Royal Unibrew A/S Annual Report 2015 Royal Unibrew in Brief Royal Unibrew is a leading regional beverage provider in a num- ber of markets – primarily in Northern Europe, Italy and in the international malt beverage markets. We produce, market, sell and distribute quality beverages with focus on branded products within beer, malt beverages and soft drinks as well as cider and long drinks. Our markets Our brands Our strategy Our main markets are Denmark, Fin- In all of our markets, we offer our cus- It is our strategy to be a focused, regional land, Italy and Germany as well as Latvia, tomers strong and locally based brands. beverage provider within beer, malt bev- Lithuania and Estonia. To these should erages and soft drinks – and to achieve be added the international markets com- Based on continuous development and leading positions in the markets or the prising a number of established markets innovation, it is our objective to meet segments in which we operate. in the Americas region and major cities customer demand for quality beverages. in Europe and North America as well as The main elements of our strategy are emerging markets in for example Africa. In addition to our own brands, we offer li- as follows: cence-based international brands of the Denmark – the number two provider of PepsiCo and Heineken Groups. beer and soft drinks with a number of strong brands Our financial targets Our medium-term financial targets: Finland – the number two provider of beer and soft drinks with a number of EBIT margin: 15% l na Fin tio y f a strong brands, as well as international NIBD/EBITDA: Max 2.5 times a nc lex nc er ie ib ia p ic il l spirits and wine brands Equity ratio: at least 30% at year end O ff it e y The Baltic countries – among the lead- Distribution policy a ing providers of beer and soft drinks Royal Unibrew is expected to continue n d I s n d n holding considerable market positions generating a rather significant liquidity n t e o o n i v t v e a i a surplus in the future, and it remains the c s l i o t f o i i p o p m n n Italy – among the market leaders in the intention currently to make distributions g t e i e S k n r super premium segment for beer with to shareholders. t a Ceres Strong Ale m L Dividend: 40-60% of net profit for the ocally based International markets – among the year market leaders in the premium seg- ment for dark malt beverages, whereas Share buy-backs will be considered cur- the beer category is covered by the Faxe rently taking into account optimisation of brand the capital structure. ROYAL UNIBREW ANNUAL REPORT 2015 3 Results 2015 2015 was a good year for Net profit for 2015 Net interest – bearing debt Royal Unibrew. 14 % higher than in 2014 mDKK mDKK 2379 Solid market positions and Hartwall integration 1553 resulted in the best perfor- 711 1184 mance ever 631 321 2011 2012 2013 2014 2015 Net revenue in 2015 at same level as 2014 Net revenue in 2015 mDKK allocated by segment % Malt Beverages Cash flow per share and Export 8% Western Europe 45% 6,032 DKK per share of DKK 2 Baltic Sea 47% 21,2 16,2 12,5 EBITDA in 2015 8,9 8 % higher than in 2014 7,3 DKK mio. 2011 2012 2013 2014 2015 EBIT in 2015 1,225 allocated by segment* % Earnings per share (EPS) Malt Beverages and Export 11% Western Europe 54% DKK per share of DKK 2 Baltic 13,0 Sea 39% EBIT margin in 2015 1,6 percentage 11,3 points higher than in 2014 9,2 % 7,1 6,4 * -4% not allocated 15.2 2011 2012 2013 2014 2015 4 ANNUAL REPORT 2015 ROYAL UNIBREW ROYAL UNIBREW ANNUAL REPORT 2015 5 Content Reviews Royal Unibrew in Brief 2 Results 2015 3 CEO Letter 6 Financial Highlights and Ratios 9 Strategy 11 Outlook 14 Financial Review 16 Western Europe 20 Baltic Sea 24 Malt and Exports 28 Shareholder Information 31 Corporate Governance 35 Risk Management 38 Remuneration 42 Board of Directors and Executive Board 44 Organisation and Employees 49 Corporate Social Responsibility 51 Management's Statement and Auditor's Report Management's Statement on the Annual Report 56 Independent Auditor's Report 57 Consolidated Financial Statements Income Statement 59 Statement of Comprehensive Income 59 Assets 60 Liabilities and Equity 60 Cash Flow Statement 61 Statement of Changes in Equity 62 Contents of Notes 63 Notes 64 Parent Company Financial Statements Content 97 Income Statement 98 Statement of Comprehensive Income 98 Assets 99 Liabilities and Equity 99 Cash Flow Statement 100 Statement of Changes in Equity 101 Notes 102 Other Information Quarterly Financial Highlights and Ratios 116 Definitions of Financial Highlights and Ratios 117 Group Structure 118 The Annual Report has been prepared in Danish and English. In case of discrepancy the Danish version shall prevail. 6 ANNUAL REPORT 2015 ROYAL UNIBREW Solid market positions and Hartwall integration generate additional earnings increase 2015 was a good year for Royal Unibrew. We improved our earnings and cash flow, and also reinforced our market positions. At the same time, we have made considerable headway with the Hartwall integration. Following a year of dividend pause in 2014 and a significant debt reduction, Royal Unibrew again has satisfactory financial and strategic flexibility. Therefore, as planned, we resumed dividend distribution and share buy-backs in 2015. We also increased our medium-term EBIT margin target from 14% to 15%. The good performance is due to our regional beverage strategy with local closeness to our consumers combined with strong customer relations as well as committed and competent employees throughout our organisation. We achieved satisfactory earnings for momentum in recent years lies in our measurements of our customers’ satis- 2015 The earnings were above expecta- shared values and our leadership within faction with their suppliers. tions at the beginning of the year and were Royal Unibrew, and in the continuity seen achieved in spite of poor summer weather among our employees. Considerable headway with as well as continuing challenging market the Hartwall integration conditions and a small revenue decline. Reinforced position in Denmark Since acquiring Hartwall in 2013, we Throughout 2015, we saw a continuing The Danish part of our business devel- have directed targeted efforts at ensur- difficult macroeconomic situation in Fin- oped very satisfactorily in 2015. Across ing successful integration of Hartwall land alongside weaker demand within channels and categories, we are seeing into Royal Unibrew. We have followed our our product categories in the other Euro- increasing consumer demand for our ambitious plan, and significant changes pean markets, except for Denmark where products. Our progress in the Danish have been made to simplify and optimise. we saw good progress. market also reflects the priority we give With the change to a common SAP plat- to ensuring cooperation with our con- form during Q1 2016, we achieved yet The positive development is due to our sumers. This is effected eg through lo- another key integration milestone. As in focused commercial agenda, the many cally based sponsorships for eg the Dan- the rest of our business, we will focus innovative initiatives in all of our markets ish football club AGF and more national on continuous improvement measures as well as continuous efficiency improve- concepts such as ”Tak Rock” (Thank You, going forward. ment throughout our business. We are Rock). We have also launched the organ- directing targeted efforts at maintain- ic beer ROYAL Økologisk (Royal Organ- Alongside the integration, we have been ing and further developing our market ic) and the new, interesting craft beers working under difficult market conditions positions, products and brands and at Schiøtz and Lottrup, which have been re- at reinforcing Hartwall’s commercial strengthening our partnerships. We ceived very well by consumers. Schiøtz position as a market-leading beverage cooperate closely with our customers, and Lottrup achieved a top 3 position in provider in Finland – and we are moving which enables us to continuously adapt their categories in the European Beer in the right direction in this multiannual our product portfolio to the needs of lo- Star and the International Food Contest, effort. We focus on strengthening part- cal consumers and customers. 2015. Moreover, we consider it a recog- nerships and increasing our presence nition of our work that, also in 2015, we with our customers. Through continuous Also, in our opinion, a considerable achieved very high scores in third-party innovation, we are striving to meet the part of the explanation of our positive changed consumer and customer needs ROYAL UNIBREW ANNUAL REPORT 2015 7 Henrik Brandt President & CEO in the wake of the challenging macroe- albeit at a lower level than in recent years singled out Royal Unibrew as “Bottler of conomic situation in Finland, and, as in due to the weaker macroeconomic devel- the Year” in the EMEA region. 2014, we succeeded in maintaining our opment in a number of markets. market shares in 2015. At the same time, EBIT margin target we are pleased to note that our score in Expanded cooperation increased to 15% third-party measurements of our cus- with PepsiCo Based on our good results in 2015 and tomers’ satisfaction with their suppliers It is important for us continuously to our expected future development, at is significantly higher than before we ac- further develop our business and es- the end of 2015 we increased our me- quired Hartwall.