V&S Group Annual Report 2007
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V&S Group Annual Report 2007 Contents SIGNIFICANT EVENTS AND KEY RATIOS . 1 COMMENTS FROM THE CEO . 2 GROUP OVERVIEW . 4 BUSINESS AREAS . 10 V&S Absolut Spirits . 10 V&S Distillers . 14 V&S Wine . 18 RESPONSIBILITY . .22 Responsibility in the marketplace . 24 Responsibility in society . 26 Responsibility in the workplace . 28 Responsibility for the environment . 30 CORPORATE GOVERNANCE REPORT . 34 BOARD OF DIRECTORS’ REPORT . 46 The Group’s operations and structure . 46 Employees . 47 Risks and risk management . 49 Outlook . 51 INFORMATION IN 2008 Proposed dividend . 51 The Annual General Meeting will take place DETTA SKÄRS BORT // Other information . 51 on 12 May in Stockholm. FINANCIAL STATEMENTS . .52 Quarterly reports will be published on Notes to the fi nancial statements . 62 12 May, 20 August and 31 October. PROPOSED DISPOSITION OF EARNINGS . 94 The Annual Report, quarterly reports and AUDIT REPORT . .95 a presentation of V&S Group are available in English at vsgroup.com and in Swedish COMMENTS ON THE RESPONSIBILITY REPORT . 96 at vsgroup.se. ASSURANCE REPORT . 107 REVIEW 1998–2007 . 108 Contact Peeter Luksep, Vice President Investor QUARTERLY DATA . 110 Relations, +46 8 744 73 53, [email protected]. ADDRESSES . .112 V&S Group in brief V&S Group is one of the world’s leading international spirits companies with sales in 126 markets. The biggest brand is absolut vodka, the fourth largest international spirits brand in the world. V&S is the leading producer and distributor of wines and spirits in Northern Europe. Its product portfolio includes many strong international, regional and local proprietary brands, as well as agency products. The Group has wholly- owned operations in ten countries. V&S is continuing to create growth and strengthen its profi tability by: • Developing and strengthening the absolut vodka brand. • Securing its position as the leading alcoholic beverage company in Northern Europe. • Acquiring and developing spirits brands with international potential. BUSINESS AREAS BRANDS OPERATIONS absolut vodka, Cruzan Rum, Produces and sells spirits in the premium segment on the global Frïs Vodka, Level Vodka, market. The biggest brand is absolut vodka. The premium segment Plymouth Gin. is characterized by good growth. The main markets are North America and Western Europe. V&S has one of the world’s largest, most advanced production facilities in Åhus and Nöbbelöv, Sweden. The business area also has production in Plymouth, Great Britain and St Croix in the US Virgin V&S ABSOLUT SPIRITS Islands. DETTA SKÄRS BORT // Aalborg Akvavit, Explorer Produces and sells local and regional spirits brands for the Vodka, Gammel Dansk, North European market. The largest categories are vodka, aquavit Luksusowa, Malteserkreuz, and bitters. V&S Distillers is a leader on the Nordic spirits market, Minttu, O.P. Anderson, which is a rather mature market. Pan Tadeusz, Polska Wódka, Production takes place in Aalborg, Otterup and Svendborg in Tapio Viina, etc. Denmark, Turku in Finland, Zielona Góra in Poland and Buxtehude V&S DISTILLERS in Germany. V&S: Aussie, Blossa, California, Produces and imports wines and fortifi ed wines for Northern Europe, Chill Out, Opal Springs, etc. both own brands and those of international partners. The Nordic wine market, where V&S Wine is a leader, has some growth. Partners: Codorníu, Gato Negro, Lindemans, Penfolds, Logistics centres are located in Stockholm in Sweden, Turku in Raimat, etc. Finland and Odense in Denmark. V&S WINE V&S Wine’s bottling operation is managed by V&S Distillers. APPROACH V&S Group emphasizes certain Core Values in its overall approach in order VALUE GENERATORS to ensure competitiveness and responsible conduct. Developing, acquiring and nurturing brands is Dynamic: Being fast, fl exible and disciplined without losing focus on fundamental to success. absolut vodka is one of commercial performance. the industry’s strongest global brands. In Northern Europe, V&S has some of the region’s strongest Dynamic Responsible: Setting a good example for the industry. brands in both the spirits and wine segments. Respons Innovative Innovative: Fostering an innovative spirit in Production is the foundation of the Long-term ible which conventions are challenged in order to Group’s operation. This enables V&S to become a market leader. ensure quality and delivery capacity, as Long-term performance: Acting with endurance well as expertise for the development when investing in brands, products, markets and of new products. Effi ciency is another people, but without detracting from fi nancial important competitive tool. performance. Distribution and marketing have become V&S Absolut Spirits increasingly important with stiffening competition between international brands. In addition to its own distribution Brands in Northern Europe, V&S has part-owned V&S Distillers Production BUSINESS AREAS distribution on most important markets. V&S Absolut Spirits is responsible for absolut vodka V&S is owned by the Kingdom of Sweden and Distribution & Mktg and the Group’s other international brands. operates under full competition on all markets. V&S Wine This requires business acumen, prioritization of and Business acumen V&S Distillers is responsible for the Group’s local an ability to generate profi tability within defi ned rules and regional spirits brands in Northern Europe. and guidelines. V&S’s profi tability is on a par with the V&S Wine is responsible for the sale of wine in most profi table large companies in the sector. Northern Europe. MARKETS DISTRIBUTION SALES* OPERATING PROFIT* Compared to Group total Compared to Group total • V&S organization 59% 88% in Northern Europe. (SEK 6,084 mn) (SEK 2,024 mn) • Future Brands in the United States. • Maxxium on most other important markets. • Independent distributors on other markets. • Production • Own organization 20% 14% in Poland. (SEK 2,050 mn) (SEK 321 mn) • V&S organization in Nordic region. • Maxxium in Germany and for Duty Free & Travel Retail. • Production • V&S Wine is responsible for the 22% 5% Group’s joint distribution organi- (SEK 2,258 mn) (SEK 108 mn) zation in the Nordic region. • V&S distributes its own brands as well as partners’ products in the Nordic region. • Logistics centre * Business area sales and operating profi t are shown before elimination for internal sales. This annual report is a translation. The Swedish version is the official. Signifi cant events and key ratios NET SALES AND • Group operating profi t rose by 1 per cent. OPERATING MARGIN Net sales remained virtually unchanged. SEK mn % Sales volume rose by 5 per cent. 12,000 24 10,000 20 • For comparable units – operating profi t increased by 19 per cent 8,000 16 – net sales increased by 7 per cent 6,000 12 – sales volume rose by just over 5 per cent. 4,000 8 • Profi t after tax for the year decreased by 7 per cent. Adjusted 2,000 4 for a one-off tax effect in 2006, this year’s profi t represents a 0 0 considerable improvement. 2003 2004 2005 2006 2007 Net sales, SEK mn • All business areas have strengthened their profi tability for Operating margin, % compar able units. NET SALES BY The Group’s most important brand, absolut vodka, continued • PRODUCT CATEGORY to increase both its volumes and sales in the United States, and Gin, 1% Liqueur, 1% on most other prioritized markets. The rate of innovation related Rum, 2% Bitters, 2% to the brand has increased. Aquavit*, 4% Whisky, 1% Other • The takeover of the expanded range from Foster’s Wine Estates spirits, 1% Wine, 21% was implemented throughout V&S Wine’s market area. Vodka, 62% Other, 5% • Non-core operations were divested: Florida Distillers, the production of industrial alcohol and of yeast and molasses alcohol in Denmark. * Including other spiced spirits. The remaining 50 per cent of Norwegian spirits and wine distributor V&S Norway AS (formerly Amundsen AS) was acquired. NET SALES BY • Climate-affecting carbon dioxide emissions fell by 12 per cent per litre GEOGRAPHICAL MARKET of product sold. In addition the Group has supported tree planting to Asia Pacific, 2% Sweden, 15% offset 40 per cent of the carbon dioxide emissions from production. Central and South Other Nordic, America, 2% Baltic States, 19% KEY RATIOS FOR THE GROUP 2007 2006 2005 North Other European America, 43% countries*, 19% Net sales, SEK mn 10,313 10,345 9,578 Operating profi t, SEK mn 2,305 2,275 2,069 Operating margin, % 22.4 22.0 21.6 * Including CIS, the Middle East and Africa. Profi t for the year after tax, SEK mn 1,469 1,577 1,506 Return on shareholders’ equity, % 19.4 22.4 25.1 OPERATING REVENUE BY Interest-bearing net liability, SEK mn 3,447 5,308 5,153 STAKEHOLDER Debt/equity ratio, times 0.4 0.7 0.7 Profit to be Cash fl ow before fi nancing activities, SEK mn 2,355 –74 68 carried forward, 7% Other, 1% Equity/assets ratio, % 46.6 40.3 40.2 Owners, 7% Employees, 11% Dividend/equity, % 10.6 1 10.5 10.6 Public sector*, 7% Sales volume, million 9-litre cases 26.9 25.7 24.9 Creditors, 1% Number of employees 2,104 2,304 2,245 CO2 emissions, kg/litre of product sold 0.46 0.52 0.55 Other Product Percentage of eco-friendly ingredients, % 49.2 45.1 42.8 suppliers, 35% suppliers, 31% 1 Board proposal. * Alcohol excises not included. For defi nitions, see Review 1998–2007 page 109. V&S ANNUAL REPORT 2007 1 COMMENTS FROM THE CEO Continued focus, increased profi tability 2007 has been a very successful year for V&S Group. I am extremely pleased to report that V&S has improved profi tability for the third consecutive year.