Supervisory Board
p) decisions in other questions that the law or the Arti-
cles of Association include within the General Meet- The Supervisory Board has a quorum if a majority of
ing’s scope of authority. its members is present when it meets. To pass a deci-
sion regarding the election or dismissal of members of
the Board of Directors and to approve the company’s
annual financial plan, all members of the Supervisory
Board must agree. To pass other decisions, it is suffi-
5.3.2 Supervisory Board cient for the majority of the members of the Supervisory
Board to vote for them. Each member of the Supervi-
sory Board has one vote. In the case of a tie, the chair-
man’s vote decides.
The status and scope of authority
of the Supervisory Board If all members of the Supervisory Board agree, the
Supervisory Board may make decisions via written vot-
The Supervisory Board was established with effect ing or voting using means of communication outside of
from 1 January 2018 with new Articles of Association a meeting (for example via email). The members vot-
approved by an Extraordinary General Meeting of the ing are then considered to be present. A decision made
Company held on 18 December 2017. The Supervi- outside of a meeting must be specified in the minutes of
sory Board is a control body that oversees the perfor- the next meeting of the Supervisory Board.
mance of the Board of Directors and the execution of
the Company’s business activity. Among other things,
the Supervisory Board appoints and dismisses mem- Remuneration of members of
bers of the Board of Directors and approves contracts the Supervisory Board
for the performance of office of the members of the
Board of Directors. The status and scope of authority of The remuneration of members of the Supervisory Board
is determined by the General Meeting.
Members of the Supervisory Board
Name Position/Function Function period in 2019 Member from Function period ends
Oldřich Šlemr chairman of the supervisory board 1/1/-31/12/2019 1 January 2018 31 December 2020
Pavel Baudiš member of the supervisory board 1/1/-31/12/2019 1 January 2018 31 December 2020
Eduard Kučera member of the supervisory board 1/1/-31/12/2019 1 January 2018 31 December 2020
and consolidated Mitas, Rubena and Savatech into a

Oldřich Šlemr global tire and technical rubber manufacturer. Mr. Šlemr
sold his stake in the ČGS Group in May 2016 to Trel-
leborg Holding AB. Mr. Šlemr holds a master’s degree
Oldřich Šlemr has been in the position of Chairman from the University of Economics in Prague.
of the Supervisory Board of PFNonwovens a.s. since
1 January 2018. Mr. Šlemr is an entrepreneur and the The list of companies in which Mr. Šlemr was a member
founder of the R2G family office which was established of the administrative, management or supervisory bod-
in September 2016. Prior to establishing R2G, Mr. Šlemr ies or shareholder during the previous five years is listed
together with his business partner built the ČGS Group below.
Type Name of the company Pozition/Function Function period

BS Servis Centrum, s.r.o. Proxy 18/12/2001 – 01/09/2015
BUZULUK a.s. Proxy 23/03/2007 – 22/02/2012
Česká gumárenská Shareholder 12/10/2007 – 15/10/2012
společnost s.r.o. Executive 12/10/2007 – 20/06/2016
ČGS a.s. Vice Chairman of the Board of Directors 20/06/2011 – 31/05/2016
Vice Chairman of the Board of Directors 18/02/2011 – 31/05/2016
ČGS HOLDING a.s.
Shareholder to 31/05/2016
Member of the Board of Directors 19/09/2011 – 25/06/2014
GALERIJNÍ a.s.
Sole Shareholder 10/10/2011 – 10/08/2016
Past IGGT a.s. Proxy 06/11/2004 – 24/06/2016
Position/
Function KOVO Antikor spol. s.r.o. Proxy 20/03/2007 – 17/06/2016
MITAS a.s. Member of the Supervisory Board 08/06/2007 – 21/06/2016
Sole Shareholder 20/07/2016 – 21/08/2017
R2G a.s. (IČ: 04658345)
Member of the Board of Directors 01/09/2016 – 01/01/2018
Snowblossom s.r.o. Shareholder 16/06/2016 – 28/06/2017
Trelleborg Bohemia, a.s. Member of the Supervisory Board 12/08/2012 – 31/05/2016
Member, resp. Chairman of the Supervi-
PFNonwovens Czech s.r.o. 07, resp. 08/12/2017 – 03/09/2018
sory Board
PFNonwovens Member, resp. Chairman of the Supervi-
07, resp. 08/12/2017 – 03/09/2018
International s.r.o. sory Board
Statutory Director from 25/06/2014

GALERIJNÍ a.s.
Chairman of the Board of Directors from 25/06/2014
Martinický palác, a.s. Member of the Board of Directors from 30/08/2016
R2G a.s. (ID: 05499640) Member of the Board of Directors from 01/01/2018
Current
Position/ R2G Foundation Member of the Endowment Council from 08/08/2016
Function R2G NW Anstalt Shareholder from 06/03/2016
R2G Rohan Sàrl Director from 05/12/2016
WIC Prague a.s. Member of the Supervisory Board from 14/12/2018
PFNonwovens Holding s.r.o. Chairman of the Supervisory Board from 30/06/2018
and malware applications. As a co-founder of the Avast

Pavel Baudiš Foundation, he also actively participates in charitable
activities. Prior to co-founding Avast he worked as a
graphics specialist at the Research Institute of Mathe-
Pavel Baudiš has been a member of the Supervisory matical Machines. Mr. Baudiš has a master’s degree in
Board of PFNonwovens a.s. since 1 January 2018. Information Technology from the Prague University of
Mr. Baudiš is also a founder of Avast Software. He Chemistry and Technology.
served as a member of the Board of Directors during
the transformation of AVAST Software a.s. from Decem- The list of companies in which Mr. Baudiš was a mem-
ber 2006 to January 2014. Mr. Baudiš still owns a sig- ber of the administrative, management or supervisory
nificant stake in Avast Software and continues to be bodies or shareholder during the previous five years is
actively involved in creating and updating new software listed below.
Type Name of the company Position/Function Function period
Director to 2014
Avast Software B.V.
Shareholder to 2014
AVAST Software s.r.o. Vice-chair of the Board

Past Position/ 18/12/2006 – 09/12/2011
(IČ: 27636917) Member of the Board
Function
PFNonwovens Czech s.r.o. Member of the Supervisory Board 07/12/2017 – 03/09/2018
PFNonwovens International s.r.o. Member of the Supervisory Board 07/12/2017 – 03/09/2018
Director from 2014

Avast Holding BV
Shareholder from 2014
AVAST Software s.r.o.

Proxy from 11/11/2014
(ID: 02176475)
Codasip s.r.o. Shareholder from 18/04/2014
Member of the Supervisory Board from 08/11/2016

Starship Enterprise, a.s.
Shareholder from 10/11/2016
Current Position/
Function
WIG Prague a.s. Member of the Supervisory Board from 14/12/2018
R2G Heritage Sàrl Shareholder from December 2018
Shareholder
R2G Rohan Sàrl from December 2018
Company executive
PaBa Software s.r.o. Shareholder from April 2018
PFNonwovens Holding s.r.o. Member of the Supervisory Board from 30/06/2018

Mr. Kučera still holds a minority position in Avast Soft-

Eduard Kučera ware, continues to be involved in the strategic man-
agement of the company and is a founder of the Avast
Foundation. Mr. Kučera has a doctorate in natural sci-
Eduard Kučera has been a member of the Supervi- ences in the field of experimental physics from Charles
sory Board of PEGAS NONWOVENS a.s. since 1 Janu- University in Prague.
ary 2018. Mr. Kučera is the co-founder, Chief Executive
Officer (1991-2009) and former Chairman of the Board The list of companies in which Mr. Kučera was a mem-
of Directors of Avast Software. Mr. Kučera led Avast ber of the administrative, management or supervisory
from its start-up phase through its transformation into bodies or shareholder during the previous five years is
a “freemium” software model towards global growth. listed below.
Director to 2014
Avast Software B.V.
Shareholder to 2014
PFNonwovens Czech s.r.o. Member of the Supervisory Board 07/12/2017 – 03/09/2018

Past Position/
Function
PFNonwovens International s.r.o. Member of the Supervisory Board 07/12/2017 – 03/09/2018
Chairman of the Board 18/12/2006 – 9/12/2011

Avast Software s.r.o.
Member of the Board 9/12/2011 – 24/2/2014
Director from 2014

AVAST Holding BV
Shareholder from 2014
Codasip s.r.o. Shareholder from 18/04/2014
Comprimato Systems s.r.o. Shareholder from 21/10/2014
SlidesLive s.r.o. Shareholder from 26/08/2013
Member of the Supervisory Board from 08/11/2016

Starship Enterprise, a.s.
Current Position/
Function Member of the Board of Directors from 27/02/2018
Thunovská, a.s.
Sole Shareholder from 27/02/2018
WIC Prague a.s. Member of the Supervisory Board from 14/12/2018
R2G Heritage Sàrl Shareholder from December 2018
R2G Rohan Sàrl Shareholder from December 2018
Pratincole Investements Limited Shareholder from April 2018
PFNonwovens Holding s.r.o. Member of the Supervisory Board from 30/06/2018

Changes in the Supervisory Board General Meeting from among non-executive mem-
in 2019 and 2020 by the date of bers of the Supervisory Board or third parties. The
approval of the Annual Report term of individual members of the Audit Committee is
three years. A member of the Audit Committee may be
The Supervisory Board was established on 1 January re-elected.
2018 and no changes were made to the Supervisory
Board since that date until the date of approval of the
Annual Report. Decision-making of the Audit Committee
The Audit Committee has a quorum if a majority of its

members is present at its meeting. To pass a decision,
the majority of all Audit Committee members must vote.
5.3.3 Audit Committee Each Audit Committee member has one vote. In the
case of a tie, the chairman’s vote decides.
If all members of the Audit Committee agree, the Audit

The status and scope of authority Committee may make decisions via written voting out-
of the Audit Committee side of a meeting. The members voting are then consid-
ered to be present. A decision made outside of a meet-
The Audit Committee was established with effect from ing must be specified in the minutes of the next meeting
1 January 2018 by the new Articles of Association of the Audit Committee.
approved by an Extraordinary General Meeting of the
Company held on 18 December 2017. The scope of
authority of the Audit Committee is stipulated by law Remuneration of members
(especially by § 44a of Act No 93/2009, on auditors and of the Audit Committee
on changes to some acts, as amended).
The remuneration of members of the Audit Committee is
determined by the General Meeting.
Composition of the Audit Committee
The company sets up an Audit Committee that com-

prises of three members, named and dismissed by the
Members of the Audit Committee
Name Position/Function Function period Member from Function period

in 2019 ends
Ivan Hayek chairman of the committee 01/01 – 31/12/2019 1 January 2018 31 December 2020
Hana Černá member of the committee 01/01 – 31/12/2019 1 January 2018 31 December 2020
Alena Naatz member of the committee 01/01 – 31/12/2019 1 January 2018 31 December 2020
Ivan Hayek
5.3.4 Board of Directors
Ivan Hayek was appointed as a member of the Audit
Committee on 1 January 2018, and named its Chair-
man on 15 February 2018. Since 1992 he has worked as
an executive of auditing company HAYEK, spol. s.r.o., The status and scope of authority
holding. He is an auditor and tax advisor. He has expe- of the Board of Directors
rience with work as Chairman of the Audit Committee
and Chairman of the Supervisory Board at other com- The Board of Directors is a statutory body that is
panies. He is a graduate of the University of Economics responsible for managing the company’s business. The
in Prague (VŠE). Prior to 1992, he worked at the Federal status and scope of authority of the Board of Directors
Ministry of Supervision. are further detailed in Article 12 of the Company’s Arti-
cles of Association.
Hana Černá
Composition of the Board of Directors
Hana Černá has been a member of the Audit Commit-
tee since 1 January 2018. Since 2016, Ms. Hana Černá The Board of Directors comprises of five members
provides accounting services on a contractual basis. elected or dismissed by the Supervisory Board. The
Between 1993 and 2016, she was the head accoun- term of individual members of the Board of Directors is
tant for the ČGS Group. Ms. Černá graduated from the three years. A member of the Board of Directors may be
Technical University of Ostrava, Faculty of Industrial re-elected.
Economics.
Decision-making of the Board of Directors

Alena Naatz
The Board of Directors has a quorum if a majority of
Alena Naatz has been a member of the audit commit- its members is present when it meets. To pass a deci-
tee since 1 January 2018. Mrs. Naatz is responsible for sion, a majority of all members of the Board of Directors
the management of R2G’s portfolio. She joined R2G must vote for it. Each member of the Board of Directors
from international law firm White & Case, where she was has one vote. In the case of a tie, the chairman’s vote
a partner in the M&A, corporate and regulatory group. decides.
Mrs. Naatz has a JUDr. degree and a Ph.D. from the
law faculty of Charles University in Prague and an LL.M. If all members of the Board of Directors agree, the
degree from the University of Durham, England. Board of Directors may make decisions via written vot-
ing or voting using means of communication outside of
a meeting (for example via email). The members vot-
Changes in the Audit Committee ing are then considered to be present. If the Board of
in 2019 and 2020 by the date of Directors makes a decision via written voting or voting
approval of the Annual Report using means of communication outside of a meeting
(for example via email), the agreement of all members of
The Audit Committee was established on 1 January the Board of Directors is needed to make the decision.
2018 and no changes were made to the Audit Com- A decision made outside of a meeting must be speci-
mittee since that date until the date of approval of the fied in the minutes of the next meeting of the Board of
Annual Report. Directors.
Remuneration of members of
the Board of Directors
Three members of the Board of Directors of PFNonwo-

vens a.s. who concurrently hold executive positions at
the holding level of the PFN Concern are not remuner-
ated by PFNonwovens a.s., however do receive remu-
neration from PFNonwovens Holding s.r.o.
The remaining two members of the Board of Directors Members of the Board of Directors
are remunerated at the level of PFNonwovens a.s. and
their remuneration consists of only a fixed component. The following table sets out information with respect to
Fixed remuneration is set by means of a service con- each of the members of the Company’s Board of Direc-
tract according to § 59 et seq. of the Business Cor- tors and their position/s within the Company:
porations Act. These contracts are in written form and
have been approved by the Supervisory Board.
Name Position/Function Function period Member from Function period

in 2019 ends
Current members of the Board of Directors
member of the board of directors

Carl Allen Bodford 1/1 – 31/12/2019 17 July 2018 16 July 2021
chairman of the board of directors
František Klaška member of the board of directors 1/1 – 31/12/2019 30 November 2006 30 April 2020
Marian Rašík member of the board of directors 1/1 – 31/12/2019 1 March 2010 31 December 2020
Michal Smrek member of the board of directors 1/1 – 31/12/2019 15 November 2017 31 December 2020
Jakub Dyba member of the board of directors 1/1 – 31/12/2019 18 December 2017 31 December 2020
Brief biographical and professional details concerning the current Com-

pany’s directors are set forth below:
Carl Allen Bodford

Mr. Bodford was appointed as the CEO of the entire PFN Group in July
2018.
Prior to PFN, Mr Bodford worked at First Quality Nonwovens for over

20 years in senior management and with Dominion Nonvovens Group
(Polybond) the previous 12 years.
Mr. Bodford was not a member of the administrative, management or

supervisory bodies or shareholder of any other company during the pre-
vious five years.
František Klaška
František Klaška was appointed as an executive director of the Company
in November 2006. Mr. Klaška has been with the Company since 1991,
having previously worked for 5 years in Zbrojovka Brno, a diversified
engineering company. He was promoted to his current position of Tech-
nical and Development Director of PEGAS NONWOVENS s.r.o. in 2001.
Mr. Klaška is a graduate of the Czech Technical University. Mr. Klaška is
the Group CTO for the entire PFN Group.
The list of companies in which Mr. Klaška was a member of the adminis-
trative, management or supervisory bodies or shareholder during the pre-
vious five years is listed below.
PEGAS-NT a.s. Member of the Board of Directors 30/08/2007 – 15/07/2017
PFN – GIC a.s. Member of the Board of Directors 11/09/2017 – 31/12/2018
PFN – NS a.s. Member of the Board of Directors 03/12/2007 – 31/12/2018

Past Position/
Function
PFN – NW a.s. Member of the Board of Directors 30/08/2007 – 31/12/2018
PFNonwovens Czech s.r.o. Executive 17/09/2007 – 31/12/2018
PFNonwovens International s.r.o. Executive 05/11/2010 – 31/12/2018
PFNonwovens Egypt LLC Executive from 06/06/2011

Current Position/
PFNonwovens RSA (PTY) LTD Executive from 11/07/2016
Function
PFNonwovens Holding s.r.o. Executive from 30/06/2018
Marian Rašík
Marian Rašík was appointed as an executive director as of 1 March 2010.
In December 2009, he was appointed as the CFO of the Group. Mr. Rašík
is the CFO for the entire PFN holding. Prior to joining PEGAS, he worked
as a director at a financial advisory firm Corpin Partners. In 2003 – 2005
he was a CFO at Vítkovice Strojírenství a.s. In the past he also worked
with VÚB Bank in the Prague branch, ABN AMRO and he started his
professional career as an auditor with Coopers & Lybrand. Marian Rašík
graduated from the Economics Faculty of the Technical University in
Ostrava.
The list of companies in which Mr. Rašík was a member of the adminis-
PEGAS-NT a.s. Member of the Board of Directors 01/04/2010 – 15/07/2017
PFN – GIC a.s. Member of the Board of Directors 11/09/2017 – 31/12/2018
PFN – NS a.s. Member of the Board of Directors 01/04/2010 – 31/12/2018

Past Position/
Function
PFN – NW a.s. Member of the Board of Directors 01/04/2010 – 31/12/2018
PFNonwovens Czech s.r.o. Executive 01/04/2010 – 31/12/2018
PFNonwovens International s.r.o. Executive 05/11/2010 – 31/12/2018
PFNonwovens Egypt LLC Executive from 06/06/2011

Current Position/
PFNonwovens RSA (PTY) LTD Executive from 11/07/2016
Function
PFNonwovens Holding s.r.o. Executive from 30/06/2018
Michal Smrek
Michal Smrek was appointed as a member of the Board of Directors
as of 15 November 2017. Michal Smrek is the chief executive of family
office R2G. Before joining R2G, Mr. Smrek was a partner at international
law firm, White & Case, where he was the head of its leading CEE private
equity practice. Michal Smrek was trained as a lawyer at CMS McKenna
and holds an MA in law and a BA in Political Science.
The list of companies in which Mr. Smrek was a member of the adminis-
OPEN FIELD PICTURES s.r.o. Shareholder 12/01/2009 – 19/07/2016
R2G a.s. (IČ: 04658345) Chairman of the Board of Directors 01/09/2016 – 01/01/2018

Past Position/
Function
Snowblossom s.r.o. Executive 11/05/2017 – 19/07/2017
PFNonwovens Holding s.r.o. Executive 24/02/2017 – 30/06/2018
R2G a.s. (IČ: 05499640) Chairman of the Board of Directors from 01/01/2018

Current Position/
WIC Prague a.s. Member of the Board of Directors from 14/12/2018
Function
R2G Heritage Sàrl Director from 17/12/2018
Jakub Dyba
Jakub Dyba has been a member of the Board of Directors since
18 December 2017. Mr. Dyba is Investment Director of the family invest-
ment office R2G. He focuses on identifying and assessing investment
opportunities and their subsequent execution. Mr. Dyba joined R2G from
Genesia a boutique investment firm, where he held the position of Gen-
eral Partner. Prior to the establishment of Genesia, he worked for Credit
Suisse First Boston as a share analyst and trader and investment banker
in Prague, London and New York.
The list of companies in which Mr. Dyba was a member of the adminis-
Executive 20/02/2014 – 07/01/2015
Genesia Investments, s.r.o.
Shareholder 20/02/2014 – 16/01/2015
Lexum a.s. Member of supervisory board 23/04/2009 – 31/01/2014

Past Position/
Pricetown s.r.o. Executive 07/04/2014 – 29/02/2016
Function
Vice Chairman of the Board of
R2G a.s. (ID: 04658345) 01/09/2016 – 01/01/2018
Directors
R2G a.s. (ID: 05499640) Executive 14/11/2017 – 01/01/2018

Genesia, s.r.o.
Executive from 04/09/2014
Vice Chairman of the Board of

Current Position/ R2G a.s. (ID: 05499640) from 01/01/2018
Directors
Function
BRODE Capital Partners Sárl Director from 01/09/2017
Czech Dental Holding s.r.o. Executive from 15/04/2019

Changes in the Board of Directors abuse (market abuse regulation) and repealing Direc-
in 2019 and 2020 by the date of tive 2003/6/EC of the European Parliament and Directive
approval of the Annual Report 2003/6/EC of the Council and Commission Directives
2003/124/EC, 2003/125/EC and 2004/72/EC.
No changes were made to the Board of Directors
during the year 2019. On 17 April 2020, the Company
announced that Mr. František Klaška decided to resign
from the Board of Directors of the Company and from all
executive positions within the PFNonwovens Concern 5.3.6 Additional
effective as of 1 May 2020. Effective as of 1 May 2020,
Mr. Tonny de Beer shall be appointed to the Company’s information about
Board of Directors and shall also replace Mr. František
Klaška in all executive positions including the position of persons discharging
Chief Technical Officer.
managerial
responsibilities
5.3.5 Persons within an issuer
discharging managerial
responsibilities Remuneration of persons discharging
managerial responsibilities
The members of the Board of Directors and the mem- Below is a summary of all monetary and non-monetary
bers of the Supervisory Board are considered as “per- income received for the accounting period 2019 by per-
sons discharging managerial responsibilities within an sons discharging managerial responsibilities from the
issuer” pursuant to Regulation (EU) No 596/2014 of Company and persons controlled by the Company.
the European Parliament and of the Council on market
in thousand CZK PFNonwovens a.s. Other Group Companies Total

Monetary Income Monetary Income Non-monetary
income
Board of Directors
8,531 0 0 8,531
Remuneration
Board of Management
0 0 0 0
Directors Bonus
Warrants 0 0 0 0
TOTAL 8,531 0 0 8,531
Supervisory Board
Supervisory 0 0 0 0
Remuneration
Board
TOTAL 0 0 0 0
TOTAL 8,531 0 0 8,531
Declaration of persons discharging Exceptions to point (a), which were made for individual
managerial responsibilities persons, are listed within the sections Board of Direc-
tors and Supervisory Board for each person separately
The persons discharging managerial responsibilities in the wording that they provided in their statement.
listed below:
There were no exceptions made to point (b) – (e) and (i).
Carl Allen Bodford, František Klaška, Marian Rašík,
Michal Smrek, Jakub Dyba, Oldřich Šlemr, Pavel Baudiš With regard to point (f), Michal Smrek, Jakub Dyba, Old-
and Eduard Kučera řich Šlemr, Pavel Baudiš and Eduard Kučera stated that
as investors they also have interests in the area of non-
each individually presented to PFNonwovens a.s. woven textiles including other plastic products based
a “Declaration”, where they declared that: on the processing of polymers in the chemical industry.
Mr. Šlemr, Mr. Baudiš and Mr. Kučera further stated that
a) they are not, nor have they been in the preceding PFNonwowens a.s. and the companies under its control
five years, members of administrative, managerial or are members of the PFNonwovens concern and subject
supervisory bodies or owners of any company other to single management by PFNonwovens Holding s.r.o.
than PFNonwovens a.s. or its related entities, In relation to this, Mr. Oldřich Šlemr, Mr. Pavel Baudiš
and Mr. Eduard Kučera, stated that they hold the posi-
b) in the last five years, they have not been convicted tions of Chairman, respectively Members of the Super-
for fraudulent criminal acts, visory Board of PFNonwovens Holding s.r.o. Carl Allen
Bodford, František Klaška and Marian Rašík made no
c) in the last five years, they have not been connected exception to point (f).
with any bankruptcy proceedings, administra-
tion, liquidation or with a company on which forced With respect to point (g), Mr. Michal Smrek and Jakub
administration was enacted Dyba concluded a contract for the performance of office
with the Company. This contract with the Company rec-
d) they have not been publicly accused or sanctioned ognizes the right, in the event of being dismissed from
by statutory or regulatory bodies, his positions and the cancellation of all contracts for the
performance of office concluded with the companies of
e) in the last five years, they have not been disqualified the PFNonwovens a.s. Group, to receive from the Com-
from the performance of their office as a member of pany his monthly remuneration (but not bonus), which
administrative, executive or supervisory bodies of he was entitled to receive from all companies of the
any issuer or the managerial function of any issuer PFNonwovens a.s. Group in the preceding year preced-
by a court of law, ing the termination of these contracts until the earlier of
(i) the expiry of the period of three months following the
f) they do not perform any activities outside the Com- date of such termination and (ii) the date of the mem-
pany that would be significant for the Company and ber of the Board of Directors entering into any form of
do not have any potential conflict of interests, employment, directorship, or other form of service rela-
tionship with a third party.
g) they do not have a work contract or any other con-
tract concluded with PFNonwovens a.s. or with its The Company did not conclude any other contracts with
subsidiaries, the members of its administrative, managerial or super-
visory bodies and senior management by which the
h) as at 31 December 2019 they do not own directly Company would be bound to performance in the event
or indirectly shares or similar securities, options and of a termination of their office or employment.
comparable investment instruments, the value of
which is related to the shares or similar securities of With regard to point (h), Mr. Pavel Baudiš stated that he
PFNonwovens a.s. indirectly holds a share in the Company via R2G Rohan
Sàrl, in which he holds a share of 24%. With regard to
i) they are not in family relationship to any member point (h), Mr. Eduard Kučera stated that he indirectly
of administrative, executive or supervisory body of holds a share in the Company via R2G Rohan Sàrl, in
PFNonwovens a.s. which he holds a share of 26%. Mr. Carl Allen Bodford,
František Klaška, Marian Rašík, Michal Smrek, Jakub
and concurrently have made relevant exceptions to Dyba and Oldřich Šlemr made no exception to point (h).
the individual points of this statement in the event that
some of the listed facts exist in their case.
5.4 A separate 5.4.3 Corporate

part of the Annual Governance principles
Report pursuant to
After the delisting of shares of the Company on the
Section 118 (4) (j) of Warsaw Stock Exchange, the administration and man-
agement code of practice (“Code of Best Practice for
the Capital Market GPW Listed Companies 2016”) of the Warsaw Stock
Exchange is no longer binding for the Company. For this
Undertakings Act reason, the Company has resolved to guide its opera-
tions, management and administration according to the
rules contained in the OECD Principles of Corporate
Governance - 2004 Edition (hereinafter “Code of con-
duct 2004”). The Code of conduct 2004 can be viewed
at the website of the Ministry of Finance of the Czech
Republic at the address:
5.4.1 Decision-making
http://www.mfcr.cz/cs/archiv/transformacni-instituce/
and composition of the agenda-byvaleho-fnm/sprava-majetku/kodex-spra-
vy-a-rizeni-spolecnosti-corpor/kodex-spravy-a-rize-
Board of Directors, the ni-spolecnosti-zaloze-14620
Supervisory Board and The Company meets the provisions of the Code of con-
duct 2004 in all significant respects with the excep-
the Audit Committee tion of certain matters, which fall under the authority
of shareholders to make decisions such as member-
ship in the statutory bodies of the Company. The Com-
Detailed information about the position of the Board of pany has established an Audit Committee, the function
Directors, the Supervisory Board and the Audit Commit- of the Remuneration Committee and the Committee for
tee is contained in the section Corporate Governance Appointment is performed by the Supervisory Board.
Report, chapter Statutory bodies of PFNonwovens a.s.
of this Annual Report.
5.4.4 Diversity policy

5.4.2 Decision-making
The Company has not yet officially adopted a specific
and scope of authority diversity policy governing the relationship of the mem-
bers of the Board of Directors, Supervisory Board and
of the General Meeting the Audit Committee. The Group has publicly under-
taken to follow the internationally accepted principles
of protection of human rights. In the Company and the
Detailed information about the position of the General entire Group, a ban on the direct or indirect discrimina-
Meeting is contained in the section Corporate Gover- tion based on age, gender, education, nationality, reli-
nance Report, chapter Statutory Bodies of PFNonwov- gion, conviction, sexual orientation and other criteria is
ens a.s. of this Annual Report. strictly enforced.
In the selection of candidates, the Group takes into

consideration the achieved level of education, expe-
rience, qualification and professional knowledge. The
rights, responsibilities and opportunities of applicants
for employment and employees of the Company do not
depend on their race, colour, religion, gender, sexual ori-
entation, citizenship, family status, origin, age or health b) Information about limited
impairments. transferability of securities
The Group has publicly appealed to its suppliers and The Company has not issued any securities with a lim-
other entities that cooperate with it, to adopt similar ited transferability.
obligations within the scope of their companies.
c) Information about significant

direct and indirect shares in the
voting rights of the Company
5.4.5 Summary
The Company does not have precise information avail-
report pursuant to able about its shareholder structure. Based on the list
of shareholders that participated in the General Meet-
§ 118, paragraph 9 ing held on 14 June 2019, as at this date its main share-
holder was PFNonwovens Holding s.r.o. with a share of
of the Capital Market 89.99% of the share capital of the Company. The Com-
pany has not received any notifications regarding share-
Undertakings Act holdings in the Company after the day of the General
Meeting.
The explanatory summary report pursuant to § 118,

paragraph 9 of the Capital Market Undertakings Act is d) Information about owners of
based on the requirements stipulated in § 118, para- securities with special right, including
graph 5, letter a) to k) of the aforementioned law. description of these rights
There are no special rights connected with the Compa-

a) Information about the share capital ny’s securities.
and reserves structure of the Company
The structure of share capital and reserves as at 31 e) Information about limitation

December 2019 of voting rights
The shares of the Company are not connected to any

Share capital and reserves in thous. CZK
limitations of voting rights other than those directly set
Share capital 229,857 by law.
Share premium 148,419

Legal and other reserves 83,461 f) Information about contracts between
shareholders known to the Company
Retained earnings (260,829) which may result in restrictions on the
Total share capital and reserves 270,908 transfer of securities and/on voting rights.
There are no contracts known to the Company which

The share capital of the Company amounts to could result in restrictions on the transfer of shares and/
EUR 10,867,185.16 and is fully repaid. The share capital on voting rights.
is divided into 8,763,859 ordinary registered shares with
a nominal value of EUR 1.24. All shares of the Company
are issued as registered securities. All shares of the g) Information about special rules
Company have been accepted for trading on the Prague determining the appointment and
Stock Exchange. The list of shareholders is replaced by dismissing of members of statutory
the evidence of registered securities kept at the central bodies and changes to the Articles
securities depository in Prague (Centrální depozitář cen- of Association of the Company
ných papírů, a.s.) pursuant to special legal regulations.
The Board of Directors consists of 5 members that are
appointed or dismissed by the Supervisory Board. The
term of office of individual members of the Board of neration (but not bonus) which he would be entitled to
Directors is 3 years. Reappointment of a member of the receive from all companies of the Group under all ser-
Board of Directors is possible. vice agreements in the year preceding the year when all
such service agreements were terminated, until the ear-
Changes to the Articles of Association are decided lier of (i) the expiry of the period of three months follow-
upon by the General Meeting with a two third majority of ing the date of such termination and (ii) the date of the
votes of the present shareholders, unless it is a change member of the Board of Directors entering into any form
resulting from an increase in the share capital by an of employment, directorship, or other form of service
authorised Board of Directors or a change that occurred relationship with a third party.
on the basis of other legal facts.
The Company is not a party to any other agreements
with its members of the Board of Directors or employ-
h) Information about special competence ees providing for compensation if they resign or are
of a statutory body of the Company made redundant without valid reason or if their employ-
ment ceases because of a takeover bid.
The Company’s Board of Directors do not have
entrusted any special competence according to the
Business Corporations Act. k) Information about programs enabling
the acquisition of shares of the Company
i) Information about significant contracts of At the present time there exists no program enabling
the Company that will become effective, the acquisition of participant securities in the Company.
be amended or cease to exist in the Persons discharging managerial responsibilities within
event of a change in the control of the an issuer do not own directly or indirectly any options
Company as a result of the takeover bid or comparable investment vehicles the value of which is
related to the shares or similar securities representing a
Certain business contracts concluded in the past by the share of the issuer.
Company’s subsidiaries or the conclusion of which are
in negotiation over the upcoming weeks or months con-
tain a provision for the change of control (i.e. a change
of control clause), which gives the counterparty the
right to terminate the contract in the event of a change 5.4.6 Internal control
of control as defined in the respective contract. The
change of control clause is, likewise, a part of the condi- and risk management
tions for the bonds that the Company and its subsidiary
PFNonwovens Czech s.r.o. issued. organisation
j) Information about contracts between The Management of the Company is responsible for the
the issuer and members of its statutory establishment and maintenance of an internal control
bodies or employees providing for system at the Company and its efficiency in the process
compensation by the Company if they of preparing financial statements. The internal control
resign or are made redundant without system covers the entire scope of activities of the Com-
valid reason or if their employment pany. The Company has established a continuous pro-
ceases because of a takeover bid cess for identifying and managing various potential risks
faced by the Company and takes appropriate actions to
The Company concluded contracts for the performance address any issues.
of office with certain members of the Board of Direc-
tors (see Declaration of persons discharging managerial
responsibilities, point g), according to which the mem- 5.4.6.1 Internal audit
bers of the Board of Directors are entitled to perfor-
mance in the event that they are dismissed from their The internal audit plays a significant role in the inter-
positions and their contracts concluded with the com- nal monitoring system. The Internal Audit Department
panies of the Group for the performance of office are is a function subordinate to the CEO. The internal audit
terminated. Each member of the Board of Directors is provides independent and professional assessment of
entitled to receive from the Company his monthly remu- the internal monitoring and management system of the
Company, the state and development of the inspected ing and compliance of internal processes with valid leg-
area relative to current best practice. In 2019, the Inter- islation and company work procedures is also verified
nal Audit Department carried out audits and auditing by an internal audit.
events, based on a yearly internal audit plan or require-
ments of statutory bodies and the CEO of the Company.
Corrective measures are implemented based on the 5.4.6.3 Function of the Audit Committee
findings of the performed audits. The status of the ful-
filment of corrective measures based on internal audits The effectiveness of internal monitoring and the risk
is continuously monitored and reported upon four times management system of the Company, the procedure
per year to senior management and the bodies of the of preparation of individual and consolidated financial
Company. The activity of the internal audit and its main statements, the effectiveness of the internal audit and
processes are described in the Instructions and Work- its functional independence and the process of statutory
ing procedures of the Internal audit department, which, audit is, likewise, monitored by the Audit Committee,
likewise, define the principles of independence of the which as a body of the Company performs this activity
internal audit and the objectivity of internal auditors. The without impacting the responsibility of the members of
work of the internal audit is regularly monitored by the the Board of Directors and the Supervisory Board.
senior management, who discusses audits and other
reports presented by the internal audit.
5.4.6.2 Financial reporting and accounting 5.4.7 Risk Factors

Financial statements, both for internal and external
reporting purposes, are prepared by professionals and The Company’s business, results of operations and
their preparation is supervised by the Audit Committee. financial condition may be adversely affected by the fol-
The annual financial statements, both standalone and lowing risks:
consolidated, are subject to the independent examina-
tion by the external auditor.
5.4.7.1 Marketing and Sales
Financial reporting and accounting within the framework
of the Group is governed by the work procedures that The Company operates in a highly competitive market
are regularly updated as required. These work proce- and the emergence of new competitors or introduction
dures cover namely the area of stocktaking of assets, of new capacities by one of the existing competitors
approval of accounting documentation, resp. process in the hygiene sector could adversely affect sales and
for preparation of financial statements including consoli- margins.
dated financial statements.
A high concentration of customers accounts for a signif-
The approval of accounting documents from customer icant percentage of the total sales, and the loss of one
and supplier relationships is performed electronically or more of them could significantly affect the Compa-
within the scope of an approval process of the SAP ny’s revenues and profitability.
business information system. The range of signing rights
of individual approbators and the definition of author- A change in the demand of end-users of hygiene prod-
ities of Company employees is defined by the work ucts and a shift of their preferences for cheaper prod-
procedure Authorisation and Signing Order. The SAP ucts could lead to a change in the product mix at the
business information system also enables the identifica- Company and affect the Company’s revenues and prof-
tion of the specific user who created, changed or can- itability.
celled an accounting document. An important element
in relation to the embezzlement of financial resources
of the Company is the section of the establishment 5.4.7.2 Production
and management of business partner information pro-
cesses from the payment process to the settlement of Any disruption to the Company production facilities
accounted liabilities. would have a material adverse effect on the Company’s
business. The Company is dependent on one manufac-
The correctness of accounting and accounting state- turer for the equipment and technical support for its pro-
ments is continuously monitored by the Department of duction lines. There is a risk that the Company may not
Accounting and Controlling. Selected parts of account- be able to reconfigure production lines on a timely basis
in order to respond to changing demand for particu- 5.4.7.6 Finance

lar kinds of spunmelt nonwovens. Machinery from other
producers may prove more efficient and develop faster The indebtedness of the Company could adversely
than the machinery of the supplier of the Company. affect the financial condition and results of operations.
There is a risk that interest rates on outstanding exter-
The Company’s competitors may have access to more nal debt could be reassessed by the banks and poten-
and cheaper sources of capital allowing them to mod- tially increased and therefore higher interest costs could
ernise and expand their operations more quickly, thus affect the Company’s profitability.
giving them a substantial competitive advantage over
the Company. There is a risk that the fluctuations in the value of the
Czech koruna and US dollar against the Euro could
The steady supply and transportation of products from adversely affect the Company’s profitability. The Com-
the Company’s plants to the customers are subject to pany’s operating subsidiaries avail themselves of tax
various uncertainties and risks. benefits offered by the Czech government. Hence, the
Company’s profitability could decrease owing to any
The Company depends on external suppliers for key adverse change in general tax policies or if the tax ben-
raw materials, therefore increases in the cost of raw efits were reduced or withdrawn.
materials, electricity and other consumables could have
a material adverse impact on the Company’s financial Polymers represent a basic input raw material for the
condition and results of operations, although polymer Company and, therefore, the development of polymer
price movements are by large transferred to customer prices has a significant effect on its financial results.
prices. Polymer purchase prices are to a large part connected
to the polymer price indexes, which serve as the basis
for the price formula and for their purchasing. Due to the
5.4.7.3 Research and Development fact that costs of polymers represent a significant share
of the final price for the customer, the sales price of the
The Company’s competitors may develop new materials Company’s finished products is also connected to the
demanded by customers and gain a competitive advan- polymer price index. Based on this mechanism, which
tage, which could adversely affect the Company’s sales is typical for the nonwoven textile industry, the Com-
and margins. pany is able to pass the purchase price of polymers on
to the customer. However, this transfer occurs with a
certain delay. Despite the fact that in the long term this
5.4.7.4 Potential Expansion mechanism hedges the Company against unfavourable
polymer price developments, in the short term the fluc-
The Company is facing risks associated with poten- tuation of the polymer price may affect the Company’s
tial acquisitions, investments, strategic partnerships or revenues and its profitability.
other ventures, including opportunity identification, risk
of the completion of the transaction and the integration The insurance coverage may not adequately protect the
of the other parties into the Company’s business. Company against possible risk of loss.
5.4.7.5 Legal and Intellectual Property 5.4.7.7 Security, Environment and Safety
The Company’s operations are exposed to financial and Compliance with, and changes in, safety, health and
operating uncertainty and are subject to government environmental laws and regulations may adversely affect
laws and regulations that may adversely affect results of the Company’s results of operations and financial con-
operations and financial conditions. ditions.
The Company may be in breach of intellectual property

rights of others. 5.4.7.8 Key Personnel and
Technical Expertise
Adverse outcomes in litigation to which the Company
might be a party could harm the business and its pros- The loss of the services of key management personnel
pects. could adversely affect the Company’s business.
The Company may not be able to hire and retain suf- 5.4.7.11 Risk Factors Relating to the
ficient numbers of qualified professional personnel Investment in the Republic of South Africa
because these personnel are limited in number and are
in high demand. Although South Africa belongs amongst the most devel-
oped economies in Africa, it still counts as an emerging
market and, therefore, the risks associated with invest-
5.4.7.9 Ownership Changes ing there are considered to be higher. As stated earlier
these risks include, but are not limited to, changes in the
A potential entry or the change in the majority owner of political environment, transfer of returns, expropriation
the Company could result in a sudden change of the or politically motivated violent damage.
long term strategy and impact value of the shares.
In this respect, it must primarily be mentioned that there
is a risk of social unrest and tensions stemming from a
5.4.7.10 Risk Factors Relating high unemployment rate and social inequality resulting
to the Investment in Egypt from historical developments and the previous apartheid
period.
Investing in emerging markets such as Egypt, gener-
ally involves a higher degree of risk than investments in Democratic institutes in the country are still not suffi-
more developed countries. These higher risks include, ciently grounded, which increases the risk of sudden
but are not limited to changes in the political environ- political changes and associated instability and uncer-
ment, transfer of returns, expropriation or politically tainty about the country’s future direction and potential
motivated violent damage. The Egyptian economy is inability to repatriate the Company’s investment in case
susceptible to future adverse effects similar to those of unfavourable developments.
suffered by other emerging market countries.
Not in the least, due to the previous underinvestment
Egypt is located in a region, which has been sub- in the energy sector, there is also the risk related to the
ject to ongoing political and security concerns, espe- reliability and quality of the electricity supply, which is
cially in recent years. In common with other countries in significant from the Company’s perspective.
the region, Egypt has experienced occasional terror-
ist attacks in the past. There can be no assurance that
extremists or terrorist groups will not escalate or con-
tinue occasional violent activities in Egypt or that the
government will continue to be generally successful in
maintaining the prevailing levels of domestic order and
stability.
Expenses of the Group

related to external auditors’
services in year 2019
CZK thousands Statutory audit Other assurance Tax advisory Other services Total
services
PFNonwovens a.s. 1,009 — — — 1,009
Other companies
2,558 69 337 — 2,964
within the Group
TOTAL 3,566 69 337 — 3,972
The Group’s costs related to the activities of external auditors included, in

addition to the statutory audit, tax advisory services for PFNonwovens Egypt
LLC and PFNonwovens RSA (Pty) Ltd and other assurance services for
PFNonwovens Egypt LLC.
6
Management Report
FEBRUARY 2020
6.1 Material events There were no major events in this month.
in 2019 and 2020 by MARCH 2020

There were no major events in this month.
the date of approval
APRIS 2020
of the Annual Report 17 April 2020: Mr. František Klaška decided to resign
from the Board of Directors of the Company and from all
executive positions within the PFNonwovens Concern
effective as of 1 May 2020 and at the same time shall
JANUARY 2019 continue to work in nonexecutive role together with PFN
There were no major events in this month. on specific projects related to its expansion. Effective
as of 1 May 2020, the present Senior Product Develop-
FEBRUARY 2019 ment and R&D Director of the PFNonwovens Concern,
7 February 2019: PFNonwovens a.s. was awarded the Mr. Tonny de Beer, shall be appointed to the Company’s
“External Business Partner Excellence Award” for the Board of Directors and shall also replace Mr. František
year 2018 by Procter & Gamble Co. Klaška in all executive positions including the position of
Chief Technical Officer.
MARCH 2019
There were no major events in this month. SUBSEQUENT EVENTS
At the beginning of 2020, the existence of the novel
APRIL 2019 corona virus (Covid-19) was confirmed, which then
There were no major events in this month. spread throughout China and outside its borders,
including to the Czech Republic, and caused interrup-
MAY 2019 tion to many business and economic activities. The
There were no major events in this month. Group considers the outbreak of this epidemic to be a
subsequent event that, nevertheless, did not have a sig-
JUNE 2019 nificant impact on the operations/finances of the Group
14 June 2019: Annual General Meeting of the Company as at the date that the financial statements were issued,
approved to settle the Company’s unconsolidated after- and as such will not lead to modifications in these finan-
tax loss from 2018, amounting to CZK 61,818,574.39 cial statements. The Group produces nonwoven textiles
from the unconsolidated retained profit of the Company that are as a result of this epidemic in high demand and,
from previous years. therefore, this situation is rather an opportunity for the
Group. The production capacities of the Group continue
JULY 2019 to be utilised 100% and production has not been signifi-
There were no major events in this month. cantly impacted by the epidemic. Nevertheless, despite
the aforementioned, the situation is unstable and is
AUGUST 2019 developing rapidly, and, therefore, it is currently not pos-
There were no major events in this month. sible to make an estimation of its potential impact on
the Group. Any actual impacts shall be reflected in the
SEPTEMBER 2019 financial statements for 2020.
The management of the Group is not aware of any other
OCTOBER 2019 events that have occurred since 31 December 2019 that
There were no major events in this month. would have any material impact on the Company.
NOVEMBER 2019
DECEMBER 2019
JANUARY 2020
06 | Management Report 51
Customers
6.2 Description
The Group’s position as one of the market leaders in
of the Company’s the EMEA hygiene nonwovens market has enabled it to
develop longstanding relationships with customers that
Business and are leading producers of disposable hygiene products.
The Group intends to continue to strengthen its existing
Market customer relationships further by taking advantage of
its in-depth understanding of customer needs, leverag-
ing technological expertise and by introducing new and
improved products and technologies. The Group works
in close cooperation with its customers as well as sup-
pliers in order to improve existing and introduce new
improved products and product properties that primar-
6.2.1 Overview of the ily address specific customer requirements for softness
and lower basis weights.
Nonwovens Market
The Group’s top five customers represented an 80%
share of total revenues in 2019 (81% in 2018). The
The Group’s key market is geographically defined as Group’s present customer mix concentration reflects the
EMEA - Europe (Western, Central and Eastern Europe, situation in the hygiene nonwoven textile market, which
Russia and Turkey), Middle East and North Africa. is divided among a small number of end producers,
each having a substantial market share.
The EMEA personal hygiene market, with an approxi-
mate 30% share of the total annual European nonwoven
production or 0.7 million tonnes, denotes the core area Suppliers of polymers
of business activity for the Group. This sector is defined
by three major product application groups: disposable The main raw materials used for the production of spun-
baby diapers, adult incontinence products and feminine melt nonwovens are polymers, primarily polypropyl-
hygiene products. Hygiene products have become a ene followed by polyethylene. During 2019, the Group
modern necessity, the demand for which is non-cyclical had sourced polymer raw materials from a total of
and compared to other market sectors is relatively unaf- eleven suppliers. The polymer raw materials are pur-
fected by economic developments. chased under both one year and multi-year agreements.
The competitiveness of the suppliers is maintained by
Geographically, the Group’s core market continues on-going benchmarking.
to be the broader European area, consisting of tradi-
tional Western European countries, Central and East-
ern Europe (CEE), including Russia. The Group started POLYMER MARKET PRICE DEVELOPMENT
to serve the Middle East and North Africa region to a
greater extent following the opening of the new pro- The fluctuation and development of polymer prices may
duction plant in Egypt and later also in the Republic of have, especially in the short-term, a significant impact
South Africa. on the financial results of the Group. Changes in poly-
mer prices are reflected first in the purchase prices,
whilst they are reflected into final sales prices for cus-
Competition tomers with a certain delay. Thus, the development of
polymer prices affects not only the costs of raw materi-
The Group’s competition can be defined as European, als but also revenue levels. The development of polymer
Middle Eastern and North African producers of spun- prices in Euros per tonne in 2018 to 2019 is shown on
melt PP and PP/PE nonwoven textiles, namely those the included graph.
active in the hygiene sector. The Company’s main com-
petitors are international and regional companies. Com-
pared to other continents, the EMEA spunmelt PP- and
PP/PE-based nonwoven textile market is much more
fragmented, numbering more than 30 producers in total.
DEVELOPMENT OF POLYMER PRICES 2018 – 2019
1,500
1,450
1,400
1,350
1,300
1,250
1,200
I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII
It is evident from the graph that the prices of polymers In order to meet the highest requirements of custom-
in 2019 were generally lower compared to 2018 and in ers in hygiene applications, the Group produces a wide
particular in the second half of the year, dropped signifi- range of light and ultra-light technologically advanced
cantly to a minimum at the end of the year. The trans- nonwoven textiles with excellent technical properties,
mission mechanism thus had a positive impact on the which are soft, pleasant to touch and therefore provide
Group due to falling prices in 2019. improved comfort to the final consumer.
Medical and Protective Clothing
6.2.2 Overview of the Nonwoven fabrics are semi-finished textile products for
the production of single-use protective clothing, meet-
Group’s Products ing and exceeding the technical requirements for high
standards of protection in dangerous workplaces for
which they have been specifically designed and devel-
oped. Their characteristic high barrier qualities provide
Hygiene protection from aggressive liquids and prevent penetra-
tion of dust particles and micro-organisms. Due to these
The core of the Group’s product mix are the nonwoven qualities they are used as semi-finished textile products
textiles, which are tailored to meet the specific needs of for the following applications:
each and every customer and are further used for the
production of:
MEDICAL PROTECTIVE CLOTHING:
Ì Disposable baby diapers
Ì Surgical masks
Ì Adult incontinence products
Ì Surgical gowns and drapes
Ì Feminine hygiene products.
Ì Head covers
Ì Shoe covers
6.3 Plants and
INDUSTRIAL PROTECTIVE CLOTHING: Premises
Ì Protective overalls and masks.
The Group has plants in the Czech Republic, Egypt, and

Agriculture in South Africa.
For agriculture, the Group offers a nonwoven textile,

which is used mainly in vegetable cultivation and gar-
dening and is suitable for large-scale production and
mechanisation. This material is used as a covering tex- Czech Republic
tile (crop cover) creating optimal microclimate for plants
and sheltering them from weather changes (light frost,
hail) and various pests and it is also used as a mulch- The Group operates two production facilities located in
ing fabric for preventing the growth and spreading of Czech Republic.
weeds.
Plant in Bučovice
Furniture and Construction Industries
The original site in Bučovice has a production building,
In the furniture-making industry, the nonwoven fabric is in which three production lines are installed together
used as a neatening fabric (either on the back or bottom with three other small finishing lines, which enable the
parts of upholstered furniture), and for seam reinforce- cutting, gluing and perforation of processed fabrics
ment in the production of mattresses or as disposable according to customer specifications. Further expansion
hygienic bed covers. of the Bučovice plant on adjacent space is limited.
In the construction industry, the nonwoven fabric is

used primarily as a component of a composite mate- Plant in Znojmo-Přímětice
rial (modified by lamination) for the production of
under-roofing covers, heat and sound insulation and The newer site in Znojmo-Přímětice consists of an
wind barriers. administrative building and operational buildings, in
which seven production lines, two regranulation lines
and a debagging line are installed.
Application area Key applications
Hygiene products Baby diapers, feminine hygiene The Group built a warehouse building at its production
products, adult incontinence prod- plant in Znojmo-Přímětice in order to improve its effi-
ucts ciency and logistics flows and to achieve savings on
external warehousing. A production-warehousing build-
Medical and pro- Surgical drapes, gowns, head and
ing with a total area of 11,000 m2 was approved for use
tective clothing shoe covers, industrial protective
in September 2016. Currently, the building serves as a
apparel
warehouse for finished products. A new production line
Agriculture Crop cover, mulching textile Reicofil 4S Compact Bico was installed in one part of
the building in 2017 and a new semi-comercial line RF5
Furniture and Mattresses, neatening fabrics, Bico FHL R&D 2F was installed in another part of the
construction interlinings,wind barriers, roofing building. The Group also owns an administrative build-
industry membranes ing in Znojmo.
Various industries Composite fabrics, laminates
In 1998, the Group was the first to install a Reicofil 3

Egypt production line capable of producing bi-component
materials - the first such production line in Europe.
The plant in Egypt is located in the industrial zone near The Reicofil 4 line, which was installed at the end of
the City of 6th October not far from Cairo and consists of 2004, employs a new technology leading to high-speed
an administration and production building containing a production with improved nonwoven textile formation
production, regranulation and debagging line. and uniformity.
The Group’s “SSMMMS 3200 Reicofil 4 Special” pro-

duction line was installed in autumn 2007 as the first of
its kind in the world. It is state-of-the-art technology and
Republic of South Africa is able to produce ultra light-weight nonwoven textiles
for the hygiene sector as well as for other applications.
The newly built plant in South Africa is located in the In the second half of 2011, the Group launched its 9th
industrial zone near the city of Atlantis in the West Cape production line. This Reicofil 4 BiCo type production line
Province approximately 60 km from Cape Town. The produces mainly hygiene materials with the option of
land purchase contract for the construction of the plant production for other applications.
was concluded in July 2017. Construction of the plant
and installation of a new production line were com- In 2013, the Group installed its first line in Egypt, model
pleted at the end of the first half of 2019. Reicofil 4S, which has a capacity of approximately
20 thousand tonnes per annum (depending on the prod-
uct portfolio). Commercial production commenced in
the third quarter of 2013 and the line has been running
in standard commercial operation since 2014.
6.4 Technology In June 2017, the Group was the first in the world to put
into commercial operation a new production line Reico-
and Production fill 4S Compact Bico at the Group’s production plant
in Znojmo-Přímětice in the Czech Republic. This line is
based on a new “no-basement” concept, the advan-
tages of which are lower infrastructure requirements,
The Group owns and operates technologically advanced shorter installation time and associated lower total
equipment necessary for the production of high-quality investment costs.
spunmelt nonwoven textiles. Production management
is focused on continuous maintenance and modernisa- During the course of the first half of 2019, the installation
tion of the equipment and machinery, ensuring that the of the Reicofil 4S Compact Bico production line at the
Group continues to rank among the leading producers newly built production plant in South Africa was com-
of nonwoven textiles in the EMEA region. pleted. It has an annual production capacity of approx-
imately 10 thousand metric tonnes. The production line
All twelve production lines were manufactured by Reif- was put into commercial operation in June 2019.
enhäuser Reicofil, a leading German global supplier of
spunmelt nonwoven production equipment, that cur- In the second half of 2019, a new semi-commercial pro-
rently dominates the market for PP- and PP/PE-based duction line was installed at the production plant in Zno-
spunmelt nonwoven machines worldwide. jmo-Přímětice. The annual production capacity of the
RF5 Bico FHL R&D 2F production line depends on the
Three production lines are located at the Bučovice plant used input raw materials and the produced products
near Brno and seven production lines are located in the and is producing 8-15 thousand tonnes. The produc-
Znomo-Přímětice plant. The output of the first and the tion line was put into commercial operation in Novem-
second line, installed in 1992 and 1996, is primarily sold ber 2019.
for technical and agricultural applications. The remain-
ing production lines are dedicated to the production of In addition to these production lines, the Group oper-
hygiene materials. ates three small finishing lines, which enable the cutting,
gluing and perforation of processed fabrics according to
customer specifications.
Machine Year of Technology Plant Location Line Width Annual Production

Installation Configuration in Metres Capacity in Tonnes
Reicofil 2 1992 S Bučovice 3.2 2,600
Reicofil 2 1996 SMS Bučovice 3.2 4,700
Reicofil 3 1998 SMS Bučovice 3.2 6,900
Reicofil 3 BiCo 2000 SSMMS Přímětice 3.2 11,400
Reicofil 3 BiCo 2001 SSS Přímětice 3.2 9,700
Reicofil 4 2004 SSS Přímětice 4.2 20,000
Reicofil 4 Special 2007 SSMMMS Přímětice 3.2 15,000
REICOFIL 4S Advanced BiCo 2011 SSMMS Přímětice 4.2 20,000
Reicofil 4S 2013 SSMMXS 6th of October City 4.2 20,000
Reicofil 4S Compact Bico 2017 SMMS Přímětice 2.6 10,000
Reicofil 4S Compact Bico 2019 SMMS Cape Town 2.6 10,000
Reicofil 5 Bico FHL R&D 2F 2019 SMMS Přímětice 2.4 10,000
Total Production Capacity 140,300
-Přímětice production plant. The production line was put

6.5 Investments into operation in November 2019. The investment was
financed by means of capital deposits and intra-com-
pany loans from the companies of the Group.
Production plant in South Africa
Investments In 2016, the Company decided to build a production

plant in South Africa. The production line was put into
completed in 2019 commercial operation in June 2019. The investment was
financed by means of capital deposits and intra-com-
pany loans from the companies of the Group.
The following investments, that have a significant
impact on the production capacity of the Group, were
completed in 2019.
Ongoing investments
Semi-commercial production line
at the production plant in Znojmo-
Přímětice in the Czech Republic At the present time there are no ongoing investments
that would have a significant impact on the production
A strategically very important project was the installation capacity of the Group.
of a semi-commercial production line at the Znojmo-
Ì Advanced technology and processes

6.6 Quality
Ì People
Management and
Ì Self-improvement
the Environment
Ì Goals and results
Risks associated with the activities of the Group are reg-

ularly monitored and assessed within the scope of the
integrated quality system. The Company makes every
effort to eliminate or mitigate risks.Significant stress is
Quality Management placed primarily on the prevention of contamination of
finished products, cleanliness and order at all work-
System places and special fundamentals of hygiene practice.
All production premises are equipped with overpressure

The Group implemented an in-house open integrated air control to eliminate the risk of insects contaminating
quality management system complying with the require- textiles. The presence of pests is regularly monitored for
ments of the EN ISO 9001 and EN ISO 14001 stan- the purpose of continuous self-improvement and setting
dards, quality management tools, quantitative require- appropriate measures. On the production lines for the
ments of key customers and their quality management hygiene segment there are camera detection systems
methods. Quality and sustainability are strategic prior- installed for the continuous detection of the presence of
ities across all areas of activity of the Group, and the all types of defects on textiles, including any contamina-
principles of the integrated quality management system tion. The group applies the four-eyes-principle.
are implemented by the company’s management at all
levels of management and applied by all employees.
Environmental Management System
The goal of the Group is long-term prosperity achieved
through continuous self-improvement for the purpose Environmental protection and the creation of safe and
of ensuring customer satisfaction with its products and healthy work conditions for employees of the Group
services. The perception of quality as a key factor, the and their constant improvement, including pollution
company culture and the constant high quality of its prevention and continuous efforts to reduce the nega-
produced products are regularly acknowledged by the tive impact of the Group’s activities on the environment
customers of the Group. belong to the highest priorities of the Group.
The integrated quality system of the Group in the pro- The Group has implemented and maintains an environ-
duction plants in the Czech Republic has been cer- mental management system to take care of all environ-
tified under EN ISO 9001 and EN ISO 14001 certifi- mental aspects as required by ISO 14001. The produc-
cates from CQS, IQNet since 1997. Recertification of tion process involves the transformation of PP or PE
the system according to the new ISO 9001:2015 and raw materials into the form of fibres through the appli-
ISO 14001:2015 norms occurred in December 2017 cation of heat and pressure. This process results in min-
with certificates being valid until 2020. The production imal chemical changes to the material and produces
plant in Egypt is likewise certified according to EN ISO only limited atmospheric emissions. All environmental
9001:2015, in this case by TÜV Nord with certificates aspects implemented by the Group are monitored and
valid until 2020. The new production plant in South reviewed.
Africa that was put into operation in the middle of last
year has implemented the same quality management The management of the Group has adopted key princi-
system as the other plants of the Group, however with- ples to meet all environmental requirements. All employ-
out ISO certification for the time being. ees are aware of and recognise their responsibility for
the fulfilment and observance of these principles.
High standards of the Group’s quality culture are based
on these fundamental pillars: Details related to environmental activities are available
on the Company’s website www.pfnonwovens.cz.
risks related, for example, to higher CAPEX, immediate

6.7 Research sale of the entire capacity of a production line, or the
complexity of commissioning large production lines.
The new production line was put into operation in mid

2019, customer qualifications were completed accord-
ing to plan and it has been running in full commercial
mode since September. Apart from the development
Research and of new technologies, the Group is actively working on
developing nonwoven textiles with excellent touch and
Technical Support feel properties, bulkiness and softness. The develop-
ment is based on the requirements of key customers
and in several cases it is a product tailor-made for a
The development of new applications, products and the specific partner.
optimisation of technologies are some of the key com-
ponents of the current and future strategy of the Group. A new element in the development of these soft and
This platform is supported by a team of engineers, who bulky nonwoven textiles is the development of tech-
are dedicated to the development of this new product nologies offering alternative nonwoven textile bonding
platform and the continuous development and improve- methods in place of the normally used heated rollers
ment of the products produced for our partners. (calanders). This new system called “Full High Loft” has
been successfully verified on pilot production lines and
Work teams are active in several different areas, which now is being put into operation on the new semi-com-
are principally divided into industrial and hygiene appli- mercial production line in Znojmo, the first of its kind
cations with the primary focus on the hygiene field. The in the world. Apart from offering an alternative bonding
majority of important projects of the Group are focused method, this innovation also provides the opportunity to
in this direction. process polymers other than the traditional polyolefins.
From a technological standpoint, the technical depart- The Group cooperates with many institutions such as
ment has three primary objectives: universities and R&D centres, primarily in the Czech
Republic and Slovakia but also in Western Europe.
1. to continuously improve the quality, performance These institutions provide the Group with special sup-
and efficiency of production of standard products, port in various specialised research areas including the
opportunity to develop products on pilot equipment,
2. to develop products with an added value through as well as consulting in areas such as patent research,
the use of current and new technologies including drawing up of patents, modelling nonwoven textile
bi-component spinning technology with the objec- structures or testing of new technologies and input raw
tive of increasing textile utility characteristics for end materials.
customers,
Research and development costs in 2019 were
3. to develop products respecting environmental pro- CZK 36.2 million (CZK 43.2 million in 2018).
tection – in the context of the Group this concerns
primarily the development of nonwoven textiles pro-
duced from renewable resources (so-called biopoly- Intellectual Property
mers).
PFNonwovens a.s. and its controlled companies, are
All of these objectives are being achieved in coopera- members of the PFNonwovens Group subject to single
tion with the raw material suppliers, using standard and management by PFNonwovens Holding s.r.o., including
special new polymers, and/or with machinery suppliers, all matters of intellectual property.
which allows the Group to offer value added products to
its customers. The Group has patented its trademarks and logos in
key countries in Europe, the Americas, Africa and Asia
In the preceding year, a new Spunmelt technology con- in order to provide protection in the main international
cept, i.e. Compact, was fully verified at the Cape Town markets.
production plant. This platform was developed to sim-
plify and speed up the Company’s entry into develop- The Group is an applicant for eleven published patent
ing markets, which are characterised by a set of specific families submitted since 2010. Six of them are the result
of internal development, the other six are the product of

cooperation with important business partners. One of 6.8 Litigation
the applications is research supported by the Ministry of
Industry and Trade of the Czech Republic. The individ-
ual applications are usually first submitted in the Czech
Republic and then the Group gradually takes them into As of today, the companies within the Group are not
international phases to cover the areas of interest both aware of any pending or threatening litigation or arbi-
in Europe as well as Africa, Asia, America and the Mid- tration proceedings against the Group that are likely to
dle East. Certain applications are submitted together have a significant effect on the Group’s financial position
with partners on the basis of mutual agreement to the or results of operations.
European Patent Office. Patent granting proceedings
take on average 3–7 years and the process runs entirely
independently in the individual countries.
The Group has patents granted for several applications

submitted in various countries. For example, recently 6.9 Significant
several patents have been granted in the Asian part of
the family or protection was granted in the USA for the contracts
improved two-step defect detection method for fibrous
materials. There are a total of 12 valid patent families,
22 valid patents and 51 applications at various stages of
proceedings. The patent families are gradually revised, In 2019, excluding contracts concluded during the
paid protection is maintained only for active products course of normal business activity, neither the Company
in interest areas. If, for example, a product has been nor any of the Group companies concluded (i) any sig-
superseded or replaced with an entirely different solu- nificant contracts, or (ii) contracts containing any pro-
tion, the documents providing them with protection are visions according to which any member of the Group
abandoned and the freed up resources are invested would have rights or obligations substantial for the
into protection of new products. For example, in recent Group as at 31 December 2019.
years the newly submitted applications have focused
primarily on protecting products from the new L12 pro-
duction line utilising the potential of the unique technol-
ogy installed there. The applications focus both on new
types of nonwoven textiles and their properties, as well
as, in cooperation with the customer, on their applica- 6.10 Strategy
tions in final products.
Information about dependency on patents The Group’s strategy into the future is to:
or licences, industrial, commercial or
financial contracts that have fundamental 4. develop and take advantage of growth opportunities
importance for business activity to strengthen its market position,
The Group also utilises licences for the production of 5. maintain and extend technological excellence in
technical materials provided by the supplier of the pro- spunmelt nonwoven textiles for disposable hygiene
duction lines. products in the EMEA region, and
Apart from these licensing contracts, the Group is not 6. provide solid returns to shareholders.
aware that during its activities it would be significantly
dependent on the utilisation of patents, licenses, indus- The Group intends to fulfil its strategy principally by
trial, commercial, financial or other similar contracts. focusing on the following areas:
Continue Investing into Technologically Advanced Pro-

duction Capacity: the Group will strive to install state-
of-the-art production capacities. The Group’s latest pro-
duction line, the semi-commercial line RF5 Bico FHL
R&D 2F, was put into operation in the fourth quarter of The Group provides continuous training, both statu-
2019 in Znojmo Plant. tory and also voluntary with the aim of increasing their
expertise and qualifications.
Maintain Close Relationships with Customers and Sup-
pliers: the Group will continue to work together with its The remuneration structure is highly motivational, with
clients, machinery manufacturers and raw material sup- the fixed component of the basic salary ranging from
pliers to research, develop and implement new products approximately 85% for manual workers and down to
ahead of the competition. The Group will endeavour to approximately 80% for management. The salary of
remain at the forefront of technical developments in the workers varies in relation to the volume produced in a
industry, supply its customers with the highest quality specific production plant and also takes into account
products and continually develop new materials. the quality of the product.
Focus on Technologically Advanced Products: the Group

is EMEA’s largest producer of bi-component spunmelt
nonwovens with extensive experience in the design and
production of ultra-lightweight materials. During recent
years, the Group has successfully commercialised sev- 6.12 Corporate
eral new materials with unique properties.
Social Responsibility
Maintain good financial performance within the industry:
the Group’s principal objectives are to continue to grow
with its core target market, deliver revenues in line with
this growth and maintain high operating margins relative The Group is more than just a major manufacturer and
to its core competitors. The Group is effective at gen- employer in its region. The Company understands its
erating significant levels of cash, which is subsequently commitment to social responsibility in its neighbour-
used to support expansion or reduce outstanding debt. hood, the local community and a healthy environment.
In 2019, the Group continued in the support of a num-

ber of cultural, social and sports events in these regions.
6.11 Human Children’s Centre
Resources In 2009, Group began its cooperation with the Children’s

Centre in Znojmo, which provides paediatric, neurologi-
cal, rehabilitation, psychological, educational and social
care services to threatened or handicapped children
The Group benefits from a skilled and motivated work- and their families. Complex care is provided in the form
force. The table below indicates the number and func- of ward, stationary and outpatient care to threatened or
tional breakdown of employees: handicapped children up to the age of 15.
As at 31 December In 2019, the Group financed a number of holidays and

Number of Employees trips for children from the Children’s Centre. Employees
2017 2018 2019 of the Group have been actively involved in providing
Board of Directors of the Com- assistance to the children.
5 5 5
pany
Management 18 17 14
Zlín Film Festival for Children and Youth
Specialists 74 77 80
Laboratory Staff 59 58 69 The Zlín Film Festival for Children and Youth is the old-
est and largest children’s film festival of its kind in the
Foremen 73 78 88
world. The festival screenings are conducted not only in
Qualified Workers 361 370 428 Zlín, but also in many other towns in the Czech Repub-
Total 590 605 684 lic. Each year, the festival screens around 300 films from
more than 50 countries around the world. The festival’s
Average no. of employees 584 598 659
attendance has reached 100,000 children and adults.
The Group has been a supporter of the Zlín Film Festival

for Children and Youth since 2013. 6.14 Comments on
Financial Results
Volleyball Club Znojmo-Přímětice
VK Znojmo-Přímětice is the only volleyball club in the

Znojmo District with players in all age categories in
both boy’s and girl’s leagues starting with prep, stu-
dent, cadet and junior level teams all the way up to adult
men’s and women’s teams. In all these categories the Revenues, Costs
club ranks among the best in Czech volleyball.
and EBITDA
The Group has been the general partner of the volleyball
club since 2010.
In 2019, consolidated revenues (revenues from sales of
the Company’s products) reached CZK 6,541.1 million,
City of Bučovice up by 0.9% yoy.
The Group supports cultural and social life in the City of In 2019, total consolidated operating costs with-
Bučovice, where one of the production plants is located. out depreciation and amortization (net) increased by
A part of this support goes to local educational and 3.6% yoy to CZK 5,323.9 million.
sports institutions.
EBITDA amounted to CZK 1,217.5 million, down by
9.6% yoy. Thus the company did not manage to meet
the target that it had set itself in the range CZK 1.30 to
1.45 billion. The failure to meet the EBITDA target was
primarily the result of low production effectiveness,
6.13 Non-financial which was related to the very low levels of inventories
of finished products during the course of the entire year
information 2019, and later than planned ramp-up of new produc-
tion capacities.
According to Accounting Act No.563/1991 Coll. the

Company is obliged to provide non-financial infor-
mation. In accordance with this law, the Company Operating Costs
shall prepare a separate report that will be published
by 30 June 2020 on the website of the Company
www.pfnonwovens.cz in the section “Investors and Total raw materials and consumables used last year
Media”. amounted to CZK 4,918.4 million, a 4.3% yoy increase.
In 2019, total staff costs amounted to CZK 366.4 mil-

lion, i.e. up by 5.7% yoy, which was to a greater degree
caused by the increase in the number of employees in
relation to the new production lines put into operation
at the production plants in Znojmo-Přímětice and South
Africa.
Depreciation and Income Tax

Amortisation
In 2019, income tax amounted to an expense in the
amount of CZK 231.6 million. Current tax payable
Consolidated depreciation and amortization reached amounted to CZK 108.4 million, increasing by 1.8%
CZK 529.5 million in 2019, up by 13.3% yoy. The year- compared to 2018. Changes in deferred tax represented
on-year increase in depreciation and amortization was a cost of CZK 123.2 million in comparison to 2018,
related to the new production lines put into operation at where in relation to the change in the approach to the
the production plants in Znojmo-Přímětice and South calculation of effect of deferred tax on investment incen-
Africa. tives represented a gain of CZK 201.6 million.
Profit from Operations Net profit

In 2019, profit from operations (EBIT) amounted to Net profit reached CZK 473.2 million in 2019, down
CZK 688.0 million, down by 21.8% compared with by 41.9% yoy. The decline of net profit was caused by
2018. the aforementioned factors, namely worse operations
results and an increase in depreciation and amortization
related to putting the new production lines into opera-
tion.
Financial Income
and Costs
Investments
In 2019, FX gains and other financial income/expense
(net) reached CZK 130.5 million. This item includes real- In 2019, total consolidated capital expenditure (CAPEX)
ized and unrealized FX gains/losses and other financial amounted to CZK 1,166.6 million, a 62.8% yoy increase.
income and expenses. The positive impact of unrealized Capital expenditures related to expansion of produc-
foreign exchange differences in 2019 was primarily the tion capacity represented CZK 933.1 million of this
result of a year-on-year appreciation of the USD against amount. Maintenance CAPEX constituted the remaining
the EUR by almost 2%, which had a positive effect on CZK 233.5 million. The Group, therefore, did not exceed
the revaluation of the intra-company loan to the Compa- its estimate of capital expenditures for 2019, which
ny’s subsidiary in Egypt. The appreciation of the South expected a maximum level of CZK 1.45 billion.
African rand against the EUR by almost 4% also had a
positive impact, which positively affected the revalua-
tion in respect to the intra-company loans provided to
the subsidiary in South Africa. The impact of the revalu-
ation of EUR-denominated bonds issued by the Czech Cash and Indebtedness
subsidiary was, likewise, positive due to the year-on-
year appreciation of the CZK against the EUR by more
than 1%. The amount of net debt as at 31 December 2019, was
CZK 4,785.3 million, up by 2.3% compared with the
Interest expenses (net) related to debt servicing level as at 31 December 2018. The increase in net debt
amounted to CZK 113.6 million in 2019, a 34.6% in comparison with the balance at the end of 2018 was
decrease compared with 2018. The reason for the primarily the result of the intensive CAPEX program
decline in interest expenses was the repayment of the related to the putting of two new production lines into
public bond issue in November 2018. operation.
Net debt to EBITDA ratio equated to 3.93.

Business Overview 6.15 Czech

of 2019 Investment
Incentives
In 2019, production output (net of scrap) reached a total
of 110,966 tonnes, up by 1.0% compared with 2018.
In 2019, the share of revenues from sales of nonwoven

textiles for the hygiene industry represented a 91.2%
share of total revenues.
Granted Investment
The geographical distribution of its markets, con-
firms the Group’s steady focus on sales to the broader Incentives
European area. In 2019, revenues from sales to West-
ern Europe amounted to 33.8%, revenues from sales
to Central and Eastern Europe and Russia amounted
to 41.2% and revenues from sales to other territories PFN – NW a.s.
amounted to the remaining 25.0%.
PFN – NW a.s. received a commitment of investment
incentives from the Ministry of Industry and Trade of the
Czech Republic based on the decision from October
2016. The incentive consists of corporate income tax
Guidance for 2020 relief of 25% of the total eligible costs and in any case
cannot exceed CZK 148.05 million. The income tax relief
may be exercised for a period of ten directly consecu-
The contracts negotiated with customers indicate the tive taxation periods. In 2017, PFN – NW a.s. received
full utilisation of our production capacity in 2020. an investment incentive subsidy for work positions in
the amount of CZK 2.5 million.
In 2020 we expect further increases in production vol-
umes due to the fact that the production lines that were The investment incentives started being drawn in the
installed in Znojmo-Přímětice and South Africa in 2019 form of an income tax subsidy in 2018. The subsidy was
will be in operation for the full year 2020. not utilised either in 2019 or in 2018.
Based on these facts and the information known to

date, the Company has set its EBITDA guidance to PFN – NS a.s.
CZK 1.25 to 1.4 billion.
PFN – NS a.s. received a commitment of investment
The Company is planning for total capital expenditures incentives from the Ministry of Industry and Trade of the
in 2020 not to exceed CZK 0.8 billion, whilst approxi- Czech Republic based on the decision dated 12 Janu-
mately one half of this amount relates to the comple- ary 2009.
tion of the installation of the new production line in
Znojmo-Přímětice. PFN – NS a.s. obtained an approval of the following
investment incentives:
Ì corporate income tax relief for a period of 10 years;

and
Ì financial support for job creation in the Znojmo

Region in the amount of CZK 200 thousand for every
new work position created.
The total amount of incentives may not exceed 30%

of the eligible investment costs (CZK 1,187 million
as at 31 December 2016). At the same time the total
amount of the public grant may not be higher than The total amount of incentives may not exceed 21.54%
CZK 403.5 million. of the eligible investment costs. At the same time the
total amount of the public grant may not be higher than
In the past, the Company has received financial support CZK 212.635 million. The relief can be applied for ten
for job creation in the amount of CZK 9.6 million. Based immediately following tax periods. The use of invest-
on the current estimate of the corporate income tax, the ment incentives has not yet begun, as the project is not
Company expects to utilise the investment incentives completed.
amounting to CZK 47.5 million as at 31 December 2019.
Overall, CZK 179.6 million should be used by the end of
2019 and CZK 172.1 million still remains to be utilised.
PFN – GIC a.s. 6.16 Own shares

PFN – GIC a.s. received a commitment of investment
incentives from the Ministry of Industry and Trade of the
Czech Republic based on the decision dated 14 March
2018.
Own shares data
PFN – GIC a.s. obtained an approval of the following
investment incentives: at the beginning
Ì corporate income tax relief for a period of 10 years; and end of 2019
and
Ì financial support for job creation. As at 31 December 2019, the Company did not hold any
of its own shares.
7
Report on Relations
PFNonwovens a.s. is a member of the PFNonwo- rently owned by several Czech physical persons and by
vens Concern controlled by the business corpo- a Lichtenstein family foundation. R2G Rohan Sàrl does
ration PFNonwovens Holding s.r.o, head office at not control any company other than PFNonwovens
Hradčanské náměstí 67/8, Hradčany, 118 00 Prague 1, Holding s.r.o.
ID No.: 046 07 341, registered in the Commercial Reg-
ister at the Municipal Court in Prague, ref. no. C 250660
(hereinafter “PFNonwovens Concern”), within the mean-
ing of Section 79 of the Act on Commercial Companies
and Cooperatives No. 90/2012 Coll. (Business Corpora- 7.1.2 Members of the
tions Act).
PFNonwovens Concern
In accordance with Section 82 of the Business Cor-
porations Act, the Company’s Board of Directors has
drawn up a Report on relations describing the relations As at 31 December 2019, excluding the controlling enti-
between the controlling entity and controlled entity, and ties and controlled entities among the members, the
between the controlled entity and other entities con- PFNonwovens Concern owned the following companies:
trolled by the same controlling entity (hereinafter “Report
on relations”). Ì PFNonwovens Czech s.r.o., Czech Republic,
ID No.: 254 78 478
Ì PFNonwovens International s.r.o., Czech Republic,

ID No.: 292 49 708
7.1. Entities Ì PFN – GIC a.s., Czech Republic, ID No.: 064 23 078
connected with Ì PFN – NS a.s., Czech Republic, ID No.: 277 57 951
the Company Ì PFN – NW a.s., Czech Republic, ID No.: 269 61 377
Ì PFNonwovens RSA (PTY) LTD, South Africa,

reg. number 2016/278699/07
Ì PFNonwovens Egypt LLC, Egypt,

reg. number 52190;
7.1.1 Entity controlling
Ì PFNonwovens US Inc., United States of America
the Company
Ì PFNonwovens LLC, United States of America
The majority owner of the Company on the basis Ì PFNonwovens (Wuxi) Co., Ltd, China,
of acquisition of the Company’s shares within the ID No.: 320200M279381
scope of a voluntary takeover bid in October 2017
is PFNonwovens Holding s.r.o., Head office at Ì FQN Asia Pte. Ltd., Singapore, registration number
Hradčanské náměstí 67/8, Hradčany, 118 00 Prague 1, 201105819R
ID No.: 046 07 341, that as at 31 December 2019 owned
89,99% of the share capital and voting rights of the
Company. PFNonwovens Holding s.r.o. is, therefore,
within the meaning of Section 74 (3) of the Business
Corporations Act, a controlling entity and the Company
is in relation to it a controlled entity.
The only associate of PFNonwovens Holding s.r.o. and

the ultimate controlling entity as at 31 December 2019 is
R2G Rohan Sàrl, with head office at 2540 Luxembourg,
rue Edward Steichen 14, Grand Duchy of Luxembourg,
registration number: B 210733. R2G Rohan Sàrl is cur-
07 | Report on Relations 67
7.1.3 Graphical representation

of ownership relations of
the PFNonwovens Concern
as at 31 December 2019
PFNonwovens Holding s.r.o.
88.78% 100%
PFNonwovens a.s. PFNonwovens US Inc.
100% 100% 100% 100%
PFNonwovens LLC FQN Asia Pte. Ltd.
Czech s.r.o. International s.r.o.
0.3%
100% PFN – NW a.s. 99.7% 100%
Egypt LLC (Wuxi) Co., Ltd.
PFNonwovens
100% PFN – NS a.s. 100%
RSA (PTY) LTD
100% PFN – GIC a.s.
7.2 Role of the 7.3 Method and

Company in the means of control in
PFNonwovens the PFNonwovens
Concern Concern
The PFNonwovens Concern presents itself to the mar- Control in the entire PFNonwovens Concern is based
ket as one group. Supportive business, financial and on ownership participation in the individual business
administrative operations are arranged at the level of corporations, PFNonwovens Concern members, and
PFNonwovens Holding s.r.o. for the entire PFNonwov- with the associated authority to appoint and dismiss the
ens Concern. The relationships with the suppliers and majority of persons such as members of statutory bod-
customers of the PFNonwovens Concern are subse- ies of the business corporation and persons in similar
quently managed by the companies PFNonwovens positions or members of supervisory bodies of the busi-
Czech s.r.o., PFNonwovens LLC, PFNonwovens Egypt ness corporation.
LLC, PFNonwovens (Wuxi) Co., Ltd and PFNonwovens
RSA (PTY) LTD.
The operating assets of the PFNonwovens Concern are

owned:
Ì in the Czech Republic by PFNonwovens Czech s.r.o.

and its three operating subsidiaries PFN – GIC a.s.,
PFN – NW a.s. and PFN – NS a.s.
Ì in the USA by PFNonwovens LLC
Ì in Egypt by PFNonwovens Egypt LLC
Ì in China by PFNonwovens (Wuxi) Co.
Ì in the Republic of South Africa by PFNonwovens

RSA (PTY) LTD.
The shares of the Company are traded on the Prague

Stock Exchange.
7.4 Summary of 7.5 Contracts

actions taken in the between related
accounting period, entities
which were taken
at the initiative
or in the interest
7.5.1 Contracts
of the controlling
between a controlled
entity or the entities
entity and a
controlled by the
controlling entity
controlling entity,
where such actions In the respective accounting period the following con-
tracts between the controlled entity and the controlling
concerned assets entity continued or were newly concluded:
exceeding 10% of Ì Sublease contract for business premises concluded

between PFNonwovens Holding s.r.o., as the lessee,
the controlled equity and PFNonwovens a.s., as the sublessee;
of the Company as Ì contract between the common administrators of

personal information.
determined from
No contracts continued nor were any new contracts
the last financial concluded between R2G Rohan Sàrl and the controlled
entity.
statements
In the accounting period, no qualified acts taken at the 7.5.2 Contracts

initiative or in the interest of the controlling entity or enti-
ties controlled by it were performed within the meaning between a controlled
of Section 82(2)(d) of the Business Corporations Act.
entity and other entities
controlled by the same
controlling entity
In the respective accounting period the following con-
tracts between the controlled entity and other entities
controlled by the same controlling entity continued or
were newly concluded:
7.5.2.1 Contracts with PFNonwovens

Czech s.r.o. 7.5.3 Conditions of
Ì contract for the provision of financial and organi- contracts between
sational services by PFNonwovens Czech s.r.o. to
PFNonwovens a.s. and its supplements; related entities
Ì loan contracts between PFNonwovens Czech s.r.o.
as the lender and PFNonwovens a.s. as the bor- The terms and conditions of the contracts mentioned
rower, total principal loaned as at 31 December 2019 above in points 5.1 and 5.2 and the considerations pro-
amounted to EUR 27.000.000; vided correspond to the terms and conditions, respec-
tively standard considerations in normal business rela-
Ì contract between the common administrators of tionships.
7.5.2.2 Contracts with PFN – GIC a.s.
Ì contract between the common administrators of 7.6 Final statement

of the Company’s
7.5.2.3 Contracts with PFN – NS a.s. Board of Directors
Ì contract between the common administrators of
We hereby declare that as at the date of our signing of
this Report on relations drawn up according to Section
7.5.2.4 Contracts with PFN – NW a.s. 82 of the Business Corporations Act for the accounting
period starting 1 January 2019 and ending 31 December
Ì contract between the common administrators of 2019, we have provided all the existing relevant import-
personal information. ant facts for this accounting period that we are aware of
relating to:
7.5.2.5 Contracts with PFNonwovens a) structure of relations between the Company and the
International s.r.o. controlling entity,
Ì loan contracts between PFNonwovens International b) structure of relations between the members of the
s.r.o. as the borrower and PFNonwovens a.s. as PFNonwovens Concern,
the lender, total principal loaned as at 31 December
2019 amounted to EUR 58.543.500; c) role of the Company in the PFNonwovens Concern,
Ì contract between the common administrators of d) method and means of control in the PFNonwovens
personal information. Concern,
e) summary of actions taken in the past accounting

period, which were taken at the initiative or in the
interest of the controlling entity or the entities con-
trolled by the controlling entity, where such actions
concerned assets exceeding 10% of the controlled
entity’s equity as determined from the last financial
statements,
f) overview of contracts between the controlled entity

and the controlling entity or between the controlled
entities, and
g) assessment of whether or not the controlled entity solutions in the form of new products, applications and
suffered any damages. optimisation of operational-production parameters.
Concurrently, with respect to its global coverage, the
We hereby declare that we are not aware of a situa- Company will be able to apply these solutions in all the
tion, whereby the Company would suffer any damages markets of the Concern, in a faster manner and at lower
resulting from the aforementioned contracts, actions or cost. The fact that only certain companies deal with
measures. customers and key suppliers on behalf of the members
of the Concern results in significantly lower costs. We
We are confident that for the Company, predominantly see a potential risk in possible future stricter legislative
advantages result from the relations between the mem- requirements on the functioning of relations between
bers of the PFNonwovens Concern. The inclusion into the members of the Concern, with which higher finan-
the PFNonwovens Concern brings the Company oppor- cial costs may be associated compared to the existing
tunities to expand and consolidate existing business system.
relationships, to provide the opportunity to offer new
In Prague on 30 March 2020 František Klaška Marian Rašík

Member of the Board of Directors Member of the Board of Directors
PFNonwovens a.s. PFNonwovens a.s.
8
Consolidated Financial
Statements
Consolidated Statement of Financial Position
prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union
As at 31 December 2019
in thousands of CZK Note 31 December 2019 31 December 2018

ASSETS
Non-current assets
Property, plant and equipment 5 o) 6,046,997 5,191,854
Intangible assets 5 p) 2,320,127 2,320,127
Goodwill 5 p) 184,791 184,264
Total non-current assets 8,551,916 7,696,245
Current assets
Inventories 5 q) 776,496 605,905
Trade and other receivables 5 r) 1,607,412 1,849,922
Contract assets 5 a) 446,923 309,717
Cash and cash equivalents 5 t) 202,534 400,134
Total current assets 3,033,366 3,165,678
Total assets 11,585,281 10,861,924
EQUITY AND LIABILITIES
Share capital and reserves

Share capital 5 u) 299,857 299,857
Legal and other reserves 5 v) 86,701 86,701
Translation reserves 88,335 57,594
Cash flow hedge reserves 16,270 4,860
Retained earnings 5 v) 4,994,938 4,521,740
Total share capital and reserves 5,486,101 4,970,752
Non-current liabilities
Deferred tax liabilities 5 x) 450,061 324,552
Long-term bonds 5 z) 3,898,726 3,923,267
Total non-current liabilities 4,348,787 4,247,819
Current liabilities
Trade and other payables 5 aa) 582,943 404,211
Corporate income tax liabilities 5 bb) 7,502 14,031
Other tax liabilities 5 bb) 3,893 3,252
Bank current liabilities 5 w) 1,089,148 1,153,368
Short-term bonds 5 y) 63,396 60,795
Provisions 3,510 7,696
Total current liabilities 1,750,393 1,643,353
Total liabilities 6,099,180 5,891,172
Total equity and liabilities 11,585,281 10,861,924
The Notes are an integral part of these consolidated financial statements.

08 | Consolidated Financial Statements 75
Consolidated Statement of
Comprehensive Income
For the year ended 31 December 2019
In thousands of CZK Note 2019 2018

Revenue 5 a), b) 6,541,444 6,484,793
Changes in inventories of finished goods and work in progress 31,087 1,278
Raw materials and consumables used 5 c) (4,985,633) (4,762,287)
Capitalization of development costs 5 e) 36,152 43,228
Staff costs 5 f), g) (366,402) (346,588)
Depreciation and amortisation expense 5 h) (529,503) (467,523)
Other operating income 5 d) 21,735 28,889
Other operating expense 5 d) (60,885) (102,259)
Foreign exchange gains and other financial income 5 i) 141,987 176,247
Foreign exchange losses and other financial expenses 5 j) (11,507) (162,087)
Interest income 5 k) 3,406 4,206
Interest expense 5 l) (117,052) (177,865)
Profit before tax 704,828 720,032

Income tax expense 5 m) (231,630) 95,125
Net profit after tax 473,198 815,157

Other comprehensive income
Exchange differences arising from translation 30,741 40,847
Net value gain/(loss) on cash flow hedges* 11,410 (36,412)
Total comprehensive income for the year 515,349 819,592
Net profit attributable to:

Equity holders of the company 473,198 815,157
Total comprehensive income attributable to:

Equity holders of the company 515,349 819,592

Net earnings per share 5 n)
Basic net earnings per share (CZK) 53.99 93.01
Diluted net earnings per share (CZK) 53.99 93.01
*) Items will be reclassified into the Statement of Comprehensive Income.

Consolidated Statement of Cash Flows
In thousands of CZK Note 2019 2018

Adjustment for:
Depreciation and Amortisation 5 h) 529,503 467,523
Foreign exchange gains/losses (61,180) (20,926)
Interest expense 5 l) 117,052 173,658
Other changes in equity 0 0
Other financial income/(expense) 5 i) (16,688) 86,946
Cash flows from operating activities

Decrease/(increase) in inventories 5 q) (170,591) 454,224
Decrease/(increase) in receivables 161,206 (595,108)
Increase/(decrease) in payables (44,820) (20,866)
Income tax (paid)/received (100,395) (94,087)
Net cash from operating activities 1,118,914 1,171,396
Cash flows from investment activities

Purchases of property, plant and equipment (1,166,589) (748,345)
Net cash flows from investment activities (1,166,589) (748,345)
Cash flows from financing activities

Increase in bank loans (57,837) 893,725
Decrease in bonds 0 (2,302,000)
Decrease in other long term payables 0 (13,340)
Acquisition of own shares and other changes in equity 0 0
Distribution of dividends 0 0
Interest paid (113,739) (172,173)
Other financial income/(expense) 0 0
Net cash used in financing activities (171,576) (1,593,788)
Net increase (decrease) in cash and cash equivalents (219,251) (1,170,737)
Cash and cash equivalents at the beginning of the period 5 t) 400,134 1,514,202
Effect of exchange rate fluctuations on cash held 21,651 56,669
Cash and cash equivalents at the end of the period 5 t) 202,534 400,134

Consolidated Statement of
Changes in Equity
In thousands of CZK Share capital Transl. Cash flow Legal Retained Total equity attribut-
reserves hedge and other earnings able to equity hold-
reserve reserves ers of the Company
Note 5 u) 5 w) 5 v)
At 1 January 2018 299,857 16,747 41,272 86,701 3,706,583 4,151,160

Other comprehensive
0 40,847 (36,412) 0 0 4,435
income for the year
Net profit for the year 0 0 0 0 815,157 815,157
Comprehensive income
0 40,847 (36,412) 0 815,157 819,592
for the year
Shareholder Transactions 0 0 0 0 0 0
At 31 December 2018 299,857 57,594 4,860 86,701 4,521,740 4,970,752
At 1 January 2019 299,857 57,594 4,860 86,701 4,521,740 4,970,752

Other comprehensive
0 30,741 11,410 0 0 42,151
income for the year
Net profit for the year 0 0 0 0 473,198 473,198
Comprehensive income
0 30,741 11,410 0 473,198 515,349
for the year
Shareholder Transactions 0 0 0 0 0 0
At 31 December 2019 299,857 88,335 16,270 86,701 4,994,938 5,486,101

Luxembourg company PEGAS NONWOVENS SA did

Notes to the not cease to exist as a result of the transfer of the head
office of the Company nor did a new legal entity come
consolidated into existence, but rather its legal form was changed to
financial statements NONWOVENS a.s. was recorded in the Czech com-
mercial register with effect from 1 January 2018. On
15 June 2018, the Annual General Meeting resolved to
change the name of the Company to PFNonwovens a.s.
prepared in accordance with International Financial The new name was recorded in the Czech commercial
Reporting Standards (IFRS) as adopted by the European register with effect from 19 June 2018. The head office
Union of the Company is Hradčanské náměstí 67/8, Hradčany,
118 00 Prague 1, Czech Republic. The head office and
For the year ended 31 December 2019 principal place of business of the main operating and
trading company, PFNonwovens Czech s.r.o., is at
(in thousands of CZK) Přímětická 3623/86, 669 02 Znojmo, Czech Republic.
PFNonwovens a.s. is a holding company and owns a

100% share in the main operating company PFNonwo-
vens Czech s.r.o. and in the company PFNonwovens
International s.r.o.
1. General
PFNonwovens Czech s.r.o. was incorporated in the
information and Czech Republic. Its registered office is located in
Znojmo, Přímětická 86, 669 02 and its subsidiaries
definition of the (PFN – NW a.s., PFN – NS a.s. a PFN – GIC a.s.) are
engaged in the production of nonwoven textiles.
consolidated entity
Within the scope of international expansion was estab-
lished PFNonwovens International s.r.o. in 2010 and in
June 2016 was established PFNonwovens Egypt LLC,
which invests in the Egyptian production capacity. In
July 2016, a subsidiary PFNonwovens RSA (PTY) LTD
was established for the purpose of realisation of the
Description and investment project in the Republic of South Africa.
principal activities The sole shareholder of PFNonwovens Holding s.r.o.

and the ultimate controlling party as at 31 December
2019 is R2G Rohan S.à r.l., registered at 2540 Lux-
The Company was incorporated in Luxembourg as a embourg, rue Edward Steichen 14, Grand Duchy of
public limited liability company (société anonyme) for Luxembourg, registration number: B 210733. Subse-
an unlimited duration on 18 November 2005, under quently, R2G Rohan Sàrl is currently owned by several
the name Pamplona PE Holdco 2 SA and was regis- Czech individuals and the Liechtenstein Family Founda-
tered with the Luxembourg trade and companies reg- tion. Except for PFNonwovens Holding s.r.o., company
ister under number B 112.044. In 2006, the Company R2G Rohan Sàrl does not control any other company.
The consolidated financial statements of the Company
On 18 December 2017, the Extraordinary General Meet- as at and for the year ended 31 December 2019 com-
ing of the Company resolved to transfer the head office prise the Company (also referred as parent company)
to the Czech Republic and to change the nationality and its subsidiaries, see note 5dd) (together referred to
(status) of the Company from Luxembourg nationality to “Company” or the “Group”).
Czech nationality. Concurrently, the Extraordinary Gen-
eral Meeting resolved to accept a new wording of the
All reported figures were rounded off and for this reason
2. Basis of some additions may not add up.
preparation
d) Basis of
measurement
a) Statement of
The consolidated financial statements have been pre-
compliance pared on the historical cost basis except for derivative
financial instruments and share based payments which
are measured at fair value.
These financial statements have been prepared in
accordance with International Financial Reporting Stan-
dards and its interpretations as adopted by the Euro-
pean Union (“IFRS”).
e) Use of estimates
These consolidated financial statements were approved
by the Board of Directors and authorised for issue on and judgments
30 April 2020.
The preparation of financial statements in compliance

with IFRS requires management to make judgments,
estimates and assumptions that affect the application of
b) Presentation and accounting policies and the reported amounts of assets
and liabilities, income and expenses. The estimates and
functional currency associated assumptions are based on historical expe-
rience and various other factors that are believed to
be reasonable under the circumstances, the results of
The financial statements are presented in thousands of which form the basis for making the judgments about
Czech Koruna (thous. CZK). The underlying functional the carrying values of assets and liabilities that are not
currency of PFNonwovens Czech s.r.o. and its Czech readily apparent from other sources. The actual results
subsidiaries is the Czech Koruna (“CZK”). Czech Koruna may differ from these estimates.
is the underlying functional currency of PFNonwov-
ens International s.r.o. as well. The functional currency The estimates and underlying assumptions are reviewed
of PFNonwovens Egypt LLC is the United States Dollar on an on-going basis. Revisions to accounting esti-
(“USD”). The functional currency of PFNonwovens RSA mates are recognised in the period in which the esti-
(PTY) LTD is the South African Rand (“ZAR”). The func- mate is revised if the revision affects only that period
tional currency of PFNonwovens a.s. is Czech Koruna or in the period of the revision and future periods if the
(“CZK”). The financial statements were translated from revision affects both the current and future periods.
the functional currencies to the presentation currency.
The management uses the estimates of future cash
flows and for the goodwill and fixed assets impair-
ment testing (see note 5 o) and 5 p). The estimates are
applied for the determination of useful life of property,
c) Rounding of plant and equipment in respect of their depreciation.
financial amounts
When preparing consolidated financial statements, the
Group uses CZK 1,000 as the minimum reporting unit.
3. Summary b) Foreign currencies

of significant
At the end of the respective accounting period, financial
accounting policies assets and liabilities are translated into the functional
currency of each accounting entity on the basis of the
official foreign exchange rate of the central bank of the
country in which the given company is present.
The accounting policies set out below have been
applied consistently to all years presented in these con- Foreign exchange gains and losses arising from the set-
solidated financial statements and have been applied tlement of transactions from the translation of finan-
consistently by Group entities. cial assets and liabilities into the functional curren-
cies of each accounting entity using the official foreign
exchange rates of the central bank at the end of the
period are reported in profit or loss as a financial income
or expense.
a) Consolidation
Revaluation using the foreign exchange rate at the end
methods of the period does not apply to non-financial items,
which are valued in historical prices. Non-financial
items priced at fair value in a foreign currency, includ-
The consolidated financial statements incorporate the ing capital participations, are revalued using the foreign
financial statements of PFNonwovens a.s. and entities exchange rate as at the date on which their fair value
controlled by the Company (its subsidiaries). Control was set. The impact of a change in foreign exchange
exists where the Company is exposed, or has rights, to rates on the non-financial items priced to fair value in a
variable returns of an entity and has the ability to affect foreign currency is booked as part of profit or loss from
those returns through its power over the entity. revaluation.
Assets, liabilities and contingent liabilities, which ful- For the purpose of presenting consolidated financial
fil the criteria for accounting recognition pursuant to statements, the assets and liabilities are expressed in
IFRS 3, are measured at fair value at the date of acqui- CZK using exchange rates ruling at the balance sheet
sition. date. Income and expense items are translated at the
average exchange rates for the period, unless exchange
Any excess of the cost of acquisition over the fair value rates fluctuated significantly during that period, in which
of the net identifiable assets acquired is accounted for case the exchange rates at the dates of the transactions
as goodwill. Any excess of the fair value of the net iden- are used.
tifiable assets acquired over the cost of acquisition is
accounted for in the income statement in the account- Exchange rates used:
ing period in which the acquisition takes place. Period average (for Statement of Exchange rate
Comprehensive Income and Cash Flow
As and when necessary, adjustments are made to Statement)
the financial statements of subsidiaries to bring their
1 January 2018 – 31 December 2018 21.735 USD/CZK
accounting policies in line with those used by other
members of the Group. 1 January 2018 – 31 December 2018 1.647 ZAR/CZK
1 January 2019 – 31 December 2019 22.934 USD/CZK
All group entities included in the note 5 dd) are fully con-
1 January 2019 – 31 December 2019 1.588 ZAR/CZK
solidated.
All intra-group transactions, balances, income, Balance sheet date

expenses and dividends are eliminated on consolida-
Balance sheet as at 31 December 2018 22.466 USD/CZK
tion.
Balance sheet as at 31 December 2018 1.562 ZAR/CZK
Balance sheet as at 31 December 2019 22.621 USD/CZK
Balance sheet as at 31 December 2019 1.611 ZAR/CZK
Exchange differences arising from translation to the pre- Revenues from the sale of services are recognised when
sentation currency are classified as equity and trans- the service is rendered.
ferred to the Group’s translation reserve.
A description of the main activities from which the
Group generates revenues is provided below.
Sale of nonwoven textiles – main source of revenues

c) Revenue recognition for the Group is from the sale of nonwoven textiles. The
Group supplies products that are used primarily for the
production of disposable hygiene products and supplies
Effective as at 1 January 2018 and in accordance with these products predominantly to large multi-national
IFRS 15, revenues are recognised in the expected value companies.
item, which the Group should, based on expectation,
receive for the goods transferred to the customer, or for
the services provided to the customer. Revenues repre-
sent trade receivables for goods and services reduced
by discounts, VAT and other taxes related with the sale. d) Segment reporting
Payment terms are usually in the range from 30 to 120
days.
IFRS 8 requires operating segments to be identified on
Revenues are reported over time in the case where the basis of internal reports about components of the
performance does not create an asset for which the Group that are regularly reviewed by the chief operat-
Group would have an alternative use, and at the same ing decision maker in order to allocate resources to the
time if the Group has a legally enforceable right to pay- segments and to assess their performance. Based on
ment for performance that it has heretofore provided analysis of IFRS 8, the Group identified one operating
to the customer. In practice this means that products segment, the production of nonwoven textiles including
that are produced based on an order from a given cus- scrap from its production.
tomer are recognised as revenues immediately after the
given product is produced. This procedure is exercised In view of the above, the reports and other information
in accordance with the requirements of IFRS 15, thus it for this segment are the same as those for the entire
was not exercised in the comparable period. Group. For this reason, there is also no reconciliation of
segment indicators with indicators for the whole Group.
In the event that the IFRS 15 criteria from the preced-
ing paragraph are not met then revenues reported at a
point in time of the sale of the products are recognised
in accounting at the time when the product is delivered
and ownership is transferred to the customer, or at the e) Research and
moment when the control with the product is transferred
to the carrier, at a time when all the following conditions development
are met:
Ì The Group transferred to the buyer the control from Expenditure on research activities, undertaken with the
the ownership of the goods, prospect of acquiring new scientific or technical knowl-
edge and understanding, is recognised in the income
Ì The Group no longer retains a continued connection statement as an expense as incurred.
at the management level pertaining to the ownership
or effective control over the goods sold, Expenditure on development activities is capitalised as
intangible asset if the product or process is technically
Ì revenues can be reliably determined, and economically feasible. The expenditure capitalised
includes the cost of materials, direct labour and directly
Ì it is probable that the economic benefits related to attributable overheads. Other development expenditure
the transactions will accrue to the Group is recognised in the income statement as an expense as
incurred. Capitalised development expenditure is stated
Ì the resulting costs or costs arising in connection at cost less accumulated amortisation and impairment
with the transaction can be reliably determined. losses.
Book value of the deferred tax receivable is tested on

f) Borrowing costs each balance sheet date. If necessary, the value of the
deferred tax receivable is decreased to the extent that
it is improbable that sufficient taxable profit will be gen-
Borrowing costs other than stated below are recognised erated which would enable to utilise a part or the whole
in the income statement in the period to which they deferred tax receivable.
relate.
Deferred tax is calculated using the tax rates that are
Borrowing costs that relate to assets that take a sub- expected to be applied in the period when the liability is
stantial period of time to get ready for use or sale are settled or the asset realised. Deferred tax is charged or
capitalised as part of the cost of such assets. credited to the profit or loss account except for deferred
tax derived from the hedge effective part of mark-
to-market revaluation of cross currency rate swaps
(CCRS). The Group designates the CCRSs as cash
flow hedge and the changes in fair value recognises in
g) Taxation equity. The changes in deferred tax derived from the
changes in fair value of the CCRS are recognised in
equity as well.
The tax expense in the income statement includes cur-
rent and deferred tax expenses. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to
Current tax income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and lia-
Current income tax is based on taxable profit and bilities on a net basis.
the tax base. Taxable profit differs from net profit as
reported in the income statement because it excludes
items of income or expense that are taxable or deduct-
ible in other periods and it further excludes items that
are never taxable or deductible. The Group’s liability for h) Government grants
current tax is calculated using tax rates that have been
enacted under local legislation by the balance sheet
date. The Group benefits from the following investment incen-
tives granted by the Czech Government:
Deferred tax
Grants and subsidies relating to employees
Deferred tax liabilities and assets arising from differ-
ences between the carrying amounts of assets and lia- The grants to train employees and subsidies to establish
bilities in the financial statements and the correspond- new jobs from the government of the Czech Republic
ing tax bases of these assets and liabilities used in the are accounted for in the comprehensive income state-
computation of taxable profit are accounted for using ment in the year in which related expenses are incurred.
the balance sheet liability method. Deferred tax liabili-
ties are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to Grants relating to income tax
the extent that it is probable that taxable profits will be
available against which deductible temporary differ- Grants relating to income tax represent investment
ences can be utilised. incentives. The Group does not account for a total tax
liability but records its tax liability less the expected
The carrying amount of deferred tax assets is reviewed amount of investment incentives.
at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable prof-
its will be available to allow all or part of the asset to be Grants for R&D projects
recovered.
The Group is successful in obtaining the grants for R&D
projects. These grants are tendered under the research
and development support programmes by the Czech The carrying amounts of intangible assets are reas-
Ministry of Industry and Trade. The grants for R&D proj- sessed to identify impairment losses where events or
ects are recognised in the statement of comprehen- changes of facts indicate that the carrying amount of
sive income in the year in which related expenses were each individual asset exceeds its recoverable amount.
incurred.
Intangible assets include software, which is amortised
on a straight-line basis over its estimated useful life,
Tax deductible items which is three years. The item also includes capital-
ised intangible assets arising from development which
The Group benefits from reduction of tax base by tax is amortized on a straight-line basis over its estimated
deductible items related to research and development useful life, which is ten years.
expenses.
An internally-generated intangible asset arising from
development is recognised if, and only if, all of the fol-
lowing have been demonstrated:
i) Property, plant Ì the technical feasibility of completing the intangible

asset so that it will be available for use or sale;
and equipment
Ì the intention to complete the intangible asset and
use or sell it;
Property, plant and equipment are stated at cost (includ-
ing costs of acquisition) less accumulated depreciation Ì the ability to use or sell the intangible asset;
and any recognised impairment loss.
Ì how the intangible asset will generate probable
The cost of assets (other than land and assets under future economic benefits;
construction) is depreciated over their estimated use-
ful lives, using the straight-line method, on the following Ì the availability of adequate technical, financial and
basis: other resources to complete the development and to
use or sell the intangible asset; and
Major group of assets Number of years
Ì the ability to measure reliably the expenditure attrib-
Production lines 20 – 25 utable to the intangible asset during its develop-
ment.
Factory and office buildings 20 – 60
Laboratory equipment 10 The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred
Cars and other vehicles 5 from the date when the intangible asset first meets the
Computer technology 4 recognition criteria listed above. Where no internal-
ly-generated intangible asset can be recognised, devel-
opment expenditure is recognised in profit or loss in the
The gain or loss arising on the disposal or retirement of period in which it is incurred.
an item of property, plant and equipment is determined
as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in state-
ment of comprehensive income.
k) Goodwill
Goodwill represents a positive difference between the
j) Intangible assets cost of acquisition and the fair value of the acquired
interest in net identifiable assets and liabilities of a sub-
sidiary as at the date of acquisition. Goodwill arising on
Purchased intangible assets are stated at cost less an acquisition of subsidiaries is presented as separate
accumulated amortisation. They are amortised on a intangible asset. After the initial recognition, goodwill is
straight-line basis over their estimated useful lives. stated at cost less any impairment losses.
l) Impairment of m) Inventories
assets and goodwill
Inventories are stated at the lower of cost and net real-
isable value. The cost comprises direct materials and,
At least at each balance sheet date, the Group reviews where applicable, direct labour costs and those over-
the carrying amounts of its tangible and intangible heads that have been incurred in bringing the invento-
assets to determine whether there is any indication that ries to their present location and condition, based on
those assets have suffered an impairment loss. If any normal operating capacity, excluding finance costs. The
such indication exists, the recoverable amount of the cost is calculated using the weighted average method.
asset is estimated in order to determine the extent of
the impairment loss (if any). Where it is not possible to The net realisable value is the estimated selling price
estimate the recoverable amount of an individual asset, less all estimated costs of completion and costs to be
the Group estimates the recoverable amount of the incurred in marketing, selling and distribution.
cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less

costs to sell and value-in-use.
n) Financial instruments
In assessing the value-in-use, the estimated future cash
flows are discounted to their present value using a pre-
tax discount rate that reflects current market assess- A financial asset is mainly cash, an equity instrument of
ments of the time value of money and the risks specific another entity or a contractual right to receive cash or
to the asset. another financial asset. A financial liability is mainly a
contractual obligation to deliver cash or another finan-
If the recoverable amount of an asset (or cash-generat- cial asset.
ing unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) Financial liabilities and assets are presented as current
is reduced to its recoverable amount. The difference (short-term) or non-current (long-term). Financial assets
between the carrying amount and recoverable amount are presented as current when the Group expects to
is recognised as a provision in the statement of compre- realize them within 12 months of the balance sheet date
hensive income. or if there is no reasonable certainty that the Group will
hold the financial assets for more than 12 months of the
For the purposes of impairment testing, goodwill is ana- balance sheet date.
lysed annually. If the recoverable amount is less than
the carrying amount of the assets, the impairment loss Financial liabilities are presented as current when they
is allocated first to reduce the carrying amount of the are due within 12 months of the balance sheet date.
goodwill and then to the other assets pro-rata on the
basis of the carrying amount of each asset. An impair- Financial assets and financial liabilities are offset and
ment loss recognised for goodwill is not reversed in a the net amount is reported in the balance sheet if there
subsequent period. is a currently enforceable legal right to offset the recog-
nized amounts and there is an intention to settle on a
Management has determined that for goodwill testing net basis, to realize the assets and settle the liabilities
purposes all acquired subsidiaries are considered as simultaneously.
a single cash generating economic unit. Recoverable
amount is set as a value in use on the basis of a dis-
counted cash flow model. Financial liabilities
For the purposes of impairment testing of goodwill, the Financial liabilities are valued in the category “amortised
goodwill is allocated to all goods producing subsidiar- value” with the exception of i) financial liabilities booked
ies. The recoverable amount is established using a dis- against expenses and gains: this classification is applied
counted cash flow model. to derivatives, financial liabilities including for trading
(e.g. short positions in securities) and other financial lia-
bilities that have been classified as such at initial recog-
nition.
The valuation and reporting methods for derivatives The method of recognizing the resulting gain or loss
intended for hedging, and derivatives intended for trad- depends on whether the derivative is designated as a
ing are described in the section Derivative financial hedging instrument, and if so, the nature of the item
instruments. being hedged.
Financial assets HEDGE ACCOUNTING – CASH FLOW HEDGES
Financial assets are classified into two main catego- Upon implementation of IFRS 9, the Group used transi-
ries (a) at amortized cost (which include mainly trade tional provisions and continues to proceed according to
receivables) and (b) at fair value through profit or loss or IAS 39 for existing hedging relationships.
through other comprehensive income.
The Group uses cross currency swaps to hedge cash
The Group categorises financial assets such as financial flows from bonds issued by the Group, resp. currency
assets in amortised value only when the following crite- forwards to hedge cash flows related to the operating
ria are met: activities of the Group. At the inception of the hedge
relationship, the Group documents the relationship
Ì the asset is held on the basis of a business model, between the hedging instrument and the hedged item
the objective of which is to collect contractual finan- The economic relationship is defined as the expectation
cial flows and concurrently that the value of the hedging instrument and the value
of the hedged item will move in the opposite direction
Ì financial flows that arise on the basis of contrac- with respect to the hedged risk. From the creation of
tual conditions, are only payments of principal and the hedge, the Group regularly documents whether the
interest hedging instrument is effective. The effectiveness of the
hedging relationship is defined as the ratio of the cumu-
lative change in the fair value of the hedging instrument
IMPAIRMENT OF FINANCIAL ASSETS relative to the change in the fair value of a hypotheti-
cal derivative (derivative, which perfectly hedges the
Impairment of financial assets by applying the IFRS 9 hedged item). A certain level of ineffectiveness is intro-
requirements is based on expected credit loss (ECL) duced into the hedging relationship by the difference
model. between the Bid and Ask rates, however, the Group
assessed this ineffectiveness as insignificant. The effec-
Payment discipline of customers is very good, trade tive portion of changes in the fair value of derivatives
receivables of the Group are insured. Historically, the that are designated and qualify as cash flow hedges is
Group has suffered only minimal losses arising from recognised in other comprehensive income. The gain
customers’ unwillingness to pay, and these losses were, or loss relating to the ineffective portion is recognised
furthermore, to a large degree, covered by the insur- immediately in profit or loss.
ance of receivables. The Group has its financial claims
covered by credible financial institutions. The reduction Amounts previously recognised in other comprehen-
in the value of financial assets due to expected credit sive income and accumulated in equity are reclassified
losses is, for the aforementioned reasons, insignificant to profit or loss in the periods when the hedged item
and thus the Group has decided not to book them. is recognised in profit or loss, on the same line as the
recognised hedged item. Hedge accounting is discon-
tinued when the Group revokes the hedging relation-
Derivative financial instruments ship, when the hedging instrument expires or is sold,
terminated, or exercised, or when it no longer qualifies
The Group’s operating activities are primarily exposed for hedge accounting. Any gain or loss accumulated in
to financial risks such as changes in foreign exchange equity at that time remains in equity and is recognised
rates and interest rates. Where necessary, the Group when the forecast transaction is ultimately recognised
uses derivative financial instruments to cover these in profit or loss. When a forecast transaction is no lon-
risks. ger expected to occur, the gain or loss accumulated in
equity is recognised immediately in profit or loss.
Derivative financial instruments are initially measured at
fair value on the contract date, and are remeasured to
fair value at subsequent reporting dates.
OTHER DERIVATIVES
r) Long-term liabilities
Certain derivative instruments are not designated for
hedge accounting. Changes in the fair value of any
derivative instruments that do not qualify for hedge Long-term liabilities, such as long-term bank loans and
accounting are recognized immediately in the income bonds, are initially measured in the amount of the cash-
statement. flow received upon issuance of such a debt instrument
reduced by the related transaction costs. Subsequently
the liabilities are measured at amortized cost using the
effective interest rate method. The difference between
the nominal value and the initial measurement of the
o) Stock option plan debt is amortised through the income statement over
the maturity of the debt.
The Company concluded a stock option plan, which is The issuance costs and discount below, resp. premium
realized through phantom options, the value of which is above the nominal value, are treated as a reduction of,
derived from the actual share price of the Company. resp. increase in the nominal value of the instrument
issued. These amounts are included in the amortization
The Company measures the liability arising from the using the effective interest rate method.
stock option plan at fair value at the balance sheet date.
Changes in the fair value of these liabilities are rec-
ognised in the statement of comprehensive income for
the period.
s) Contract assets
Fair value is calculated as the intrinsic price of an
option, i.e. the difference between the current market and liabilities
price of the Company’s shares and the phantom share
strike price. The time value of an option is not taken into
consideration. Contract asset is the Group’s right to consideration
in exchange for goods or services that the Group has
transferred to a customer when that right is conditioned
on something other than the passage of time (for exam-
ple, the Group’s future performance).
p) Trade and other
Contract liability is the Group’s obligation to transfer
receivables goods or provide services to a customer for which the
Group has received consideration from the customer.
Trade and other receivables are initially measured at Contract assets and liabilities are initially measured at
fair value and subsequently at amortised cost using the fair value and subsequently at amortized cost using the
effective interest method. effective interest rate method.
q) Cash and cash t) Trade and other

equivalents payables
Cash and cash equivalents comprise cash on hand, Trade payables arise when the counterparty fulfils its
bank accounts and other short-term highly liquid invest- obligations from a contract and are initially measured
ments that are readily convertible to a known amount of at fair value, subsequently measured at amortised cost
cash and are subject to an insignificant risk of changes using the effective interest method.
in value.
ing from the accounting period starting on 1 January

u) Provisions 2019 and the Group has implemented this standard
as of this date.
Provisions are recognised when the Group has a pres- Ì Amendments to IFRS 9 Financial instruments –
ent obligation as a result of a past event, and it is proba- Subscription feature with negative compensation
ble that the Group will be required to settle that obliga- – effective for annual periods beginning on or after
tion, and a reliable estimate can be made of the amount 1 January 2019,
of the obligation. Provisions are measured at the man-
agement’s best estimate of the expenditure required Ì Amendments to IAS 19 Employee Benefits – Plan
to settle the obligation at the balance sheet date, and Amendment, Curtailment or Settlement (effective
are discounted to the present value where the effect is for annual periods beginning on or after 1 January
material. 2019),
Ì Amendments to IAS 28 Investments in Associates

and Joint Ventures – Long-term Interests in Associ-
ates and Joint Ventures (effective for annual periods
v) Own shares beginning on or after 1 January 2019),
Ì IFRIC 23 Uncertainty over Income Tax Treatments

Treasury shares are presented in the balance sheet as (effective for annual periods beginning on or after
a deduction from equity in the amount equal to their 1 January 2019),
acquisition cost. The acquisition of treasury shares is
recorded based on the trade date and presented in the Ì Amendments to various standards due to
statement of changes in equity as a reduction in equity. “Improvements to IFRSs (cycle 2015 – 2017)”
resulting from the annual improvement project of
IFRS (IFRS 3, IFRS 11, IAS 12 and IAS 23) primarily
with a view to removing inconsistencies and clarify-
ing wording (effective for annual periods beginning
w) Adoption of new on or after 1 January 2019).
and revised standards The adoption of the above standards did not have a sig-
nificant impact on the Group’s financial statements.
Standards and Interpretations New Standards

effective in the current period
Certain new standards and interpretations have been
The following amendments to the existing standards issued that are compulsory for the financial period start-
issued by the International Accounting Standards Board ing 1 January 2020 or later and that the Group has not
(IASB) and adopted by the EU are effective for the cur- implemented earlier. At the date of authorisation of
rent reporting period for the first time: these financial statements the following new standards,
amendments to the existing standards and new inter-
Ì IFRS 16 Leases – effective for annual periods begin- pretation issued by IASB and adopted by the EU were in
ning on or after 1 January 2019. issue but not yet effective:
The new standard IFRS 16 Leasing replaces all Ì Amendments to References to the Conceptual
existing international accounting regulations relating Framework in IFRS Standards (effective for annual
to lease accounting for both the lessee and the les- periods beginning on or after 1 January 2020).
sor. According to this standard, the lessee will book
the majority of lease items on the balance sheet. Ì Amendment to IFRS 3 Business Combinations
From the lessor’s perspective, the accounting treat- (effective for annual periods beginning on or after
ment of leasing remains practically unchanged. This 1 January 2020),
model will be applied to leases, with the exception
of short term leases and leasing where the under- Ì Amendments to IAS 1 Presentation of Finan-
lying asset has a low value. The standard is bind- cial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors international level in different currencies and uses
(effective for annual periods beginning on or after financial instruments depending on interest rates.
1 January 2020),
When managing its financial risks, the Group concen-
Ì IFRS 17 Insurance Contracts (effective for annual trates on the unpredictability of financial markets and
periods beginning on or after 1 January 2021), endeavours to minimise potential negative effects on the
results of operations.
Ì Amendments to IFRS 10 “Consolidated Financial
Statements” and IAS 28 “Investments in Asso- The following paragraphs provide qualitative and quanti-
ciates and Joint Ventures” – Sale or Contribution tative disclosure on potential effects of these risks upon
of Assets between an Investor and its Associate or the Group.
Joint Venture and further amendments (effective
date deferred indefinitely until the research project
on the equity method has been concluded),
Ì Amendments IFRS 9, IAS 39 and IFRS 7 Bench- Credit risk

mark rate reform (effective for annual periods
beginning on or after 1 January 2020)
The vast majority of sales are on credit to customers.
Ì Amendment IAS 1 - Presentation and publication Risks arising from the provision of credit are covered
of financial statements: Classification of liabilities up to 90% of their nominal value by insurance policies
as short term, resp. long term (effective for annual in respect of individual customers’ receivables or by
periods beginning on or after 1 January 2022). receiving advance payments from customers.
The Group does not expect to apply any of the above The maximum credit risk to which the Group is theoret-
standards, revisions or amendments before their effec- ically exposed is represented by the carrying amounts
tive date. The Group anticipates that the adoption of stated for cash and cash equivalents and trade and
these new standards, amendments to the existing stan- other receivables in the balance sheet. Overview of
dards and new interpretations will have no material trade and other receivables according to due date is
impact on the financial statements of the Group in the shown below.
period of initial application.
2019 2018
% of % of
total total
4. Financial risks, Not yet over-

due
1,033,946 92.3% 1,267,288 90.5%
investment risks and Overdue less

39,063 3.5% 113,794 8.1%
than 1 month
capital management Overdue more
47,208 4.2% 18,837 1.4%
than 1 month
Total 1,120,217 100.0% 1,399,919 100.0%

The Group is exposed to the financial risks connected
with its operations as follows:
In 2019, the Group created a provision for an expected
Ì credit risk, regarding its normal business relations overdue credit loss in the amount of 673 thousand
with customers; CZK (18 thousand CZK in 2018).
Ì liquidity risk, with particular reference to the avail-

ability of funds and access to the credit market;
Ì market risk (primarily relating to foreign exchange

and interest rates), since the Group operates at an
The credit quality of bank balances can be summarized ond largest customer accounted for 15% of the Group’s
based on Moody’s ratings as at 31 December 2019 and total sales, compared with a 17% share in 2018, and
2018 as follows: the third largest customer accounted for 11% of the
Group’s total sales, compared with a 9% share in 2018.
There were no other customers with more than 10%
31 December 2019 31 December 2018
share on total sales.
– Aa3 172,516 174,575
The Group did not change any objectives, policies and
– A1 28,980 225,077
processes for managing the credit risk in 2019.
– A2 5 9
– A3 159 (2)
– Without
external rating
387 0
Liquidity risk
Total 202,046 399,659
Liquidity risk arises if the Group is unable to obtain the

Explanation of the Moody’s rating: funds needed to carry out its operations under current
economic conditions.
Aa3 – very high quality with very low credit risk
In order to reduce the liquidity risk, the Group optimises
A1 – A2 assessed as high quality with low credit risk. the management of funds as follows:
A3 – assessed as medium quality at a higher level with a Ì maintaining an adequate level of available liquidity;
low credit risk.
Ì obtaining adequate credit lines;
Baa1 – Baa3 – assessed as medium quality with a cer-
tain degree of a speculative level and a medium credit Ì monitoring future liquidity on the basis of business
risk. planning.
Concentration of credit risk Liquidity risk analysis
The Group supplies the vast majority of its production The following tables detail the Group’s expected matu-
to global customers and their production plants around rity for its non-derivative financial assets and remain-
the world. Due to this fact, it is difficult to determine the ing contractual maturity for its non-derivative finan-
exposure of the Group to geographical segments. cial liabilities. The tables have been drawn up based on
the undiscounted contractual maturities of the financial
The Group supplies nonwoven textiles primarily to the assets including interest that will be earned on those
hygiene segment, where the segment’s share of total assets and based on undiscounted cash flows of finan-
revenues in 2019 accounted for approximately 91% cial liabilities based on the earliest date on which the
(90% in 2018). The remaining 9% of revenues (10% in Group can be required to pay. The financial liabilities
2018) came from the building construction, agricultural part of the table includes both interest and principal
and healthcare segments. cash flows.
The present customer mix concentration of the Group

reflects the situation in the final consumer market, which
is divided among a small number of end producers,
each having a substantial market share. The top five
customers represented an 80% share of total revenues
in 2019 (81% in 2018). The trade receivables of top five
customers as at 31 December 2019 amounted to 88%
of all trade receivables (92% as at 31 December 2018).
In 2019, the largest customer accounted for 46% of

the Group’s total sales (48% share in 2018). The sec-
2019 Book value Less than 6 months – 1 year – 2 years – 5+ years Total
6 months 1 year 2 years 5 years
Financial liabilities:
Variable interest rate bonds 670,109 14,306 14,306 28,612 85,835 706,612 849,670
Fixed interest rate bonds 3,228,617 23,822 58,726 82,548 2,540,989 919,499 3,625,584
Trade payables 230,944 230,944 0 0 0 0 230,944
Short-term bond payables 63,396 63,396 0 0 0 0 63,396
Payables to employees 28,117 28,117 0 0 0 0 28,117
Other payables 9,214 9,214 0 0 0 0 9,214
2018 Book value Less than 6 months – 1 year – 2 years – 5+ years Total
6 months 1 year 2 years 5 years
Variable interest rate bonds 669,834 13,797 13,797 27,595 82,784 733,189 871,162
Fixed interest rate bonds 3,253,433 24,117 59,100 83,217 1,301,073 2,271,788 3,739,294
Trade payables 262,435 262,435 0 0 0 0 262,435
Short-term bond payables 60,795 60,795 0 0 0 0 60,795
Payables to employees 37,912 37,912 0 0 0 0 37,912
Other payables 9,205 9,205 0 0 0 0 9,205
Management believes that the funds and available credit been drawn up based on the undiscounted net cash
lines described in Note 5x); in addition to the funds inflows/(outflows) on the derivative instrument that settle
that are generated from operating activities, will enable on a net basis. When the amount payable or receivable
the Group to satisfy its requirements resulting from its is not fixed, the amount disclosed has been determined
investment activities and its working capital needs. by reference to the projected interest rates as illustrated
by the yield curves existing at the reporting date.
The following table details the Group’s liquidity analy-
sis for its derivative financial instruments. The table has
2019 Less than 6 months 6 months – 1 year 1 year – 2 years 2 years – 5 years 5+ years
Net settled:
Cross currency rate swap 14,306 (10,551) 3,755 85,259 49,827
FX option structure 5,412 5,412 14,344 4,818 --
2018 Less than 6 months 6 months – 1 year 1 year – 2 years 2 years – 5 years 5+ years
Net settled:
Cross currency rate swap 13,797 (11,722) 2,076 64,741 46,460
FX option structure 6,303 16,533 37,158 21,676 --
The Group did not change any objectives, policies and processes for managing the liquidity risk in 2019.
(bank loans, bonds, intra-company loans, cash, trade

Market Risk receivables and trade payables). Unrealized foreign
exchange gains and losses do not have an effect on the
cash flows of the Group.
Market risk is the risk that the Group’s income or the
value of the financial instruments held are affected by The Group is exposed to a currency risk primarily result-
changes in market prices, such as foreign exchange ing from changes to the following currency pairs:
rates, interest rates and equity prices.
Ì CZK/EUR – The appreciation of CZK against EUR
The Group is exposed to market risks from fluctuations has a negative effect on the operating results of the
in foreign currency exchange and interest rates. Group resulting from the fact that a majority of rev-
enues are invoiced in EUR, whereas a part of the
expenses, e.g. staff costs and energy are paid out
in CZK. The appreciation of CZK against EUR has a
positive effect on financial results since the appreci-
Currency risk ation of CZK leads to a reduction in liabilities tied to
EUR-denominated company bonds. The deprecia-
tion of CZK against EUR has the opposite effect.
The Group operates its production activities only in the
Czech Republic, Egypt and the republic of South Africa, Ì USD/EUR – the appreciation of USD against EUR
it conducts business at an international level. This fact has a positive impact on financial results since the
exposes the Group to a currency risk, namely in rela- appreciation of USD leads to a reduction in liabilities
tion to both its operational as well as financial activities. arising from intra-company loans provided in EUR
The underlying functional currency of PFNonwovens for the financing of the investment project in Egypt
Czech s.r.o. and its subsidiaries is Czech koruna (CZK). to the Egyptian subsidiary, whose functional cur-
The Czech koruna is the functional currency of PFNon- rency is USD. The depreciation of USD against EUR
wovens International s.r.o. The functional currency of has the opposite effect.
PFNonwovens Egypt LLC is the US dollar (USD). The
functional currency of PFNonwovens RSA (PTY) LTD is Ì ZAR/EUR – the appreciation of ZAR against EUR
the South African rand (ZAR). The functional and pre- has a positive impact on financial results since the
sentation currency of PFNonwovens a.s. is the Czech appreciation of ZAR leads to a reduction in liabili-
koruna (CZK). The part of operating activities (revenues ties arising from intra-company loans provided in
and operating costs) are carried out in EUR. The major- EUR for the financing of the investment project in
ity of financial activities (such as repayment of loans and South Africa to the South African subsidiary, whose
interest) are also carried out in EUR. functional currency is ZAR. The depreciation of ZAR
against EUR has the opposite effect.
Trading activity Changes in other currency exchange rates should have

no fundamental impact on the results of the Group.
From the trading (operational) perspective the Group
attempts to hedge the currency risk of its revenues and
Impact of changes in foreign currency 2019 2018
expenses naturally in the given currencies. Despite this
exchange rates
natural hedging, a certain balance is created between
the revenues and expenses in the given currencies Appreciation of CZK against EUR by 5 % (67,634) (55,079)
(namely in CZK and EGP), e.g. staff costs and energy,
Depreciation of CZK against EUR by 5 % 67,634 55,079
which are paid out in the local currency (CZK and EGP)
and are not covered, resp. are covered only partially by
revenues in the local currencies. This discrepancy, resp.
Appreciation of USD against EUR by 5 % 60,378 69,525
remaining balance between revenues and expenses in
the individual currencies represents a currency risk. Depreciation of USD against EUR by 5 % (60,378) (69,525)
Financial activity Appreciation of ZAR against EUR by 5 % 78,137 22,906
Depreciation of ZAR against EUR by 5 % (78,137) (22,906)

The Group is exposed to unrealized foreign exchange
gains/losses from the revaluation of balance sheet items ’000 CZK
Interest rate risk 5. Notes to the

consolidated
The Group is exposed to interest rate risk resulting from
a private bond issue in the amount of CZK 678 million financial statements
bearing a variable interest rate of 6M PRIBOR + 2%. In
order to manage the interest rate risk, the Group has
concluded a cross currency swap (CCRS), where the
Group receives a variable interest rate of 6M PRIBOR
+ 2% and pays a fixed rate. The interest rate risk is thus
fully eliminated. For details refer to Note 5 aa).
a) Revenues
The Group did not change any objectives, policies and
processes for managing the interest rate risk in 2019.
Revenues divided by product groups
2019 % of total 2018 % of total

Capital management Hygiene 5,965,391 91.2% 5,845,672 90.1%
Other 576,053 8.8% 639,121 9.9%

The Group’s objectives when managing capital are:
Total
6,541,444 100.0% 6,484,793 100.0%
revenues
Ì to safeguard the entity’s ability to continue as a
going concern, so that it can continue to provide
returns for shareholders and benefits for other stake-
holders, and Division of Revenues according to actual
delivery location of goods to customer
Ì to provide an adequate return to shareholders com-
mensurately with the level of risk. Region 2019 % of total 2018 % of total
Western
The Group manages the amount of capital and capi- 2,212,377 33.8% 2,185,487 33.7%
Europe
tal structure, and makes adjustments to it in the light
of changes in economic conditions and the risk char- Central and
acteristics of the underlying assets. The Group consid- Eastern
2,696,325 41.2% 2,489,646 38.4%
ers equity and proceeds from the bond issues as cap- Europe,
ital. In order to maintain or adjust the capital structure, Russia
the Group may adjust the amount of dividends paid to
Other 1,632,742 25.0% 1,809,660 27.9%
shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt. Total 6,541,444 100.0% 6,484,793 100.0%
The Group does not define any level of capital, however

management closely monitors the risks in connection Division of revenues according to
with capital inadequacy and is prepared to change the time of revenue recognition
level of capital as stated above.
In accordance with the terms of the bonds issued by
Over time 2,212,377 33.8% 5,389,698 83.1%
the Group, the Group has to keep the ratio of consoli-
dated net debt to consolidated EBITDA below 4.50. As Point in time 2,696,325 41.2% 1,095,095 16.9%
at 31 December 2019, this ratio was 3.91 (3.47 as at
Total 1,632,742 25.0% 6,484,793 100.0%
31 December 2018).
Contract assets
b) Segment reporting
The following table provides information about trade
receivables and contract assets resulting from contracts
with customers. In accordance with IFRS 8, the Group identified one
operating segment, the segment of nonwoven textiles.
Receivables constitute trade receivables from already This segment consists of the production and sale of
issued invoices. nonwoven textiles, including scrap from its production.
Contract assets constitute products that have been pro- In consideration of the aforementioned, the statements
duced on the basis of an order received from a cus- and other information for this segment are identical
tomer and meet the IFRS 15 condition for recognition of to the statements and other information for the entire
revenue over time. In the case of the Group the condi- Group. Likewise, for this reason no reconciliation of seg-
tion is met that the product does not have an alternative ment indicators with the indicators for the entire Group
use for the Group and at the same time the Group has is performed.
a legally enforceable right to payment for performance.
For this reason, no provision is created for these assets.
Essentially, these constitute products produced on the
basis of a customer’s order, which will be delivered in
the following period for a price that is already known for c) Raw materials,
the following period.
consumables and
as at as at
31 December 31 December services used
2019 2018
Trade receivables 1,120,217 1,399,919

2019 2018
Contract assets 446,923 309,717
Raw materials consumed 3,988,808 4,020,620
Total 1,567,140 1,709,636 Purchase of goods 58,369 0
Consumed spare parts
Contract assets are converted into receivables when 169,055 118,937
and repairs
the products are shipped and an invoice is issued. New
contract assets are created when products are pro- Energy consumed 220,388 211,620
duced that meet the aforementioned conditions for rec- Other consumables 32,582 25,163
ognition of revenue over time.
Other services 516,431 385,947
Total raw materials and
4,985,633 4,762,287
Allocation of a transaction price to consumables used
remaining performance obligations
The Group applies practical expedient in accordance

with paragraph 121 of IFRS 15 and does not publish
information about remaining performance obligations for
which the initially expected time of duration is one year
or less.
In accordance with the aforementioned, the Group has

no liabilities for performance with an expected time of
duration longer than one year.
d) Other operating e) Capitalization of

income/expense development costs
Expenditure on development activities are capital-
Other operating income ized according to the Group’s accounting policies. The
expenditure capitalised includes the cost of materials,
2019 2018 direct labour and directly attributable overheads.
Gain on the sale of assets 4,591 3,853
2019 2018
Insurance proceeds 3,483 14,246
Cost of materials 34,329 41,825
Other income 13,661 10,790
Direct labour 3,383 3,227
Other operating income total 21,735 28,889
Directly attributable overheads (1,560) (1,824)
Total developments costs capi-

36,152 43,228
Other operating expense talized
2019 20178
Net book value of sold assets 2,164 3,152
Insurance expense 37,455 30,754
Other expense 21,266 68,353
Other operating expense total 60,885 102,259
f) Staff costs
2019 Average Total Wages and Remunera- Revenues related Social security Social
number of salaries tion of Board to the stock option and health insur- expenses
employees members plan revaluation ance expenses
Employees 654 359,792 268,217 0 0 82,259 9,317
Executives and
5 6,610 240 8,531 -4,186 2,025 0
non-executives
Total 659 366,402 268,457 8,531 -4,186 84,284 9,317
2018 Average Total Wages and Remunera- Revenues related Social security Social
number of salaries tion of Board to the stock option and health insur- expenses
employees members plan revaluation ance expenses
Employees 593 319,923 235,392 0 0 79,170 5,361
Executives and
5 26,665 14,479 10,367 (911) 2,730 0
non-executives
Total 598 346,588 249,871 10,367 (911) 81,900 5,361

Summary of the contractual terms of the phantom

g) Cash-settled share- option as at 31 December 2019:
based payment Grant date Strike Number Fair value of
for executive price of granted granted options

options
managers and non- (CZK) (pcs) (TCZK)
executive directors 24/05/2007 749.20 44,840 0
15/06/2010 473.00 15,464 3,510
Total 60,304 3,510

The information below relates to share option programs
from 2007 and 2010 for which as at 31 December 2019
and as at 31 December 2018 there remained 60,304 Summary of the contractual terms of the phantom
phantom share options to be exercised. All the issued option as at 31 December 2018:
share options/warrants from share option programs in
2014 and 2017 have been exercised.
Grant date Strike Number Fair value of
price of granted granted options
The Annual General Meeting held on 15 June 2007
options
approved the grant of an aggregate amount of 230,735
phantom options. Each phantom option, when exer- (CZK) (pcs) (TCZK)
cised, will grant the manager the right to receive cash
24/05/2007 749.20 44,840 2,547
calculated as closing price of one company share on the
Prague stock exchange (the PSE) (or other market if the 15/06/2010 473.00 15,464 5,150
PSE trading is discontinued) on the day preceding the
Total 60,304 7,696
day of exercise of the phantom option less CZK 749.20
representing the offer price at the time of the initial
public offering of the shares of PFNonwovens a.s. (the The fair value of the phantom options as at 31 Decem-
IPO price). Of the originally granted 230,735 phantom ber 2019 was TCZK 3,510 (TCZK 7,696 as at 31 Decem-
options, 44,840 phantom options are currently held by ber 2018). The current management of the Company did
former executive managers and non-executive directors. not hold any phantom option as at 31 December 2019
and as at 31 December 2018.
The Annual General Meeting held on June 15, 2010
approved the grant of an aggregate amount of 230,735 The fair value of phantom options was calculated as
phantom options. Each phantom option, when exer- a difference between the Company’s closing share
cised, will grant the director the right to receive in cash price on the PSE of CZK 700 as at 31 December 2019
an amount equal to the difference between CZK 473.00 (CZK 806 as at 31 December 2018) and the strike price
representing the Company’s share price on the PSE as of the phantom options.
of 15 December 2009 increased by 10%, and the clos-
ing price of one Company’s share on the day preceding
the day of exercise of the phantom option on the PSE.
Of the originally granted 230,735 phantom options,
15,464 phantom options are currently held by former h) Depreciation and
executive managers and non-executive directors.
amortisation expense
2019 2018
Depreciation of tangible assets 493,305 445,102
Amortisation of intangible assets 36,199 22,421
Total 529,503 467,523

i) Foreign exchange l) Interest expense

gains and other
financial income 2019 2018
Interest and debt settlement

113,946 176,516
expenses on loans and borrowings
2019 2018 Other 3,106 1,349
Realised and unrealised foreign Total 117,052 177,865

125,299 176,247
exchange gains
Derivatives revaluation 16,688 0

No borrowing cost were capitalised in 2019 and 2018.
Other financial income 0 0
Total 141,987 176,247
m) Income tax
(expense)/ income
j) Foreign exchange
losses and other 2019 2018
financial expenses Current income tax 108,394 (106,483)
Deferred income tax 123,236 201,608
Total 231,630 95,125

2019 2018
Realised and unrealised foreign

0 93,235
exchange losses The changes in deferred tax are described in Note 5 y).
Revaluation of derivatives 0 54,328
Other financial expense 11,507 14,525
Total 11,507 162,087
Other financial expenses include mainly insurance and

bank charges.
k) Interest income
2019 2018
Interest income 3,406 4,206
The item includes interest income on bank accounts

and term deposits.
Effective tax rate
Income tax calculated using the enacted tax rate 133,917 19.0% 136,806 19.0%
Non-deductible tax items (18,506) (2.6%) 726 0.1%
Differences in tax rates of countries in which individual entities operate 24,436 3.5% 0 0%
Utilisation of accumulated tax losses not reported in deferred tax (2,139) (0.3%) (23,405) (3.3%)
Tax losses from actual period not reported in deferred tax 65,579 9.3% 13,684 1.9%
Initial reported effect of investment incentives on deferred tax 27,970 4.0% (178,538) (24.8%)
Utilisation of investment incentives initially not reported in deferred tax 0 0.0% (42,784) (5.9%)
Other effects 372 0.1% (1,614) (0.2%)
Total income tax/effective tax rate 231,630 32.9% (95,125) (13.2%)
PFN – NW a.s. started making use of the incentives in PFN – GIC a.s. was granted an investment incentives in
2008, year 2017 was the last year, in which PFN – NW a.s. March 2018 and has not yet started to utilise them.
used the investment incentives. PFN – NW a.s. was
granted additional investment incentives in 2016. Maximum percentage of expended amount used as
PFN – NS a.s. was granted an investment incentives in corporate tax relief is 48% for PFN – NW a.s., 30% for
January 2009 and has started to utilise them in 2016. PFN – NS a.s. and 22% for PFN – GIC a.s.
Summary as of 31 December 2019
Max. amount in Unused amount as at 31 Decem- Corporate tax First year of usage of
million CZK ber 2019 in million CZK relief for corporate tax relief
PFN – NW a.s.* 148.1 148.1 10 years n/a
PFN – NS a.s. 403.5 172.1 10 years 2016
PFN – GIC a.s. 212.6 212.6 10 years n/a
Summary as of 31 December 2018
Max. amount in Unused amount as at 31 Decem- Corporate tax First year of usage of
million CZK ber 2018 in million CZK relief for corporate tax relief
PFN – NW a.s.* 148.1 148.1 10 years n/a
PFN – NS a.s. 403.5 224.2 10 years 2016
PFN – GIC a.s. 212.6 212.6 10 years n/a
*) commitment of investment incentives from the Ministry of Industry and Trade

of the Czech Republic based on the decision from October 2016
Investment incentives are tax savings granted by the Basic earnings per share
government provided that certain conditions are fulfilled
(such as the level of incremental investments) by the
2019 2018
Group. For this reason the intangible asset was recog-
nised – deferred tax asset - arising from tax incentives Net profit attributable to
TCZK 473,198 815,157
and from corresponding income tax subsidies. equity holders
Weighted average number Num-

Since nearly all taxable income was generated from 8,763,859 8,763,859
of ordinary shares ber
operating activities in the Czech Republic, the tax rate
of 19% (19% in 2017) in the Czech Republic was used Basic earnings per share CZK 53.99 93.01
to calculate the total income tax.
Diluted earnings per share CZK 53.99 93.01
Basic earnings per share and diluted earnings per share

are calculated as net profit for the year attributable to
n) Earnings per share equity holders of the Company divided by the weighted
average of the number of shares existing each day in
the given year.
The calculation of basic earnings per share as at
31 December 2019 was based on the net profit attribu-
table to equity holders and a weighted average number
of ordinary shares in 2019. There were no changes in
the number of shares in 2019.
Fully diluted earnings per share as at 31 December 2019

and 31 December 2018 are equal to basic earnings per
share since the Company has no instruments issued
that would potentially have a diluting effect on earnings.
o) Property, plant and equipment
Land and Production Other Under Pre- Total

buildings machinery equipment Construction payments
Acquisition cost
Balance at 31/12/2017 2,201,624 6,383,249 563,339 43,006 173,175 9,364,393
Additions 22,631 29,503 32,082 194,565 371,595 650,376
Disposals (900) (3,389) (6,279) 0 0 (10,568)
Transfers 365 1,463 3,087 (4,915) 0 0
Reclassification 0 4,378 0 0 0 4,378
Exchange differences 40,860 69,877 1,248 (3,181) (11,426) 97,378
Balance at 31/12/2018 2,264,580 6,485,081 593,477 229,475 533,344 10,105,957
Additions 25,244 1,091,785, 60,470 8,793 135,254 1,321,545
Disposals 0 (37,137) (18,660) 0 0 (55,797)
Transfers 273,415 490,588 14,474 (231,842) (546,635) 0
Reclassification 0 16,439 (16,439) (3,891) 0 (3,891)
Exchange differences 5,593 10,045 186 7,168 13,447 36,440
Balance at 31/12/2019 2,568,831 8,056,802 633,510 9,703 135,409 11,404,254
Accumulated amortisation
Balance at 31/12/2017 483,577 3,671,999 291,248 0 0 4,446,824
Depreciation expense 59,264 338,496 47,342 0 0 445,102
Disposals (288) (3,241) (6,159) 0 0 (9,688)
Reclassification 0 2,286 0 0 0 2,286
Exchange differences 4,962 23,518 1,100 0 0 29,580
Balance at 31/12/2018 547,515 4,033,058 333,530 0 0 4,914,103
Depreciation expense 64,645 379,598 49,062 0 0 493,305
Disposals 0 (37,137) (14,644) 0 0 (51,782)
Reclassification 0 0 0 0 0 0
Exchange differences 500 2,727 (1,598) 0 0 1,629
Balance at 31/12/2019 612,660 4,378,245 366,350 0 0 5,357,255
Net book value
31/12/2017 1,718,047 2,711,250 272,091 43,006 173,175 4,917,569
31/12/2018 1,717,065 2,452,023 259,947 229,475 533,344 5,191,854
31/12/2019 1,956,171 3,678,556 267,159 9,703 135,409 6,046,997

The Group tested the the value of non-current tangi- Cash flows for 2033 are calculated for all three CGU’s
ble assets for impairment as at 31 December 2019 and with a conservative assumption of 0% year-on-year
2018. Management decided that for the purposes of change and the discount rates provided below.
impairment testing of the value of non-current tangi-
ble assets, the subsidiaries of the Company are divided
into three cash-generating units, i.e. subsidiaries of the Discount rates
Company in the Czech Republic (hereinafter “CGU CZ”),
the subsidiary of the company in Egypt (hereinafter The discount rates provided below have been set on the
“CGU EG”) and the subsidiary of the Company in South basis of an estimation of weighted costs of capital of
Africa (hereinafter “CGU JAR”). In respect to the fact the Group, increased by a risk surcharge for the individ-
that CGU JAR commenced commercial operations only ual countries in which the CGU’s are operated.
in the middle of 2019, the management believes that
for the purpose of assessing the reduction in the value
CGU Discount rate used
of non-current tangible assets of CGU JAR there is cur-
rently an insufficient amount of relevant information on CGU CZ 5.1%
the basis of which it would be possible to reliably cal-
CGU EG 9.2%
culate the potential impairment of non-current tangible
assets. For this reason, CGU JAR was eliminated from
further analysis.
Booking the impairment of non-
current tangible assets
Key assumptions used in the calculation
of the value-in-use are the following: On the basis of the above-mentioned calculations for
the individual CGU’s, as at 31 December 2019 and
Ì Customer demand – In the past, the Group has been 2018, no impairment of non-current tangible assets has
able to sell 100% of production capacity of the units been booked in relation to CGU CZ and CGU EG.
generating cash flows. The management believes
that the planned almost full utilisation of produc-
tion capacities in the upcoming years is realistically Value-in-use sensitivity analysis
achievable.
The value-in-use of the individual CGU’s is sensitive pri-
Ì Planned gross margin – In 2020 and in subsequent marily to changes in the discount rate and the EBITDA
years, the management conservatively expects a margin. The sensitivity analysis for the individual CGU’s
similar trend as in the past. is provided below.
Projection of future cash flows
For the purpose of assessing whether a reduction of

the value of non-current tangible assets has occurred,
a value-in-use calculation was used for CGU CZ and
CGU EG, which is based on the forecast cash flows
according to the financial budgets approved by the
management for each individual CGU for 2020, the
realistic levels of these cash flows and the below-men-
tioned discount rates.
The cash flow forecasts for the period 2021-2033 are

based on past experience, whilst it is conservatively
assumed that during the course of this period:
Ì For CGU CZ – 1% year-on-year decrease in reve-

nues and EBITDA
Ì For CGU EG – 0% year-on-year change in revenues

and EBITDA
CGU CZ CGU EG
Discount rate
The impact of an increase in the discount rate by 1 pp. on the value-in-use of the CGU thous. CZK (1,973,820) (93,423)
Discount rate threshold limit value at which the value-in-use of the CGU = 0 % 12% 10%
EBITDA margin
The impact of a decrease in the EBITDA margin by 1 pp. on the value-in-use of the CGU thous. CZK (905,430) (77,645)
EBITDA threshold limit value at which the value-in-use of the CGU = 0 % 12% 14%
p) Intangible assets and goodwill

Goodwill Software, capitalized Intangible assets Assets in Total
development and – research and progress
other intangible assets development
Acquisition cost
Balance at 31/12/2017 2,320,127 34,577 174,663 281 2,529,648
Additions 0 4,116 27,579 15,953 47,648
Disposals 0 (8,289) 0 0 (8,289)
Transfers 0 0 0 0 0
Exchange differences 0 0 0 0 0
Balance at 31/12/2018 2,320,127 30,404 202,242 16,234 2,569,007
Additions 0 574 29,611 6,541 36,726
Disposals 0 (79) 0 0 (79)
Transfers 0 585 0 (585) 0
Balance at 31/12/2019 2,320,127 31,484 231,854 22,190 2,605,654
Accumulated amortisation
Balance at 31/12/2017 0 22,030 28,401 0 50,431
Amortisation expense 0 3,403 19,018 0 22,421
Disposals 0 (8,235) 0 0 (8,235)
Balance at 31/12/2018 0 17,197 47,419 0 64,616
Amortisation expense 0 4,101 32,097 0 36,199
Disposals 0 (79) 0 0 (79)
Balance at 31/12/2019 0 21,220 79,516 0 100,736
Net book value

31/12/2017 2,320,127 12,547 146,262 281 2,479,217
31/12/2018 2,320,127 13,207 154,823 16,234 2,504,391
31/12/2019 2,320,127 10,265 152,337 22,190 2,504,918
The Group tested the possible impairment of good- Based on the above mentioned-calculation, no impair-
will as at 31 December 2019 and 2018. Due to the fact ment of goodwill was recognised either in 2019 or in
that goodwill was recognized in 2006, it relates only 2018.
to Czech subsidiaries in the Group. The management
therefore has determined that for goodwill testing pur-
poses all subsidiaries in the Czech Republic are con-
sidered as one cash generating unit. The calculation
of the recoverable amount of this single cash gener- q) Inventories
ating unit is based on cash flow projections derived
from financial budget approved by management for the
year 2020 with discount rates for the individual years
2019 2018
of 5.1% p.a. (2018: 8.0% p.a.), which were set on the
basis of an estimation of weighted average cost of cap- Materials 389,252 315,777
ital. Cash flow projections for the period 2021 – 2033 are
Products 18,068 12,771
based on previous experience, while a 1% year-on-year
decline in sales and operating profit EBITDA is conser- Semi-finished products 32,675 21,913
vatively assumed during this period. Cash flows after
Spare parts 288,023 231,154
this period are calculated using a conservative expec-
tation of 0% year-on-year decline and the aforemen- Other 48,478 24,290
tioned discount rates. The recoverable amount is sen-
Total 776,496 605,905
sitive primarily to changes in the discount rate, and the
operating profit margin (EBITDA margin). An increase of
the discount rate by 1 percentage point would lower the Spare parts include items with a turnover time shorter
recoverable amount by approximately CZK 1,974 million than one year or of immaterial individual value.
and vice versa. The discount rate would need to reach
approximately 12% for it to be necessary to book an
impairment of goodwill. The degree of growth (develop-
ment of demand from customers) used in the calcula-
tion is lower than the long term estimated growth of the r) Current trade and
nonwoven textile market in Europe. A decrease in the
EBITDA margin by 1 percentage point would lower the other receivables
recoverable amount by approximately CZK 905 mil-
lion and vice versa. The EBITDA margin would need to
reach approximately 12 % for it to be necessary to book
2019 2018
an impairment of goodwill. According to the opinion of
management a potential change in key assumptions on Financial assets
which the recoverable amount is based would not mean
Trade receivables 1,120,217 1,399,919
that the total accounting value of these cash generating
units would exceed their total recoverable value. Positive fair value of financial
22,143 947
derivatives
The key assumptions used in the value-in-use calcula-
Non-financial assets
tions are as follows:
Other receivables 28,573 2,313
Ì Demand from the customers – In the past, the Group
Contingent assets 69,862 92,385
was able to sell 100% of its production capacity
related to the cash generating unit. The management Prepaid expenses 87,274 7,689
believes that the planned almost full utilisation of the
Advance payments 8,781 14,589
production facilities for the next four years is reason-
ably achievable. Other tax receivables 270,563 332,080
Total 1,607,412 1,849,922

Ì Budgeted gross margin – For 2020 and onwards
management conservatively expects in terms of
margins a similar pattern as in the past.
Interest rate swaps receivable of the Group, a negative value represents a

payable of the Group.
The Group did not have any open interest rate swaps as
at 31 December 2018 or 31 December 2019.
Counterparty 2019 2018
ČSOB - EUR 25 mil. – hedging derivative 11,351 20,848

Cross currency rate swaps Česká spořitelna – EUR 39.852 mil. –
77 -13,672
derivative intended for trading
As at 31 December 2019, the Group held two open
cross currency swaps. Total 11,428 7,176
The first swap that is, for the purposes of hedge

accounting, booked as a derivative hedging the risk of Fair value of the swaps is determined by the EUR and
change of variable interest rates (Pribor) and the cur- CZK yield curve at the balance sheet date and the dis-
rency risk connected with the receipt of foreign currency counted cash flow method. The inputs used in the fair
cash flows (revenues), was concluded in July 2015 with value calculation are categorised in accordance with
a total nominal value of CZK 678,000 thousand (receiv- IFRS 7 into level 2 of fair value hierarchy.
ing leg) against EUR 25,000 thousand (paying leg) for
the purpose of hedging the currency risk of the CZK
denominated private bond issue, which were issued by SENSITIVITY OF THE FAIR VALUE OF
the subsidiary PFNonwovens Czech s.r.o., maturing on CROSS CURRENCY SWAPS
14 July 2025 with a variable interest rate of 6M PRIBOR
+ 2.00% p.a. The swap bears a fixed interest rate of The appreciation of CZK against EUR by 1% would,
3.39% p.a. At the same time, this swap hedges foreign as at 31 December 2019, increase the fair value of the
currency risk for cash flows, revenues that the Group cross currency swaps by approximately CZK 16.5 mil-
realizes in EUR. The economic relationship is defined lion.
as the expectation that the value of the hedging instru-
ment and the value of the hedged item will be reversed The depreciation of CZK against EUR by 1% would,
in relation to the hedged risk. That is if interest rates as at 31 December 2019, decrease the fair value of the
rise, the value of the hedging instrument, the asset, will cross currency swaps by approximately CZK 16.5 mil-
increase, as will increase also the value of the hedged lion.
issued bonds, the liability, and vice versa. In case of
appreciation of CZK against EUR, the value of the hedg-
ing instrument will increase and at the same time the FX forwards
value of hedged item, EUR sales translated into CZK will
decrease. The Group considers the hedging relationship As at 31 December 2019 and 31 December 2018, the
to be effective due to the fact that the parameters of the Group did not have any open FX forwards.
hedging instrument’s and the hedged items are identical
(nominal, maturity dates for interest payments, stable
sales in EUR). For this reason the net fair value of the Foreign currency options
hedging derivative was reported in equity, i.e. via other
comprehensive income.
FOREIGN CURRENCY OPTION STRUCTURE I.
The second swap, which is intended for trading (ie it is
not accounted for in hedge accounting), was concluded In July 2019, a foreign currency option structure expired
in July 2015 with a total nominal value of CZK 1,080,000 this structure was concluded by the Group in March
thousand (receiving leg) against EUR 39,852 thou- 2016. The objective of this foreign currency option
sand (paying leg) for the purpose of hedging the cur- structure was to hedge currency risk connected to rev-
rency risk of the CZK-denominated private bond issue, enues in EUR and their conversion to CZK in approxi-
which were issued by the holding company PFNonwo- mately the amount as the Group expends each month
vens a.s., maturing on 14 July 2022 with a fixed interest on the payment of wages and salaries.
rate of 2.646% p.a. The swap bears a fixed interest rate
of 3.15% p.a.
Fair value of the swaps as at 31 December 2019 and

2018 was as follows. A positive value represents a
FOREIGN CURRENCY OPTION STRUCTURE II. item will move in the opposite direction with respect to
the hedged risk. In case of appreciation of CZK against
In April 2018, the Group concluded a foreign currency EUR, the value of the hedging instrument will increase
option structure. The objective of this foreign currency and at the same time the value of the hedged item,
option structure is to hedge currency risk connected to sales, in EUR, will decrease. The Group considers the
revenues in EUR and their conversion to CZK in approx- hedging relationship to be effective due to the fact that
imately the amount as the Group expends each month the parameters of the hedging instrument’s and the
on the payment of wages and salaries after the expira- hedged items are identical (nominal, maturity dates for
tion to the aforementioned option structure from 2016. interest payments, stable sales in EUR). For this reason,
The foreign currency option structure consists of two the entire fair value of the hedging derivative was recog-
independent transactions, a series of synthetic forwards nized in equity, resp. other comprehensive result.
and written (sold) options with a monthly expiration from
August 2019 to July 2021. The Group accounts for the second part of the option
structure, a series of monthly written options, outside
The Company has implemented hedge accounting on hedge accounting, and accordingly the change in its fair
a part of the foreign currency option structure, namely value is booked in the profit and loss statement.
a series of monthly synthetic forwards. The economic
relationship is defined as the expectation that the value The fair value of these foreign currency option struc-
of the hedging instrument and the value of the hedged tures (divided into hedging derivatives and deriva-
item will move in the opposite direction with respect to tives intended for trading), as at 31 December 2019
the hedged risk. In case of appreciation of CZK against and 2018, is presented in the following table. A positive
EUR, the value of the hedging instrument will increase value represents a receivable of the Group, a negative
and at the same time the value of the hedged item, value a payable of the Group.
sales, in EUR, will decrease. The Group considers the
hedging relationship to be effective due to the fact that The fair value of derivative financial instruments is
the parameters of the hedging instrument’s and the derived in accordance with the second level in the hier-
hedged items are identical (nominal, maturity dates for archy of fair values according to IFRS 13.
interest payments, stable sales in EUR). For this reason,
the entire fair value of the hedging derivative was recog-
2019 2018
nized in equity, resp. other comprehensive result.
Foreign currency option structure
— 34
The Group accounts for the second part of the option I. – series of barrier options
structure, a series of monthly written options, outside
Foreign currency option structure II.
hedge accounting, and accordingly the change in its fair (1,310) (5,171)
– series of listed options
value is booked in the profit and loss statement.
Foreign currency option structure III.
(830) —
– series of listed options
FOREIGN CURRENCY OPTION STRUCTURE III.
Total (2,140) (5,137)
In March 2019, the Group concluded a foreign currency

option structure. The objective of this foreign currency 2019 2018
option structure is to hedge currency risk connected to
revenues in EUR and their conversion to CZK in approx- Foreign currency option structure I.
— 6,259
imately the amount as the Group expends each month – series of synthetic forwards
on the payment of wages and salaries after the expira- Foreign currency option structure II.
tion to the aforementioned option structure from 2018. 7,254 (7,351)
– series of synthetic forwards
The foreign currency option structure consists of two
independent transactions, a series of synthetic forwards Foreign currency option structure III.
3,462 —
and written (sold) options with a monthly expiration from – series of synthetic forwards
August 2021 to March 2022. Total 10,716 (1,092)
The Company has implemented hedge accounting on

a part of the foreign currency option structure, namely Overview of the total nominal value of hedging within
a series of monthly synthetic forwards. The economic the cash flow hedging structure according to the pay-
relationship is defined as the expectation that the value ment terms as at 31 December 2019 is provided in the
of the hedging instrument and the value of the hedged following table.
Term of Nominal value of the Nominal value of the

payment hedge in EUR '000 hedge in CZK '000 t) Cash and cash
2020 (14,400) 376,728
equivalents
2021 (13,900) 367,543
2022 (3,300) 88,671

2019 2017
Total (31,600) 832,942
Cash in hand 488 475
Current accounts 202,046 399,659

Overview of the total nominal value of hedging within
the cash flow hedging structure according to the pay- Total 202,534 400,134
ment terms as at 31 December 2018 is provided in the
following table. The credit quality of bank balances on the basis of the
Moody’s rating as at 31 December 2019 and 2018 is
provided in part 4 Credit risk.
Term of Nominal value of the Nominal value of the
payment hedge in EUR '000 hedge in CZK '000
2019 (13,700) 362,406
2020 (14,400) 376,728

u) Share capital
2021 (8,400) 219,758
Total (36,500) 958,892

The total number of shares as at 31 December 2018 and
as at 31 December 2019 was 8,763,859 shares at EUR
1.24 per share. The Company held 0 pieces of own shares
SENSITIVITY OF THE FAIR VALUE OF THE as at 31 December 2018 and as at 31 December 2019.
FOREIGN CURRENCY OPTION STRUCTURE II.
As at 31 December 2018, the shares of the Company
The appreciation, resp. depreciation of CZK against consist of 8,763,859 shares with a nominal value of
EUR by 5% would, as at 31 December 2019, increase, EUR 1.24 per share.
resp. decrease the fair value of the foreign currency
option structure by approximately CZK 29.0 million. No new shares were issued during the course of 2019
or 2018.
SENSITIVITY OF THE FAIR VALUE OF THE

FOREIGN CURRENCY OPTION STRUCTURE III.
The appreciation, resp. depreciation of CZK against v) Legal and

EUR by 5% would, as at 31 December 2019, increase,
resp. decrease the fair value of the foreign currency other reserves
option structure by approximately CZK 14.0 million.
2019 2018
Legal reserves 29,443 29,443

s) Income tax Other reserves 57,258 57,258
receivables Total 86,701 86,701
Legal reserves are created in the amount of 10% of the

As at 31 December 2019 and 2018, the Group had no Company’s share capital. This reserve is not available
income tax receivables. for dividend distribution.
Other reserves include mainly dividends not paid on

own shares and are distributable to shareholders.
antee from the parent company on behalf of its subsid-

w) Short-term iary which is a party to the contract with the bank. No
covenants are attached to the overdraft facility.
bank loans
The outstanding balances of the overdraft facilities as
at 31 December 2019, respectively as at 31 December
On 6 October 2015, the Group concluded a contract for 2018 are shown below.
an overdraft facility. The overdraft is secured by a guar-
2019 Drawdown Liability as at Current Non-current Interest rate Interest rate

limit in mil. 31/12/2019 in at 31/12/2019
EUR thous. CZK
Overdraft 25.0 411,638 411,638 — 1D EURIBOR + 0.75% 0.75%
Bank current liabilities total 1,089,148 1,089,148 —
2018 Drawdown Liability as at Current Non-current Interest rate Interest rate

limit in mil. 31/12/2018 in at 31/12/2018
EUR thous. CZK
Bank current liabilities total 1,153,368 1,153,368 —
The carrying amount of the bank loans approximates their fair value. The over-
draft facility is treated as a bank current liability.
x) Deferred tax
Deferred tax assets and liabilities
Assets Liabilities Net

2019 2018 2019 2018 2019 2018
Property, plant and equipment 0 0 (577,779) (505,986) (577,779) (505,986)
Inventories 6,443 6,149 0 0 6,443 6,149
Investment incentives and tax losses 105,091 179,043 0 0 105,091 179,243
Other 0 0 (3,816) (3,958) (3,816) (3,958)
Deferred tax asset / (liability) 111,534 185,392 (561,595) (509,944) (450,061) (324,552)
Offset of deferred tax assets and liabilities (111,534) (185,392) 111,534 185,392 — —
Deferred tax asset / (liability) — — (450,061) (324,552) (450,061) (324,552)
In accordance with the accounting policy described in Note

Long-term bonds
3g), the deferred tax was calculated using the tax rates applied
for the years in which the tax asset will be realised or the tax
liability will be settled, i.e. at 19% for year 2019 onward in the as at as at
Czech Republic, 25% in Egypt and 28% in the Republic of 31/12/2019 31/12/2018
South Africa (2018 – 19% in the Czech Republic, 25% in Egypt
Bond nominal 3,908,939 3,935,683
and 28% in the Republic of South Africa).
Issuance costs related to the bond
(10,213) (12,415)
issue
Total long-term bonds 3,898,726 3,923,267

y) Bonds
On 14 June 2015, the Group issued three private issues of Short-term bonds
unsecured senior bonds in the total nominal value of approxi-
mately EUR 100 million, which are reported in Other non-cur-
as at as at
rent liabilities.
31/12/2019 31/12/2018
The first issue in the amount of CZK 678,000,000 (six hundred Interest accrued on issued bonds 63,396 60,795
and seventy-eight million Czech crowns) with an offer price of
Total short-term bonds 63,396 60,795
100% matures on 14 July 2025 and bears a variable interest
rate of 6M PRIBOR + 2.00% p.a.
The second issue in the amount of EUR 35,000,000 (thirty-five

million euro) with an offer price of 100% matures on 14 July
2025 and bears a fixed interest rate of 3.39% p.a. z) Current trade and
The manager of the first and second issue was Českosloven- other payables
ská obchodní banka.
The third issue in the amount of CZK 1,080,000,000 (one

2019 2017
billion and eighty million Czech crowns) with an offer price of
101.594% matures on 14 July 2022 and bears a fixed interest Financial liabilities
rate of 2.646% p.a. The manager of the issue was Česká
Trade payables 230,944 262,435
spořitelna.
Negative fair value of financial
2,140 0
Both of the issues denominated in Czech crowns were hedged derivatives
against foreign exchange risks using cross-currency swaps.
Other payables 9,214 9,205
The Group is thus effectively a fixed rate payer in EUR.
Non-financial liabilities
On 20 January 2017, the Group issued the fourth private bond
Liabilities to employees 28,117 37,912
issue in the amount of EUR 50,000,000 (fifty million euro) with
an offer price of 99.637% which matures on 20 January 2024 Contingent liabilities 299,359 81,348
and bears a fixed interest rate of 1.875% p.a. The manager of
Deferred income 12,504 13,118
the issue was Česká spořitelna.
Advances received 664 193
Issuance costs include amounts paid in connection with the
Total 582,943 404,211
bond issues for legal, accounting and other services as well as
the bond nominal discount/premium. These amounts are amor-
tised over the term of the bond issue on an effective interest
rate basis.
The following methods and assumptions are used by

aa) Tax liabilities the Group to estimate the fair value of each class of
financial instruments:
2019 2017
Cash and cash equivalents,
Employment tax 3,893 3,252 current investments
Corporate income tax payable 7,502 14,031 The carrying amount of cash and other current finan-
cial assets approximates fair value due to the relatively
Total 11,395 17,283 short-term maturity of these financial instruments.
As at 31 December 2019 the corporate income tax lia- Short-term receivables and payables
bility amounted to 7,502 TCZK based on difference
between advances paid and estimate for the corporate The carrying amount of receivables and payables
income tax expense for 2019. approximates fair value due to the short-term maturity
of these financial instruments.
Short-term loans
bb) Fair value of
The carrying amount approximates fair value because of
financial instruments the short period to maturity of those instruments.
Fair value is defined as the amount at which the instru- Long-term debt
ment could be exchanged in a current transaction
between knowledgeable willing parties in an arm’s The fair value of long-term debt is based on the quoted
length transaction, other than in a forced or liquida- market price for the same or similar issues or on the
tion sale. Fair values of the financial instruments of the current rates available for debt with the same matu-
Group are based on fair value statements prepared by rity profile. The carrying amount of long-term debt and
the banks or determined based on cash flow models. other payables with variable interest rates approximates
their fair values. The fair value of long term debts was
The fair value valuation is analysed according to the estimated using discounted cash flow models in accor-
level in the fair value hierarchy as follows: (i) The first dance with the third level in the hierarchy for setting fair
level is valuation on the basis of quoted prices (unad- values.
justed) from active markets for the same types of
assets or liabilities, (ii) second-level valuations con-
sists of valuation techniques where all important inputs Derivatives
are observed for an asset or liability, either directly
(i.e. using price) or indirectly (i.e. derived from prices), The fair value of derivatives is based on the fair value
and (iii) third-level valuations are valuations which are statements prepared by the banks, for this reason it falls
not based solely on observation of market information into the second level in the fair value hierarchy.
(meaning that valuation requires significant unobserv-
able inputs). The management of the Company utilises Carrying amounts and the estimated fair values of finan-
judgement in the categorisation of financial tools utiliz- cial assets at 31 December 2019 and 2018 are as fol-
ing a fair value hierarchy. When the measurement of fair lows (in CZK thousands):
value utilises observable inputs, which require signifi-
cant adjustment, then this measurement is assumed to
be level 3.
Continuous valuations using fair value are those that are

required or permitted by accounting standards on the
balance sheet at the end of every reporting period.
Category 2019 2018
Book value Fair value Book value Fair value
ASSETS
Current assets
Trade and other receivables 1,607,412 1,607,412 1,849,922 1,849,922
Cash and cash equivalents 202,534 202,534 400,134 400,134
OUTSIDE RESOURCES
Non-current bonds 3,898,726 3,988,682 3,923,267 3,997,475
Current liabilities
Trade and other payables 582,943 582,943 404,211 404,211
Tax liabilities 11,395 11,395 17,283 17,283
Current bank loans 1,089,148 1,089,148 1,153,368 1,153,368
Current bonds 63,396 63,396 60,795 60,795
DERIVATIVES
Short-term receivables 0 0 6,293 6,293
Long-term receivables 22,143 22,143 21,290 21,290
Current liabilities 0 0 0 0
Non-current liabilities (2,140) (2,140) (26,636) (26,636)

cc) Entities
To translate the registered capital of subsidiaries, the USD/CZK 22.621 and
ZAR/CZK 1.611 rate of exchange effective on 31 December 2019 was used.
Subsidiaries included in the consolidated entity
Company Acquisition Share in the Registered Registered Number and nominal valueof shares
date subsidiary capital TCZK/ capital
TUSD/TZAR TCZK
PFNonwovens
5/12/2005 100% TCZK 3,633 3,633 100% participation of TCZK 3,633
Czech s.r.o.*
64 shares at TCZK 10,000 per share and

PFN – NW a.s. 14/12/2005 100% TCZK 650,000 650,000
10 shares at TCZK 1,000 per share
64 shares at TCZK 10,000 per share and

PFN – NS a.s. 3/12/2007 100% TCZK 650,000 650,000
10 shares at TCZK 1,000 per share
2 registered shares in paper form at

PFN – GIC a.s. 11/9/2017 100% TCZK 2,000 2,000
TCZK 1,000 per share
PFNonwovens
18/10/2010 100% TCZK 200 200 100% participation of TCZK 200
International s.r.o.**
PFNonwovens
6/6/2011 100% TUSD 43,000 972,703 100% participation of TUSD 43,000
EGYPT LLC***
PFNONWOVENS RSA
11/7/2016 100% TZAR 30,000 120,825 100% participation of TZAR 75,000
(PTY) LTD****
*) PFNonwovenss Czech s.r.o. was registered on vens Czech s.r.o. as a successor company (with

14 November 2003 as ELK INVESTMENTS s.r.o and effect from 1 January 2017).
changed its name to PEGAS NONWOVENS s.r.o. in
2006. At the end of year 2017, it changed its name **) PFNonwovens International s.r.o. serves as a spe-
to PEGAS NONWOVENS Czech s.r.o. and then cial purpose vehicle established for the purpose of
in September 2018 to PFNonwovens Czech s.r.o. making potential future investments.
PEGAS a.s., the subsidiary of PFNonwovens
Czech s.r.o., was established in 1990. It merged ***) PFNonwovens Egypt LLC was established for the
with PFNonwovens Czech s.r.o. with effect from purpose of executing the construction and opera-
1 January 2006 and was deleted from the Com- tion of a new production plant in Egypt.
mercial Register on 12 May 2006. CEE Enter-
prise a.s. merged with PFNonwovens Czech s.r.o. ****) PFNonwovens RSA (PTY) LTD was established for
with effect from 1 January 2007 and was deleted the purpose of realisation of the investment project
from the Commercial Register on 20 August 2007. in the Republic of South Africa.
PEGAS – DS a.s., former subsidiary of PFNon-
wovens Czech s.r.o., ceased to exist following its
merger with PFNonwovens Czech s.r.o. with effect
from 1 January 2011. PEGAS-NT a.s., its former
subsidiary, merged with the company PFNonwo-
dd) Related parties 7. Subsequent

transactions events
Below are provided the transactions with related par-
ties outside the Group, i.e. excluding the companies At the beginning of 2020, the existence of the novel
included in the consolidated entity, and their impact on corona virus (Covid-19) was confirmed, which then
the individual items of the Consolidated Statement of spread throughout China and outside its borders,
Comprehensive Income and the Consolidated State- including to the Czech Republic, and caused interrup-
ment of Financial Position. tion to many business and economic activities. The
Group considers the outbreak of this epidemic to be a
'000 CZK 2019 2018 subsequent event that, nevertheless, did not have a sig-
Revenues 2,360 1,529 nificant impact on the operations/finances of the Group
as at the date that the financial statements were issued,
Other operating incomes 4,711 0
and as such will not lead to modifications in these finan-
Raw materials and consumables used 32,140 148 cial statements. The Group produces nonwoven textiles
Other operating costs 58,346 0 that are as a result of this epidemic in high demand and,
Total 97,557 1,677 therefore, this situation is rather an opportunity for the
Group. The production capacities of the Group continue
to be utilised 100% and production has not been signifi-
'000 CZK as at as at
cantly impacted by the epidemic. Nevertheless, despite
31/12/2019 31/12/2087
the aforementioned, the situation is unstable and is
Trade and other receivables 9,997 6,000 developing rapidly, and, therefore, it is currently not pos-
Trade and other payables 23,364 19 sible to make an estimation of its potential impact on
Total 33,361 6,019 the Group. Any actual impacts shall be reflected in the
financial statements for 2020.
On 17 April 2020, the Company announced that Mr.

6. Contingencies František Klaška decided to resign from the Board of
Directors of the Company and from all executive posi-
and commitments tions within the PFNonwovens Concern effective as of
1 May 2020. Effective as of 1 May 2020, Mr. Tonny de
Beer shall be appointed to the Company’s Board of
Directors and shall also replace Mr. František Klaška in
As at 31 December 2019, the Group had contracted all executive positions including the position of Chief
future commitments amounting to EUR 7,2 million, Technical Officer.
i.e. CZK 182 million (CZK 1,191 million as at Decem-
ber 31, 2018) not reported in the statement of financial The management of the Group is not aware of any other
position, which relate to the completion of the investment events that have occurred since the balance sheet date
into the new production line in Znojmo-Přímětice. that would have any material impact on the consoli-
dated financial statements as at 31 December 2019.
The Group has no material contingencies or commit-
ments.
Signature of the authorised representatives:
Date: František Klaška Marian Rašík

Member of the Board of Member of the Board of
30 April 2020 PFNonwovens a.s. PFNonwovens a.s.
9
Non-consolidated
Financial Statements
Statement of Financial Position

of PFNonwovens a.s.
As at 31 December 2019
in thousands of CZK Note 31/12/2019 31/12/2018

ASSETS
Shares in subsidiaries 5i) 290,159 790,264

Long-term loans to subsidiaries 5j) 1,736,112 1,939,939
Total non-current assets 2,026,271 2,730,203
Trade and other receivables 5k) 37,271 38,041

Cash and cash equivalents 5l) 6,288 229,335
Total current assets 43,559 267,376
Total assets 2,069,830 2,997,579
EQUITY AND LIABILITIES
Share capital 5t) 299,857 299,857

Share premium 148,419 148,419
Legal and other reserves 5v) 83,461 83,461
Retained earnings 5u) (260,829) 228,019
Total share capital and reserves 270,908 759,756
Long-term bonds 5m) 1,085,998 1,088,358

Long-term loans from subsidiaries 5n) 693,771 1,111,819
Total non-current liabilities 1,779,769 2,200,177
Short-term bonds 5o) 13,256 13,256

Trade and other payables 5p) 2,383 16,661
Tax liabilities 5q) 4 33
Reserves 5r) 3,510 7,696
Total current liabilities 19,153 37,646
Total liabilities 1,798,922 2,237,823
Total equity and liabilities 2,069,830 2,997,579
The Notes are an integral part of the financial statements.

09 | Non-consolidated Financial Statements 115
Statement of Comprehensive
Income of PFNonwovens a.s.
in thousands of CZK Note 2019 2018
Raw materials and consumables used 5a) (4,556) (6,263)
Staff costs 5b) (6,610) (12,426)
Provisions 5i) (500,104) 0
Other operating income 0 1,556
Other operating expense 5c) (1,548) (1,599)
Foreign exchange gains and other financial income 5d) 15,753 42,488
Foreign exchange losses and other financial expenses 5e) (15,230) (48,469)
Interest income 5f) 58,907 62,608
Interest expense 5g) (35,460) (99,713)
Profit before tax (488,848) (61,819)
Net profit after tax (488,848) (61,819)
Other comprehensive income
Total comprehensive income for the year (488,848) (61,819)
Net profit attributable to:
Equity holders of the company (488,848) (61,819)
Total comprehensive income attributable to:
Equity holders of the company (488,848) (61,819)

Net earnings per share 5t)
Basic net earnings per share (55.78) (0.01)
Diluted net earnings per share (55.78) (0.01)

Statement of Cash Flows of

PFNonwovens a.s.
in thousands of CZK 2019 2018

Profit / (loss) before tax (488,848) (61,819)
Adjustment for:
Exchange rate changes 14,477 (41,900)
Interest expense 35,460 99,713
Interest income (58,907) (62,608)
Other non-cash transactions 486,054 0
Cash flows from operating activities

Decrease / (increase) in receivables 0 187,634
Increase / (decrease) in payables (4,230) 1,698
Net cash from operating activities (15,993) 122,719
Cash flows from investment activities

Net cash flows from investment activities 0 0
Cash flows from financing activities

Increase / (decrease) in short-term bonds 0 (2,304,032)
Increase / (decrease) in long-term bonds 0 (2,367)
Increase / (decrease) in long-term loans from subsidiaries (413,973) 1,114,722
(Increase) / decrease in long-term and short-term loans to subsidiaries 204,153 75,064
Interest received 35,319 275
Interest paid (32,264) (94,184)
Net cash flows from financing activities (206,764) (1,210,522)
Net increase (decrease) in cash and cash equivalents (222,757) (1,087,803)
Cash and cash equivalents at the beginning of the period 229,335 1,298,482
Effect of exchange rate fluctuations on cash held (290) 18,656
Cash and cash equivalents at the end of the period 6,288 229,335

Statement of Changes in Equity

of PFNonwovens a.s.
in thousands of CZK Share capital Share premium Legal and other Retained Total equity attribut-
reserves earnings able to equity holders
of the Company
At 1 January 2018 299,857 148,419 83,461 289,838 821,574
Net profit for the year 0 0 0 (61,819) (61,819)
Rounding 0 0 0 1 1
At 31 December 2018 299,857 148,419 83,461 228,019 759,756

At 1 January 2019 299,857 148,419 83,461 228,019 759,756
Net profit for the year 0 0 0 (488,848) (488,848)
At 31 December 2019 299,857 148,419 83,461 (260,829) 270,908

Luxembourg company PEGAS NONWOVENS SA did

Notes to the non- not cease to exist as a result of the transfer of the head
office of the Company nor did a new legal entity come
consolidated into existence, but rather its legal form was changed to
financial statements NONWOVENS a.s. was recorded in the Czech com-
mercial register with effect from 1 January 2018. On
15 June 2018, the Annual General Meeting resolved to
change the name of the Company to PFNonwovens a.s.
prepared in accordance with International Financial The new name was recorded in the Czech commercial
Reporting Standards (IFRS) as adopted by the European register with effect from 19 June 2018. The head office
Union of the Company is Hradčanské náměstí 67/8, Hradčany,
118 00 Prague 1, Czech Republic. The head office and
For the year ended 31 December 2019 principal place of business of the main operating and
trading company, PFNonwovens Czech s.r.o., is at
(in thousands of CZK) Přímětická 3623/86, 669 02 Znojmo, Czech Republic.
PFNonwovens a.s. is a holding company and owns a

100% share in the main operating company PFNonwo-
vens Czech s.r.o. and in the company PFNonwovens
1. General
PFNonwovens Czech s.r.o. was incorporated in the
information and Czech Republic. Its registered office is located in
Znojmo, Přímětická 86, 669 02 and its subsidiaries
definition of the (PFN – NW a.s., PFN – NS a.s. a PFN – GIC a.s.) are
engaged in the production of nonwoven textiles.
consolidated entity
Within the scope of international expansion was estab-
lished PFNonwovens International s.r.o. in 2010 and in
June 2016 was established PFNonwovens Egypt LLC,
which invests in the Egyptian production capacity. In
July 2016, a subsidiary PFNonwovens RSA (PTY) LTD
was established for the purpose of realisation of the
Description and investment project in the Republic of South Africa.
principal activities The sole shareholder of PFNonwovens Holding s.r.o.

and the ultimate controlling party as at 31 Decem-
ber 2018 is R2G Rohan Sàrl, registered at 2540 Lux-
The Company was incorporated in Luxembourg as a embourg, rue Edward Steichen 14, Grand Duchy of
public limited liability company (société anonyme) for Luxembourg, registration number: B 210733. Subse-
an unlimited duration on 18 November 2005, under quently, R2G Rohan Sàrl is currently owned by several
the name Pamplona PE Holdco 2 SA and was regis- Czech individuals and the Liechtenstein Family Founda-
tered with the Luxembourg trade and companies reg- tion. Except for PFNonwovens Holding s.r.o., company
ister under number B 112.044. In 2006, the Company R2G Rohan Sàrl does not control any other company.
On 18 December 2017, the Extraordinary General Meet-

ing of the Company resolved to transfer the head office
to the Czech Republic and to change the nationality
(status) of the Company from Luxembourg nationality to
Czech nationality. Concurrently, the Extraordinary Gen-
eral Meeting resolved to accept a new wording of the
2. Basis of d) Basis of
preparation measurement
The nonconsolidated financial statements have been
prepared on the historical cost basis except for deriv-
ative financial instruments and share based payments
which are measured at fair value.
a) Statement of
compliance
e) Use of estimates
These financial statements have been prepared in
accordance with International Financial Reporting Stan- and judgments
dards and its interpretations as adopted by the Euro-
pean Union (“IFRS”).
The preparation of financial statements in compliance
These consolidated financial statements were approved with IFRS requires management to make judgments,
by the Board of Directors and authorised for issue on estimates and assumptions that affect the application of
30 April 2020. accounting policies and the reported amounts of assets
and liabilities, income and expenses. The estimates and
associated assumptions are based on historical expe-
rience and various other factors that are believed to
be reasonable under the circumstances, the results of
b) Presentation and which form the basis for making the judgments about
the carrying values of assets and liabilities that are not
functional currency readily apparent from other sources. The actual results
may differ from these estimates.
The functional currency of the Company and the cur- The estimates and underlying assumptions are reviewed
rency in which the financial statements are presented is on an on-going basis. Revisions to accounting esti-
the Czech Koruna (CZK). mates are recognised in the period in which the esti-
mate is revised if the revision affects only that period
or in the period of the revision and future periods if the
revision affects both the current and future periods.
c) Rounding of The management uses the estimates of future cash

flows to classify bank loans and loans granted to/
financial amounts received from subsidiaries into short and long term. A
significant estimate is also the use in determining the
value in use of subsidiaries.
When preparing financial statements, the Company
uses CZK 1,000 as the minimum reporting unit. All
reported figures were rounded off and for this reason
some additions may not add up.
3. Summary c) Borrowing costs

of significant
Borrowing costs other than stated below are recognised
accounting policies in the income statement in the period to which they
relate.
Borrowing costs that relate to assets that take a sub-

The accounting policies set out below have been stantial period of time to get ready for use or sale are
applied consistently to all years presented in these capitalised as part of the cost of such assets.
nonconsolidated financial statements and have been
applied consistently by Group entities.
d) Taxation
a) Foreign currencies
The tax expense in the income statement includes cur-
rent and deferred tax expenses.
When preparing the Company’s financial statements,
a fixed rate is used to convert transactions in curren-
cies other than the functional currency. This rate is Current tax
determined on the basis of the daily exchange rate
announced by the central bank on the last business day Current income tax is based on taxable profit and
of the calendar month and is used for accounting trans- the tax base. Taxable profit differs from net profit as
actions accounted for in the following month. reported in the income statement because it excludes
items of income or expense that are taxable or deduct-
During the year, only realized foreign exchange gains ible in other periods and it further excludes items that
and losses are recognized. Monetary assets and liabil- are never taxable or deductible. The Company’s liabil-
ities denominated in a foreign currency are translated ity for current tax is calculated using tax rates that have
at the balance sheet date at the exchange rate prevail- been enacted under local legislation by the balance
ing on that date. All exchange differences (realized and sheet date.
unrealized) are recognized in the income statement.
Deferred tax
A deferred tax liability or a deferred tax asset is

b) Shares in accounted for using the balance sheet liability method
and results from differences between the carrying
subsidiaries amount of assets and liabilities and the corresponding
tax base of those assets and liabilities used to calculate
the tax. Deferred tax liabilities are generally based on all
Shares in subsidiaries are accounted for at historical temporary differences. Deferred tax assets are recog-
cost. An impairment loss is recognized when the value nized when it is probable that future taxable profits will
of the asset is irreversibly reduced according to the be available against which the deferred tax asset can be
opinion of the management. Other value adjustments utilized.
are not continued if the reasons for doing so are no lon-
ger present.
e) Financial instruments
A financial asset is mainly cash, an equity instrument of
another entity or a contractual right to receive cash or
another financial asset. A financial liability is mainly a Impairment of financial assets

contractual obligation to deliver cash or another finan-
cial asset. Impairment of financial assets by applying the IFRS 9
requirements is based on expected credit loss (ECL)
Financial liabilities and assets are presented as current model.
(short-term) or non-current (long-term). Financial assets
are presented as current when the Company expects to The Company has financial receivables to credible
realize them within 12 months of the balance sheet date financial institutions and to subsidiaries. Impairment of
or if there is no reasonable certainty that the Company financial assets due to ECL is immaterial and the Com-
will hold the financial assets for more than 12 months of pany therefore decided not to account for it.
the balance sheet date.
Financial liabilities are presented as current when they Derivative financial instruments
are due within 12 months of the balance sheet date.
The Company’s operating activities are primarily
Financial assets and financial liabilities are offset and exposed to financial risks such as changes in foreign
the net amount is reported in the balance sheet if there exchange rates and interest rates. Where necessary, the
is a currently enforceable legal right to offset the recog- Company uses derivative financial instruments to cover
nized amounts and there is an intention to settle on a these risks.
net basis, to realize the assets and settle the liabilities
simultaneously. Derivative financial instruments are initially measured at
fair value on the contract date, and are remeasured to
fair value at subsequent reporting dates.
Financial liabilities
The method of recognizing the resulting gain or loss
Financial liabilities are valued in the category “amortised depends on whether the derivative is designated as a
value” with the exception of i) financial liabilities booked hedging instrument, and if so, the nature of the item
against expenses and gains: this classification is applied being hedged.
to derivatives, financial liabilities including for trading
(e.g. short positions in securities) and other financial lia-
bilities that have been classified as such at initial recog- Hedge accounting – cash flow hedges
nition.
The Company does not have derivatives that it would
Financial liabilities are booked when extinguished (i.e. at account for in accordance with hedge accounting
the point in time when the obligation that is specified in requirements.
the contract is completed, cancelled or has expired).
Other derivatives
Financial assets
Certain derivative instruments are not designated for
Financial assets are classified into two main categories hedge accounting. Changes in the fair value of any
(a) at amortized cost (which include mainly trade receiv- derivative instruments that do not qualify for hedge
ables) and (b) at fair value through profit or loss. Clas- accounting are recognized immediately in the income
sification into these categories is similar to the financial statement.
liabilities above.
The Company categorises financial assets such as

financial assets in amortised value only when the follow-
ing criteria are met: f) Stock option plan
Ì the asset is held on the basis of a business model,
the objective of which is to collect contractual finan- The Company concluded a stock option plan, which is
cial flows and concurrently realized through phantom options, the value of which is
derived from the actual share price of the Company.
Ì financial flows that arise on the basis of contractual
conditions, are only payments of principal and interest
The Company measures the liability arising from the probable that the Company will be required to settle
stock option plan at fair value at the balance sheet date. that obligation, and a reliable estimate can be made of
Changes in the fair value of these liabilities are rec- the amount of the obligation. Provisions are measured
ognised in the statement of comprehensive income for at the management’s best estimate of the expenditure
the period. required to settle the obligation at the balance sheet
date, and are discounted to the present value where the
Fair value is calculated as the intrinsic price of an effect is material.
option, i.e. the difference between the current market
price of the Company’s shares and the phantom share
strike price. The time value of an option is not taken into
consideration.
j) Own shares
Treasury shares are presented in the balance sheet as
g) Cash and cash a deduction from equity in the amount equal to their
acquisition cost. The acquisition of treasury shares is
equivalents recorded based on the trade date and presented in the
statement of changes in equity as a reduction in equity.
Cash and cash equivalents comprise cash on hand,

bank accounts and other short-term highly liquid invest-
ments that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes k) Adoption of new and
in value.
revised standards
h) Long-term liabilities Standards and Interpretations

effective in the current period
Long-term liabilities, such as long-term bank loans and The following amendments to the existing standards
bonds, are initially measured in the amount of the cash- issued by the International Accounting Standards Board
flow received upon issuance of such a debt instrument (IASB) and adopted by the EU are effective for the cur-
reduced by the related transaction costs. Subsequently rent reporting period for the first time:
the liabilities are measured at amortized cost using the
effective interest rate method. The difference between Ì IFRS 16 Leasing – effective for annual periods
the nominal value and the initial measurement of the beginning on or after 1 January 2019.
debt is amortised through the income statement over
the maturity of the debt. The new IFRS 16 Leasing standard replaces all exist-
ing international accounting directives relating to leasing
The issuance costs and discount below, resp. premium accounting for both the lessee and the lessor. Accord-
above the nominal value, are treated as a reduction of, ing to this standard, the lessee will book the majority
resp. increase in the nominal value of the instrument of leasing items on the balance sheet. For the lessor,
issued. These amounts are included in the amortization the booking method remains practically unchanged.
using the effective interest rate method. This model will be used for leasing, with the exception
of short-term rentals and leases, where the underlying
asset has a low value. The standard is binding from the
regular accounting period starting 1 January 2019 and
the Company has implemented this standard to this
i) Provisions date.
The inclusion of this standard had no impact on the

Provisions are recognised when the Company has a Company’s financial results due to the fact that the
present obligation as a result of a past event, and it is Company has no leases, which would meet IFRS 16 cri-
teria for capitalisation of leased assets and the associ- (effective for annual periods beginning on or after
ated financial liability on the balance sheet. 1 January 2020),
Ì Amendments to IFRS 9 Financial instruments – Ì IFRS 17 Insurance Contracts (effective for annual
Subscription feature with negative compensation periods beginning on or after 1 January 2021),
– effective for annual periods beginning on or after
1 January 2019, Ì Amendments to IFRS 10 “Consolidated Financial
Statements” and IAS 28 “Investments in Asso-
Ì Amendments to IAS 19 Employee Benefits – Plan ciates and Joint Ventures” – Sale or Contribution
Amendment, Curtailment or Settlement (effective of Assets between an Investor and its Associate or
for annual periods beginning on or after 1 January Joint Venture and further amendments (effective
2019), date deferred indefinitely until the research project
on the equity method has been concluded),
Ì Amendments to IAS 28 Investments in Associates
and Joint Ventures – Long-term Interests in Associ- Ì Amendments IFRS 9, IAS 39 and IFRS 7 Bench-
ates and Joint Ventures (effective for annual periods mark rate reform (effective for annual periods
beginning on or after 1 January 2019), beginning on or after 1 January 2020),
Ì IFRIC 23 Uncertainty over Income Tax Treatments Ì Amendment IAS 1 – Presentation and publication
(effective for annual periods beginning on or after of financial statements: Classification of liabilities
1 January 2019). as short term, resp. long term (effective for annual
periods beginning on or after 1 January 2022).
The adoption of these standards did not have an impact
on the Company’s financial statements. The Company does not expect to apply any of the
above standards, revisions or amendments before
Amendments to various standards due to “Improve- their effective date. The Company anticipates that the
ments to IFRSs (cycle 2015 -2017)” resulting from the adoption of these new standards, amendments to the
annual improvement project of IFRS (IFRS 3, IFRS 11, existing standards and new interpretations will have no
IAS 12 and IAS 23) primarily with a view to remov- material impact on the financial statements of the Com-
ing inconsistencies and clarifying wording (effective for pany in the period of initial application.
annual periods beginning on or after 1 January 2019).
New standards
Certain new standards and interpretations have been 4. Financial risks,

issued that are compulsory for the financial period
starting 1 January 2020 or later and that the Company investments
already implemented earlier. To the approval date of this
financial statement, the International Accounting Stan- risks and capital
dards Board (IASB) has issued the following new stan-
dards, amendments to the existing standards and inter- management
pretations accepted by the European Union, which have
not yet come into effect:
Ì Amendments to References to the Conceptual The Company is a holding company and in this respect
Framework in IFRS Standards (effective for annual is exposed to the following financial risks:
periods beginning on or after 1 January 2020).
Ì credit risk in connection with funds deposited with
Ì Amendment to IFRS 3 Business Combinations financial institutions, banks
(effective for annual periods beginning on or after
1 January 2020), Ì liquidity risk, with particular reference to the avail-
ability of funds and access to the credit market;
Ì Amendments to IAS 1 Presentation of Finan-
cial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors
Ì market risk (primarily relating to foreign exchange Ì maintaining an adequate level of available liquidity;
and interest rates), since the Company operates at
an international level in different currencies. Ì obtaining adequate credit lines;
When managing its financial risks, the Company con- Ì monitoring future liquidity on the basis of business
centrates on the unpredictability of financial markets planning.
and endeavours to minimise potential negative effects
on the results of operations.
Liquidity risk analysis
The following paragraphs provide qualitative and quanti-
tative disclosure on potential effects of these risks upon The following tables detail the Company’s expected
the Company. maturity for its non-derivative financial assets and
remaining contractual maturity for its non-derivative
financial liabilities. The tables have been drawn up
based on the undiscounted contractual maturities of the
financial assets including interest that will be earned on
Credit risk those assets and based on undiscounted cash flows of
financial liabilities based on the earliest date on which
the Company can be required to pay. The financial liabil-
The credit quality of bank balances can be summarized ities part of the table includes both interest and principal
based on Moody’s ratings as at 31 December 2019 and cash flows.
2018 as follows:
31 December 2019 31 December 2018

Aa3 6,241 35,835
A1 47 193,500
Total 6,288 229,335
Explanation of the Moody’s rating:
Aa3 – very high quality with very low credit risk
A1 – A2 assessed as high quality with low credit risk.
A3 – assessed as medium quality at a higher level with a

low credit risk.
Baa1 – Baa3 – assessed as medium quality with a cer-

tain degree of a speculative level and a medium credit
risk.
Liquidity risk
Liquidity risk arises if the Company is unable to obtain
the funds needed to carry out its operations under cur-
rent economic conditions.
In order to reduce the liquidity risk, the Company opti-

mises the management of funds as follows:
2019 Interest rate as Less than 6 months – 1 year – 2 years – 5+ years Total
at 31 December 6 months 1 year 2 years 5 years
Financial assets:
Loans to subsidiaries 3.50% 0 0 0 1,736,112 0 1,736,112
Fixed interest rate bonds 2.646% 0 28,577 28,577 1,108,577 0 1,165,730
Loans from subsidiaries 3.50% 0 0 0 693,771 0 693,771
Cross currency rate swaps 0 3,322 3,322 (64,02)9 0 (57,386)
Total 0 31,898 31,898 1,738,319 0 1,802,116
2018 Interest rate as Less than 6 months – 1 year – 2 years – 5+ years Total
at 31 December 6 months 1 year 2 years 5 years
Financial assets:
Loans to subsidiaries 3.50% 0 0 0 1,939,939 0 1,939,939
Fixed interest rate bonds 2.646% 0 28,577 28,577 1,137,154 0 1,194,307
Loans from subsidiaries 3.50% 0 0 0 1,111,819 0 1,111,819
Cross currency rate swaps 0 3,717 3,717 (47,363) 0 (39,929)
Total 0 32m294 32,294 2,201,609 0 2,346,055
The Company did not change any objectives, policies

and processes for managing the liquidity risk in 2019. Currency risk
Financial activity
Market Risk
The Company is exposed to unrealized foreign
exchange gains/losses from the revaluation of balance
Market risk is the risk that the Company’s income or sheet items (bank loans, bonds, intra-company loans,
the value of the financial instruments held are affected cash, trade receivables and trade payables). Unrealized
by changes in market prices, such as foreign exchange foreign exchange gains and losses do not have an effect
rates, interest rates and equity prices. on the cash flows of the Company.
The Company is exposed to market risks from fluctua- The Company is exposed to a currency risk primarily
tions in foreign currency exchange rates. resulting from changes to the following currency pairs:
Ì CZK/EUR – The currency risk is mainly due to the

balance of loans provided to subsidiaries and loans
received from subsidiaries denominated in EUR. The
bonds issued by the Company are denominated in
CZK. The Company has no other significant assets
or liabilities in currencies other than CZK. Given the

positive balance (net receivable) of loans provided to Capital management
subsidiaries, the appreciation of CZK against EUR
has a negative impact on the financial result, as the
CZK appreciation leads to a reduction in the net loan The Company’s objectives when managing capital are:
receivable of the subsidiaries expressed in CZK. The
depreciation of CZK against EUR has the opposite Ì to safeguard the entity’s ability to continue as a
effect. going concern, so that it can continue to provide
returns for shareholders and benefits for other stake-
Changes in other currency exchange rates should have holders, and
no fundamental impact on the results of the Company.
Ì to provide an adequate return to shareholders com-
mensurately with the level of risk.
Impact of changes in foreign 2019 2018
currency exchange rates
The Company manages the amount of capital and cap-
Appreciation of CZK against ital structure, and makes adjustments to it in the light of
(40,076) (30,283)
EUR by 5% changes in economic conditions and the risk character-
istics of the underlying assets. The Company considers
Depreciation of CZK against
40,076 30,283 equity and proceeds from the bond issues as capital.
EUR by 5%
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to
‘000 CZK shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt.
and processes for managing the currency risk in 2019. The Company does not define the necessary level of
capital, however management closely monitors the risks
in connection with capital inadequacy and is prepared
to change the level of capital as stated above.
Interest rate risk In accordance with the terms of the bonds issued by the
Company, the Company has to keep the ratio of consol-
idated net debt to consolidated EBITDA below 4.50. As
The Company is not exposed to interest rate risk of 31 December 2019, this ratio was 3.93.
because the loans granted to subsidiaries resp. the
loans received from subsidiaries have a fixed interest
rate. Also, the bonds issued bear a fixed interest rate.

and processes for managing the interest rate risk in
2019.
Investment risks
The Company holds shares in subsidiaries and provides
them with loans for the financing of investment projects
in Egypt and South Africa. In general, investments of
this kind carry a higher degree of risk than investments
in more developed countries. These higher risks include
among others changes in the political environment, rev-
enue transfers, nationalization, or politically motivated
violent damage.
Insurance expenses represent the cost of liability insur-

5. Notes to the ance of the members of the Board of Directors.
non-consolidated
financial statements
d) Foreign exchange
gains and other
financial income
a) Raw materials,
consumables and '000 CZK 2019 2018
services used Foreign exchange gains 1,702 42,488

Revaluation of derivatives 14,051 0
'000 CZK 2019 2018 Foreign exchange gains and
15,753 42,488
Expenses on external services 4,556 6,263 other financial income
Total raw materials and con-

4,556 6,263
sumables used
e) Foreign exchange
b) Staff costs losses and other
'000 CZK 2019 2018
financial expenses
Remuneration of Board members 8,531 10,367
'000 CZK 2019 2018
Other wages 240 240
Foreign exchange losses 15,207 344
Social and health insurance 2,025 2,730
Bank fees 23 39
Expenses/(income) from the
(4,186) -911
revaluation of the option plan Revaluation of derivatives 0 48,086
Total staff costs 6,610 12,426 Foreign exchange losses and

15,230 48,469
other financial expenses
c) Other operating
expense f) Interest income
'000 CZK 2019 2018
'000 CZK 2019 2018
Insurance expense 1,508 1,579
Interest income on term deposits 1,333 275
Other operating expense 40 20
Interest income on loans pro-
57,574 62,334
Total other operating expense 1,548 1,599 vided to subsidiaries
For the assessment of the reduction of value of its share

g) Interest expense in PFNonwovens Czech s.r.o., the accounting value of
the share is compared to the valuation of CGU CZ. The
valuation of CGU CZ consists of the calculated val-
'000 CZK 2019 2018 ue-in-use increased by the value of CGU CZ cash and
decreased by the value of non-current long term liabili-
Interest expense from issued bonds 29,884 94,022
ties as at 31 December 2019.
Interest expenses on loans received
5,576 5,691
from subsidiaries For the assessment of the reduction of value of its share
in PFNonwovens International s.r.o the accounting value
Interest expense 35,460 99,713
of the share is compared to the sum of the valuations
of CGU EG and CGU JAR. The valuation of CGU EG
consists of the calculated value-in-use increased by
the value of CGU EG cash and decreased by the value
of non-current long term liabilities as at 31 December
2019. In respect to the fact that CGU JAR commenced
h) Income tax commercial operations only in the middle of 2019, the
management believes that for the calculation of the
value of value-in-use of CGU JAR there is currently an
The Company does not generate tax profits and conse- insufficient amount of relevant information. For this rea-
quently no tax payable is accounted for. son, the valuation of CGU JAR was set as the sum of
the accounting value of the investment into equity and
Potential deferred tax assets arising from accumulated intra-company loans provided to CGU JAR in connec-
tax losses from previous periods have not been recog- tion with the construction of the production plant in
nized because of its potential utilization in the future is South Africa.
unlikely.
Key prerequisites used in the calculation

of the value-in-use are the following:
i) Shares in subsidiaries Ì Customer demand – In the past, the Company has

been able to sell 100% of production capacity of
the unit generating cash flows. The management
believes that the planned almost full utilisation of
'000 CZK % Share 31/12/ 31/12/
production capacities in the upcoming years is real-
ownership capital 2019 2018
istically achievable.
PFNonwovens
100% 3,633 9,803 9,803
Czech s.r.o. Ì Planned gross margin – In 2020 and in subsequent
years, the management conservatively expects a
PFNonwovens
100% 200 280,356 780,461 similar trend as in the past.
Shares in sub-
290,159 790,264
sidiaries Projection of future cash flows
For the purpose of assessing whether a reduction of the

The Company tested its shares in the subsidiaries for value of the shares has occurred, a value-in-use cal-
impairment as at 31 December 2019. Management culation was used for CGU CZ and CGU EG, which is
decided that for the purposes of testing the reduction based on the forecast cash flows according to the finan-
of value of its shares in the subsidiaries, the subsidiar- cial budgets approved by the management for each
ies of the Company are divided into three cash-generat- individual CGU for 2020, discounted by the below-men-
ing units, i.e. subsidiaries of the Company in the Czech tioned discount rates.
Republic (hereinafter “CGU CZ”), the subsidiary of the
Company in Egypt (hereinafter “CGU EG”) and the sub- The cash flow forecasts for the period 2021-2033 are
sidiary of the Company in South Africa (hereinafter based on past experience, whilst it is conservatively
“CGU JAR”). assumed that during the course of this period:
Ì For CGU CZ – 1% year-on-year decline in revenues

and EBITDA. j) Long-term loans
Ì For CGU EG – 0% year-on-year change in revenues to subsidiaries
and EBITDA.
Cash flows for 2033 are calculated for both the CGU’s '000 CZK 31/12/2019 31/12/2018
with a conservative presumption of 0% year-on-year
change and the discount rates provided below. PFNonwovens International s.r.o.
1,487,590 1,711,832
– nominal
PFNonwovens International s.r.o.

Discount rates – accrued interest
248,522 228,107
The discount rates provided below have been set on the Long-term loans to subsidiaries 1,736,112 1,939,939
basis of an estimation of weighted costs of capital of
the Group, increased by a risk surcharge for the individ-
ual countries in which the CGU’s are operated. Loans to subsidiaries principally consist of loans
granted to PFNonwovens International s.r.o. in connec-
tion with investment projects abroad.
CGU Used discount rate
CGU CZ 5.1% As at 31 December 2019, the Company has provided to

PFNonwovens International s.r.o. in connection with an
CGU EG 9.2%
investment project in Egypt, a loan with a nominal value
of EUR 49.9 million (EUR 57.9 million as at 31 December
2018) maturing in 2024, which bears a fixed interest rate
Booking of the reduced value of the share of 3.5% p.a.
On the basis of the above-mentioned calculations, As at 31 December 2019, the Company has provided
impairment was booked with respect to the account- to PFNonwovens International s.r.o. in connection
ing value of the share in PFNonwovens Interna- with an investment project in South Africa, loans with
tional s.r.o as at 31 December 2019 in the amount of a nominal value of EUR 8.6 million (EUR 8.6 million as
CZK 500,104 thousand. at 31 December 2018) maturing in 2022, which bear a
fixed interest rate of 3.5% p.a.
In relation to the share in PFNonwovens Czech s.r.o., as
at 31 December 2019, no impairment of the share value
was not booked.
k) Trade and other

Sensitivity analysis
receivables
The valuation of the individual CGU’s is sensitive primar-
ily to changes in the discount rate.
'000 CZK 31/12/2019 31/12/2018
An increase in the discount rate for CGU CZ by 1 pp.
Non-financial assets
would reduce the value of the valuation of CGU CZ by
CZK 1,973,820 thousand. Impairment of the value of the Positive fair value of financial
77 0
share in PFNonwovens Czech s.r.o. would be booked derivatives
only when using a discount rate of 28% for CGU CZ or
Operating advances granted 0 290
greater.
Other receivables from subsid-
37,194 37,751
An increase in the discount rate for CGU EG by iaries
1 pp. would reduce the valuation of CGU EG by
Trade and other receivables 37,271 38,041
CZK 93,423 thousand. Impairment of the value of the
share in PFNonwovens International s.r.o. would not be
booked when using a discount rate of 5.9% for CGU EG Financial derivatives and their fair value are disclosed in
or smaller. Note 5 (p) Trade and other payables.
l) Cash and cash n) Long-term loans

equivalents from subsidiaries
'000 CZK 31/12/2019 31/12/2018 '000 CZK 31/12/2019 31/12/2018
Cash in hand 0 193,447 PFNonwovens Czech s.r.o.

686,070 1,106,175
– nominal
Current accounts 6,288 35,888
PFNonwovens Czech s.r.o.
– accrued interest
Long-term loans from subsid-

693,771 1,111,819
iaries
The credit quality of bank balances based on Moody’s
rating as at 31 December 2019 and 2018 is presented in
Part 4 Credit risk.
Subsidiary PFNonwovens Czech s.r.o. provided loans
to the Company in November 2018 in connection with
the repayment of the public bond (ISIN CZ0000000559).
The loans with the total nominal value of EUR 43.0 mil-
m) Long-term bonds lion bear a fixed interest rate of 0.6%.
During 2019, the Company repaid the nominal amount

'000 CZK 31/12/2019 31/12/2018 of these loans in the amount of EUR 16.0 million. The
outstanding nominal as at 31 December 2019 thus
Private bond issue 2.646/2022
1,080,000 1,080,000 amounted to EUR 27.0 million.
– nominal
Private bond issue 2.646/2022

5,998 8,358
– amortization of costs
Long-term bonds 1,085,998 1,088,358

o) Short-term bonds
On 14 June 2015, the Company issued the bonds '000 CZK 31/12/2019 31/12/2018
(ISIN CZ0000000658) with the total nominal value of
Interest accrued on issued
CZK 1,080,000,000.00 with a fixed interest rate of 13,256 13,256
bonds
2.646% p.a. The bond matures on 14 June 2022.
Short-term bonds 13,256 13,256
The cost of bond issues is amortized over the maturity
of the bond.
p) Trade and q) Tax liabilities

other payables
Tax liabilities of CZK 4 thousand as at 31 December
2019 (CZK 32 thousand as at 31 December 2018) repre-
'000 CZK 31/12/2019 31/12/2018 sent liabilities from income tax from dependent activity.
Financial liabilities
Trade payables to subsidiaries 1,388 1,928
Negative fair value of financial

derivatives
0 13,672 r) Reserves
Contingent liabilities 970 968
The provision as at 31 December 2019 of
Trade and other payables 25 93
CZK 3,510 thousand (CZK 7,696 thousand as at
Trade and other payables 2,383 16,661 31 December 2018) represents the fair value of the
Company’s potential liability in respect of the share
options programs from 2007 and 2010.
Financial derivatives
Information on share options programs
On 9 July 2015, the Company entered into a cross
currency swap agreement with the financial institu- The information below relates to share option programs
tion (hereinafter referred to as “Swap 1”), in which it from 2007 and 2010 for which as at 31 December 2018
exchanged funds obtained from Bond 1 in CZK for and as at 31 December 2017 there remained 60,304
financial means in EUR. phantom share options to be exercised. All the issued
share options/warrants from share option programs in
Under this swap agreement, the Company is a 2014 and 2017 have been exercised.
payer of the EUR fixed rate of 3.15% and the recip-
ient of the CZK fixed rate of 2.646%. On the matu- The Annual General Meeting held on 15 June 2007
rity date of Bond 1, on July 14, 2022, the Com- approved the grant of an aggregate amount of 230,735
pany will receive the nominal value of the swap of phantom options. Each phantom option, when exer-
CZK 1,080,000,000.00 and pay the nominal value of the cised, will grant the manager the right to receive cash
swap of EUR 39,852,398.52. calculated as closing price of one company share on
the Prague stock exchange (the PSE) (or other mar-
Fair value of the swaps as at 31 December 2019 and ket if the PSE trading is discontinued) on the day pre-
2018 was as follows. A positive value represents a ceding the day of exercise of the phantom option less
receivable of the Company, a negative value represents CZK 749.20 representing the offer price at the time of
a payable of the Company. Swap 1 do not meet the cri- the initial public offering of the shares of PFNonwovens
teria for hedging derivatives and changes in their fair a.s. (the IPO price). Of the originally granted 230,735
value are therefore recognized in the income statement. phantom options, 44,840 phantom options are currently
held by former executive managers and non-executive
'000 CZK 31/12/2019 31/12/2018 directors.
Swap 1 – derivate inducted for
77 (13,672) The Annual General Meeting held on June 15, 2010
trading
approved the grant of an aggregate amount of 230,735
Total 77 (13,672) phantom options. Each phantom option, when exer-
cised, will grant the director the right to receive in cash
an amount equal to the difference between CZK 473.00
representing the Company’s share price on the PSE as
of 15 December 2009 increased by 10%, and the clos-
ing price of one Company’s share on the day preceding
the day of exercise of the phantom option on the PSE.
Of the originally granted 230,735 phantom options,
15,464 phantom options are currently held by former share since the Company has no instruments issued
executive managers and non-executive directors. that would potentially have a diluting effect on earnings.

option as at 31 December 2019: Basic earnings per share
Grant date Strike Number of Fair value of 2019 2018

price granted options granted options
Net profit attributable to
TCZK (488,848) (61,819)
(CZK) (pcs) (TCZK) equity holders
24/05/2007 749.20 44,840 0 Weighted average number

Number 8,763,859 8,764,538
of ordinary shares
15/06/2010 473.00 15,464 3,510
Basic earnings per share CZK (55.78) (7.05)
Total 60,304 3,510
Diluted earnings per share CZK (55.78) (7.05)

option as at 31 December 2018: Basic Earnings per Share (EPS) and Diluted Earnings
per Share (Diluted EPS) are calculated as net profit
Grant date Strike Number of Fair value of for the year attributable to equity holders of the Com-
price granted options granted options pany divided by the weighted average of the number of
shares existing each day in the given year.
(CZK) (pcs) (TCZK)
24/05/2007 749.20 44,840 2,547
15/06/2010 473.00 15,464 5,150
Total 60,304 7,696 t) Share capital

The fair value of the phantom options as at 31 Decem- The total number of shares as at 31 December 2018
ber 2019 was TCZK 3,510 (TCZK 7,696 as at 31 Decem- was 8,763,859 shares at EUR 1.24 per share. The Com-
ber 2018). The current management of the Company did pany held 0 pieces of own shares as at 31 December
not hold any phantom option as at 31 December 2019 2018.
and as at 31 December 2018.
The total number of shares as at 31 December 2019
The fair value of phantom options was calculated as was 8,763,859 shares at EUR 1.24 per share. The Com-
a difference between the Company’s closing share pany held 0 pieces of own shares as at 31 December
price on the PSE of CZK 700 as at 31 December 2019 2019.
(CZK 806 as at 31 December 2018) and the strike price
of the phantom options. As at 31 December 2019, the share capital of the Com-
pany amounts to EUR 10,867,185.16.
No new shares were issued during the course of 2019

or 2018.
s) Earnings per share
The calculation of basic earnings per share as at
31 December 2019 was based on the net profit attribut- u) Retained earnings
able to equity holders and a weighted average number
of ordinary shares in 2019. There were no changes in
the number of shares in 2019. In 2019, the annual general meeting decided to cover
the loss from retained profits from previous years.
Fully diluted earnings per share as at 31 December 2019
and 31 December 2018 are equal to basic earnings per
In 2018, the annual general meeting of the Company Continuous valuations using fair value are those that are
resolved to transfer the profit for 2017 to the account of required or permitted by accounting standards on the
retained profits from previous years. balance sheet at the end of every reporting period.
The following methods and assumptions are used by

the Company to estimate the fair value of each class of
financial instruments:
v) Legal and
other reserves Cash and cash equivalents,
current investments
'000 CZK 31/12/2019 31/12/2018 The carrying amount of cash and other current finan-
Legal reserves 29,070 29,070 cial assets approximates fair value due to the relatively
short-term maturity of these financial instruments.
Other reserves 54,390 54,390
Legal and other reserves 83,461 83,461
Short-term receivables and payables
Legal reserves are created in the amount of 10% of the
Company’s share capital. This reserve is not available The carrying amount of receivables and payables
for dividend distribution. approximates fair value due to the short-term maturity
of these financial instruments.
Other reserves include mainly dividends not paid on
own shares and are distributable to shareholders.
Short-term loans
The carrying amount approximates fair value because of

w) Fair value of the short period to maturity of those instruments.
financial instruments
Long-term debt
Fair value is defined as the amount at which the instru- The fair value of long-term debt is based on the quoted
ment could be exchanged in a current transaction market price for the same or similar issues or on the
between knowledgeable willing parties in an arm’s current rates available for debt with the same matu-
length transaction, other than in a forced or liquidation rity profile. The carrying amount of long-term debt and
sale. Fair values of the financial instruments of the Com- other payables with variable interest rates approximates
pany are based on fair value statements prepared by the their fair values. The fair value of long term debts was
banks or determined based on cash flow models. estimated using discounted cash flow models in accor-
dance with the third level in the hierarchy for setting fair
The fair value valuation is analysed according to the values.
level in the fair value hierarchy as follows: (i) The first
level is valuation on the basis of quoted prices (unad-
justed) from active markets for the same types of assets Derivatives
or liabilities, (ii) second-level valuations consists of valu-
ation techniques where all important inputs are observed The fair value of derivatives is based on the fair value
for an asset or liability, either directly (i.e. using price) statements prepared by the banks for this reason, it falls
or indirectly (i.e. derived from prices), and iii) third-level into the second level in the fair value hierarchy.
valuations are valuations which are not based solely on
observation of market information (meaning that valua- Carrying amounts and the estimated fair values of finan-
tion requires significant unobservable inputs). The man- cial assets (except for derivatives) at 31 December 2019
agement of the Company utilises judgement in the cate- and 2018 are as follows (in CZK thousands):
gorisation of financial tools utilizing a fair value hierarchy.
When the measurement of fair value utilises observable
inputs, which require significant adjustment, then this
measurement is assumed to be level 3.
Category 2019 2018
Book value Fair value Book value Fair value
ASSETS
Current assets
Long-term loans to subsidiaries 1,736,112 1,736,112 1,939,939 1,939,939
Trade and other receivables 37,271 37,271 38,041 38,041
OUTSIDE RESOURCES
Long term bonds (1,085,998) (1,060,289) (1,088,358) (1,059,126)
Current liabilities
Short-term loans from subsidiaries (693,771) (693,771) (1,111,819) (1,111,819)
Short-term bonds (13,256) (13,256) (13,256) (13,256)
Trade and other payables (2,383) (2,383) (16,661) (16,661)
DERIVATIVES
Short-term receivables 0 0 0 0
Long-term receivables 77 77 0 0
Current liabilities 0 0 0 0
Non-current liabilities 0 0 (13,672) (13,672)
x) Related parties '000 CZK 2019 2018
transactions Other operating oncome 0 1,529
Interest expense (5,576) (5,691)

The following are related party transactions and their
impact on the consolidated statement of comprehen- Total 51,998 58,172
sive income and the consolidated statement of financial
position.
'000 CZK 31/12/2019 31/12/2018
Assets
7. Subsequent
Long-term loans to subsid-
1,736,112 1,939,939
events
iaries
Other receivables from

37,194 37,751
subsidiaries
At the beginning of 2020, the existence of the novel
Total assets 1,773,306 1,977,690 corona virus (Covid-19) was confirmed, which then
spread throughout China and outside its borders,
including to the Czech Republic, and caused interrup-
Liabilities tion to many business and economic activities. The
Company considers the outbreak of this epidemic to
Short-term loans from
693,771 1,111,819 be a subsequent event that, nevertheless, did not have
subsidiaries
a significant impact on the operations/finances of the
Trade and other payables 1,388 1,928 companies in the group as at the date that the finan-
cial statements were issued, and as such will not lead to
Total liabilities 695,159 1,113,747
modifications in these financial statements.
On 17 April 2020, the Company announced that

Mr. František Klaška decided to resign from the Board of
Directors of the Company and from all executive posi-
tions within the PFNonwovens Concern effective as of
6. Contingencies 1 May 2020. Effective as of 1 May 2020, Mr. Tonny de
Beer shall be appointed to the Company’s Board of
and commitments Directors and shall also replace Mr. František Klaška in
all executive positions including the position of Chief
Technical Officer.
On 6 October 2015, the Company issued a corpo- The management of the Company is not aware of any
rate guarantee of up to EUR 30 million (CZK 762.3 mil- other events that have occurred since the balance
lion), which guarantees the repayment of all liabili- sheet date that would have any material impact on the
ties related to the overdraft facility provided by Česká non-consolidated financial statements as at 31 Decem-
spořitelna, a.s., to PFNonwovens Czech s.r.o. ber 2019.
The Company’s management is not aware of any other

contingent liabilities of the Company as at 31 Decem-
ber 2019.
Date: Signature of the authorised representatives:
30 April 2020 František Klaška Marian Rašík

10
Independent
Auditor’s Report
Independent auditor’s report

to the shareholder of company PFNonwovens a.s.
to the shareholder of company PFNonwovens a.s.
Report on the audit of the consolidated and separate financial statements
Report on the audit of the consolidated and separate financial statements
Our opinion
Our
In ouropinion
opinion:
In our
theopinion:
accompanying consolidated financial statements give a true and fair view of the consolidated
financial position ofconsolidated
 the accompanying PFNonwovens a.s., with
financial its registered
statements give aoffice at Hradčanské
true and fair view of náměstí 67/8,
the consolidated
Praha 1 („the
financial Company“)
position and its subsidiaries
of PFNonwovens a.s., with its(together “theoffice
registered Group”) as at 31 December
at Hradčanské náměstí 2019,
67/8, of
their consolidated financial performance and their consolidated cash flows for the year
Praha 1 („the Company“) and its subsidiaries (together “the Group”) as at 31 December 2019, of ended
31 December
their 2019financial
consolidated in accordance with International
performance Financial Reporting
and their consolidated cash flowsStandards as adopted
for the year ended by
the European Union (“EU“).
31 December 2019 in accordance with International Financial Reporting Standards as adopted by
 the
the European Unionseparate
accompanying (“EU“). financial statements give a true and fair view of the financial position
 of the Company standing
the accompanying separate alone as at statements
financial 31 December 2019,
give of and
a true its financial
fair viewperformance andposition
of the financial its cash
flows
of the for the yearstanding
Company ended 31 December
alone as at 312019 in accordance
December 2019, ofwith International
its financial Financialand
performance Reporting
its cash
Standards
flows for theasyear
adopted
endedby31
theDecember
EU. 2019 in accordance with International Financial Reporting
Standards
What we haveas adopted by the EU.
audited
What we have
The Group’s audited financial statements comprise:
consolidated
The The
Group’s consolidated
consolidated financial
statement statements
of financial comprise:
position as at 31 December 2019;
 The consolidated
The consolidated statement
statement of
of comprehensive
financial positionincome
as at 31
forDecember 2019; 31 December 2019;
the year ended
statement of
of cash
comprehensive income
flows for the for the31
year ended year ended 312019;
December December 2019;
statement of
of changes
cash flows
in for the for
equity year ended
the year 31 December
ended 2019; 2019; and
31 December
 The
The consolidated statement offinancial
notes to the consolidated changesstatements,
in equity forwhich
the year ended
include 31 December
significant 2019;policies
accounting and
and other explanatory information.
 The notes to the consolidated financial statements, which include significant accounting policies
The and other explanatory
Company’s information.
separate financial statements comprise:
The The
Company’s separate
statement financial statements
of non-consolidated comprise:
financial position as at 31 December 2019;
 The
The statement
statement of
of non-consolidated
non-consolidated financial positionincome
comprehensive as at 31
forDecember 2019; 31 December 2019;
the year ended
 The
The statement
statement of
of non-consolidated
non-consolidated comprehensive income
cash flows for the for the31
year ended year ended 312019;
December December 2019;
 The
The statement
statement of
of non-consolidated
non-consolidated cash flows
changes in for the year
equity ended
for the year 31 December
ended 2019; 2019; and
31 December
 The
The statement ofseparate
notes to the non-consolidated changes in equity
financial statements, which for the year
include ended accounting
significant 31 December 2019;and
policies and
 other explanatory information.
The notes to the separate financial statements, which include significant accounting policies and
other explanatory information.
PricewaterhouseCoopers Audit, s.r.o., Hvězdova 1734/2c, 140 00 Prague 4, Czech Republic

T: +420 251 151 111, F: +420 251 156 111, www.pwc.com/cz
PricewaterhouseCoopers Audit, s.r.o., Hvězdova 1734/2c, 140 00 Prague 4, Czech Republic
T: +420 251 151 111, F: +420
PricewaterhouseCoopers 251
Audit, 156registered
s.r.o., 111, www.pwc.com/cz
seat Hvězdova 1734/2c, 140 00 Prague 4, Czech Republic, Identification
Number: 40765521, registered with the Commercial Register kept by the Municipal Court in Prague, Section C, Insert 3637,
PricewaterhouseCoopers Audit,
and in the Register of Audit s.r.o., registered
Companies seat Hvězdova
with the Chamber 1734/2c,
of Auditors 140
of the 00 Prague
Czech 4, Czech
Republic Republic,
under Licence Identification
No. 021.
Number: 40765521, registered with the Commercial Register kept by the Municipal Court in Prague, Section C, Insert 3637,
and in the Register of Audit Companies with the Chamber of Auditors of the Czech Republic under Licence No. 021.
10 | Independent Auditor’s Report 139
Shareholder of PFNonwovens a.s.

Basis for opinion

We conducted our audit in accordance with the Act on Auditors, Regulation (EU) No. 537/2014 of the
European Parliament and of the Council (“the EU Regulation”) and Standards on Auditing of the
Chamber of Auditors of the Czech Republic (together “Audit regulations”). These standards consist of
International Standards on Auditing (ISAs) as supplemented and modified by related application
guidance. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and the Company in accordance with the Act on Auditors, EU
Regulation and International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants accepted by the Chamber of Auditors of the Czech Republic (together “Ethic
regulations”), and we fulfilled our other ethical responsibilities in accordance with the Ethic regulations.
Our audit approach

Overview
The total group materiality level for the consolidated financial statements
is CZK 65,414 thousand.
The overall materiality level for individual financial statements is
Materiality CZK 20,698 thousand.
• We have identified eight entities that, in our opinion, require full audit
coverage based on their size or risk.
Audit
scope • The audit of all the above mentioned companies was conducted by the
group audit team.
• Companies that are part of a consolidated group that have been audited
Key audit for these purposes account for 100% of the Group's total revenues. The
matters scope of the audit procedures provides a sufficient and appropriate basis
for our opinion.
 Impairment test of assets held by the subsidiary PFNonwovens Egypt LLC and
of investment in PFNonwovens Egypt LLC.
As part of designing our audit, we determined the materiality and assessed the risks of material
misstatement in the consolidated and separate financial statements (together the “financial
statements”). In particular, we considered where management made subjective judgements, for
example, in respect of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
We also addressed the risk of management override of internal controls, including among other
matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance as to whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
2

Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall materiality for each set of financial statements as a whole as set out in the table
below. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements,
both individually and in aggregate, on each set of financial statements.
Overall Group CZK 65,414 thousand

materiality
(CZK 51,878 thousand for the previous period)
Overall materiality CZK 20,698 thousand

for the Company
standing alone
(CZK 23,981 thousand for the previous period)
How we Materiality for the Group and the Company was determined as 1% of the
determined it Group’s total revenues.
Materiality for the Company was determined as 1% of the Company’s total

assets.
Rationale for the The use of total revenues as a basis for determining the materiality is one of
materiality consistent audit practice.We initially considered using profit before tax, but
benchmark because of fluctuating earnings, we considered total sales revenues as the
applied most stable basis. We have decided to use revenues due to Group's strong
focus on monitoring and increasing revenues. Revenues are one of key
indicators, which are monitored by the Group management. The company
also aims to increase its market share as measured by total revenues.
The company is a holding type and generates income through management
fees, interest on loans and dividends. The Company’s primary objective is to
maintain and enhance investments in its subsidiaries. Based on these facts,
we decided to use the Company's total assets as a basis for determining
materiality.
3

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of each set of financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Key audit matter How our audit addressed the key audit
matter
Impairment test of assets held by subsidiary Our audit procedures include, in particular a
PFNonwovens Egypt LLC in the consolidated critical assessment of the assumptions and
financial statements (see accounting policies and estimates used by the Company to
Note 5o in the consolidated financial statements) determine the recoverable amount of assets
and investment in the subsidiary PFNonwovens and of the investment in the subsidiary.
Egypt LLC in the separate financial statements of the
This assessment included:
Company (see accounting policies and Note 5i in the
Company's separate financial statements). - an assessment of the macroeconomic
assumptions applied by the Company,
Description of the key audit matter
including those that apply to discount rates,
The Group holds assets in the total amount of
- an assessment of the financial plans
CZK 1,442,531 thousand belonging to the subsidiary
prepared by the Company, including
PFNonwovens Egypt LLC reported in the
detailed discussions with the Company's
consolidated statement of financial position as at 31
management on the robustness and
December 2019.
probability of fulfilment of the plans,
The share in PFNonwovens Egypt LLC is owned via
- conduct a sensitivity analysis of significant
a direct subsidiary of PFNonwovens International
model parameters to the change in the
s.r.o. Value of tested investment was amounted to
realizable value of assets and investments
CZK 780,461 as of 31 December 2019.
in the subsidiary,
The egyptian company is producing the same
- analysis of accounting for impairment of
products as the Group and supplies both foreign
assets and investments in the subsidiary,
markets and local customers in Egypt. A high level of
management estimates is needed to assess the - back testing the accuracy of estimates
potential impairment of the assets of the egyptian made by management of the Company in
subsidiary and the related investment. A discounted prior periods to determine the reliability of
cash flow model was used to determine the estimates and judgments by management,
realizable value and to perform the impairment test
of assets and the impairment test of the investment - an assessment of the completeness and
in the egyptian subsidiary. The results of the adequacy of the information disclosed in the
performed impairment tests of these assets and notes to the consolidated and separate
financial statements (see Note 5o in the
investment are dependent on key inputs, especially
Group's consolidated financial statements
in the following areas:
and Note 5i in the Company's separate
- Assumption of growth of future cash flows in financial statements).
current budgets and plans approved by the Group's
management and the subsequent growth rates
included in the business plan. The business plan
reflects the Group's intentions to use the full
production capacity of the production plant in Egypt;
4

- The discount rates used to determine the present

value of future cash flows for a company operating in
a given geographical location.
The tests performed in this way did not reveal any
impairment of assets belonging to the subsidiary
PFNonwovens Egypt LLC in the consolidated
financial statements of the Group (see Note 5o in the
consolidated financial statements).
The value of the investment in the Company's
separate financial statements was decreased by the
value of CZK 500,104 thousand (see Note 5i in the
Company's separate financial statements).
How we tailored our audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on each set of financial statements as a whole, taking into account the structure of the Group,
the accounting processes and controls, the share of individual subsidiaries on the Group financial
position and performance and specifics of the industry in which the Group and the Company operate.
Group financial statements consist of the eight accounting entities, including the Group's production
and business activities and the control unit function. In developing the Group-wide audit approach, we
have identified the type of work that must be performed on each entity by us as a group auditor.
Accordingly, we conducted an audit of the complete financial information of all eight entities. This,
together with other Group procedures, gives us the assurance we need for our opinion on the
consolidated financial statements as a whole.
Other information
In compliance with Section 2(b) of the Act on Auditors, the other information comprises the Annual
Report but it does not include both of the financial statements and our auditor’s report thereon. The
Board of Directors is responsible for the other information.
Our opinion on the financial statements does not cover the other information. In connection with our
audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our
knowledge about the Group and the Company obtained in the audit or otherwise appears to be
materially misstated. In addition, we assessed whether the other information has been prepared, in all
material respects, in accordance with applicable law and regulation, in particular, whether the other
information complies with law and regulation in terms of formal requirements and procedure for
preparing the other information in the context of materiality, i.e. whether any non-compliance with
these requirements could influence judgments made on the basis of the other information.
Based on the procedures performed, to the extent we are able to assess it, in our opinion:
 the other information describing the facts that are also presented in the financial statements is, in
all material respects, consistent with the financial statements; and
5

 the other information is prepared in compliance with with applicable laws and regulations.
In addition, our responsibility is to report, based on the knowledge and understanding of the Group
and the Company obtained in the audit, on whether the other information contains any material
misstatement of fact. Based on the procedures we have performed on the other information obtained,
we have not identified any material misstatement of fact.
Responsibilities of the Board of Directors, Supervisory Board and Audit Committee of

the Company for the financial statements
The Board of Directors is responsible for the preparation and fair presentation of the financial
statements in accordance with International Financial Reporting Standards as adopted by the EU and
for such internal control as the Board of Directors determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Group
and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the Board of Directors either
intends to liquidate the Group or the Company or to cease operations, or has no realistic alternative
but to do so.
The Supervisory Board of the Company is responsible for overseeing the financial reporting process.
The Audit Committee of the Company is responsible for monitoring of the financial statements
preparation process.
Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Audit regulations will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with the above-stated requirements, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
 identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal controls.
 obtain an understanding of internal controls relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group and the Company’s internal controls.
 evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors.
 conclude on the appropriateness of the Board of Directors' use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group and the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
6

events or conditions may cause the Group or the Company to cease to continue as a going
concern.
 evaluate the overall presentation, structure and content of the financial statements, including the
notes, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
 obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with the Board of Directors, Supervisory Board and Audit Committee regarding,
among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement showing that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the Supervisory Board and Audit Committee, we determine
those matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on other legal and regulatory requirements

In compliance with Article 10(2) of the EU Regulation, we provide the following information, which is
required in addition to the requirements of International Standards on Auditing:
Consistency of the audit opinion with the additional report to the Audit Committee
We confirm that the audit opinion expressed herein is consistent with the additional report to the Audit
Committee of the Company, which we issued today in accordance with Article 11
of the EU Regulation.
Appointment of auditor and period of engagement

We were appointed as the auditors of the Group and the Company for year 2019 by the General
Meeting of Shareholders of the Company on 14 June 2019. Our uninterrupted engagement as
auditors of the Group and the Company has lasted for 2 years.
Provided non-audit services

The non-audit services are disclosed on page 46 of the Annual Report.
PwC Network did not provide prohibited services referred to in the Article 5 of the EU Regulation.
7

30 April 2020
represented by
Václav Prýmek Petra Jirková Bočáková

Statutory Auditor, Licence No. 2253
Translation note
This version of our report is a translation from the original, which was prepared in the Czech language. All possible care has been taken to ensure that the translation
is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the Czech version of our report takes precedence
over this translation.
8
11
Glossary
6th October City – is a satellite city near Cairo, Egypt. papers and products which are woven, knitted, tufted or
The city has a population of approximately half a million stitchbonded incorporating binding yarns or filaments,
people and many companies have their regional head- or felted by wet milling, whether or not additionally nee-
quarters located there. dled.
Bi-Component Fibre (Bi-Co) – Man-made textile fibre Polymer – Substance composed of molecules with
consisting of two or more basic components (polymers). large molecular mass composed of repeating structural
Typical cross sections of fibres are, for example, side by units, or monomers, connected by covalent chemical
side, core and sheath (produced by the Group), islands bonds, i.e. a plastic.
in the sea, etc.
Polypropylene / Polyethylene – Thermoplastic poly-
Bučovice – A city in Moravia in the Vyškov District with mers consisting of long chains of monomers (propyl-
approximately 6,500 inhabitants. The Company oper- ene, ethylene), naturally hydrophobic, resistant to many
ates three of its production lines here. chemical solvents, bases and acids. Produced mainly
from crude oil by the chemical industry and used in a
CEE – Central and Eastern Europe wide variety of applications.
Clearstream Bank – Clearstream is a leading European Přímětice – Formerly an independent village, currently a
supplier of post-trading services, a subsidiary of Deut- suburb of Znojmo. The Company operates its main pro-
sche Börse. Clearstream International was formed in duction facilities there.
January 2000 through the merger of Cedel International
and Deutsche Börse Clearing. PSE – Prague Stock Exchange, a regulated market for
securities trading in the Czech Republic
EDANA – European Disposables and Nonwovens Asso-
ciation is the European Trade Association for the non- PX – Official index of blue chip stock of the Prague
wovens and hygiene products converters industries, Stock Exchange.
with around 200 member companies in 28 countries.
Reicofil – Leading nonwoven machinery producer.
EGAP – is the Export Guarantee and Insurance Corpo-
ration founded in June 1992 as a state-owned export Regranulation – Method for recycling scrap textile into
credit agency, insuring credits connected with exports granulate which can then be fully reused in the manu-
of goods and services from the Czech Republic against facturing process.
political and commercial risks. EGAP, now part of the
state export support programme, provides insurance Spunmelt Process – Technological process of produc-
services to all exporters of Czech goods. ing nonwovens. Hot molten polymer is forced through
spinnerets to produce continuous filaments drawn by air
EMEA – Europe, the Middle East and Africa. to reach the required fibre diameter.
IFRS – International Financial Reporting Standards. Spunbond Textile – Textile produced by spunbond/
spunmelt process.
IPO – Initial Public Offering.
IRS – Interest Rate Swap. Financial instrument hedging

interest rate risk.
Meltblown Process – Technological process of pro-

ducing nonwovens. A polymer is extruded into air gap
nozzles and then blown in the form of very thin fibres
(0.1 – 10 microns) on to a belt.
Meltblown Fabric – Textile produced using the melt-

blown process.
Nonwoven Textile – A manufactured sheet, web or bat

of directionally or randomly oriented fibres, bonded by
friction, and/or cohesion and/or adhesion, excluding
11 | Glossary 149
1. Alternative performance
measures
In accordance with the ESMA (European Securities and Markets Authority)

directives regarding transparency for the protection of investors in the Euro-
pean Union, this glossary includes the ALTERNATIVE PERFORMANCE MEA-
SURES (APMs), which correspond to those financial measures that are used
but not defined or explained in the applicable financial information framework.
The definition of these measures establishes equivalences with accounting
items used, facilitating the interpretation of the information, where appropriate.
Performance Definition Purpose Reconciliation with financial

measure accounts
Budgeted A financial measure defined as Used as a benchmark number See Corporate Governance
EBITDA revenues less cost of goods sold for performance evaluation in the Report:
and selling, general, and administra- management bonus scheme.
tive expenses set in the Company’s Set as a qualified estimate of
business plan. the Company’s management.
CAPEX Capital expenditure in intangible Displays the amount of funds See Consolidated Statement
assets and property, plant and equip- invested in the operations to secure of Casch Flows (row Net
ment, including capital expenditure the long-term earning power. Cash flows from investment
financed by leasing. activities).
EBIT (Profit A financial measure defined as Used to present the Company’s See Consolidated Statement of
from operations) revenues less cost of goods sold and operating result while eliminating Comprehensive Income.
selling, general, and administrative the effects of differences among
– Earnings expenses, and depreciation and local taxation systems and different
Before Interest amortisation. financing activities.
and Taxes
EBITDA A financial indicator which determines Since it does not include financial See Year 2019 in Brief, in thou-
the operating margin of a company and tax indicators or account- sand of CZK:
– Earnings prior to deducting interest, taxes, ing expenses not involving cash
Before Interest, impairments, restructuring costs, and outflow, it is used by Management 2019: 687,995 + 529,503
Taxes, Depre- amortisation. Calculated as Net profit to evaluate the Company’s results = 1,217,498
ciation and before income tax, interest expense, over time.
Amortisation interest income, foreign exchange 2018: 879,531 + 467,523
changes, other financial income/ = 1,347,054
expense and depreciation and amorti-
sation, thus Profit from operations +
restructuring costs and amortization.
Performance Definition Purpose Reconciliation with financial

measure accounts
EBIT Margin Percentage margin calculated as Used to assess the Company’s See Year 2019 in Brief, in thou-
EBIT / Revenues. operating performance. sand of CZK:
2019: 687,995 / 6,541,444

= 10.5%
2018: 879,531 / 6,484,793

= 13.6%
EBITDA Margin Percentage margin calculated as Intends to display the profitability See Year 2019 in Brief, in thou-
EBITDA / Revenues. of the business. sand of CZK:
2019: 1,217,498 / 6,541,444

= 18.6%
2018: 1,347,055 / 6,484,793

= 20.8%
Net Debt A financial indicator calculated as The indicator shows the level of See Year 2019 in Brief, in thou-
the sum of Current and Non-current company’s financial debt, i.e. the sand of CZK:
bank loans and Other non-current nominal amount of debt less cash
liabilities reduced by Cash and Cash and cash equivalents held by the 2019: 3,898,726 + 1,089,148
Equivalents. Company. The indicator is primarily – 202,534 = 4,785,340
used to assess the overall appro-
priateness of the Company’s level 2018: 3,923,267 + 1,153,368
of debt, i.e. for example in relation – 400,134 = 4,676,501
to profitability or balance sheet
indicators.
Net Debt / Net Debt / EBITDA. Where EBITDA This ratio indicates the Company’s See Year 2019 in Brief, in mil-
EBITDA is the running total for the past 12 capability to decrease and pay lion of CZK:
months. back its debt as well as its ability
to take on additional debt to grow 2019: 4,785.3 / 1,217.5 = 3.93
its business. The indicator shows
approximately how long it would 2018: 4,676.5 / 1,347.1 = 3.47
take for a company to pay back its
debt out of its primary source of
operating cash flows.
Net Profit Margin Net profit after tax divided by total Used to show the Company’s See Year 2019 in Brief, in thou-
revenues. capability to convert revenue into sand of CZK:
profits available for shareholders.
2019: 473,198 / 6,541,444
= 7.2%
2018: 815,157 / 6,484,793

= 12.6%
11 | Glossary 151
12
Statements of
Responsible Persons
12 | Statements of Responsible Persons 155
František Klaška, Member of the Board of PFNonwovens a.s.
Marian Rašík, Member of the Board of PFNonwovens a.s.
hereby declare that, to the best of their knowledge, the consolidated financial
report provides a true and fair view of the financial position, business activities
and financial results of the issuer and the consolidated group for the year 2019
and about the prospects for future development of the financial position, busi-
ness activities and financial results of the issuer and the consolidated group.
In Prague on 30 April 2020 František Klaška Marian Rašík

Notes
Notes 157
Notes
Notes
© PFNonwovens a.s., 2020
Design, production, print: KREATIVA s.r.o.
www.pfnonwovens.cz

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ANNUAL RE PORT 201 9

Year 2019 in Brief 8

Statement of the CEO 12

Corporate Governance Report 22

Consolidated Financial Statements 72

Non-consolidated Financial Statements 112

Independent Auditor’s Report 136

THE ANNUAL REPORT 2019

PFNonwovens a.s. (hereafter “the Company”) and its subsidiar-

Founded in 1990, the Group has of international expansion, a new

Total production output (in tonnes net of scrap)

0 20,000 40,000 60,000 80,000 100,000 120,000

Revenues (CZK thousands)

0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000

Number of employees – EOP

0 100 200 300 400 500 600 700

Financials (CZK thousands) 2019 2018

Revenues 6,541,444 6,484,793

EBITDA 1,217,498 1,347,054

Profit from Operations 687,995 879,531

No. of Shares - End of Period (“EOP”) 8,763,859 8,763,859

Total Assets 11,585,281 10,861,924

Total Equity 5,486,101 4,970,752

Total Borrowings 4,987,874 5,076,635

Net Debt 4,785,340 4,676,501

CAPEX 1,166,589 748,345

Ratios 2019 2018

EBITDA Margin 18.6% 20.8%

Operating Profit Margin 10.5% 13.6%

Margin of Net Profit Attributable to Shareholders 7.2% 12.6%

CAPEX as % of Revenues 17.8% 11.5%

Operations 2019 2018

Total Production Output (in tonnes net of scrap) 110,966 109,845

Number of Employees – EOP 684 605

Exchange Rates 2019 2018

USD/CZK average 22.934 21.735

USD/CZK EOP 22.621 22.466

ZAR/CZK average 1.588 1.647

ZAR/CZK EOP 1.611 1.562

Carl Allen Bodford

Chairman of the Board of Directors of PFNonwovens a.s.

Ì to ask the Supervisory Board to review the per-

The total Share Capital of the Company as at

of which owns shares 0.00%

Rights and obligations of which shares held by the Board of

Ì right to a share of the surplus upon liquidation

depository (Centrální depozitář cenných papírů, a.s.) pursuant to special legal

Share Price Development and

SHARE PRICE DEVELOPMENT 1 JANUARY 2019 – 31 DECEMBER 2019

5. Approval of consolidated financial statements of the

held on 14 June 2019 6. Approval of separate financial statements of the

1. Election of the chair of the General Meeting, the min-

2. Approval of the Rules of Procedure of the General Dividend Policy

4. Report of the Supervisory Board on the results of

ISIN Issuer Type Nominal Offer Interest Date Maturity

As at 31 December 2019, the Group was not assigned a

Ì Half Year Report for the 1st Half of 2020.

Ì 1st Half 2020 Unaudited Consolidated Financial

Address Přímětická 3623/86

Phone number +420 515 262 408